LABOR LAW CASE DIGESTS

I. APPLICABLE LAWS

PHILIPPINE ASSOCIATION OF SERVICE EXPORTERS vs TORRES

212 SCRA 298

SAN JUAN DE DIOS HOSPITAL vs NLRC

282 SCRA 316

LETRAN CALAMBA FACULTY & EMPLOYEES ASSOC. vs NLRC

GR 156225 January 29, 2008

ASUNCION vs NLRC
362 SCRA 56

II. BASIC PRINCIPLES

SINGER SEWING MACHINE COMPANY vs. HON. FRANKLIN DRILON

[193 SCRA 271]
Facts:
Singer Machine Collectors Union-Baguio filed a petition for direct certification as the sole and
exclusive bargaining agent of all collectors of Singer Sewing Machine. The company opposed the
petition mainly because the union members are not employees but independent contractors as
evidenced by the collection agency agreement which they signed.
Med-Arbiter ruled that there exists an employee-employer relationship and granted the
certification election which was affirmed by Sec. Drilon. The company files the present petition on
the determination of the relationship. The union insist that the provisions of the Collection
Agreement belie the company’s position that the union members are independent contractors.
Issue:
Whether or not there exists an employer-employee relationship between the parties.
SC Ruling:
The present case calls for the application of the control test, which if not satisfied, would lead to
the conclusion that no employee-employer relationship exists. If the union members are not
employees, no right to organize for the purpose of bargaining or as a bargaining agent cannot be
recognized.
The following elements are generally considered in the determination of the relationship: the
selection and engagement of the employee, payment of wages, power of dismissal and the power
to control the employee’s conduct which is the most important element.
The nature of the relationship between a company and its collecting agents depends on the
circumstances of each particular relationship. Not all collecting agents are employees and neither
are all collecting agents independent contractors. The agreement confirms the status of the
collecting agents as independent contractor. The requirement that collection agents utilize only
receipt forms and report forms issued by the company and that reports shall be submitted at least
once a week is not necessarily an indication of control over the means by which the job collection
is to be performed. Even if report requirements are to be called control measures, any control is
only with respect to the end result of the collection since the requirements regulate the things to
be done after the performance of the collection job or the rendition of service.
The plain language of the agreement reveals that the designation as collection agent does not
create an employment relationship and that the applicant is to be considered at all times as an
independent contractor.
The court finds that since private respondents are not employees of the company, they are not
entitled to the constitutional right to form or join a labor organization for the purposes of collective
bargaining. There is no constitutional and legal basis for their union to be granted their petition for
direct certification.
MANILA GOLF CLUB, INC. VS. INTERMEDIATE APPELLATE COURT
[237 SCRA 207]
Facts:
This is originally filed with the Social Security Commission (SSC) via petition of 17 persons who
styled themselves as “ Caddies of Manila Golf and Country Club-PTCCEA” for the coverage and
availment of benefits of the Social Security Act as amended, PTCCEA (Philippine Technical,
Clerical, Commercial Employees Association) a labor organization where which they claim for
membership.
The same time two other proceedings were filed and pending. These are certification election
case filed by PTCCEA on behalf of the same caddies of Manila Golf and Country club which was
in favor of the caddies and compulsory arbitration case involving PTCCEA and Manila Golf and
Country Club which was dismissed and ruled that there was no employer-employee relationship
between the caddies and the club.
Issue:
Whether or not rendering caddying services for members of golf clubs and their guests in said
clubs’ courses or premises are the employees of such clubs and therefore within the compulsory
coverage of the Social Security System (SSS).
SC Ruling:
The Court does not agree that the facts logically point to the employer-employee relationship.
In the very nature of things, caddies must submit to some supervision of their conduct while
enjoying the privilege of pursuing their occupation within the premises and grounds of whatever
club they do work in. They work for the club to which they attach themselves on sufferance but,
on the other hand, also without having to observe any working hours, free to leave anytime they
please, to stay away for as long they like.
These considerations clash frontally with the concept of employment. It can happen that a caddy
who has rendered services to a player on one day may still find sufficient time to work elsewhere.
Under such circumstances, the caddy may leave the premises and to go to such other place of
work that he wishes. These are things beyond the control of the petitioner.
The caddy (LLamar) is not an employee of petitioner Manila Golf and Country Club and the
petitioner is under no obligation to report him for compulsory coverage of SSS.

ENCYCLOPEDIA BRITANNICA (Philippines), INC. vs. NLRC

[264 SCRA 4]

Facts:
Limjoco was a Sales Divison of Encyclopaedia Britannica and was in charge of selling the
products through some sales representatives. As compensation, he would receive commissions
from the products sold by his agents. He was also allowed to use the petitioner’s name, goodwill
and logo. It was agreed that office expenses would be deducted from Limjoco’s commissions.
In 1974, Limjoco resigned to pursue his private business and filed a complaint against petitioner
for alleged non-payment of separation pay and other benefits and also illegal deduction from
sales commissions. Petitioner alleged that Limjoco was not an employee of the company but an
independent dealer authorized to promote and sell its products and in return, received
commissions therein. Petitioner also claims that it had no control and supervision over the
complainant as to the manners and means he conducted his business operations. Limjoco
maintained otherwise. He alleged he was hired by the petitioner and was assigned in the sales
department.
The Labor Arbiter ruled that Limjoco was an employee of the company. NLRC also affirmed the
decision and opined that there was no evidence supporting allegation that Limjoco was an
independent contractor or dealer.
Issue:
Whether or not there was an employee-employer relationship between the parties.
SC Ruling:
There was no employee-employer relationship. In determining the relationship, the following
elements must be present: selection and engagement of the employee, payment of wages, power
of dismissal and power to control the employee’s conduct. The power of control is commonly
regarded as the most crucial and determinative indicator of the presence or absence of an
employee-employer relationship. Under the control test, an employee-employer relationship
exists where the person for whom the services are performed reserves a right to control not only
the end to be achieved, but also the manner and means to be employed in reaching that end.
The issuance of guidelines by the petitioner was merely guidelines on company policies which
sales managers follow and impose on their respective agents. Limjoco was not an employee of
the company since he had the free rein in the means and methods for conducting the marketing
operations. He was merely an agent or an independent dealer of the petitioner. He was free to
conduct his work and he was free to engage in other means of livelihood.
In ascertaining the employee-employer relationship, the factual circumstances must be
considered. The element of control is absent where a person who works for another does so
more or less at his own pleasure and is not subject to definite hours or conditions of work, and in
turn is compensated in according to the result of his efforts and not the amount thereof. Hence,
there was no employee-employer relationship.

SUSAN CARUNGCONG vs. NLRC

[283 SCRA 319]
Facts:
Susan Carungcong began her career in the insurance industry in 1974 as an agent of Sun Life
Assurance Company of Canada. She signed an Agent Agreement with Sun Life. In virtue of
which she was designated the latter’s agent to solicit applications for its insurance and annuity
policies.
This contract was superseded some five years later when she signed two (2) new agreements.
The first, denominated Career Agent’s or Unit Manager’s Agreement, dealt with such matters as
the agent’s commissions, his obligations, limitations on his authority, and termination of the
agreement by death, or by written notice with or without cause. The second was titled, Manager’s
Supplementary Agreement. It explicitly described as a “further agreement”. Carungcong and Sun
Life executed another Agreement named New Business Manager with the function generally to
manage a New Business Office established. This latest Agreement stressed that the New
Business Manager in performance of his duties defined herein, shall be considered an
independent contractor and not an employee of Sun Life, and that under no circumstance shall
the New Business Manager and/or his employees be considered employees of Sun Life.
Ms. Eleizer Sibayan, Manager of Sun Life’s Internal Audit Department, commenced an inquiry
into the special fund availments of Carungcong and other New Business Managers. Respondent
Lance Kemp, had been receiving reports of anomalies in relation thereto from unit managers and
agents. Thereafter, on January 1990, Carungcong was confronted with and asked to explain the
discrepancies set out in Sibayan’s report. She was given a letter signed by Metron V. Deveza,
CLU, Director, Marketing, which advised of the termination of her relationship with Sun Life.
Carungcong promptly instituted proceedings for vindication in the Arbitration Branch of the
National Labor Relations Commissions on January 16, 1990. There she succeeded in obtaining
a favorable judgment. Labor Arbiter found that there existed an employer-employee relationship
between her and Sun Life. On appeal, the National Labor Relations Commission reversed the
Arbiter’s judgment. It affirmed that no employment relationship existed between Carungcong and
Sun Life.
Issue:
Whether or not there petitioner was an employee subject to control and supervision by Sun Life.
SC Ruling:
Noteworthy is that this last agreement which emphasized, like the “Career Agent’s or Unit
Manager’s Agreement” first signed by her, that in performance of her duties defined herein.
Carungcong would be considered an independent contractor and not an employee of Sun Life,
and that under no circumstance shall the New Business Manager and/or his employees be
considered employees of Sun Life.
Carungcong is an independent contractor. It was indicated in the very face of the contract. The
rules and regulations of the company is not sufficient to establish an employer-employee
relationship. It does not necessarily create any employer-employee relationship where the
employers’ controls have to interfere in the methods and means by which employee would like
employ to arrive at the desired results.
Carungcong admitted that she was free to work as she pleases, at the place and time she felt
convenient for her to do so. She was not paid to a fixed salary and was mainly paid by
commissions depending on the volume of her performance.
She was not an employee of Sun Life Co.

ROGELIO RAMOS and ERLINDA RAMOS vs. CA

[380 SCRA 467]
Facts:
Petitioner Erlinda Ramos was advised to undergo an operation for the removal of her stone in the
gall bladder. She was referred to Dr. Hosaka, a surgeon, who agreed to do the operation. The
operation was scheduled on June 17, 1985 in the De los Santos Medical Center. Erlinda was
admitted to the medical center the day before the operation. On the following day, she was ready
for operation as early as 7:30 am. Around 9:30, Dr. Hosaka has not yet arrived. By 10 am,
Rogelio wanted to pull out his wife from the operating room. Dr. Hosaka finally arrived at 12:10
pm more than 3 hours of the scheduled operation.
Dr. Guiterres tried to intubate Erlinda. The nail beds of Erlinda were bluish discoloration in her left
hand. At 3 pm, Erlinda was being wheeled to the Intensive care Unit and stayed there for a
month. Since the ill-fated operation, Erlinda remained in comatose condition until she died.
The family of Ramos sued them for damages.
Issue:
Whether or not there was an employee-employer relationship that existed between the medical
center and Drs. Hosaka and Guiterrez.
SC Ruling:
Private Hospitals hire, fire and exercise real control over their attending and visiting consultant
staff. While consultants are not technically employees, the control exercised, the hiring and the
right to terminate consultants fulfill the hallmarks of an employer-employee relationship with the
exception of payment of wages. The control test is determining.
In applying the four fold test, DLSMC cannot be considered an employer of the respondent
doctors. It has been consistently held that in determining whether an employer-employee
relationship exists between the parties, the following elements must be present: (1) selection and
engagement of services; (2) payment of wages; (3) the power to hire and fire; and (4) the power
to control not only the end to be achieved, but the means to be used in reaching such an end.
The hospital does not hire consultants but it accredits and grants him the privilege of maintaining
a clinic and/or admitting patients. It is the patient who pays the consultants. The hospital cannot
dismiss the consultant but he may lose his privileges granted by the hospital. The hospital’s
obligation is limited to providing the patient with the preferred room accommodation and other
things that will ensure that the doctor’s orders are carried out.
The court finds that there is no employer-employee relationship between the doctors and the
hospital.

JOSE SONZA vs. ABS-CBN BROADCASTING CORPORATION

[G.R. No. 138051. June 10, 2004]
Facts:
In May 1994, ABS-CBN signed an agreement with the Mel and Jay Management and
Development Corporation (MJMDC). ABS-CBN was represented by its corporate officers while
MJMDC was represented by Sonza, as President and general manager, and Tiangco as its EVP
and treasurer. Referred to in the agreement as agent, MJMDC agreed to provide Sonza’s
services exclusively to ABS-CBN as talent for radio and television. ABS-CBN agreed to pay
Sonza a monthly talent fee of P310, 000 for the first year and P317, 000 for the second and third
year.
On April 1996, Sonza wrote a letter to ABS-CBN where he irrevocably resigned in view of the
recent events concerning his program and career. After the said letter, Sonza filed with the
Department of Labor and Employment a complaint alleging that ABS-CBN did not pay his
salaries, separation pay, service incentive pay,13th month pay, signing bonus, travel allowance
and amounts under the Employees Stock Option Plan (ESOP). ABS-CBN contended that no
employee-employer relationship existed between the parties. However, ABS-CBN continued to
remit Sonza’s monthly talent fees but opened another account for the same purpose.
The Labor Arbiter dismissed the complaint and found that there is no employee-employer
relationship. NLRC affirmed the decision of the Labor Arbiter. CA also affirmed the decision of
NLRC.
Issue:
Whether or not there was employer-employee relationship between the parties.
SC Ruling:
Case law has consistently held that the elements of an employee-employer relationship are
selection and engagement of the employee, the payment of wages, the power of dismissal and
the employer’s power to control the employee on the means and methods by which the work is
accomplished. The last element, the so-called "control test", is the most important element.
Sonza’s services to co-host its television and radio programs are because of his peculiar talents,
skills and celebrity status. Independent contractors often present themselves to possess unique
skills, expertise or talent to distinguish them from ordinary employees. The specific selection and
hiring of SONZA, because of his unique skills, talent and celebrity status not possessed by
ordinary employees, is a circumstance indicative, but not conclusive, of an independent
contractual relationship. All the talent fees and benefits paid to SONZA were the result of
negotiations that led to the Agreement. For violation of any provision of the Agreement, either
party may terminate their relationship. Applying the control test to the present case, we find that
SONZA is not an employee but an independent contractor.
The control test is the most important test our courts apply in distinguishing an employee from an
independent contractor. This test is based on the extent of control the hirer exercises over a
worker. The greater the supervision and control the hirer exercises, the more likely the worker is
deemed an employee. The converse holds true as well – the less control the hirer exercises, the
more likely the worker is considered an independent contractor. To perform his work, SONZA
only needed his skills and talent. How SONZA delivered his lines, appeared on television, and
sounded on radio were outside ABS-CBN’s control. ABS-CBN did not instruct SONZA how to
perform his job. ABS-CBN merely reserved the right to modify the program format and airtime
schedule "for more effective programming." ABS-CBN’s sole concern was the quality of the
shows and their standing in the ratings.
Clearly, ABS-CBN did not exercise control over the means and methods of performance of
Sonza’s work. A radio broadcast specialist who works under minimal supervision is an
independent contractor. Sonza’s work as television and radio program host required special skills
and talent, which SONZA admittedly possesses.
ABS-CBN claims that there exists a prevailing practice in the broadcast and entertainment
industries to treat talents like Sonza as independent contractors. The right of labor to security of
tenure as guaranteed in the Constitution arises only if there is an employer-employee relationship
under labor laws. Individuals with special skills, expertise or talent enjoy the freedom to offer their
services as independent contractors. The right to life and livelihood guarantees this freedom to
contract as independent contractors. The right of labor to security of tenure cannot operate to
deprive an individual, possessed with special skills, expertise and talent, of his right to contract as
an independent contractor.

ANGELITO LAZARO vs. SOCIAL SECURITY COMMISSION

[435 SCRA 472 (2004)]
Facts:
Respondent Rosalina M. Laudato filed a petition before the SSC for social security coverage and
remittance of unpaid monthly social security contributions against her three (3) employers.
Among the respondents was herein petitioner Angelito L. Lazaro, proprietor of Royal Star
Marketing (“Royal Star”), which is engaged in the business of selling home appliances.
Lazaro denied that Laudato was an employee but instead claimed that she was an agent of the
company. Lazaro also maintained that she was not mandated to work of definite work hours and
thus not deemed to be a regular employee of Royal Star Marketing, the company of Lazaro.
SSC promulgated a decision rendering that Laudato is a regular employee of Royal Star
Marketing and entitled to social security contributions. Lazaro filed a petition for review before the
CA where CA ruled that Laudato was an employee of Royal Star Marketing. This petition before
the Court assails same arguments raised by Lazaro in SSC. She raised that Laudato was not an
employee of Royal Star Marketing since Royal Star had no control over the activities of Laudato.
Issue:
Whether or not Laudato was a regular employee of Royal Star Marketing and thus, entitled to
social security contributions.
SC Ruling:
It is an accepted doctrine that for the purposes of coverage under the Social Security Act, the
determination of employer-employee relationship warrants the application of the “control test,”
that is, whether the employer controls or has reserved the right to control the employee, not only
as to the result of the work done, but also as to the means and methods by which the same is
accomplished.
The SSC, applying the control test found that Laudato was an employee of Royal Star. The Court
agrees with the findings of the SSC and the CA. The fact that Laudato was paid by way of
commission does not preclude the establishment of an employer-employee relationship.
In the case of Grepalife v. Judico, the Court upheld the existence of an employer-employee
relationship between the insurance company and its agents, despite the fact that the
compensation that the agents on commission received was not paid by the company but by the
investor or the person insured. The relevant factor remains, as stated earlier, whether the
"employer" controls or has reserved the right to control the "employee" not only as to the result of
the work to be done but also as to the means and methods by which the same is to be
accomplished.
Neither does it follow that a person who does not observe normal hours of work cannot be
deemed an employee.
In the case of Cosmopolitan Funeral Homes, Inc. v. Maalat, the employer similarly denied the
existence of an employer-employee relationship, as the claimant according to it, was a
“supervisor on commission basis” who did not observe normal hours of work. This Court declared
that there was an employer-employee relationship, noting that “[the] supervisor, although
compensated on commission basis, [is] exempt from the observance of normal hours of work for
his compensation is measured by the number of sales he makes.”

ABS-CBN BROADCASTING CORPORATION vs. MARLYN NAZARENO et al.

[G.R. No. 164156. September 26, 2006]
Facts:
Petitioner ABS-CBN Broadcasting Corporation (ABS-CBN) is engaged in the broadcasting
business and owns a network of television and radio stations, whose operations revolve around
the broadcast, transmission, and relay of telecommunication signals. It sells and deals in or
otherwise utilizes the airtime it generates from its radio and television operations. It has a
franchise as a broadcasting company, and was likewise issued a license and authority to operate
by the National Telecommunications Commission.
Petitioner employed respondents Nazareno, Gerzon, Deiparine, and Lerasan as production
assistants (PAs) on different dates. They were assigned at the news and public affairs, for various
radio programs in the Cebu Broadcasting Station. On December 19, 1996, petitioner and the
ABS-CBN Rank-and-File Employees executed a Collective Bargaining Agreement (CBA) to be
effective during the period from December 11, 1996 to December 11, 1999. However, since
petitioner refused to recognize PAs as part of the bargaining unit, respondents were not included
to the CBA.
On October 12, 2000, respondents filed a Complaint for Recognition of Regular Employment
Status, Underpayment of Overtime Pay, Holiday Pay, Premium Pay, Service Incentive Pay, Sick
Leave Pay, and 13th Month Pay with Damages against the petitioner before the NLRC. The
Labor Arbiter rendered judgment in favor of the respondents, and declared that they were regular
employees of petitioner as such, they were awarded monetary benefits. NLRC affirmed the
decision of the Labor Arbiter. Petitioner filed a motion for reconsideration but CA dismissed it.
Issue:
Whether or not the respondents were considered regular employees of ABS-CBN.
SC Ruling:
The respondents are regular employees of ABS-CBN. It was held that where a person has
rendered at least one year of service, regardless of the nature of the activity performed, or where
the work is continuous or intermittent, the employment is considered regular as long as the
activity exists, the reason being that a customary appointment is not indispensable before one
may be formally declared as having attained regular status.
In Universal Robina Corporation v. Catapang, the Court states that the primary standard,
therefore, of determining regular employment is the reasonable connection between the particular
activity performed by the employee in relation to the usual trade or business of the employer. The
test is whether the former is usually necessary or desirable in the usual business or trade of the
employer. The connection can be determined by considering the nature of work performed and its
relation to the scheme of the particular business or trade in its entirety. Also, if the employee has
been performing the job for at least a year, even if the performance is not continuous and merely
intermittent, the law deems repeated and continuing need for its performance as sufficient
evidence of the necessity if not indispensability of that activity to the business. Hence, the
employment is considered regular, but only with respect to such activity and while such activity
exists.
Additionally, respondents cannot be considered as project or program employees because no
evidence was presented to show that the duration and scope of the project were determined or
specified at the time of their engagement. In the case at bar, however, the employer-employee
relationship between petitioner and respondents has been proven. In the selection and
engagement of respondents, no peculiar or unique skill, talent or celebrity status was required
from them because they were merely hired through petitioner’s personnel department just like
any ordinary employee. Respondents did not have the power to bargain for huge talent fees, a
circumstance negating independent contractual relationship. Respondents are highly dependent
on the petitioner for continued work. The degree of control and supervision exercised by
petitioner over respondents through its supervisors negates the allegation that respondents are
independent contractors.
The presumption is that when the work done is an integral part of the regular business of the
employer and when the worker, relative to the employer, does not furnish an independent
business or professional service, such work is a regular employment of such employee and not
an independent contractor. As regular employees, respondents are entitled to the benefits
granted to all other regular employees of petitioner under the CBA . Besides, only talent-artists
were excluded from the CBA and not production assistants who are regular employees of the
respondents. Moreover, under Article 1702 of the New Civil Code: “In case of doubt, all labor
legislation and all labor contracts shall be construed in favor of the safety and decent living of the
laborer.”

ANGELINA FRANCISCO vs. NLRC

[500 SCRA 690 (2006)]
Facts:
Petitoner was hired by Kasei Corporation during the incorporation stage. She was designated as
accountant and corporate secretary and was assigned to handle all the accounting needs of the
company. She was also designated as Liason Officer to the City of Manila to secure permits for
the operation of the company.
In 1996, Petitioner was designated as Acting Manager. She was assigned to handle recruitment
of all employees and perform management administration functions. In 2001, she was replaced
by Liza Fuentes as Manager. Kasei Corporation reduced her salary to P2,500 per month which
was until September. She asked for her salary but was informed that she was no longer
connected to the company. She did not anymore report to work since she was not paid for her
salary. She filed an action for constructive dismissal with the Labor Arbiter.
The Labor Arbiter found that the petitioner was illegally dismissed. NLRC affirmed the decision
while CA reversed it.
Issue:
Whether or not there was an employer-employee relationship.
SC Ruling:
The court held that in this jurisdiction, there has been no uniform test to determine the existence
of an employer-employee relation. Generally, courts have relied on the so-called right of control
test where the person for whom the services are performed reserves a right to control not only the
end to be achieved but also the means to be used in reaching such end. In addition to the
standard of right-of-control, the existing economic conditions prevailing between the parties, like
the inclusion of the employee in the payrolls, can help in determining the existence of an
employer-employee relationship.
The better approach would therefore be to adopt a two-tiered test involving: (1) the putative
employer’s power to control the employee with respect to the means and methods by which the
work is to be accomplished; and (2) the underlying economic realities of the activity or
relationship.
In Sevilla v. Court of Appeals, the court observed the need to consider the existing economic
conditions prevailing between the parties, in addition to the standard of right-of-control like the
inclusion of the employee in the payrolls, to give a clearer picture in determining the existence of
an employer-employee relationship based on an analysis of the totality of economic
circumstances of the worker.
Thus, the determination of the relationship between employer and employee depends upon the
circumstances of the whole economic activity, such as: (1) the extent to which the services
performed are an integral part of the employer’s business; (2) the extent of the worker’s
investment in equipment and facilities; (3) the nature and degree of control exercised by the
employer; (4) the worker’s opportunity for profit and loss; (5) the amount of initiative, skill,
judgment or foresight required for the success of the claimed independent enterprise; (6) the
permanency and duration of the relationship between the worker and the employer; and (7) the
degree of dependency of the worker upon the employer for his continued employment in that line
of business. The proper standard of economic dependence is whether the worker is dependent
on the alleged employer for his continued employment in that line of business.
By applying the control test, there is no doubt that petitioner is an employee of Kasei Corporation
because she was under the direct control and supervision of Seiji Kamura, the corporation’s
Technical Consultant. It is therefore apparent that petitioner is economically dependent on
respondent corporation for her continued employment in the latter’s line of business.
There can be no other conclusion that petitioner is an employee of respondent Kasei Corporation.
She was selected and engaged by the company for compensation, and is economically
dependent upon respondent for her continued employment in that line of business. Her main job
function involved accounting and tax services rendered to Respondent Corporation on a regular
basis over an indefinite period of engagement. Respondent Corporation hired and engaged
petitioner for compensation, with the power to dismiss her for cause. More importantly,
Respondent Corporation had the power to control petitioner with the means and methods by
which the work is to be accomplished.

ROGELIO NOGALES vs. CAPITOL MEDICAL CENTER et al.

[G.R. No. 142625. December 19, 2006]
Facts:
Pregnant with her fourth child, Corazon Nogales ("Corazon"), who was then 37 years old, was
under the exclusive prenatal care of Dr. Oscar Estrada ("Dr. Estrada") beginning on her fourth
month of pregnancy or as early as December 1975. Around midnight of 25 May 1976, Corazon
started to experience mild labor pains prompting Corazon and Rogelio Nogales ("Spouses
Nogales") to see Dr. Estrada at his home. After examining Corazon, Dr. Estrada advised her
immediate admission to the Capitol Medical Center ("CMC"). t 6:13 a.m., Corazon started to
experience convulsionsAt 6:22 a.m., Dr. Estrada, assisted by Dr. Villaflor, applied low forceps to
extract Corazon's baby. In the process, a 1.0 x 2.5 cm. piece of cervical tissue was allegedly
torn.At 6:27 a.m., Corazon began to manifest moderate vaginal bleeding which rapidly became
profuse. Corazon died at 9:15 a.m. The cause of death was "hemorrhage, post partum.
Issue:
Whether or not CMC is vicariously liable for the negligence of Dr. Estrada.
SC Ruling:
Private hospitals, hire, fire and exercise real control over their attending and visiting "consultant"
staff. The basis for holding an employer solidarily responsible for the negligence of its employee
is found in Article 2180 of the Civil Code which considers a person accountable not only for his
own acts but also for those of others based on the former's responsibility under a relationship of
patria potestas.
In general, a hospital is not liable for the negligence of an independent contractor-physician.
There is, however, an exception to this principle. The hospital may be liable if the physician is the
"ostensible" agent of the hospital. This exception is also known as the "doctrine of apparent
authority”.
For a hospital to be liable under the doctrine of apparent authority, a plaintiff must show that: (1)
the hospital, or its agent, acted in a manner that would lead a reasonable person to conclude that
the individual who was alleged to be negligent was an employee or agent of the hospital; (2)
where the acts of the agent create the appearance of authority, the plaintiff must also prove that
the hospital had knowledge of and acquiesced in them; and (3) the plaintiff acted in reliance upon
the conduct of the hospital or its agent, consistent with ordinary care and prudence. In the instant
case, CMC impliedly held out Dr. Estrada as a member of its medical staff. Through CMC's acts,
CMC clothed Dr. Estrada with apparent authority thereby leading the Spouses Nogales to believe
that Dr. Estrada was an employee or agent of CMC.

COCA-COLA BOTTLERS PHILS., INC., vs. DR. DEAN CLIMACO

[G.R. No. 146881. February 15, 2007]
Facts:
Dr. Climaco is a medical doctor who was hired by the petitioner by virtue of retainer agreement.
The agreement states that there is no employer-employee relationship between the parties. The
retainer agreement was renewed annually. The last one expired on Dec. 31, 1993. Despite of the
non-renewal of the agreement, respondent continued to perform his functions as company doctor
until he received a letter in March 1995 concluding their retainer agreement.
Respondent filed a complaint before the NLRC seeking recognition as a regular employee of the
petitioner company and prayed for the payment of all benefits of a regular employee. In the
decision of the Labor Arbiter, the company lacked control over the respondent’s performance of
his duties. Respondent appealed where it rendered that no employer-employee relationship
existed between the parties.
The CA ruled that an employer-employee relationship existed.
Issue:
Whether or not there exists an employer-employee relationship between the parties.
SC Ruling :
The Court, in determining the existence of an employer-employee relationship, has invariably
adhered to the four-fold test: (1) the selection and engagement of the employee; (2) the payment
of wages; (3) the power of dismissal; and (4) the power to control the employee’s conduct, or the
so-called “control test,” considered to be the most important element.
The Court agrees with the finding of the Labor Arbiter and the NLRC that the circumstances of
this case show that no employer-employee relationship exists between the parties. The
Comprehensive Medical Plan, provided guidelines merely to ensure that the end result was
achieved, but did not control the means and methods by which respondent performed his
assigned tasks. In addition, the Court finds that the schedule of work and the requirement to be
on call for emergency cases do not amount to such control, but are necessary incidents to the
Retainership Agreement.
Considering that there is no employer-employee relationship between the parties, the termination
of the Retainership Agreement, which is in accordance with the provisions of the Agreement,
does not constitute illegal dismissal of respondent.

CALAMBA MEDICAL CENTER vs NLRC

GR 176484 November 25, 2008

III. RIGHT TO HIRE

William Ollendorf vs. Ira Abrahamson
[38 Phil. 585]
Facts:
The record discloses that Ollendorf is and for a long time past has been engaged in the city of
Manila and elsewhere in the Philippines in the business of manufacturing ladies' embroidered
underwear for export. Ollendorf imports the material from which this underwear is made and
adopts decorative designs which are embroidered upon it by Filipino needle workers from
patterns selected and supplied by him. Most of the embroidery work is done in the homes of the
workers. The embroiderers employed by plaintiff are under contract to work for plaintiff
exclusively.
On September 1915, plaintiff and defendant entered into a contract. Under the terms of this,
agreement defendant entered the employ of plaintiff and worked for him until April 1916, when
defendant, on account of ill health, left plaintiff's employ and went to the United States. While in
plaintiff's employ defendant had access to all parts of plaintiff's establishment, and had full
opportunity to acquaint himself with plaintiff's business methods and business connections. The
duties performed by him were such as to make it necessary that he should have this knowledge
of plaintiff s business. Defendant had a general knowledge of the Philippine embroidery business
before his employment by plaintiff, having been engaged in similar work for several years.
Some months after his departure, defendant returned to Manila as the manager of the Philippine
Underwear Company, a corporation. This corporation does not maintain a factory in the Philippine
Islands, but sends material and embroidery designs from New York to its local representative
here who employs Filipino needle workers to embroider the designs and make up the garments in
their homes. The only difference between plaintiff's business and that of the firm by which the
defendant is employed, is the method of doing the finishing work — the manufacture of the
embroidered material into finished garments.
Shortly after defendant's return to Manila and the commencement by him of the discharge of the
duties of his position as local manager of the Philippine Embroidery Company, plaintiff
commenced this action, the principal purpose of which is to prevent, by injunction, any further
breach of that part of defendant's contract of employment by plaintiff, by which he agreed that he
would not "enter into or engage himself directly or indirectly . . . in a similar or competitive
business to that of (plaintiff) anywhere within the Philippine Islands for a period of five years . . ."
from the date of the agreement.
Issue:
Whether or not the said contract is valid.
SC Ruling:
The contract is a valid one. The only limitation upon the freedom of contractual agreement is that
the pacts established shall not be contrary to "law, morals or public order." (Civil Code, art. 1255.)
Public welfare is first considered, and if it be not involved, and the restraint upon one party is not
greater than protection to the other party requires, the contract may be sustained. The question is
whether, under the particular circumstances of the case and the nature of the particular contract
involved in it the contract is, or is not, unreasonable.
The Courts adopt the modern rule that the validity of restraints upon trade or employment is to be
determined by the intrinsic reasonableness of the restriction in each case, rather than by any
fixed rule, and that such restrictions may be upheld when not contrary to the public welfare and
not greater than is necessary to afford a fair and reasonable protection to the party in whose favor
it is imposed.
A business enterprise may and often does depend for its success upon the owner's relations with
other dealers, his skill in establishing favorable connections, his methods of buying and selling —
a multitude of details, none vital if considered alone, but which in the aggregate constitute the
sum total of the advantages which are the result of the experience or individual aptitude and
ability of the man or men by whom the business has been built up. Failure or success may
depend upon the possession of these intangible but all-important assets, and it is natural that
their possessor should seek to keep them from falling into the hands of his competitors.
It is with this object in view that such restrictions as that now under consideration are written into
contracts of employment. Their purpose is the protection of the employer, and if they do not go
beyond what is reasonably necessary to effectuate this purpose they should be upheld. We are of
the opinion, and so hold, that in the light of the established facts the restraint imposed upon
defendant by his contract is not unreasonable.

Alfonso del Castillo vs. Shannon Richmond

[45 Phil. 679]
Facts:
The case was instituted to declare the contract of services entered into by Alfonso del Castillo as
null and void. Del Castillo alleges that the provisions and conditions contained in the third
paragraph of said contract constitute an illegal and unreasonable restriction upon his liberty to
contract, are contrary to public policy, and are unnecessary in order to constitute a just and
reasonable protection to the defendant; and asked that the same be declared null and void and of
no effect.
The said contract constituted an illegal and unreasonable restriction upon the right of the plaintiff
to contract and was contrary to public policy. It will be noted that the restrictions placed upon the
plaintiff are strictly limited (a) to a limited district or districts, and (b) during the time while the
defendant or his heirs may own or have open a drugstore, or have an interest in any other one
within said limited district.
Issue:
Whether or not the said restriction contrary to public policy.
SC Ruling:
The restriction is reasonable and not contrary to public policy.
The law concerning contracts which tend to restrain business or trade has gone through a long
series of changes from time to time with the changing conditions of trade and commerce. With
trifling exceptions, said changes have been a continuous development of a general rule.
The early cases show plainly a disposition to avoid and annul all contract which prohibited or
restrained any one from using lawful trade " at any time or at any place," as being against the
benefit of the state. Later, however, the rule became well established that if the restraint was
limited to "a certain time" and within "a certain place", such contracts were valid and not "against
the benefit of the state." Later cases, and we think the rule is now well established, have held that
contract in restraint of trade is valid providing there is a limitation upon either time or place. A
contract, however, which restrains a man entering into a business or trade without either a
limitation as to time or place, will be held in valid.
As stated in the case of Ollendorf vs. Abrahamson, The public welfare of course must always be
considered, and if it be not involved and the restraint upon one party is not greater than protection
to the other requires, contracts like the one we are discussing will be sustained. The general
tendency, we believe, of modern authority, is to make the test whether the restraint is reasonably
necessary for the protection of the contracting parties. If the contract is reasonably necessary to
protect the interest of the parties, it will be upheld.
In that case we held that a contract by which an employee agrees refrain a given length of time,
after the expiration of the term of his employment, from engaging in business, competitive with
that of his employer, is not void as being in restraint of trade if the restraint imposed is not greater
than that which is necessary to afford a reasonable protection.

Philippine Telegraph and Telephone Company vs. NLRC

[272 SCRA 596 (1997)]
Facts:
Grace de Guzman was initially hired by petitioner as a reliever for a fixed period from November
21, 1990 until April 20, 1991 vice one C.F. Tenorio who went on maternity leave. Under the
Reliever Agreement which she signed with Petitioner Company, her employment was to be
immediately terminated upon expiration of the agreed period. Thereafter, from June 10, 1991 to
July 1, 1991, and from July 19, 1991 to August 8, 1991, private respondent’s services as reliever
were again engaged by petitioner, this time in replacement of one Erlinda F. Dizon who went on
leave during both periods. After August 8, 1991, and pursuant to their Reliever Agreement, her
services were terminated.
It now appears that private respondent had made the s representation, that she was single
eventhough she contracted marriage months before, in the two successive reliever agreements
which she signed on June 10, 1991 and July 8, 1991. When petitioner supposedly learned about
the same later, its branch supervisor sent to private respondent a memorandum requiring her to
explain the discrepancy. In that memorandum, she was reminded about the company’s policy of
not accepting married women for employment.
Private respondent was dismissed from the company effective January 29, 1992, which she
readily contested by initiating a complaint for illegal dismissal. Labor Arbiter handed down a
decision declaring that private respondent, who had already gained the status of a regular
employee, was illegally dismissed by petitioner. On appeal to the National Labor Relations
Commission (NLRC), said public respondent upheld the labor arbiter and it ruled that private
respondent had indeed been the subject of an unjust and unlawful discrimination by her
employer, PT&T.
Issue:
Whether or not discrimination merely by reason of the marriage of a female employee is
expressly prohibited by Article 136.
SC Ruling:
An employer is free to regulate, according to his discretion and best business judgment, all
aspects of employment, “from hiring to firing,” except in cases of unlawful discrimination or those
which may be provided by law. Petitioner’s policy of not accepting or considering as disqualified
from work any woman worker who contracts marriage runs afoul of the test of, and the right
against, discrimination, afforded all women workers by our labor laws and by no less than the
Constitution.
Respondent’s act of concealing the true nature of her status from PT&T could not be properly
characterized as willful or in bad faith as she was moved to act the way she did mainly because
she wanted to retain a permanent job in a stable company. In other words, she was practically
forced by that very same illegal company policy into misrepresenting her civil status for fear of
being disqualified from work.
The government, to repeat, abhors any stipulation or policy in the nature of that adopted by
petitioner PT&T. The Labor Code states, in no uncertain terms, as follows:
“ART. 136. Stipulation against marriage. - It shall be unlawful for an employer to require as a
condition of employment or continuation of employment that a woman shall not get married, or to
stipulate expressly or tacitly that upon getting married, a woman employee shall be deemed
resigned or separated, or to actually dismiss, discharge, discriminate or otherwise prejudice a
woman employee merely by reason of marriage.”
Under American jurisprudence, job requirements which establish employer preference or
conditions relating to the marital status of an employee are categorized as a “sex-plus”
discrimination where it is imposed on one sex and not on the other. Further, the same should be
evenly applied and must not inflict adverse effects on a racial or sexual group which is protected
by federal job discrimination laws.
Petitioner’s policy is not only in derogation of the provisions of Article 136 of the Labor Code on
the right of a woman to be free from any kind of stipulation against marriage in connection with
her employment, but it likewise assaults good morals and public policy, tending as it does to
deprive a woman of the freedom to choose her status, a privilege that by all accounts inheres in
the individual as an intangible and inalienable right.
Hence, while it is true that the parties to a contract may establish any agreements, terms, and
conditions that they may deem convenient, the same should not be contrary to law, morals, good
customs, public order, or public policy. Carried to its logical consequences, it may even be said
that petitioner’s policy against legitimate marital bonds would encourage illicit or common-law
relations and subvert the sacrament of marriage.

Duncan Association of Detailman-PTGWO vs. Glaxo Phils.

[G.R. No.162994. September 17, 2004]
Facts:
Petitioner Pedro A. Tecson was hired by respondent Glaxo Wellcome Philippines, Inc.) as
medical representative on October 1995, after Tecson had undergone training and orientation.
Tecson signed a contract of employment which stipulates, among others, that he agrees to study
and abide by existing company rules; to disclose to management any existing or future
relationship by consanguinity or affinity with co-employees or employees of competing drug
companies and should management find that such relationship poses a possible conflict of
interest, to resign from the company.
The Employee Code of Conduct of Glaxo similarly provides that an employee is expected to
inform management of any existing or future relationship by consanguinity or affinity with co-
employees or employees of competing drug companies. If management perceives a conflict of
interest or a potential conflict between such relationship and the employee’s employment with the
company, the management and the employee will explore the possibility of a “transfer to another
department in a non-counterchecking position” or preparation for employment outside the
company after six months.
Tecson was initially assigned to market Glaxo’s products in the Camarines Sur-Camarines Norte
sales area. Subsequently, Tecson entered into a romantic relationship with Bettsy, an employee
of Astra Pharmaceuticals (Astra), a competitor of Glaxo. Bettsy was Astra’s Branch Coordinator
in Albay. Despite of warnings, Tecson married Bettsy. The superiors of Tecson reminded him of
the company policy and suggested that either him or Bettsy shall resign from their respective
companies. Tecson requested more time to resolve the issue. In November of 1999, Glaxo
transferred Tecson to Mindanao area involving the provinces of Butuan, Surigao and Agusan del
Sur. Tecson did not agree to the reassignment and referred this matter to the grievance
committee. It was resolved and was submitted to voluntary arbitration.
The NCMB rendered decision that Glaxo’s policy was a valid one. Aggrieved, Tecson filed a
petition to the CA where CA held that Glaxo’s policy prohibiting its employees from having
personal relationships with employees of competitor companies is a valid exercise of its
management prerogatives. Hence, this petition.
Issue:
Whether or not the policy of a pharmaceutical company prohibiting its employees from marrying
employees of any competitor company is valid.
SC Ruling:
There is no error to the Court of Appeals when it ruled that Glaxo’s policy prohibiting an employee
from having a relationship with an employee of a competitor company is a valid exercise of
management prerogative. Glaxo has a right to guard its trade secrets, manufacturing formulas,
marketing strategies and other confidential programs and information from competitors, especially
so that it and Astra are rival companies in the highly competitive pharmaceutical industry.
The prohibition against personal or marital relationships with employees of competitor companies
upon Glaxo’s employees is reasonable under the circumstances because relationships of that
nature might compromise the interests of the company. In laying down the assailed company
policy, Glaxo only aims to protect its interests against the possibility that a competitor company
will gain access to its secrets and procedures. That Glaxo possesses the right to protect its
economic interests cannot be denied.
No less than the Constitution recognizes the right of enterprises to adopt and enforce such a
policy to protect its right to reasonable returns on investments and to expansion and growth.
Indeed, while our laws endeavor to give life to the constitutional policy on social justice and the
protection of labor, it does not mean that every labor dispute will be decided in favor of the
workers. The law also recognizes that management has rights which are also entitled to respect
and enforcement in the interest of fair play.

Star Paper Corporation vs. Ronaldo Simbol, et al.

[G.R. No.164774. April 12, 2006]
Facts:
Petitioner Star Paper Corporation is a corporation engaged in trading, principally of paper
products. Josephine Ongsitco is its Manager of the Personnel and Administration Department
while Sebastian Chua is its Managing Director.
Respondents Ronaldo D. Simbol (Simbol), Wilfreda N. Comia (Comia) and Lorna E. Estrella
(Estrella) were all regular employees of the company. Simbol was employed by the company on
October 1993 and met Alma Dayrit, also an employee of the company, whom he married on June
1998. Prior to the marriage, Ongsitco advised the couple that should they decide to get married,
one of them should resign pursuant to a company policy. Simbol resigned on June 20, 1998
pursuant to the company policy.
Comia was hired by the company on February 1997. She met Howard Comia, a co-employee,
whom she married on June 1, 2000. Ongsitco likewise reminded them that pursuant to company
policy, one must resign should they decide to get married. Comia resigned on June 30, 2000.
Estrella was hired on July 29, 1994. She met Luisito Zuñiga (Zuñiga), also a co-worker.
Petitioners stated that Zuñiga, a married man, got Estrella pregnant. The company allegedly
could have terminated her services due to immorality but she opted to resign on December 21,
1999.
The respondents signed a Release and Confirmation Agreement and stated therein that they
have no money and property accountabilities in the company. Respondents offer a different
version of their dismissal. Respondents later filed a complaint for unfair labor practice,
constructive dismissal, separation pay and attorney’s fees. They averred that the aforementioned
company policy is illegal and contravenes Article 136 of the Labor Code.
Labor Arbiter dismissed the complaint and states that the company policy was decreed pursuant
to what the respondent corporation perceived as management prerogative. On appeal to the
NLRC, the Commission affirmed the decision of the Labor Arbiter. In its assailed Decision dated
August 3, 2004, the Court of Appeals reversed the NLRC decision.
Issue:
Whether or not the questioned policy is a valid exercise of management prerogative.
SC Ruling:
The case at bar involves Article 136 of the Labor Code which provides: It shall be unlawful for
an employer to require as a condition of employment or continuation of employment that a
woman employee shall not get married, or to stipulate expressly or tacitly that upon getting
married a woman employee shall be deemed resigned or separated, or to actually dismiss,
discharge, discriminate or otherwise prejudice a woman employee merely by reason of her
marriage.
With more women entering the workforce, employers are also enacting employment policies
specifically prohibiting spouses from working for the same company. We note that two types of
employment policies involve spouses: policies banning only spouses from working in the same
company (no-spouse employment policies), and those banning all immediate family members,
including spouses, from working in the same company (anti-nepotism employment policies).
It utilizes two theories of employment discrimination: the disparate treatment and the disparate
impact. Under the disparate treatment analysis, the plaintiff must prove that an employment policy
is discriminatory on its face. No-spouse employment policies requiring an employee of a
particular sex to either quit, transfer, or be fired are facially discriminatory. On the other hand, to
establish disparate impact, the complainants must prove that a facially neutral policy has a
disproportionate effect on a particular class.
The courts that have broadly construed the term “marital status” rule that it encompassed the
identity, occupation and employment of one's spouse. They hold that the absence of such a bona
fide occupational qualification invalidates a rule denying employment to one spouse due to the
current employment of the other spouse in the same office. Thus, they rule that unless the
employer can prove that the reasonable demands of the business require a distinction based on
marital status and there is no better available or acceptable policy which would better accomplish
the business purpose, an employer may not discriminate against an employee based on the
identity of the employee’s spouse. This is known as the bona fide occupational qualification
exception.
We note that since the finding of a bona fide occupational qualification justifies an employer’s no-
spouse rule, the exception is interpreted strictly and narrowly by these state courts. There must
be a compelling business necessity for which no alternative exists other than the discriminatory
practice. To justify a bona fide occupational qualification, the employer must prove two factors: (1)
that the employment qualification is reasonably related to the essential operation of the job
involved; and, (2) that there is a factual basis for believing that all or substantially all persons
meeting the qualification would be unable to properly perform the duties of the job.
The court does not find a reasonable business necessity in the case at bar. The protection given
to labor in our jurisdiction is vast and extensive that we cannot prudently draw inferences from the
legislature’s silence that married persons are not protected under our Constitution and declare
valid a policy based on a prejudice or stereotype. Thus, for failure of petitioners to present
undisputed proof of a reasonable business necessity, we rule that the questioned policy is an
invalid exercise of management prerogative.

Rolando Rivera vs. Solid Bank Corporation

[G.R. No.163269. April 19, 2006]
Facts:
Petitioner Rolando Rivera had been working for Solidbank Corporation since July 1977. He was
initially employed as an Audit Clerk, then as Credit Investigator, Senior Clerk, Assistant
Accountant, and Assistant Manager. Prior to his retirement, he became the Manager of the
Credit Investigation and Appraisal Division of the Consumer’s Banking Group. In the meantime,
Rivera and his brother-in-law put up a poultry business in Cavite.
In December 1994, Solidbank offered two retirement programs to its employees: (a) the Ordinary
Retirement Program (ORP), under which an employee would receive 85% of his monthly basic
salary multiplied by the number of years in service; and (b) the Special Retirement Program
(SRP), under which a retiring employee would receive 250% of the gross monthly salary
multiplied by the number of years in service. Since Rivera was only 45 years old, he was not
qualified for retirement under the ORP. Under the SRP, he was entitled to receive P1,045,258.95
by way of benefits.
Deciding to devote his time and attention to his poultry business in Cavite, Rivera applied for
retirement under the SRP. Subsequently, Solidbank required Rivera to sign an undated Release,
Waiver and Quitclaim, which was notarized on March 1, 1995. Rivera acknowledged receipt of
the net proceeds of his separation and retirement benefits and promised that “[he] would not, at
any time, in any manner whatsoever, directly or indirectly engage in any unlawful activity
prejudicial to the interest of Solidbank, its parent, affiliate or subsidiary companies, their
stockholders, officers, directors, agents or employees, and their successors-in-interest and will
not disclose any information concerning the business of Solidbank, its manner or operation, its
plans, processes, or data of any kind.”
On May 1995, the Equitable Banking Corporation employed Rivera as Manager of its Credit
Investigation and Appraisal Division of its Consumers’ Banking Group. Upon discovering this,
Solidbank First Vice-President for Human Resources Division (HRD) wrote a letter informing
Rivera that he had violated the Undertaking and demanded the return of all the monetary benefits
he received in consideration of the SRP within five days from receipt; otherwise, appropriate legal
action would be taken against him.
When Rivera refused to return the amount demanded within the given period, Solidbank filed a
complaint. Petitioner avers that the prohibition incorporated in the Release, Waiver and Quitclaim
barring him as retiree from engaging directly or indirectly in any unlawful activity and disclosing
any information concerning the business of respondent bank, as well as the employment ban
contained in the Undertaking he executed, is oppressive, unreasonable, cruel and inhuman
because of its overbreath.
Issue:
Whether or not the post-retirement competitive employment ban is reasonable.
Ruling of the Court:
The post-retirement competitive employment ban is unreasonable because it has no geographical
limits. The respondent is barred from accepting any kind of employment in any competitive bank
within the proscribed period.
Retirement plans, in light of the constitutional mandate of affording full protection to labor, must
be liberally construed in favor of the employee, it being the general rule that pension or retirement
plans formulated by the employer are to be construed against it. Retirement benefits, after all,
are intended to help the employee enjoy the remaining years of his life, releasing him from the
burden of worrying for his financial support, and are a form of reward for being loyal to the
employer. Respondent is burdened to establish that a restrictive covenant barring an employee
from accepting a competitive employment after retirement or resignation is not an unreasonable
or oppressive, or in undue or unreasonable restraint of trade, thus, unenforceable for being
repugnant to public policy
In cases where an employee assails a contract containing a provision prohibiting him or her from
accepting competitive employment as against public policy, the employer has to adduce evidence
to prove that the restriction is reasonable and not greater than necessary to protect the
employer’s legitimate business interests. The restraint may not be unduly harsh or oppressive in
curtailing the employee’s legitimate efforts to earn a livelihood and must be reasonable in light of
sound public policy.
Consideration must be given to the employee’s right to earn a living and to his ability to determine
with certainty the area within which his employment ban is restituted. A provision on territorial
limitation is necessary to guide an employee of what constitutes as violation of a restrictive
covenant and whether the geographic scope is co-extensive with that in which the employer is
doing business. In considering a territorial restriction, the facts and circumstances surrounding
the case must be considered.

YRASUEGUI vs PHILIPPINE AIRLINES

GR 168081 October 17, 2008

IV. WAGE AND THE WAGE RATIONALIZATION ACT

Ilaw at Buklod ng Manggagawa (IBM) vs. NLRC

[198 SCRA 586 (1991)]
Facts:
The union known as Ilaw at Buklod Ng Manggagawa (IBM) said to represent 4,500 employees of
San Miguel Corporation, more or less, working at the various plants, offices, and warehouses
located at the National Capital Region presented to the company a "demand" for correction of the
significant distortion in the workers' wages.
In that demand, the Union explicitly invoked Section 4 (d) of RA 6727 which reads as follows:
Where the application of the increases in the wage rates under this Section results in distortions
as defined under existing laws in the wage structure within an establishment and gives rise to a
dispute therein, such dispute shall first be settled voluntarily between the parties and in the event
of a deadlock, the same shall be finally resolved through compulsory arbitration by the regional
branches of the National Labor Relations Commission having jurisdiction over the workplace. It
shall be mandatory for the NLRC to conduct continuous hearings and decide any dispute arising
under this Section within twenty (20) calendar days from the time said dispute is formally
submitted to it for arbitration. The pendency of a dispute arising from a wage distortion shall not in
any way delay the applicability of the increase in the wage rates prescribed under this Section.
Issue:
Whether or not the strike is legal in the resolution of wage distortion.
SC Ruling:
The strike involving the issue of wage distortion is illegal as a means of resolving it. The legality of
these activities is usually dependent on the legality of the purposes sought to be attained and the
means employed therefore. It goes without saying that these joint or coordinated activities may be
forbidden or restricted by law or contract. In the instance of "distortions of the wage structure
within an establishment" resulting from "the application of any prescribed wage increase by virtue
of a law or wage order," Section 3 of Republic Act No. 6727 prescribes a specific, detailed and
comprehensive procedure for the correction thereof, thereby implicitly excluding strikes or
lockouts or other concerted activities as modes of settlement of the issue.
The provision states that the employer and the union shall negotiate to correct the distortions.
Any dispute arising from wage distortions shall be resolved through the grievance procedure
under their collective bargaining agreement and, if it remains unresolved, through voluntary
arbitration. Unless otherwise agreed by the parties in writing, such dispute shall be decided by the
voluntary arbitrator or panel of voluntary arbitrators within ten (10) calendar days from the time
said dispute was referred to voluntary arbitration. In cases where there are no collective
agreements or recognized labor unions, the employers and workers shall endeavor to correct
such distortions. Any dispute arising there from shall be settled through the National Conciliation
and Mediation Board and, if it remains unresolved after ten (10) calendar days of conciliation,
shall be referred to the appropriate branch of the National Labor Relations Commission (NLRC).
It shall be mandatory for the NLRC to conduct continuous hearings and decide the dispute within
twenty (20) calendar days from the time said dispute is submitted for compulsory arbitration. The
pendency of a dispute arising from a wage distortion shall not in any way delay the applicability of
any increase in prescribed wage rates pursuant to the provisions of law or Wage Order.
The legislative intent that solution of the problem of wage distortions shall be sought by voluntary
negotiation or arbitration, and not by strikes, lockouts, or other concerted activities of the
employees or management, is made clear in the rules implementing RA 6727 issued by the
Secretary of Labor and Employment pursuant to the authority granted by Section 13 of the Act.
Section 16, Chapter I of these implementing rules, after reiterating the policy that wage distortions
be first settled voluntarily by the parties and eventually by compulsory arbitration, declares that,
"Any issue involving wage distortion shall not be a ground for a strike/lockout."

Employees Confederation of the Philippines (ECOP) vs. NWPC

[201 SCRA 759 (1991)]
Facts:
Petitioners ECOP questioned the validity of the wage order issued by the RTWPB dated October
23, 1990 pursuant to the authority granted by RA 6727. The wage order increased the minimum
wage by P17.00 daily in the National Capital Region.
The wage order is applied to all workers and employees in the private sector of an increase of P
17.00 including those who are paid above the statutory wage rate. ECOP appealed with the
NWPC but dismissed the petition.
The Solicitor General in its comment posits that the Board upon the issuance of the wage order
fixed minimum wages according to the salary method. Petitioners insist that the power of RTWPB
was delegated, through RA 6727, to grant minimum wage adjustments and in the absence of
authority, it can only adjust floor wages.
Issue:
Whether or not the wage order issues by RTWPB dated October 23, 1990 is valid.
SC Ruling:
The Court agrees with the Solicitor General. It noted that there are two ways in the determination
of wage, these are floor wage method and salary ceiling method. The floor wage method involves
the fixing of determinate amount that would be added to the prevailing statutory minimum wage
while the salary ceiling method involves where the wage adjustment is applied to employees
receiving a certain denominated salary ceiling.
RA 6727 gave statutory standards for fixing the minimum wage.
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 framework 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 of employment generation and family income; and
(j) The equitable distribution of income and wealth along the imperatives of economic and
social development."
The wage order was not acted in excess of board’s authority. The law gave reasonable limitations
to the delegated power of the board.

Norma Mabeza vs. NLRC, Peter Ng/Hotel Supreme

[271 SCRA 670]
Facts:
Petitioner Norma Mabeza contends that on the first week of May 1991, she and her co-
employees at the Hotel Supreme in Baguio City were asked by the hotel's management to sign
an instrument attesting to the latter's compliance with minimum wage and other labor standard
provisions of law. Petitioner signed the affidavit but refused to go to the City Prosecutor's Office to
swear to the veracity and contents of the affidavit as instructed by management. The affidavit was
nevertheless submitted on the same day to the Regional Office of the Department of Labor and
Employment in Baguio City.
The affidavit was drawn by management for the sole purpose of refuting findings of the Labor
Inspector of DOLE apparently adverse to the private respondent. After she refused to proceed to
the City Prosecutor's Office, petitioner states that she was ordered by the hotel management to
turn over the keys to her living quarters and to remove her belongings from the hotel premises.
According to her, respondent strongly chided her for refusing to proceed to the City Prosecutor's
Office to attest to the affidavit. She thereafter reluctantly filed a leave of absence from her job
which was denied by management. When she attempted to return to work on May 1991, the
hotel's cashier informed her that she should not report to work and, instead, continue with her
unofficial leave of absence.
Consequently, three days after her attempt to return to work, petitioner filed a complaint for illegal
dismissal before the Arbitration Branch of the National Labor Relations Commission — CAR
Baguio City. In addition to her complaint for illegal dismissal, she alleged underpayment of
wages, non-payment of holiday pay, service incentive leave pay, 13th month pay, night
differential and other benefits.
Responding to the allegations for illegal dismissal, private respondent Peter Ng alleged before
Labor Arbiter that petitioner surreptitiously left her job without notice to the management and that
she actually abandoned her work. He maintained that there was no basis for the money claims for
underpayment and other benefits as these were paid in the form of facilities to petitioner and the
hotel's other employees.
Labor Arbiter dismissed the complaint. On April 1994, respondent NLRC promulgated its assailed
Resolution affirming the Labor Arbiter's decision.
Issue:
Whether or not the employer has exerted pressure, in the form of restraint, interference or
coercion, against his employee's right to institute concerted action for better terms and conditions
of employment constitutes unfair labor practice.
SC Ruling:
The Court ruled that there was unfair labor practice. Without doubt, the act of compelling
employees to sign an instrument indicating that the employer observed labor standards
provisions of law when he might have not, together with the act of terminating or coercing those
who refuse to cooperate with the employer's scheme constitutes unfair labor practice. The first act
clearly preempts the right of the hotel's workers to seek better terms and conditions of
employment through concerted action. For refusing to cooperate with the private respondent's
scheme, petitioner was obviously held up as an example to all of the hotel's employees, that they
could only cause trouble to management at great personal inconvenience. Implicit in the act of
petitioner's termination and the subsequent filing of charges against her was the warning that they
would not only be deprived of their means of livelihood, but also possibly, their personal liberty.
Granting that meals and lodging were provided and indeed constituted facilities, such facilities
could not be deducted without the employer complying first with certain legal requirements.
Without satisfying these requirements, the employer simply cannot deduct the value from the
employee's wages. First, proof must be shown that such facilities are customarily furnished by the
trade. Second, the provision of deductible facilities must be voluntarily accepted in writing by the
employee. Finally, facilities must be charged at fair and reasonable value. These requirements
were not met in the instant case.
More significantly, the food and lodging, or the electricity and water consumed by the petitioner
were not facilities but supplements. A benefit or privilege granted to an employee for the
convenience of the employer is not a facility. The criterion in making a distinction between the two
not so much lies in the kind (food, lodging) but the purpose. Considering that hotel workers are
required to work different shifts and are expected to be available at various odd hours, their ready
availability is a necessary matter in the operations of a small hotel, such as the private
respondent's hotel.

Joy Brothers Inc., vs. nwpc

[273 SCRA 622 (1997)]
Facts:
Wage Order No. NCR-03, providing for a twenty-seven peso wage increase for all private sector
workers and employees in the National Capital Region receiving one hundred fifty-four pesos
(P154.00) and below daily, was approved November 29, 1993.
On February 1994, petitioner applied for exemption from said wage order on the ground that it
was a distressed establishment. The RTWPB denied petitioner's application for exemption after
holding that the corporation accumulated profits amounting to P38,381.80 for the period under
review. Petitioner's motion for reconsideration was likewise denied by the Wages and Productivity
Board on January 5, 1995. On appeal to the National Wages and Productivity Commission,
petitioner was again denied relief.
More specifically, petitioner contends that the interim period to be reckoned with is from January
1, 1993 to December 15, 1993 and not merely up to September 30, 1993 as held by respondent
Commission. Significantly, the period up to December 31, 1993 will reflect losses in petitioner
corporation's books, but not if the covered interim period is only up to September 30, 1993.
Issue:
Whether or not Petitioner Corporation falls within the exemption for distressed establishments.
SC Ruling:
The petitioner company is not entitled to exemption of the wage order since it is not a distressed
establishment. Under Section 5 of Wage Order No. NCR-03, distressed firms may be exempted
from the provisions of the Order upon application with and due determination of the Board.
NWPC Guidelines No. 01, Series of 1992, providing for the Revised Guidelines on Exemption
indicate the criteria to qualify for exemption as follows:
For Distressed Establishments: In the case of a stock corporation, partnership, single
proprietorship, non-stock, non-profit organization or cooperative engaged in a business activity or
charging fees for its services —When accumulated losses for the last 2 full accounting periods
and interim period, if any, immediately preceding the effectivity of the Order have impaired by at
least 25 percent the: Paid-up capital at the end of the last full accounting period preceding the
effectivity of the Order, in the case of corporations: Total invested capital at the beginning of the
last full accounting period preceding the effectivity of the Order in the case of partnerships and
single proprietorships. Establishments operating for less than two (2) years may be granted
exemption when accumulated losses for said period have impaired by at least 25% the paid-up
capital or total invested capital, as the case may be."
Section 8, paragraph a, of the Rules Implementing Wage Order No. NCR-03 provides that
exemption from compliance with the wage increase may be granted to distressed establishments
whose paid-up capital has been impaired by at least twenty-five percent (25%) or which registers
capital deficiency or negative net worth.
The Guidelines expressly require interim quarterly financial statements for the period immediately
preceding December 16, 1993. The last two full accounting periods here are 1991 and 1992, for
which years petitioner incurred net profits of P53,607.00 and P60,188.00, respectively.

Prubankers Association vs. Prudential Bank and Trust Company

[302 SCRA 74 (1999)]
Facts:
On November, the RTWPB 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 had rendered service for at
least three (3) months before its effectivity, and for the same period thereafter, in the following
categories: P17.50 in the cities of Naga and Legaspi; P15.50 in the municipalities of Tabaco,
Daraga, Pili and the city of Iriga; and P10.00 for all other areas in the Bicol Region.
On November 1993, RTWPB 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 bank 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, 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. It
demanded in the Labor Management Committee meetings that the petitioner extend the
application of the wage orders to its employees outside Regions V and VII, claiming that the
regional implementation of the said orders created a wage distortion in the wage rates of
petitioner's employees nationwide. As the grievance could not be settled in the said meetings, the
parties agreed to submit the matter to voluntary arbitration.
Issue:
Whether or not a wage distortion resulted from respondent's implementation of the Wage Orders.
SC Ruling:
The court ruled that there is no wage distortion since the wage order implementation covers all
the branches of the bank. The hierarchy of positions was still preserved. The levels of different
pay classes was not eliminated. The statutory definition of wage distortion is found in Article 124
of the Labor Code, as amended by Republic Act No. 6727, which reads: Standards/Criteria for
Minimum Wage Fixing — . . ."As used herein, a wage distortion shall mean a situation where an
increase in prescribed wage results in the elimination 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."
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 and (4) The existence of the distortion in the same region of the country.
A disparity in wages between employees holding similar positions but in different regions does
not constitute wage distortion as contemplated by law. As stated, 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.

Liduvino Millares, et al. vs. NLRC

[305 SCRA 501]
Facts:
Petitioners numbering one hundred sixteen 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.
Issue:
Whether the 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.
SC Ruling:
The allowances are not part of the wages of the employees. 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.
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." Customary is founded on long-established and constant practice connoting
regularity. The receipt of an allowance on a monthly basis does not ipso facto characterize it as
regular and forming part of salary because the nature of the grant is a factor worth considering.
The court agrees with the observation of the Office of the Solicitor General that the subject
allowances were temporarily, not regularly, received by petitioners. 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.
In determining whether a privilege is a facility, the criterion is not so much its kind but its purpose.
Revenue Audit Memo Order No. 1-87 pertinently provides —3.2… 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.
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 subject allowances did not form part of petitioners' wages.

International School Alliance of Educators vs. Hon. Quisumbing

[333 SCRA 13 (2000)]
Facts:
International School, Inc., pursuant to Presidential Decree 732, is a domestic educational
institution established primarily for dependents of foreign diplomatic personnel and other
temporary residents. To enable the School to continue carrying out its educational program and
improve its standard of instruction, Section 2(c) of the same decree authorizes the School to
employ its own teaching and management personnel selected by it either locally or abroad, from
Philippine or other nationalities, such personnel being exempt from otherwise applicable laws and
regulations attending their employment, except laws that have been or will be enacted for the
protection of employees.
The School hires both foreign and local teachers as members of its faculty, classifying the same
into two: (1) foreign-hires and (2) local-hires. The School employs four tests to determine whether
a faculty member should be classified as a foreign-hire or a local hire: (a) What is one's domicile?
(b) Where is one's home economy? (c) To which country does one owe economic allegiance? (d)
Was the individual hired abroad specifically to work in the School and was the School responsible
for bringing that individual to the Philippines? Should the answer to any of these queries point to
the Philippines, the faculty member is classified as a local hire; otherwise, he or she is deemed a
foreign-hire.
The School grants foreign-hires certain benefits not accorded local- hires. These include housing,
transportation, shipping costs, taxes, and home leave travel allowance. Foreign-hires are also
paid a salary rate twenty-five percent (25%) more than local-hires. The School justifies the
difference on two "significant economic disadvantages" foreign-hires have to endure, namely: (a)
the "dislocation factor" and (b) limited tenure. The compensation scheme is simply the School's
adaptive measure to remain competitive on an international level in terms of attracting competent
professionals in the field of international education.
Issue:
Whether or not local hire teachers shall enjoy same salary as foreign hire teachers where they
perform the same work. This calls for the applicability of the principle of equal pay for equal work.
SC Ruling:
Notably, the International Covenant on Economic, Social, and Cultural Rights, supra, in Article 7
thereof, provides: The States Parties to the present Covenant recognize the right of everyone to
the enjoyment of just and favorable conditions of work, which ensure, in particular: ( a)
Remuneration which provides all workers, as a minimum, with: (i)Fair wages and equal
remuneration for work of equal value without distinction of any kind, in particular women being
guaranteed conditions of work not inferior to those enjoyed by men, with equal pay for equal
work;
The foregoing provisions impregnably institutionalize in this jurisdiction the long honored legal
truism of "equal pay for equal work." Persons who work with substantially equal qualifications,
skill, effort and responsibility, under similar conditions, should be paid similar salaries. This rule
applies to the School.
The School contends that petitioner has not adduced evidence that local-hires perform work
equal to that of foreign-hires. The Court finds this argument a little inconsiderate. If an employer
accords employees the same position and rank, the presumption is that these employees perform
equal work. If the employer pays one employee less than the rest, it is not for that employee to
explain why he receives less or why the others receive more. The employer has discriminated
against that employee; it is for the employer to explain why the employee is treated unfairly.
In this case, the employer has failed to discharge this burden. There is no evidence here that
foreign-hires perform 25% more efficiently or effectively than the local-hires. Both groups have
similar functions and responsibilities, which they perform under similar working conditions. Thus
the employees are entitled to same salary for performance of equal work.

Bankard Employees Union vs. NLRC

[G.R. No.140689. February 17, 2004]
Facts:
Bankard, Inc. classifies its employees by levels: Level I, Level II, Level III, Level IV, and Level V.
On May 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 industry’s 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), and Levels II, III and IV by nine hundred pesos (P900.00). Accordingly, the
salaries of employees who fell below the new minimum rates were also adjusted to reach such
rates under their levels.
This made Bankard Employees Union-WATU (petitioner), the duly certified exclusive bargaining
agent of the regular rank and file employees of Bankard, to request for the increase in the salary
of its old, regular employees. Bankard insisted 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.
Petioner filed a notice of strike. The strike was averted when the dispute was certified by the
Secretary of Labor and Employment for compulsory arbitration. NLRC finding no wage distortion
dismissed the case for lack of merit. Petitioner’s motion for reconsideration of the dismissal of the
case was denied.
Issue:
 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.
SC Ruling
The Court will not interfere in the management prerogative of the petitioner. The employees are
not precluded to negotiate through the provisions of the CBA.
Upon the enactment of R.A. No. 6727 (WAGE RATIONALIZATION ACT, amending, among
others, Article 124 of the Labor Code), 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.
In the case of Prubankers Association v. Prudential Bank and Trust Company, it 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. 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.
Put differently, the entry of new employees to the company ipso facto places them under any of
the levels mentioned in the new salary scale which private respondent adopted retroactive to April
1, 1993. 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.
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:
Article 124. Standards/Criteria for Minimum Wage Fixing. 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.
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.
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 present case, the need to increase the
competitiveness of Bankard’s hiring rate. An employer would be discouraged from adjusting the
salary rates of a particular group of employees for fear that it would result to a demand by all
employees for a similar increase, especially if the financial conditions of the business cannot
address an across-the-board increase.
Wage distortion is a factual and economic condition that may be brought about by different
causes. The mere factual existence of wage distortion does not, however, ipso facto result to an
obligation to rectify it, absent a law or other source of obligation which requires its rectification.

Cesar Odango vs. NLRC and Antique Electric Cooperative, Inc.

[G.R. No.147420. June 10, 2004]
Facts:
Petitioners are monthly-paid employees of ANTECO whose workdays are from Monday to Friday
and half of Saturday. After a routine inspection, the Regional Branch of the Department of Labor
and Employment found ANTECO liable for underpayment of the monthly salaries of its
employees. On September 1989, the DOLE directed ANTECO to pay its employees wage
differentials amounting to P1,427,412.75. ANTECO failed to pay. On various dates in 1995,
thirty-three (33) monthly-paid employees filed complaints with the NLRC praying for payment of
wage differentials, damages and attorney’s fees.
On November 1996, the Labor Arbiter rendered a Decision in favor of petitioners granting them
wage differentials amounting to P1,017,507.73 and attorney’s fees of 10%. ANTECO appealed
the Decision to the NLRC where it reversed the Labor Arbiter’s Decision. The NLRC denied
petitioners’ motion for reconsideration. Petitioners then elevated the case to CA where it
dismissed the petition for failure to comply with Section 3, Rule 46 of the Rules of Court. The
Court of Appeals explained that petitioners failed to allege the specific instances where the NLRC
abused its discretion. The appellate court denied petitioners’ motion for reconsideration. Hence,
this petition.
Issue:
Whether or not the petitioners are entitled to money claims.
SC Ruling:
The Court ruled that the petitioners are not entitled to money claims or wage differentials.
The petitioners claim is based on Section 2, Rule IV, Book III of the Implementing Rules and
Policy Instructions No. 9 issued by the Secretary of Labor which was declared null and void since
in the guise of clarifying the Labor Code’s provisions on holiday pay, they in effect amended them
by enlarging the scope of their exclusion.
Even assuming that Section 2, Rule IV of Book III is valid, their claim will still fail. The basic rule in
this jurisdiction is "no work, no pay." The right to be paid for un-worked days is generally limited to
the ten legal holidays in a year. Petitioners’ claim is based on a mistaken notion that Section 2,
Rule IV of Book III gave rise to a right to be paid for un-worked days beyond the ten legal
holidays. Petitioners’ line of reasoning is not only a violation of the "no work, no pay" principle, it
also gives rise to an invidious classification, a violation of the equal protection clause.

C. Planas Commercial and/or Marcial Cohu vs. NLRC

[G.R. No. 144619. November 11, 2005]
Facts:
In September 1993, Morente, Allauigan and Ofialda and others filed a complaint for
underpayment of wages, non payment of overtime pay, holiday pay, service incentive leave pay,
and premium pay for rest day and holiday and night shift differential against petitioners in the
Arbitration Branch of NLRC. It alleged that Cohu is engaged in the business of wholesale of
plastic products and fruits of different kinds with more than 24 employees. Respondents were
hired on January 1990, May 1990 and July 19991 as laborers and were paid below the minimum
wage for the past 3 years. They were required to work for more than 8 hours a day and never
enjoyed the minimum benefits. Petitioners filed their comment stating that the respondents were
their helpers.
The Labor Arbiter rendered a decision dismissing the money claims. Respondents filed an appeal
with the NLRC where it granted the money claims of Ofialda, Morente and Allaguian. Petitioners
appealed with the CA but it was denied. It said that the company having claimed of exemption of
the coverage of the minimum wage shall have the burden of proof to the claim.
In the present petition, the Petitioners insist that C. Planas Commercial is a retail establishment
principally engaged in the sale of plastic products and fruits to the customers for personal use,
thus exempted from the application of the minimum wage law; that it merely leases and occupies
a stall in the Divisoria Market and the level of its business activity requires and sustains only less
than ten employees at a time. Petitioners contend that private respondents were paid over and
above the minimum wage required for a retail establishment, thus the Labor Arbiter is correct in
ruling that private respondents’ claim for underpayment has no factual and legal basis.
Petitioners claim that since private respondents alleged that petitioners employed 24 workers, it
was incumbent upon them to prove such allegation which private respondents failed to do.
Issue:
Whether or not petitioner is exempted from the application of minimum wage law.
SC Ruling:
The contention of the petitioners that they are exempted by the law must be proven. The
petitioners have not successfully shown that they had applied for the exemption.
R.A. No. 6727 known as the Wage Rationalization Act provides for the statutory minimum wage
rate of all workers and employees in the private sector. Section 4 of the Act provides for
exemption from the coverage, thus: Sec. 4. (c) Exempted from the provisions of this Act are
household or domestic helpers and persons employed in the personal service of another,
including family drivers. Also, retail/service establishments regularly employing not more than ten
(10) workers may be exempted from the applicability of this Act upon application with and as
determined by the appropriate Regional Board in accordance with the applicable rules and
regulations issued by the Commission. Whenever an application for exemption has been duly
filed with the appropriate Regional Board, action on any complaint for alleged non-compliance
with this Act shall be deferred pending resolution of the application for exemption by the
appropriate Regional Board.
In the event that applications for exemptions are not granted, employees shall receive the
appropriate compensation due them as provided for by this Act plus interest of one percent (1%)
per month retroactive to the effectivity of this Act.
Clearly, for a retail/service establishment to be exempted from the coverage of the minimum
wage law, it must be shown that the establishment is regularly employing not more than ten (10)
workers and had applied for exemptions with and as determined by the appropriate Regional
Board in accordance with the applicable rules and regulations issued by the Commission.

EJR Crafts Corporation vs. Court of Appeals

[G.R. No.147420. June 10, 2004]
Facts:
In 1997, private respondents filed a complaint for underpayment of wages, regular holiday pay,
overtime pay, nonpayment of 13th month pay and service incentive leave pay against petitioner
before the Regional Office, NCR of the Department of Labor and Employment (DOLE). Acting on
the complaint, Regional Director issued an inspection authority to Senior Labor Enforcement
Officer.
On 22 August 1997, an inspection was conducted on the premises of petitioner’s offices wherein
the following violations of labor standards law were discovered, to wit: non-presentation of
employment records (payrolls and daily time records); underpayment of wages, regular holiday
pay, and overtime pay; and nonpayment of 13th month pay and service incentive leave pay. On
the same day, the Notice of Inspection Result was received by and explained to the manager of
petitioner corporation Mr. Jae Kwan Lee, with the corresponding directive that necessary
restitution be effected within five days from said receipt.
As no restitution was made, the Regional Office thereafter conducted summary investigations.
However, despite due notice, petitioner failed to appear for two consecutive scheduled hearings.
Petitioner failed to question the findings of the Labor Inspector received by and explained to the
corporation’s manager. Petitioner then filed a Motion for Reconsideration of said Order arguing
that the Regional Director has no jurisdiction over the case as private respondents were allegedly
no longer connected with petitioner corporation at the time of the filing of the complaint and when
the inspection was conducted, and that private respondents’ claims are within the exclusive and
original jurisdiction of the Labor Arbiters.
Issue:
Whether or not the Regional Director has jurisdiction over the claims of herein private
respondents.
SC Ruling:
The Court favors the respondents in the money claims against the petitioner company. It is
admitted that for the Regional Director to exercise the power to order compliance, or the so-called
"enforcement power" under Article 128(b) of P.D. No. 442 as amended, it is necessary that the
employer-employee relationship still exists.
In support of its contention that it is the Labor Arbiter and not the Regional Director who has
jurisdiction over the claims of herein private respondents, petitioner contends that at the time the
complaint was filed, the private respondents were no longer its employees. Considering thus that
there still exists an employer-employee relationship between petitioner and private respondents
and that the case involves violations of labor standard provisions of the Labor Code, we agree
with the Undersecretary of Labor and the appellate court that the Regional Director has
jurisdiction to hear and decide the instant case in conformity with Article 128(b) of the Labor Code
which states: Art. 128. Visitorial and Enforcement Power. –(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 this Code and other labor legislation based on the findings of labor
employment and enforcement officers or industrial safety engineers made in the course of
inspection. The Secretary or his duly authorized representatives shall issue writs of execution to
the appropriate authority for the enforcement of their orders, except in cases where the employer
contests the findings of the labor employment and enforcement officer and raises issues
supported by documentary proofs which were not considered in the course of inspection.

Pag-asa Steel Works, Inc. vs. CA and Pag-asa Steel Workers Union
[G.R. No.166647. March 31, 2006]
Facts:
Petitioner Pag-Asa Steel Works, Inc. is a corporation duly organized and existing under Philippine
laws and is engaged in the manufacture of steel bars and wire rods. Pag-Asa Steel Workers
Union is the duly authorized bargaining agent of the rank-and-file employees.
RTWPB of NCR issued a wage order which provided for a P 13.00 increase of the salaries
receiving minimum wages. The Petitioner and the union negotiated on the increase. Petitioner
forwarded a letter to the union with the list of adjustments involving rank and file employees. In
September 1999, the petitioner and union entered into an collective bargaining agreement where
it provided wage adjustments namely P15, P25, P30 for three succeeding year. On the first year,
the increase provided were followed until RTWPB issued another wage order where it provided
for a P25.50 per day increase in the salary of employees receiving the minimum wage and
increased the minimum wage to P223.50 per day. Petitioner paid the P25.50 per day increase to
all of its rank-and-file employees.
On November 2000, Wage Order No. NCR-08 was issued where it provided the increase of
P26.50 per day. The union president asked that the wage order be implemented where petitioner
rejected the request claiming that there was no wage distortion and it was not obliged to grant the
wage increase. The union submitted the matter for voluntary arbitration where it favored the
position of the company and dismissed the complaint. The matter was elevated to CA where it
favored the respondents. Hence, this petition.
Issue:
Whether or not the company was obliged to grant the wage increase under Wage Order No.
NCR-08 as a matter of practice.
SC Ruling:
The Court favors the petitioner that wage increase shall not be granted by virtue of CBA or matter
of practice by the company. It is submitted that employers unless exempt are mandated to
implement the said wage order but limited to those entitled thereto. There is no legal basis to
implement the same across-the-board. A perusal of the record shows that the lowest paid
employee before the implementation of Wage Order #8 is P250.00/day and none was receiving
below P223.50 minimum. This could only mean that the union can no longer demand for any
wage distortion adjustment. The provision of wage order #8 and its implementing rules are very
clear as to who are entitled to the P26.50/day increase, i.e., "private sector workers and
employees in the National Capital Region receiving the prescribed daily minimum wage rate of
P223.50 shall receive an increase of Twenty-Six Pesos and Fifty Centavos (P26.50) per day,"
and since the lowest paid is P250.00/day the company is not obliged to adjust the wages of the
workers.
The provision in the CBA that "Any Wage Order to be implemented by the Regional Tripartite
Wage and Productivity Board shall be in addition to the wage increase adverted above" cannot be
interpreted in support of an across-the-board increase. If such were the intentions of this
provision, then the company could have simply accepted the original demand of the union for
such across-the-board implementation, as set forth in their original proposal. The fact that the
company rejected this proposal can only mean that it was never its intention to agree, to such
across-the-board implementation. Wage Order No. NCR-08 clearly states that only those
employees receiving salaries below the prescribed minimum wage are entitled to the wage
increase provided therein, and not all employees across-the-board as respondent Union would
want petitioner to do. Considering therefore that none of the members of respondent Union are
receiving salaries below the P250.00 minimum wage, petitioner is not obliged to grant the wage
increase to them.
Moreover, to ripen into a company practice that is demandable as a matter of right, the giving of
the increase should not be by reason of a strict legal or contractual obligation, but by reason of an
act of liberality on the part of the employer. Hence, even if the company continuously grants a
wage increase as mandated by a wage order or pursuant to a CBA, the same would not
automatically ripen into a company practice.

Equitable-PCI Bank vs. Ricardo Sadac

[G.R. No.164772. June 8, 2006]
Facts:
Ricardo Sadac was appointed Vice President of the Legal Department of petitioner Bank effective
1 August 1981, and subsequently General Counsel thereof on 8 December 1981. On June 1989,
nine lawyers of petitioner Bank’s Legal Department, in a letter-petition to the Chairman of the
Board of Directors, accused respondent Sadac of abusive conduct and ultimately, petitioned for a
change in leadership of the department. On the ground of lack of confidence in Sadac, under the
rules of client and lawyer relationship, petitioner Bank instructed respondent Sadac to deliver all
materials in his custody in all cases in which the latter was appearing as its counsel of record. In
reaction thereto, Sadac requested for a full hearing and formal investigation but the same
remained unheeded. On 9 November 1989, respondent Sadac filed a complaint for illegal
dismissal with damages against petitioner Bank and individual members of the Board of Directors
thereof. After learning of the filing of the complaint, petitioner Bank terminated the services of
respondent Sadac. Finally, on 10 August 1989, Sadac was removed from his office
Labor Arbiter rendered decision that Sadac’s termination was illegal and entitled to reinstatement
and payment of full back wages. NLRC affirmed the decision upon appeal by the Bank. Sadac
filed for execution of judgment where it gave its computation which amounted to P 6.03 M
representing his back wages and the increases he should have received during the time he was
illegally dismissed. The Bank opposed to Sadac’s computation. The Labor Arbiter favor Sadac’s
computation. NLRC, upon appeal by the bank, reversed the decision. CA reversed the decision of
NLRC. Hence, this petition.
Issue:
Whether or not the computation of back wages shall include the general increases.
SC Ruling:
To resolve the issue, the court revisits its pronouncements on the interpretation of the term
backwages. Backwages in general are granted on grounds of equity for earnings which a worker
or employee has lost due to his illegal dismissal. It is not private compensation or damages but is
awarded in furtherance and effectuation of the public objective of the Labor Code. Nor is it a
redress of a private right but rather in the nature of a command to the employer to make public
reparation for dismissing an employee either due to the former’s unlawful act or bad faith.
In the case of Bustamante v. National Labor Relations Commission, It said that the Court deems
it appropriate to reconsider such earlier ruling on the computation of back wages by now holding
that conformably with the evident legislative intent as expressed in Rep. Act No. 6715, back
wages to be awarded to an illegally dismissed employee, should not, as a general rule, be
diminished or reduced by the earnings derived by him elsewhere during the period of his illegal
dismissal. The underlying reason for this ruling is that the employee, while litigating the legality
(illegality) of his dismissal, must still earn a living to support himself and family, while full
backwages have to be paid by the employer as part of the price or penalty he has to pay for
illegally dismissing his employee. The clear legislative intent of the amendment in Rep. Act No.
6715 is to give more benefits to workers than was previously given them. Thus, a closer
adherence to the legislative policy behind Rep. Act No. 6715 points to "full backwages" as
meaning exactly that, i.e., without deducting from backwages the earnings derived elsewhere by
the concerned employee during the period of his illegal dismissal.
There is no vested right to salary increases. Sadac may have received salary increases in the
past only proves fact of receipt but does not establish a degree of assuredness that is inherent in
backwages. The conclusion is that Sadac’s computation of his full backwages which includes his
prospective salary increases cannot be permitted.

Metropolitan Bank and Trust Company vs. NWPC and RTWPB

[G.R. No.144322. February 6, 2007]
Facts:
On October 17, 1995, the Regional Tripartite Wages and Productivity Board, Region II,
Tuguegarao, Cagayan (RTWPB), by virtue of Republic Act No. 6727 (R.A. No. 6727), otherwise
known as the Wage Rationalization Act, issued Wage Order No. R02-03 (Wage Order), as
follows: Section 1. Upon effectivity of this Wage Order, all employees/workers in the private
sector throughout Region II, regardless of the status of employment are granted an across-the-
board increase of P15.00 daily.
The Wage Order was published in a newspaper of general circulation on December 2, 1995 and
took effect on January 1, 1996. Its Implementing Rules were approved on February 14, 1996. Per
Section 13 of the Wage Order, any party aggrieved by the Wage Order may file an appeal with
the National Wages and Productivity Commission (NWPC) through the RTWPB within 10
calendar days from the publication of the Wage Order.
Banker’s Council in a letter inquiry to NWPC requested for ruling to seek exemption from
coverage of the wage order since the members bank are paying more than the regular wage.
NWPC replied that the member banks are covered by the wage order and does not fall with the
exemptible categories.
In another letter inquiry, Metrobank asked for the interpretation of the applicability of the wage
order. NWPC referred it to RTWPB. RTWPB in return clarified that establishments in Region 2
are covered by the wage order. Petitioner filed a petition with the CA and denied the petition.
Issue:
Whether or not the wage order is void thus it has no legal effect and the RTWPB acted in excess
of its jurisdiction.
SC Ruling:
The Court finds that Section 1, Wage Order No. R02-03 is void insofar as it grants a wage
increase to employees earning more than the minimum wage rate; and pursuant to the
separability clause of the Wage Order, Section 1 is declared valid with respect to employees
earning the prevailing minimum wage rate.
The powers of NWPC are enumerated in ART. 121. Powers and Functions of the Commission. -
The Commission shall have the following powers and functions: (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; (f) To review plans and
programs of the Regional Tripartite Wages and Productivity Boards to determine whether these
are consistent with national development plans; (g) To exercise technical and administrative
supervision over the Regional Tripartite Wages and Productivity Boards.
R.A. No. 6727 declared it a 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 industrial
dispersal; and to allow business and industry reasonable returns on investment, expansion and
growth.
In line with its declared policy, R.A. No. 6727 created the NWPC, vested with the power to
prescribe rules and guidelines for the determination of appropriate minimum wage and
productivity measures at the regional, provincial or industry levels; and authorized the RTWPB to
determine and fix the minimum wage rates applicable in their respective regions, provinces, or
industries therein and issue the corresponding wage orders, subject to the guidelines issued by
the NWPC. Pursuant to its wage fixing authority, the RTWPB may issue wage orders which set
the daily minimum wage rates, based on the standards or criteria set by Article 124 of the Labor
Code.
The Court declared that there are two ways of fixing the minimum wage: the "floor-wage" method
and the "salary-ceiling" method. The "floor-wage" method involves the fixing of a determinate
amount to be added to the prevailing statutory minimum wage rates. On the other hand, in the
"salary-ceiling" method, the wage adjustment was to be applied to employees receiving a certain
denominated salary ceiling. In other words, workers already being paid more than the existing
minimum wage (up to a certain amount stated in the Wage Order) are also to be given a wage
increase.
In the present case, the RTWPB did not determine or fix the minimum wage rate by the "floor-
wage method" or the "salary-ceiling method" in issuing the Wage Order. The RTWPB did not set
a wage level nor a range to which a wage adjustment or increase shall be added. Instead, it
granted an across-the-board wage increase of P15.00 to all employees and workers of Region 2.
In doing so, the RTWPB exceeded its authority by extending the coverage of the Wage Order to
wage earners receiving more than the prevailing minimum wage rate, without a denominated
salary ceiling. As correctly pointed out by the OSG, the Wage Order granted additional benefits
not contemplated by R.A. No. 6727.

V. VIOLATION OF WAGE ORDERS

-NO CASES-

VI. WAGE ENFORCEMENT AND RECOVERY

RAJAH HUMABON HOTEL, INC. vs. HON. CRESENCIANO TRAJANO et. al

[G.R. No. 100222-23. September 14, 1993]
Facts:
Subsequent to the initial pleading filed by respondent-employees before the regional director of
DOLE for redress in regard to underpaid wages and non-payment of benefits, petitioners were
instructed to allow the inspection of the employment records of respondents on April 4, 1989.
However, no inspection could be done on that date on account of the picket staged by other
workers. At the re-scheduled examination after closure of petitioners' business on April 16, 1989,
instead of presenting the payrolls and daily time records of private respondents, petitioner Peter
Po submitted a motion to dismiss on the supposition that the regional director has no jurisdiction
over the case because the employer-employee relationship had been served as a result of the
closure of petitioners' business, apart from the fact that each of the claims of private respondents
exceeded the jurisdictional limit of P5,000.00 pegged by Republic Act No. 6715 or the New Labor
Relations Law.
Issue:
Who between the regional director of DOLE and the labor arbiter has jurisdictional competence
over the complaint of private respondents? To answer this will be to evaluate what will be the
applicable law to the complaint, Executive Order No. 111 or Republic Act No. 6715?
SC Ruling:
Section 2 of EO No. 111, promulgated on December 24, 1986, which amended Article 128(b) of
the Labor Code gives concurrent jurisdiction to both the Secretary of Labor (or the various
regional directors) and the labor arbiters over money claims among the other cases mentioned by
Article 217 of the Labor Code. This provision merely confirms/reiterates the
enforcement/adjudication authority of the Regional Director over uncontested money claims in
cases where an employer-employee relationship still exists.
However, with the enactment of Republic Act No. 6715, which took effect on March 21, 1989 or
seven days after the complaint at bar was filed on March 14, 1989, Articles 129 and 217 of the
Labor Code were amended, there is no doubt that the regional directors can try money claims
only if the following requisites concur: (1) the claim is presented by an employee or person
employed in domestic or household service, or househelper under the code; (2) the claimant, no
longer being employed, does not seek reinstatement; and (3) the aggregate money claim of the
employee or housekeeper does not exceed five thousand pesos (P5,000.00). Thus, the power to
hear and decide employees' claims arising from employer-employee relations, exceeding
P5,000.00 for each employee should be left to the Labor Arbiter as the exclusive repository of the
power to hear and decide such claims.
In the instant case, a simple examination of the labor arbiter's impugned order dated September
25, 1989 readily shows that the aggregate claims of each of the twenty-five employees of
petitioner are above the amount of P5,000.00 fixed by Republic Act No. 6715. Therefore, the
regional director had no jurisdiction over the case. Hence, the petition is granted and the public
respondent is directed to refer the workers' money claims to the appropriate Labor Arbiter for
proper disposition.

FRANCISCO GUICO vs. HON. LEONARDO QUISIMBING et. al.

[G.R. No. 131750. November 16, 1998]
Facts:
The case started when the Office of the Regional Director, Department of Labor and Employment
(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 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 twenty-one (21)
employees who are copier operators: (1) underpayment of wages; (2) underpayment of 13th
month pay; and (3) no service incentive leave with pay.
Issue/s:
Whether or not the Regional Director has jurisdiction over the labor standards case.
SC Ruling:
The petition was dismissed. The Court sustained the jurisdiction of the respondent Secretary. As
the respondent correctly pointed out, this Court's ruling in Servando case 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.
Moreover, the records of the House of Representatives 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 to finally settle any lingering doubts on
the visitorial and enforcement powers of the Secretary of Labor and Employment." Thus,
petitioner's reliance on Servando is untenable.

EJR CRAFTS CORPORATION vs. HON. COURT OF APPEALS et. al.

[G.R. No. 154101. March 10, 2006]
Facts:
Sometime in 1997, private respondents filed a complaint for underpayment of wages, regular
holiday pay, overtime pay, nonpayment of 13th month pay and service incentive leave pay
against petitioner before the Regional Office, NCR of the DOLE. Acting on the complaint, an
inspection was conducted on the premises of petitioner’s offices on August 22, 1997 wherein
violations of labor standards law were discovered. Petitioner argued that the Regional Director
has no jurisdiction over the case as private respondents were allegedly no longer connected with
petitioner corporation at the time of the filing of the complaint and when the inspection was
conducted, and that private respondents’ claims are within the exclusive and original jurisdiction
of the Labor Arbiters.
Issue:
Whether or not public respondent Regional Director has jurisdiction over the case.
SC Ruling:
This Court not being a trier of facts, it has to rely on findings of facts by the lower courts and
regard it with great respect. As found by both Undersecretary of Labor and the Court of Appeals,
the said quitclaim and release forms are unreliable and do not correspond to other documents on
record which would prove that private respondents were working for the petitioner up to August
1997.
Considering thus that there still exists an employer-employee relationship between petitioner and
private respondents and that the case involves violations of labor standard provisions of the
Labor Code, this Court rules with the Undersecretary of Labor and the appellate court that the
Regional Director has jurisdiction to hear and decide the instant case in conformity with Article
128(b) of the Labor Code which states that: “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 this Code
and other labor legislation based on the findings of labor employment and enforcement officers or
industrial safety engineers made in the course of inspection. The Secretary or his duly authorized
representatives shall issue writs of execution to the appropriate authority for the enforcement of
their orders, except in cases where the employer contests the findings of the labor employment
and enforcement officer and raises issues supported by documentary proofs which were not
considered in the course of inspection.”
Hence, the petition is denied.

EX-BATAAN VETERANS SECURTY AGENCY, INC. vs. SEC. OF LABOR et. al.
[G.R. No. 152396. November 20, 2007]
Facts:
Ex-Bataan Veterans Security Agency, Inc. (EBVSAI) is in the business of providing security
services while private respondents are EBVSAI's employees assigned to the National Power
Corporation at Ambuklao Hydro Electric Plant, Bokod, Benguet (Ambuklao Plant). On 20
February 1996, private respondents led by Alexander Pocding (Pocding) instituted a complaint for
underpayment of wages against EBVSAI before the Regional Office of the Department of Labor
and Employment (DOLE). On 7 March 1996, the Regional Office conducted a complaint
inspection at the Ambuklao Plant where some violations were noted.
Issue:
Whether or not the Secretary of Labor or his duly authorized representatives acquired jurisdiction
over EBVSAI. Corollary to this is whether the Secretary of Labor or his duly authorized
representatives have jurisdiction over the money claims of private respondents which exceed
P5,000.
SC Ruling:
The petition has no merit. On the Regional Director's jurisdiction over EBVSAI, the he validly
acquired jurisdiction over EBVSAI after receiving the notices of hearing. Thus, EBVSAI cannot
question the jurisdiction after appearing before the Regional Director.
More importantly, on the Regional Director's jurisdiction over the money claims, this Court made
reference to and affirm the ruling in Cirineo Bowling Plaza, Inc. v. Sensing, where this Court
sustained the jurisdiction of the DOLE Regional Director and held that the visitorial and
enforcement powers of the DOLE Regional Director to order and enforce compliance with labor
standard laws can be exercised even where the individual claim exceeds P5,000.
However, if the labor standards case is covered by the exception clause in Article 128(b) of the
Labor Code, then the Regional Director will have to endorse the case to the appropriate
Arbitration Branch of the NLRC. In order to divest the Regional Director or his representatives of
jurisdiction, the following elements must be present: (a) that the employer contests the findings of
the labor regulations officer and raises issues thereon; (b) that in order to resolve such issues,
there is a need to examine evidentiary matters; and (c) that such matters are not verifiable in the
normal course of inspection. The rules also provide that the employer shall raise such objections
during the hearing of the case or at any time after receipt of the notice of inspection results. In this
case, the Regional Director validly assumed jurisdiction over the money claims of private
respondents even if the claims exceeded P5,000 because such jurisdiction was exercised in
accordance with Article 128(b) of the Labor Code and the case does not fall under the exception
clause. The Court also notes that EBVSAI did not contest the findings of the labor regulations
officer during the hearing or after receipt of the notice of inspection results.
Hence, the petition was denied.

CATHOLIC VICARIATE BAGUIO CITY vs HON STO TOMAS

GR 167334 March 07, 2008

VIRGILIO SAPIO vs. UNDALOC CONSTRUCTION

[G.R. No. 155034. May 22, 2008]
Facts:
The controversy started with a complaint filed by petitioner against Undaloc Construction and/or
Engineer Cirilo Undaloc for illegal dismissal, underpayment of wages and nonpayment of
statutory benefits. Respondent Undaloc Construction, a single proprietorship owned by Cirilo
Undaloc, is engaged in road construction business in Cebu City. Petitioner had been employed
as watchman from 1 May 1995 to 30 May 1998 when he was terminated on the ground that the
project he was assigned to was already finished, he being allegedly a project employee. But
petitioner asserted that he was a regular employee having been engaged to perform works which
are "usually necessary or desirable" in respondents' business.
Issue:
(1) Whether or not the petitioner is a project employee
(2) whether or not he is entitled to salary differential apart from attorney’s fees.
SC Ruling:
That petitioner was a project employee became a non-issue beginning with the decision of the
Labor Arbiter. Contested still is his entitlement to salary differential, apart from attorney's fees.
With regards to this issue, the court said that the conclusion of the Labor Arbiter that entries in the
December 1995 payroll sheet could have been altered is utterly baseless. The claim that the
December 1995 payroll sheet was written in pencil and was thus rendered it prone to alterations
or erasures is clearly non sequitur. The same is true with respect to the typewritten payroll
sheets. In fact, neither the Labor Arbiter nor the NLRC found any alteration or erasure or traces
thereat, whether on the pencil-written or typewritten payroll sheets. Indeed, the most minute
examination will not reveal any tampering. Furthermore, if there is any adverse conclusion as
regards the December 1995 payroll sheet, it must be confined only to it and cannot be applied to
the typewritten payroll sheets.
Moreover, absent any evidence to the contrary, good faith must be presumed in this case. Entries
in the payroll, being entries in the course of business, enjoy the presumption of regularity under
Rule 130, Section 43 of the Rules of Court. Hence, while as a general rule, the burden of proving
payment of monetary claims rests on the employer, when fraud is alleged in the preparation of
the payroll, the burden of evidence shifts to the employee and it is incumbent upon him to adduce
clear and convincing evidence in support of his claim. Unfortunately, petitioner's bare assertions
of fraud do not suffice to overcome the disputable presumption of regularity.
While we adhere to the position of the appellate court that the "tendency" to alter the entries in
the payrolls was not substantiated, we cannot however subscribe to the total deletion of the
award of salary differential and attorney's fees, as it so ruled. The award of attorney's fees is
warranted under the circumstances of this case. Thus, the petition is partially granted. Petitioner
is awarded the salary differential in the reduced amount of P13,156.00 and respondents are
directed to pay the same, as well as ten percent (10%) of the award as attorney's fees.

HON. SECRETARY OF LABOR vs PANAY VETERANS SECURITY AND INVESTIGATION

AGENCY
GR 167708 August 22, 2008
NATIONAL MINES AND ALLIED WORKERS UNION vs MARCOPPER MINING CORP
GR 174641 November 11, 2008

PEOPLE’S BROADCASTING vs SECRETARY OF DOLE

GR 179652 May 08, 2009

PHILIPPINE HOTELIERS INC, ET AL vs NATIONAL UNION OF WORKERS IN HOTEL,

RESTAURANT, AND ALLIED INDUSTRIES-DUSIT HOTEL NIKKO CHAPTER
GR 181972 August 25, 2009

VII. WAGE PROTECTION PROVISIONS AND PROHIBITIONS REGARDING WAGES

Rosario Gaa vs. COURT OF APPEALS

[140 SCRA 304]
Facts:
It appears that respondent Europhil Industries Corporation was formerly one of the tenants in
Trinity Building at T.M. Kalaw Street, Manila, while petitioner Rosario A. Gaa was then the
building administrator.
On December 12, 1973, Europhil Industries commenced an action (in the Court of First Instance
of Manila for damages against petitioner for having perpetrated certain acts that Europhil
Industries considered a trespass upon its rights, namely, cutting of its electricity, and removing its
name from the building directory and gate passes of its officials and employees", On June 28,
1974, said court rendered judgment in favor of respondent Europhil Industries, ordering petitioner
to pay the former the sum of P10,000.00 as actual damages, P5,000.00 as moral damages,
P5,000.00 as exemplary damages and to pay the costs.
The said decision having become final and executory, a writ of garnishment was issued pursuant
to which Deputy Sheriff Cesar A. Roxas on August 1, 1975 served a Notice of Garnishment upon
El Grande Hotel, where petitioner was then employed, garnishing her "salary, commission and/or
remuneration." Petitioner then filed with the Court of First Instance of Manila a motion to lift said
garnishment on the ground that her "salaries, commission and or remuneration" are exempted
from execution under Article 1708 of the New Civil Code. Said motion was denied by the lower
Court.
Court of Appeals dismissed the petition. In dismissing the petition, the Court of Appeals held that
petitioner is not a mere laborer as contemplated under Article 1708 as the term laborer does not
apply to one who holds a managerial or supervisory position like that of petitioner, but only to
those laborers occupying the lower strata.
Issue:
Whether or not the Petitioner is covered by Article 1708 of the New Civil Code.
SC Ruling:
The Court ruled that petitioner is not covered by Article 1708 since she does not fall with in the
criteria of laborer. Article 1708 of the Civil Code provides: “The laborer's wage shall not be subject
to execution or attachment, except for debts incurred for food, shelter, clothing and medical
attendance."
It is beyond dispute that petitioner is not an ordinary or rank and file laborer but a responsibly
place employee, of El Grande Hotel, responsible for planning, directing, controlling, and
coordinating the activities of all housekeeping personnel so as to ensure the cleanliness,
maintenance and orderliness of all guest rooms, function rooms, public areas, and the
surroundings of the hotel. Considering the importance of petitioner's function in El Grande Hotel,
it is undeniable that petitioner is occupying a position equivalent to that of a managerial or
supervisory position.
We do not think that the legislature intended the exemption in Article 1708 of the New Civil Code
to operate in favor of any but those who are laboring men or women in the sense that their work
is manual. Persons belonging to this class usually look to the reward of a day's labor for
immediate or present support, and such persons are more in need of the exemption than any
others. Petitioner is definitely not within that class.
Nestle Philippines, Inc. vs. NLRC and Union of Filipro Employees
[193 SCRA 504]
Facts:
Four (4) collective bargaining agreements separately covering the petitioner's employees in its
Alabang/Cabuyao factories; Makati Administration Office. (Both Alabang/Cabuyao factories and
Makati office were represented by the respondent, Union of Filipro Employees [UFE]);Cagayan
de Oro Factory represented by WATU; and Cebu/Davao Sales Offices represented by the Trade
Union of the Philippines and Allied Services (TUPAS), all expired on June 30, 1987. UFE was
certified as the sole and exclusive bargaining agent for all regular rank-and-file employees at the
petitioner's Cagayan de Oro factory, as well as its Cebu/Davao Sales Office.
In August 1987, while the parties, were negotiating, the employees at Cabuyao resorted to a
"slowdown" and walk-outs prompting the petitioner to shut down the factory. Marathon collective
bargaining negotiations between the parties ensued. On September 1987, the UFE declared a
bargaining deadlock. On September 8, 1987, the Secretary of Labor assumed jurisdiction and
issued a return to work order. In spite of that order, the union struck, without notice, at the
Alabang/Cabuyao factory, the Makati office and Cagayan de Oro factory on September 11, 1987
up to December 8, 1987. The company retaliated by dismissing the union officers and members
of the negotiating panel who participated in the illegal strike. The NLRC affirmed the dismissals
on November 2, 1988. On January 26, 1988, UFE filed a notice of strike on the same ground of
CBA deadlock and unfair labor practices.
However, on March 30, 1988, the company was able to conclude a CBA with the union at the
Cebu/Davao Sales Office, and on August 5, 1988, with the Cagayan de Oro factory workers. The
union assailed the validity of those agreements and filed a case of unfair labor practice against
the company on November 16, 1988. After conciliation efforts of the NCMB yielded negative
results, the dispute was certified to the NLRC. The NLRC issued a resolution on June 5, 1989,
whose pertinent disposition regarding the union's demand for liberalization of the company's
retirement plan for its workers. the NLRC issued a resolution denying the motions for
reconsideration. With regard to the Retirement Plan, the NLRC held that Anent management's
objection to the modification of its Retirement Plan, the plan is specifically mentioned in the
previous bargaining agreements thereby integrating or incorporating the provisions thereof to the
agreement. By reason of its incorporation, the plan assumes a consensual character which
cannot be terminated or modified at will by either party. Consequently, it becomes part and parcel
of CBA negotiations.
Petitioner alleged that since its retirement plan is non-contributory, Nestle has the sole and
exclusive prerogative to define the terms of the plan because the workers have no vested and
demandable rights, the grant thereof being not a contractual obligation but merely gratuitous. At
most the company can only be directed to maintain the same but not to change its terms. It
should be left to the discretion of the company on how to improve or modify the same.
Issue:
Whether or not the workers have vested and demandable rights over the retirement plan.
SC Ruling:
The Court ruled that employees have a vested and demandable right over the retirement plan.
The inclusion of the retirement plan in the collective bargaining agreement as part of the package
of economic benefits extended by the company to its employees to provide them a measure of
financial security after they shall have ceased to be employed in the company, reward their
loyalty, boost their morale and efficiency and promote industrial peace, gives "a consensual
character" to the plan so that it may not be terminated or modified at will by either party.
The fact that the retirement plan is non-contributory, i.e., that the employees contribute nothing to
the operation of the plan, does not make it a non-issue in the CBA negotiations. As a matter of
fact, almost all of the benefits that the petitioner has granted to its employees under the CBA —
salary increases, rice allowances, midyear bonuses, 13th and 14th month pay, seniority pay,
medical and hospitalization plans, health and dental services, vacation, sick & other leaves with
pay — are non-contributory benefits. Since the retirement plan has been an integral part of the
CBA since 1972, the Union's demand to increase the benefits due the employees under said
plan, is a valid CBA issue.
The petitioner's contention, that employees have no vested or demandable right to a non-
contributory retirement plan, has no merit for employees do have a vested and demandable right
over existing benefits voluntarily granted to them by their employer. The latter may not unilaterally
withdraw, eliminate or diminish such benefits.

Five J Taxi and/or Juan Armamiento vs. NLRC

[235 SCRA 556]
Facts:
Private respondents Domingo Maldigan and Gilberto Sabsalon were hired by the petitioners as
taxi drivers and, as such, they worked for 4 days weekly on a 24-hour shifting schedule. Aside
from the daily boundary of P700.00 for air-conditioned taxi or P450.00 for non-air-conditioned
taxi, they were also required to pay P20.00 for car washing, and to further make a P15.00 deposit
to answer for any deficiency in their boundary, for every actual working day.
In less than 4 months after Maldigan was hired as an extra driver by the petitioners, he already
failed to report for work for unknown reasons. Petitioners learned that he was working for Mine of
Gold Taxi Company. With respect to Sabsalon, while driving a taxicab of petitioners on
September 1983, he was held up by his armed passenger who took all his money and thereafter
stabbed him. He was hospitalized and after his discharge, he went to this home province to
recuperate.
In January, 1987, Sabsalon was re-admitted by petitioners as a taxi driver under the same terms
and conditions as when he was first employed, but his working schedule was made on an
alternative basis where he drove only every other day. However, on several occasions, he failed
to report for work during his schedule. On September 22, 1991, Sabsalon failed to remit his
boundary of P700.00 for the previous day. Also, he abandoned his taxicab in Makati without fuel
refill worth P300.00. Despite repeated requests of petitioners for him to report for work, he
adamantly refused. Afterwards it was revealed that he was driving a taxi for Bulaklak Company.
Sometime in 1989, Maldigan requested petitioners for the reimbursement of his daily cash
deposits for 2 years, but herein petitioners told him that not a single centavo was left of his
deposits as these were not even enough to cover the amount spent for the repairs of the taxi he
was driving. This was allegedly the practice adopted by petitioners to recoup the expenses
incurred in the repair of their taxicab units. When Maldigan insisted on the refund of his deposit,
petitioners terminated his services. Sabsalon, on his part, claimed that his termination from
employment was effected when he refused to pay for the washing of his taxi seat covers.
On November 27, 1991, private respondents filed a complaint with the manila Arbitration Office of
the National Labor Relations Commission charging petitioners with illegal dismissal and illegal
deductions.
Issue:
Whether or not the deductions made were illegal and if illegal, considered a prohibition regarding
wages.
SC Ruling:
The Court declares that the deposits made amounts to the prohibition provided by law. The
deposits made were illegal and the respondents must be refunded.
Article 114 of the Labor Code provides as follows:
Deposits for loss or damage. — No employer shall require his worker to make deposits from
which deductions shall be made for the reimbursement of loss of or damage to tools, materials, or
equipment supplied by the employer, except when the employer is engaged in such trades,
occupations or business where the practice of making deposits is a recognized one, or is
necessary or desirable as determined by the Secretary of Labor in appropriate rules and
regulations.
It can be deduced that the said article provides the rule on deposits for loss or damage to tools,
materials or equipments supplied by the employer. Clearly, the same does not apply to or permit
deposits to defray any deficiency which the taxi driver may incur in the remittance of his
boundary.
On the matter of the car wash payments, the labor arbiter had this to say in his decision: "Anent
the issue of illegal deductions, there is no dispute that as a matter of practice in the taxi industry,
after a tour of duty, it is incumbent upon the driver to restore the unit he has given to the same
clean condition when he took it out, and as claimed by the respondents (petitioners in the present
case), complainant(s) (private respondents herein) were made to shoulder the expenses for
washing, the amount doled out was paid directly to the person who washed the unit, thus we find
nothing illegal in this practice, much more (sic) to consider the amount paid by the driver as illegal
deduction in the context of the law."
Consequently, private respondents are not entitled to the refund of the P20.00 car wash
payments they made. It will be noted that there was nothing to prevent private respondents from
cleaning the taxi units themselves, if they wanted to save their P20.00. Also, as the Solicitor
General correctly noted, car washing after a tour of duty is a practice in the taxi industry, and is, in
fact, dictated by fair play.

Manila Electric Company vs. Secretary of Labor

[G.R. No. 130439. October 26, 1999]
Facts:
MEWA is the duly recognized labor organization of the rank-and-file employees of MERALCO.
On September 7, 1995, MEWA informed MERALCO of its intention to re-negotiate the terms and
conditions of their existing 1992-1997 Collective Bargaining Agreement (CBA) covering the
remaining period of two years starting from December 1, 1995 to November 30, 1997. MERALCO
signified its willingness to re-negotiate through its letter dated October 17, 1995 and formed a
CBA negotiating panel for the purpose. On November 10, 1995, MEWA submitted its proposal to
MERALCO, which, in turn, presented a counter-proposal. Thereafter, collective bargaining
negotiations proceeded. However, despite the series of meetings between the negotiating panels
of MERALCO and MEWA, the parties failed to arrive at “terms and conditions acceptable to both
of them.”
On April 23, 1996, MEWA filed a Notice of Strike with the National Capital Region Branch of the
National Conciliation and Mediation Board (NCMB) of the Department of Labor and Employment
(DOLE) which was docketed as NCMB-NCR-NS-04-152-96, on the grounds of bargaining
deadlock and unfair labor practices. The NCMB then conducted a series of conciliation meetings
but the parties failed to reach an amicable settlement. MERALCO filed a petition to let the
Secretary of DOLE to assume jurisdiction over the case which was granted.
Issue:
Whether the members of MEWA are entitled to benefits given as bonuses, being negotiated in
the CBA.
SC Ruling:
The members of MEWA are entitled to the benefits although in the form of benefits which is a
subject of the negotiation of CBA.
As a rule, a bonus is not a demandable and enforceable obligation; it may nevertheless be
granted on equitable consideration as when the giving of such bonus has been the
company’s long and regular practice. To be considered a “regular practice,” the giving of the
bonus should have been done over a long period of time, and must be shown to have been
consistent and deliberate.
The ruling in National Sugar Refineries Corporation vs. NLRC: “The test or rationale of this
rule on long practice requires an indubitable showing that the employer agreed to continue giving
the benefits knowing fully well that said employees are not covered by the law requiring payment
thereof.”
In this case, the record shows the MERALCO, aside from complying with the regular 13th month
bonus, has further been giving its employees an additional Christmas bonus at the tail-end of the
year since 1988. While the special bonuses differed in amount and bore different titles, it can not
be denied that these were given voluntarily and continuously on or about Christmas time.
The considerable length of time MERALCO has been giving the special grants to its employees
indicates a unilateral and voluntary act on its part, to continue giving said benefits knowing that
such act was not required by law.
Indeed, a company practice favorable to the employees has been established and the payments
made by MERALCO pursuant thereto ripened into benefits enjoyed by the employees.
Consequently, the giving of the special bonus can no longer be withdrawn by the company as this
would amount to a diminution of the employee’s existing benefits.
Philippine Veterans Bank vs. NLRC
[G.R. No.130439. October 26, 1999]
Facts:
In 1983, petitioner Philippine Veterans Bank was placed under receivership by the Central Bank
(now Bangko Sentral). Petitioner was subsequently placed under liquidation on 15 June 1985.
Consequently, its employees, including private respondent Dr. Jose Teodorico V. Molina, were
terminated from work and given their respective separation pay and other benefits. To assist in
the liquidation, some of petitioner’s former employees were rehired, among them Molina, whose
re-employment commenced on 15 June 1985. On 11 May 1991, MOLINA filed a complaint
against members of the liquidation team. The complaint demanded the implementation of Wage
Orders Nos. NCR-01 and NCR-02 (hereafter W.O. 1 and W.O. 2) as well as moral damages and
attorney’s fees in the amount of P300,000.
Meanwhile, W.O. 1 took effect on November 1990, prescribing a P17-increase in the daily wage
of employees whose monthly salary did not exceed P3,802.08. On the other hand, W.O. 2
became mandated a P12-increase in the daily wage of employees whose monthly salary did not
exceed P4,319.16. Molina claimed that his salary should have been adjusted in compliance with
said wage orders. The liquidation team countered that MOLINA was not entitled to any salary
increase because he was already receiving a monthly salary of P6,654.60.
Labor Arbiter rejected the 26.16 factor used by the liquidators in computing the daily wage of
MOLINA, adopting instead the factor of “365 days.” Consequently, they were ordered to pay
Molina the wage differentials due him under W.O. 1 and W.O. 2. On appeal, the NLRC sustained
the labor arbiter’s ruling after concluding that Molina was a regular employee of petitioner with a
basic monthly salary of P3,754.60 at the time of his dismissal on 31 January 1992. He was,
therefore, entitled to the wage increases mandated by the aforesaid wage orders.
Issue:
Whether Molina is entitled to wage increase computation that used the 365 days factor.
SC Ruling:
Molina is entitled to the wage increase computation using the 365 days as factor. The documents
attached show that the Bank has been consistently using the factor of 365 days in computing
your equivalent monthly salary prior to its being placed under receivership by the Central Bank.
This is evident in the wage and allowance increases granted under previous Presidential Decrees
and Wage Orders, which were given by the Bank on monthly basis, i.e., where the rest days are
unworked but paid. This is also indicated in the appointment and service records of bank
personnel who started out as daily paid employees and were eventually promoted as permanent
employees with fixed monthly salaries. However, when R.A. 6640 went into force, the Bank
unilaterally reduced the factor to 262 instead of maintaining factor 365 as was the practice/policy
long before the effectivity of the Act. And when R.A 6727 took effect, the Bank reverted to the old
practice/policy of using factor 365 days in computing your equivalent monthly rate salary.
May we add that the old practice of the bank in using factor 365 days in a year in determining
equivalent monthly salary cannot unilaterally be changed by your employer without the consent of
the employees, such practice being now a part of the terms and conditions of your employment.
An employment agreement, whether written or unwritten, is a bilateral contract and as such either
party thereto cannot change or amend the terms thereof without the consent of the other party
thereto.
It is clear that respondent is entitled to the wage increase under R.A. 6440 computed on the basis
of 365 paid days and to the corresponding salary differentials as a result of the application of this
factor. Evidently, the use of the 365 factor is binding and conclusive, forming as it did part of the
employment contract. To abandon such policy and revert to its old practice of using the 26.16
factor would be a diminution of a labor benefit, which is prohibited by the Labor Code. It cannot
be doubted that the 365 factor favors petitioner’s employees because it results in a higher
determination of their monthly salary.

Philippine Appliance Corporation (PHILCOR) vs. CA

[G.R. No.149434. June 3, 2004]
Facts:
Petitioner is a domestic corporation engaged in the business of manufacturing refrigerators,
freezers and washing machines. Respondent United Philacor Workers Union-NAFLU is the duly
elected collective bargaining representative of the rank-and-file employees of petitioner.
During the collective bargaining negotiations between petitioner and respondent union in 1997,
petitioner offered the amount of P4, 000.00 to each employee as an “early conclusion bonus”.
Petitioner claims that this bonus was promised as a unilateral incentive for the speeding up of
negotiations between the parties and to encourage respondent union to exert their best efforts to
conclude a CBA. Upon conclusion of the CBA negotiations, petitioner accordingly gave this early
signing bonus.
In view of the expiration of this CBA, respondent union sent notice to petitioner of its desire to
negotiate a new CBA. Petitioner and respondent union began their negotiations. On October 22,
1999, after eleven meetings, respondent union expressed dissatisfaction at the outcome of the
negotiations and declared a deadlock. A few days later, on October 26, 1999, respondent union
filed a Notice of Strike with the NCMB, Region IV in Calamba, Laguna, due to the bargaining
deadlock.
The conciliation meetings started with eighteen unresolved items between petitioner and
respondent union. At the meeting, respondent union accepted petitioner’s proposals on fourteen
items, leaving the following items unresolved: wages, rice subsidy, signing, and retroactive
bonus.
Petitioner and respondent union failed to arrive at an agreement concerning these four remaining
items. On January 2000, respondent union went on strike at the petitioner’s plant. The strike
lasted for eleven days and resulted in the stoppage of manufacturing operations as well as losses
for petitioner, which constrained it to file a petition before the Department of Labor and
Employment. Labor Secretary assumed jurisdiction over the dispute and, on January 2000,
ordered the striking workers to return to work within twenty-four hours from notice and directed
petitioner to accept back the said employees. It rendered decision fixing the amount of wage
increase and directed to conclude a CBA to include the items granted in the conference.
Petitioner contested on the awarding of signing bonus.
Issue:
Whether the signing bonus is covered under the maintenance of existing benefits.
SC Ruling:
The payment of signing bonus is not covered under the existing benefits. The Court has
consistently ruled that a bonus is not a demandable and enforceable obligation. True, it may
nevertheless be granted on equitable considerations as when the giving of such bonus has been
the company’s long and regular practice.
To be considered a “regular practice,” however, the giving of the bonus should have been done
over a long period of time, and must be shown to have been consistent and deliberate. The test
or rationale of this rule on long practice requires an indubitable showing that the employer agreed
to continue giving the benefits knowing fully well that said employees are not covered by the law
requiring payment thereof.
Respondent does not contest the fact that petitioner initially offered a signing bonus only during
the previous CBA negotiation. Previous to that, there is no evidence on record that petitioner
ever offered the same or that the parties included a signing bonus among the items to be
resolved in the CBA negotiation. Hence, the giving of such bonus cannot be deemed as an
established practice considering that the same was given only once, that is, during the 1997 CBA
negotiation.

Special Steel Products vs. Lutgardo Villareal & Frederick So

[G.R. No.143304. July 8, 2004]
Facts:
Special Steel Products, Inc., is a domestic corporation engaged in the principal business of
importation, sale, and marketing of BOHLER steel products. Respondents worked for petitioner
as assistant manager and salesman. Villareal obtained a car loan from Bank of Commerce with
petitioner as surety wherein they are jointly and severally agreed to pay the bank in installment
basis. In January 1997, Villareal resigned and joined Hi-Grade Industrial and Technical Products
as Executive vice-president.
Respondent So was sponsored by petitioner to attend a training course in Kapfenberg, Austria
conducted by BOHLER. It rewarded So’s outstanding sales performance. When So returned, the
petitioner asked respondent So to sign a memorandum to work for the company for three years.
After 2 years and 4 months, So resigned from the company. Petitioner ordered respondents an
accounting of the various Christmas giveaways they received. In return, respondents also
demanded payment of their separation benefits, commissions, monetary benefits but petitioner
refused and withheld the 13th month pay and other benefits.
Issue:
Whether or not the employer can withhold its employee’s wages and benefits as lien to protect its
interest as surety in the car loan and for expenses in the training abroad.
SC Ruling:
The employer cannot withhold respondent’s 13th month pay and other monetary benefits.
Article 116 of the Labor Code, as amended, provides:
“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 worker’s consent.”
The above provision is clear and needs no further elucidation. Indeed, petitioner has no legal
authority to withhold respondents’ 13th month pay and other benefits. What an employee has
worked for, his employer must pay. 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
employer’s property.

Jenny Agabon & Virgilio Agabon vs. NLRC

[G.R. No.158693. November 17, 2004]
Facts:
Private respondent Riviera Home Improvements, Inc. is engaged in the business of selling and
installing ornamental and construction materials. It employed petitioners Virgilio Agabon and
Jenny Agabon as gypsum board and cornice installers on January 2, 1992 until February 23,
1999 when they were dismissed for abandonment of work.
Petitioners then filed a complaint for illegal dismissal and payment of money claims and on
December 28, 1999, the Labor Arbiter rendered a decision declaring the dismissals illegal and
ordered private respondent to pay the monetary claims.
Issue:
Whether or not respondent’s dismissal is illegal and if not, entitles them benefits.
SC Ruling:
The Court ruled that the dismissal is legal and entitles them of payment of benefits.
Dismissals based on just causes contemplate acts or omissions attributable to the employee
while dismissals based on authorized causes involve grounds under the Labor Code which allow
the employer to terminate employees. A termination for an authorized cause requires payment of
separation pay. When the termination of employment is declared illegal, reinstatement and full
back wages are mandated under Article 279. If reinstatement is no longer possible where the
dismissal was unjust, separation pay may be granted.
Procedurally, (1) if the dismissal is based on a just cause under Article 282, the employer must
give the employee two written notices and a hearing or opportunity to be heard if requested by
the employee before terminating the employment: a notice specifying the grounds for which
dismissal is sought a hearing or an opportunity to be heard and after hearing or opportunity to be
heard, a notice of the decision to dismiss; and (2) if the dismissal is based on authorized causes
under Articles 283 and 284, the employer must give the employee and the Department of Labor
and Employment written notices 30 days prior to the effectivity of his separation.
From the foregoing rules four possible situations may be derived: (1) the dismissal is for a just
cause under Article 282 of the Labor Code, for an authorized cause under Article 283, or for
health reasons under Article 284, and due process was observed; (2) the dismissal is without just
or authorized cause but due process was observed; (3) the dismissal is without just or authorized
cause and there was no due process; and (4) the dismissal is for just or authorized cause but due
process was not observed.
In the fourth situation, the dismissal should be upheld. While the procedural infirmity cannot be
cured, it should not invalidate the dismissal. However, the employer should be held liable for
non-compliance with the procedural requirements of due process.
The present case squarely falls under the fourth situation. The dismissal should be upheld
because it was established that the petitioners abandoned their jobs to work for another
company. Private respondent, however, did not follow the notice requirements and instead
argued that sending notices to the last known addresses would have been useless because they
did not reside there anymore. Unfortunately for the private respondent, this is not a valid excuse
because the law mandates the twin notice requirements to the employee’s last known address.
Thus, it should be held liable for non-compliance with the procedural requirements of due
process.
The Court ruled that respondent is liable for petitioners’ holiday pay, service incentive leave pay
and 13th month pay without deductions. The evident intention of Presidential Decree No. 851 is to
grant an additional income in the form of the 13th month pay to employees not already receiving
the same so as “to further protect the level of real wages from the ravages of world-wide
inflation.” Clearly, as additional income, the 13th month pay is included in the definition of wage
under Article 97(f) of the Labor Code.
An employer is prohibited under Article 113 of the same Code from making any deductions
without the employee’s knowledge and consent.

American Wire & cable Daily Rated Employees Union vs. Amercan Wire & Cable Co., Inc.,
& the Court of Appeals
[G.R. No.155059. April 29, 2005]
Facts:
American Wire and Cable Co., Inc., is a corporation engaged in the manufacture of wires and
cables. There are two unions in this company, the American Wire and Cable Monthly-Rated
Employees Union and the American Wire and Cable Daily-Rated Employees Union.
On 16 February 2001, an original action was filed before the NCMB of the Department of Labor
and Employment by the two unions for voluntary arbitration. They alleged that the private
respondent, without valid cause, suddenly and unilaterally withdrew and denied certain benefits
and entitlements which they have long enjoyed. These are Service Award, 35% premium pay of
an employee’s basic pay for the work rendered during Holy Monday, Holy Tuesday, Holy
Wednesday, December 23, 26, 27, 28 and 29, Christmas Party and Promotional Increase.
Issue:
Whether or not the respondent company violated Article 100 of the Labor Code.
SC Ruling:
The Court ruled that company is not guilty of violating Art. 100 of the Labor Code.
Article 100 of the Labor Code provides:
PROHIBITION AGAINST ELIMINATION OR DIMINUTION OF BENEFITS. – Nothing in this Book
shall be construed to eliminate or in any way diminish supplements, or other employee benefits
being enjoyed at the time of promulgation of this Code.
The certain benefits and entitlements are considered bonuses. A bonus can only be enforceable
and demandable if it has ripened into a company practice. It must also be expressly agreed by
the employer and employee or it must be on a fixed amount.
The assailed benefits were never subjects of any agreement between the union and the
company. It was never incorporated in the CBA. Since all these benefits are in the form of
bonuses, it is neither enforceable nor demandable.

Honda Philippines., Inc., vs. Samahan ng Malayang Manggagawa sa Honda

[G.R. No.145561. June 15, 2005]
Facts:
The case stems from the collective bargaining agreement between Honda and the respondent
union that it granted the computation of 14th month pay as the same as 13th month pay. Honda
continues the practice of granting financial assistance covered every December each year of not
less than 100% of the basic salary. In the latter part of 1998, the parties started to re-negotiate for
the fourth and fifth years of the CBA. The union filed a notice of strike on the ground of unfair
labor practice for deadlock.
DOLE assumed jurisdiction over the case and certified it to the NLRC for compulsory arbitration.
The striking employees were ordered to return to work and management to accept them back
under the same terms prior to the strike staged. Honda issued a memorandum of the new
computation of the 13th month and 14th month pay to be granted to all its employees whereby the
31 long strikes shall be considered unworked days for purpose of computing the said benefits.
The amount equivalent to ½ of the employees’ basic salary shall be deducted from these
bonuses, with a commitment that in the event that the strike is declared legal, Honda shall pay
the amount.
The respondent union opposed the pro-rated computation of bonuses. This issue was submitted
to voluntary arbitration where it ruled that the company’s implementation of the pro-rated
computation is invalid.
Issue:
Whether or not the pro-rated computation of the 13th and 14th month pays and other bonuses in
question is valid and lawful.
SC Ruling:
The Court ruled that the pro-rated computation is invalid.
The pro-rated computation of Honda as a company policy has not ripened into a company
practice and it was the first time they implemented such practice.
The payment of the 13th month pay in full month payment by Honda has become an established
practice. The length of time where it should be considered in practice is not being laid down by
jurisprudence. The voluntary act of the employer cannot be unilaterally withdrawn without
violating Article 100 of the Labor Code.
The court also rules that the withdrawal of the benefit of paying a full month salary for 13th month
pay shall constitute a violation of Article 100 of the Labor Code.

Producers Bank of the Philippines vs. NLRC

[355 SCRA 506]
Facts:
Petitioner was placed by Central Bank of the Philippines (Bangko Sentral ng Pilipinas) under a
conservator for the purpose of protecting its assets. When the respondents ought to implement
the CBA (Sec. 1, Art. 11) regarding the retirement plan and pertaining to uniform allowance, the
acting conservator of the petition expressed objection resulting an impasse between the petitioner
bank and respondent union. The deadlock continued for at least six months. The private
respondent, to resolve the issue filed a case against petitioner for unfair labor practice and
flagrant violation of the CBA.
The Labor Arbiter dismissed the petition. NLRC reversed the findings and ordered the
implementation of the CBA.
Issue:
Whether or not the employees who have retired have no personality to file an action since there is
no longer an employer-employee relationship.
SC Ruling:
The Court rules that employees who have retired still have the personality to file a complaint.
Retirement results from a voluntary agreement between the employer and the employee whereby
the latter after reaching a certain age agrees to sever his employment with the former. The very
essence of retirement is the termination of employer-employee relationship.
Retirement of the employee does not in itself affect his employment status especially when it
involves all rights and benefits due to him, since these must be protected as though there had
been no interruption of service. It must be borne in mind that the retirement scheme was part of
the employment package and the benefits to be derived therefrom constituted as it were a
continuing consideration of services rendered as well as an effective inducement foe remaining
with the corporation. It is intended to help the employee enjoy the remaining years of his life.
When the retired employees were requesting that their retirement benefits be granted, they were
not pleading for generosity but merely demanding that their rights, embodied in the CBA, be
recognized. When an employee has retired but his benefits under the law or CBA have not yet
been given, he still retains, for the purpose of prosecuting his claims, the status of an employee
entitled to the protection of the Labor Code, one of which is the protection of the labor union.

Angel Jardin vs. National Labor Relations Commissions

[G.R. No.119268. February 23, 2000]
Facts:
Petitioners were drivers of private respondent, Philjama International Inc., a domestic corporation
engaged in the operation of "Goodman Taxi." Petitioners used to drive private respondent’s
taxicabs every other day on a 24-hour work schedule under the boundary system. Under this
arrangement, the petitioners earned an average of P400.00 daily.
Nevertheless, private respondent admittedly regularly deducts from petitioners’ daily earnings the
amount of P30.00 supposedly for the washing of the taxi units. Believing that the deduction is
illegal, petitioners decided to form a labor union to protect their rights and interests.
Upon learning about the plan of petitioners, private respondent refused to let petitioners drive
their taxicabs when they reported for work on August 6, 1991, and on succeeding days.
Petitioners suspected that they were singled out because they were the leaders and active
members of the proposed union. Aggrieved, petitioners filed with the labor arbiter a complaint
against private respondent for unfair labor practice, illegal dismissal and illegal deduction of
washing fees. In a dated August 31, 1992, the labor arbiter dismissed said complaint for lack of
merit.
Issue:
Whether or not the deduction for the washing of taxi units is illegal.
SC Ruling:
The Court ruled that the deduction made for the car wash is not illegal.
In Five J Taxi vs. NLRC, the court views that it is not illegal in the context of the law. We note that
after a tour of duty, it is incumbent upon the driver to restore the unit he has driven to the same
clean condition when he took it out. Car washing after a tour of duty is indeed a practice in the
taxi industry and is in fact dictated by fair play. Hence, the drivers are not entitled to
reimbursement of washing charges.

Manila Jockey Club Employees Labor Union vs. Manila Jockey Club
[G.R. No.167601. March 7, 2007]
Facts:
Petitioner Manila Jockey Club Employees Labor Union-PTGWO and respondent Manila Jockey
Club, Inc., a corporation with a legislative franchise to conduct, operate and maintain horse races,
entered into a Collective Bargaining Agreement (CBA) effective January 1, 1996 to December 31,
2000. The CBA governed the economic rights and obligations of respondent’s regular monthly
paid rank-and-file employees. In the CBA, the parties agreed to a 7-hour work schedule from 9:00
a.m. to 12:00 noon and from 1:00 p.m. to 5:00 p.m. on a work week of Monday to Saturday.
On April 3, 1999, respondent issued an inter-office memorandum declaring that, effective April
20, 1999, the hours of work of regular monthly-paid employees shall be from 1:00 p.m. to 8:00
p.m. when horse races are held, that is, every Tuesday and Thursday. The memorandum,
however, maintained the 9:00 a.m. to 5:00 p.m. schedule for non-race days.
On October 12, 1999, petitioner and respondent entered into an Amended and Supplemental
CBA retaining Section 1 of Article IV and Section 2 of Article XI, supra, and clarified that any
conflict arising therefrom shall be referred to a voluntary arbitrator for resolution.
Subsequently, before a panel of voluntary arbitrators of the National Conciliation and Mediation
Board (NCMB), petitioner questioned the above office memorandum as violative of the prohibition
against non-diminution of wages and benefits guaranteed under Section 1, Article IV, of the CBA
which specified the work schedule of respondent's employees to be from 9:00 a.m. to 5:00 p.m.
Petitioner claimed that as a result of the memorandum, the employees are precluded from
rendering their usual overtime work from 5:00 p.m. to 9:00 p.m.
The NCMB’s panel of voluntary arbitrators, in a decision dated October 18, 2001, upheld
respondent's prerogative to change the work schedule of regular monthly-paid employees under
Section 2, Article XI, of the CBA. Petitioner moved for reconsideration but the panel denied the
motion.
Issue:
Whether or not the respondent violated the non-diminution of benefits under Article 100 of the
Labor Code.
SC Ruling:
The Court ruled that the respondent did not violate the principle of non-diminution of benefits. The
provision of the CBA also grants respondent the prerogative to relieve employees from duty
because of lack of work. Petitioner’s argument, therefore, that the change in work schedule
violates Article 100 of the Labor Code because it resulted in the diminution of the benefit enjoyed
by regular monthly-paid employees of rendering overtime work with pay, is untenable.
Section 1, Article IV, of the CBA does not guarantee overtime work for all the employees but
merely provides that "all work performed in excess of seven (7) hours work schedule and on days
not included within the work week shall be considered overtime and paid as such."
Respondent was not obliged to allow all its employees to render overtime work everyday for
the whole year, but only those employees whose services were needed after their regular
working hours and only upon the instructions of management. The overtime pay was not
given to each employee consistently, deliberately and unconditionally, but as a
compensation for additional services rendered. Thus, overtime pay does not fall within the
definition of benefits under Article 100 of the Labor Code on prohibition against elimination or
diminution of benefits.

San Miguel Corp et al., vs. Numeriano Layoc, Jr., et al.

[G.R. No. 149640. October 19, 2007.]
Facts:
Respondents were among the "Supervisory Security Guards" of the Beer Division of San Miguel
Corporation. They started working as guards with the petitioner San Miguel Corporation assigned
to the Beer Division on different dates until such time that they were promoted as supervising
security guards. From the commencement of their employment, the private respondents were
required to punch their time cards for purposes of determining the time they would come in and
out of the company's work place. Corollary, the private respondents were availing the benefits for
overtime, holiday and night premium duty through time card punching. However, in the early
1990's, the San Miguel Corporation embarked on a Decentralization Program aimed at enabling
the separate divisions of the San Miguel Corporation to pursue a more efficient and effective
management of their respective operations.
As a result of the Decentralization Program, the Beer Division of the San Miguel Corporation
implemented on January 1, 1993 a "no time card policy" whereby the Supervisory I and II
composing of the supervising security guards of the Beer Division were no longer required to
punch their time cards. Consequently, on January 16, 1993, without prior consultation with the
private respondents, the time cards were ordered confiscated and the latter were no longer
allowed to render overtime work. However, in lieu of the overtime pay and the premium pay, the
personnel of the Beer Division of the petitioner San Miguel Corporation affected by the "No Time
Card Policy" were given a 10% across-the-board increase on their basic pay while the
supervisors who were assigned in the night shift (6:00 p.m. to 6:00 a.m.) were given night shift
allowance ranging from P2,000.00 to P2,500.00 a month.
Hence, this complaint filed for unfair labor practice, violation of Article 100 of the Labor Code of
the Philippines, and violation of the equal protection clause and due process of law in relation to
paragraphs 6 and 8 of Article 32 of the New Civil Code of the Philippines.
Issue:
Whether the circumstances in the present case constitute an exception to the rule that
supervisory employees are not entitled to overtime pay.
SC Ruling:
Article 82 of the Labor Code states that the provisions of the Labor Code on working conditions
and rest periods shall not apply to managerial employees. The other provisions in the Title
include normal hours of work (Article 83), hours worked (Article 84), meal periods (Article 85),
night shift differential (Article 86), overtime work (Article 87), undertime not offset by overtime
(Article 88), emergency overtime work (Article 89), and computation of additional compensation
(Article 90). It is thus clear that, generally, managerial employees such as respondents are not
entitled to overtime pay for services rendered in excess of eight hours a day. Respondents failed
to show that the circumstances of the present case constitute an exception to this general rule.
Aside from their allegations, respondents were not able to present anything to prove that
petitioners were obliged to permit respondents to render overtime work and give them the
corresponding overtime pay. Even if petitioners did not institute a "no time card policy,"
respondents could not demand overtime pay from petitioners if respondents did not render
overtime work. The requirement of rendering additional service differentiates overtime pay from
benefits such as thirteenth month pay or yearly merit increase. These benefits do not require any
additional service from their beneficiaries. Thus, overtime pay does not fall within the definition of
benefits under Article 100 of the Labor Code.
Hence, the petition is granted.

San Miguel Corporation vs. Angel Pontillas

[G.R. No.155178. May 7, 2008]
Facts:
On 24 October 1980, San Miguel Corporation (petitioner) employed Angel C. Pontillas
(respondent) as a daily wage company guard. In 1984, respondent became a monthly-paid
employee which entitled him to yearly increases in salary. On 19 October 1993, respondent filed
an action for recovery of damages due to discrimination under Article 100 of the Labor Code of
the Philippines (Labor Code), as amended, as well as for recovery of salary differential and
backwages, against petitioner. Respondent questioned the rate of salary increase given him by
petitioner.
On 6 December 1993, Ricardo F. Elizagaque (Elizagaque), petitioner’s Vice President and VisMin
Operations Center Manager, issued a Memorandum ordering, among others, the transfer of
responsibility of the Oro Verde Warehouse to the newly-organized VisMin Logistics Operations
effective 1 January 1994. Respondent continued to report at Oro Verde Warehouse. He alleged
that he was not properly notified of the transfer and that he did not receive any written order from
Capt. Fortich, his immediate superior.
In a letter dated 28 February 1994, petitioner informed respondent that an administrative
investigation.In a letter dated 7 April 1994, petitioner informed respondent of its decision to
terminate him for violating company rules and regulations, particularly for Insubordination or
Willful Disobedience in Carrying Out Reasonable Instructions of his superior.
Issue:
Whether or not respondent’s dismissal from employment is legal.
SC Ruling:
Respondent was dismissed for a just cause. An employer may terminate an employment for
serious misconduct or willful disobedience by the employee of the lawful orders of his employer or
representative in connection with his work. Willful disobedience requires the concurrence of two
elements: (1) the employee’s assailed conduct must have been willful, that is, characterized by a
wrongful and perverse attitude; and (2) the order violated must have been reasonable, lawful,
made known to the employee, and must pertain to the duties which he had been engaged to
discharge. The records show that respondent was not singled out for the transfer. Respondent’s
transfer was the effect of the integration of the functions of the Mandaue Brewery – Materials
Management and the Physical Distribution group into a unified logistics organization, the VisMin
Logistics Operations.
Moreover, the employer exercises the prerogative to transfer an employee for valid reasons and
according to the requirements of its business, provided the transfer does not result in demotion in
rank or diminution of the employee’s salary, benefits, and other privileges. In this case, we found
that the order of transfer was reasonable and lawful considering the integration of Oro Verde
Warehouse with VisMin Logistics Operations. Respondent was properly informed of the transfer
but he refused to receive the notices on the pretext that he was wary because of his pending
case against petitioner. Respondent failed to prove that petitioner was acting in bad faith in
effecting the transfer. There was no demotion involved, or even a diminution of his salary,
benefits, and other privileges. Respondent’s persistent refusal to obey petitioner’s lawful order
amounts to willful disobedience under Article 282 of the Labor Code. The petition was granted.

Arco Metal vs. Products Co., Inc., et al., vs. Samahan ng Mga Manggagawa sa Arco-Metal-
NAFLU
[G.R. No. 170734, May 14, 2008]
Facts:
Petitioner is a company engaged in the manufacture of metal products, whereas respondent is
the labor union of petitioner’s rank and file employees. Sometime in December 2003, petitioner
paid the 13th month pay, bonus, and leave encashment of three union members in amounts
proportional to the service they actually rendered in a year, which is less than a full twelve (12)
months. Respondent protested the prorated scheme, claiming that on several occasions
petitioner did not prorate the payment of the same benefits to seven (7) employees who had not
served for the full 12 months. According to respondent, the prorated payment violates the rule
against diminution of benefits under Article 100 of the Labor Code. Thus, they filed a complaint
before the National Conciliation and Mediation Board (NCMB).
Issue:
Whether or not the grant of 13th month pay, bonus, and leave encashment in full regardless of
actual service rendered constitutes voluntary employer practice and, consequently, whether or
not the prorated payment of the said benefits constitute diminution of benefits under Article 100 of
the Labor Code.
SC Ruling:
Any benefit and supplement being enjoyed by employees cannot be reduced, diminished,
discontinued or eliminated by the employer. The principle of non-diminution of benefits is founded
on the Constitutional mandate to "protect the rights of workers and promote their welfare and to
afford labor full protection. Said mandate in turn is the basis of Article 4 of the Labor Code which
states that all doubts in the implementation and interpretation of this Code, including its
implementing rules and regulations shall be rendered in favor of labor.
Jurisprudence is replete with cases which recognize the right of employees to benefits which
were voluntarily given by the employer and which ripened into company practice. Thus in
DavaoFruits Corporation v. Associated Labor Unions, et al. where an employer had freely and
continuously included in the computation of the 13th month pay those items that were expressly
excluded by the law, we held that the act which was favorable to the employees though not
conforming to law had thus ripened into a practice and could not be withdrawn, reduced,
diminished, discontinued or eliminated. In Sevilla Trading Company v. Semana, we ruled that the
employer’s act of including non-basic benefits in the computation of the 13th month pay was a
voluntary act and had ripened into a company practice which cannot be peremptorily withdrawn.
In the years 1992, 1993, 1994, 1999, 2002 and 2003, petitioner had adopted a policy of freely,
voluntarily and consistently granting full benefits to its employees regardless of the length of
service rendered. True, there were only a total of seven employees who benefited from such a
practice, but it was an established practice nonetheless. Jurisprudence has not laid down any rule
specifying a minimum number of years within which a company practice must be exercised in
order to constitute voluntary company practice. Thus, it can be six (6) years, three (3) years, or
even as short as two (2) years. Petitioner cannot shirk away from its responsibility by merely
claiming that it was a mistake or an error, supported only by an affidavit of its manufacturing
group head. Hence, petition was denied.

GENESIS TRANSPORT SERVICE INC, ET AL vs UNYON NG MALAYANG MANGGAGAWA

NG GENESIS TRANSPORT, ET AL
GR 182114 April 05, 2010

VIII. PAYMENT OF WAGES

Dominico Congson vs. National Labor Relations Commissions

[243 SCRA 260 (1995)]
Facts:
Petitioner is the registered owner of Southern Fishing Industry. Private respondents were hired on
various dates 3 by petitioner as regular piece-rate workers. They were uniformly paid at a rate of
P1.00 per tuna weighing thirty (30) to eighty (80) kilos per movement. They worked seven (7)
days a week.
During the first week of June 1990, petitioner notified his workers of his proposal to reduce the
rate-per-tuna movement due to the scarcity of tuna. Private respondents resisted petitioner's
proposed rate reduction. When they reported for work the next day, they were informed that they
had been replaced by a new set of workers.
On June 1990, private respondents filed a case against petitioner before the NLRC for
underpayment of wages (non-compliance with Rep. Act Nos. 6640 and 6727) and non-payment
of overtime pay, 13th month pay, holiday pay, rest day pay, and five (5)-day service incentive
leave pay; and for constructive dismissal. With respect to their monetary claims, private
respondents charged petitioner with violation of the minimum wage law, alleging that with
petitioner's rates and the scarcity of tuna catches, private respondents' average monthly earnings
each did not exceed ONE THOUSAND PESOS (P1,000.00).
In addition to the amount of P1.00 per 'bariles' per movement herein complainants get the
intestines and liver of the tuna as part of their salary. That for every tuna delivered, herein
complainants extract at least three (3) kilos of intestines and liver. That the minimum prevailing
price of tuna intestine and liver in 1986 to 1990 range from P15.00 to P20.00/kilo. The value of
the tuna intestine and liver should be computed in arriving at the daily wage of herein
complainants because the very essence of the agreement between complainants and respondent
is: complainants shall be paid only P1.00 per tuna per movement BUT the intestines and liver of
the tuna delivered shall go to the herein complainants. It should be noted that tuna intestines and
liver are easily disposed of in any public market. What they are after, in truth and in fact is the
tuna intestines and liver which they can easily convert into cash."
Quite clearly, petitioner admits that the P1.00-per-tuna movement is the actual wage rate applied
to private respondents as expressly agreed upon by both parties. Petitioner further admits that
private respondents were entitled to retrieve the tuna intestines and liver as part of their
compensation. Finally, petitioner does not refute Labor Arbiter when the latter fixed private
respondents' individual monthly wage at P2,670 computed at the mandatory daily wage of
P89.00. Petitioner therefore argues that the combined value of private respondents' cash wage
and the monetary value of the tuna liver and intestines clearly exceeded the minimum wage fixed
by law.
Issue:
Whether or not the means of payment of the wage is valid.
SC Ruling:
The Court does not agree with the petitioner. The Labor Code expressly provides:
"Article 102. Forms of Payment. — No employer shall pay the wages of an employee by
means of, promissory notes vouchers, coupons, tokens, tickets, chits, or any object other than
legal tender, even when expressly requested by the employee. Payment of wages by check or
money order shall be allowed when such manner of payment is customary on the date of
effectivity of this Code, or is necessary because as specified in appropriate regulations to be
issued by the Secretary of Labor or as stipulated in a collective bargaining agreement."
Undoubtedly, petitioner's practice of paying the private respondents the minimum wage by means
of legal tender combined with tuna liver and intestines runs counter to the abovecited provision of
the Labor Code. The fact that said method of paying the minimum wage was not only agreed
upon by both parties in the employment agreement but even expressly requested by private
respondents, does not shield petitioner. Article 102 of the Labor Code is clear. Wages shall be
paid only by means of legal tender. The only instance when an employer is permitted to pay
wages in forms other than legal tender, that is, by checks or money order, is when the
circumstances prescribed in the second paragraph of Article 102 are present.

North Davao Mining Corp. & Asset Privatization Trust vs. NLRC
[254 SCRA 721 (1996)]
Facts:
Petitioner North Davao Mining Corporation was incorporated in 1974 as a 100% privately-owned
company. Later, the Philippine National Bank became part owner thereof as a result of a
conversion into equity of a portion of loans obtained by North Davao from said bank. On June 30,
1986, PNB transferred all its loans to and equity in North Davao in favor of the national
government which later turned them over to petitioner Asset Privatization Trust As of December
31, 1990 the national government held 81.8% of the common stock and 100% of the preferred
stock of said company.
Respondent Wilfredo Guillema is one among several employees of North Davao who were
separated by reason of the company’s closure on May 31, 1992, and who were the complainants
in the cases before the respondent labor arbiter. On May 31, 1992, petitioner North Davao
completely ceased operations due to serious business reverses. From 1988 until its closure in
1992, North Davao suffered net losses averaging three billion pesos per year, for each of the five
years prior to its closure. All told five months prior to its closure, its total liabilities had exceeded
its assets by 20.392 billion pesos. When it ceased operations, its remaining employees were
separated and given the equivalent of 12.5 days’ pay for every year of service, computed on their
basic monthly pay, in addition to the commutation to cash of their unused vacation and sick
leaves. However, it appears that, during the life of the petitioner corporation, from the beginning
of its operations in 1981 until its closure in 1992, it had been giving separation pay equivalent to
thirty days’ pay for every year of service. Moreover, the employees had to collect their salaries at
a bank in Tagum, Davao del Norte, some 58 kilometers from their workplace and about 2 ½hours’
travel time by public transportation; this arrangement lasted from 1981 up to 1990.
Subsequently, a complaint was filed with respondent labor arbiter by respondent Wilfredo
Guillema and 271 other seperated employees for additional separation pay; back wages;
transportation allowance; hazard pay; etc., amounting to P58,022,878.31.
Issue:
Whether or not time spent in collecting wages in a place other than the place of employment is
compensable notwithstanding that the same is done during official time.
SC Ruling:
It is undisputed that because of security reasons, from the time of its operations, petitioner NDMC
maintained its policy of paying its workers at a bank in Tagum, Davao del Norte, which usually
took the workers about two and a half (2 1/2) hours of travel from the place of work and such
travel time is not official. Records also show that on February 12,1992, when an inspection was
conducted by the Department of Labor and Employment at the premises of petitioner NDMC at
Amacan, Maco, Davao del Norte, it was found out that petitioners had violated labor standards
law, one of which is the place of payment of wages.
Section 4, Rule VIII, Book III of the Omnibus Rules Implementing the Labor Code provides that:
Place of payment. - (a) As a general rule, the place of payment shall be at or near the place of
undertaking. Payment in a place other than the workplace shall be permissible only under the
following circumstances: (1) When payment cannot be effected at or near the place of work by
reason of the deterioration of peace and order conditions, or by reason of actual or impending
emergencies caused by fire, flood, epidemic or other calamity rendering payment thereat
impossible; (2) When the employer provides free transportation to the employees back and forth;
and (3) Under any analogous circumstances; provided that the time spent by the employees in
collecting their wages shall be considered as compensable hours worked.
From the evidence on record, we find that the hours spent by complainants in collecting salaries
at a bank in Tagum, Davao del Norte shall be considered compensable hours worked.
Considering further the distance between Amacan, Maco to Tagum which is 2½ hours by travel
and the risks in commuting all the time in collecting complainants’ salaries, would justify the
granting of backwages equivalent to 2 days in a month.

House of Sara Lee vs. Cynthia Rey

[G.R. No.149013. August 31, 2006]
Facts:
The House of Sara Lee is engaged in the direct selling of a variety of product lines for men and
women, including cosmetics, intimate apparels, perfumes, ready to wear clothes and other
novelty items, through its various outlets nationwide. In the pursuit of its business, the petitioner
engages and contracts with dealers to sell the aforementioned merchandise. These dealers,
known either as “Independent Business Managers” (IBMs) or “Independent Group Supervisors”
(IGSs), depending on whether they sell individually or through their own group, would obtain at
discounted rates the merchandise from the petitioner on credit or then sell the same products to
their own customers at fixed prices also determined by the petitioner.
In turn, the dealers are paid “Services Fees,” or sales commissions, the amount of which
depends on the volume and value of their sales. Under existing company policy, the dealers
must remit to the petitioner the proceeds of their sales within a designated credit period, which
would either be 38 days for IGSs or 52 days for IBMs, counted from the day the said dealers
acquired the merchandise from the petitioner. To discourage late remittances, the petitioner
imposes a “Credit Administration Charge,” or simply, a penalty charge, on the value of the
unremitted payment.
The dealers under this system earn income through a profit margin between the discounted
purchase price they pay on credit to the petitioner and the fixed selling price their customers will
have to pay. On top of this margin, the dealer is given the Service Fee, a sales commission,
based on the volume of sales generated by him or her. Due to the sheer volume of sales
generated by all of its outlets, the petitioner has found the need to strictly monitor the 38- or 52-
day “rolling due date” of each of its IBMs and IGSs through the employment of “Credit
Administration Supervisors” (CAS) for each branch. The primary duty of the CAS is to strictly
monitor each of these deadlines, to supervise the credit and collection of payments and
outstanding accounts due to the petitioner from its independent dealers and various customers,
and to screen prospective IBMs. To discharge these responsibilities, the CAS is provided with a
computer equipped with control systems through which data is readily generated. Under this
organizational setup, the CAS is under the direct and immediate supervision of the Branch
Operations Manager (BOM).
Cynthia Rey at the time of her dismissal from employment, held the position of Credit
Administration Supervisor or CAS at the Cagayan de Oro City branch of the petitioner. She was
first employed by the petitioner as an Accounts Receivable Clerk at its Caloocan City branch. In
November 1993, respondent was transferred to the Cagayan de Oro City branch retaining the
same position. In January 1994, respondent was elevated to the position of CAS. At that time,
the Branch Operations Manager or BOM of the Cagayan de Oro City branch was a certain Mr.
Jeremiah Villagracia. In March 1995, respondent was temporarily assigned to the Butuan City
branch.
Sometime in June 1995, while respondent was still working in Butuan City, she allegedly
instructed the Accounts Receivable Clerk of the Cagayan de Oro outlet to change the credit term
of one of the IBMs of the petitioner who happens to be respondent’s sister-in-law, from the 52-day
limit to an “unauthorized” term of 60 days. The respondent made the instruction just before the
computer data for the computation of the Service Fee accruing to Ms. Rey-Petilla was about to be
generated. Ms. Mendoza then reported this allegedly unauthorized act of respondent to her
Branch Operations Manager, Mr. Villagracia. Acting on the report, as the petitioner alleges, BOM
Villagracia discreetly verified the records and discovered that it was not only the 52-day credit
term of IBM Rey-Petilla that had been extended by the respondent, but there were several other
IBMs whose credit terms had been similarly extended beyond the periods allowed by company
policy. BOM Villagracia then summoned the respondent and required her to explain the
unauthorized credit extensions.
Respondent received a favorable decision from the Labor Arbiter granting her payment of 13th
month pay and other monetary benefits.
Issue:
Whether or not respondent is entitled to 13th month pay.
SC Ruling:
The award of 13th month pay must be deleted. Respondent is not a rank-and-file employee and
is, therefore, not entitled to thirteenth-month pay. However, the NLRC and the CA are correct in
refusing to award 14th and 15th month pay as well as the “monthly salary increase of 10 percent
per year for two years based on her latest salary rate.” The respondent must show that these
benefits are due to her as a matter of right. Mere allegations by the respondent do not suffice in
the absence of proof supporting the same. With respect to salary increases in particular, the
respondent must likewise show that she has a vested right to the same, such that her salary
increases can be made a component in the computation of backwages. What is evident is that
salary increases are a mere expectancy. They are by nature volatile and dependent on
numerous variables, including the company’s fiscal situation, the employee’s future performance
on the job, or the employee’s continued stay in a position. In short, absent any proof, there is no
vested right to salary increases.

Equitable Banking Corporation vs. Ricardo Sadac

[G.R. No. 164772. June 8, 2006.]
Facts:
Respondent Sadac was appointed Vice President of the Legal Department of petitioner Bank
effective 1 August 1981, and subsequently General Counsel thereof on 8 December 1981. On 26
June 1989, nine lawyers of petitioner Bank's Legal Department, in a letter-petition to the
Chairman of the Board of Directors, accused respondent Sadac of abusive conduct, inter alia,
and ultimately, petitioned for a change in leadership of the department. On the ground of lack of
confidence in respondent Sadac, under the rules of client and lawyer relationship, petitioner Bank
instructed respondent Sadac to deliver all materials in his custody in all cases in which the latter
was appearing as its counsel of record. In reaction thereto, respondent Sadac requested for a full
hearing and formal investigation but the same remained unheeded. On 9 November 1989,
respondent Sadac filed a complaint for illegal dismissal with damages against petitioner Bank and
individual members of the Board of Directors thereof. After learning of the filing of the complaint,
petitioner Bank terminated the services of respondent Sadac. Finally, on 10 August 1989,
respondent Sadac was removed from his office and ordered disentitled to any compensation and
other benefits.
Issue:
Whether or not general salary increases should be included in the base figure to be used in the
computation of backwages.
SC Ruling:
Backwages in general are granted on grounds of equity for earnings which a worker or employee
has lost due to his illegal dismissal. It is not private compensation or damages but is awarded in
furtherance and effectuation of the public objective of the Labor Code. Nor is it a redress of a
private right but rather in the nature of a command to the employer to make public reparation for
dismissing an employee either due to the former's unlawful act or bad faith.
The Supreme Court had consistently held that payment of full backwages is the price or penalty
that the employer must pay for having illegally dismissed an employee. Thus, the Supreme Court
no longer regarded equity as a basis when dealing with illegal dismissal cases because it is not
equity at play in illegal dismissals but rather, it is employer's obligation to pay full back wages.
The backwages to be awarded to an illegally dismissed employee, should not, as a general rule,
be diminished or reduced by the earnings derived from him during the period of his illegal
dismissal. 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. The same
holds true in case of retrenched employees.
Attention must be called to Article 279 of the Labor Code of the Philippines, as amended by
Section 34 of Rep. Act No. 6715. The law provides as follows: ART. 279. Security of Tenure. —
In cases of regular employment, the employer shall not terminate the services of an employee
except for a just cause or when authorized by this Title. An employee who is unjustly dismissed
from work shall be entitled to reinstatement without loss of seniority rights and other privileges
and to his full backwages, inclusive of allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was withheld from him up to the time of his
actual reinstatement.
Article 279 mandates that an employee's full backwages shall be inclusive of allowances and
other benefits or their monetary equivalent. Contrary to the ruling of the Court of Appeals, we do
not see that a salary increase can be interpreted as either an allowance or a benefit. Salary
increases are not akin to allowances or benefits, and cannot be confused with either. The term
"allowances" is sometimes used synonymously with "emoluments," as indirect or contingent
remuneration, which may or may not be earned, but which is sometimes in the nature of
compensation, and sometimes in the nature of reimbursement. Allowances and benefits are
granted to the employee apart or separate from, and in addition to the wage or salary. In contrast,
salary increases are amounts which are added to the employee's salary as an increment thereto
for varied reasons deemed appropriate by the employer. Salary increases are not separate grants
by themselves but once granted, they are deemed part of the employee's salary. To extend the
coverage of an allowance or a benefit to include salary increases would be to strain both the
imagination of the Court and the language of law. Indeed, if the intent were to include salary
increases as basis in the computation of backwages, the same should have been explicitly stated
in the same manner that the law used clear and unambiguous terms in expressly providing for the
inclusion of allowances and other benefits.
The weight of authority leans in petitioner Bank's favor and against respondent Sadac's claim for
the inclusion of general increases in the computation of his backwages. We stressed in
Paramount that an unqualified award of backwages means that the employee is paid at the wage
rate at the time of his dismissal. And the Court has declared that the base figure to be used in the
computation of backwages due to the employee should include not just the basic salary, but also
the regular allowances that he had been receiving, such as the emergency living allowances and
the 13th month pay mandated under the law. Furthermore, the award of salary differentials is not
allowed, the established rule being that upon reinstatement, illegally dismissed employees are to
be paid their backwages without deduction and qualification. "The term 'backwages without
qualification and deduction' means that the workers are to be paid their backwages fixed as of the
time of the dismissal or strike without deduction for their earnings elsewhere during their layoff
and without qualification of their wages as thus fixed; i.e., unqualified by any wage increases or
other benefits that may have been received by their co-workers who are not dismissed or did not
go on strike. Awards including salary differentials are not allowed. The salary base properly used
should, however, include not only the basic salary but also the emergency cost of living
allowances and also transportation allowances if the workers are entitled thereto.
Moreover, there is no vested right to salary increases. That respondent Sadac may have received
salary increases in the past only proves fact of receipt but does not establish a degree of
assuredness that is inherent in backwages. From the foregoing, the plain conclusion is that
respondent Sadac's computation of his full backwages which includes his prospective salary
increases cannot be permitted.
Hence, the petition is partially granted in the sense that in the computation of the backwages,
respondent Sadac's claimed prospective salary increases, check-up benefit, clothing allowance,
and cash conversion of vacation leaves are excluded.

IX. CONDITIONS OF EMPLOYMENT

San Juan de Dios Hospital Employees Association-AFW vs. NLRC

[282 SCRA 316 (1997)]
Facts:
Petitioners, the rank-and-file employee-union officers and members of San Juan De Dios Hospital
Employees Association sent a four (4)-page letter with attached support signatures requesting
and pleading for the expeditious implementation and payment by respondent Juan De Dios
Hospital of the 40 HOURS/5-DAY WORKWEEK with compensable weekly two (2) days off
provided for by Republic Act 5901 as clarified for enforcement by the Secretary of Labor’s Policy
Instructions No. 54 dated April 12, 1988.”
Respondent hospital failed to give a favorable response; thus, petitioners filed a complaint
regarding their claims for statutory benefits under the above-cited law and policy issuance. On
February 26, 1992, the Labor Arbiter dismissed the complaint. Petitioners appealed before public
respondent National Labor Relations Commission which affirmed the Labor Arbiter’s decision.
Issue:
Whether Policy Instructions No. 54 issued by then Labor Secretary (now Senator) Franklin M.
Drilon is valid or not.
SC Ruling:
The policy instruction is not valid. This issuance clarifies the enforcement policy of this
Department on the working hours and compensation of personnel employed by hospital/clinics
with a bed capacity of 100 or more and those located in cities and municipalities with a population
of one million or more.
Reliance on Republic Act No. 5901, however, is misplaced for the said statute, as correctly ruled
by respondent NLRC, and has long been repealed with the passage of the Labor Code on May 1,
1974. Article 302 of which explicitly provide: “All labor laws not adopted as part of this Code
either directly or by reference are hereby repealed. All provisions of existing laws, orders,
decrees, rules and regulations inconsistent herewith are likewise repealed.” Accordingly, only
Article 83 of the Labor Code which appears to have substantially incorporated or reproduced the
basic provisions of Republic Act No. 5901 may support Policy Instructions No. 54 on which the
latter’s validity may be gauged. Article 83 of the Labor Code states: Normal Hours of Work. --
The normal hours of work of any employee shall not exceed eight (8) hours a day.
“Health personnel in cities and municipalities with a population of at least one million (1,000,000)
or in hospitals and clinics with a bed capacity of at least one hundred (100) shall hold regular
office hours for eight (8) hours a day, for five (5) days a week, exclusive of time for meals, except
where the exigencies of the service require that such personnel work for six (6) days or forty-eight
(48) hours, in which case they shall be entitled to an additional compensation of at least thirty per
cent (30%) of their regular wage for work on the sixth day. For purposes of this Article, “health
personnel” shall include: resident physicians, nurses, nutritionists, dietitians, pharmacists, social
workers, laboratory technicians, paramedical technicians, psychologists, midwives, attendants
and all other hospital or clinic personnel.”
A cursory reading of Article 83 of the Labor Code betrays petitioners’ position that “hospital
employees” are entitled to “a full weekly salary with paid two (2) days’ off if they have completed
the 40-hour/5-day workweek”. What Article 83 merely provides are: (1) the regular office hour of
eight hours a day, five days per week for health personnel, and (2) where the exigencies of
service require that health personnel work for six days or forty-eight hours then such health
personnel shall be entitled to an additional compensation of at least thirty percent of their regular
wage for work on the sixth day. There is nothing in the law that supports then Secretary of
Labor’s assertion that “personnel in subject hospitals and clinics are entitled to a full weekly wage
for seven (7) days if they have completed the 40-hour/5-day workweek in any given workweek”.
Needless to say, the Secretary of Labor exceeded his authority by including a two days off with
pay in contravention of the clear mandate of the statute. Administrative interpretation of the law is
at best merely advisory, and the Court will not hesitate to strike down an administrative
interpretation that deviates from the provision of the statute.

Sime Darby Pilipinas, Inc. vs. NLRC

[289 SCRA 86 (1998)]
Facts:
Sime Darby Pilipinas, Inc., petitioner, is engaged in the manufacture of automotive tires, tubes
and other rubber products. Sime Darby Salaried Employees Association (ALU-TUCP), private
respondent, is an association of monthly salaried employees of petitioner at its Marikina factory.
Prior to the present controversy, all company factory workers in Marikina including members of
private respondent union worked from 7:45 a.m. to 3:45 p.m. with a 30 minute paid “on call” lunch
break.
On 14 August 1992 petitioner issued a memorandum to all factory-based employees advising all
its monthly salaried employees in its Marikina Tire Plant, except those in the Warehouse and
Quality Assurance Department working on shifts, a change in work schedule effective 14
September 1992 thus –
7:45 A.M. – 4:45 P.M. (Mon to Fri) 7:45 A.M. – 11:45 P.M. (Sat).
Coffee break time will be ten minutes only anytime between:
9:30 A.M. –10:30 A.M. and 2:30 P.M. –3:30 P.M.
Lunch break will be between: 12:00 NN –1:00 P.M. (Mon to Fri).
Excluded from the above schedule are the Warehouse and QA employees who are on shifting.
Their work and break time schedules will be maintained as it is now.
Since private respondent felt affected adversely by the change in the work schedule and
discontinuance of the 30-minute paid “on call” lunch break, it filed on behalf of its members a
complaint with the Labor Arbiter for unfair labor practice, discrimination and evasion of liability
pursuant to the resolution of this Court the Labor Arbiter dismissed the complaint on the ground
that the change in the work schedule and the elimination of the 30-minute paid lunch break of the
factory workers constituted a valid exercise of management prerogative and that the new work
schedule, break time and one-hour lunch break did not have the effect of diminishing the benefits
granted to factory workers as the working time did not exceed eight (8) hours.
Issue:
Whether or not the act of management in revising the work schedule of its employees and
discarding their paid lunch break constitutive of unfair labor practice?
SC Ruling:
The Court ruled that the revision of work schedule is a management prerogative and does not
amount to unfair labor practice in discarding the paid lunch break.
The right to fix the work schedules of the employees rests principally on their employer. In the
instant case petitioner, as the employer, cites as reason for the adjustment the efficient conduct
of its business operations and its improved production.
It rationalizes that while the old work schedule included a 30-minute paid lunch break, the
employees could be called upon to do jobs during that period as they were “on call.” Even if
denominated as lunch break, this period could very well be considered as working time because
the factory employees were required to work if necessary and were paid accordingly for working.
With the new work schedule, the employees are now given a one-hour lunch break without any
interruption from their employer. For a full one-hour undisturbed lunch break, the employees can
freely and effectively use this hour not only for eating but also for their rest and comfort which are
conducive to more efficiency and better performance in their work.
Since the employees are no longer required to work during this one-hour lunch break, there is no
more need for them to be compensated for this period. The Court agrees with the Labor Arbiter
that the new work schedule fully complies with the daily work period of eight (8) hours without
violating the Labor Code. Besides, the new schedule applies to all employees in the factory
similarly situated whether they are union members or not.

Philippine Airlines, Inc., vs. NLRC

[302 SCRA 582 (1999)]
Facts:
Private respondent was employed as flight surgeon at petitioner company. He was assigned at
the PAL Medical Clinic at Nichols and was on duty from 4:00 in the afternoon until 12:00 midnight.
On February 17, 1994, at around 7:00 in the evening, private respondent left the clinic to have his
dinner at his residence, which was about five-minute drive away. A few minutes later, the clinic
received an emergency call from the PAL Cargo Services.
One of its employees, Mr. Manuel Acosta, had suffered a heart attack. The nurse on duty, Mr.
Merlino Eusebio, called private respondent at home to inform him of the emergency. The patient
arrived at the clinic at 7:50 in the evening and Mr. Eusebio immediately rushed him to the
hospital.
When private respondent reached the clinic at around 7:51 in the evening, Mr. Eusebio had
already left with the patient. Mr. Acosta died the following day. Upon learning about the incident,
PAL Medical Director Dr. Godofredo B. Banzon ordered the Chief Flight Surgeon to conduct an
investigation. The Chief Flight Surgeon required private respondent to explain why no
disciplinary sanction should be taken against him.
In his explanation, private respondent asserted that he was entitled to a thirty-minute meal break;
that he immediately left his residence upon being informed by Mr. Eusebio about the emergency
and he arrived at the clinic a few minutes later; that Mr. Eusebio panicked and brought the patient
to the hospital without waiting for him.
Finding private respondent’s explanation unacceptable, the management charged private
respondent with abandonment of post while on duty. He was given ten days to submit a written
answer to the administrative charge.
In his answer, private respondent reiterated the assertions in his previous explanation. He further
denied that he abandoned his post on February 17, 1994. He said that he only left the clinic to
have his dinner at home.
In fact, he returned to the clinic at 7:51 in the evening upon being informed of the emergency.
After evaluating the charge as well as the answer of private respondent, petitioner company
decided to suspend private respondent for three months effective December 16, 1994.
Issue:
Whether or not being a full-time employee is obliged to stay in the company premises for not less
than eight (8) hours. Hence, he may not leave the company premises during such time, even to
take his meals.
SC Ruling:
The Court does not agree with the petitioner. Articles 83 and 85 of the Labor Code read: Normal
hours of work—The normal hours of work of any employee shall not exceed eight (8) hours a day.
Health personnel in cities and municipalities with a population of at least one million (1,000,000)
or in hospitals and clinics with a bed capacity of at least one hundred (100) shall hold regular
office hours for eight (8) hours a day, for five (5) days a week, exclusive of time for meals,
except where the exigencies of the service require that such personnel work for six (6) days or
forty-eight (48) hours, in which case they shall be entitled to an additional compensation of at
least thirty per cent (30%) of their regular wage for work on the sixth day. For purposes of this
Article, “health personnel” shall include: resident physicians, nurses, nutritionists, dieticians,
pharmacists, social workers, laboratory technicians, paramedical technicians, psychologists,
midwives, attendants and all other hospital or clinic personnel.
Art. 85. Meal periods.—Subject to such regulations as the Secretary of Labor may prescribe, it
shall be the duty of every employer to give his employees not less than sixty (60) minutes time-off
for their regular meals.
Section 7, Rule I, Book III of the Omnibus Rules Implementing the Labor Code further states:
Sec. 7. Meal and Rest Periods.—Every employer shall give his employees, regardless of sex,
not less than one (1) hour time-off for regular meals, except in the following cases when a meal
period of not less than twenty (20) minutes may be given by the employer provided that such
shorter meal period is credited as compensable hours worked of the employee;
(a) Where the work is non-manual work in nature or does not involve strenuous physical exertion;
(b) Where the establishment regularly operates not less than sixteen hours a day;

(c) In cases of actual or impending emergencies or there is urgent work to be performed on

machineries, equipment or installations to avoid serious loss which the employer would otherwise
suffer; and
(d) Where the work is necessary to prevent serious loss of perishable goods.
Rest periods or coffee breaks running from five (5) to twenty (20) minutes shall be considered as
compensable working time.
Thus, the eight-hour work period does not include the meal break. Nowhere in the law may it be
inferred that employees must take their meals within the company premises. Employees are not
prohibited from going out of the premises as long as they return to their posts on time. Private
respondent’s act of going home to take his dinner does not constitute abandonment.

Linton Commercial Co., vs. Alex A. Hellera et al.

[G.R. No. 163147. October 10, 2007.]
Facts:
Linton is a domestic corporation engaged in the business of importation, wholesale, retail and
fabrication of steel and its by-products. Petitioner Desiree Ong is Linton's vice president. On 17
December 1997, Linton issued a memorandum addressed to its employees informing them of the
company's decision to suspend its operations from 18 December 1997 to 5 January 1998 due to
the currency crisis that affected its business operations. Linton submitted an establishment
termination report to the Department of Labor and Employment (DOLE) regarding the temporary
closure of the establishment covering the said period. The company's operation was to resume
on 6 January 1998. On 7 January 1997, Linton issued another memorandum informing them that
effective 12 January 1998, it would implement a new compressed workweek of three (3) days on
a rotation basis. In other words, each worker would be working on a rotation basis for three
working days only instead for six days a week. On the same day, Linton submitted an
establishment termination report concerning the rotation of its workers. Linton proceeded with the
implementation of the new policy without waiting for its approval by DOLE. Aggrieved, sixty-eight
(68) workers (workers) filed a Complaint for illegal reduction of workdays.
Issue:
Whether or not there was an illegal reduction of work when Linton implemented a compressed
workweek by reducing from six to three the number of working days with the employees working
on a rotation basis.
SC Ruling:
The Bureau of Working Conditions of the DOLE, moreover, released a bulletin providing for in
determining when an employer can validly reduce the regular number of working days. The said
bulletin states that a reduction of the number of regular working days is valid where the
arrangement is resorted to by the employer to prevent serious losses due to causes beyond his
control, such as when there is a substantial slump in the demand for his goods or services or
when there is lack of raw materials. Although the bulletin stands more as a set of directory
guidelines than a binding set of implementing rules, it has one main consideration, consistent with
the ruling in Philippine Graphic Arts Inc., in determining the validity of reduction of working hours
— that the company was suffering from losses.
Petitioners attempt to justify their action by alleging that the company was suffering from financial
losses owing to the Asian currency crisis. Was petitioners' claim of financial losses supported by
evidence? A close examination of petitioners' financial reports for 1997-1998 shows that, while
the company suffered a loss of P3,645,422.00 in 1997, it retained a considerable amount of
earnings and operating income. Clearly then, while Linton suffered from losses for that year, there
remained enough earnings to sufficiently sustain its operations. In business, sustained operations
in the black is the ideal but being in the red is a cruel reality. However, a year of financial losses
would not warrant the immolation of the welfare of the employees, which in this case was done
through a reduced workweek that resulted in an unsettling diminution of the periodic pay for a
protracted period. Permitting reduction of work and pay at the slightest indication of losses would
be contrary to the State's policy to afford protection to labor and provide full employment.
Certainly, management has the prerogative to come up with measures to ensure profitability or
loss minimization. However, such privilege is not absolute. Management prerogative must be
exercised in good faith and with due regard to the rights of labor. As previously stated, financial
losses must be shown before a company can validly opt to reduce the work hours of its
employees. However, to date, no definite guidelines have yet been set to determine whether the
alleged losses are sufficient to justify the reduction of work hours. If the standards set in
determining the justifiability of financial losses under Article 283 (i.e., retrenchment) or Article 286
(i.e., suspension of work) of the Labor Code were to be considered, petitioners would end up
failing to meet the standards. On the one hand, Article 286 applies only when there is a bona fide
suspension of the employer's operation of a business or undertaking for a period not exceeding
six (6) months. Records show that Linton continued its business operations during the effectivity
of the compressed workweek, which spanned more than the maximum period. On the other hand,
for retrenchment to be justified, any claim of actual or potential business losses must satisfy the
following standards: (1) the losses incurred are substantial and not de minimis; (2) the losses are
actual or reasonably imminent; (3) the retrenchment is reasonably necessary and is likely to be
effective in preventing the expected losses; and (4) the alleged losses, if already incurred, or the
expected imminent losses sought to be forestalled, are proven by sufficient and convincing
evidence. Linton failed to comply with these standards.
All taken into account, the compressed workweek arrangement was unjustified and illegal. Thus,
petitioners committed illegal reduction of work hours. Petitioners are ordered to pay respondents,
except the aforementioned 21 workers who executed waivers and quitclaims, the monetary award
as computed, pursuant to the decision of the Labor Arbiter with interest at the rate of 6% per
annum from 12 December 2003, the date of promulgation of the Court of Appeals' decision, until
the finality of this decision, and thereafter at the rate of 12% per annum until full payment.

BISIG MANGGAGAWA SA TRYCO vs NLRC

GR 151309 October 15, 2008

X. MINIMUM LABOR STANDARD BENEFITS

Union of Filipro Employees (UFE) vs. Benigno Vivar

[205 SCRA 203 (1992)]
Facts:
On November 8, 1985, respondent Filipro, Inc. (now Nestle Philippines, Inc.) filed with the
National Labor Relations Commission a petition for declaratory relief seeking a ruling on its rights
and obligations respecting claims of its monthly paid employees for holiday pay.
Both Filipro and the Union of Filipro Employees (UFE) agreed to submit the case for voluntary
arbitration and appointed respondent Benigno Vivar, Jr. as voluntary arbitrator. Arbitrator Vivar
rendered a decision directing Filipro to pay its monthly paid employees holiday pay pursuant to
Article 94 of the Code, subject only to the exclusions and limitations specified in Article 82 and
such other legal restrictions as are provided for in the Code.
However,the respondent arbitrator refused to take cognizance of the case reasoning that he had
no more jurisdiction to continue as arbitrator because he had resigned from service effective May
1, 1986.
Issue:
Whether or not sales personnel are excluded in the payment of holiday pay.
SC Ruling:
The Court ruled that field personnel are not entitled to such pay. Under Article 82, field personnel
are not entitled to holiday pay. Said article defines field personnel as "non-agricultural employees
who regularly perform their duties away from the principal place of business or branch office of
the employer and whose actual hours of work in the field cannot be determined with reasonable
certainty."
The controversy centers on the interpretation of the clause "whose actual hours of work in the
field cannot be determined with reasonable certainty." It is undisputed that these sales personnel
start their field work at 8:00 a.m. after having reported to the office and come back to the office at
4:00 p.m. or 4:30 p.m. if they are Makati-based.
The petitioner maintains that the period between 8:00 a.m. to 4:00 or 4:30 p.m. comprises the
sales personnel's working hours which can be determined with reasonable certainty.
The Court does not agree. The law requires that the actual hours of work in the field be
reasonably ascertained. The company has no way of determining whether or not these sales
personnel, even if they report to the office before 8:00 a.m. prior to field work and come back at
4:30 p.m., really spend the hours in between in actual field work.
The Court concurs with the arbitrator when it disposed that the requirement for the salesmen and
other similarly situated employees to report for work at the office at 8:00 a.m. and return at 4:00
or 4:30 p.m. is not within the realm of work in the field as defined in the Code but an exercise of
purely management prerogative of providing administrative control over such personnel. This
does not in any manner provide a reasonable level of determination on the actual field work of the
employees which can be reasonably ascertained. Actual field work begins after 8:00 a.m. when
the sales personnel follow their field itinerary, and ends immediately before 4:00 or 4:30 p.m.
when they report back to their office. The period between 8:00 a.m. and 4:00 or 4:30 p.m.
comprises their hours of work in the field, the extent or scope and result of which are subject to
their individual capacity and industry and which 'cannot be determined with reasonable certainty.'
This is the reason why effective supervision over field work of salesmen and medical
representatives, truck drivers and merchandisers is practically a physical impossibility.
Consequently, they are excluded from the ten holidays with pay.
Moreover, the requirement that "actual hours of work in the field cannot be determined with
reasonable certainty" must be read in conjunction with Rule IV, Book III of the Implementing
Rules which provides:
"Rule IV Holidays with Pay. SECTION 1.Coverage. — This rule shall apply to all employees
except: (e) Field personnel and other employees whose time and performance is unsupervised by
the employer
The Court finds that the rule did not add another element to the Labor Code definition of field
personnel. The clause "whose time and performance is unsupervised by the employer" did not
amplify but merely interpreted and expounded the clause "whose actual hours of work in the field
cannot be determined with reasonable certainty." The former clause is still within the scope and
purview of Article 82 which defines field personnel. Hence, in deciding whether or not an
employee's actual working hours in the field can be determined with reasonable certainty, query
must be made as to whether or not such employee's time and performance is constantly
supervised by the employer.
The petitioner claims that the fact that these sales personnel are given incentive bonus every
quarter based on their performance is proof that their actual hours of work in the field can be
determined with reasonable certainty. The Court thinks otherwise.
The criteria for granting incentive bonus are:
(1) attaining or exceeding sales volume based on sales target;
(2) good collection performance;
(3) proper compliance with good market hygiene;
(4) good merchandising work;
(5) minimal market returns and
(6) proper truck maintenance.
The above criteria indicate that these sales personnel are given incentive bonuses precisely
because of the difficulty in measuring their actual hours of field work. These employees are
evaluated by the result of their work and not by the actual hours of field work which are hardly
susceptible to determination.
In San Miguel Brewery, Inc. v. Democratic Labor Organization, the Court had occasion to discuss
the nature of the job of a salesman. It states that :
"The reasons for excluding an outside salesman are fairly apparent. Such a salesman, to a
greater extent, works individually. There are no restrictions respecting the time he shall work and
he can earn as much or as little, within the range of his ability, as his ambition dictates. In lieu of
overtime he ordinarily receives commissions as extra compensation. He works away from his
employer's place of business, is not subject to the personal supervision of his employer, and his
employer has no way of knowing the number of hours he works per day."

National Sugar Refineries Corporation vs. NLRC

[220 SCRA 452 (1993)]
Facts:
Petitioner National Sugar Refineries Corporation (NASUREFCO), a corporation which is fully
owned and controlled by the Government, operates three (3) sugar refineries located at
Bukidnon, Iloilo and Batangas. The Batangas refinery was privatized on April 11, 1992 pursuant
to Proclamation No. 50.
Private respondent union represents the former supervisors of the NASUREFCO Batangas Sugar
Refinery, namely, the Technical Assistant to the Refinery Operations Manager, Shift Sugar
Warehouse Supervisor, Senior Financial/Budget Analyst, General Accountant, Cost Accountant,
Sugar Accountant, Junior Financial/Budget Analyst, Shift Boiler Supervisor,, Shift Operations
Chemist, Shift Electrical Supervisor, General Services Supervisor, Instrumentation Supervisor,
Community Development Officer, Employment and Training Supervisor, Assistant Safety and
Security Officer, Head and Personnel Services, Head Nurse, Property Warehouse Supervisor,
Head of Inventory Control Section, Shift Process Supervisor, Day Maintenance Supervisor and
Motorpool Supervisor.
On June 1, 1988, petitioner implemented a Job Evaluation (JE) Program affecting all employees,
from rank-and-file to department heads which was designed to rationalized the duties and
functions of all positions, reestablish levels of responsibility, and recognize both wage and
operational structures. Jobs were ranked according to effort, responsibility, training and working
conditions and relative worth of the job. As a result, all positions were re-evaluated, and all
employees including the members of respondent union were granted salary adjustments and
increases in benefits commensurate to their actual duties and functions.
The Courts glean from the records that for about ten years prior to the JE Program, the members
of respondent union were treated in the same manner as rank-and file employees. As such, they
used to be paid overtime, rest day and holiday pay pursuant to the provisions of Articles 87, 93
and 94 of the Labor Code as amended. On May 11, 1990, petitioner NASUREFCO recognized
herein respondent union, which was organized pursuant to Republic Act NO. 6715 allowing
supervisory employees to form their own unions, as the bargaining representative of all the
supervisory employees at the NASUREFCO Batangas Sugar Refinery. Two years after the
implementation of the JE Program, specifically on June 20, 1990, the members of herein
respondent union filed a complainant with the executive labor arbiter for non-payment of
overtime, rest day and holiday pay allegedly in violation of Article 100 of the Labor Code.
Issue:
Whether or not the members of respondent union are entitled to overtime, rest day and holiday
pay.
SC Ruling:
The members of the union are not entitled to overtime, rest and holiday pay since they fall within
the classification of managerial employees which makes them a part of the exempted employees.
It must of necessity be ascertained first whether or not the union members, as supervisory
employees, are to be considered as officers or members of the managerial staff who are exempt
from the coverage of Article 82 of the Labor Code.
It is not disputed that the members of respondent union are supervisory employees, as defined
employees, as defined under Article 212(m), Book V of the Labor Code on Labor Relations, which
reads: “'Managerial employee' is one who is vested with powers or prerogatives to lay down and
execute management policies and/or to hire, transfer, suspend, lay-off, recall, discharged, assign
or discipline employees. Supervisory employees are those who, in the interest of the employer
effectively recommend such managerial actions if the exercise of such authority is not merely
routinary or clerical in nature but requires the use of independent judgment. All employees not
falling within any of those above definitions are considered rank-and-file employees of this Book."
Article 82 of the Labor Code states: “The provisions of this title shall apply to employees in all
establishments and undertakings whether for profit or not, but not to government employees,
managerial employees, field personnel, members of the family of the employer who are
dependent on him for support, domestic helpers, persons in the personal service of another, and
workers who are paid by results as determined by the Secretary of Labor in Appropriate
regulations.”
As used herein, 'managerial employees' refer to those whose primary duty consists of the
management of the establishment in which they are employed or of a department or subdivision
thereof, and to other officers or members of the managerial staff.
'Sec. 2. Exemption. — The provisions of this rule shall not apply to the following persons if they
qualify for exemption under the condition set forth herein:
(b) Managerial employees, if they meet all of the following conditions, namely:
(1) Their primary duty consists of the management of the establishment in which they are
employed or of a department or subdivision thereof:
(2) They customarily and regularly direct the work of two or more employees therein:
(3) They have the authority to hire or fire other employees of lower rank; or their suggestions
and recommendations as to the hiring and firing and as to the promotion or any other change of
status of other employees are given particular weight.
(c) Officers or members of a managerial staff if they perform the following duties and
responsibilities:
(1) The primary duty consists of the performance of work directly related to management
policies of their employer;
(2) Customarily and regularly exercise discretion and independent judgment;
(3) (i) Regularly and directly assist a proprietor or a managerial employee whose primary
duty consists of the management of the establishment in which he is employed or subdivision
thereof; or
(ii) execute under general supervision work along specialized or technical lines requiring special
training, experience, or knowledge; or
(iii) execute under general supervision special assignments and tasks;
(4) Who do not devote more 20 percent of their hours worked in a work-week to activities
which are not directly and closely related to the performance of the work described in paragraphs
(1), (2), and above."
They are clearly officers or members of the managerial staff because they meet all the conditions
prescribed by law and, hence, they are not entitled to overtime, rest day and supervisory
employees under Article 212 (m) should be made to apply only to the provisions on Labor
Relations, while the right of said employees to the questioned benefits should be considered in
the light of the meaning of a managerial employee and of the officers or members of the
managerial staff, as contemplated under Article 82 of the Code and Section 2, Rule I Book III of
the implementing rules.
In other words, for purposes of forming and joining unions, certification elections, collective
bargaining, and so forth, the union members are supervisory employees. In terms of working
conditions and rest periods and entitlement to the questioned benefits, however, they are officers
or members of the managerial staff, hence they are not entitled thereto.
The union members will readily show that these supervisory employees are under the direct
supervision of their respective department superintendents and that generally they assist the
latter in planning, organizing, staffing, directing, controlling communicating and in making
decisions in attaining the company's set goals and objectives. These supervisory employees are
likewise responsible for the effective and efficient operation of their respective departments.
More specifically, their duties and functions include, among others, the following operations
whereby the employee:
1) assists the department superintendent in the following:
a) planning of systems and procedures relative to department activities;
b) organizing and scheduling of work activities of the department, which
includes employee shifting scheduled and manning complement;
c) decision making by providing relevant information data and other inputs;
d) attaining the company's set goals and objectives by giving his full support;
e) selecting the appropriate man to handle the job in the department; and
f) preparing annual departmental budget;
2) observes, follows and implements company policies at all times and recommends disciplinary
action on erring subordinates;
3) trains and guides subordinates on how to assume responsibilities and become more
productive;
4) conducts semi-annual performance evaluation of his subordinates and recommends necessary
action for their development/advancement;
5) represents the superintendent or the department when appointed and authorized by the
former;
6) coordinates and communicates with other inter and intra department supervisors when
necessary;
7) recommends disciplinary actions/promotions;
8) recommends measures to improve work methods, equipment performance, quality of service
and working conditions;
9) sees to it that safety rules and regulations and procedure and are implemented and followed
by all NASUREFCO employees, recommends revisions or modifications to said rules when
deemed necessary, and initiates and prepares reports for any observed abnormality within the
refinery;
10) supervises the activities of all personnel under him and goes to it that instructions to
subordinates are properly implemented; and
11) performs other related tasks as may be assigned by his immediate superior.
From the foregoing, it is apparent that the members of respondent union discharge duties and
responsibilities which ineluctably qualify them as officers or members of the managerial staff, as
defined in Section 2, Rule I Book III of the aforestated Rules to Implement the Labor Code, viz.:
(1) their primary duty consists of the performance of work directly related to management policies
of their employer;
(2) they customarily and regularly exercise discretion and independent judgment;
(3) they regularly and directly assist the managerial employee whose primary duty consist of the
management of a department of the establishment in which they are employed
(4) they execute, under general supervision, work along specialized or technical lines requiring
special training, experience, or knowledge;
(5) they execute, under general supervision, special assignments and tasks; and
(6) they do not devote more than 20% of their hours worked in a work-week to activities which are
not directly and clearly related to the performance of their work hereinbefore described.
Under the facts obtaining in this case, The Court is constrained to agree with petitioner that the
union members should be considered as officers and members of the managerial staff and are,
therefore, exempt from the coverage of Article 82. Perforce, they are not entitled to overtime, rest
day and holiday.

Engr. Leonicio Salazar vs. nlrc

[256 SCRA 273 (1996).]
Facts:
On April 1990, private respondent employed petitioner as construction/project engineer for the
construction of the Monte de Piedad building in Cubao, Quezon City. Allegedly, by virtue of an
oral contract, petitioner would also receive a share in the profits after completion of the project
and that petitioner's services in excess of eight (8) hours on regular days and services rendered
on weekends and legal holidays shall be compensable overtime at the rate of P27.85 per hour.
On 16 April 1991, petitioner received a memorandum issued by private respondent's project
manager, Engr. Nestor A. Delantar informing him of the termination of his services effective on 30
April 1991.
On 13 September 1991, petitioner filed a complaint against private respondent for illegal
dismissal, unfair labor practice, illegal deduction, non-payment of wages, overtime rendered,
service incentive leave pay, commission, allowances, profit-sharing and separation pay with the
NLRC-NCR Arbitration Branch, Manila.
Issue:
Whether or not petitioner is entitled to separation pay.
SC Ruling:
The petitioner is not entitled to separation pay. Petitioner admitted that his job was to supervise
the laborers in the construction project. Hence, although petitioner cannot strictly be classified as
a managerial employee under Art. 82 of the Labor Code, and sec. 2(b), Rule 1, Book III of the
Omnibus Rules Implementing the Labor Code, nonetheless he is still not entitled to payment of
the aforestated benefits because he falls squarely under another exempt category — "officers or
members of a managerial staff" as defined under sec. 2(c) of the abovementioned implementing
rules:
SECTION 2. Exemption. — The provisions of this Rule shall not apply to the following persons
if they qualify for exemption under the condition set forth herein:
(c) Officers or members of a managerial staff if they perform the following duties and
responsibilities:
(1) The primary duty consists of the performance of work directly related to management policies
of their employer;
(2) Customarily and regularly exercise discretion and independent judgment;
(3) [i] Regularly and directly assist a proprietor or a managerial employee whose primary duty
consists of the management of the establishment in which he is employed or subdivision thereof;
or
[ii] execute under general supervision work along specialized or technical lines requiring
special training, experience, or knowledge; or
[iii] execute under general supervision special assignments and tasks; and
(4) who do not devote more than 20 percent of their hours worked in a work-week to activities
which are not directly and closely related to the performance of the work described in paragraphs
(1), (2), and (3) above.
The petitioner was paid overtime benefits does not automatically and necessarily denote that
petitioner is entitled to such benefits. Art. 82 of the Labor Code specifically delineates who are
entitled to the overtime premiums and service incentive leave pay provided under Art. 87, 93, 94
and 95 of the Labor Code and the exemptions thereto.
As previously determined petitioner falls under the exemptions and therefore has no legal claim to
the said benefits. It is well and good that petitioner was compensated for his overtime services.
However, this does not translate into a right on the part of petitioner to demand additional
payment when, under the law, petitioner is clearly exempted there from.

Labor Congress of the Philippines vs. NLRC

[G.R. No. 1239381. May 21, 1998]
Facts:
The 99 persons named as petitioners in this proceeding were rank-and-file employees of
respondent Empire Food Products, which hired them on various dates. Petitioners filed against
private respondents a complaint for payment of money claims and for violation of labor standards
laws They also filed a petition for direct certification of petitioner Labor Congress of the
Philippines as their bargaining representative. In an Order dated October 24, 1990, Mediator
Arbiter approved the memorandum of agreement and certified LCP "as the sole and exclusive
bargaining agent among the rank-and-file employees of Empire Food Products for purposes of
collective bargaining with respect to wages, hours of work and other terms and conditions of
employment".
On November 1990, petitioners through LCP President Navarro submitted to private respondents
a proposal for collective bargaining. On January 1991, petitioners filed a complaint against
private respondents for Unfair Labor Practice by way of Illegal Lockout and/or Dismissal; Union
busting thru Harassments [sic], threats, and interfering with the rights of employees to self-
organization; Violation of the Memorandum of Agreement dated October 23, 1990;
Underpayment of Wages in violation of R.A. No. 6640 and R.A. No. 6727, such as Wages
promulgated by the Regional Wage Board; Actual, Moral and Exemplary Damages."
Issue:
Whether or not the petitioners are entitled to labor standard benefits considering they are paid by
piece rate worker.
SC Ruling:
The petitioners are so entitled to these benefits namely, holiday pay, premium pay, 13th month
pay and service incentive leave. Three (3) factors lead us to conclude that petitioners, although
piece-rate workers, were regular employees of private respondents. First, as to the nature of
petitioners' tasks were necessary or desirable in the usual business of private respondents, who
were engaged in the manufacture and selling of such food products; second, petitioners worked
for private respondents throughout the year, and third, the length of time that petitioners worked
for private respondents. Thus, while petitioners' mode of compensation was on a "per piece
basis," the status and nature of their employment was that of regular employees.
The Rules Implementing the Labor Code exclude certain employees from receiving benefits such
as nighttime pay, holiday pay, service incentive leave and 13th month pay, "field personnel and
other employees whose time and performance is unsupervised by the employer, including those
who are engaged on task or contract basis, purely commission basis, or those who are paid a
fixed amount for performing work irrespective of the time consumed in the performance thereof."
Plainly, petitioners as piece-rate workers do not fall within this group. As mentioned earlier, not
only did petitioners labor under the control of private respondents as their employer, likewise did
petitioners toil throughout the year with the fulfillment of their quota as supposed basis for
compensation.
Further, in Section 8(b), Rule IV, Book III which we quote hereunder, piece workers are
specifically mentioned as being entitled to holiday pay.
SEC. 8. Holiday pay of certain employees. —
(b) Where a covered employee is paid by results or output, such as payment on piece work, his
holiday pay shall not be less than his average daily earnings for the last seven (7) actual working
days preceding the regular holiday: Provided, however, that in no case shall the holiday pay be
less than the applicable statutory minimum wage rate.
In addition, the Revised Guidelines on the Implementation of the 13th Month Pay Law, in view of
the modifications to P.D. No. 851 19 by Memorandum Order No. 28, clearly exclude the employer
of piece rate workers from those exempted from paying 13th month pay, to wit:
2. EXEMPTED EMPLOYERS
The following employers are still not covered by P.D. No. 851:
d. Employers of those who are paid on purely commission, boundary or task basis, and
those who are paid a fixed amount for performing specific work, irrespective of the
time consumed in the performance thereof, except where the workers are paid on
piece-rate basis in which case the employer shall grant the required 13th month pay
to such workers.
The Revised Guidelines as well as the Rules and Regulations identify those workers who fall
under the piece-rate category as those who are paid a standard amount for every piece or unit of
work produced that is more or less regularly replicated, without regard to the time spent in
producing the same.
As to overtime pay, the rules, however, are different. According to Sec 2(e), Rule I, Book III of the
Implementing Rules, workers who are paid by results including those who are paid on piece-work,
takay, pakiao, or task basis, if their output rates are in accordance with the standards prescribed
under Sec. 8, Rule VII, Book III, of these regulations, or where such rates have been fixed by the
Secretary of Labor in accordance with the aforesaid section, are not entitled to receive overtime
pay. As such, petitioners are beyond the ambit of exempted persons and are therefore entitled to
overtime pay.

Mercidar Fishing Corporation vs. NLRC & Fermin Agao, Jr.

[G.R. No. 1112574. October 8, 1998.]
Facts:
This case originated from a complaint filed on September 20, 1990 by private respondent Fermin
Agao, Jr. against petitioner for illegal dismissal, violation of P.D. No. 851, and non-payment of five
days service incentive leave for 1990. Private respondent had been employed as a "bodegero" or
ship's quartermaster on February 12, 1988. He complained that he had been constructively
dismissed by petitioner when the latter refused him assignments aboard its boats after he had
reported to work on May 28, 1990.
Private respondent alleged that he had been sick and thus allowed to go on leave without pay for
one month from April 28, 1990 but that when he reported to work at the end of such period with a
health clearance, he was told to come back another time as he could not be reinstated
immediately. Thereafter, petitioner refused to give him work. For this reason, private respondent
asked for a certificate of employment from petitioner on September 6, 1990. However, when he
came back for the certificate on September 10, petitioner refused to issue the certificate unless
he submitted his resignation. Since private respondent refused to submit such letter unless he
was given separation pay, petitioner prevented him from entering the premises.
Petitioner, on the other hand, alleged that it was private respondent who actually abandoned his
work.
Issue:
Whether or not the fishing crew members are considered field personnel as classified in Art. 82 of
the Labor Code.
SC Ruling:
Art. 82 of the Labor Code provides: “The provisions of this title [Working Conditions and Rest
Periods] shall apply to employees in all establishments and undertakings whether for profit or not,
but not to government employees, field personnel, members of the family of the employer who
are dependent on him for support, domestic helpers, persons in the personal service of another,
and workers who are paid by results as determined by the Secretary of Labor in appropriate
regulations.”
"Field personnel" shall refer to non-agricultural employees who regularly perform their duties
away from the principal place of business or branch office of the employer and whose actual
hours of work in the field cannot be determined with reasonable certainty.
In contrast, in the case at bar, during the entire course of their fishing voyage, fishermen
employed by petitioner have no choice but to remain on board its vessel. Although they perform
non-agricultural work away from petitioner's business offices, the fact remains that throughout the
duration of their work they are under the effective control and supervision of petitioner through the
vessel's patron or master.

San Miguel Corporation vs. Court of Appeals

[G.R. No. 146775. January 30, 2002.]
Facts:
On 17 October 1992, the Department of Labor and Employment conducted a routine inspection in
the premises of San Miguel Corporation in Sta. Filomena, Iligan City. In the course of the
inspection, it was discovered that there was underpayment by SMC of regular Muslim holiday pay
to its employees. DOLE sent a copy of the inspection result to SMC and it was received by and
explained to its personnel officer Elena dela Puerta.
SMC contested the findings and DOLE conducted summary hearings on 19 November 1992, 28
May 1993 and 4 and 5 October 1993. Still, SMC failed to submit proof that it was paying regular
Muslim holiday pay to its employees. Hence, Director IV of DOLE Iligan District Office issued a
compliance order directing SMC to consider Muslim holidays as regular holidays and to pay both
its Muslim and non-Muslim employees holiday pay within thirty (30) days from the receipt of the
order. SMC appealed but it was dismissed.
Issue:
Whether or not the employees are entitled with regular Muslim holiday pay.
SC Ruling:
The employees are entitled to regular Muslim holiday pay. Muslim holidays are provided under
Articles 169 and 170, Title I, Book V, of Presidential Decree No. 1083, otherwise known as the
Code of Muslim Personal Laws, which states: Official Muslim holidays. — The following are
hereby recognized as legal Muslim holidays:
(a) 'Amun Jadîd (New Year), which falls on the first day of the first lunar month of Muharram;
(b) Maulid-un-Nabî (Birthday of the Prophet Muhammad), which falls on the twelfth day of the
third lunar month of Rabi-ul-Awwal,
(c) Lailatul Isrâ Wal Mi'râj (Nocturnal Journey and Ascension of the Prophet Muhammad), which
falls on the twenty-seventh day of the seventh lunar month of Rajab:
(d) 'Îd-ul-Fitr (Hari Raya Puasa), which falls on the first day of the tenth lunar month of Shawwal,
commemorating the end of the fasting season; and
(e) 'Îd-ul-Adhâ (Hari Raya Haji),which falls on the tenth day of the twelfth lunar month of Dhû'l-
Hijja.
Art. 170 provides the provinces and cities where officially observed. — (1) Muslim holidays shall
be officially observed in the Provinces of Basilan, Lanao del Norte, Lanao del Sur, Maguindanao,
North Cotabato, Iligan, Marawi, Pagadian, and Zamboanga and in such other Muslim provinces
and cities as may hereafter be created; (2) Upon proclamation by the President of the
Philippines, Muslim holidays may also be officially observed in other provinces and cities.
The foregoing provisions should be read in conjunction with Article 94 of the Labor Code, which
provides: Right to holiday pay. (a) Every worker shall be paid his regular daily wage during
regular holidays, except in retail and service establishments regularly employing less than ten
(10) workers; (b) The employer may require an employee to work on any holiday but such
employee shall be paid a compensation equivalent to twice his regular rate;
However, there should be no distinction between Muslims and non-Muslims as regards payment
of benefits for Muslim holidays. The Court reminds the respondent-appellant that wages and
other emoluments granted by law to the working man are determined on the basis of the criteria
laid down by laws and certainly not on the basis of the worker's faith or religion.
At any rate, Article 3(3) of Presidential Decree No. 1083 also declares that ". . . nothing herein
shall be construed to operate to the prejudice of a non-Muslim." In addition, the 1999 Handbook
on Workers' Statutory Benefits states considering that all private corporations, offices, agencies,
and entities or establishments operating within the designated Muslim provinces and cities are
required to observe Muslim holidays, both Muslim and Christians working within the Muslim areas
may not report for work on the days designated by law as Muslim holidays.

Rolando Tan vs. Leovigildo Lagarama & Court of Appeals

 [G.R. No. 151228. August 15, 2002.]
Facts:
Petitioner Rolando Tan is the president of Supreme Theater Corporation and the general
manager of Crown and Empire Theaters in Butuan City. Private respondent Leovigildo Lagrama
is a painter, making ad billboards and murals for the motion pictures shown at the Empress,
Supreme, and Crown Theaters for more than 10 years, from September 1, 1988 to October 17,
1998.
On October 17, 1998, private respondent Lagrama was summoned by Tan and upbraided:
"Nangihi na naman ka sulod sa imong drawinganan." ("You again urinated inside your work
area.") When Lagrama asked what Tan was saying, Tan told him, "Ayaw daghang estorya. Dili ko
gusto nga mo-drawing ka pa. Guikan karon, wala nay drawing. Gawas." ("Don't say anything
further. I don't want you to draw anymore. From now on, no more drawing. Get out.")
Lagrama denied the charge against him. He claimed that he was not the only one who entered
the drawing area and that, even if the charge was true, it was a minor infraction to warrant his
dismissal. However, everytime he spoke, Tan shouted "Gawas" ("Get out"), leaving him with no
other choice but to leave the premises. Lagrama filed a complaint with the National Labor
Relations Commission (NLRC) in Butuan City. He alleged that he had been illegally dismissed
and sought reinvestigation and payment of 13th month pay, service incentive leave pay, salary
differential, and damages.
As no amicable settlement had been reached, Labor Arbiter Rogelio P. Legaspi directed the
parties to file their position papers. It declared that the dismissal illegal and order the payment of
monetary benefits. Tan appealed to the NLRC and reversing the decision of the Labor Arbiter.
Issue:
Whether or not the respondent was illegally dismissed and thus entitled to payment of benefits
provided by law.
SC Ruling:
The respondent was illegally dismissed and entitled to benefits. The Implementing Rules of the
Labor Code provide that no worker shall be dismissed except for a just or authorized cause
provided by law and after due process. This provision has two aspects: (1) the legality of the act
of dismissal, that is, dismissal under the grounds provided for under Article 282 of the Labor Code
and (2) the legality in the manner of dismissal. The illegality of the act of dismissal constitutes
discharge without just cause, while illegality in the manner of dismissal is dismissal without due
process.
In this case, by his refusal to give Lagrama work to do and ordering Lagrama to get out of his
sight as the latter tried to explain his side, petitioner made it plain that Lagrama was dismissed.
Urinating in a work place other than the one designated for the purpose by the employer
constitutes violation of reasonable regulations intended to promote a healthy environment under
Art. 282(1) of the Labor Code for purposes of terminating employment, but the same must be
shown by evidence. Here there is no evidence that Lagrama did urinate in a place other than a
rest room in the premises of his work.
Instead of ordering his reinstatement as provided in Art. 279 of the Labor Code, the Labor Arbiter
found that the relationship between the employer and employee has been so strained that the
latter's reinstatement would no longer serve any purpose. The parties do not dispute this finding.
Hence, the grant of separation pay in lieu of reinstatement is appropriate.
This is of course in addition to the payment of backwages which, in accordance with the ruling in
Bustamante v. NLRC should be computed from the time of Lagrama's dismissal up to the time of
the finality of this decision, without any deduction or qualification.
The Bureau of Working Conditions 32 classifies workers paid by results into two groups, namely;
(1) those whose time and performance is supervised by the employer, and (2) those whose time
and performance is unsupervised by the employer. The first involves an element of control and
supervision over the manner the work is to be performed, while the second does not. If a piece
worker is supervised, there is an employer-employee relationship, as in this case. However, such
an employee is not entitled to service incentive leave pay since, as pointed out in Makati
Haberdashery v. NLRC 33 and Mark Roche International v. NLRC, 34 he is paid a fixed amount
for work done, regardless of the time he spent in accomplishing such work.
Avelino Lambo vs. National Labor Relations Commission
[317 SCRA 420.]
Facts:
Petitioners Avelino Lambo and Vicente Belocura were employed as tailors by private respondents
J.C. Tailor Shop and/or Johnny Co on September 10, 1985 and March 3, 1985, respectively.
They worked from 8:00 a.m. to 7:00 p.m. daily, including Sundays and holidays. As in the case of
the other 100 employees of private respondents, petitioners were paid on a piece-work basis,
according to the style of suits they made. Regardless of the number of pieces they finished in a
day, they were each given a daily pay of at least P64.00.
On January 17, 1989, petitioners filed a complaint against private respondents for illegal
dismissal and sought recovery of overtime pay, holiday pay, premium pay on holiday and rest
day, service incentive leave pay, separation pay, 13th month pay, and attorney’s fees. After
hearing, Labor Arbiter found private respondents guilty of illegal dismissal and accordingly
ordered them to pay petitioners’ claims. On appeal, the NLRC reversed the decision of the Labor
Arbiter. The NLRC held petitioners guilty of abandonment of work and accordingly dismissed their
claims except that for 13th month pay.
Petitioners allege that they were dismissed by private respondents as they were about to file a
petition with the Department of Labor and Employment (DOLE) for the payment of benefits such
as Social Security System (SSS) coverage, sick leave and vacation leave. They deny that they
abandoned their work.
Issue:
Whether or not the petitioners are entitled to the minimum benefits provided by law.
SC Ruling:
The petitioners are entitled to the minimum benefits provided by law. There is no dispute that
petitioners were employees of private respondents although they were paid not on the basis of
time spent on the job but according to the quantity and the quality of work produced by them.
There are two categories of employees paid by results: (1) those whose time and performance
are supervised by the employer. (Here, there is an element of control and supervision over the
manner as to how the work is to be performed. A piece-rate worker belongs to this category
especially if he performs his work in the company premises.); and (2) those whose time and
performance are unsupervised. (Here, the employer’s control is over the result of the work.
Workers on pakyao and takay basis belong to this group.) Both classes of workers are paid per
unit accomplished.
Piece-rate payment is generally practiced in garment factories where work is done in the
company premises, while payment on pakyao and takay basis is commonly observed in the
agricultural industry, such as in sugar plantations where the work is performed in bulk or in
volumes difficult to quantify. 4 Petitioners belong to the first category, i.e., supervised employees.
In this case, private respondents exercised control over the work of petitioners. As tailors,
petitioners worked in the company’s premises from 8:00 a.m. to 7:00 p.m. daily, including
Sundays and holidays. The mere fact that they were paid on a piece-rate basis does not negate
their status as regular employees of private respondents. The term "wage" is broadly defined in
Art. 97 of the Labor Code as remuneration or earnings, capable of being expressed in terms of
money whether fixed or ascertained on a time, task, piece or commission basis. Payment by the
piece is just a method of compensation and does not define the essence of the relations. Nor
does the fact that petitioners are not covered by the SSS affect the employer-employee
relationship.
As petitioners were illegally dismissed, they are entitled to reinstatement with back wages. The
Arbiter applied the rule in the Mercury Drug case, according to which the recovery of back wages
should be limited to three years without qualifications or deductions. Any award in excess of three
years is null and void as to the excess. The Labor Arbiter correctly ordered private respondents
to give separation pay.
Considerable time has lapsed since petitioners’ dismissal, so that reinstatement would now be
impractical and hardly in the best interest of the parties. In lieu of reinstatement, separation pay
should be awarded to petitioners at the rate of one month salary for every year of service, with a
fraction of at least six (6) months of service being considered as one (1) year. The awards for
overtime pay, holiday pay and 13th month pay are in accordance with our finding that petitioners
are regular employees, although paid on a piece-rate basis.

R&E Transport, Inc. & Honorio Enriquez vs. Avelina Latag

[G.R. No. 155214. February 13, 2004.]
Facts:
Pedro Latag was a regular employee of La Mallorca Taxi since March 1, 1961. When La Mallorca
ceased from business operations, Latag transferred to R & E Transport, Inc. He was receiving an
average daily salary of five hundred pesos (P500.00) as a taxi driver. Latag got sick in January
1995 and was forced to apply for partial disability with the SSS, which was granted. When he
recovered, he reported for work in September 1998 but was no longer allowed to continue
working on account of his old age. Latag thus asked Felix Fabros, the administrative officer of
[petitioners], for his retirement pay pursuant to Republic Act 7641 but he was ignored.
Thus, on December 21, 1998, Latagfiled a case for payment of his retirement pay before the
NLRC. Latag however died on April 30, 1999. Subsequently, his wife, Avelina Latag, substituted
him. On January 10, 2000, the Labor Arbiter rendered a decision in favor of Latag.
Issue:
Whether or not Latag is entitled to retirement benefits considering she signed a waiver of
quitclaim.
SC Ruling:
The respondent is entitled to retirement benefits despite of the waiver of quitclaims. There is no
dispute the fact that the late Pedro M. Latag is entitled to retirement benefits. Rather, the bone of
contention is the number of years that he should be credited with in computing those benefits.
The findings of the NLRC that Pedro must be credited only with his service to R & E Transport,
Inc., because the evidence shows that the aforementioned companies are two different entities.
After a careful and painstaking review of the evidence on record, the court supports the NLRC's
findings.
As to the Quitclaim and Waiver signed by Respondent Latag, the CA committed no error when it
ruled that the document was invalid and could not bar her from demanding the benefits legally
due her husband. This is not say that all quitclaims are invalid per se. Courts, however, are wary
of schemes that frustrate workers' rights and benefits, and look with disfavor upon quitclaims and
waivers that bargain these away.
Undisputably, Pedro M. Latag was credited with 14 years of service with R & E Transport, Inc.
Article 287 of the Labor Code, as amended by Republic Act No. 7641, 30 provides: Retirement.
— In the absence of a retirement plan or agreement providing for retirement benefits of
employees in the establishment, an employee upon reaching the age of sixty (60) years or more,
but not beyond sixty-five (65) years which is hereby declared the compulsory retirement age, who
has served at least five (5) years in said establishment, may retire and shall be entitled to
retirement pay equivalent to at least one-half (1/2) month salary for every year of service, a
fraction of at least six (6) months being considered as one whole year. Unless the parties provide
for broader inclusions, the term one half-month salary shall mean fifteen (15) days plus one-
twelfth (1/12) of the 13th month pay and the cash equivalent of not more than five (5) days of
service incentive leaves
The rules implementing the New Retirement Law similarly provide the above-mentioned formula
for computing the one-half month salary. Since Pedro was paid according to the "boundary"
system, he is not entitled to the 13th month 32 and the service incentive pay; hence, his
retirement pay should be computed on the sole basis of his salary.
It is accepted that taxi drivers do not receive fixed wages, but retain only those sums in excess of
the "boundary" or fee they pay to the owners or operators of their vehicles. Thus, the basis for
computing their benefits should be the average daily income. In this case, the CA found that
Pedro was earning an average of five hundred pesos (P500) per day. We thus compute his
retirement pay as follows: P500 x 15 days x 14 years of service equals P105,000.

Asian Transmission Corporation vs. Court of Appeals

[425 SCRA 478 (2004).]
Facts:
The Department of Labor and Employment (DOLE) issued an Explanatory Bulletin dated March
11, 1993 wherein it clarified that employees are entitled to 200% of their basic wage on April 9,
1993, whether unworked, which apart from being Good Friday is also Araw ng Kagitingan, both
legal holidays.
The bulletin reads: "On the correct payment of holiday compensation on April 9, 1993 which apart
from being Good Friday is also Araw ng Kagitingan, i.e., two regular holidays falling on the same
day, this Department is of the view that the covered employees are entitled to at least two
hundred percent (200%) of their basic wage even if said holiday is unworked. The first 100%
represents the payment of holiday pay on April 9, 1993 as Good Friday and the second 100% is
the payment of holiday pay for the same date as Araw ng Kagitingan.
Said bulletin was reproduced on January 23, 1998, when April 9, 1998 was both Maundy
Thursday and Araw ng Kagitingan. Despite the explanatory bulletin, [Asian Transmission
Corporation opted to pay its daily paid employees only 100% of their basic pay on April 9, 1998.
Respondent Bisig ng Asian Transmission Labor Union (BATLU) protested.
In accordance with Step 6 of the grievance procedure of the Collective Bargaining Agreement
(CBA) existing between petitioner and BATLU, the controversy was submitted for voluntary
arbitration. On July 31, 1998, the Office of the Voluntary Arbitrator rendered a decision directing
petitioner to pay its covered employees "200% and not just 100% of their regular daily wages for
the unworked April 9, 1998 which covers two regular holidays, namely, Araw ng Kagitingan and
Maundy Thursday."
Issue:
Whether or not the employees are entitled to the computation embodied in the bulletin
clarification.
SC Ruling:
The employees are entitled to the computation given in the bulletin clarification.
Subject of interpretation in the case at bar is Article 94 of the Labor Code which reads: Right to
holiday pay. — (a) Every worker shall be paid his regular daily wage during regular holidays,
except in retail and service establishments regularly employing less than ten (10) workers; (b)
The employer may require an employee to work on any holiday but such employee shall be paid
a compensation equivalent to twice his regular rate; and (c) As used in this Article, "holiday"
includes: New Year's Day, Maundy Thursday, Good Friday, the ninth of April, the first of May, the
twelfth of June, the fourth of July, the thirtieth of November, the twenty-fifth and thirtieth of
December and the day designated by law for holding a general election, which was amended by
Executive Order No. 203 issued on June 30, 1987, such that the regular holidays are now:
1. New Year's DayJanuary 1
2. Maundy Thursday Movable Date
3. Good Friday Movable Date
4. Araw ng Kagitingan April 9 (Bataan and Corregidor Day)
5. Labor Day May 1
6. Independence Day June 12
7. National Heroes Day Last Sunday of August
8. Bonifacio Day November 30
9. Christmas Day December 25
10. Rizal Day December 30
The Court agrees with the voluntary arbitrator. The Voluntary Arbitrator held that Article 94 of the
Labor Code provides for holiday pay for every regular holiday, the computation of which is
determined by a legal formula which is not changed by the fact that there are two holidays falling
on one day, like on April 9, 1998 when it was Araw ng Kagitingan and at the same time was
Maundy Thursday; and that that the law, as amended, enumerates ten regular holidays for every
year should not be interpreted as authorizing a reduction to nine the number of paid regular
holidays "just because April 9 (Araw ng Kagitingan) in certain years, like 1993 and 1998, is also
Holy Friday or Maundy Thursday."
Holiday pay is a legislated benefit enacted as part of the Constitutional imperative that the State
shall afford protection to labor. Its purpose is not merely "to prevent diminution of the monthly
income of the workers on account of work interruptions. In other words, although the worker is
forced to take a rest, he earns what he should earn, that is, his holiday pay." 8 It is also intended
to enable the worker to participate in the national celebrations held during the days identified as
with great historical and cultural significance.
Independence Day (June 12), Araw ng Kagitingan (April 9), National Heroes Day (last Sunday of
August), Bonifacio Day (November 30) and Rizal Day (December 30) were declared national
holidays to afford Filipinos with a recurring opportunity to commemorate the heroism of the
Filipino people, promote national identity, and deepen the spirit of patriotism.
Labor Day (May 1) is a day traditionally reserved to celebrate the contributions of the working
class to the development of the nation, while the religious holidays designated in Executive Order
No. 203 allow the worker to celebrate his faith with his family.
As reflected above, Art. 94 of the Labor Code, as amended, afford a worker the enjoyment of ten
paid regular holidays. The provision is mandatory, regardless of whether an employee is paid on
a monthly or daily basis. Unlike a bonus, which is a management prerogative, holiday pay is a
statutory benefit demandable under the law. Since a worker is entitled to the enjoyment of ten
paid regular holidays, the fact that two holidays fall on the same date should not operate to
reduce to nine the ten holiday pay benefits a worker is entitled to receive.

Autobus Transport System vs. Antonio Bautista

[G.R. No. 156364. May 16, 2005.]
Facts:
Respondent Antonio Bautista has been employed by petitioner Auto Bus Transport Systems, Inc.,
since May 1995, as driver-conductor with travel routes Manila-Tuguegarao via Baguio, Baguio-
Tuguegarao via Manila and Manila-Tabuk via Baguio. Respondent was paid on commission
basis, seven percent (7%) of the total gross income per travel, on a twice a month basis.
On January 2000, while respondent was driving Autobus No. 114 along Sta. Fe, Nueva Vizcaya,
the bus he was driving accidentally bumped the rear portion of Autobus No. 124, as the latter
vehicle suddenly stopped at a sharp curve without giving any warning. Respondent averred that
the accident happened because he was compelled by the management to go back to Roxas,
Isabela, although he had not slept for almost twenty-four (24) hours, as he had just arrived in
Manila from Roxas, Isabela.
Respondent further alleged that he was not allowed to work until he fully paid the amount of
P75,551.50, representing thirty percent (30%) of the cost of repair of the damaged buses and that
despite respondent's pleas for reconsideration, the same was ignored by management. After a
month, management sent him a letter of termination. Thus, on 02 February 2000, respondent
instituted a Complaint for Illegal Dismissal with Money Claims for nonpayment of 13th month pay
and service incentive leave pay against Autobus.
On 29 September 2000, based on the pleadings and supporting evidence presented by the
parties, Labor Arbiter decided that the complaint be dismissed where the respondent must pay to
the complainant
Issue:
Whether or not respondent is entitled to service incentive leave.
SC Ruling:
The respondent is entitled to service incentive leave.
The disposition of the issue revolves around the proper interpretation of Article 95 of the Labor
Code vis-à-vis Section 1(D), Rule V, Book III of the Implementing Rules and Regulations of the
Labor Code which provides: RIGHT TO SERVICE INCENTIVE LEAVE, (a) Every employee who
has rendered at least one year of service shall be entitled to a yearly service incentive leave of
five days with pay.
Moreover, Book III, Rule V: SERVICE INCENTIVE LEAVE also states that this rule shall apply to
all employees except: (d) Field personnel and other employees whose performance is
unsupervised by the employer including those who are engaged on task or contract basis, purely
commission basis, or those who are paid in a fixed amount for performing work irrespective of the
time consumed in the performance thereof;
A careful examination of said provisions of law will result in the conclusion that the grant of
service incentive leave has been delimited by the Implementing Rules and Regulations of the
Labor Code to apply only to those employees not explicitly excluded by Section 1 of Rule V.
According to the Implementing Rules, Service Incentive Leave shall not apply to employees
classified as "field personnel."
The phrase "other employees whose performance is unsupervised by the employer" must not be
understood as a separate classification of employees to which service incentive leave shall not be
granted. Rather, it serves as an amplification of the interpretation of the definition of field
personnel under the Labor Code as those "whose actual hours of work in the field cannot be
determined with reasonable certainty."
The same is true with respect to the phrase "those who are engaged on task or contract basis,
purely commission basis." Said phrase should be related with "field personnel," applying the rule
on ejusdem generis that general and unlimited terms are restrained and limited by the particular
terms that they follow. Hence, employees engaged on task or contract basis or paid on purely
commission basis are not automatically exempted from the grant of service incentive leave,
unless, they fall under the classification of field personnel.
What must be ascertained in order to resolve the issue of propriety of the grant of service
incentive leave to respondent is whether or not he is a field personnel.
According to Article 82 of the Labor Code, "field personnel" shall refer to non-agricultural
employees who regularly perform their duties away from the principal place of business or branch
office of the employer and whose actual hours of work in the field cannot be determined with
reasonable certainty. This definition is further elaborated in the Bureau of Working Conditions
(BWC), Advisory Opinion to Philippine Technical-Clerical Commercial Employees Association 10
which states that:
As a general rule, field personnel are those whose performance of their job/service is not
supervised by the employer or his representative, the workplace being away from the principal
office and whose hours and days of work cannot be determined with reasonable certainty; hence,
they are paid specific amount for rendering specific service or performing specific work. If
required to be at specific places at specific times, employees including drivers cannot be said to
be field personnel despite the fact that they are performing work away from the principal office of
the employee.
At this point, it is necessary to stress that the definition of a "field personnel" is not merely
concerned with the location where the employee regularly performs his duties but also with the
fact that the employee's performance is unsupervised by the employer. As discussed above, field
personnel are those who regularly perform their duties away from the principal place of business
of the employer and whose actual hours of work in the field cannot be determined with
reasonable certainty. Thus, in order to conclude whether an employee is a field employee, it is
also necessary to ascertain if actual hours of work in the field can be determined with reasonable
certainty by the employer. In so doing, an inquiry must be made as to whether or not the
employee's time and performance are constantly supervised by the employer. Respondent is not
a field personnel but a regular employee who performs tasks usually necessary and desirable to
the usual trade of petitioner's business. Accordingly, respondent is entitled to the grant of service
incentive leave.
The clear policy of the Labor Code is to grant service incentive leave pay to workers in all
establishments, subject to a few exceptions. Section 2, Rule V, Book III of the Implementing
Rules and Regulations provides that "every employee who has rendered at least one year of
service shall be entitled to a yearly service incentive leave of five days with pay."
Service incentive leave is a right which accrues to every employee who has served "within 12
months, whether continuous or broken reckoned from the date the employee started working,
including authorized absences and paid regular holidays unless the working days in the
establishment as a matter of practice or policy, or that provided in the employment contracts, is
less than 12 months, in which case said period shall be considered as one year." It is also
"commutable to its money equivalent if not used or exhausted at the end of the year." In other
words, an employee who has served for one year is entitled to it. He may use it as leave days or
he may collect its monetary value. To limit the award to three years, as the solicitor general
recommends, is to unduly restrict such right.

San Miguel Corporation vs. Caroline del Rosario

[G.R. No. 168194. December 13, 2005.]
Facts:
On April 17, 2000, respondent was employed by petitioner as key account specialist. On March 9,
2001, petitioner informed respondent that her probationary employment will be severed at the
close of the business hours of March 12, 2001. On March 13, 2001, respondent was refused
entry to petitioner's premises. On June 24, 2002, respondent filed a complaint against petitioner
for illegal dismissal and underpayment/non-payment of monetary benefits. Respondent alleged
that petitioner feigned an excess in manpower because after her dismissal, it hired new recruits
and re-employed two of her batch mates. On the other hand, petitioner claimed that respondent
was a probationary employee whose services were terminated as a result of the excess
manpower that could no longer be accommodated by the company.
The Labor Arbiter declared respondent a regular employee because her employment exceeded
six months and holding that she was illegally dismissed as there was no authorized cause to
terminate her employment. On appeal to NLRC, it modified the previous decision.
Issue:
Whether or not the respondent was an employee and was illegally terminated. If so, is she
entitled to monetary benefits?
SC Ruling:
In termination cases, the burden of proving the circumstances that would justify the employee's
dismissal rests with the employer. The best proof that petitioner should have presented to prove
the probationary status of respondent is her employment contract. None, having been presented,
the continuous employment of respondent as an account specialist for almost 11 months, from
April 17, 2000 to March 12, 2001, means that she was a regular employee and not a temporary
reliever or a probationary employee. And while it is true that by way of exception, the period of
probationary employment may exceed six months when the parties so agree, such as when the
same is established by company policy, or when it is required by the nature of the work, none of
these exceptional circumstance were proven in the present case. Thus, respondent whose
employment exceeded six months is undoubtedly a regular employee of petitioner.
Her termination from employment must be for a just or authorized cause, otherwise, her dismissal
would be illegal. Petitioner tried to justify the dismissal of respondent under the authorized cause
of redundancy. It thus argued in the alternative that even assuming that respondent qualified for
regular employment, her services still had to be terminated because there are no more regular
positions in the company. Undoubtedly, petitioner is invoking a redundancy which allegedly
resulted in the termination not only of the trainees, probationers but also of some of its regular
employees.
Redundancy, for purposes of the Labor Code, exists where the services of an employee are in
excess of what is reasonably demanded by the actual requirements of the enterprise. Succinctly
put, a position is redundant where it is superfluous, and superfluity of a position or positions may
be the outcome of a number of factors, such as overhiring of workers, decreased volume of
business, or dropping of a particular product line or service activity previously manufactured or
undertaken by the enterprise. The criteria in implementing a redundancy are: (a) less preferred
status, e.g. temporary employee; (b) efficiency; and (c) seniority. What further militated against
the alleged redundancy advanced by petitioner is their failure to refute respondent's assertion that
after her dismissal, it hired new recruits and re-employed two of her batch mates. The Court finds
that petitioner was not able to discharge the burden of proving that the dismissal of respondent
was valid.
Considering that respondent was illegally dismissed, she is entitled not only to reinstatement but
also to payment of full back wages, computed from the time her compensation was actually
withheld from her on March 13, 2001, up to her actual reinstatement. She is likewise entitled to
other benefits, i.e., service incentive leave pay and 13th month pay computed from such date
also up to her actual reinstatement. Respondent is not entitled to holiday pay because the
records reveal that she is a monthly paid regular employee. Under Section 2, Rule IV, Book III of
the Omnibus Rules Implementing the Labor Code, employees who are uniformly paid by the
month, irrespective of the number of working days therein, shall be presumed to be paid for all
the days in the month whether worked or not.

Charlito Peñaranda vs. National Labor Relations Commission

 [G.R. No. 159577. May 3, 2006.]
Facts:
Sometime in June 1999, Petitioner Charlito Peñaranda was hired as an employee of Baganga
Plywood Corporation (BPC) to take charge of the operations and maintenance of its steam plant
boiler. In May 2001, Peñaranda filed a Complaint for illegal dismissal with money claims against
BPC and its general manager, Hudson Chua, before the NLRC.
After the parties failed to settle amicably, the labor arbiter directed the parties to file their position
papers and submit supporting documents.
Peñaranda alleges that he was employed by respondent Banganga on March 15, 1999 with a
monthly salary of P5,000.00 as Foreman/Boiler Head/Shift Engineer until he was illegally
terminated on December 19, 2000. he alleges that his services were terminated without the
benefit of due process and valid grounds in accordance with law. Furthermore, he was not paid
his overtime pay, premium pay for working during holidays/rest days, night shift differentials and
finally claimed for payment of damages and attorney's fees having been forced to litigate the
present complaint.
Respondent BPC is a domestic corporation duly organized and existing under Philippine laws and
is represented herein by its General Manager HUDSON CHUA, the individual respondent.
Respondents allege that complainant's separation from service was done pursuant to Art. 283 of
the Labor Code. The respondent BPC was on temporary closure due to repair and general
maintenance and it applied for clearance with the Department of Labor and Employment,
Regional Office No. XI, to shut down and to dismiss employees. And due to the insistence of
herein complainant he was paid his separation benefits.
Consequently, when respondent BPC partially reopened in January 2001, Peñaranda failed to
reapply.
The labor arbiter ruled that there was no illegal dismissal and that petitioner's Complaint was
premature because he was still employed by BPC. Petitioner’s money claims for illegal dismissal
was also weakened by his quitclaim and admission during the clarificatory conference that he
accepted separation benefits, sick and vacation leave conversions and thirteenth month pay.
Issue:
Whether or not Peñaranda is a regular, common employee entitled to monetary benefits under
Art. 82 of the Labor Code and is entitled to the payment of overtime pay and other monetary
benefits.
SC Ruling:
The petitioner is not entitled to overtime pay and other monetary benefits.
The Court disagrees with the NLRC's finding that petitioner was a managerial employee.
However, petitioner was a member of the managerial staff, which also takes him out of the
coverage of labor standards. Like managerial employees, officers and member of the managerial
staff are not entitled to the provisions of law on labor standards.
The Implementing Rules of the Labor Code define members of a managerial staff as those with
the following duties and responsibilities:
(1) The primary duty consists of the performance of work directly related to management
policies of the employer;
(2) Customarily and regularly exercise discretion and independent judgment;
(3) (i) Regularly and directly assist a proprietor or a managerial employee whose primary
duty consists of the management of the establishment in which he is employed or subdivision
thereof; or (ii) execute under general supervision work along specialized or technical lines
requiring special training, experience, or knowledge; or (iii) execute under general supervision
special assignments and tasks; and
(4) who do not devote more than 20 percent of their hours worked in a workweek to activities
which are not directly and closely related to the performance of the work described in paragraphs
(1), (2), and (3) above."
The petitioner’s work involves:
1. To supply the required and continuous steam to all consuming units at minimum cost.
2. To supervise, check and monitor manpower workmanship as well as operation of boiler
and accessories.
3. To evaluate performance of machinery and manpower.
4. To follow-up supply of waste and other materials for fuel.
5. To train new employees for effective and safety white working.
6. Recommend parts and suppliers purchases. acEHSI
7. To recommend personnel actions such as: promotion, or disciplinary action.
8. To check water from the boiler, feedwater and softener, regenerate softener if beyond
hardness limit.
9. Implement Chemical Dosing.
10. Perform other task as required by the superior from time to time." 34
The foregoing enumeration, particularly items, 1, 2, 3, 5 and 7 illustrates that petitioner was a
member of the managerial staff. His duties and responsibilities conform to the definition of a
member of a managerial staff under the Implementing Rules.
Petitioner supervised the engineering section of the steam plant boiler. His work involved
overseeing the operation of the machines and the performance of the workers in the engineering
section. This work necessarily required the use of discretion and independent judgment to ensure
the proper functioning of the steam plant boiler. As supervisor, petitioner is deemed a member of
the managerial staff.
Noteworthy, even petitioner admitted that he was a supervisor. In his Position Paper, he stated
that he was the foreman responsible for the operation of the boiler. The term foreman implies
that he was the representative of management over the workers and the operation of the
department. Petitioner's evidence also showed that he was the supervisor of the steam plant.
His classification as supervisors is further evident from the manner his salary was paid. He
belonged to the 10% of respondent's 354 employees who were paid on a monthly basis; the
others were paid only on a daily basis.

House of Sara Lee vs. Cynthia Rey

[G.R. No.149013. August 31, 2006]
Facts:
The House of Sara Lee is engaged in the direct selling of a variety of product lines for men and
women, including cosmetics, intimate apparels, perfumes, ready to wear clothes and other
novelty items, through its various outlets nationwide. In the pursuit of its business, the petitioner
engages and contracts with dealers to sell the aforementioned merchandise. These dealers,
known either as “Independent Business Managers” (IBMs) or “Independent Group Supervisors”
(IGSs), depending on whether they sell individually or through their own group, would obtain at
discounted rates the merchandise from the petitioner on credit or then sell the same products to
their own customers at fixed prices also determined by the petitioner.
In turn, the dealers are paid “Services Fees,” or sales commissions, the amount of which
depends on the volume and value of their sales. Under existing company policy, the dealers
must remit to the petitioner the proceeds of their sales within a designated credit period, which
would either be 38 days for IGSs or 52 days for IBMs, counted from the day the said dealers
acquired the merchandise from the petitioner. To discourage late remittances, the petitioner
imposes a “Credit Administration Charge,” or simply, a penalty charge, on the value of the
unremitted payment.
The dealers under this system earn income through a profit margin between the discounted
purchase price they pay on credit to the petitioner and the fixed selling price their customers will
have to pay. On top of this margin, the dealer is given the Service Fee, a sales commission,
based on the volume of sales generated by him or her. Due to the sheer volume of sales
generated by all of its outlets, the petitioner has found the need to strictly monitor the 38- or 52-
day “rolling due date” of each of its IBMs and IGSs through the employment of “Credit
Administration Supervisors” (CAS) for each branch. The primary duty of the CAS is to strictly
monitor each of these deadlines, to supervise the credit and collection of payments and
outstanding accounts due to the petitioner from its independent dealers and various customers,
and to screen prospective IBMs. To discharge these responsibilities, the CAS is provided with a
computer equipped with control systems through which data is readily generated. Under this
organizational setup, the CAS is under the direct and immediate supervision of the Branch
Operations Manager (BOM).
Cynthia Rey at the time of her dismissal from employment, held the position of Credit
Administration Supervisor or CAS at the Cagayan de Oro City branch of the petitioner. She was
first employed by the petitioner as an Accounts Receivable Clerk at its Caloocan City branch. In
November 1993, respondent was transferred to the Cagayan de Oro City branch retaining the
same position. In January 1994, respondent was elevated to the position of CAS. At that time,
the Branch Operations Manager or BOM of the Cagayan de Oro City branch was a certain Mr.
Jeremiah Villagracia. In March 1995, respondent was temporarily assigned to the Butuan City
branch.
Sometime in June 1995, while respondent was still working in Butuan City, she allegedly
instructed the Accounts Receivable Clerk of the Cagayan de Oro outlet to change the credit term
of one of the IBMs of the petitioner who happens to be respondent’s sister-in-law, from the 52-day
limit to an “unauthorized” term of 60 days. The respondent made the instruction just before the
computer data for the computation of the Service Fee accruing to Ms. Rey-Petilla was about to be
generated. Ms. Mendoza then reported this allegedly unauthorized act of respondent to her
Branch Operations Manager, Mr. Villagracia. Acting on the report, as the petitioner alleges, BOM
Villagracia discreetly verified the records and discovered that it was not only the 52-day credit
term of IBM Rey-Petilla that had been extended by the respondent, but there were several other
IBMs whose credit terms had been similarly extended beyond the periods allowed by company
policy. BOM Villagracia then summoned the respondent and required her to explain the
unauthorized credit extensions.
Respondent received a favorable decision from the Labor Arbiter granting her payment of 13th
month pay and other monetary benefits.
Issue:
Whether or not respondent is entitled to 13th month pay.
SC Ruling:
The award of 13th month pay must be deleted. Respondent is not a rank-and-file employee and
is, therefore, not entitled to thirteenth-month pay. However, the NLRC and the CA are correct in
refusing to award 14th and 15th month pay as well as the “monthly salary increase of 10 percent
per year for two years based on her latest salary rate.” The respondent must show that these
benefits are due to her as a matter of right. Mere allegations by the respondent do not suffice in
the absence of proof supporting the same. With respect to salary increases in particular, the
respondent must likewise show that she has a vested right to the same, such that her salary
increases can be made a component in the computation of backwages. What is evident is that
salary increases are a mere expectancy. They are by nature volatile and dependent on
numerous variables, including the company’s fiscal situation, the employee’s future performance
on the job, or the employee’s continued stay in a position. In short, absent any proof, there is no
vested right to salary increases.

Leyte IV Electric Cooperative, Inc., vs. LEYECO IV Employees Union-ALU

[G.R. No. 157775. October 19, 2007.]
Facts:
On April 6, 1998, Leyte IV Electric Cooperative, Inc. (petitioner) and Leyeco IV Employees Union-
ALU (respondent) entered into a Collective Bargaining Agreement (CBA) covering petitioner rank-
and-file employees, for a period of five (5) years effective January 1, 1998. On June 7, 2000,
respondent, through its Regional Vice-President, Vicente P. Casilan, sent a letter to petitioner
demanding holiday pay for all employees, as provided for in the CBA.
Petitioner, on the other hand, in its Position Paper, insisted payment of the holiday pay in
compliance with the CBA provisions, stating that payment was presumed since the formula used
in determining the daily rate of pay of the covered employees is Basic Monthly Salary divided by
30 days or Basic Monthly Salary multiplied by 12 divided by 360 days, thus with said formula, the
employees are already paid their regular and special days, the days when no work is done, the
51 un-worked Sundays and the 51 un-worked Saturdays.
Issue:
Whether or not Leyte IV Electric Cooperative is liable for underpayment of holiday pay.
SC Ruling:
The Voluntary Arbitrator gravely abused its discretion in giving a strict or literal interpretation of
the CBA provisions that the holiday pay be reflected in the payroll slips. Such literal interpretation
ignores the admission of respondent in its Position Paper that the employees were paid all the
days of the month even if not worked. In light of such admission, petitioner's submission of its 360
divisor in the computation of employees' salaries gains significance.
This ruling was applied in Wellington Investment and Manufacturing Corporation v. Trajano, 43
Producers Bank of the Philippines v. National Labor Relations Commission. In this case, the
monthly salary was fixed by Wellington to provide for compensation for every working day of the
year including the holidays specified by law — and excluding only Sundays. In fixing the salary,
Wellington used what it called the "314 factor"; that is, it simply deducted 51 Sundays from the
365 days normally comprising a year and used the difference, 314, as basis for determining the
monthly salary. The monthly salary thus fixed actually covered payment for 314 days of the year,
including regular and special holidays, as well as days when no work was done by reason of
fortuitous cause, such as transportation strike, riot, or typhoon or other natural calamity, or cause
not attributable to the employees.
It was also applied in Odango v. National Labor Relations Commission, where Court ruled that
the use of a divisor that was less than 365 days cannot make the employer automatically liable
for underpayment of holiday pay. In said case, the employees were required to work only from
Monday to Friday and half of Saturday. Thus, the minimum allowable divisor is 287, which is the
result of 365 days, less 52 Sundays and less 26 Saturdays (or 52 half Saturdays). Any divisor
below 287 days meant that the employees were deprived of their holiday pay for some or all of
the ten legal holidays. The 304-day divisor used by the employer was clearly above the minimum
of 287 days.
In this case, the employees are required to work only from Monday to Friday. Thus, the minimum
allowable divisor is 263, which is arrived at by deducting 51 un-worked Sundays and 51 un-
worked Saturdays from 365 days. Considering that petitioner used the 360-day divisor, which is
clearly above the minimum, indubitably, petitioner's employees are being given their holiday pay.
Thus, the Voluntary Arbitrator should not have simply brushed aside petitioner's divisor formula.
In granting respondent's claim of non-payment of holiday pay, a "double burden" was imposed
upon petitioner because it was being made to pay twice for its employees' holiday pay when
payment thereof had already been included in the computation of their monthly salaries. Hence,
the petition is granted.

San Miguel Corp et al., vs. Numeriano Layoc, Jr., et al.

[G.R. No. 149640. October 19, 2007.]
Facts:
Respondents were among the "Supervisory Security Guards" of the Beer Division of San Miguel
Corporation. They started working as guards with the petitioner San Miguel Corporation assigned
to the Beer Division on different dates until such time that they were promoted as supervising
security guards. From the commencement of their employment, the private respondents were
required to punch their time cards for purposes of determining the time they would come in and
out of the company's work place. Corollary, the private respondents were availing the benefits for
overtime, holiday and night premium duty through time card punching. However, in the early
1990's, the San Miguel Corporation embarked on a Decentralization Program aimed at enabling
the separate divisions of the San Miguel Corporation to pursue a more efficient and effective
management of their respective operations.
As a result of the Decentralization Program, the Beer Division of the San Miguel Corporation
implemented on January 1, 1993 a "no time card policy" whereby the Supervisory I and II
composing of the supervising security guards of the Beer Division were no longer required to
punch their time cards. Consequently, on January 16, 1993, without prior consultation with the
private respondents, the time cards were ordered confiscated and the latter were no longer
allowed to render overtime work. However, in lieu of the overtime pay and the premium pay, the
personnel of the Beer Division of the petitioner San Miguel Corporation affected by the "No Time
Card Policy" were given a 10% across-the-board increase on their basic pay while the
supervisors who were assigned in the night shift (6:00 p.m. to 6:00 a.m.) were given night shift
allowance ranging from P2,000.00 to P2,500.00 a month.
Hence, this complaint filed for unfair labor practice, violation of Article 100 of the Labor Code of
the Philippines, and violation of the equal protection clause and due process of law in relation to
paragraphs 6 and 8 of Article 32 of the New Civil Code of the Philippines.
Issue:
Whether the circumstances in the present case constitute an exception to the rule that
supervisory employees are not entitled to overtime pay.
SC Ruling:
Article 82 of the Labor Code states that the provisions of the Labor Code on working conditions
and rest periods shall not apply to managerial employees. The other provisions in the Title
include normal hours of work (Article 83), hours worked (Article 84), meal periods (Article 85),
night shift differential (Article 86), overtime work (Article 87), undertime not offset by overtime
(Article 88), emergency overtime work (Article 89), and computation of additional compensation
(Article 90). It is thus clear that, generally, managerial employees such as respondents are not
entitled to overtime pay for services rendered in excess of eight hours a day. Respondents failed
to show that the circumstances of the present case constitute an exception to this general rule.
Aside from their allegations, respondents were not able to present anything to prove that
petitioners were obliged to permit respondents to render overtime work and give them the
corresponding overtime pay. Even if petitioners did not institute a "no time card policy,"
respondents could not demand overtime pay from petitioners if respondents did not render
overtime work. The requirement of rendering additional service differentiates overtime pay from
benefits such as thirteenth month pay or yearly merit increase. These benefits do not require any
additional service from their beneficiaries. Thus, overtime pay does not fall within the definition of
benefits under Article 100 of the Labor Code.
Hence, the petition is granted.

BAHIA SHIPPING SERVICES, INC., vs.REYNALDO CHUA

[G.R. No. 162195. April 8, 2008.]
Facts:
Private respondent Reynaldo Chua was hired by the petitioner shipping company, Bahia Shipping
Services, Inc., as a restaurant waiter on board a luxury cruise ship liner M/S Black Watch
pursuant to a Philippine Overseas Employment Administration (POEA) approved employment
contract dated October 9, 1996 for a period of nine (9) months from October 18, 1996 to July 17,
1997. On October 18, 1996, the private respondent left Manila for Heathrow, England to board
the said sea vessel where he will be assigned to work. On February 15, 1997, the private
respondent reported for his working station one and one-half hours late. On February 17, 1997,
the master of the vessel served to the private respondent an official warning-termination form
pertaining to the said incident. On March 8, 1997, the vessel's master, ship captain Thor Fleten
conducted an inquisitorial hearing to investigate the said incident. Thereafter, on March 9, 1997,
private respondent was dismissed from the service on the strength of an unsigned and undated
notice of dismissal. An alleged record or minutes of the said investigation was attached to the
said dismissal notice.
On March 24, 1997, the private respondent filed a complaint for illegal dismissal and other
monetary claims. The private respondent alleged that he was paid only US$300.00 per month as
monthly salary for five (5) months instead of US$410.00 as stipulated in his employment contract.
Thus, he claimed that he was underpaid in the amount of US$110.00 per month for that same
period of five (5) months. He further asserted that his salaries were also deducted US$20.00 per
month by the petitioner for alleged union dues. Private respondent argued that it was his first
offense committed on board the vessel. He adverted further that the petitioner has no proof of
being a member of the AMOSUP or the ITF to justify its claim to deduct the said union dues
[from] his monthly salary.
Issue:
Whether or not reporting for work one and one-half hours late and abandoning his work are valid
grounds for dismissal.
SC Ruling:
It being settled that the dismissal of respondent was illegal, it follows that the latter is entitled to
payment of his salary for the unexpired portion of his contract, as provided under Republic Act
(R.A.) No. 8042, considering that his employment was pre-terminated on March 9, 1997 or four
months prior to the expiration of his employment contract on July 17, 1997.
Article 279 of the Labor Code, as amended, mandates that an illegally dismissed employee is
entitled to the twin reliefs of (a) either reinstatement or separation pay, if reinstatement is no
longer viable, and (b) backwages. Both are distinct reliefs given to alleviate the economic damage
suffered by an illegally dismissed employee and, thus, the award of one does not bar the other.
Both reliefs are rights granted by substantive law which cannot be defeated by mere procedural
lapses. Substantive rights like the award of backwages resulting from illegal dismissal must not
be prejudiced by a rigid and technical application of the rules. The order of the Court of Appeals
to award backwages being a mere legal consequence of the finding that respondents were
illegally dismissed by petitioners, there was no error in awarding the same.
The Court has consistently applied the foregoing exception to the general rule. It does so yet
again in the present case. Section 10 of R.A. No. 8042, entitles an overseas worker who has
been illegally dismissed to "his salaries for the unexpired portion of the employment contract or
for three (3) months for every year of the unexpired term, whichever is less." The CA correctly
applied the interpretation of the Court in Marsaman Manning Agency, Inc. v. National Labor
Relations Commission that the second option which imposes a three months salary cap applies
only when the term of the overseas contract is fixed at one year or longer; otherwise, the first
option applies in that the overseas worker shall be entitled payment of all his salaries for the
entire unexpired period of his contract.

PNCC SKYWAY TRAFFIC MANAGEMENT AND SECURITY DIVISION WORKERS

ORGANIZATION
GR 171231 February 17, 2010

XI. OTHER SPECIAL BENEFITS

Pantranco North Express, Inc., vs. NLRC & Urbano Suñiga

[259 SCRA 161 (1996)]
Facts:
Private respondent was hired by petitioner in 1964 as a bus conductor. He eventually joined the
Pantranco Employees Association-PTGWO. He continued in petitioner's employ until August 12,
1989, when he was retired at the age of fifty-two (52) after having rendered twenty five years'
service. The basis of his retirement was the compulsory retirement provision of the collective
bargaining agreement between the petitioner and the aforenamed union. On February 1990,
private respondent filed a complaint for illegal dismissal against petitioner with NLRC. The
complaint was consolidated with two other cases of illegal dismissal having similar facts and
issues, filed by other employees, non-union members.
Labor Arbiter rendered his decision finding that the three complainants were illegally and unjustly
dismissed and order the respondent to reinstate them to their former or substantially equivalent
positions without loss of seniority rights with full back wages and other benefits. Petitioner
appealed to public respondent, which issued the questioned Resolution affirming the labor
arbiter's decision in toto.
Issue:
Whether or not the CBA stipulation on compulsory retirement after twenty-five years of service is
legal and enforceable.
SC Ruling:
The Court rules that the CBA stipulation is legal and enforceable.
The bone of contention in this case is the provision on compulsory retirement after 25 years of
service.
Article XI, Section 1 (e) (5) of the May 2, 1989 Collective Bargaining Agreement 8 between
petitioner company and the union states:
Section 1. The COMPANY shall formulate a retirement plan with the following main features:
(e) The COMPANY agrees to grant the retirement benefits herein provided to regular employees
who may be separated from the COMPANY for any of the following reasons:
(5) Upon reaching the age of sixty (60) years or upon completing twenty-five (25) years of service
to the COMPANY, whichever comes first, and the employee shall be compulsory retired and paid
the retirement benefits herein provided."
The said Code provides: Art. 287. Retirement. — Any employee may be retired upon
reaching the retirement age established in the Collective Bargaining Agreement or other
applicable employment contract. In case of retirement, the employee shall be entitled to receive
such retirement benefits as he may have earned under existing laws and any collective
bargaining or other agreement."
The Court agrees with petitioner and the Solicitor General. Art. 287 of the Labor Code as worded
permits employers and employees to fix the applicable retirement age at below 60 years.
Moreover, providing for early retirement does not constitute diminution of benefits. In almost all
countries today, early retirement, i.e., before age 60, is considered a reward for services rendered
since it enables an employee to reap the fruits of his labor — particularly retirement benefits,
whether lump-sum or otherwise — at an earlier age, when said employee, in presumably better
physical and mental condition, can enjoy them better and longer.
As a matter of fact, one of the advantages of early retirement is that the corresponding retirement
benefits, usually consisting of a substantial cash windfall, can early on be put to productive and
profitable uses by way of income-generating investments, thereby affording a more significant
measure of financial security and independence for the retiree who, up till then, had to contend
with life's vicissitudes within the parameters of his fortnightly or weekly wages. Thus we are now
seeing many CBAs with such early retirement provisions. And the same cannot be considered a
diminution of employment benefits.
Being a product of negotiation, the CBA between the petitioner and the union intended the
provision on compulsory retirement to be beneficial to the employees-union members, including
herein private respondent. When private respondent ratified the CBA with the union, he not only
agreed to the CBA but also agreed to conform to and abide by its provisions. Thus, it cannot be
said that he was illegally dismissed when the CBA provision on compulsory retirement was
applied to his case.
Incidentally, we call attention to Republic Act No. 7641, known as "The Retirement Pay Law",
which went into effect on January 7, 1993. Although passed many years after the compulsory
retirement of herein private respondent, nevertheless, the said statute sheds light on the present
discussion when it amended
Art. 287 of the Labor Code, to make it read as follows: Retirement. — Any employee may be
retired upon reaching the retirement age establish in the collective bargaining agreement or other
applicable employment contract.
In the absence of a retirement plan or agreement providing for retirement benefits of employees
in the establishment, an employee upon reaching the age of sixty (60) years or more, but not
beyond sixty-five (65) years which is hereby declared the compulsory retirement age, who has
served at least five (5) years in the said establishment may retire . . ."
The aforequoted provision makes clear the intention and spirit of the law to give employers and
employees a free hand to determine and agree upon the terms and conditions of retirement.
Providing in a CBA for compulsory retirement of employees after twenty-five (25) years of service
is legal and enforceable so long as the parties agree to be governed by such CBA. The law
presumes that employees know what they want and what is good for them absent any showing
that fraud or intimidation was employed to secure their consent thereto.

R&E Transport, Inc. & Honorio Enriquez vs. Avelina Latag

[G.R. No. 155214. February 13, 2004.]
Facts:
Pedro Latag was a regular employee of La Mallorca Taxi since March 1, 1961. When La Mallorca
ceased from business operations, Latag transferred to R & E Transport, Inc. He was receiving an
average daily salary of five hundred pesos (P500.00) as a taxi driver.
Latag got sick in January 1995 and was forced to apply for partial disability with the SSS, which
was granted. When he recovered, he reported for work in September 1998 but was no longer
allowed to continue working on account of his old age. Latag thus asked Felix Fabros, the
administrative officer of [petitioners], for his retirement pay pursuant to Republic Act 7641 but he
was ignored.

Thus, on December 21, 1998, Latagfiled a case for payment of his retirement pay before the
NLRC. Latag however died on April 30, 1999. Subsequently, his wife, Avelina Latag, substituted
him. On January 10, 2000, the Labor Arbiter rendered a decision in favor of Latag.
Issue:
Whether or not Latag is entitled to retirement benefits considering she signed a waiver of
quitclaim.
SC Ruling:
The respondent is entitled to retirement benefits despite of the waiver of quitclaims.
There is no dispute the fact that the late Pedro M. Latag is entitled to retirement benefits. Rather,
the bone of contention is the number of years that he should be credited with in computing those
benefits. The findings of the NLRC that Pedro must be credited only with his service to R & E
Transport, Inc., because the evidence shows that the aforementioned companies are two
different entities. After a careful and painstaking review of the evidence on record, the court
supports the NLRC's findings.
As to the Quitclaim and Waiver signed by Respondent Latag, the CA committed no error when it
ruled that the document was invalid and could not bar her from demanding the benefits legally
due her husband. This is not say that all quitclaims are invalid per se. Courts, however, are wary
of schemes that frustrate workers' rights and benefits, and look with disfavor upon quitclaims and
waivers that bargain these away.
Undisputably, Pedro M. Latag was credited with 14 years of service with R & E Transport, Inc.
Article 287 of the Labor Code, as amended by Republic Act No. 7641, 30 provides: Retirement.
— In the absence of a retirement plan or agreement providing for retirement benefits of
employees in the establishment, an employee upon reaching the age of sixty (60) years or more,
but not beyond sixty-five (65) years which is hereby declared the compulsory retirement age, who
has served at least five (5) years in said establishment, may retire and shall be entitled to
retirement pay equivalent to at least one-half (1/2) month salary for every year of service, a
fraction of at least six (6) months being considered as one whole year. Unless the parties provide
for broader inclusions, the term one half-month salary shall mean fifteen (15) days plus one-
twelfth (1/12) of the 13th month pay and the cash equivalent of not more than five (5) days of
service incentive leaves
The rules implementing the New Retirement Law similarly provide the above-mentioned formula
for computing the one-half month salary. Since Pedro was paid according to the "boundary"
system, he is not entitled to the 13th month 32 and the service incentive pay; hence, his
retirement pay should be computed on the sole basis of his salary.
It is accepted that taxi drivers do not receive fixed wages, but retain only those sums in excess of
the "boundary" or fee they pay to the owners or operators of their vehicles. Thus, the basis for
computing their benefits should be the average daily income. In this case, the CA found that
Pedro was earning an average of five hundred pesos (P500) per day. We thus compute his
retirement pay as follows: P500 x 15 days x 14 years of service equals P105,000.

Marilyn Odchimar Gerlach vs. Reuters Limited, Phils.

[G.R. No. 148542. January 17, 2005.]
Facts:
On February 15, 1982, respondent Reuters Limited, Phils. (Reuters), a company engaged in
news dissemination with offices worldwide, hired Marilyn Odchimar Gerlach as its local
correspondent. On October 1983, respondent Reuters implemented a local Retirement Benefit
Plan (Plan) for its Philippine-hired employees. The Plan is funded by the company, but an
employee-participant may volunteer to contribute a percentage of his basic monthly salary to the
fund. Petitioner was automatically covered by the Plan by reason of her age and length of
service. However, she opted not to contribute to the fund. She worked in Reuters Philippines up
to December 23, 1983. On October 12, 1988, she was directed to return to Manila and resume
her post by December 15, 1988.
On March 1, 1991, petitioner received her retirement benefits under the Plan in the amount of
P79,228.04, which amount was determined by the trustee bank (Bank of the Philippine Island) in
accordance with the provisions of the Plan. The computation was based on her notional salary.
However, she questioned the amount she received as well as her entitlement to a disturbance
grant, contending that her retirement benefits must be computed on the basis of her actual salary
abroad, not on her notional salary.
Eventually, petitioner filed with the Office of the Labor Arbiter, NCR, a money claim against
respondent, docketed. On March 1994, the Labor Arbiter rendered its first Decision ordering
respondent to pay petitioner additional retirement benefits in the sum of P436,000.00, which
amount was based on her actual salary abroad, not on her notional salary; a disturbance grant in
the sum of Stg 1,750 or its equivalent in pesos; and attorney's fees. On appeal, the National
Labor Relations Commission (NLRC), rendered its Decision setting aside the appealed Decision
and remanding the case to the Labor Arbiter for trial on the merits.
Issue:
Whether or not petitioner is allowed to claim for additional retirement benefits.
SC Ruling:
The petitioner is not entitled to the additional retirement benefits.
There are three kinds of retirement schemes. The first type is compulsory and contributory in
character. The second type is one set up by agreement between the employer and the
employees in collective bargaining agreements or other agreements between them. The third
type is one that is voluntarily given by the employer, expressly as in an announced company
policy or impliedly as in a failure to contest the employee's claim for retirement benefits. 28 It is
this third type of retirement scheme which covers respondent's Plan.
Article 287 of the Labor Code reads:
Article 287. Retirement. —
Any employee may be retired upon reaching the retirement age established in the collective
bargaining agreement or other applicable employment contract.
In case of retirement, the employee shall be entitled to receive such retirement benefits as he
may have earned under existing laws and any collective bargaining agreement and other
agreements."
The first paragraph of the above provisions deals with the retirement age of an employee
established in (a) a collective bargaining agreement or (b) other applicable employment contract.
The second paragraph deals with the retirement benefits to be received by a retiring employee
which he may have earned under (a) an existing law, (b) a collective bargaining or (c) other
agreements.
Nonetheless, Section 14(a), Rule 1 of the Rules and Regulations Implementing Book VI of the
Labor Code, provides:
"Sec. 14. Retirement benefits. — (a) An employee who is retired pursuant to a bona fide
retirement plan or in accordance with the applicable individual or collective agreement or
established employer policy shall be entitled to all the retirement benefits provided therein . "
Thus, in the instant case, respondent based petitioner's retirement benefits on its Plan and
established policy, which is in accord with the above provision. Consequently, petitioner's theory
that the computation of her retirement benefits should be based on her basic annual salary while
stationed abroad is untenable.
The Court ruled that petitioner's retirement benefits must be based on her notional Philippine
salary. It is very clear that from the very start of her first assignment overseas, respondent
apprised her that the company's contribution to the Plan is based on her notional Philippine
salary.
In fact, under the Plan, the company's contribution to the fund is 10% of the basic monthly salary
of each participant. Respondent also informed petitioner of the amount of her notional Philippine
salary whenever she was transferred to her next overseas assignment or when there were
increases in her salary, both actual and notional. Significantly, respondent was able to prove that
it has been its practice worldwide that the notional salary of an employee is its basis in computing
its contribution to the retirement plan for a local employee detailed abroad. It follows that the
amount of retirement benefits of a retiring employee assigned abroad is based on his notional
salary.
Honda Philippines., Inc., vs. Samahan ng Malayang Manggagawa sa Honda
[G.R. No.145561. June 15, 2005]
Facts:
The case stems from the collective bargaining agreement between Honda and the respondent
union that it granted the computation of 14th month pay as the same as 13th month pay. Honda
continues the practice of granting financial assistance covered every December each year of not
less than 100% of the basic salary. In the latter part of 1998, the parties started to re-negotiate for
the fourth and fifth years of the CBA. The union filed a notice of strike on the ground of unfair
labor practice for deadlock.
DOLE assumed jurisdiction over the case and certified it to the NLRC for compulsory arbitration.
The striking employees were ordered to return to work and management to accept them back
under the same terms prior to the strike staged. Honda issued a memorandum of the new
computation of the 13th month and 14th month pay to be granted to all its employees whereby the
31 long strikes shall be considered unworked days for purpose of computing the said benefits.
The amount equivalent to ½ of the employees’ basic salary shall be deducted from these
bonuses, with a commitment that in the event that the strike is declared legal, Honda shall pay
the amount.
The respondent union opposed the pro-rated computation of bonuses. This issue was submitted
to voluntary arbitration where it ruled that the company’s implementation of the pro-rated
computation is invalid.
Issue:
Whether or not the pro-rated computation of the 13th and 14th month pays and other bonuses in
question is valid and lawful.
SC Ruling:
The Court ruled that the pro-rated computation is invalid.
The pro-rated computation of Honda as a company policy has not ripened into a company
practice and it was the first time they implemented such practice.
The payment of the 13th month pay in full month payment by Honda has become an established
practice. The length of time where it should be considered in practice is not being laid down by
jurisprudence. The voluntary act of the employer cannot be unilaterally withdrawn without
violating Article 100 of the Labor Code.
The court also rules that the withdrawal of the benefit of paying a full month salary for 13th month
pay shall constitute a violation of Article 100 of the Labor Code.

Alpha Jaculbe vs. Silliman University

[G.R. No. 156934. March 16, 2007.]
Facts:
Sometime in 1958, petitioner began working for respondent’s university medical center as a
nurse. In a letter in December 1992, respondent, through its Human Resources Development
Office, informed petitioner that she was approaching her 35th year of service with the university
and was due for automatic retirement on November 18, 1993, at which time she would be 57
years old. This was pursuant to respondent’s retirement plan for its employees which provided
that its members could be automatically retired “upon reaching the age of 65 or after 35 years of
uninterrupted service to the university.” Respondent required certain documents in connection
with petitioner’s impending retirement.
A brief exchange of letters between petitioner and respondent followed. Petitioner emphatically
insisted that the compulsory retirement under the plan was tantamount to a dismissal and
pleaded with respondent to be allowed to work until the age of 60 because this was the minimum
age at which she could qualify for SSS pension. But respondent stood pat on its decision to retire
her, citing “company policy.”
On November 15, 1993, petitioner filed a complaint in the National Labor Relations Commission
(NLRC) for “termination of service with preliminary injunction and/or restraining order.” On
November 18, 1993, respondent compulsorily retired petitioner. The labor arbiter rendered a
decision finding respondent guilty of illegal dismissal and ordered that petitioner be reinstated and
paid full back wages. On appeal, the NLRC reversed the labor arbiter’s decision and dismissed
the complaint. the CA affirmed the NLRC.
Issue:
Whether or not the respondent’s retirement plan imposing automatic retirement after 35 years of
service contravenes the security of tenure clause in the 1987 Constitution and the Labor Code.
SC Ruling:
Retirement plans allowing employers to retire employees who are less than the compulsory
retirement age of 65 are not per se repugnant to the constitutional guaranty of security of tenure.
Article 287 of the Labor Code provides: Retirement - Any employee may be retired upon reaching
the retirement age established in the collective bargaining agreement or other applicable
employment contract. By its express language, the Labor Code permits employers and
employees to fix the applicable retirement age at below 60 years.
The rules and regulations of the plan show that participation therein was not voluntary at all. Rule
III of the plan, on membership, stated:
SECTION 1 – MEMBERSHIP, All full-time Filipino employees of the University will automatically
become members of the Plan, provided, however, that those who have retired from the
University, even if rehired, are no longer eligible for membership in the Plan. A member who
continues to serve the University cannot withdraw from the Plan.
SECTION 2 – EFFECTIVITY OF MEMBERSHIP, Membership in the Plan starts on the day a
person is hired on a full-time basis by the University.
SECTION 3 – TERMINATION OF MEMBERSHIP, Termination of membership in the Plan shall
be upon the death of the member, resignation or termination of employee’s contract by the
University, or retirement from the University.
Meanwhile, Rule IV, on contributions, stated:
The Plan is contributory. The University shall set aside an amount equivalent to 3½% of the basic
salaries of the faculty and staff. To this shall be added a 5% deduction from the basic salaries of
the faculty and staff.
A member on leave with the University approval shall continue paying, based on his pay while on
leave, his leave without pay should pay his contributions to the Plan. However, a member, who
has been on leave without pay should pay his contributions based on his salary plus the
University’s contributions while on leave or the full amount within one month immediately after the
date of his reinstatement. Provided[,] further that if a member has no sufficient source of income
while on leave may pay within six months after his reinstatement.
It was through no voluntary act of her own that petitioner became a member of the plan. In fact,
the only way she could have ceased to be a member thereof was if she stopped working for
respondent altogether. Furthermore, in the rule on contributions, the repeated use of the word
“shall” ineluctably pointed to the conclusion that employees had no choice but to contribute to the
plan (even when they were on leave).
Retirement is the result of a bilateral act of the parties, a voluntary agreement between the
employer and the employee whereby the latter, after reaching a certain age agrees to sever his or
her employment with the former. The truth was that petitioner had no choice but to participate in
the plan, given that the only way she could refrain from doing so was to resign or lose her job. It is
axiomatic that employer and employee do not stand on equal footing, a situation which often
causes an employee to act out of need instead of any genuine acquiescence to the employer.
This was clearly just such an instance.
An employer is free to impose a retirement age less than 65 for as long as it has the employees’
consent. Stated conversely, employees are free to accept the employer’s offer to lower the
retirement age if they feel they can get a better deal with the retirement plan presented by the
employer. Thus, having terminated petitioner solely on the basis of a provision of a retirement
plan which was not freely assented to by her, respondent was guilty of illegal dismissal.

Intercontinental Broadcasting Corporation vs. Noemi Amarilla [G.R. No. 162775. October
27, 2006.]
Facts:
On various dates, petitioner employed the following persons at its Cebu station: Candido C.
Quiñones, Jr, Corsini R. Lagahit, as Studio Technician, Anatolio G. Otadoy, as Collector and
Noemi Amarilla, as Traffic Clerk. On March 1986, the government sequestered the station,
including its properties, funds and other assets, and took over its management and operations
from its owner, Roberto Benedicto. However, in December 1986, the government and Benedicto
entered into a temporary agreement under which the latter would retain its management and
operation. On November 1990, the Presidential Commission on Good Government (PCGG) and
Benedicto executed a Compromise Agreement, where Benedicto transferred and assigned all his
rights, shares and interests in petitioner station to the government.
In the meantime, the four employees retired from the company and received, on staggered basis,
their retirement benefits under the 1993 Collective Bargaining Agreement between petitioner and
the bargaining unit of its employees. In the meantime, a P1,500.00 salary increase was given to
all employees of the company, current and retired, effective July 1994. However, when the four
retirees demanded theirs, petitioner refused and instead informed them via a letter that their
differentials would be used to offset the tax due on their retirement benefits in accordance with
the National Internal Revenue Code (NIRC).
The four retirees filed separate complaints against IBC TV-13 Cebu and Station Manager Louella
F. Cabañero for unfair labor practice and non-payment of backwages before the NLRC.
Issue:
Whether or not the retirement benefits of respondents are part of their gross income.
SC Ruling:
The Court agrees with petitioner that under the CBA, it is not obliged to pay for the taxes on the
respondents' retirement benefits. CBA did not provide a provision where petitioner obliged itself
to pay the taxes on the retirement benefits of its employees. The Court also agrees with petitioner
that, under the NIRC, the retirement benefits of respondents are part of their gross income
subject to taxes.
Section 28 (b) (7) (A) of the NIRC of 1986 23 provides: Gross Income. — (b) Exclusions from
gross income. — The following items shall not be included in gross income and shall be exempt
from taxation under this Title: (7) Retirement benefits, pensions, gratuities, etc. — A.) Retirement
benefits received by officials and employees of private firms whether individuals or corporate, in
accordance with a reasonable private benefit plan maintained by the employer: Provided, That
the retiring official or employee has been in the service of the same employer for at least ten (10)
years and is not less than fifty years of age at the time of his retirement: Provided, further, That
the benefits granted under this subparagraph shall be availed of by an official or employee only
once. For purposes of this subsection, the term "reasonable private benefit plan" means a
pension, gratuity, stock bonus or profit-sharing plan maintained by an employer for the benefit of
some or all of his officials or employees, where contributions are made by such employer for
officials or employees, or both, for the purpose of distributing to such officials and employees the
earnings and principal of the fund thus accumulated, and wherein it is provided in said plan that at
no time shall any part of the corpus or income of the fund be used for, or be diverted to, any
purpose other than for the exclusive benefit of the said official and employees.
Revenue Regulation No. 12-86, the implementing rules of the foregoing provisions, provides: (b)
Pensions, retirements and separation pay. — Pensions, retirement and separation pay constitute
compensation subject to withholding tax, except the following: (1) Retirement benefit received by
official and employees of private firms under a reasonable private benefit plan maintained by the
employer, if the following requirements are met: (i) The retirement plan must be approved by the
Bureau of Internal Revenue; (ii) The retiring official or employees must have been in the service
of the same employer for at least ten (10) years and is not less than fifty (50) years of age at the
time of retirement; and (iii) The retiring official or employee shall not have previously availed of
the privilege under the retirement benefit plan of the same or another employer.
Thus, for the retirement benefits to be exempt from the withholding tax, the taxpayer is burdened
to prove the concurrence of the following elements: (1) a reasonable private benefit plan is
maintained by the employer; (2) the retiring official or employee has been in the service of the
same employer for at least 10 years; (3) the retiring official or employee is not less than 50 years
of age at the time of his retirement; and (4) the benefit had been availed of only once.
Article VIII of the 1993 CBA provides for two kinds of retirement plans - compulsory and optional.
Thus: ARTICLE VIII RETIREMENT
Section 1: Compulsory Retirement — Any employee who has reached the age of Fifty Five (55)
years shall be retired from the COMPANY and shall be paid a retirement pay in accordance with
the following schedule:
LENGTH OF SERVICE RETIREMENT BENEFITS=
1 year-below 5 yrs. 15 days for every year of service
5 years-9 years 30 days for every year of service
10 years-14 years 50 days for every year of service
15 years-19 years 65 days for every year of service
20 years or more 80 days for every year of service
A supervisor who reached the age of Fifty (50) may at his/her option retire with the same
retirement benefits provided above.
Section 2: Optional Retirement — Any covered employee, regardless of age, who has rendered
at least five (5) years of service to the COMPANY may voluntarily retire and the COMPANY
agrees to pay Long Service Pay to said covered employee in accordance with the following
schedule:
LENGTH OF SERVICE RETIREMENT BENEFITS
5-9 years 15 days for every year of service
10-14 years 30 days for every year of service
15-19 years 50 days for every year of service
20 years or more 60 days for every year of service
Section 3: Fraction of a Year — In computing the retirement under Section 1 and 2 of this Article,
a fraction of at least six (6) months shall be considered as one whole year. Moreover, the
COMPANY may exercise the option of extending the employment of an employee.
Section 4: Severance of Employment Due to Illness — When a supervisor suffers from disease
and/or permanent disability and her/his continued employment is prohibited by law or prejudicial
to her/his health of the health of his co-employees, the COMPANY shall not terminate the
employment of the subject supervisor unless there is a certification by a competent public health
authority that the disease is of such a nature or at such stage that it can not be cured within a
period of six (6) months even with proper medical treatment. The supervisor may be separated
upon payment by the COMPANY of separation pay pursuant to law, unless the supervisor falls
within the purview of either Sections 1 or 2 hereof. In which case, the retirement benefits
indicated therein shall apply, whichever is higher.
Section 5: Loyalty Recognition — The COMPANY shall recognize the services of the
supervisor/director who have reached the following number of years upon retirement by granting
him/her a plaque of appreciation and any lasting gift: 10 years but below 15 years (P3,000.00)
worth; 15 years but below 20 year (P7,000.00) worth; 20 years and more (P10,000.00) worth.
Respondents were qualified to retire optionally from their employment with petitioner. there is no
record that the 1993 CBA had been approved or was ever presented to the BIR. Hence, the
retirement benefits of respondents are taxable.
Under Section 80 of the NIRC, petitioner, as employer, was obliged to withhold the taxes on said
benefits and remit the same to the BIR. Section 80. Liability for Tax. — (A) Employer. — The
employer shall be liable for the withholding and remittance of the correct amount of tax required
to be deducted and withheld under this Chapter. If the employer fails to withhold and remit the
correct amount of tax as required to be withheld under the provision of this Chapter, such tax
shall be collected from the employer together with the penalties or additions to the tax otherwise
applicable in respect to such failure to withhold and remit.

REYES vs NLRC ET AL
GR 160233 August 08, 2007

Letran Calamba Faculty & Employees Association vs. NLRC et al.

[G.R. No. 156225. January 29, 2008.]
Facts:
On October 8, 1992, the Letran Calamba Faculty and Employees Association (petitioner) filed
with Regional Arbitration Branch No. IV of the National Labor Relations Commission (NLRC) a
Complaint against Colegio de San Juan de Letran, Calamba, Inc. (respondent) for collection of
various monetary claims due to its members. Some of the allegations of the petitioners in its
Position Paper are: (1) In the computation of the thirteenth month pay of its academic personnel,
respondent does not include as basis therefor their compensation for overloads. It only takes into
account the pay the faculty members receive for their teaching loads not exceeding eighteen (18)
units; (2) respondent has not paid the wage increases required by Wage Order No. 5 to its
employees who qualify thereunder; (3) respondent has not also paid its employees the holiday
pay for the ten (10) regular holidays as provided for in Article 94 of the Labor Code. Respondent
has refused without justifiable reasons and despite demands to pay its obligations.
As to the inclusion of the overloads of respondent's faculty members in the computation of their
13th-month pay, petitioner argues that under the Revised Guidelines on the Implementation of
the 13th-Month Pay Law, promulgated by the Secretary of Labor on November 16, 1987, the
basic pay of an employee includes remunerations or earnings paid by his employer for services
rendered, and that excluded therefrom are the cash equivalents of unused vacation and sick
leave credits, overtime, premium, night differential, holiday pay and cost-of-living allowances.
Petitioner claims that since the pay for excess loads or overloads does not fall under any of the
enumerated exclusions and considering that the said overloads are being performed within the
normal working period of eight hours a day, it only follows that the overloads should be included
in the computation of the faculty members' 13th-month pay.
Issue:
Whether or not a teacher's overload pay should be considered in the computation of his or her
13th-month pay.
SC Ruling:
It is a settled rule that when an administrative or executive agency renders an opinion or issues a
statement of policy, it merely interprets a pre-existing law and the administrative interpretation is
at best advisory for it is the courts that finally determine what the law means. In the present case,
while the DOLE Order may not be applicable, the Court finds that overload pay should be
excluded from the computation of the 13th-month pay of petitioner's members.
In resolving the issue of the inclusion or exclusion of overload pay in the computation of a
teacher's 13th-month pay, it is decisive to determine what "basic salary" includes and excludes. In
this respect, the Court's disquisition in San Miguel Corporation v. Inciong is instructive, to wit:
Under Presidential Decree 851 and its implementing rules, the basic salary of an employee is
used as the basis in the determination of his 13th month pay. Any compensations or
remunerations which are deemed not part of the basic pay is excluded as basis in the
computation of the mandatory bonus. Under the Rules and Regulations Implementing
Presidential Decree 851, the following compensations are deemed not part of the basic salary: a)
Cost-of-living allowances granted pursuant to Presidential Decree 525 and Letter of Instruction
No. 174; b) Profit sharing payments; c) All allowances and monetary benefits which are not
considered or integrated as part of the regular basic salary of the employee at the time of the
promulgation of the Decree on December 16, 1975.
Under a later set of Supplementary Rules and Regulations Implementing Presidential Decree 851
issued by the then Labor Secretary Blas Ople, overtime pay, earnings and other remunerations
are excluded as part of the basic salary and in the computation of the 13th-month pay. The
exclusion of cost-of-living allowances under Presidential Decree 525 and Letter of Instruction No.
174 and profit sharing payments indicate the intention to strip basic salary of other payments
which are properly considered as "fringe" benefits. Likewise, the catch-all exclusionary phrase "all
allowances and monetary benefits which are not considered or integrated as part of the basic
salary" shows also the intention to strip basic salary of any and all additions which may be in the
form of allowances or "fringe" benefits. Moreover, the Supplementary Rules and Regulations
Implementing Presidential Decree 851 is even more emphatic in declaring that earnings and
other remunerations which are not part of the basic salary shall not be included in the
computation of the 13th-month pay.
While doubt may have been created by the prior Rules and Regulations Implementing
Presidential Decree 851 which defines basic salary to include all remunerations or earnings paid
by an employer to an employee, this cloud is dissipated in the later and more controlling
Supplementary Rules and Regulations which categorically, exclude from the definition of basic
salary earnings and other remunerations paid by employer to an employee. A cursory perusal of
the two sets of Rules indicates that what has hitherto been the subject of a broad inclusion is now
a subject of broad exclusion. The Supplementary Rules and Regulations cure the seeming
tendency of the former rules to include all remunerations and earnings within the definition of
basic salary.
The all-embracing phrase "earnings and other remunerations" which are deemed not part of the
basic salary includes within its meaning payments for sick, vacation, or maternity leaves,
premium for works performed on rest days and special holidays, pay for regular holidays and
night differentials. As such they are deemed not part of the basic salary and shall not be
considered in the computation of the 13th-month pay. If they were not so excluded, it is hard to
find any "earnings and other remunerations" expressly excluded in the computation of the 13th-
month pay. Then the exclusionary provision would prove to be idle and with no purpose.
This conclusion finds strong support under the Labor Code of the Philippines. To cite a few
provisions: “Art. 87. Overtime work. Work may be performed beyond eight (8) hours a day
provided that the employee is paid for the overtime work, additional compensation equivalent to
his regular wage plus at least twenty-five (25%) percent thereof”. It is clear that overtime pay is an
additional compensation other than and added to the regular wage or basic salary, for reason of
which such is categorically excluded from the definition of basic salary under the Supplementary
Rules and Regulations Implementing Presidential Decree 851. In Article 93 of the same Code,
paragraph “c.) work performed on any special holiday shall be paid an additional compensation of
at least thirty percent (30%) of the regular wage of the employee."
It is likewise clear that premium for special holiday which is at least 30% of the regular wage is an
additional compensation other than and added to the regular wage or basic salary. For similar
reason it shall not be considered in the computation of the 13th-month pay. In the same manner
that payment for overtime work and work performed during special holidays is considered as
additional compensation apart and distinct from an employee's regular wage or basic salary, an
overload pay, owing to its very nature and definition, may not be considered as part of a teacher's
regular or basic salary, because it is being paid for additional work performed in excess of the
regular teaching load.
Moreover, petitioner failed to refute private respondent's contention that excess teaching load is
paid by the hour, while the regular teaching load is being paid on a monthly basis; and that the
assignment of overload is subject to the availability of teaching loads. This only goes to show that
overload pay is not integrated with a teacher's basic salary for his or her regular teaching load. In
addition, overload varies from one semester to another, as it is dependent upon the availability of
extra teaching loads. As such, it is not legally feasible to consider payments for such overload as
part of a teacher's regular or basic salary. Verily, overload pay may not be included as basis for
determining a teacher's 13th-month pay.

PHILIPPINE AIRLINES vs PHILIPPINE AIRLINES EMPLOYEES ASSOC.

GR 142399 March 12, 2008

Arco Metal vs. Products Co., Inc., et al., vs. Samahan ng Mga Manggagawa sa Arco-Metal-
NAFLU
[G.R. No. 170734, May 14, 2008]
Facts:
Petitioner is a company engaged in the manufacture of metal products, whereas respondent is
the labor union of petitioner’s rank and file employees. Sometime in December 2003, petitioner
paid the 13th month pay, bonus, and leave encashment of three union members in amounts
proportional to the service they actually rendered in a year, which is less than a full twelve (12)
months. Respondent protested the prorated scheme, claiming that on several occasions
petitioner did not prorate the payment of the same benefits to seven (7) employees who had not
served for the full 12 months. According to respondent, the prorated payment violates the rule
against diminution of benefits under Article 100 of the Labor Code. Thus, they filed a complaint
before the National Conciliation and Mediation Board (NCMB).
Issue:
Whether or not the grant of 13th month pay, bonus, and leave encashment in full regardless of
actual service rendered constitutes voluntary employer practice and, consequently, whether or
not the prorated payment of the said benefits constitute diminution of benefits under Article 100 of
the Labor Code.
SC Ruling:
Any benefit and supplement being enjoyed by employees cannot be reduced, diminished,
discontinued or eliminated by the employer. The principle of non-diminution of benefits is founded
on the Constitutional mandate to "protect the rights of workers and promote their welfare and to
afford labor full protection. Said mandate in turn is the basis of Article 4 of the Labor Code which
states that all doubts in the implementation and interpretation of this Code, including its
implementing rules and regulations shall be rendered in favor of labor.
Jurisprudence is replete with cases which recognize the right of employees to benefits which
were voluntarily given by the employer and which ripened into company practice. Thus in
DavaoFruits Corporation v. Associated Labor Unions, et al. where an employer had freely and
continuously included in the computation of the 13th month pay those items that were expressly
excluded by the law, we held that the act which was favorable to the employees though not
conforming to law had thus ripened into a practice and could not be withdrawn, reduced,
diminished, discontinued or eliminated. In Sevilla Trading Company v. Semana, we ruled that the
employer’s act of including non-basic benefits in the computation of the 13th month pay was a
voluntary act and had ripened into a company practice which cannot be peremptorily withdrawn.
In the years 1992, 1993, 1994, 1999, 2002 and 2003, petitioner had adopted a policy of freely,
voluntarily and consistently granting full benefits to its employees regardless of the length of
service rendered. True, there were only a total of seven employees who benefited from such a
practice, but it was an established practice nonetheless. Jurisprudence has not laid down any rule
specifying a minimum number of years within which a company practice must be exercised in
order to constitute voluntary company practice. Thus, it can be six (6) years, three (3) years, or
even as short as two (2) years. Petitioner cannot shirk away from its responsibility by merely
claiming that it was a mistake or an error, supported only by an affidavit of its manufacturing
group head. Hence, petition was denied.

UNIVERSAL ROBINA SUGAR MILLING CORP vs CABALLEDA

GR 156644 July 28, 2008