[G.R. No. 94825. September 4, 1992.

94825. September 4, 1992.] internal agreement among the operators to set the ceiling of the contract rates. It was aimed to curb the
practice of security agencies which were in cutthroat competition to request for wage adjustments after
PHILIPPINE FISHERIES DEVELOPMENT AUTHORITY, Petitioner, v. NATIONAL LABOR RELATIONS proposals were accepted in good faith to the prejudice of the parties.
COMMISSION, and ODIN SECURITY AGENCY, as representative of its Security Guards, Respondents.
6. ID.; SECURITY AGENCY; CANNOT ESCAPE LIABILITY FOR PAYMENT OF UNPAID WAGES;
Franklin J. Andrada for Petitioner. PAYMENT OF WAGES TO EMPLOYEES GUARANTEED UNDER THE CONSTITUTION. — it bears
emphasis that it was the private respondent which first deprived the security personnel of their rightful wage
Ramon Encarnacion and Reynato V. Siozon for Private Respondents. under Wage Order No. 6. The private respondent is the employer of the security guards and as the employer,
it is charged with knowledge of labor laws and the adequacy of the compensation that it demands for
contractual services is its principal concern and not any other’s (Del Rosario & Sons Logging Enterprises, Inc.
SYLLABUS v. NLRC, 136 SCRA 669 [1985]). Given this peculiar circumstance, the private respondent should also be
faulted for the unpaid wage differentials of the security guards. By filing the complaint in its own behalf and in
behalf of the security guards, the private respondent wishes to exculpate itself from liability on the strength of
1. LABOR AND SOCIAL LEGISLATIONS; PRINCIPAL AND CONTRACTOR; JOINTLY AND SEVERALLY the ruling in the Eagle case that the ultimate liability rests with the principal. Nonetheless, the inescapable fact
LIABLE FOR PAYMENT OF UNPAID WAGES; TERM ‘EMPLOYER’ CONSTRUED. — Notwithstanding that is that the employees must be guaranteed payment of the wages due them for the performance of any work,
the petitioner is a government agency, its liabilities, which are joint and solidary with that of the contractor, are task, job or project. They must be given ample protection as mandated by the Constitution (See Article II,
provided in Articles 106, 107 and 109 of the Labor Code. This places the petitioner’s liabilities under the scope Section 18 and Article XIII, Section 3). Thus, to assure compliance with the provisions of the Labor Code
of the NLRC. Moreover, Book Three, Title II on Wages specifically provides that the term "employer" includes including the statutory minimum wage, the joint and several liability of the contractor and the principal is
any person acting directly or indirectly in the interest of an employer in relation to an employee and shall mandated.
include the Government and all its branches, subdivisions and instrumentalities, all government-owned or
controlled corporation and institutions as well as non-profit private institutions, or organizations (Art. 97 [b], 7. ID.; SOLIDARY LIABILITY OF PRINCIPAL AND CONTRACTOR; WITHOUT PREJUDICE TO THE RIGHT
Labor Code; Eagle Security Agency, Inc. v. NLRC, 173 SCRA 479 [1989]; Rabago v. NLRC, 200 SCRA 158 OF REIMBURSEMENT TO EITHER PRINCIPAL OR DIRECT EMPLOYER AS WARRANTED. — We hold the
[1991]). Settled is the rule that in job contracting, the petitioner as principal is jointly and severally liable with petitioner and the private respondent jointly and severally liable to the security guards for the unpaid wage
the contractor for the payment of unpaid wages. The statutory basis for the joint and several liability is set forth differentials under Wage Order No. 6. As held in the Eagle case, the security guards’ immediate recourse is
in Articles 107, and 109 in relation to Article 106 of the Labor Code. with their direct employer, private respondent Odin Security Agency. The solidary liability is, however, without
prejudice to a claim for reimbursement by the private respondent against the petitioner for only one-half of the
2. ID.; ID.; ID.; WAGE ORDERS, MANDATORY AND CANNOT BE WAIVED. — In the case at bar, the action amount due considering that the private respondent is also at fault for entering into the contract without taking
instituted by the private respondent was for the payment of unpaid wage differentials under Wage Order No. 6. into consideration the minimum wage rates under Wage Order No. 6.
The liabilities of the parties were very well explained in the case of Eagle Security v. NLRC, supra where the
court held: . . . "The solidary liability of PTSI and EAGLE, however, does not preclude the right of
reimbursement from his co-debtor by the one who paid [See Article 1217, Civil Code]. It is with respect to this DECISION
right of reimbursement that petitioners can find support in the aforecited contractual stipulation and Wage
Order provision. "That Wage Orders are explicit that payment of the increases are `to be borne’ by the
principal or client.’To be borne’, however, does not mean that the principal, PTSI in this case, would directly GUTIERREZ, JR., J.:
pay the security guards the wage and allowance increases because there is no privity of contract between
them. The security guards’ contractual relationship is with their immediate employer, EAGLE. As an employer,
EAGLE is tasked, among others, with the payment of their wages [See Article VII Sec. 3 of the Contract for The petitioner questions the resolution of the National Labor Relations Commission (NLRC) dated January 17,
Security Services, supra and Bautista v. Inciong, G.R. No. 52824, March 16, 1988, 158 SCRA 556]. . . . The 1983 setting aside the order of dismissal issued by the Labor Arbiter and the resolution dated June 25, 1990
Wage Orders are statutory and mandatory and can not be waived. The petitioner can not escape liability since denying petitioner’s motion for reconsideration.
the law provides the joint and solidary liability of the principal and the contractor for the protection of the
laborers. The facts are as follows:chanrob1es virtual 1aw library

3. ID.; ID.; ID.; DUE PROCESS OBSERVED IN CASE AT BAR. — The contention that it was deprived due The petitioner is a government-owned or controlled corporation created by P.D. No. 977.
process because no hearing was conducted does not deserve merit. A decision on the merits is proper where
the issues raised by the parties did not involve intricate questions of law. (See Blue Bar Coconut Phils. Inc. v. On November 11, 1985, it entered into a contract with the Odin Security Agency for security services of its
Minister of Labor, 174 SCRA 25 [1989]) There can be no question that the security guards are entitled to wage Iloilo Fishing Port Complex in Iloilo City. The pertinent provision of the contract provides:chanrobles.com :
adjustments. The computation of the amount due to each individual guard can be made during the execution virtual law library
of the decision where hearings can be held. (See Section 3, Rule VIII of the New Rules of Procedure of the
NLRC). OBLIGATION OF THE FISHING PORT COMPLEX:chanrob1es virtual 1aw library

4. ID.; INDIRECT EMPLOYER; ESTOPPED FROM ASSAILING CONTRACT. — Petitioner assail the contract 1. For and in consideration of the services to be rendered by the AGENCY to the FISHING PORT COMPLEX,
for security services for being void ab initio on the ground that it did not comply with the bidding requirements the latter shall pay to the former per month for eight (8) hours work daily as follows:chanrob1es virtual 1aw
set by law. Undeniably, services were rendered already and the petitioner benefitted from said contract for two library
(2) years now. The petitioner is therefore estopped from assailing the contract.
OUTSIDE METRO MANILA
5. ID.; PHIL. ASSOCIATION OF DETECTIVE AND PROTECTIVE AGENCY OPERATORS (PADPAO);
PURPOSE FOR ITS CREATION. — In the complaint filed, the private respondent alleged that it requested the Security Guard P1,990.00
Regional Director, NCR Region of the Department of Labor and Employment for their intercession in
connection with the illegal bidding and award made by the petitioner in favor of Triad Security Agency which Security Supervisor 2,090.00
was below the minimum wage law. Undeniably, the private respondent is equally guilty when it entered into
the contract with the petitioner without considering Wage Order No. 6. The private respondent tries to explain Det. Commander 2,190.00.
that the Philippine Association of Detective and Protective Agency Operators (PADPAO) which fixes the
contract rate of the security agencies was unable to fix the new contract rate until May 12, 1986. We, however, The Security Group of the AGENCY will be headed by a detachment commander whose main function shall
agree with the posture that the setting of wages under PADPAO is of no moment. The PADPAO consist of the administration and supervision control of the AGENCY’s personnel in the FISHING PORT
memorandum was not necessary to make Wage Order No. 6 effective. The PADPAO memo was merely an COMPLEX. There shall be one supervisor per shift who shall supervise the guards on duty during a particular

1
shift. or be sued; and

The above schedule of compensation includes among others, the following:chanrob1es virtual 1aw library (3) Assuming the individual guards have legal personality the action involves interpretation of contract over
which it has no authority. (Rollo, p. 75)
(a) Minimum wage (Wage Order No. 5)
On August 19, 1988, the Labor Arbiter issued an Order dismissing the complaint stating that the petitioner’s
(b) Rest Day Pay being a government-owned or controlled corporation would place it under the scope and jurisdiction of the
Civil Service Commission and not within the ambit of the NLRC.
(c) Night Differential Pay
This Order of dismissal was raised on Appeal to the NLRC and on January 17, 1989 the NLRC issued the
(d) Incentive Leave Pay questioned resolution setting aside the order and entered a decision granting reliefs to the
private Respondent.
(e) 13th Month Pay
A motion for reconsideration was subsequently filed raising among others that the resolution
(f) Emergency Cost of Living Allowance (up to Wage Order No. 5) is:chanroblesvirtualawlibrary

(g) 4% Contractor’s Tax (1) In violation of the right of the respondent to due process under the Constitution;

(h) Operational Expenses (2) Granting arguendo that the due process clause was observed, the resolution granting relief is without any
legal basis; and
(i) Overhead (Rollo, pp. 197-198)
(3) Granting arguendo that there is legal basis for the award, the stipulation under the contract allowing an
The contract for security services also provided for a one year renewable period unless terminated by either of increase of wage rate is void ab initio. (Rollo, p. 86)
the parties. It reads:chanrob1es virtual 1aw library
On June 25, 1990, the motion for reconsideration was denied.
9. This agreement shall take effect upon approval for a period of one (1) year unless sooner terminated upon
notice of one party to the other provided, that should there be no notice of renewal within thirty (30) days The petitioner now comes to this Court reiterating substantially the same grounds it raised in its motion for
before the expiry date, the same shall be deemed renewed, and provided further, that the party desiring to reconsideration, to wit:chanrob1es virtual 1aw library
terminate the contract before the expiry date shall give thirty (30) days written advance notice to the other
party. (Rollo, p. 198) (1) The National Labor Relations Commission failed to observe due process.

On October 24, 1987, and during the effectivity of the said Security Agreement, the private respondent (2) Granting the award of the National Labor Relations Commission is valid, reliefs granted are not legal.
requested the petitioner to adjust the contract rate in view of the implementation of Wage Order No. 6 which
took effect on November 1, 1984.chanroblesvirtualawlibrary (3) Assuming the award complies with the requirements of due process, the National Labor Relations
Commission erred when it failed to declare the contract for security services void. (Rollo, pp. 201-202)
The private respondent’s request for adjustment was anchored on the provision of Wage Order No. 6 which
states:chanrob1es virtual 1aw library The petitioner is a government-owned or controlled corporation with a special charter. This places it under the
scope of the civil service (Art. XI [B] [1] and [2], 1987 Constitution); Boy Scouts of the Philippines v. NLRC,
SECTION 9. In the case of contracts for construction projects and for security, janitorial and similar services, 196 SCRA 176 [1991]; PNOC-Energy Development Corp. v. NLRC, 201 SCRA 487 [1991]). However, the
the increases in the minimum wage and allowance rates of the workers shall be borne by the principal or client guards are not employees of the petitioner. The contract of services explicitly states that the security guards
of the construction/service contractor and the contracts shall be deemed amended accordingly, subject to the are not considered employees of the petitioner (Rollo, p. 45). There being no employer-employee relationship
provisions of Section 3(c) of this Order. (Rollo, p. 49) between the petitioner and the security guards, the jurisdiction of the Civil Service Commission may not be
invoked in this case.
Section 7, par. c of the Security Services Contract which calls for an automatic escalation of the rate per guard
in case of wage increase also reads:chanrob1es virtual 1aw library The contract entered into by the petitioner which is merely job contracting makes the petitioner an indirect
employer. The issue, therefore, is whether or not an indirect employer is bound by the rulings of the NLRC.
The terms and conditions herein set forth shall be modified by the applicable provisions of subsequent laws or
decrees, especially as they pertain to increases in the minimum wage and occupational benefits to workers. Notwithstanding that the petitioner is a government agency, its liabilities, which are joint and solidary with that
(Rollo, p. 46) of the contractor, are provided in Articles 106, 107 and 109 of the Labor Code. This places the petitioner’s
liabilities under the scope of the NLRC. Moreover, Book Three, Title II on Wages specifically provides that the
Requests for adjustment of the contract price were reiterated on January 14, 1988 and February 19, 1988 but term "employer" includes any person acting directly or indirectly in the interest of an employer in relation to an
were ignored by the petitioner. employee and shall include the Government and all its branches, subdivisions and instrumentalities, all
government-owned or controlled corporation and institutions as well as non-profit private institutions, or
Thus on June 7, 1988, the private respondent filed with the Office of the Sub-Regional Arbitrator in Region VI, organizations (Art. 97 [b], Labor Code; Eagle Security Agency, Inc. v. NLRC, 173 SCRA 479 [1989]; Rabago
Iloilo City a complaint for unpaid amount of re-adjustment rate under Wage Order No. 6 together with wage v. NLRC, 200 SCRA 158 [1991]). The NLRC, therefore, did not commit grave abuse of discretion in assuming
salary differentials arising from the integration of the cost of living allowance under Wage Order No. 1, 2, 3 jurisdiction to set aside the Order of dismissal by the Labor Arbiter.chanrobles virtual lawlibrary
and 5 pursuant to Executive Order No. 178 plus the amount of P25,000.00 as attorney’s fees and cost of
litigation. The underlying issue in this case is who should carry the burden of the wage increases.

On July 29, 1988, the petitioner filed a Motion to Dismiss on the following grounds:chanrob1es virtual 1aw Settled is the rule that in job contracting, the petitioner as principal is jointly and severally liable with the
library contractor for the payment of unpaid wages. The statutory basis for the joint and several liability is set forth in
Articles 107, and 109 in relation to Article 106 of the Labor Code. (Del Rosario and Sons Logging Enterprises,
(1) The Commission has no jurisdiction to hear and try the case; Inc. v. NLRC, 136 SCRA 669 [1985]; Baguio v. NLRC, 202 SCRA 465 [1991]; Ecal v. NLRC, 195 SCRA 224
[1991]). In the case at bar, the action instituted by the private respondent was for the payment of unpaid wage
(2) Assuming it has jurisdiction, the security guards of Odin Security Agency have no legal personality to sue

2
differentials under Wage Order No. 6. The liabilities of the parties were very well explained in the case of Order No. 6. The private respondent is the employer of the security guards and as the employer, it is charged
Eagle Security v. NLRC, supra where the court held:chanrob1es virtual 1aw library with knowledge of labor laws and the adequacy of the compensation that it demands for contractual services
is its principal concern and not any other’s (Del Rosario & Sons Logging Enterprises, Inc. v. NLRC, 136 SCRA
669 [1985]).
x x x
Given this peculiar circumstance, the private respondent should also be faulted for the unpaid wage
differentials of the security guards. By filing the complaint in its own behalf and in behalf of the security guards,
"The solidary liability of PTSI and EAGLE, however, does not preclude the right of reimbursement from his co-
the private respondent wishes to exculpate itself from liability on the strength of the ruling in the Eagle case
debtor by the one who paid [See Article 1217, Civil Code]. It is with respect to this right of reimbursement that
that the ultimate liability rests with the principal. Nonetheless, the inescapable fact is that the employees must
petitioners can find support in the aforecited contractual stipulation and Wage Order provision.
be guaranteed payment of the wages due them for the performance of any work, task, job or project. They
must be given ample protection as mandated by the Constitution (See Article II, Section 18 and Article XIII,
"The Wage Orders are explicit that payment of the increases are `to be borne’ by the principal or client.’To be
Section 3). Thus, to assure compliance with the provisions of the Labor Code including the statutory minimum
borne’, however, does not mean that the principal, PTSI in this case, would directly pay the security guards
wage, the joint and several liability of the contractor and the principal is mandated.
the wage and allowance increases because there is no privity of contract between them. The security guards’
contractual relationship is with their immediate employer, EAGLE. As an employer, EAGLE is tasked, among
We, therefore, hold the petitioner and the private respondent jointly and severally liable to the security guards
others, with the payment of their wages [See Article VII Sec. 3 of the Contract for Security Services, supra and
for the unpaid wage differentials under Wage Order No. 6. As held in the Eagle case, the security guards’
Bautista v. Inciong, G.R. No. 52824, March 16, 1988, 158 SCRA 556].
immediate recourse is with their direct employer, private respondent Odin Security Agency. The solidary
liability is, however, without prejudice to a claim for reimbursement by the private respondent against the
"Premises considered, the security guards’ immediate recourse for the payment of the increases is with their
petitioner for only one-half of the amount due considering that the private respondent is also at fault for
direct employer, EAGLE. However, in order for the security agency to comply with the new wage and
entering into the contract without taking into consideration the minimum wage rates under Wage Order No.
allowance rates it has to pay the security guards, the Wage Order made specific provision to amend existing
6.chanrobles lawlibrary : rednad
contracts for security services by allowing the adjustment of the consideration paid by the principal to the
security agency concerned. What the Wage Orders require, therefore, is the amendment of the contract as to
WHEREFORE, the questioned resolutions of the National Labor Relations Commission are hereby
the consideration to cover the service contractor’s payment of the increases mandated. In the end, therefore,
AFFIRMED with the modification that both the petitioner and the private respondent are ORDERED to pay
ultimate liability for the payment of the increases rests with the principal."cralaw virtua1aw library
jointly and severally the unpaid wage differentials under Wage Order No. 6 without prejudice to the right of
reimbursement for one-half of the amount which either the petitioner or the private respondent may have to
The Wage Orders are statutory and mandatory and can not be waived. The petitioner can not escape liability
pay to the security guards. Costs against the petitioner.
since the law provides the joint and solidary liability of the principal and the contractor for the protection of the
laborers. The contention that it was deprived due process because no hearing was conducted does not
SO ORDERED.
deserve merit. A decision on the merits is proper where the issues raised by the parties did not involve
intricate questions of law. (See Blue Bar Coconut Phils. Inc. v. Minister of Labor, 174 SCRA 25 [1989]) There
can be no question that the security guards are entitled to wage adjustments. The computation of the amount
due to each individual guard can be made during the execution of the decision where hearings can be held.
(See Section 3, Rule VIII of the New Rules of Procedure of the NLRC) Neither can the petitioner assail the
[G.R. No. 121439. January 25, 2000]
contract for security services for being void ab initio on the ground that it did not comply with the bidding
requirements set by law. Undeniably, services were rendered already and the petitioner benefitted from said
contract for two (2) years now. The petitioner is therefore estopped from assailing the contract.chanrobles law AKLAN ELECTRIC COOPERATIVE INCORPORATED (AKELCO), petitioner, vs. NATIONAL LABOR
library : red RELATIONS COMMISSION (Fourth Division), RODOLFO M. RETISO and 165 OTHERS,[1] respondents.
Quite noteworthy is the fact that the private respondent entered into the contract when Wage Order No. 6 had
already been in force. The contract was entered into in November 11, 1985 one year after the effectivity of DECISION
Wage Order No. 6 which was on November 1, 1984. The rates of the security guards as stipulated in the
contract did not consider the increases in the minimum wage mandated by Wage Order No. 6. Two years
after, the private respondent is now asking for an adjustment in the contract price pursuant to the wage order GONZAGA-REYES, J.:
provision.
In his petition for certiorari and prohibition with prayer for writ of preliminary injunction and/or temporary
Such action of the private respondent is rather disturbing and must not remain unchecked. In the complaint
restraining order, petitioner assails (a) the decision dated April 20, 1995, of public respondent National Labor
filed, the private respondent alleged that it requested the Regional Director, NCR Region of the Department of
Relations Commission (NLRC), Fourth (4th) Division, Cebu City, in NLRC Case No. V-0143-94 reversing the
Labor and Employment for their intercession in connection with the illegal bidding and award made by the
February 25, 1994 decision of Labor Arbiter Dennis D. Juanon and ordering petitioner to pay wages in the
petitioner in favor of Triad Security Agency which was below the minimum wage law. Undeniably, the private
aggregate amount of P6,485,767.90 to private respondents, and (b) the resolution dated July 28, 1995
respondent is equally guilty when it entered into the contract with the petitioner without considering Wage
denying petitioners motion for reconsideration, for having been issued with grave abuse of discretion.
Order No. 6.

The private respondent tries to explain that the Philippine Association of Detective and Protective Agency A temporary restraining order was issued by this Court on October 9, 1995 enjoining public respondent from
Operators (PADPAO) which fixes the contract rate of the security agencies was unable to fix the new contract executing the questioned decision upon a surety bond posted by petitioner in the amount of P6,400,000.00.[2]
rate until May 12, 1986.

We, however, agree with the posture that the setting of wages under PADPAO is of no moment. The PADPAO
memorandum was not necessary to make Wage Order No. 6 effective. The PADPAO memo was merely an
internal agreement among the operators to set the ceiling of the contract rates. It was aimed to curb the
practice of security agencies which were in cutthroat competition to request for wage adjustments after
proposals were accepted in good faith to the prejudice of the parties.chanrobles.com.ph : virtual law library
While it is true that security personnel should not be deprived of what is lawfully due them, it bears emphasis
that it was the private respondent which first deprived the security personnel of their rightful wage under Wage
The facts as found by the Labor Arbiter are as follows:[3]
"These are consolidated cases/claims for non-payment of salaries and wages, 13th
month pay, ECOLA and other fringe benefits as rice, medical and clothing allowances,
submitted by complainant Rodolfo M. Retiso and 163 others, Lyn E. Banilla and Wilson
B. Sallador against respondents Aklan Electric Cooperative, Inc. (AKELCO), Atty.
Leovigildo Mationg in his capacity as General Manager; Manuel Calizo, in his capacity
as Acting Board President, Board of Directors, AKELCO.

3
Complainants alleged that prior to the temporary transfer of the office of AKELCO from
Lezo Aklan to Amon Theater, Kalibo, Aklan, complainants were continuously
performing their task and were duly paid of their salaries at their main office located at
Lezo, Aklan.
That on January 22, 1992, by way of resolution of the Board of Directors of AKELCO
allowed the temporary transfer holding of office at Amon Theater, Kalibo, Aklan per
information by their Project Supervisor, Atty. Leovigildo Mationg, that their head office
is closed and that it is dangerous to hold office thereat;
Nevertheless, majority of the employees including herein complainants continued to
report for work at Lezo Aklan and were paid of their salaries.
That on February 6, 1992, the administrator of NEA, Rodrigo Cabrera, wrote a letter
addressed to the Board of AKELCO, that he is not interposing any objections to the
action taken by respondent Mationg
That on February 11, 1992, unnumbered resolution was passed by the Board of
AKELCO withdrawing the temporary designation of office at Kalibo, Aklan, and that the
daily operations must be held again at the main office of Lezo, Aklan;[4]
That complainants who were then reporting at the Lezo office from January 1992 up to
May 1992 were duly paid of their salaries, while in the meantime some of the
employees through the instigation of respondent Mationg continued to remain and
work at Kalibo, Aklan;
That from June 1992 up to March 18, 1993, complainants who continuously reported
for work at Lezo, Aklan in compliance with the aforementioned resolution were not paid
their salaries;
That on March 19, 1993 up to the present, complainants were again allowed to draw
their salaries; with the exception of a few complainants who were not paid their salaries
for the months of April and May 1993;
Per allegations of the respondents, the following are the facts:
1. That these complainants voluntarily abandoned their respective work/job
assignments, without any justifiable reason and without notifying the management of
the Aklan Electric Cooperative, Inc. (AKELCO), hence the cooperative suffered
damages and systems loss;
2. That the complainants herein defied the lawful orders and other issuances by the
General Manager and the Board of Directors of the AKELCO. These complainants
were requested to report to work at the Kalibo office x x x but despite these lawful
orders of the General Manager, the complainants did not follow and wilfully and
maliciously defied said orders and issuance of the General Manager; that the Board of
Directors passed a Resolution resisting and denying the claims of these complainants,
x x x under the principle of "no work no pay" which is legally justified; That these
complainants have "mass leave" from their customary work on June 1992 up to March
18, 1993 and had a "sit-down" stance for these periods of time in their alleged protest
of the appointment of respondent Atty. Leovigildo Mationg as the new General
Manager of the Aklan Electric Cooperative, Inc. (AKELCO) by the Board of Directors
and confirmed by the Administrator of the National Electrification Administration (NEA),
Quezon City; That they engaged in " . . . slowdown mass leaves, sit downs, attempts to
damage, destroy or sabotage plant equipment and facilities of the Aklan Electric
Cooperative, Inc. (AKELCO)."
On February 25, 1994, a decision was rendered by Labor Arbiter Dennis D. Juanon dismissing the
complaints.[5]
Dissatisfied with the decision, private respondents appealed to the respondent Commission.
On appeal, the NLRCs Fourth Division, Cebu City,[6] reversed and set aside the Labor Arbiters decision and
held that private respondents are entitled to unpaid wages from June 16, 1992 to March 18, 1993, thus:[7]
"The evidence on records, more specifically the evidence submitted by the
complainants, which are: the letter dated April 7, 1993 of Pedrito L. Leyson, Office
Manager of AKELCO (Annex "C"; complainants position paper; Rollo, p.102)
addressed to respondent Atty. Leovigildo T. Mationg; respondent AKELCO General
Manager; the memorandum of said Atty. Mationg dated 14 April 1993, in answer to the
letter of Pedrito Leyson (Annex "D" complainants position paper); as well as the
computation of the unpaid wages due to complainants (Annexes "E" to "E-3";
complainants position paper, Rollo, pages 1024 to 1027) clearly show that
complainants had rendered services during the period - June 16, 1992 to March 18,
1993. The record is bereft of any showing that the respondents had submitted any
evidence, documentary or otherwise, to controvert this asseveration of the
complainants that services were rendered during this period. Subjecting these
evidences submitted by the complainants to the crucible of scrutiny, We find that
respondent Atty. Mationg responded to the request of the Office Manager, Mr. Leyson,
which We quote, to wit:
"Rest assured that We shall recommend your aforesaid request
to our Board of Directors for their consideration and appropriate
action. This payment, however, shall be subject, among others,
to the availability of funds."
This assurance is an admission that complainants are entitled to payment for services
rendered from June 16, 1992 to March 18, 1993, specially so that the recommendation
and request comes from the office manager himself who has direct knowledge
regarding the services and performance of employees under him. For how could one
office manager recommend payment of wages, if no services were rendered by
employees under him. An office manager is the most qualified person to know the
performance of personnel under him. And therefore, any request coming from him for
payment of wages addressed to his superior as in the instant case shall be given
weight.
Furthermore, the record is clear that complainants were paid of their wages and other
fringe benefits from January, 1992 to May, 1992 and from March 19, 1993 up to the
time complainants filed the instant cases. In the interegnum, from June 16, 1992 to
March 18, 1993, complainants were not paid of their salaries, hence these claims. We
could see no rhyme nor reason in respondents refusal to pay complainants salaries
during this period when complainants had worked and actually rendered service to
AKELCO.
While the respondents maintain that complainants were not paid during this interim
period under the principle of "no work, no pay", however, no proof was submitted by
the respondents to substantiate this allegation. The labor arbiter, therefore, erred in
dismissing the claims of the complainants, when he adopted the "no work, no pay"
principle advanced by the respondents.
WHEREFORE, in view of the foregoing, the appealed decision dated February 25,
1994 is hereby Reversed and Set Aside and a new one entered ordering respondent
AKELCO to pay complainants their claims amounting to P6,485,767.90 as shown in
the computation (Annexes "E" to "E-3")."
4
A motion for reconsideration was filed by petitioner but the same was denied by public respondent in a
resolution dated July 28, 1995.[8]
Petitioner brought the case to this Court alleging that respondent NLRC committed grave abuse of discretion
citing the following grounds:[9]
1. PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION IN
REVERSING THE FACTUAL FINDINGS AND CONCLUSIONS OF THE LABOR
ARBITER, AND DISREGARDING THE EXPRESS ADMISSION OF PRIVATE
RESPONDENTS THAT THEY DEFIED PETITIONERS ORDER TRANSFERRING
THE PETITIONERS OFFICIAL BUSINESS OFFICE FROM LEZO TO KALIBO AND
FOR THEM TO REPORT THEREAT.
2. PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION IN
CONCLUDING THAT PRIVATE RESPONDENTS WERE REALLY WORKING OR
RENDERING SERVICE ON THE BASIS OF THE COMPUTATION OF WAGES AND
THE BIASED RECOMMENDATION SUBMITTED BY LEYSON WHO IS ONE OF THE
PRIVATE RESPONDENTS WHO DEFIED THE LAWFUL ORDERS OF PETITIONER.
3. PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION IN
CONSIDERING THE ASSURANCE BY PETITIONERS GENERAL MANAGER
MATIONG TO RECOMMEND THE PAYMENT OF THE CLAIMS OF PRIVATE
RESPONDENTS AS AN ADMISSION OF LIABILITY OR A RECOGNITION THAT
COMPENSABLE SERVICES WERE ACTUALLY RENDERED.
4. GRANTING THAT PRIVATE RESPONDENTS CONTINUED TO REPORT AT THE
LEZO OFFICE, IT IS STILL GRAVE ABUSE OF DISCRETION FOR PUBLIC
RESPONDENT TO CONSIDER THAT PETITIONER IS LEGALLY OBLIGATED TO
RECOGNIZE SAID CIRCUMSTANCE AS COMPENSABLE SERVICE AND PAY
WAGES TO PRIVATE RESPONDENTS FOR DEFYING THE ORDER FOR THEM TO
REPORT FOR WORK AT THE KALIBO OFFICE WHERE THE OFFICIAL BUSINESS
AND OPERATIONS WERE CONDUCTED.
5. PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION AND
SERIOUS, PATENT AND PALPABLE ERROR IN RULING THAT THE "NO WORK,
NO PAY" PRINCIPLE DOES NOT APPLY FOR LACK OF EVIDENTIARY SUPPORT
WHEN PRIVATE REPONDENTS ALREADY ADMITTED THAT THEY DID NOT
REPORT FOR WORK AT THE KALIBO OFFICE.
6. PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION IN
ACCORDING WEIGHT AND CREDIBILITY TO THE SELF-SERVING AND BIASED
ALLEGATIONS OF PRIVATE RESPONDENTS, AND ACCEPTING THEM AS
PROOF, DESPITE THE ESTABLISHED FACT AND ADMISSION THAT PRIVATE
RESPONDENTS DID NOT REPORT FOR WORK AT THE KALIBO OFFICE, OR
THAT THEY WERE NEVER PAID FOR ANY WAGES FROM THE TIME THEY
DEFIED PETITIONERS ORDERS.
Petitioner contends that public respondent committed grave abuse of discretion in finding that private
respondents are entitled to their wages from June 16, 1992 to March 18, 1993, thus disregarding the principle
of "no work, no pay". It alleges that private respondents stated in their pleadings that they not only objected to
the transfer of petitioners business office to Kalibo but they also defied the directive to report thereat because
they considered the transfer illegal. It further claims that private respondents refused to recognize the authority
of petitioners lawful officers and agents resulting in the disruption of petitioners business operations in its
official business office in Lezo, AKlan, forcing petitioner to transfer its office from Lezo to Kalibo transferring all
its equipments, records and facilities; that private respondents cannot choose where to work, thus, when they
defied the lawful orders of petitioner to report at Kalibo, private respondents were considered dismissed as far
as petitioner was concerned. Petitioner also disputes private respondents allegation that they were paid their
salaries from January to May 1992 and again from March 19, 1993 up to the present but not for the period
from June 1992 to March 18, 1993 saying that private respondents illegally collected fees and charges due
petitioner and appropriated the collections among themselves for which reason they are claiming salaries only
for the period from June 1992 to March 1993 and that private respondents were paid their salaries starting
only in April 1993 when petitioners Board agreed to accept private respondents back to work at Kalibo office
out of compassion and not for the reason that they rendered service at the Lezo office. Petitioner also adds
that compensable service is best shown by timecards, payslips and other similar documents and it was an
error for public respondent to consider the computation of the claims for wages and benefits submitted merely
by private respondents as substantial evidence.
The Solicitor General filed its Manifestation in lieu of Comment praying that the decision of respondent NLRC
be set aside and payment of wages claimed by private respondents be denied for lack of merit alleging that
private respondents could not have worked for petitioner's office in Lezo during the stated period since
petitioner transferred its business operation in Kalibo where all its records and equipments were brought; that
computations of the claims for wages and benefits submitted by private respondents to petitioner is not proof
of rendition of work. Filing its own Comment, public respondent NLRC claims that the original and exclusive
jurisdiction of this Court to review decisions or resolutions of respondent NLRC does not include a correction
of its evaluation of evidence as factual issues are not fit subject for certiorari.
Private respondents, in their Comment, allege that review of a decision of NLRC in a petition
for certiorari under Rule 65 does not include the correctness of its evaluation of the evidence but is confined to
issues of jurisdiction or grave abuse of discretion and that factual findings of administrative bodies are entitled
to great weight, and accorded not only respect but even finality when supported by substantial evidence. They
claim that petitioner's Board of Directors passed an unnumbered resolution on February 11, 1992 returning
back the office to Lezo from Kalibo Aklan with a directive for all employees to immediately report at Lezo; that
the letter-reply of Atty. Mationg to the letter of office manager Leyson that he will recommend the payment of
the private respondents' salary from June 16, 1992 to March 18, 1993 to the Board of Directors was an
admission that private respondents are entitled to such payment for services rendered. Private respondents
state that in appreciating the evidence in their favor, public respondent NLRC at most may be liable for errors
of judgment which, as differentiated from errors of jurisdiction, are not within the province of the special civil
action of certiorari.
Petitioner filed its Reply alleging that review of the decision of public respondent is proper if there is a conflict
in the factual findings of the labor arbiter and the NLRC and when the evidence is insufficient and insubstantial
to support NLRCs factual findings; that public respondents findings that private respondents rendered
compensable services were merely based on private respondents computation of claims which is self-serving;
that the alleged unnumbered board resolution dated February 11, 1992, directing all employees to report to
Lezo Office was never implemented because it was not a valid action of AKELCOs legitimate board.
The sole issue for determination is whether or not public respondent NLRC committed grave abuse of
discretion amounting to excess or want of jurisdiction when it reversed the findings of the Labor Arbiter that
private respondents refused to work under the lawful orders of the petitioner AKELCO management; hence
they are covered by the "no work, no pay" principle and are thus not entitled to the claim for unpaid wages
from June 16, 1992 to March 18, 1993.
We find merit in the petition.
At the outset, we reiterate the rule that in certiorari proceedings under Rule 65, this Court does not assess and
weigh the sufficiency of evidence upon which the labor arbiter and public respondent NLRC based their
resolutions. Our query is limited to the determination of whether or not public respondent NLRC acted without
or in excess of its jurisdiction or with grave abuse of discretion in rendering the assailed resolutions.[10] While
administrative findings of fact are accorded great respect, and even finality when supported by substantial
evidence, nevertheless, when it can be shown that administrative bodies grossly misappreciated evidence of
such nature as to compel a contrary conclusion, this court had not hesitated to reverse their factual
findings.[11] Factual findings of administrative agencies are not infallible and will be set aside when they fail the
test of arbitrariness.[12] Moreover, where the findings of NLRC contradict those of the labor arbiter, this Court,
in the exercise of its equity jurisdiction, may look into the records of the case and reexamine the questioned
findings.[13]
We find cogent reason, as shown by the petitioner and the Solicitor General, not to affirm the factual findings
of public respondent NLRC.
5
We do not agree with the finding that private respondents had rendered services from June 16, 1992 to March Complainants thus could not be considered to have abandoned their work as Lezo
18, 1993 so as to entitle them to payment of wages. Public respondent based its conclusion on the following: remained to be their office and not Kalibo despite the temporary transfer thereto.
(a) the letter dated April 7, 1993 of Pedrito L. Leyson, Office Manager of AKELCO addressed to AKELCOs Further the fact that they were allowed to draw their salaries up to May, 1992 is an
General Manager, Atty. Leovigildo T. Mationg, requesting for the payment of private respondents unpaid acknowledgment by the management that they are working during the period.
wages from June 16, 1992 to March 18, 1993; (b) the memorandum of said Atty. Mationg dated 14 April 1993,
in answer to the letter request of Pedrito Leyson where Atty. Mationg made an assurance that he will
recommend such request; (c) the private respondents own computation of their unpaid wages. We find that xxx
the foregoing does not constitute substantial evidence to support the conclusion that private respondents are
entitled to the payment of wages from June 16, 1992 to March 18, 1993. Substantial evidence is that amount
It must be pointed out that complainants worked and continuously reported at Lezo
of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion. [14] These
office despite the management holding office at Kalibo. In fact, they were paid their
evidences relied upon by public respondent did not establish the fact that private respondents actually
wages before it was withheld and then were allowed to draw their salaries again on
rendered services in the Kalibo office during the stated period.
March 1993 while reporting at Lezo up to the present.

The letter of Pedrito Leyson to Atty. Mationg was considered by public respondent as evidence that services
Respondents acts and payment of complainants salaries and again from March 1993
were rendered by private respondents during the stated period, as the recommendation and request came
is an unequivocal recognition on the part of respondents that the work of complainants
from the office manager who has direct knowledge regarding the services and performance of employees
is continuing and uninterrupted and they are therefore entitled to their unpaid wages for
under him. We are not convinced. Pedrito Leyson is one of the herein private respondents who are claiming
the period from June 1992 to March 1993."
for unpaid wages and we find his actuation of requesting in behalf of the other private respondents for the
payment of their backwages to be biased and self-serving, thus not credible.
The admission is detrimental to private respondents cause. Their excuse is that the transfer to Kalibo was
illegal but we agree with the Labor Arbiter that it was not for private respondents to declare the managements
On the other hand, petitioner was able to show that private respondents did not render services during the
act of temporarily transferring the AKELCO office to Kalibo as an illegal act. There is no allegation nor proof
stated period. Petitioners evidences show that on January 22, 1992, petitioners Board of Directors passed a
that the transfer was made in bad faith or with malice. The Labor Arbiter correctly rationalized in its decision as
resolution temporarily transferring the Office from Lezo, Aklan to Amon Theater, Kalibo, Aklan upon the
follows:[18]
recommendation of Atty. Leovigildo Mationg, then project supervisor, on the ground that the office at Lezo was
dangerous and unsafe. Such transfer was approved by then NEA Administrator, Rodrigo E. Cabrera, in a
letter dated February 6, 1992 addressed to petitioners Board of Directors.[15] Thus, the NEA Administrator, in "We do not subscribe to complainants theory and assertions. They, by their own
the exercise of supervision and control over all electric cooperatives, including petitioner, wrote a letter dated allegations, have unilaterally committed acts in violation of managements/respondents
February 6, 1992 addressed to the Provincial Director PC/INP Kalibo Aklan requesting for military assistance directives purely classified as management prerogative. They have taken amongst
for the petitioners team in retrieving the electric cooperatives equipments and other removable facilities and/or themselves declaring managements acts of temporarily transferring the holding of the
fixtures consequential to the transfer of its principal business address from Lezo to Kalibo and in maintaining AKELCO office from Lezo to Kalibo, Aklan as illegal. It is never incumbent upon
peace and order in the cooperatives coverage area.[16] The foregoing establishes the fact that the continuous themselves to declare the same as such. It is lodged in another forum or body legally
operation of the petitioners business office in Lezo Aklan would pose a serious and imminent threat to mantled to do the same. What they should have done was first to follow managements
petitioners officials and other employees, hence the necessity of temporarily transferring the operation of its orders temporarilytransferring office for it has the first presumption of legality. Further,
business office from Lezo to Kalibo. Such transfer was done in the exercise of a management prerogative and the transfer was only temporary. For:
in the absence of contrary evidence is not unjustified. With the transfer of petitioners business office from its
former office, Lezo, to Kalibo, Aklan, its equipments, records and facilities were also removed from Lezo and
brought to the Kalibo office where petitioners official business was being conducted; thus private respondents "The employer as owner of the business, also has inherent
allegations that they continued to report for work at Lezo to support their claim for wages has no basis. rights, among which are the right to select the persons to be
hired and discharge them for just and valid cause; to
promulgate and enforce reasonable employment rules and
Moreover, private respondents in their position paper admitted that they did not report at the Kalibo office, as regulations and to modify, amend or revoke the same; to
Lezo remained to be their office where they continuously reported, to wit:[17] designate the work as well as the employee or employees to
perform it; to transfer or promote employees; to schedule,
direct, curtail or control company operations; to introduce or
"On January 22, 1991 by way of a resolution of the Board of Directors of AKELCO it
install new or improved labor or money savings methods,
allowed the temporary holding of office at Amon Theater, Kalibo, Aklan, per information
facilities or devices; to create, merge, divide, reclassify and
by their project supervisor, Atty. Leovigildo Mationg that their head office is closed and
abolish departments or positions in the company and to sell or
that it is dangerous to hold office thereat.
close the business.

Nevertheless, majority of the employees including the herein complainants, continued

xxx
to report for work at Lezo, Aklan and were paid of their salaries.

Even as the law is solicitous of the welfare of the employees it

xxx
must also protect the right of an employer to exercise what are
clearly management prerogatives. The free will of management
The transfer of office from Lezo, Aklan to Kalibo, Aklan being illegal for failure to to conduct its own business affairs to achieve its purpose can
comply with the legal requirements under P.D. 269, the complainants remained and not be denied. The transfer of assignment of a medical
continued to work at the Lezo Office until they were illegally locked out therefrom by representative from Manila to the province has therefore been
the respondents. Despite the illegal lock out however, complainants continued to report held lawful where this was demanded by the requirements of
daily to the location of the Lezo Office, prepared to continue in the performance of their the drug companys marketing operations and the former had at
regular duties. the time of his employment undertaken to accept assignment
anywhere in the Philippines. (Abbot Laboratories (Phils.), Inc.,
et al. vs. NLRC, et al., G.R. No. L-76959, Oct. 12, 1987).

6
 It is the employers prerogative to abolish a position which it deems no longer
necessary, and the courts, absent any findings of malice on the part of the
management, cannot erase that initiative simply to protect the person holding office
(Great Pacific Life Assurance Corporation vs. NLRC, et al., G.R. No. 88011, July 30,
1990)."
Private respondents claim that petitioners Board of Directors passed an unnumbered resolution dated
February 11, 1992 returning back the office from its temporary office in Kalibo to Lezo. Thus, they did not defy
any lawful order of petitioner and were justified in continuing to remain at Lezo office. This allegation was
controverted by petitioner in its Reply saying that such unnumbered resolution was never implemented as it
was not a valid act of petitioners Board. We are convinced by petitioners argument that such unnumbered
resolution was not a valid act of petitioners legitimate Board considering the subsequent actions taken by the
petitioners Board of Directors decrying private respondents inimical act and defiance, to wit (1) Resolution No.
411, s. of 1992 on September 9, 1992, dismissing all AKELCO employees who were on illegal strike and who
refused to return to work effective January 31, 1992 despite the directive of the NEA project supervisor and
petitioners acting general manager;[19] (2) Resolution No. 477, s. of 1993 dated March 10, 1993 accepting
back private respondents who staged illegal strike, defied legal orders and issuances, out of compassion,
reconciliation, Christian values and humanitarian reason subject to the condition of "no work, no pay" [20] (3)
Resolution No. 496, s. of 1993 dated June 4, 1993, rejecting the demands of private respondents for
backwages from June 16, 1992 to March 1993 adopting the policy of "no work, no pay" as such demand has
no basis, and directing the COOP Legal Counsel to file criminal cases against employees who
misappropriated collections and officers who authorized disbursements of funds without legal authority from
the NEA and the AKELCO Board.[21] If indeed there was a valid board resolution transferring back petitioners
office to Lezo from its temporary office in Kalibo, there was no need for the Board to pass the above-cited
resolutions.
We are also unable to agree with public respondent NLRC when it held that the assurance made by Atty.
Mationg to the letter-request of office manager Leyson for the payment of private respondents wages from
June 1992 to March 1993 was an admission on the part of general manager Mationg that private respondents
are indeed entitled to the same. The letter reply of Atty. Mationg to Leyson merely stated that he will
recommend the request for payment of backwages to the Board of Directors for their consideration and
appropriate action and nothing else, thus, the ultimate approval will come from the Board of Directors. We find
well-taken the argument advanced by the Solicitor General as follows:[22]
The allegation of private respondents that petitioner had already approved payment of
their wages is without basis. Mationgs offer to recommend the payment of private
respondents' wages is hardly approval of their claim for wages. It is just an undertaking
to recommend payment. Moreover, the offer is conditional. It is subject to the condition
that petitioners Board of Directors will give its approval and that funds were available.
Mationgs reply to Leysons letter for payment of wages did not constitute approval or
assurance of payment. The fact is that, the Board of Directors of petitioner rejected
private respondents demand for payment (Board Resolution No. 496, s. 1993).
We are accordingly constrained to overturn public respondents findings that petitioner is not justified in its
refusal to pay private respondents wages and other fringe benefits from June 16, 1992 to March 18, 1993;
public respondents stated that private respondents were paid their salaries from January to May 1992 and
again from March 19, 1993 up to the present. As cited earlier, petitioners Board in a Resolution No. 411 dated
September 9, 1992 dismissed private respondents who were on illegal strike and who refused to report for
work at Kalibo office effective January 31, 1992; since no services were rendered by private respondents they
were not paid their salaries. Private respondents never questioned nor controverted the Resolution dismissing
them and nowhere in their Comment is it stated that they questioned such dismissal. Private respondents also
have not rebutted petitioners claim that private respondents illegally collected fees and charges due petitioner
and appropriated the collections among themselves to satisfy their salaries from January to May 1992, for
which reason, private respondents are merely claiming salaries only for the period from June 16, 1992 to
March 1993.
Private respondents were dismissed by petitioner effective January 31, 1992 and were accepted back by
petitioner, as an act of compassion, subject to the condition of "no work, no pay" effective March 1993 which
explains why private respondents were allowed to draw their salaries again. Notably, the letter-request of Mr.
Leyson for the payment of backwages and other fringe benefits in behalf of private respondents was made
only in April 1993, after a Board Resolution accepting them back to work out of compassion and humanitarian
reason. It took private respondents about ten months before they requested for the payment of their
backwages, and the long inaction of private respondents to file their claim for unpaid wages cast doubts as to
the veracity of their claim.
The age-old rule governing the relation between labor and capital, or management and employee of a "fair
days wage for a fair days labor" remains as the basic factor in determining employees wages. If there is no
work performed by the employee there can be no wage or pay unless, of course, the laborer was able, willing
and ready to work but was illegally locked out, suspended or dismissed,[23] or otherwise illegally prevented
from working,[24] a situation which we find is not present in the instant case. It would neither be fair nor just to
allow private respondents to recover something they have not earned and could not have earned because
they did not render services at the Kalibo office during the stated period.
Finally, we hold that public respondent erred in merely relying on the computations of compensable services
submitted by private respondents. There must be competent proof such as time cards or office records to
show that they actually rendered compensable service during the stated period to entitle them to wages. It has
been established that the petitioners business office was transferred to Kalibo and all its equipments, records
and facilities were transferred thereat and that it conducted its official business in Kalibo during the period in
question. It was incumbent upon private respondents to prove that they indeed rendered services for
petitioner, which they failed to do. It is a basic rule in evidence that each party must prove his affirmative
allegation. Since the burden of evidence lies with the party who asserts the affirmative allegation, the plaintiff
or complainant has to prove his affirmative allegations in the complaint and the defendant or the respondent
has to prove the affirmative allegation in his affirmative defenses and counterclaim.[25]
WHEREFORE, in view of the foregoing, the petition for CERTIORARI is GRANTED. Consequently the
decision of public respondent NLRC dated April 20, 1995 and the Resolution dated July 28, 1995 in NLRC
Case No. V-0143-94 are hereby REVERSED and SET ASIDE for having been rendered with grave abuse of
discretion amounting to lack or excess of jurisdiction. Private respondents complaint for payment of unpaid
wages before the Labor Arbiter is DISMISSED.
SO ORDERED.
[G.R. No. 140689. February 17, 2004]
BANKARD EMPLOYEES UNION-WORKERS ALLIANCE TRADE UNIONS, petitioner, vs. NATIONAL
LABOR RELATIONS COMMISSION and BANKARD, INC., respondents.
DECISION
CARPIO MORALES, J.:
The present Petition for Review on Certiorari under Rule 45 of the Rules of Court raises the issue of
whether the unilateral adoption by an employer of an upgraded salary scale that increased the hiring rates of
new employees without increasing the salary rates of old employees resulted in wage distortion within the
contemplation of Article 124 of the Labor Code.
Bankard, Inc. (Bankard) classifies its employees by levels, to wit: Level I, Level II, Level III, Level IV,
and Level V. On May 28, 1993, its Board of Directors approved a New Salary Scale, made retroactive to April
1, 1993, for the purpose of making its hiring rate competitive in the industrys labor market. The New Salary
Scale increased the hiring rates of new employees, to wit: Levels I and V by one thousand pesos (P1,000.00),
7
and Levels II, III and IV by nine hundred pesos (P900.00). Accordingly, the salaries of employees who fell Public respondent National Labor Relations Commission (NLRC) refutes petitioners position, however.
below the new minimum rates were also adjusted to reach such rates under their levels. It, through the Office of the Solicitor General, essays in its Comment of April 12, 2000 as follows:

Bankards move drew the Bankard Employees Union-WATU (petitioner), the duly certified exclusive
bargaining agent of the regular rank and file employees of Bankard, to press for the increase in the salary of To determine the existence of wage distortion, the historical classification of the employees prior to the wage
its old, regular employees. increase must be established. Likewise, it must be shown that as between the different classification of
employees, there exists a historical gap or difference.
Bankard took the position, however, that there was no obligation on the part of the management to
grant to all its employees the same increase in an across-the-board manner.
xxx
As the continued request of petitioner for increase in the wages and salaries of Bankards regular
employees remained unheeded, it filed a Notice of Strike on August 26, 1993 on the ground of discrimination
The classification preferred by petitioner is belied by the wage structure of private respondent as shown in the
and other acts of Unfair Labor Practice (ULP).
new salary scale it adopted on May 28, 1993, retroactive to April 1, 1993, which provides, thus:
A director of the National Conciliation and Mediation Board treated the Notice of Strike as a Preventive
Mediation Case based on a finding that the issues therein were not strikeable.
Hiring Minimum Maximum
Petitioner filed another Notice of Strike on October 8, 1993 on the grounds of refusal to bargain, Level From To From To From To
discrimination, and other acts of ULP - union busting. The strike was averted, however, when the dispute was I 3,100 4,100 3,200 4,200 7,200 9,2
certified by the Secretary of Labor and Employment for compulsory arbitration. II 3,200 4,100 3,300 4,200 7,500 9,5
III 3,300 4,200 3,400 4,300 8,000 10,
The Second Division of the NLRC, by Order of May 31, 1995, finding no wage distortion, dismissed the IV 3,500 4,400 3,600 4,500 8,500 10,
case for lack of merit. V 3,700 4,700 3,800 4,800 9,000 11,

Petitioners motion for reconsideration of the dismissal of the case was, by Resolution of July 28, 1995,
denied.
Petitioner thereupon filed a petition for certiorari before this Court, docketed as G.R. 121970. In
accordance with its ruling in St. Martin Funeral Homes v. NLRC,[1] the petition was referred to the Court of
Appeals which, by October 28, 1999, denied the same for lack of merit.
Hence, the present petition which faults the appellate court as follows:
Thus the employees of private respondent have been historically classified into levels, i.e. I to V, and not
on the basis of their length of service. Put differently, the entry of new employees to the company ipso facto
place[s] them under any of the levels mentioned in the new salary scale which private respondent adopted
retroactive [to] April 1, 1993. Petitioner cannot make a contrary classification of private respondents
employees without encroaching upon recognized management prerogative of formulating a wage structure,
in this case, one based on level.[7] (Emphasis and underscoring supplied)

(1) It misapprehended the basic issues when it concluded that under Bankards new wage
structure, the old salary gaps between the different classification or level of employees were
still reflected by the adjusted salary rates[2]; and
(2) It erred in concluding that wage distortion does not appear to exist, which conclusion is
manifestly contrary to law and jurisprudence.[3]
Upon the enactment of R.A. No. 6727 (WAGE RATIONALIZATION ACT, amending, among others,
Article 124 of the Labor Code) on June 9, 1989, the term wage distortion was explicitly defined as:
... a situation where an increase in prescribed wage rates results in the elimination or 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.[4]
Prubankers Association v. Prudential Bank and Trust Company[5] laid down the four elements of wage
distortion, to wit: (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; and (4) The existence of the distortion in the
same region of the country.
Normally, a company has a wage structure or method of determining the wages of its employees. In a
problem dealing with wage distortion, the basic assumption is that there exists a grouping or classification of
employees that establishes distinctions among them on some relevant or legitimate bases.[6]
Involved in the classification of employees are various factors such as the degrees of responsibility, the
skills and knowledge required, the complexity of the job, or other logical basis of differentiation. The differing
wage rate for each of the existing classes of employees reflects this classification.
Petitioner maintains that for purposes of wage distortion, the classification is not one based on levels or
ranks but on two groups of employees, the newly hired and the old, in each and every level, and not between
and among the different levels or ranks in the salary structure.
The issue of whether wage distortion exists being a question of fact that is within the jurisdiction of
quasi-judicial tribunals,[8] and it being a basic rule that findings of facts of quasi-judicial agencies, like the
NLRC, are generally accorded not only respect but at times even finality if they are supported by substantial
evidence, as are the findings in the case at bar, they must be respected. For these agencies have acquired
expertise, their jurisdiction being confined to specific matters.[9]
It is thus clear that there is no hierarchy of positions between the newly hired and regular employees of
Bankard, hence, the first element of wage distortion provided in Prubankers is wanting.
While seniority may be a factor in determining the wages of employees, it cannot be made
the sole basis in cases where the nature of their work differs.
Moreover, for purposes of determining the existence of wage distortion, employees cannot create their
own independent classification and use it as a basis to demand an across-the-board increase in salary.
As National Federation of Labor v. NLRC, et al.[10] teaches, the formulation of a wage structure through
the classification of employees is a matter of management judgment and discretion.
[W]hether or not a new additional scheme of classification of employees for compensation purposes should be
established by the Company (and the legitimacy or viability of the bases of distinction there embodied) is
properly a matter of management judgment and discretion, and ultimately, perhaps, a subject matter
for bargaining negotiations between employer and employees. It is assuredly something that falls outside
the concept of wage distortion.[11] (Emphasis and underscoring supplied)
As did the Court of Appeals, this Court finds that the third element provided in Prubankers is also
wanting. For, as the appellate court explained:
In trying to prove wage distortion, petitioner union presented a list of five (5) employees allegedly
affected by the said increase:
Pay of Old/ Pay of Newly Difference
Regular Employees Hired Employees

8
A. Prior to April 1, 1993 present case, the need to increase the competitiveness of Bankards hiring rate. An employer would be
Level I P4,518.75 P3,100 P1,418.75discouraged from adjusting the salary rates of a particular group of employees for fear that it would result to a
(Sammy Guce) demand by all employees for a similar increase, especially if the financial conditions of the business cannot
Level II P6,242.00 P3,200 P3,042.00address an across-the-board increase.
(Nazario Abello)
Level III P4,850.00 P3,300 P1,550.00 Petitioner cites Metro Transit Organization, Inc. v. NLRC[13] to support its claim that the obligation to
(Arthur Chavez) rectify wage distortion is not confined to wage distortion resulting from government decreed law or wage order.
Level IV P5,339.00 P3,500 P1,839.00
Reliance on Metro Transit is however misplaced, as the obligation therein to rectify the wage distortion
Melissa Cordero)
was not by virtue of Article 124 of the Labor Code, but on account of a then existing company practice that
Level V P7,090.69 P3,700 P3,390.69
whenever rank-and-file employees were paid a statutorily mandated salary increase, supervisory employees
(Ma. Lourdes Dee)
were, as a matter of practice, also paid the same amount plus an added premium. Thus this Court held in said
B. Effective April 1, 1993 case:
Level I P4,518.75 P4,100 P418.75
Sammy Guce)
Level II P6,242.00 P4,100 P2,142.00We conclude that the supervisory employees, who then (i.e., on April 17, 1989) had, unlike the rank-and-file
(Nazario Abello) employees, no CBA governing the terms and conditions of their employment, had the right to rely on
Level III P4,850.00 P4,200 P650.00 the company practice of unilaterally correcting the wage distortion effects of a salary increase given to the
(Arthur Chavez) rank-and-file employees, by giving the supervisory employees a corresponding salary increase plus a
Level IV P5,330.00 P4,400 P939.00 premium. . . .[14](Emphasis supplied)
(Melissa Cordero)
Level V P7,090.69 P4,700 P2,390.69
(Ma. Lourdes Dee) Wage distortion is a factual and economic condition that may be brought about by different causes.
In Metro Transit, the reduction or elimination of the normal differential between the wage rates of rank-and-file
and those of supervisory employees was due to the granting to the former of wage increase which was,
Even assuming that there is a decrease in the wage gap between the pay of the old employees and the newly however, denied to the latter group of employees.
hired employees, to Our mind said gap is not significant as to obliterate or result in severe contraction of the
intentional quantitative differences in the salary rates between the employee group. As already stated, the The mere factual existence of wage distortion does not, however, ipso facto result to an obligation to
classification under the wage structure is based on the rank of an employee, not on seniority. For this reason, rectify it, absent a law or other source of obligation which requires its rectification.
,wage distortion does not appear to exist.[12] (Emphasis and underscoring supplied)
Unlike in Metro Transit then where there existed a company practice, no such management practice is
herein alleged to obligate Bankard to provide an across-the-board increase to all its regular employees.
Apart from the findings of fact of the NLRC and the Court of Appeals that some of the elements of wage
distortion are absent, petitioner cannot legally obligate Bankard to correct the alleged wage distortion as the Bankards right to increase its hiring rate, to establish minimum salaries for specific jobs, and to adjust
increase in the wages and salaries of the newly-hired was not due to a prescribed law or wage order. the rates of employees affected thereby is embodied under Section 2, Article V (Salary and Cost of Living
Allowance) of the parties Collective Bargaining Agreement (CBA), to wit:
The wordings of Article 124 are clear. If it was the intention of the legislators to cover all kinds of wage
adjustments, then the language of the law should have been broad, not restrictive as it is currently phrased:
Section 2. Any salary increase granted under this Article shall be without prejudice to the right of the Company
to establish such minimum salaries as it may hereafter find appropriate for specific jobs, and to adjust the
Article 124. Standards/Criteria for Minimum Wage Fixing. rates of the employees thereby affected to such minimum salaries thus established.[15] (Italics and
underscoring supplied)

xxx
Where the application of any prescribed wage increase by virtue of a law or Wage Order issued by any
Regional Board results in distortions of the wage structure within an establishment, the employer and the
union shall negotiate to correct the distortions. Any dispute arising from the wage distortions shall be resolved
through the grievance procedure under their collective bargaining agreement and, if it remains unresolved,
through voluntary arbitration.
This CBA provision, which is based on legitimate business-judgment prerogatives of the employer, is a
valid and legally enforceable source of rights between the parties.
In fine, absent any indication that the voluntary increase of salary rates by an employer was done
arbitrarily and illegally for the purpose of circumventing the laws or was devoid of any legitimate purpose other
than to discriminate against the regular employees, this Court will not step in to interfere with this management
prerogative. Employees are of course not precluded from negotiating with its employer and lobby for wage
increases through appropriate channels, such as through a CBA.

x x x (Italics and emphasis supplied)
Article 124 is entitled Standards/Criteria for Minimum Wage Fixing. It is found in CHAPTER V on
WAGE STUDIES, WAGE AGREEMENTS AND WAGE DETERMINATION which principally deals with the
fixing of minimum wage. Article 124 should thus be construed and correlated in relation to minimum wage
fixing, the intention of the law being that in the event of an increase in minimum wage, the distinctions
embodied in the wage structure based on skills, length of service, or other logical bases of differentiation will
be preserved.
This Court, time and again, has shown concern and compassion to the plight of workers in adherence
to the Constitutional provisions on social justice and has always upheld the right of workers to press for better
terms and conditions of employment. It does not mean, however, that every dispute should be decided in favor
of labor, for employers correspondingly have rights under the law which need to be respected.
WHEREFORE, the present petition is hereby DENIED.
SO ORDERED.

If the compulsory mandate under Article 124 to correct wage distortion is applied to voluntary and
unilateral increases by the employer in fixing hiring rates which is inherently a business judgment prerogative,
then the hands of the employer would be completely tied even in cases where an increase in wages of a
particular group is justified due to a re-evaluation of the high productivity of a particular group, or as in the

9
[G.R. No. 121927. April 22, 1998] WHEREFORE, premises considered, judgment is hereby rendered ordering the respondent Antonio W. Iran to
pay the complainants the following:

1. Celso Labiaga P10,033.10

2. Godofredo Petralba 1,250.00
ANTONIO W. IRAN (doing business under the name and style of Tones Iran Enterprises), petitioner, 3. Fernando Colina 11,753.10
vs. NATIONAL LABOR RELATIONS COMMISSION (Fourth Division), GODOFREDO O. 4. Moreno Cadalso 11,753.10
PETRALBA, MORENO CADALSO, PEPITO TECSON, APOLINARIO GOTHONG GEMINA, 5. Diosdado Gonzalgo 7,159.04
JESUS BANDILAO, EDWIN MARTIN, CELSO LABIAGA, DIOSDADO GONZALGO, 6. Apolinario Gimena 8,312.24
FERNANDO M. COLINA, respondents. 7. Jesus Bandilao 14,729.50
8. Pepito Tecson 9,126.55
---------------
DECISION

ROMERO, J.: 74,116.63

Whether or not commissions are included in determining compliance with the minimum wage Attorneys Fees (10%)
requirement is the principal issue presented in this petition. of the gross award 7,411.66
-------------
Petitioner Antonio Iran is engaged in softdrinks merchandising and distribution in Mandaue City, Cebu,
employing truck drivers who double as salesmen, truck helpers, and non-field personnel in pursuit
thereof. Petitioner hired private respondents Godofredo Petralba, Moreno Cadalso, Celso Labiaga and GRAND TOTAL AWARD P81,528.29
Fernando Colina as drivers/salesmen while private respondents Pepito Tecson, Apolinario Gimena, Jesus ========
Bandilao, Edwin Martin and Diosdado Gonzalgo were hired as truck helpers. Drivers/salesmen drove
petitioners delivery trucks and promoted, sold and delivered softdrinks to various outlets in Mandaue City. The
truck helpers assisted in the delivery of softdrinks to the different outlets covered by the driver/salesmen. The other claims are dismissed for lack of merit.

As part of their compensation, the driver/salesmen and truck helpers of petitioner received
commissions per case of softdrinks sold at the following rates: SO ORDERED.[1]

SALESMEN:
Ten Centavos (P0.10) per case of Regular softdrinks.
Twelve Centavos (P0.12) per case of Family Size softdrinks.
TRUCK HELPERS:
Eight Centavos (P0.08) per case of Regular softdrinks.
Ten Centavos (P0.10) per case of Family Size softdrinks.
Sometime in June 1991, petitioner, while conducting an audit of his operations, discovered cash
shortages and irregularities allegedly committed by private respondents. Pending the investigation of
irregularities and settlement of the cash shortages, petitioner required private respondents to report for work
everyday. They were not allowed, however, to go on their respective routes. A few days thereafter, despite
aforesaid order, private respondents stopped reporting for work, prompting petitioner to conclude that the
former had abandoned their employment. Consequently, petitioner terminated their services. He also filed on
November 7, 1991, a complaint for estafa against private respondents.
On the other hand, private respondents, on December 5, 1991, filed complaints against petitioner for
illegal dismissal, illegal deduction, underpayment of wages, premium pay for holiday and rest day, holiday pay,
service incentive leave pay, 13th month pay, allowances, separation pay, recovery of cash bond, damages and
attorneys fees. Said complaints were consolidated and docketed as Rab VII-12-1791-91, RAB VII-12-1825-91
and RAB VII-12-1826-91, and assigned to Labor Arbiter Ernesto F. Carreon.
The labor arbiter found that petitioner had validly terminated private respondents, there being just
cause for the latters dismissal. Nevertheless, he also ruled that petitioner had not complied with minimum
wage requirements in compensating private respondents, and had failed to pay private respondents their
13th month pay. The labor arbiter, thus, rendered a decision on February 18, 1993, the dispositive portion of
which reads:
Both parties seasonably appealed to the NLRC, with petitioner contesting the labor arbiters refusal to
include the commissions he paid to private respondents in determining compliance with the minimum wage
requirement. He also presented, for the first time on appeal, vouchers denominated as 13th month pay signed
by private respondents, as proof that petitioner had already paid the latter their 13th month pay. Private
respondents, on the other hand, contested the findings of the labor arbiter holding that they had not been
illegally dismissed, as well as mathematical errors in computing Jesus Bandilaos wage differentials. The
NLRC, in its decision of December 21, 1994, affirmed the validity of private respondents dismissal, but found
that said dismissal did not comply with the procedural requirements for dismissing employees. Furthermore, it
corrected the labor arbiters award of wage differentials to Jesus Bandilao. The dispositive portion of said
decision reads:
WHEREFORE, premises considered, the decision is hereby MODIFIED in that complainant Jesus Bandilaos
computation for wage differential is corrected from P154.00 to P4,550.00. In addition to all the monetary
claim (sic) originally awarded by the Labor Arbiter a quo, P1,000.00 is hereby granted to each
complainants (sic)as indemnity fee for failure of respondents to observe procedural due process.
SO ORDERED.[2]
Petitioners motion for reconsideration of said decision was denied on July 31, 1995, prompting him to
elevate this case to this Court, raising the following issues:
1. THE HONORABLE COMMISSION ACTED WITH GRAVE ABUSE OF DISCRETION AND
CONTRARY TO LAW AND JURISPRUDENCE IN AFFIRMING THE DECISION OF THE LABOR
ARBITER A QUO EXCLUDING THE COMMISSIONS RECEIVED BY THE PRIVATE
RESPONDENTS IN COMPUTING THEIR WAGES;
2. THE HONORABLE COMMISSION ACTED WITH GRAVE ABUSE OF DISCRETION IN FINDING
PETITIONER GUILTY OF PROCEDURAL LAPSES IN TERMINATING PRIVATE
RESPONDENTS AND IN AWARDING EACH OF THE LATTER P1,000.00 AS INDEMNITY FEE;

10
 3. THE HONORABLE COMMISSION GRAVELY ERRED IN NOT CREDITING THE ADVANCE
AMOUNT RECEIVED BY THE PRIVATE RESPONDENTS AS PART OF THEIR 13 TH MONTH
PAY.
The petition is impressed with merit.
The NLRC, in denying petitioners claim that commissions be included in determining compliance with
the minimum wage ratiocinated thus:
Respondent (petitioner herein) insist assiduously that the commission should be included in the computation
of actual wages per agreement. We will not fall prey to this fallacious argument. An employee should receive
the minimum wage as mandated by law and that the attainment of the minimum wage should not be
dependent on the commission earned by an employee. A commission is an incentive for an employee to work
harder for a better production that will benefit both the employer and the employee. To include the commission
in the computation of wage in order to comply with labor standard laws is to negate the practice that a
commission is granted after an employee has already earned the minimum wage or even beyond it.[3]
This holding is unsupported by law and jurisprudence. Article 97(f) of the Labor Code defines wage as
follows:
Art. 97(f) Wage paid to any employee shall mean the remuneration or earnings, however designated, capable
of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission
basis, or other method of calculating the same, which is payable by an employer to an employee under a
written or unwritten contract of employment for work done or to be done, or for services rendered or to be
rendered and includes the fair and reasonable value, as determined by the Secretary of Labor, of board,
lodging, or other facilities customarily furnished by the employer to the employee.
x x x x x x x x x. (Emphasis supplied)
This definition explicitly includes commissions as part of wages. While commissions are, indeed,
incentives or forms of encouragement to inspire employees to put a little more industry on the jobs particularly
assigned to them, still these commissions are direct remunerations for services rendered. In fact, commissions
have been defined as the recompense, compensation or reward of an agent, salesman, executor, trustee,
receiver, factor, broker or bailee, when the same is calculated as a percentage on the amount of his
transactions or on the profit to the principal. The nature of the work of a salesman and the reason for such
type of remuneration for services rendered demonstrate clearly that commissions are part of a salesmans
wage or salary.[4]
Thus, the commissions earned by private respondents in selling softdrinks constitute part of the
compensation or remuneration paid to drivers/salesmen and truck helpers for serving as such, and hence,
must be considered part of the wages paid them.
The NLRC asserts that the inclusion of commissions in the computation of wages would negate the
practice of granting commissions only after an employee has earned the minimum wage or over. While such a
practice does exist, the universality and prevalence of such a practice is questionable at best. In truth, this
Court has taken judicial notice of the fact that some salesmen do not receive any basic salary but depend
entirely on commissions and allowances or commissions alone, although an employer-employee relationship
exists.[5] Undoubtedly, this salary structure is intended for the benefit of the corporation establishing such, on
the apparent assumption that thereby its salesmen would be moved to greater enterprise and diligence and
close more sales in the expectation of increasing their sales commissions. This, however, does not detract
from the character of such commissions as part of the salary or wage paid to each of its salesmen for
rendering services to the corporation.[6]
Likewise, there is no law mandating that commissions be paid only after the minimum wage has been
paid to the employee. Verily, the establishment of a minimum wage only sets a floor below which an
employees remuneration cannot fall, not that commissions are excluded from wages in determining
compliance with the minimum wage law. This conclusion is bolstered by Philippine Agricultural Commercial
and Industrial Workers Union vs. NLRC,[7] where this Court acknowledged that drivers and conductors who are
compensated purely on a commission basis are automatically entitled to the basic minimum pay mandated by
law should said commissions be less than their basic minimum for eight hours work. It can, thus, be inferred
that were said commissions equal to or even exceed the minimum wage, the employer need not pay, in
addition, the basic minimum pay prescribed by law. It follows then that commissions are included in
determining compliance with minimum wage requirements.
With regard to the second issue, it is settled that in terminating employees, the employer must furnish
the worker with two written notices before the latter can be legally terminated: (a) a notice which apprises the
employee of the particular acts or omissions for which his dismissal is sought, and (b) the subsequent notice
which informs the employee of the employers decision to dismiss him.[8](Italics ours) Petitioner asseverates
that no procedural lapses were committed by him in terminating private respondents. In his own words:
when irregularities were discovered, that is, when the misappropriation of several thousands of pesos was
found out, the petitioner instructed private respondents to report back for work and settle their accountabilities
but the latter never reported for work. This instruction by the petitioner to report back for work and settle their
accountabilities served as notices to private respondents for the latter to explain or account for the missing
funds held in trust by them before they disappeared.[9]
Petitioner considers this return-to-work order as equivalent to the first notice apprising the employee of
the particular acts or omissions for which his dismissal is sought. But by petitioners own admission, private
respondents were never told in said notice that their dismissal was being sought, only that they should settle
their accountabilities. In petitioners incriminating words:
It should be emphasized here that at the time the misappropriation was discovered and subsequently
thereafter, the petitioners first concern was not effecting the dismissal of private respondents but the recovery
of the misappropriated funds thus the latter were advised to report back to work.[10]
As above-stated, the first notice should inform the employee that his dismissal is being sought. Its
absence in the present case makes the termination of private respondents defective, for which petitioner must
be sanctioned for his non-compliance with the requirements of or for failure to observe due process.[11] The
twin requirements of notice and hearing constitute the essential elements of due process, and neither of these
elements can be disregarded without running afoul of the constitutional guarantee. Not being mere
technicalities but the very essence of due process, to which every employee is entitled so as to ensure that
the employers prerogative to dismiss is not exercised arbitrarily,[12] these requisites must be complied with
strictly.
Petitioner makes much capital of private respondents failure to report to work, construing the same as
abandonment which thus authorized the latters dismissal. As correctly pointed out by the NLRC, to which the
Solicitor General agreed, Section 2 of Book V, Rule XIV of the Omnibus Rules Implementing the Labor Code
requires that in cases of abandonment of work, notice should be sent to the workers last known address. If
indeed private respondents had abandoned their jobs, it was incumbent upon petitioner to comply with this
requirement. This, petitioner failed to do, entitling respondents to nominal damages in the amount of
P5,000.00 each, in accordance with recent jurisprudence,[13] to vindicate or recognize their right to procedural
due process which was violated by petitioner.
Lastly, petitioner argues that the NLRC gravely erred when it disregarded the vouchers presented by
the former as proof of his payment of 13th month pay to private respondents. While admitting that said
vouchers covered only a ten-day period, petitioner argues that the same should be credited as amounts
received by private respondents as part of their 13th month pay, Section 3(e) of the Rules and Regulations
Implementing P.D. No. 851 providing that the employer shall pay the difference when he pays less than
1/12th of the employees basic salary.[14]
While it is true that the vouchers evidencing payments of 13th month pay were submitted only on
appeal, it would have been more in keeping with the directive of Article 221[15] of the Labor Code for the NLRC
to have taken the same into account.[16] Time and again, we have allowed evidence to be submitted on
appeal, emphasizing that, in labor cases, technical rules of evidence are not binding.[17] Labor officials should
use every and all reasonable means to ascertain the facts in each case speedily and objectively, without
regard to technicalities of law or procedure.[18]
It must also be borne in mind that the intent of P.D. No. 851 is the granting of additional income in the
form of 13th month pay to employees not as yet receiving the same and not that a double burden should be
imposed on the employer who is already paying his employees a 13th month pay or its equivalent.[19] An
employer who pays less than 1/12th of the employees basic salary as their 13thmonth pay is only required to
pay the difference.[20]
11
 The foregoing notwithstanding, the vouchers presented by petitioner covers only a particular year. It
does not cover amounts for other years claimed by private respondents. It cannot be presumed that the same
amounts were given on said years. Hence, petitioner is entitled to credit only the amounts paid for the
particular year covered by said vouchers.
WHEREFORE, in view of the foregoing, the decision of the NLRC dated July 31, 1995, insofar as it
excludes the commissions received by private respondents in the determination of petitioners compliance with
the minimum wage law, as well as its exclusion of the particular amounts received by private respondents as
part of their 13th month pay is REVERSED and SET ASIDE. This case isREMANDED to the Labor Arbiter for
a recomputation of the alleged deficiencies. For non-observance of procedural due process in effecting the
dismissal of private respondents, said decision is MODIFIED by increasing the award of nominal damages to
private respondents from P1,000.00 to P5,000.00 each. No costs.
SO ORDERED.
[G.R. No. 122827. March 29, 1999]
LIDUVINO M. MILLARES, et. al , petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, (FIFTH
DIVISION), and PAPER INDUSTRIES CORPORATION OF THE PHILIPPINES
(PICOP), respondents.
DECISION
BELLOSILLO, J.:
Petitioners numbering one hundred sixteen (116)[1] occupied the positions of Technical Staff, Unit
Manager, Section Manager, Department Manager, Division Manager and Vice President in the mill site of
respondent Paper Industries Corporation of the Philippines (PICOP) in Bislig, Surigao del Sur. In 1992 PICOP
suffered a major financial setback allegedly brought about by the joint impact of restrictive government
regulations on logging and the economic crisis. To avert further losses, it undertook a retrenchment program
and terminated the services of petitioners. Accordingly, petitioners received separation pay computed at the
rate of one (1) month basic pay for every year of service. Believing however that the allowances they allegedly
regularly received on a monthly basis during their employment should have been included in the computation
thereof they lodged a complaint for separation pay differentials.
The allowances in question pertained to the following -
1. Staff/Manager's Allowance -
Respondent PICOP provides free housing facilities to supervisory and managerial employees assigned in
Bislig. The privilege includes free water and electric consumption. Owing however to shortage of such
facilities, it was constrained to grant Staff allowance instead to those who live in rented houses outside but
near the vicinity of the mill site. But the allowance ceases whenever a vacancy occurs in the company's
housing facilities. The former grantee is then directed to fill the vacancy. For Unit, Section and Department
Managers, respondent PICOP gives an additional amount to meet the same kind of expenses called
Manager's allowance.
2. Transportation Allowance -
To relieve respondent PICOP's motor pool in Bislig from a barrage of requests for company vehicles and to
stabilize company vehicle requirements it grants transportation allowance to key officers and Managers
assigned in the mill site who use their own vehicles in the performance of their duties. It is a conditional grant
such that when the conditions no longer obtain, the privilege is discontinued. The recipients of this kind of
allowance are required to liquidate it by submitting a report with a detailed enumeration of expenses incurred.
3. Bislig Allowance -
The Bislig Allowance is given to Division Managers and corporate officers assigned in Bislig on account of the
hostile environment prevailing therein. But once the recipient is transferred elsewhere outside Bislig, the
allowance ceases.
Applying Art.,97, par. (f), of the Labor Code which defines if wage," the Executive Labor Arbiter opined that the
subject allowances, being customarily furnished by respondent PICOP and regularly received by petitioners,
formed part of the latter's wages. Resolving the controversy from another angle, on the strength of the ruling
in Santos v. NLRC[2] and Soriano v. NLRC[3] that in the computation of separation pay account should be taken
not just of the basic salary but also of the regular allowances that the employee had been receiving, he
concluded that the allowances should be included in petitioners' base pay. Thus respondent PICOP was
ordered on 28 April 1994 to pay petitioners Four Million Four Hundred Eighty-One Thousand Pesos
(P4,481,000.00) representing separation pay differentials plus ten per cent (10%) thereof as attorney's fees.[4]
The National Labor Relations Commission (NLRC) did not share the view of the Executive Labor
Arbiter. On 7 October 1994 it set aside the assailed decision by decreeing that the allowances did not form
part of the salary base used in computing separation pay.[5]
Its ruling was based on the finding that the cases relied upon by the Executive Labor Arbiter were
inapplicable since they involved illegal dismissal where separation pay was granted in lieu of reinstatement
which was no longer feasible. Instead, what it considered in point was Estate of the late Eugene J. Kneebone
v. NLRC[6] where the Court held that representation and transportation allowances were deemed not part of
salary and should therefore be excluded in the computation of separation benefits. Relating the present case
with Art. 97, par. (f), of the Labor Code, the NLRC likewise found that petitioners' allowances were
contingency-based and thus not included in their salaries. On 26 September 1995 reconsideration was
denied.[7]
In this petition for certiorari, petitioners submit that their allowances are included in the definition of
"facilities" in Art. 97, par. (f), of the Labor Code, being necessary and indispensable for their existence and
subsistence. Furthermore they claim that their availment of the monetary equivalent of those "facilities" on a
monthly basis was characterized by permanency, regularity and customariness. And to fortify their arguments
they insist on the applicability of Santos,[8] Soriano,[9] The Insular Life Assurance Company,[10] Planters
Products, Inc.[11] and Songco[12] which are all against the NLRC holding that the salary base in computing
separation pay includes not just the basic salary but also the regular allowances.
There is no showing of grave abuse of discretion on the part of the NLRC. In case of retrenchment to
prevent losses, Art. 283 of the the Labor Code imposes on the employer an obligation to grant to the affected
employees separation pay equivalent to one (1) month pay or at least one-half (1/2) month pay for every year
of service, whichever is higher. Since the law speaks of "pay," the question arises, "What exactly does the
term connote?" We correlate Art. 283 with Art. 97 of the same Code on definition of terms. "Pay" is not defined
therein but "wage." In Songco the Court explained that both words (as well as salary) generally refer to one
and the same meaning, i.e., a reward or recompense for services performed. Specifically, "wage" is defined in
letter (f) as the remuneration or earnings, however designated, capable of being expressed in terms of money,
whether fixed or ascertained on a time, task, piece, or commission basis, or other method of calculating the
same, which is payable by an employer to an employee under a written or unwritten contract of employment
for work done or to be done, or for services rendered or to be rendered and includes the fair and reasonable
value, as determined by the Secretary of Labor, of board, lodging, or other facilities customarily furnished by
the employer to the employee.
We invite attention to the above-underlined clause. Stated differently, when an employer customarily
furnishes his employee board, lodging or other facilities, the fair and reasonable value thereof, as determined
by the Secretary of Labor and Employment, is included in "wage." In order to ascertain whether the subject
allowances form part of petitioner's "wages," we divide the discussion on the following - "customarily
furnished;" "board, lodging or other facilities;" and, "fair and reasonable value as determined by the Secretary
of Labor."
"Customary" is founded on long-established and constant practice[13] connoting regularity.[14] The
receipt of an allowance on a monthly basis does not ipso facto characterize it as regular and forming part of
12
salary[15]because the nature of the grant is a factor worth considering. We agree with the observation of the
Office of the Solicitor General- that the subject allowances were temporarily, not regularly, received by
petitioners because -
In the case of the housing allowance, once a vacancy occurs in the company-provided housing
accommodations, the employee concerned transfers to the company premises and his housing allowance is
discontinued x x x x
On the other hand, the transportation allowance is in the form of advances for actual transportation expenses
subject to liquidation x x x given only to employees who have personal cars.
The Bislig allowance is given to Division Managers and corporate officers assigned in Bislig, Surigao del
Norte. Once the officer is transferred outside Bislig, the allowance stops.[16]
We add that in the availment of the transportation allowance, respondent PICOP set another
requirement that the personal cars be used by the employees in the performance of their duties. When the
conditions for availment ceased to exist, the allowance reached the cutoff point. The finding of the NLRC
along the same line likewise merits concurrence, i.e., petitioners' continuous enjoyment of the disputed
allowances was based on contingencies the occurrence of which wrote finis to such enjoyment.
Although it is quite easy to comprehend "board" and "lodging," it is not so with "facilities." Thus Sec. 5,
Rule VII, Book III, of the Rules Implementing the Labor Code gives meaning to the term as including articles or
services for the benefit of the employee or his family but excluding tools of the trade or articles or service
primarily for the benefit of the employer or necessary to the conduct of the employer's business. The Staff
/Manager's allowance may fall under "lodging" but the transportation and Bislig allowances are not embraced
in "facilities" on the main consideration that they are granted as well as the Staff/Manager's allowance for
respondent PICOP's benefit and convenience, i.e., to insure that petitioners render quality performance. In
determining whether a privilege is a facility, the criterion is not so much its kind but its purpose.[17] That the
assailed allowances were for the benefit and convenience of respondent company was supported by the
circumstance that they were not subjected to withholding tax. Revenue Audit Memo Order No. 1-87 pertinently
provides -
3.2 x x x x transportation, representation or entertainment expenses shall not constitute taxable compensation
if:
(a) It is for necessary travelling and representation or entertainment expenses paid or incurred by the
employee in the pursuit of the trade or business of the employer, and
(b) The employee is required to, and does, make an accounting/liquidation for such expense in accordance
with the specific requirements of substantiation for such category or expense.
Board and lodging allowances furnished to an employee not in excess of the latter's needs and given free of
charge, constitute income to the latter except if such allowances or benefits are furnished to the employee for
the convenience of the employer and as necessary incident to proper performance of his duties in which case
such benefits or allowances do not constitute taxable income.[18]
The Secretary of Labor and Employment under Sec. 6, Rule VII, Book III, of the Rules Implementing
the Labor Code may from time to time fix in appropriate issuances the "fair and reasonable value of board,
lodging and other facilities customarily furnished by an employer to his employees." Petitioners' allowances do
not represent such fair and reasonable value as determined by the proper authority simply because the
Staff/Manager's allowance and transportation allowance were amounts given by respondent company in lieu
of actual provisions for housing and transportation needs whereas the Bislig allowance was given in
consideration of being assigned to the hostile environment then prevailing in Bislig.
The inevitable conclusion is that, as reached by the NLRC, subject allowances did not form part of
petitioners' wages.
In Santos[19] the Court decreed that in the computation of separation pay awarded in lieu of
reinstatement, account must be taken not only of the basic salary but also of transportation and emergency
living allowances.Later, the Court in Soriano, citing Santos, was general in its holding that the salary base
properly used in computing separation pay where reinstatement was no longer feasible should include not just
the basic salary but also the regular allowances that the employee had been receiving. Insular merely
reiterated the aforementioned rulings. The rationale is not difficult to discern. It is the obligation of the
employer to pay an illegally dismissed employee the whole amount of his salaries plus all other benefits,
bonuses and general increases to which he would have been normally entitled had he not been dismissed and
had not stopped working.[20] The same holds true in case of retrenched employees. And thus we
applied Insular and Soriano in Planters in the computation of separation pay of retrenched
employees. Songco likewise involved retrenchment and was relied upon in Planters, Soriano and Santos in
determining the proper amount of separation pay. As culled from the foregoing jurisprudence, separation pay
when awarded to an illegally dismissed employee in lieu of reinstatement or to a retrenched employee should
be computed based not only on the basic salary but also on the regular allowances that the employee had
been receiving. But in view of the previous discussion that the disputed allowances
were not regularly received by petitioners herein, there was no reason at all for petitioners to resort to the
above cases.
Neither is Kneebone applicable, contrary to the finding of the NLRC, because of the difference in
factual circumstances. In Kneebone, the Court was tasked to resolve the issue whether the representation and
transportation allowances formed part of salary as to be considered in the computation
of retirement benefits. The ruling was in the negative on the main ground that the retirement plan of the
company expressly excluded such allowances from salary.
WHEREFORE, the petition is DISMISSED. The resolution of public respondent National Labor
Relations Commission dated 7 October 1994 holding that the Staff /Manager's, transportation and Bislig
allowances did not form part of the salary base used in computing the separation pay of petitioners, as well as
its resolution dated 26 September 1995 denying reconsideration, is AFFIRMED. No costs.
[G.R. No. 128296. September 8, 2003]
NASIPIT LUMBER COMPANY, PHILIPPINE WALLBOARD CORPORATION AND ANAKAN LUMBER
COMPANY, petitioners, vs. NATIONAL WAGES AND PRODUCTIVITY COMMISSION, UNITED
LUMBER AND GENERAL WORKERS OF THE PHILIPPINES and WESTERN AGUSAN
WORKERS UNION, respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:
Before us is a petition for certiorari with prayer for issuance of a temporary restraining order and/or writ
of preliminary injunction which seeks to set aside the Decision[1] dated July 3, 1996 and Resolution[2] dated
November 27, 1996 of the National Wages and Productivity Commission (NWPC) in the consolidated NWPC
Case Nos. E-95-099, E-95-100 and E-95-101, entitled In Re: Application for Extension of Exemption from
Wage Order No. RX-03 of Applicants-Appellants Nasipit Lumber Company, Philippine Wallboard Corporation
and Anakan Lumber Company.
The undisputed facts of this case are as follows:
On November 19, 1993, the Regional Tripartite Wages and Productivity Board (RTWPB) of Region X,
Northern Mindanao, Cagayan de Oro City, issued Wage Order No. RX-03.[3] This Wage Order mandated a
P7.00 increase in the minimum daily wage of all workers and employees in the private sector in Region X
receiving a daily wage of not more than P130.00 per day and an additional P10.00 allowance per day.
13
 Subsequently or on March 17, 1994, Nasipit Lumber Company, Philippine Wallboard Corporation and
Anakan Lumber Company (herein petitioners) filed their separate application for exemption from compliance
with Wage Order No. RX-03, claiming they are distressed establishments whose paid-up capital has been
impaired by at least twenty-five percent (25%).
After finding that the petitioners indeed sustained financial losses which impaired their respective paid-
up capital, the RTWPB, in a consolidated Order dated December 3, 1994, granted petitioners a full exemption
from compliance with the said Wage Order for a period of one (1) year or from December 8, 1993 to
December 7, 1994.
On December 8, 1994, petitioners, citing the continuous business decline in the wood processing
industry, filed a consolidated petition for extension of their full exemption from compliance with Wage Order
No. RX-03 for another year or from December 8, 1994 to December 8, 1995.
However, in a Resolution No. 95-01 dated February 24, 1995, the RTWPB denied petitioners
consolidated application for extension of exemption. In justifying its denial, the RTWPB relied on Section 7 of
the NWPC Revised Guidelines No. 1, Series of 1992, thus:
Establishments shall be granted full exemption of one (1) year from effectivity of the Order for all categories of
exemption.
From the said Resolution, petitioners interposed an appeal to the NWPC.
On July 3, 1996, the NWPC rendered a Decision denying the appeal for lack of merit. The NWPC
ratiocinated as follows:
Thus, the principal issue to be resolved in this case is whether or not the period of exemption under Wage
Order RX-03 can be extended for more than one (1) year.
We rule in the negative.
Section 7 of the NWPC Revised Guidelines on Exemption, which is the applicable rule on this matter, provides
for the duration and extent of exemption that can be granted to a qualified applicant establishment, to wit:
Establishments shall be granted full exemption of one (1) year from effectivity of the Order for all categories of
exemption.
xxx
As set forth by the aforecited rule, the maximum period of exemption that can be accorded to a qualified
applicant is only for one (1) year from the effectivity of the Wage Order. This non-extendable one year period
of exemption, which had been consistently applied to all analogous cases in the past involving companies
seeking extension of the period of their exemption, remains and continues to be the existing policy on the
matter.Precisely, the rationale behind this policy is to afford protection to workers who may be unfairly affected
by the deleterious effect of a prolonged exemption which is not in accord with the very purpose of the issuance
of a Wage Order.
WHEREFORE, premises considered, the instant appeal is hereby DENIED for lack of merit. Board Resolution
No. 95-01, Series of 1995 dated 24 February 1995 is AFFIRMED.
SO ORDERED.
Unswayed, petitioners filed on August 14, 1996, a consolidated motion for reconsideration.
However, the NWPC remained steadfast with its earlier Decision and denied petitioners motion in its
Resolution dated November 27, 1996.
Hence, this petition for certiorari. Petitioners contend they are entitled to an extension for another year
of their full exemption as distressed establishments on the basis of paragraph 4, Section 3 of Wage Order No.
RX-03 which expressly provides: (D)istressed establishments, as defined by the Board upon due and proper
application with the Board, may also be exempted either partly or fully for a period of one year renewable for
another year provided the conditions still persist and warrant the exemption, provided further that they qualify
under the implementing guidelines issued by the Board.
More specifically, petitioners claim that the NWPC exceeded its jurisdiction (1) in deleting the phrase
renewable for another year provided the conditions still persist and warrant the exemption from paragraph 4,
Section 3 of Wage Order No. RX-03 issued by the RTWPB; (2) in overriding the clear intention of the RTWPB
to extend the exemption of distressed establishments; and (3) in applying Section 7 of the NWPC Guideline
No. 01, Series of 1992, limiting the duration of exemption to one (1) year, contrary to Republic Act No. 6727.[4]
Article 121 of the Labor Code, as amended by Republic Act No. 6727, partly provides:
ART. 121. Powers and Functions of the Commission. The Commission shall have the following powers and
functions:
xxx
(c) To prescribe rules and guidelines for the determination of appropriate minimum wage and productivity
measures at the regional, provincial or industry levels;
(d) To review regional wage levels set by the Regional Tripartite Wages and Productivity Boards to determine
if these are in accordance with prescribed guidelines and national development plans;
xxx
Interpreting the above provision, this Court through Justice Artemio V. Panganiban, in Nasipit Lumber
Company, Inc. vs. National Wages and Productivity Commission,[5] held:
The foregoing clearly grants the NWPC, x x x, the power to prescribe the rules and guidelines for the
determination of minimum wage and productivity measures. x x x, the NWPC has the power not only to
prescribe guidelines to govern wage orders, but also to issue exemptions therefrom, x x x. In short, the NWPC
lays down the guidelines which the RTWPB implements.
In affirming the RTWPBs Resolution denying petitioners application for extension for another year of
their full exemption from compliance with Wage Order No. RX-03, the NWPC did not act with grave abuse of
discretion. On the contrary, it merely applied its own Guideline No. 01, Series of 1992 limiting the duration of
exemption to only one (1) year.
It is noteworthy that the RTWPB, for its part, implemented to the letter the said Guideline.
WHEREFORE, the petition is hereby DISMISSED. The assailed Decision dated July 3, 1996 and
Resolution dated November 27, 1996 of the National Wages and Productivity Commission (NWPC) are
hereby AFFIRMED.
SO ORDERED.
[G.R. No. 128296. September 8, 2003]
14
NASIPIT LUMBER COMPANY, PHILIPPINE WALLBOARD CORPORATION AND ANAKAN LUMBER
COMPANY, petitioners, vs. NATIONAL WAGES AND PRODUCTIVITY COMMISSION, UNITED
LUMBER AND GENERAL WORKERS OF THE PHILIPPINES and WESTERN AGUSAN
WORKERS UNION, respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:
Before us is a petition for certiorari with prayer for issuance of a temporary restraining order and/or writ
of preliminary injunction which seeks to set aside the Decision[1] dated July 3, 1996 and Resolution[2] dated
November 27, 1996 of the National Wages and Productivity Commission (NWPC) in the consolidated NWPC
Case Nos. E-95-099, E-95-100 and E-95-101, entitled In Re: Application for Extension of Exemption from
Wage Order No. RX-03 of Applicants-Appellants Nasipit Lumber Company, Philippine Wallboard Corporation
and Anakan Lumber Company.
The undisputed facts of this case are as follows:
On November 19, 1993, the Regional Tripartite Wages and Productivity Board (RTWPB) of Region X,
Northern Mindanao, Cagayan de Oro City, issued Wage Order No. RX-03.[3] This Wage Order mandated a
P7.00 increase in the minimum daily wage of all workers and employees in the private sector in Region X
receiving a daily wage of not more than P130.00 per day and an additional P10.00 allowance per day.
Subsequently or on March 17, 1994, Nasipit Lumber Company, Philippine Wallboard Corporation and
Anakan Lumber Company (herein petitioners) filed their separate application for exemption from compliance
with Wage Order No. RX-03, claiming they are distressed establishments whose paid-up capital has been
impaired by at least twenty-five percent (25%).
After finding that the petitioners indeed sustained financial losses which impaired their respective paid-
up capital, the RTWPB, in a consolidated Order dated December 3, 1994, granted petitioners a full exemption
from compliance with the said Wage Order for a period of one (1) year or from December 8, 1993 to
December 7, 1994.
On December 8, 1994, petitioners, citing the continuous business decline in the wood processing
industry, filed a consolidated petition for extension of their full exemption from compliance with Wage Order
No. RX-03 for another year or from December 8, 1994 to December 8, 1995.
However, in a Resolution No. 95-01 dated February 24, 1995, the RTWPB denied petitioners
consolidated application for extension of exemption. In justifying its denial, the RTWPB relied on Section 7 of
the NWPC Revised Guidelines No. 1, Series of 1992, thus:
Establishments shall be granted full exemption of one (1) year from effectivity of the Order for all categories of
exemption.
From the said Resolution, petitioners interposed an appeal to the NWPC.
On July 3, 1996, the NWPC rendered a Decision denying the appeal for lack of merit. The NWPC
ratiocinated as follows:
Thus, the principal issue to be resolved in this case is whether or not the period of exemption under Wage
Order RX-03 can be extended for more than one (1) year.
We rule in the negative.
Section 7 of the NWPC Revised Guidelines on Exemption, which is the applicable rule on this matter, provides
for the duration and extent of exemption that can be granted to a qualified applicant establishment, to wit:
Establishments shall be granted full exemption of one (1) year from effectivity of the Order for all categories of
exemption.
xxx
As set forth by the aforecited rule, the maximum period of exemption that can be accorded to a qualified
applicant is only for one (1) year from the effectivity of the Wage Order. This non-extendable one year period
of exemption, which had been consistently applied to all analogous cases in the past involving companies
seeking extension of the period of their exemption, remains and continues to be the existing policy on the
matter.Precisely, the rationale behind this policy is to afford protection to workers who may be unfairly affected
by the deleterious effect of a prolonged exemption which is not in accord with the very purpose of the issuance
of a Wage Order.
WHEREFORE, premises considered, the instant appeal is hereby DENIED for lack of merit. Board Resolution
No. 95-01, Series of 1995 dated 24 February 1995 is AFFIRMED.
SO ORDERED.
Unswayed, petitioners filed on August 14, 1996, a consolidated motion for reconsideration.
However, the NWPC remained steadfast with its earlier Decision and denied petitioners motion in its
Resolution dated November 27, 1996.
Hence, this petition for certiorari. Petitioners contend they are entitled to an extension for another year
of their full exemption as distressed establishments on the basis of paragraph 4, Section 3 of Wage Order No.
RX-03 which expressly provides: (D)istressed establishments, as defined by the Board upon due and proper
application with the Board, may also be exempted either partly or fully for a period of one year renewable for
another year provided the conditions still persist and warrant the exemption, provided further that they qualify
under the implementing guidelines issued by the Board.
More specifically, petitioners claim that the NWPC exceeded its jurisdiction (1) in deleting the phrase
renewable for another year provided the conditions still persist and warrant the exemption from paragraph 4,
Section 3 of Wage Order No. RX-03 issued by the RTWPB; (2) in overriding the clear intention of the RTWPB
to extend the exemption of distressed establishments; and (3) in applying Section 7 of the NWPC Guideline
No. 01, Series of 1992, limiting the duration of exemption to one (1) year, contrary to Republic Act No. 6727.[4]
Article 121 of the Labor Code, as amended by Republic Act No. 6727, partly provides:
ART. 121. Powers and Functions of the Commission. The Commission shall have the following powers and
functions:
xxx
(c) To prescribe rules and guidelines for the determination of appropriate minimum wage and productivity
measures at the regional, provincial or industry levels;
(d) To review regional wage levels set by the Regional Tripartite Wages and Productivity Boards to determine
if these are in accordance with prescribed guidelines and national development plans;
xxx
Interpreting the above provision, this Court through Justice Artemio V. Panganiban, in Nasipit Lumber
Company, Inc. vs. National Wages and Productivity Commission,[5] held:
The foregoing clearly grants the NWPC, x x x, the power to prescribe the rules and guidelines for the
determination of minimum wage and productivity measures. x x x, the NWPC has the power not only to
prescribe guidelines to govern wage orders, but also to issue exemptions therefrom, x x x. In short, the NWPC
lays down the guidelines which the RTWPB implements.
15
 In affirming the RTWPBs Resolution denying petitioners application for extension for another year of
their full exemption from compliance with Wage Order No. RX-03, the NWPC did not act with grave abuse of
discretion. On the contrary, it merely applied its own Guideline No. 01, Series of 1992 limiting the duration of
exemption to only one (1) year.
It is noteworthy that the RTWPB, for its part, implemented to the letter the said Guideline.
WHEREFORE, the petition is hereby DISMISSED. The assailed Decision dated July 3, 1996 and
Resolution dated November 27, 1996 of the National Wages and Productivity Commission (NWPC) are
hereby AFFIRMED.
SO ORDERED.
[G.R. No. 131247. January 25, 1999]
PRUBANKERS ASSOCIATION, petitioner, vs. PRUDENTIAL BANK & TRUST COMPANY, respondent.
DECISION
PANGANIBAN, J.:
Wage distortion presupposes an increase in the compensation of the lower ranks in an office hierarchy
without 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 petitioners separate and regional implementation of Wage Order No. VII-03 at its Cebu,
Mabolo and P. del Rosario branches.
The June 18, 1996 Decision of the Voluntary Arbitration Committee,[2] which the Court of Appeals
reversed and set aside, disposed as follows:
WHEREFORE, it is hereby ruled that the Banks 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 05-03 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 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 petitioners 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 banks 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 the 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
16
 In its Memorandum, petitioner raises the following issues:[6]
I pendens.[9] Another case elucidates the consequence of forum-shopping: [W]here a litigant sues the same
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 respondents implementation of the
aforecited Wage Orders. As a preliminary matter, we shall also take up the question of forum-shopping.
The Courts Ruling
The petition is devoid of merit.[7]
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-04-012-97 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 forum-shopping 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
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
Banks 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 Banks regionalization of its wage
structure based on RA 6727. Even if the voluntary arbitration case calls for striking down the Banks
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 Banks national wage structure. Hence, the final disposition of one would
constitute res judicata in the other. Thus, forum-shopping 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:
Article 124. Standards/Criteria for Minimum Wage Fixing - xxx
As used herein, a wage distortion shall mean a situation where an increase in prescribed wage results in the
elimination or 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. xxx. The concept of 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.
17
 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, length 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 petitioners 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
Petitioners 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
productivity-improvement 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) Effects on employment generation and family income; and
(j) 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, xxx 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. xxx 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
18
covers the pay scales even of employees in different regions, and not only those of employees in the same
region or branch. We disagree.
Section 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 petitioners view that establishment includes all branches
and offices in different regions.
Further negating petitioners 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
The only remedy provided for by law from such a decision is a special civil action for certiorari under Rule 65
of the Rules of Court based on jurisdictional grounds or on alleged grave abuse of discretion amounting to
lack or excess of jurisdiction, not by way of an appeal by certiorari. Nevertheless, in the interest of justice, this
petition is treated as a special civil action for certiorari.
Petitioner was employed in respondent corporation. On August 28, 1985, respondent Jose M. Mirasol
persuaded petitioner to subscribe to 1,500 shares of respondent corporation at P100.00 per share or a total of
P150,000.00. He made an initial payment of P37,500.00. On September 1, 1975, petitioner was appointed
President and General Manager of the respondent corporation. However, on January 2, 1986, he resigned.
On December 19, 1986, petitioner instituted with the NLRC a complaint against private respondents for the
payment of his unpaid wages, his cost of living allowance, the balance of his gasoline and representation
expenses and his bonus compensation for 1986. Petitioner and private respondents submitted their position
papers to the labor arbiter. Private respondents admitted that there is due to petitioner the amount of
P17,060.07 but this was applied to the unpaid balance of his subscription in the amount of P95,439.93.
Petitioner questioned the set-off alleging that there was no call or notice for the payment of the unpaid
subscription and that, accordingly, the alleged obligation is not enforceable.

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.
In a decision dated April 28, 1987, the labor arbiter sustained the claim of petitioner for P17,060.07 on the
ground that the employer has no right to withhold payment of wages already earned under Article 103 of the
Labor Code. Upon the appeal of the private respondents to public respondent NLRC, the decision of the labor
arbiter was reversed in a decision dated September 18, 1987. The NLRC held that a stockholder who fails to
pay his unpaid subscription on call becomes a debtor of the corporation and that the set-off of said obligation
against the wages and others due to petitioner is not contrary to law, morals and public policy.

WHEREFORE, the petition is DENIED and the assailed Decision is AFFIRMED. Costs against Hence, the instant petition.
petitioner.

SO ORDERED. The petition is impressed with merit.

Firstly, the NLRC has no jurisdiction to determine such intra-corporate dispute between the stockholder and
the corporation as in the matter of unpaid subscriptions. This controversy is within the exclusive jurisdiction of
G.R. No. 80039 April 18, 1989 the Securities and Exchange Commission. 1

ERNESTO M. APODACA, petitioner, Secondly, assuming arguendo that the NLRC may exercise jurisdiction over the said subject matter under the
vs. circumstances of this case, the unpaid subscriptions are not due and payable until a call is made by the
NATIONAL LABOR RELATIONS COMMISSION, JOSE M. MIRASOL and INTRANS PHILS., corporation for payment. 2 Private respondents have not presented a resolution of the board of directors of
INC., respondents. respondent corporation calling for the payment of the unpaid subscriptions. It does not even appear that a
notice of such call has been sent to petitioner by the respondent corporation.

Diego O. Untalan for petitioner.

What the records show is that the respondent corporation deducted the amount due to petitioner from the
amount receivable from him for the unpaid subscriptions. 3 No doubt such set-off was without lawful basis, if
The Solicitor General for public respondent. not premature. As there was no notice or call for the payment of unpaid subscriptions, the same is not yet due
and payable.

Barcelona, Perlas, Joven & Academia Law Offices for private respondents.
Lastly, assuming further that there was a call for payment of the unpaid subscription, the NLRC cannot validly
set it off against the wages and other benefits due petitioner. Article 113 of the Labor Code allows such a
deduction from the wages of the employees by the employer, only in three instances, to wit:

GANCAYCO, J.:
Does the National Labor Relations Commission (NLRC) have jurisdiction to resolve a claim for non-payment of
stock subscriptions to a corporation? Assuming that it has, can an obligation arising therefrom be offset
against a money claim of an employee against the employer? These are the issues brought to this court
through this petition for review of a decision of the NLRC dated September 18, 1987.
ART. 113. Wage Deduction. — No employer, in his own behalf or in behalf of any
person, shall make any deduction from the wages of his employees, except:
(a) In cases where the worker is insured with his consent by the employer, and the
deduction is to recompense the employer for the amount paid by him as premium on
the insurance;

19
 (b) For union dues, in cases where the right of the worker or his union to checkoff has
been recognized by the employer or authorized in writing by the individual worker
concerned; and
(c) In cases where the employer is authorized by law or regulations issued by the
Secretary of Labor. 4
WHEREFORE, the petition is GRANTED and the questioned decision of the NLRC dated September 18, 1987
is hereby set aside and another judgment is hereby rendered ordering private respondents to pay petitioner
the amount of P17,060.07 plus legal interest computed from the time of the filing of the complaint on
December 19, 1986, with costs against private respondents.
SO ORDERED.
G.R. No. 87449 January 23, 1990
SOUTH MOTORISTS ENTERPRISES, petitioner,
vs.
ROQUE TOSOC, ET AL., and HON. SECRETARY OF LABOR AND EMPLOYMENT, respondents.
Manuel M. Parades for petitioner.
Henry V. Briguera for private respondents.
MELENCIO-HERRERA, J.:
At issue in this special civil action for Certiorari is the jurisdiction of the Regional Directors of the Department
of Labor and Employment to act on money claims. Petitioner South Motorists Enterprises (SOUTH
MOTORISTS) maintains that said officials are bereft of authority to act on such claims as this falls under the
original and exclusive jurisdiction of Labor Arbiters. Respondents maintain otherwise.
The facts are as follows:
Sometime in January of 1983, complaints for non-payment of emergency cost of living allowances were filed
by 46 workers, Tosoc, et als., against SOUTH MOTORISTS before the Naga City District Office of Regional
Office No. 5 of the then Ministry of Labor. On 10 January 1983 a Special Order was issued by the District
Labor Officer directing its Labor Regulation Officers to conduct an inspection and verification of SOUTH
MOTORISTS' employment records.
On the date of the inspection and verification, SOUTH MOTORISTS was unable to present its employment
records on the allegation that they had been sent to the main office in Manila. The case was then set for
conference on 25 January 1983 but had to be reset to 8 February 1983 upon the request of SOUTH
MOTORISTS to enable it to present all the employment records on such date. However, on 7 February 1983
SOUTH MOTORISTS asked for another deferment to 16 February 1983 due to its lawyer's tight schedule. On
16 February 1983, SOUTH MOTORISTS again requested for a resetting to 3 March 1983 because of the
alleged voluminous records it had to locate and its desire to submit a memorandum regarding complainants'
claims. On 2 March 1983, SOUTH MOTORISTS once again requested an extension of 30 days on the ground
that the documents were still being prepared and collated and that a formal manifestation or motion would
follow. Nothing did.
On 7 March 1983, the assigned Labor Regulation Officers submitted an Inspection Report on the basis of
which an Order dated 14 April 1983 was issued by Labor Officer Domingo Reyes directing SOUTH
MOTORISTS to pay Tosoc, et als., the total amount of One Hundred Eighty Four Thousand Six Hundred
Eighty Nine and 12/100 Pesos (P184,689.12) representing the latter's corresponding emergency cost of living
allowances.
SOUTH MOTORISTS moved for reconsideration of the Order, which was denied. On 11 July 1988, the
Secretary of Labor and Employment affirmed the appealed Order. On 28 July 1988, SOUTH MOTORISTS
moved for reconsideration but this proved unsuccessful. A Second Motion for Reconsideration was filed,
which was likewise denied in an Order dated 7 March 1989.
Hence, this certiorari Petition questioning the monetary award by the Regional Director and, in general, his
jurisdiction to validly award money claims.
The Court resolved to give due course to the Petition and to decide the case.
SOUTH MOTORISTS contends that only the Labor Arbiter, who is a trier of facts, may determine after hearing
such questions as whether or not an employer-employee relationship exists; whether or not the workers were
project workers; whether or not the employees worked continuously or whether or not they should receive
emergency cost of living allowances and if entitled, how much each should receive. Thus, SOUTH
MOTORISTS submits that this case should be referred to the Labor Arbiter for proper proceedings.
Two provisions of law are crucial to the issue—Article 129 and Article 217 of the Labor Code, as recently
amended by Republic Act No. 6715, approved on 2 March 1989. Said amendments, being curative in nature,
have retroactive effect and, thus, should apply in this case (BRIAD AGRO vs. DE LA CERNA, G.R. No. 82805,
and CAMUS ENGINEERING vs. DE LA CERNA, G.R. No. 83225, 9 November 1989). At this juncture, it
should be pointed out in the light of these Briad-Agro cases, including the modificatory Resolution thereon of 9
November 1989, petitioner's invocations of the rulings in Zambales Base Metals, L-73184-88, 26 November
1986, and kindred cases, is now out-dated.
The aforesaid Articles, as amended, respectively read as follows:
Art. 129. Recovery of wages, simple money claims and other benefits.— Upon complaint of any
interested party, the Regional Director of the Department of Labor and Employment or any of the
duly authorized hearing officers of the Department is empowered, through summary proceeding
and after due notice, to hear and decide cases involving the recovery of wages and other
monetary claims and benefits, including legal interest, owing to an employee or person employed
in domestic or household service and househelper under this Code, arising from employer-
employee relations: Provided, That such complaint does not include a claim for
reinstatement: Provided, further, That the aggregate claim of each employee or househelper does
not exceed five thousand pesos (P5,000.00). . . .
and
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:
xxx xxx xxx
(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), whether or not accompanied with a claim for reinstatement.
20
 xxx xxx xxx 37. Ernesto Osoc 6,024.48
38. Bernardo Gabrillo 1,490.72
39. Romeo Abarro 2,722.72
Clearly, Regional Directors are empowered to hear and decide, in a summary proceeding, claims for recovery 40. Rogelio Usinar 2,722.72
of wages and other monetary claims and benefits, including legal interest, subject to the concurrence of the 41. Fortunate Sola 1,453.76
following requisites: 42. Romeo Calpi 2,821.28
43. Rogelio Villamor 2,772.00
44. Jose Banday 4,817.12
1) the claim is presented by an employee or person employed in domestic or household service, or
45. Alberto Cornelio 2,882.88
househelper under the Code;
46. Pablo Olarte 2,192.96
—————
2) the claim arises from employer-employee relations;
TOTAL P 184,689.12
3) the claimant no longer being employed, does not seek reinstatement; and
In accordance with Articles 129 and 217 of the Labor Code, as amended, supra, those awards in excess of
4) the aggregate money claim of each employee or househelper does not exceed P5,000.00 (Art. P5,000.00, particularly those given to Macario Gavino, Vito T. Euste, Jose Brequillo, Domingo Cis, Alberto
129, Labor Code, as amended by R.A. 6715). Agreda, Amancio Galona, Roque Tosoc, Hilarion P. Guinoo, Felipe Cea, Roberto Guinoo, and Ernesto Osoc,
each of which exceeds P5,000.00, should be ventilated in a proceeding before the Labor Arbiters. The other
awards, or those not in excess of P5,000.00 and having no issue of reinstatement set forth, should be
But where these requisites do not concur, the Labor Arbiters shall have exclusive original jurisdiction over affirmed.
claims arising from employer-employee relationship except claims for employees' compensation, social
security, medicare and maternity benefits (parag. 6, Art. 217, Labor Code as amended by R.A. 6715).
As to the matter that the respondent Secretary of Labor and Employment erred in affirming the award based
on a mere Inspection Report, we see no reason for SOUTH MOTORISTS to complain as it was afforded
The records of this case show that the award of One Hundred Eighty Four Thousand Six Hundred Eighty Nine ample opportunity to present its side. It failed to present employment records giving as an excuse that they
and 12/100 Pesos (P l84,689.12) given by the District Labor Officer on 14 April 1983 is itemized as follows: were sent to the main office in Manila, in violation of Section 11 of Rule X, Book II of the Omnibus Rules
Implementing the Labor Code providing that:
1. Anatalio Cado P 3,203.20
2. Macario Gavino 6,332.48 All employment records of the employees of the employer shall be kept and maintained in or about
3. Vito T. Euste 6,073.76 the premises of the workplace. The premises of a workplace shall be understood to mean the main
4. Domingo Ricafort 3,843.84 or branch office or establishment, if any, depending., upon where the employees are regularly
5. Roger Paulo 4,176.48 assigned. The keeping of the employee's records in another place is prohibited.
6. Elias Clarianes 4,201.12
7. Ernesto Brequillo 4,176.48
8. Santiago Asares 4,114.88 SOUTH MOTORISTS also caused the resettings of all subsequent hearings—from 25 January 1983 to 8
9. Marcelito Verdadero 4,127.20 February 1983, then to 16 February 1983, then to 3 March and finally, again requested for another 30-day-
10. Elias Pascua 4,348.96 extension on the ground that the documents, were still being prepared and collated. Having been given the
11. Francisco Herrera 3,991.68 opportunity to put forth its case, SOUTH MOTORISTS has only itself to blame for having failed to avail of the
12. Efren San Joaquin 3,979.36 same (Adamson and Adamson, Inc. vs. Judge Amores, G.R. No. 58292, 23 July 1987,152 SCRA 237). What
13. Dominador Payo 4,201.12 is more, its repeated failure to attend the hearings, and to submit any motion as manifested may be construed
14. Jesus Militante 4,201.12 as a waiver of its right to adduce evidence to controvert the worker's claims.
15. Ubaldo Osoc, Jr. 2,156.00
16. Salvador Clarianes 3,843.84
WHEREFORE, the award of One Hundred Eighty Four Thousand Six Hundred Eighty Nine and 12/100 (P
17. Vicente Lovendino 1,416.80
l84,689.12) is hereby MODIFIED. The individual claims of Macario Gavino, Vito T. Euste Jose, Brequillo,
18. Jose Brequillo 6,049.12
Domingo Cis, Alberto Agreda, Amancio Galona, Roque Tosoc, Hilarion P. Guinoo, Felipe Cea, Roberto
19. Domingo Cis 7,884.80
Guinoo, and Ernesto Osoc, each of which exceeds P5,000.00, are hereby remanded to the Labor Arbiter for
20. Alberto Agreda 5,396.16
proper disposition. All other individual awards not in excess of P5,000.00 are hereby AFFIRMED. Costs
21. Amancio Galona 6,418.72
against petitioner.
22. Eduardo Brequillo 2,858.24
23. Luis Clarianes 4,127.20
24. Roque Tosoc 6,418.72 SO ORDERED.
25. Hilarion P. Guinoo 6,086.08
26. Carlos Plegino 1,478.40
27. Felipe Cea 6,024.48
28. Salvador Calamba 4,040.96
29. Ramon Marco 4,669.28
30. Eddie del Castillo 4,201.12
31. Lope Guinoo 3,868.48
32. Marcelino Habla 1,096.48
33. Roberto Guinoo 5,938.24
34. Efren Andalis 4,114.88
35. Solomon Tosoc 2,722.72 [G.R. No. 143304. July 8, 2004]
36. Cornelio Ballares 3,006.08

21
SPECIAL STEEL PRODUCTS, INC., petitioner, vs. LUTGARDO VILLAREAL AND FREDERICK
SO, respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:
May an employer withhold its employees wages and benefits as lien to protect its interest as a surety in
the latters car loan and for expenses incurred in a training abroad? This is the basic issue for our resolution in
the instant case.
At bar is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as
amended, assailing the Decision[1] dated October 29, 1999 and Resolution[2] dated May 8, 2000 of the Court of
Appeals in CA-G.R. SP No. 50957, entitled Special Steel Products, Inc. vs. National Labor Relations
Commission, Lutgardo Villareal and Frederick So.
The factual antecedents as borne by the records are:
Special Steel Products, Inc., petitioner, is a domestic corporation engaged in the principal business of
importation, sale, and marketing of BOHLER steel products. Lutgardo C. Villareal and Frederick G. So,
respondents, worked for petitioner as assistant sales manager and salesman, respectively.
Sometime in May 1993, respondent Villareal obtained a car loan from the Bank of Commerce, with
petitioner as surety, as shown by a continuing suretyship agreement and promissory note wherein they jointly
and severally agreed to pay the bank P786,611.60 in 72 monthly installments. On January 15, 1997,
respondent Villareal resigned and thereafter joined Hi-Grade Industrial and Technical Products, Inc. as
executive vice-president.
Sometime in August 1994, petitioner sponsored respondent Frederick So to attend a training course
in Kapfenberg, Austria conducted by BOHLER, petitioners principal company. This training was a reward for
respondent Sos outstanding sales performance. When respondent returned nine months thereafter, petitioner
directed him to sign a memorandum providing that BOHLER requires trainees from Kapfenberg to continue
working with petitioner for a period of three (3) years after the training. Otherwise, each trainee shall refund to
BOHLER $6,000.00 (US dollars) by way of set-off or compensation. On January 16, 1997 or 2 years and 4
months after attending the training, respondent resigned from petitioner.
Immediately, petitioner ordered respondents to render an accounting of its various Christmas
giveaways[3] they received. These were intended for distribution to petitioners customers.
In protest, respondents demanded from petitioner payment of their separation benefits, commissions,
vacation and sick leave benefits, and proportionate 13th month pay. But petitioner refused and instead,
withheld their 13th month pay and other benefits.
On April 16, 1997, respondents filed with the Labor Arbiter a complaint for payment of their monetary
benefits against petitioner and its president, Augusto Pardo, docketed as NLRC NCR Case No. 04-02820-97.
In due course, the Labor Arbiter rendered a Decision dated February 18, 1998, the dispositive portion
of which reads:
WHEREFORE, decision is hereby rendered ordering the respondents, Special Steel Products, Inc. and Mr.
Augusto Pardo to pay, jointly and severally, complainants Frederick G. So and Lutgardo C. Villareal the
amounts of Seventy One Thousand Two Hundred Seventy Nine Pesos and Fifty Eight Centavos (P71,279.58)
and One Hundred Sixty Four Thousand Eight Hundred Seventy Three Pesos (P164,873.00), respectively,
representing their commissions, retirement benefit (for Villareal), proportionate 13th month, earned vacation
and sick leave benefits, and attorneys fees.
xxx
SO ORDERED.
On appeal, the National Labor Relations Commission (NLRC), in a Decision dated June 29, 1998,
affirmed with modification the Arbiters Decision in the sense that Pardo, petitioners president, was exempted
from any liability.
On September 11, 1998, petitioner filed a motion for reconsideration but was denied.
Hence, petitioner filed with the Court of Appeals a petition for certiorari.
On October 29, 1999, the Court of Appeals rendered a Decision dismissing the petition and affirming
the assailed NLRC Decision, thus:
At the outset, the Court notes that despite its Seventh Assignment of Error, petitioner does not question the
NLRCs decision affirming the labor arbiters award to private respondents of commissions, proportionate
13thmonth pay, earned vacation and sick leave benefits and retirement benefit (for Villareal). It merely asserts
that it was withholding private respondents claims by reason of their pending obligations.
Petitioner justifies its withholding of Villareals monetary benefits as a lien for the protection of its right as surety
in the car loan. It asserts that it would release Villareals monetary benefits if he would cause its substitution as
surety by Hi-Grade. It further asserts that since Villareals debt to the Bank is now due and demandable, it
may, pursuant to Art. 2071 of the New Civil Code, demand a security that shall protect him from any
proceeding by the creditor and from the danger of insolvency of the debtor.
Petitioners posture is not sanctioned by law. It may only protect its right as surety by instituting an action x x x
to demand a security (Kuenzle and Streiff vs. Tan Sunco, 16 Phil 670). It may not take the law into its own
hands. Indeed, it is unlawful for any person, directly or indirectly, to withhold any amount from the wages of a
worker or induce him to give up any part of his wages by force, stealth, intimidation, threat or by any other
means whatsoever without the workers consent (Art. 116, Labor Code).
Moreover, petitioner has made no payment on the car loan. Consequently, Villareal is not indebted to
petitioner. On the other hand, petitioner owes Villareal for the decreed monetary benefits. The withholding of
Villareals monetary benefits had effectively prevented him from settling his arrearages with the Bank.
With regard to Sos money claims. We find no cogent reason to disturb the findings of the NLRC. x x x.
Sos all-expense paid trip to Austria was a bonus for his outstanding sales performance. Before his sojourn to
Austria, petitioner issued him a memorandum (or memo) stating that Bohler is now imposing that trainees
coming to Kapfenberg to stay with the local representative for at least three (3) years after training, otherwise,
a lump sum compensation of not less than US $6,000.00 will have to be refunded to them by the trainee. So
did not affix his signature on the memo. However, nine (9) months after coming back from his training, he was
made to sign the memo. In his letter to Augusto Pardo dated July 18, 1997, So stated that his signature was
needed only as a formality and that he was left with no choice but to accommodate Augusto Pardos
request. The labor arbiter gave credence to such explanation.
Assuming arguendo that the memo is binding on So, his more than two years post-training stay with petitioner
is a substantial compliance with the condition. Besides, So tendered his resignation effective February 16,
1997. Instead of asking So to defer his resignation until the expiration of the three-year period, petitioner
advanced its effectivity by one month - as of January 16, 1997. This means that petitioner no longer needed
Sos services, particularly the skill and expertise acquired by him from the training. More importantly, the party
entitled to claim the US $6,000.00 liquidated damages is BOHLER and not petitioner. Consequently, petitioner
has no right to insist on payment of the liquidated damages, much less to withhold Sos monetary benefits in
order to exact payment thereof.
With regard to the Christmas giveaways. We agree with the findings of the labor arbiter (affirmed by the
NLRC) that there is no existing memorandum requiring the accounting of such giveaways and that no actual
accounting has ever been required before, as in the case of then Sales Manager Benito Sayo whose
resignation took effect on December 31, 1996 but was not required to account for the Christmas
giveaways. To make So account now for said items would amount to discrimination. In any event, the matter
of accounting of the giveaways may be ventilated in the proper forum.
22
Finally, petitioner may not offset its claims against private respondents monetary benefits. With respect
to its being the surety of Villareal, two requisites of compensation are lacking, to wit: that each one of the
obligors be bound principally, and that he be at the same time a principal creditor of the other and that (the two
debts) be liquidated and demandable (Art. 1279 (1) and (4), New Civil Code). And in respect to its claim for
liquidated damages against So, there can be no compensation because his creditor is not petitioner but
BOHLER (Art. 1278, New Civil Code).
Consequently, the NLRC committed no grave abuse of discretion.
"ARTICLE 1279. In order that compensation may be proper, it is necessary:
(1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor of
the other;
(2) That both debts consist in a sum of money, or if the things due are consumable, they be of the same kind,
and also of the same quality if the latter has been stated;

WHEREFORE, the petition is DISMISSED while the assailed decision of the NLRC is AFFIRMED. (3) That the two debts be due;

SO ORDERED. (4) That they be liquidated and demandable;

On December 15, 1999, petitioner filed a motion for reconsideration but was denied by the Appellate (5) That over neither of them there be any retention or controversy, commenced by third persons and
Court in a Resolution dated May 8, 2000. communicated in due time to the debtor."

Hence, this petition for review on certiorari. Petitioner contends that as a guarantor, it could legally
withhold respondent Villareals monetary benefits as a preliminary remedy pursuant to Article 2071 of the Civil
Code, as amended.[4] As to respondent So, petitioner, citing Article 113 of the Labor Code, as amended,[5] in
relation to Article 1706 of the Civil Code, as amended,[6] maintains that it could withhold his monetary benefits
being authorized by the memorandum he signed.
Article 116 of the Labor Code, as amended, provides:
In the present case, set-off or legal compensation cannot take place between petitioner and respondent
So because they are not mutually creditor and debtor of each other.
A careful reading of the Memorandum[10] dated August 22, 1994 reveals that the lump sum
compensation of not less than US $6,000.00 will have to be refunded by each trainee to BOHLER, not to
petitioner.

ART. 116. Withholding of wages and kickbacks prohibited. It shall be unlawful for any person, directly or
indirectly, to withhold any amount from the wages (and benefits) of a worker or induce him to give up
any part of his wages by force, stealth, intimidation, threat or by any other means whatsoever without the
workers consent.
In fine, we rule that petitioner has no legal right to withhold respondents 13 th month pay and other
benefits to recompense for whatever amount it paid as security for respondent Villareals car loan; and for the
expenses incurred by respondent So in his training abroad.
WHEREFORE, the petition is DENIED. The Decision dated October 29, 1999 and Resolution
dated May 8, 2000 of the Court of Appeals in CA-G.R. SP No. 50957 are hereby AFFIRMED.

The above provision is clear and needs no further elucidation. Indeed, petitioner has no legal authority SO ORDERED.
to withhold respondents 13th month pay and other benefits. What an employee has worked for, his employer
must pay.[7] Thus, an employer cannot simply refuse to pay the wages or benefits of its employee because he
has either defaulted in paying a loan guaranteed by his employer; or violated their memorandum of
agreement; or failed to render an accounting of his employers property.[8]

Nonetheless, petitioner, relying on Article 2071 (earlier cited), contends that the right to demand
security and obtain release from the guaranty it executed in favor of respondent Villareal may be exercised
even without initiating a separate and distinct action.
[G.R. No. 107487. September 29, 1997]
There is no guaranty involved herein and, therefore, the provision of Article 2071 does not apply.

A guaranty is distinguished from a surety in that a guarantor is the insurer of the solvency of the debtor
and thus binds himself to pay if the principal is unable to pay, while a surety is the insurer of the debt, and
he obligates himself to pay if the principal does not pay.[9]
THE MANILA BANKING CORPORATION (Manilabank) and ARNULFO B. AURELLANO in his capacity
Based on the above distinction, it appears that the contract executed by petitioner and respondent as Statutory Receiver of Manilabank, petitioners, vs. THE NATIONAL LABOR RELATIONS
Villareal (in favor of the Bank of Commerce) is a contract of surety. In fact, it is denominated as a continuing COMMISSION, VICTOR L. MENDOZA, RODOLFO VE. TIMBOL, RUBEN G. ASEDILLO,
suretyship agreement. Hence, petitioner could not just unilaterally withhold respondents wages or benefits as FLORINDA S. DAYRIT, and 19 other Senior Officers similarly situated; HORACE REYES and
a preliminary remedy under Article 2071. It must file an action against respondent Villareal. Thus, the 14 other Senior Managers similarly situated; AURORA VILLACERAN and 34 other Assistant
Appellate Court aptly ruled that petitioner may only protect its right as surety by instituting an action to demand Managers similarly situated; CONSUELO RIZARRI, EMERENCIANA SAMSON, BRENDA C.
a security. BERMUDEZ, FLORYPEE ABRIGO, EMMA BALDERAMA, and 211 other Junior Officers
similarly situated, respondents.
As to respondent So, petitioner maintains that there can be a set-off or legal compensation between
them. Consequently, it can withhold his 13th month pay and other benefits.

For legal compensation to take place, the requirements set forth in Articles 1278 and 1279 of the Civil
Code, quoted below, must be present.
[G.R. No. 107902. September 29, 1997]

"ARTICLE 1278. Compensation shall take place when two persons, in their own right, are creditors and
debtors of each other.

23
THE MANILA BANKING CORPORATION (Manilabank) and ARNULFO B. AURELLANO in his capacity
as Statutory Receiver of Manilabank, petitioners, vs. THE NATIONAL LABOR RELATIONS
COMMISSION-NCR, LABOR ARBITER FELIPE PATI and VICTOR L. MENDOZA, RODOLFO
VE. TIMBOL, RUBEN G. ASEDILLO, FLORINDA S. DAYRIT, and 19 other Senior Officers
similarly situated; HORACE REYES, JOSE BELMONTE and 14 other Senior Managers and
53 Managers similarly situated; AURORA VILLACERAN and 34 other Assistant Managers
similarly situated; CONSUELO RIZARRI, EMERENCIANA SAMSON, BRENDA C.
BERMUDEZ, FLORYPEE ABRIGO, EMMA BALDERAMA, and 211 other Junior Officers
similarly situated, respondents.
DECISION
KAPUNAN, J.:
The principal issue presented for resolution in these petitions for certiorari[1] under Rule 65 of the Rules
of Court is whether or not public respondent National Labor Relations Commission (NLRC) committed grave
abuse of discretion in affirming with slight modifications Labor Arbiter Felipe Patis decision awarding herein
private respondents claim of P193,338,212.33 consisting of:
1. Wage increase of 25% of gross monthly wage from January 1985 to December 1988;
2. Christmas Bonus of one and one-half (1-1/2) months pay from December 1985 to December
1987;
3. Mid-year Bonus of one (1) month pay from 1985 to 1988, inclusive;
4. Profit Sharing of 5% of net profit for 1985 and 1986;
5. Differentials on accrued leaves, retirement benefits and Christmas and Mid-year bonuses;
6. Longevity pay, Loyalty Bonus and Medical, Dental and Optical Benefits;
7. Uniform allowance of P600.00 per year from January 1985 to January 1988, inclusive;
8. One-half (1/2) month pay 1987 Christmas Bonus which was deducted from the retirement
benefit of each complainant;
9. Travel Plan and Car Plan with respect to the 23 complainants Senior Officers; and
10. Car Plan and Gasoline Allowance benefits with respect to the 15 complainants, Senior
Managers and 54 Assistant Managers.
annual interest thereon of 12% and attorneys fees amounting to 10% of the said amount.
The antecedents show that on June 5, 1984, petitioner Manila Banking Corporation (Manilabank) was
placed under comptrollership by then Central Bank Governor Jose B. Fernandez in view of the banks financial
distress.[2]
The decision of the Monetary Board of the Central Bank was based on the findings that the bank was
experiencing liquidity problems and had incurred chronic reserve deficiencies against deposit liabilities. In fact
on May 23, 1984, a month before it was placed under comptrollership, Manilabank was prohibited by the
Monetary Board from granting new loans and making new investments except investments in government
securities with Central Bank support, and from declaring cash or stock dividends.[3]
A February 19, 1986 Central Bank report on Manilabanks financial condition as of December 31, 1985
disclosed, among other things, that the banks operations for the preceding year resulted in a net loss
of P362.4 million. It likewise revealed that the banks financial condition continued to deteriorate.[4]
Consequently, on May 22, 1987, the Monetary Board issued Resolution No. 505 prohibiting Manilabank
from doing business in the Philippines. The said resolution reads:
Finding to be true the statements of the Assistant to the Governor and Officer-in-Charge,
Supervision and Examination Sector (SES) Department I, in his memorandum dated April 28,
1987 submitting a report on the financial condition of the Manila Banking Corporation (TMBC) as
of March 31, 1987, that the financial condition of TMBC is one of insolvency and its continuance
in business would involve probable loss to its depositors and creditors and considering, among
other things, that:
1. During the 3-month period January 1 to March 31, 1987, TMBC incurred losses
of 62.3 million , before interest on Central Bank overdraft and penalties on reserve
deficiencies (242.9 million for the three months);
2. Prior notices had been made to TMBC of a condition which may be considered
as one indicating insolvency as defined under Sec. 29 of R.A. No. 265, as
amended, in various letters of Mr. Antonio T. Castro, Jr., Special Assistant to the
Governor and Head, SES Department I, dated December 9, 1985, December 13,
1985 and October 16, 1986 and in a letter of the Governor, dated February 27,
1987;
3. Mr. Vicente G. Puyat, in response to his request conveyed by Mrs. Reyes to the
Monetary Board, for a chance to appear before the Monetary Board in
representation of the majority stockholders of TMBC, in connection with the
rehabilitation plan for TMBC, had been invited three times to appear before the
Board: first, on May 13, 1987, then on May 18, 1987 upon his request, and on May
22, 1987, which invitations he did not respond to himself and neither did he attend
the Board meetings held on May 18, 1987 and May 22, 1987;
4. TMBC has not submitted a rehabilitation plan accepted to the Central Bank; and
5. The said Assistant to the Governor, who was present during the Monetary Board
meeting held on May 22, 1987, had categorically confirmed that, after considering
all the adjustments, TMBC would still be insolvent even with an additional capital
infusion of P500 million.
the Board decided as follows:
1. To prohibit TMBC to do business in the Philippines and place its assets and affairs under
receivership in accordance with the provisions of Section 29 of R.A. No. 265, as amended; and
2. To designate the Assistant to the Governor and Officer-in-Charge, SES Department I, as
Receiver of TMBC, to immediately take charge of its assets and liabilities, as expeditiously as
possible collect and gather all the assets and administer the same for the benefit of its creditors
exercising all the powers necessary for these purposes including, but not limited to, bringing
suits and foreclosing mortgages in its name.[5]
Thereafter, Feliciano Miranda, Jr. was designated as receiver. He immediately took charge of the
banks assets and liabilities. He likewise terminated the employment of about 343 officers and top managers of
the bank. All these officers and top managers, who are private respondents herein, were paid whatever
separation and/or retirement benefits were due them.
On November 11, 1988, the Monetary Board issued Resolution No. 1003 ordering the liquidation of
Manilabank on account of insolvency. The resolution reads as follows:
Having determined and confirmed on the basis of the memorandum of the Special Assistant to
the Governor and Head, Supervision and Examination Sector (SES) Department I, and
Receiver, The Manila Banking Corporation (TMBC), dated November 4, 1988, submitting a
report on the financial condition of TMBC as of July 31, 1988, that the financial condition of the
bank continues to be one of insolvency and it can no longer resume business with safety to its
depositors, creditors and the general public, considering the opinion of the Central Bank legal
counsel that, with the Supreme Courts decision dated March 10, 1988 (a) setting aside the
decision of the Court of Appeals sustaining the decision of the Regional Trial Court to issue a
writ of preliminary injunction dated July 14, 1987 against the enforcement of Monetary Board
Resolution No. 505 dated May 22, 1987, (b) dissolving the said writ of preliminary injunction, and
(c) making permanent the temporary restraining order issued by the Supreme Court on February
16, 1988, the liquidation of TMBC may now be ordered by the Monetary Board and that its
authority to order such liquidation is not affected by the pendency of Civil Case No. 87-40659
nor of the Supreme Courts resolution of March 10, 1988 (enjoining the Court of Appeals from
interfering in the receivership of TMBC), the Board decided as follows:
1. To order the liquidation of TMBC in accordance with Section 29 of R.A. No. 265,
as amended; and
24
2. To designate Mr. Renan V. Santos, Special Assistant to the Governor, and Head, Supervision and
Examination Sector Department V, as Liquidator of TMBC.[6]
Of even date, private respondents filed a complaint against ManilaBank and its statutory receiver with
the arbitration branch of the National Labor Relations Commission (NLRC) claiming entitlement to the
following additional benefits alleged to have accrued from 1984 to their effective dates of termination, viz: (a)
Wage increases; (b) Christmas bonuses; (c) Mid-year bonuses; (d) Profit sharing; (e) Car and travel plans; (f)
Gasoline allowances; (g) Differentials on accrued leaves, retirement and other bonuses; (h) Longevity pay and
loyalty pay; (i) Medical, dental and optical benefits; and (j) Uniform allowances. [7] Such claims to entitlement of
the foregoing benefits was based on Manilabanks alleged practice, policy and tradition of awarding said
benefits. They contended that the policy has ripened into vested property rights in their favor.
Manila bank, on its part, alleged that the additional benefits sought are without basis in fact and in
law. It argued that the same are conferred by management only when it deems necessary to do so. The award
of the said benefits is in the nature of a management prerogative which, it contended, can be withheld by
management upon a clear showing that the company is not in a position to grant them either because of
financial difficulties or circumstances which do not warrant conferment of such benefits. And since it was
experiencing financial distress, it claimed that it was in no position to give the benefits sought. Additionally, it
asseverated that it was deprived of its right to present evidence in a full-blown trial by the labor arbiter.
On November 14, 1989, Labor Arbiter Felipe Pati rendered his decision ordering Manilabank and its
statutory receiver to pay in full all the claims of private respondents amounting to P193,338,212.33, plus
12% interest annually and 10% of the total award as attorneys fees. The dispositive portion of the decision
reads:
WHEREFORE, judgment is hereby rendered in favor of the complainants and against the
respondents, ordering and authorizing the Receiver RENAN V. SANTOS to pay, pursuant to the
provisions of Article 110 of the Labor Code, as amended:
1.The complainants the net amount of claims due appearing opposite the name of
each complainant listed in the Computation of Net Claim consisting of six (6)
pages hereto attached and made part of this Decision;
2.The complainants counsel the amount equal to 10% of the total amount
awarded to complainants in this action as attorneys fees.
SO ORDERED.[8]
On November 25, 1989, petitioners Manilabank and the CB statutory receiver appealed to the NLRC
and posted an appeal bond in the form of a certification from the Central Bank to the effect that the portion of
Manilabanks funds in an amount equal to that of the total award of the labor arbiter, has been reserved and
set aside by the Central Bank to answer for the private respondents claims should they finally be adjudged to
be entitled thereto.
On December 8, 1989, private respondents opposed the appeal and filed a motion for the issuance of a
writ of execution of the labor arbiters judgment on the ground that the Central Bank certification cannot be
considered as an appeal bond.
On June 21, 1991, the NLRC issued an order requiring petitioners to deposit with the Cashier of the
NLRC a cash bond or its equivalent in treasury bills, warrants and/or other government securities in the
amount of P193,000,000.00, plus ten percent (10%) thereof as attorneys fees within ten (10) days from receipt
thereof.
On July 5, 1991, petitioners moved to reconsider said order. However, pending resolution of said
motion for reconsideration, petitioners submitted to the NLRC a Certificate of Time Deposit issued by the
Philippine National Bank (PNB) in the amount of P212,700,000.00, payable to the receiver of Manilabank.
On January 16, 1992, the NLRC held a hearing where the parties agreed that the certificate of time
deposit submitted by Manilabank to the NLRC be considered substantial compliance of the requirement of an
appeal bond, on the condition that it will be periodically renewed and re-deposited with the NLRC Cashier
upon its maturity, and that the securities deposited should be free from any other claims or liens.
On September 9, 1992, the NLRC issued a resolution on the merits of the case and, as above-stated,
affirmed with slight modifications, the decision of the labor arbiter. The decretal portion of the same reads:
WHEREFORE, except for the modification we provided on the manner medical, dental and
optical benefits should be claimed/paid, and our awarding annual interest of 12% to whatever
has been awarded below, the appealed decision is hereby affirmed and respondents appeal is
hereby dismissed.
SO ORDERED.[9]
Petitioners filed a motion for reconsideration from the aforequoted resolution.
On October 14, 1992, private respondents filed an ex parte motion for the issuance of a writ of
execution. Petitioners opposed the same, reasoning that the assets of Manilabank are exempt from execution
and that the NLRC resolution had not become final and executory.
On October 22, 1992, the NLRC issued an order directing petitioners, under pain of contempt, to renew
the certificate of time deposit and to have the same issued in the name of , and deposited with, the cashier of
the NLRC.
In response, petitioners Manilabank and Arnulfo Aurellano filed petition for certiorari before this Court,
docketed as G.R. No. 107487, to set aside said order alleging that the same was issued with grave abuse of
discretion because it (as re-phrased):
a. violated an existing statute.[10]
b. arbitrary compelled the Receiver to violate his statutory duty to preserve Manilabanks assets
for the benefit of all creditors.[11]
c. whimsically deprived petitioners of their right to file a motion for reconsideration of the
Order.[12]
d. was not anchored upon any cogent reason other than to preempt petitioners from invoking the
corrective powers of this Honorable Court of last resort.[13]
On November 26, 1992, petitioners earlier motion for reconsideration of the NLRC Decision dated
September 9, 1992 was denied for lack of merit in an order which dispositively reads as follows:
Wherefore, premises considered, order is hereby issued:
1. denying respondents motion for reconsideration;
2. directing the NLRC Cashier to hold in her custody re-submitted Certificate of
Time Deposit No. 890530-D dated October 27, 1992 with maturity date on
December 28, 1992;
3. directing the respondents to post an additional bond, either in cash, surety, or
certificate of time deposit drawn in the name of the Cashier, NLRC, in the amount
of P76,572,000.00 to cover, the additional award detailed in our September 9,
1992 resolution;
4. directing, accordingly, the Executive Clerk to cause the personal service of this
Order upon the parties, particularly the respondents and their counsel; and
5. holding in abeyance the execution of our September 9, 1992 resolution (despite
its finality now) for a period of ten (10) calendar days from respondents receipt of
this Order, with the warning, however, that should this Commission not receive a
restraining order from the Supreme Court within said period of ten (10) calendar
days, then a writ of execution will be issued to enforce our now final judgment.
SO ORDERED.[14]
Consequently, petitioners filed another petition for certiorari before this Court, this time docketed as
G.R. No. 107902, contending that:
25
 a. Public respondents, in grave abuse of discretion, effectively violated petitioners right due
process because-
(1) The monstrous award totaling about P212 million was decided based purely
on private respondents worthless papers which were never identified nor
supported by any single affidavit.
(2) The Labor Arbiter proceeded to decide the case solely on the bases of the
pleadings filed, despite the enormity of the claims and the reapeted demands for a
full-dress trial (which, ironically, were initially granted by the Office of the Labor
Arbiter), made necessary by the conflicting factual allegations of the parties and
the worthless papers passed off by private respondents as their evidence.[15]
b. Public respondents unlawfully arrogated unto themselves the jurisdiction to pass upon the
question of Manilabanks insolvency, despite the pleaded pendency of that prejudicial question
before the RTC of Manila which had aquired exclusive jurisdiction to rule on the issue to the
exclusion of all others.[16]
c. The money award adjudged against the insolvent Manilabank violates all notions of justice
and equity, considering that the beneficiaries thereof are former officers and top managers of
Manilabank who, being part of management, were partly to blame for the banks financial
decline.[17]
d. A statutory receiver has the power to adopt and implement prudent policies aimed at
preserving the assets of an insolvent bank including regulating, according to his own discretion
and judgment, all aspects of employment.[18]
e. Public respondents arbitrary findings that salary increases, Christmas and mid-year bonuses
and other benefits have been regularly and unconditionally paid by Manilabank to private
respondents, and that Manilabank earned profits in 1984, 1985 and 1986, are contrary to the
evidence on record and are based on pure unsubstantiated guesswork. [19]
f. The award of attorneys fees is unconscionable, especially in light of its dissipative effect of the
remaining assets of the insolvent Manilabank and its prejudicial consequences on Manilabanks
stockholders and creditors.[20]
g. The NLRCs award of legal interest on the amount awarded by the labor arbiter and its order to
deposit an additional bond to cover such interest have no legal basis and give an undue
advantage to other creditors of the insolvent Manilabank.[21]
h. The NLRCs threat to execute the judgment would be unlawful if carried out, because
Manilabanks assets are legally exempt from execution.[22]
On December 9, 1992, this Court ordered that G.R. No. 107902 be consolidated with G.R. No.
107487.[23]
On December 16, 1992, this Court issued a Resolution temporarily enjoining public respondent NLRC
from enforcing and/or carrying out the decision of the labor arbiter dated November 14, 1989 and its resolution
dated September 9, 1992 and order dated November 26, 1992, all issued in NLRC NCR Case No. 00-11-
04624-88.[24]
G.R. No. 107902 is impressed with merit.
Both the Labor Arbiter and the NLRC opted to award all the additional benefits claimed by the 343
private respondents who had already been duly paid separation pay and/or retirement benefits upon
termination of their employment. The NLRC erroneously adopted the findings of the labor arbiter, misapplying
the time-honored rule that factual findings of quasi-judicial agencies are accorded not only respect but even
finality if supported by substantial evidence. It declared that the additional benefits sought are in the nature of
bonuses which when made part of the wage or salary or compensation of an employee become demandable
and enforceable.[25]
Both the Labor Arbiters and the NLRCs findings and conclusions are flawed.
By definition, a bonus is a gratuity or act of liberality of the giver which the recipient has no right to
demand as a matter of right.[26] It is something given in addition to what is ordinarily received by or strictly due
the recipient. The granting of a bonus is basically a management prerogative which cannot be forced upon the
employer who may not be obliged to assume the onerous burden of granting bonuses or other benefits aside
from the employees basic salaries or wages,[27] especially so if it is incapable of doing so.
In Philippine Education Co., Inc. v. Court of Industrial Relations,[28] cited in Philippine duplicators, Inc. v.
NLRC,[29] the Court expounded on the nature of a bonus, thus:
As a rule, a bonus is an amount granted and paid to an employee for his industry and loyalty
which contributed to the success of the employers business and made possible the realization of
profits. It is an act of generosity of the employer for which the employee ought to be thankful and
grateful. It is also granted by an enlightened employer to spur the employee to greater efforts for
the success of the business and realization of bigger profits. xxx From the legal point of view, a
bonus is not a demandable and enforceable obligation. It is so when it is made part of the wage
or salary or compensation. In such a case the latter would be fixed amount and the former would
be a contingent one dependent upon the realization of profits. xxx . (Italics supplied).[30]
Clearly then, a bonus is an amount given ex gratia to an employee by an employer on account of
success in business or realization of profits. How then can an employer be made liable to pay additional
benefits in the nature of bonuses to its employees when it has been operating on considerable net losses for a
given period of time?
Records bear out that petitioner Manilabank was already in dire financial straits in the mid-80s. As early
as 1984, the Central Bank found that Manilabank had been suffering financial losses. Presumably, the
problems commenced even before their discovery in 1984. As earlier chronicled, the Central Bank placed
petitioner bank under comptrollership in 1984 because of liquidity problems and excessive interbank
borrowings. In 1987, it was placed under receivership and was ordered to close operation. In 1988, it was
ordered liquidated.
It is evident, therefore, that petitioner bank was operating on net losses from the years 1984, 1985 and
1986, thus, resulting to its eventual closure in 1987 and liquidation in 1988. Clearly, there was no success in
business or realization of profits to speak of that would warrant the conferment of additional benefits sought by
private respondents. No company should be compelled to act liberally and confer upon its employees
additional benefits over and above those mandated by law when it is plagued by economic difficulties and
financial losses. No act of enlightened generosity and self-interest can be exacted from near empty, if not
empty, coffers.
Consequently, on the ten (10) items awarded to herein private respondents (enumerated at page 3)
which represent additional benefits, they having already been paid separation and retirement benefits, we rule
as follows:
First. The award of 5% profit sharing of petitioner banks net profits for the years 1985 and 1986 is
deleted as there were clearly no profits to share during that period given the banks financial status in 1985 and
1986 when it was operating on net losses.
Second. The award of wage increases and Christmas and mid-year bonuses from 1985 to 1988, being
in the nature of gratuities and dependent as they on the petitioners liberality and capability to give, is likewise
deleted for same reasons above stated.
Third. The award of differentials on accrued leaves, retirement benefits and Christmas and mid-year
bonuses is also deleted as a necessary and logical consequence of the denial of the wage increases and
Christmas and mid-year bonuses.
Fourth. The award of medical, dental and optical benefits is well-taken and, therefore, affirmed.
Fifth. The claim for travel plans for 23 senior officers, and car plans and gasoline allowances for 23
senior officers, 15 senior managers and 54 assistant managers may only be granted to those officers who
have not yet availed of the said benefit subject to the proper determination by the labor arbiter.
Sixth and last. Claims for longevity pay, loyalty bonuses and uniform allowance of P600.00 for 1985
may be granted given the apparent loyalty and allegiance shown by herein private respondents to petitioner
bank despite rough sailing during the said period of time.
That disposes of G.R. No. 107902.
With respect to G.R. No. 107487, the same is dismissed, the issues raised therein having been
rendered moot and academic by the foregoing disquisitions and disposition. Besides, it is beyond dispute that
employees indeed enjoy first preference in the event of bankruptcy or liquidation of an employers business.[31]
26
 WHEREFORE, premises considered, G.R. No. 107902 is GRANTED and is hereby REMANDED to the against elimination or diminution of benefits under Article 100 of the Labor Code, as amended. The dispositive
Labor Arbiter for the proper computation of the monetary awards in accordance with the foregoing disquisition portion of the Order states:
and with reasonable dispatch. G.R. No. 107487 is hereby DISMISSED.

SO ORDERED. "WHEREFORE, premises considered and pursuant to the Rules on the Disposition of Labor Standards Cases
in the Regional Offices issued by the Secretary of Labor and Employment on 16 September 1987, respondent
Copylandia Services and Trading thru its owner/manager Mr. Francisco Guico, is hereby ORDERED to pay
the employees the amount of ONE MILLION EIGHTY ONE THOUSAND SEVEN HUNDRED FIFTY SIX
PESOS AND SEVENTY CENTAVOS (P1,081,756.70) representing their backwages, distributed as follows:

1. Rosalina Carrera - P68,010.91

[G.R. No. 131750. November 16, 1998] 2. Joanna Ventura - 28,568.10
3. Mercelita Paredes - 68,010.91
4. Aida Licuanan - 68,010.91
5. Gemma Gales - 68,010.91
6. Clotilda Zarata - 27,808.33
7. Consolacion Miguel - 65,708.28
FRANCISCO GUICO, JR., doing business under the name and style of COPYLANDIA SERVICES &
8. Gemma Macalalay - 68,010.91
TRADING, petitioner, vs. THE HON. SECRETARY OF LABOR & EMPLOYMENT LEONARDO
9. Wandy Aquino - 19,559.58
A. QUISUMBING, THE OFFICE OF REGIONAL DIRECTOR OF REGION I, DEP'T OF LABOR &
10. Laureta Clauna - 68,010.91
EMPLOYMENT, ROSALINA CARRERA, ET. AL., respondents.
11. Josephine Valdez - 27,808.33
12. Leilani Berrozo - 27,808.33
DECISION 13. Majestina Raymundo - 68,010.91
14. Theresa Rosario - 68,010.91
PUNO, J.: 15. Edelyn Maramba - 68,010.91
16. Yolly Dimabayao - 40,380.60
17. Vilma Calaguin - 68,010.91
This is a petition for certiorari seeking review of two (2) Orders[1] issued by the respondent Secretary of 18. Maila Balolong - 40,380.60
Labor and Employment dismissing petitioner's appeal. 19. Clarissa Villena - 27,808.33
20. Maryann Galinato - 68,010.91
The case started when the Office of the Regional Director, Department of Labor and Employment 21. Desiree Cabasag - 27,808.33
(DOLE), Region I, San Fernando, La Union, received a letter-complaint dated April 25, 1995, requesting for an
investigation of petitioner's establishment, Copylandia Services & Trading, for violation of labor standards
laws. Pursuant to the visitorial and enforcement powers of the Secretary of Labor and Employment or his duly Total P1,081,756.70
authorized representative under Article 128 of the Labor Code, as amended, inspections were conducted at
Copylandia's outlets on April 27 and May 2, 1995. The inspections yielded the following violations involving
and to submit proof of payment to this Office within seven (7) days from receipt hereof. Otherwise,
twenty-one (21) employees who are copier operators: (1) underpayment of wages; (2) underpayment of 13th
a Writ of Execution will be issued to enforce this Order.
month pay; and (3) no service incentive leave with pay.[2]

The first hearing of the case was held on June 14, 1995, where petitioner was represented by Joseph
Botea, Officer-in-Charge of the Dagupan City outlets, while the 21 employees were represented by Leilani
Barrozo, Gemma Gales, Majestina Raymundo and Laureta Clauna. It was established that a copier operator
was receiving a daily salary ranging from P35.00 to P60.00 plus commission of P20.00 per P500.00 worth of
photocopying. There was also incentive pay of P20.00 per P250.00 worth of photocopying in excess of the
first P500.00.[3]
"SO ORDERED."[7]
Petitioner received a copy of the Order on November 10, 1995. On November 15, 1995, petitioner filed
a Notice of Appeal.[8] The next day, he filed a Memorandum of Appeal accompanied by a Motion to Reduce
Amount of Appeal Bond and a Manifestation of an Appeal Bond.

On July 13, 1995, petitioner's representative submitted a Joint Affidavit signed and executed by the 21
employees expressing their disinterest in prosecuting the case and their waiver and release of petitioner from
his liabilities arising from non-payment and underpayment of their salaries and other benefits. Individually
signed documents dated December 21, 1994, purporting to be the employees' Receipt, Waiver and Quitclaim
were also submitted.[4]
In the investigation conducted by Hearing Officer Adonis Peralta on July 21, 1995, the 21 employees
claimed that they signed the Joint Affidavit for fear of losing their jobs. They added that their daily salary was
increased to P92.00 effective July 1, 1995, but the incentive and commission schemes were discontinued.
They alleged that they did not waive the unpaid benefits due to them.[5]
On October 30, 1995, Regional Director Guerrero N. Cirilo issued an Order[6] favorable to the 21
employees. First, he ruled that the purported Receipt, Waiver and Quitclaim dated December 21 and 22,
1994, could not cause the dismissal of the labor standards case against the petitioner since the same were
executed before the filing of the said case. Moreover, the employees repudiated said waiver and quitclaim.
Second, he held that despite the salary increase granted by the petitioner, the daily salary of the employees
was still below the minimum daily wage rate of P119.00 under Wage Order No. RB-I-03. Thirdly, he held that
the removal of the commission and incentive schemes during the pendency of the case violated the prohibition
In his appeal memorandum,[9] petitioner questioned the jurisdiction of the Regional Director citing
Article 129 of the Labor Code, as amended,[10] and Section 1, Rule IX of the Implementing Rules of Republic
Act No. 6715.[11] He argued that the Regional Director has no jurisdiction over the complaint of the 21
employees since their individual monetary claims exceed the P5,000.00 limit. He alleged that the Regional
Director should have indorsed the case to the Labor Arbiter for proper adjudication and for a more formal
proceeding where there is ample opportunity for him to present evidence to contest the claims of the
employees. He further alleged that the Regional Director erred in computing the monetary award since it was
done without regard to the actual number of days and time worked by the employees. He also faulted the
Regional Director for not giving credence to the Receipt, Waiver and Quitclaim of the employees.
In the Motion to Reduce Amount of Appeal Bond,[12] petitioner claimed he was having difficulty in raising
the monetary award which he denounced as exorbitant. Pending resolution of the motion, he posted an appeal
bond in the amount of P105,000.00 insisting that the jurisdiction of the Regional Director is limited to claims
of P5,000.00 per employee and there were 21 employees involved in the case.
On November 22, 1995, petitioner also filed a request to hold in abeyance any action relative to the
case for a possible amicable settlement with the employees.[13]

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 On January 10, 1996, District Labor Officer Adonis Peralta forwarded a Report showing that the
petitioner and most of the 21 employees had reached a compromise agreement. The Release, Waiver and
Quitclaim was signed by the following employees and show the following amounts they received, viz:
1. Aida Licuanan - P3,000.00
2. Clarissa Villena - 3,000.00
3. Gemma Gales - 3,000.00
4. Desiree Cabansag - 3,000.00
5. Clotilda Zarata - 3,000.00
6. Consolacion Miguel - 5,000.00
7. Josephine Valdez - 3,000.00
8. Maryann Galinato - 5,000.00
9. Theresa Rosario - 3,000.00
10.Yolly Dimabayao - 3,000.00
11.Vilma Calaguin - 3,000.00
12.Gemma Macalalay - 3,000.00
13.Edelyn Maramba - 5,000.00
14.Charito Gonzales - 3,000.00
15.Joanna Ventura - 3,000.00
Four (4) employees did not sign in the compromise agreement. They insisted that they be paid what is due to
them according to the Order of the Regional Director in the total amount of P231,841.06. They were Laureta
Clauna, Majestina Raymundo, Leilani Barrozo and Rosalina Carrera.[14]
In a letter[15] dated February 23, 1996, the Regional Director informed petitioner that he could not give
due course to his appeal since the appeal bond of P105,000.00 fell short of the amount due to the 4
employees who did not participate in the settlement of the case. In the same letter, he directed petitioner to
post, within ten (10) days from receipt of the letter, the amount of P126,841.06 or the difference between the
monetary award due to the 4 employees and the appeal bond previously posted.
On March 13, 1996, petitioner filed a Motion for Reconsideration to Reduce Amount of Appeal
Bond.[16] He manifested that he has closed down his business operations due to severe financial losses and
implored the Regional Director to accept the appeal bond already filed for reasons of justice and equity.
In an Order dated December 3, 1996, the respondent Secretary denied the foregoing Motion for
Reconsideration on the ground that the directive from the Regional Director to post an additional surety bond
is contained in a "mere letter" which cannot be the proper subject for a Motion for Reconsideration and/or
Appeal before his office. He added that for failure of the petitioner to post the correct amount of surety or cash
bond, his appeal was not perfected following Article 128 (b) of the Labor Code, as amended. Despite the non-
perfection of the appeal, respondent Secretary looked into the Receipt, Waiver and Quitclaim signed by the
employees and rejected it on the ground that the consideration was unconscionably inadequate. He ruled,
nonetheless, that the amount received by the said employees should be deducted from the judgment award
and the difference should be paid by the petitioner.
On December 26, 1996, petitioner filed a Motion for Reconsideration. On February 13, 1997, he filed a
Motion to Admit Additional Bond and posted the amount of P126,841.06 in compliance with the order of the
Regional Director in his letter dated February 13, 1996.[17]
On October 24, 1997, the respondent Secretary denied the Motion for Reconsideration. He ruled that
the Regional Director has jurisdiction over the case citing Article 128 (b) of the Labor Code, as amended. He
pointed out that Republic Act No. 7730 repealed the jurisdictional limitations imposed by Article 129 on the
visitorial and enforcement powers of the Secretary of Labor and Employment or his duly authorized
representatives. In addition, he held that petitioner is now estopped from questioning the computation made
by the Regional Director as a result of the compromise agreement he entered into with the employees. Lastly,
he reiterated his ruling that the Receipt, Waiver and Quitclaim signed by the employees was not valid.
Petitioner is now before this Court raising the following issues:
I employer may be perfected only upon the posting of a cash or surety bond issued by a reputable bonding
Whether or not Public Respondent acted with grave abuse of discretion amounting to lack or in excess of
jurisdiction when he set aside the Release and Quitclaim executed by the seventeen (sic) complainants before
the Office of the Regional Director when Public Respondent himself ruled that the Appeal of the Petitioner was
not perfected and, therefore, Public Respondent did not acquire jurisdiction over the case.
II
Whether or not Public Respondent acted with grave abuse of discretion amounting to lack or in excess of
jurisdiction when in complete disregard of Article 227 of the Labor Code, Public Respondent set aside and
nullified the Release and Quitclaim executed by the seventeen (sic) complainants.
III
Whether or not Public Respondent acted with grave abuse of discretion amounting to lack or in excess of
jurisdiction when he affirmed the Order of the Regional Director who, in complete disregard of the due process
requirements of law, computed the monetary award given to the private respondents without notice to
petitioner and without benefit of hearing.
IV
Whether or not petitioner is deemed estopped from appealing the decision of the Regional Director when it
(sic) entered into a compromise settlement with complainants/private respondents.
The threshold issues that need to be settled in this case are: (1) whether or not the Regional Director
has jurisdiction over the instant labor standards case, and (2) whether or not petitioner perfected his appeal.
With regard to the issue of jurisdiction, petitioner alleged that the Regional Director has no jurisdiction
over the instant case since the individual monetary claims of the 21 employees exceed P5,000.00. He further
argued that following Article 129 of the Labor Code, as amended, and Section 1, Rule IX of the Implementing
Rules of Republic Act No. 6715, the jurisdiction over this case belongs to the Labor Arbiter, and the Regional
Director should have indorsed it to the appropriate regional branch of the National Labor Relations
Commission (NLRC). On the other hand, the respondent Secretary held that the jurisdictional limitation
imposed by Article 129 on his visitorial and enforcement power under Article 128 (b) of the Labor Code, as
amended, has been repealed by Republic Act No. 7730.[18] He pointed out that the amendment
"[n]otwithstanding the provisions of Article 129 and 217 of the Labor Code to the contrary" erased all doubts as
to the amendatory nature of the new law, and in effect, overturned this Court's ruling in the case of Servando's
Inc. v. Secretary of Labor and Employment.[19]
We sustain the jurisdiction of the respondent Secretary. As the respondent correctly pointed out, this
Court's ruling in Servando --- that the visitorial power of the Secretary of Labor to order and enforce
compliance with labor standard laws cannot be exercised where the individual claim exceeds P5,000.00, can
no longer be applied in view of the enactment of R.A. No. 7730 amending Article 128 (b) of the Labor Code,
viz:
Article 128 (b) - Notwithstanding the provisions of Articles 129 and 217 of this Code to the Contrary, and in
cases where the relationship of employer-employee still exists, the Secretary of Labor and Employment or his
duly authorized representatives shall have the power to issue compliance orders to give effect to the labor
standards provisions of the Code and other labor legislation based on the findings of the 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.
An order issued by the duly authorized representative of the Secretary of Labor and Employment under this
article may be appealed to the latter. In case said order involves a monetary award, an appeal by the
company duly accredited by the Secretary of Labor and Employment in the amount equivalent to the monetary
award in order appealed from. (Italics supplied.)
The records of the House of Representatives[20] show that Congressmen Alberto S. Veloso and Eriberto V.
Loreto sponsored the law. In his sponsorship speech, Congressman Veloso categorically declared that "this
bill seeks to do away with the jurisdictional limitations imposed through said ruling (referring to Servando) and
28
to finally settle any lingering doubts on the visitorial and enforcement powers of the Secretary of Labor and
Employment."[21] Petitioner's reliance on Servando is thus untenable.

The next issue is whether petitioner was able to perfect his appeal to the Secretary of Labor and
Employment. Article 128 (b) of the Labor Code clearly provides that the appeal bond must be "in the amount
equivalent to the monetary award in the order appealed from." The records show that petitioner failed to post
the required amount of the appeal bond. His appeal was therefore not perfected.

IN VIEW WHEREOF, the petition for certiorari is dismissed. No pronouncement as to costs.

SO ORDERED.

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