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I. THE APPLICABLE LAWS


II. BASIC PRINCIPLES

1. ABS-CBN BROADCASTING CORPORATION, petitioner, vs. MARLYN NAZARENO, MERLOU
GERZON, JENNIFER DEIPARINE, and JOSEPHINE LERASAN, respondents.

G.R. No. 164156
September 26, 2006

Facts:

ABS-CBN 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, with a monthly compensation
of P4,000. They were issued ABS-CBN employees identification cards and were required to
work for a minimum of eight hours a day, including Sundays and holidays. They were made
to: a) Prepare, arrange airing of commercial broadcasting based on the daily operations log
and digicart of respondent ABS-CBN; b) Coordinate, arrange personalities for air interviews;
c) Coordinate, prepare schedule of reporters for scheduled news reporting and lead-in or
incoming reports; d) Facilitate, prepare and arrange airtime schedule for public service
announcement and complaints; e) Assist, anchor program interview, etc; and f) Record, log
clerical reports, man based control radio.

Petitioner and the ABS-CBN Rank-and-File Employees executed a Collective Bargaining
Agreement (CBA) to be effective during the period from Dec 11, 1996 to Dec 11, 1999.
However, since petitioner refused to recognize PAs as part of the bargaining unit,
respondents were not included to the CBA.

Due to a memorandum assigning PAs to non-drama programs, and that the DYAB studio
operations would be handled by the studio technician. There was a revision of the schedule
and assignments and that respondent Gerzon was assigned as the full-time PA of the TV
News Department reporting directly to Leo Lastimosa.

On Oct 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 13
th
Month Pay with Damages against the petitioner before the NLRC.

Issue: WON the respondents are regular employees?

Held: Respondents are considered regular employees of ABS-CBN and are entitled to the
benefits granted to all regular employees.

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. Article 280 of the Labor Code provides:
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Regular and Casual Employment.The provisions of written agreement to the
contrary notwithstanding and regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the employee has been engaged
to perform activities which are usually necessary or desirable in the usual business or
trade of the employer except where the employment has been fixed for a specific
project or undertaking the completion or termination of which has been determined
at the time of the engagement of the employee or where the work or services to be
performed is seasonal in nature and the employment is for the duration of the
season.

Any employee who has rendered at least one year of service, whether continuous or
intermittent, is deemed regular with respect to the activity performed and while such
activity actually exists. The fact that respondents received pre-agreed talent fees instead
of salaries, that they did not observe the required office hours, and that they were
permitted to join other productions during their free time are not conclusive of the nature of
their employment. They are regular employees who perform several different duties under
the control and direction of ABS-CBN executives and supervisors.

There are two kinds of regular employees under the law: (1) those engaged to perform
activities which are necessary or desirable in the usual business or trade of the employer;
and (2) those casual employees who have rendered at least one year of service, whether
continuous or broken, with respect to the activities in which they are employed.

What determines whether a certain employment is regular or otherwise is the character of
the activities performed in relation to the particular trade or business taking into account all
the circumstances, and in some cases the length of time of its performance and its
continued existence.

The employer-employee relationship between petitioner and respondents has been proven
by the ff:

First. 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 petitioners personnel department just like any ordinary employee.

Second. The so-called talent fees of respondents correspond to wages given as a
result of an employer-employee relationship. Respondents did not have the power to
bargain for huge talent fees, a circumstance negating independent contractual
relationship.

Third. Petitioner could always discharge respondents should it find their work
unsatisfactory, and respondents are highly dependent on the petitioner for continued
work.

Fourth. 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
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independent business or professional service, such work is a regular employment of such
employee and not an independent contractor.


2. ATOK BIG WEDGE COMPANY, INC., petitioner, vs. JESUS P. GISON, respondents.

G.R. No. 169510
August 8, 2011

Facts:
Sometime in February 1992, respondent Jesus P. Gison was engaged as part-time consultant on
retainer basis by petitioner Atok Big Wedge Company, Inc. through its then Asst. Vice-President
and Acting Resident Manager, Rutillo A. Torres. As a consultant on retainer basis, respondent
assisted petitioner's retained legal counsel with matters pertaining to the prosecution of cases
against illegal surface occupants within the area covered by the company's mineral claims.
Respondent was likewise tasked to perform liaison work with several government agencies,
which he said was his expertise. Petitioner did not require respondent to report to its office on
a regular basis, except when occasionally requested by the management to discuss matters
needing his expertise as a consultant. As payment for his services, respondent received a
retainer fee of P3,000.00 a month, which was delivered to him either at his residence or in a
local restaurant. The parties executed a retainer agreement, but such agreement was misplaced
and can no longer be found. The said arrangement continued for the next eleven years.
Sometime thereafter, since respondent was getting old, he requested that petitioner cause his
registration with the Social Security System (SSS), but petitioner did not accede to his request.
He later reiterated his request but it was ignored by respondent considering that he was only a
retainer/consultant. On February 4, 2003, respondent filed a Complaint with the SSS against
petitioner for the latter's refusal to cause his registration with the SSS. On the same date, Mario
D. Cera, in his capacity as resident manager of petitioner, issued a Memorandum advising
respondent that within 30 days from receipt thereof, petitioner is terminating his retainer
contract with the company since his services are no longer necessary.

On February 21, 2003, respondent filed a Complaint for illegal dismissal, unfair labor practice,
underpayment of wages, non-payment of 13th month pay, vacation pay, and sick leave pay
with the National Labor Relations Commission (NLRC), Regional Arbitration Branch (RAB),
Cordillera Administrative Region, against petitioner, Mario D. Cera, and Teofilo R. Asuncion, Jr.
The case was docketed as NLRC Case No. RAB-CAR-02-0098-03.

Issue:
Whether or not there was an employer-employee relationship and whether Gison was illegally
dismissed.

Ruling:
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The petition is meritorious.

To ascertain the existence of an employer-employee relationship jurisprudence has invariably
adhered to the four-fold test, to wit: (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." Of these four, the last one is the most important. The
so-called "control test" is commonly regarded as the most crucial and determinative indicator
of the presence or absence of an employer-employee relationship. Under the control test, an
employer-employee relationship exists where the person for whom the services are performed
reserves the right to control not only the end achieved, but also the manner and means to be
used in reaching that end.

Applying the aforementioned test, an employer-employee relationship is apparently absent in
the case at bar. Among other things, respondent was not required to report everyday during
regular office hours of petitioner. Respondent's monthly retainer fees were paid to him either
at his residence or a local restaurant. More importantly, petitioner did not prescribe the
manner in which respondent would accomplish any of the tasks in which his expertise as a
liaison officer was needed; respondent was left alone and given the freedom to accomplish the
tasks using his own means and method. Respondent was assigned tasks to perform, but
petitioner did not control the manner and methods by which respondent performed these
tasks. Verily, the absence of the element of control on the part of the petitioner engenders a
conclusion that he is not an employee of the petitioner.

Moreover, the absence of the parties' retainership agreement notwithstanding, respondent
clearly admitted that petitioner hired him in a limited capacity only and that there will be no
employer-employee relationship between them.

Contrary to the conclusion of the CA, respondent is not an employee, much more a regular
employee of petitioner. The appellate court's premise that regular employees are those who
perform activities which are desirable and necessary for the business of the employer is not
determinative in this case. In fact, any agreement may provide that one party shall render
services for and in behalf of another, no matter how necessary for the latter's business, even
without being hired as an employee. Hence, respondent's length of service and petitioner's
repeated act of assigning respondent some tasks to be performed did not result to
respondent's entitlement to the rights and privileges of a regular employee.
Furthermore, despite the fact that petitioner made use of the services of respondent for eleven
years, he still cannot be considered as a regular employee of petitioner. Article 280 of the Labor
Code, in which the lower court used to buttress its findings that respondent became a regular
employee of the petitioner, is not applicable in the case at bar. Indeed, the Court has ruled that
said provision is not the yardstick for determining the existence of an employment relationship
because it merely distinguishes between two kinds of employees, i.e., regular employees and
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casual employees, for purposes of determining the right of an employee to certain benefits, to
join or form a union, or to security of tenure; it does not apply where the existence of an
employment relationship is in dispute. It is, therefore, erroneous on the part of the Court of
Appeals to rely on Article 280 in determining whether an employer-employee relationship
exists between respondent and the petitioner

Considering that there is no employer-employee relationship between the parties, the
termination of respondent's services by the petitioner after due notice did not constitute illegal
dismissal warranting his reinstatement and the payment of full backwages, allowances and
other benefits.


3. JOSE MEL BERNARTE, petitioner, vs. PHILIPPINE BASKETBALL ASSOCIATION (PBA), JOSE
EMMANUEL M. EALA, and PERRY MARTINEZ, respondents.

G.R. No. 192084
September 14, 2011

Facts:
Complainants (Jose Mel Bernarte and Renato Guevarra) aver that they were invited to join the
PBA as referees. During the leadership of Commissioner Emilio Bernardino, they were made to
sign contracts on a year-to-year basis. During the term of Commissioner Eala, however, changes
were made on the terms of their employment. They contend they were illegally dismissed.
Respondents aver, on the other hand, that complainants entered into two contracts of retainer
with the PBA. Complainants were not illegally dismissed because they were not employees of
the PBA. Their respective contracts of retainer were simply not renewed. PBA had the
prerogative of whether or not to renew their contracts, which they knew were fixed.

Labor Arbiter declared petitioner an employee whose dismissal by respondents was illegal.
Accordingly, the Labor Arbiter ordered the reinstatement of petitioner and the payment
of backwages, moral and exemplary damages and attorneys fees. NLRC affirmed the Labor
Arbiters judgment. Respondents filed a petition for certiorari with the Court of Appeals, which
overturned the decisions of the NLRC and Labor Arbiter.

Issue:
Whether petitioner is an employee of respondents, which in turn determines whether
petitioner was illegally dismissed.


Ruling:
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To determine the existence of an employer-employee relationship, case law has consistently
applied the four-fold test. In this case, PBA admits repeatedly engaging petitioners services, as
shown in the retainer contracts. PBA pays petitioner a retainer fee, exclusive of per diem or
allowances, as stipulated in the retainer contract. PBA can terminate the retainer contract for
petitioners violation of its terms and conditions.

The contractual stipulations hardly demonstrate control over the means and methods by which
petitioner performs his work as a referee officiating a PBA basketball game. The contractual
stipulations do not pertain to, much less dictate, how and when petitioner will blow the whistle
and make calls. On the contrary, they merely serve as rules of conduct or guidelines in order to
maintain the integrity of the professional basketball league. As correctly observed by the Court
of Appeals, how could a skilled referee perform his job without blowing a whistle and making
calls? x x x [H]ow can the PBA control the performance of work of a referee without controlling
his acts of blowing the whistle and making calls?
We agree with respondents that once in the playing court, the referees exercise their own
independent judgment, based on the rules of the game, as to when and how a call or decision is
to be made. The referees decide whether an infraction was committed, and the PBA cannot
overrule them once the decision is made on the playing court. The referees are the only,
absolute, and final authority on the playing court. Respondents or any of the PBA officers
cannot and do not determine which calls to make or not to make and cannot control the
referee when he blows the whistle because such authority exclusively belongs to the referees.
The very nature of petitioners job of officiating a professional basketball game undoubtedly
calls for freedom of control by respondents.

Moreover, the following circumstances indicate that petitioner is an independent contractor:
(1) the referees are required to report for work only when PBA games are scheduled, which is
three times a week spread over an average of only 105 playing days a year, and they officiate
games at an average of two hours per game; and (2) the only deductions from the fees received
by the referees are withholding taxes.

In other words, unlike regular employees who ordinarily report for work eight hours per day for
five days a week, petitioner is required to report for work only when PBA games are scheduled
or three times a week at two hours per game. In addition, there are no deductions for
contributions to the Social Security System, Philhealth or Pag-Ibig, which are the usual
deductions from employees salaries. These undisputed circumstances buttress the fact that
petitioner is an independent contractor, and not an employee of respondents. Furthermore,
the applicable foreign case law declares that a referee is an independent contractor whose
special skills and independent judgment are required specifically for such position and cannot
possibly be controlled by the hiring party.

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In addition, the fact that PBA repeatedly hired petitioner does not by itself prove that petitioner
is an employee of the former. For a hired party to be considered an employee, the hiring party
must have control over the means and methods by which the hired party is to perform his
work, which is absent in this case. The continuous rehiring by PBA of petitioner simply signifies
the renewal of the contract between PBA and petitioner, and highlights the satisfactory services
rendered by petitioner warranting such contract renewal. Conversely, if PBA decides to
discontinue petitioners services at the end of the term fixed in the contract, whether for
unsatisfactory services, or violation of the terms and conditions of the contract, or for whatever
other reason, the same merely results in the non-renewal of the contract, as in the present
case. The non-renewal of the contract between the parties does not constitute illegal dismissal
of petitioner by respondents.


4. CALAMBA MEDICAL CENTER, INC., petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION, RONALDO LANZANAS AND MERCEDITHA LANZANAS, respondents.

G.R. No. 176484.
November 25, 2008

Facts:
Calamba Medical Center, engaged the services of medical doctors-spouses Dr. Ronaldo and Dr.
Merceditha Lanzanas as part of its team of resident physicians. Reporting at the hospital twice-
a-week on twenty-four-hour shifts, respondents were paid a monthly "retainer" of P4,800.00
each. Resident physicians were also given a percentage share out of fees charged for out-
patient treatments, operating room assistance and discharge billings, in addition to their fixed
monthly retainer.

The work schedules of the members of the team of resident physicians were fixed by
petitioner's medical director Dr. Desipeda, and they were issued ID, enrolled in the SSS and
withheld tax from them.
After an incident where Dr. Trinidad overheard a phone conversation between Dr. Ronaldo and
a fellow employee Diosdado Miscala, the former was given a preventive suspension and his
wife Dr. Merceditha was not given any schedule after sending the Memorandum. On March
1998, Dr. Ronaldo filed a complaint for illegal suspension and Dr. Merceditha for illegal
dismissal.

Issue:
Whether or not there exists an employer-employee relationship between petitioner and the
spouses-respondents?

Ruling:
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Drs. Lanzanas were declared employees of the petitioner hospital.

Under the control test, an employment relationship exists between a physician and a hospital if
the hospital controls both the means and the details of the process by which the physician is to
accomplish his task.

That petitioner exercised control over respondents gains light from the undisputed fact that in
the emergency room, the operating room, or any department or ward for that matter,
respondents' work is monitored through its nursing supervisors, charge nurses and orderlies.
Without the approval or consent of petitioner or its medical director, no operations can be
undertaken in those areas. For control test to apply, it is not essential for the employer to
actually supervise the performance of duties of the employee, it being enough that it has the
right to wield the power.

With respect to respondents' sharing in some hospital fees, this scheme does not sever the
employment tie between them and petitioner as this merely mirrors additional form or another
form of compensation or incentive similar to what commission-based employees receive as
contemplated in Article 97 (f) of the Labor Code.

Moreover, respondents were made subject to petitioner-hospital's Code of Ethics,the
provisions of which cover administrative and disciplinary measures on negligence of duties,
personnel conduct and behavior, and offenses against persons, property and the hospital's
interest.
More importantly, petitioner itself provided incontrovertible proof of the employment status of
respondents, namely, the identification cards it issued them, the payslips and BIR W-2 (now
2316) Forms which reflect their status as employees, and the classification as "salary" of their
remuneration. Moreover, it enrolled respondents in the SSS and Medicare (Philhealth)
program. It bears noting at this juncture that mandatory coverage under the SSS Law is
premised on the existence of an employer-employee relationship, except in cases of
compulsory coverage of the self-employed.



5. PRIMO E. CAONG, JR., ALEXANDER J. TRESQUIO, AND LORIANO D. DALUYON, petitioner,
vs. AVELINO REGUALOS, respondents.

G.R. No. 179428.
January 26, 2011

Facts:
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Petitioners filed a complaint against the respondent on the grounds of illegal dismissal. Their
allegations are they were not availed of the due process of law when they were dismissed,
there was no just cause and the respondent disregarded that there are days that boundary
could not be met due to the scarcity of passengers. The respondent countered that they were
not employees hence they are not covered by the labor code, and that there is no such illegal
dismissal since he only suspended them because they have arrears to be paid which was
resulted from the lack of payment of boundary.

The labor arbiter favored the respondents contention, that there was no illegal dismissal, the
respondent was just imposing sanction on the petitioners for not paying the full amount of
boundary, thus resulted to suspension. The petitioner appealed the case, however it was
denied thus the case went up to the Supreme Court.

Issue:
WON there was employee and employer relationship between the parties and there was an
illegal dismissal in case.

Ruling:
Yes, there is employee and employer relationship.

The Supreme Court held that in boundary system, it shall not be treated as lessee and lessor
relationship, the existence of boundary does not negate the employee and employer
relationship.
However on the issue of illegal dismissal, the court ruled that there is no illegal dismissal. Since
the respondent was just exercising his prerogative as an employer, thus he has the right to
suspend them due to not paying the full amount of boundary.


6. SUSAN G. CARUNGCONG, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, SUN
LIFE ASSURANCE CO. OF CANADA, LANCE KEMP and MERTON DEVEZA, respondents.

G.R. No. 118086.
December 15, 1997.

Facts:
Petitioner Carungcong began her career in the insurance industry 1974 as an agent of
respondent Sun Life Assurance Company of Canada. On January 1, 1986 Carungcong and Sun
Life executed an agreement by which the former was named New Business Manager. The
agreement stressed that the "New Business Manager" in the performance of his/her duties
defined therein, shall be considered an independent contractor and not an employee of Sun
Life. On January 11, 1990, Sun Life terminated her relationship with the company for
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dishonesty, disloyalty and breach of her Agent's agreement and New Business Manager's
Agreement. Carungcong then instituted proceedings for vindication in the Arbitration Branch of
the National Labor Relations Commission. She succeeded in obtaining a favorable judgment.
The Labor Arbiter found that there existed an employee-employer relationship between her
and Sun Life. On appeal, the NLRC reversed the Labor Arbiters judgment. It affirmed that no
employment relationship existed between Carungcong and Sun Life. Hence, the present
petition.

Issue:
Whether or not Carungcong should be considered as an employee of Sun Life?

Ruling:
It is germane to advert to the fact, which should by now be apparent, that Carungcong was not
your ordinary run-of-the-mill employee, nor even your average managerial employee or
supervisor. Her stated annual income from her occupation is impressive by any standards: "in
excess of P3,000,000.00," exclusive of overriding commissions. Certainly, she may not be
likened to an ordinary person applying for employment, or an ordinary employee striving to
keep his job, under the moral dominance of the hiring entity or individual. By no means may
Carungcong be considered as dealing, or having dealt, with Sun Life from an inferior position, as
a disadvantaged, morally-dominated person. She must be deemed as having transacted with
Sun Life's executives on more or less equal terms.
These considerations impel concurrence with the conclusions of the challenged decision and
resolution of respondent Commission which considered Carungcong as an independent
contractor, not an employee of Sun Life. It is significant that this issue of the precise status of
Carungcong as an independent contractor, evidently deemed decisive by respondent
Commission, was discussed by it at some length not once, but twice, first in its Decision of July
29, 1994, and then in its second Decision of October 28, 1994 resolving the separate motions
for reconsideration of the parties.
In the Decision of July 29, 1994, the Commission said:


A thorough review of the facts and evidence adduced on record compels us to rule in
the negative (on "the question of whether or not complainant Carungcong is a regular
employee of respondents").
Moreover, it is true that complainant Carungcong's duties and functions derived from
her then existing agreements/contracts were made subject to rules and regulations
issued by respondent company, and for that matter, have likewise been made subject of
certain limitations imposed by said respondent company. Nonetheless, these are not
sufficient to accord the effect of establishing employer-employee relationship absent in
this case. This is so because the insurance business is not just any other ordinary
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business. It is one that is imbued with public interest, hence, it must be governed by the
rules and regulations of the state. The controls adverted to by complainant are latent in
the kind of business she is into and are mainly aimed at promoting the results the
parties so desire and do not necessarily create any employer-employee relationships,
where the employers' controls have to interfere in the methods and means by which the
employee would like to employ to arrive at the desired results.
For that matter, complainant Carungcong was never paid a fixed wage or salary but was
mainly paid by commissions, depending on the level and volume of her
performance/production, the number of trained agents, when taken in and assigned to
her, being responsible for her added income as she gets a certain percentage from the
said agents' production as part of her commission.
In the second judgment of October 28, 1994,

respondent Commission stressed the following
points:
Complainant's "theory of the case" appears to be limited to pointing out that
respondent company issued rules and regulations to which she should conform.
However, no showing has been made that such rules and
regulations effectively and actually controlled or restricted her choice of methods in
performing her duties as New Business Manager. Without such proof, there can be no
plausible reason to believe that her contractual declaration that she was an
independent contractor has been qualified.
Of course, Carungcong disagrees with these dispositions. Quite possibly, others may share her
opinion, and insist that there was error in either the appreciation of the evidence or the choice
of law or jurisprudence applied by the Commission. But such errors of judgment as might be
ascribed to the Commission's reasoned conclusions may not be accorded so egregious a cast as
to be fairly considered to constitute grave abuse of discretion meriting correction by the
extraordinary writ of certiorari.
It should be apparent that no whimsicality, capriciousness, or want of logic or foundation may
rationally be imputed to NLRC in its marshaling and analysis of the evidence, its identification of
the issues, in its assessment of the arguments thereon, and its conclusions on the basis thereof.
It is simply not possible in the premises to opine that grave abuse of discretion was attendant
on its challenged decisions.

7. COCA COLA BOTTLERS (PHILS.), INC./ERIC MONTINOLA, Manager, petitioners, vs. DR.
DEAN N. CLIMACO, respondent.

G.R. No. 146881.
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February 5, 2007.

Facts:
Dr. Dean Climaco(respondent), a medical doctor, was hired by Coca-cola Bottlers
Phil.(petitioner) by virtue of a Retainer Agreement. Among the terms and conditions under
their retainer agreement are:
That the agreement shall only for 1 year beginning Jan. 1, 1988 to Dec. 31, 1988. Either
party may terminate the contract upon giving a 30-day written notice to the other;
That petitioner shall compensate respondent a retainer fee of P3,800/month. The
DOCTOR may charge professional fee for hospital services rendered in line with his
specialization;
That in consideration of the retainers fee, the DOCTOR agrees to perform the duties
and obligations in the COMPREHENSIVE MEDICAL PLAN, made an integral part of this
retainer agreement;
That the DOCTOR shall observe clinic hours at the companys premises from Monday to
Saturday of a minimum of two (2) hours each day or a maximum of TWO (2) hours each
day or treatment from 7:30 a.m. to 8:30 a.m and 3:00pm to 4:00pm. It is further
understood that the DOCTOR shall be on call at all times during the other workshifts to
attend to emergency case(s);
That no employee-employer relationship shall exist between the company and the
DOCTOR.

The retainer agreement expired after 1 year. However, despite the non-renewal of the
agreement, respondent continued to perform his functions as company doctor to petitioner
until he received a letter dated march 9, 1995 from the company ending their retainership
agreement.
Respondent thereafter filed a complaint before the NLRC seeking recognition as a regular
employee of petitioner and thus prayed from payment of all the benefits of a regular employee
including 13th month pay, COLA, holiday pay, service incentive leave, and Christmas bonus.
Also, respondent filed another complaint for illegal dismissal against petitioner.

In the Decisions dated Nov. 28, 1996 & Feb. 24, 1997, both the instant complaint was dismissed
by the Labor Arbiters and subsequently affirmed by the NLRC on the ground that no employer-
employee relationship existed between petitioner company and respondent.
However when it was elevated to CA for review, the latter ruled that employer-employee
relationship existed between the parties after applying the four-fold test: (1) power to hire
employee (2) payment of wages (3) power to dismissal (4) and power to control over the
employee with respect to the means and methods by which the work is to be accomplished.
The CA held it in this wise:
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First, the agreement provide the company desires to engage on a retainer basis the
services of a physician and the said DOCTOR is accepting such engagement. This clearly
shows that coca-cola company exercised its power to hire.
Secondly, the agreement showed that petitioner would compensate the doctor for
P3,800/month. This would represent the element of payment of wages.
Thirdly, it was provided in the agreement that the same shall be valid only for 1 year.
the said term notwithstanding, either party may terminated the contract upon giving
30-day written notice. This would show that petitioner had the power to dismissal.
Lastly, the agreement reveal that Coca-cola control over the conduct of respondent in
the latters performance of his duties sas a doctor for the company.
Hence, this petition filed by Coca-cola company

Issue:
Whether or not there exist an employer-employee relationship between the parties.

Ruling:
The Court agrees with the finding of the Labor Arbiter and the NLRC.

The Court held that the Labor Arbiter and the NLRC correctly found that petitioner company
lacked the power of control over the performance by respondent of his duties.

The Court citing the case of Neri vs. NLRC said, petitioner company, through the Comprehensive
Medical Plan, provided guidelines merely to ensure that the end result was achieved. In other
words, what was sought to be controlled by the petitioner company was actually the end result
of the task. The guidelines or the Comprehensive Medical Plan were laid down merely to ensure
that the desired end result was achieved but did not control the means and methods by which
respondent performed his assigned tasks.

The Supreme Court further held that, an employee is required to stay in the employers
workplace or proximately close thereto that he cannot utilize his time effectively and gainfully
for his own purpose. Such is not the prevailing situation here. The respondent does not dispute
that fact that outside of the two (2) hours that he is required to be at petitioner companys
premises, he is not at all further required to just sit around in the premises and wait for an
emergency to occur so as to enable him from using such hours for his own benefit and
advantage. In fact, respondent maintains his own private clinic attending his private practice in
the city, where he services his patients and bills them accordingly. The Court finds that the
requirement to be on call for emergency cases do not amount to such control, but are
necessary incidents to the Retainership Agreement.

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The Supreme Court also notes that the Agreement granted to both parties the power to
terminate their relationship upon giving a 30-day notice. Hence, petitioner company did not
wield the sole power of dismissal or termination.


8. ENCYCLOPAEDIA BRITANNICA (PHILIPPINES), INC., petitioner, vs. NATIONAL LABOR
RELATIONS COMMISSION, HON. LABOR ARBITER TEODORICO L. ROGELIO and BENJAMIN
LIMJOCO, respondents.

G.R. No. 87098.
November 4, 1996.

Facts:
Private respondent was a sales division manager of private petitioner and was in charge of
selling the latters products through sales representatives. As compensation, private
respondent receive commissions from the products sold by his agents. After resigning from
office to pursue his private business, he filed a complaint against the petitioner, claiming for
non-payment of separation pay and other benefits.

Petitioner alleged that complainant was not its employee but an independent dealer authorized
to promote and sell its products and in return, received commissions therefrom. Petitioner did
not have any salary and his income from petitioner was dependent on the volume of sales
accomplished. He had his own office, financed the business expense, and maintained his own
workforce. Thus petitioner argued that it had no control and supervision over the complainant
as to the manner and means he conducted his business operations.

The Labor Arbiter ruled that complainant was an employee of the petitioner company. Petioner
had control over the complainant since the latter was required to make periodic reports of his
sales activities to the company.

Issue:
Whether or not there exists an employer-employee relationship.

Ruling:
No. Control of employees conduct is commonly regarded as the most crucial and determinative
indicator of the presence or absence of an employer-employee relationship. Under this, an
employer-employee relationship exists where the person for whom the services are performed
reserves the right to control not only the end to be achieved, but also the manner and means to
be used in reaching that end.

15

The fact that petitioner issued memoranda to private respondent and to other division sales
managers did not prove that petitioner had actual control over them. The different memoranda
were merely guidelines on company policies which the sales managers follow and impose on
their respective agents.


9. JEROMIE D. ESCASINAS and EVAN RIGOR SINGCO, petitioners, vs. SHANGRI-LA'S MACTAN
ISLAND RESORT and DR. JESSICA J.R. PEPITO, respondents.

G.R. No. 178827.
March 4, 2009.

Facts:
Registered nurses Jeromie D. Escasinas and Evan Rigor Singco (petitioners) were engaged in
1999 and 1996, respectively, by Dr. Jessica Joyce R. Pepito (respondent doctor) to work in her
clinic at respondent Shangri-las Mactan Island Resort (Shangri-la) in Cebu of which she was a
retained physician. In late 2002, petitioners filed with the National Labor Relations Commission
(NLRC) a complaint for regularization, underpayment of wages, non-payment of holiday pay,
night shift differential and 13th month pay differential against respondents, claiming that they
are regular employees of Shangri-la. Shangri-la claimed, however, that petitioners were not its
employees but of respondent doctor, that Article 157 of the Labor Code, as amended, does not
make it mandatory for a covered establishment to employ health personnel, that the services
of nurses is not germane nor indispensable to its operations, and that respondent doctor is a
legitimate individual contractor who has the power to hire, fire and supervise the work of
nurses under her.

Issue:
Whether or not there exists an employer-employee relationship between Shangri-la and
petitioners.

Ruling:
The Court holds that respondent doctor is a legitimate independent contractor. That Shangri-la
provides the clinic premises and medical supplies for use of its employees and guests do not
necessarily prove that respondent doctor lacks substantial capital and investment. Besides, the
maintenance of a clinic and provision of medical services to its employees is required under Art.
157, which are not directly related to Shangri-las principal business operation of hotels and
restaurants.

As to payment of wages, respondent doctor is the one who underwrites the following: salaries,
SSS contributions and other benefits of the staff; group life, group personal accident insurance
and life/death insurance for the staff with minimum benefit payable at 12 times the employees
16

last drawn salary, as well as value added taxes and withholding taxes, sourced from her
P60,000.00 monthly retainer fee and 70% share of the service charges from Shangri-las guests
who avail of the clinic services. It is unlikely that respondent doctor would report petitioners as
workers, pay their SSS premium as well as their wages if they were not indeed her employees.
With respect to the supervision and control of the nurses and clinic staff, it is not disputed that
a document, Clinic Policies and Employee Manual claimed to have been prepared by
respondent doctor exists, to which petitioners gave their conformity and in which they
acknowledged their co-terminus employment status. It is thus presumed that said document,
and not the employee manual being followed by Shangri-las regular workers, governs how they
perform their respective tasks and responsibilities. In fine, as Shangri-la does not control how
the work should be performed by petitioners, it is not petitioners employer.




10. ANGELINA FRANCISCO, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, KASEI
CORPORATION, SEIICHIRO TAKAHASHI, TIMOTEO ACEDO, DELFIN LIZA, IRENE
BALLESTEROS, TRINIDAD LIZA and RAMON ESCUETA, respondents.

G.R. No. 170087.
August 31, 2006.

Facts:
In 1995, petitioner was hired by Kasei Corporation as Accountant and Corporate Secretary, and
as Liaison Officer to the City of Makati. In 1996, petitioner was designated as Acting Manager
while her old position as accountant was accorded to Gerry Nino, and she did so for five years.
In January 2001, petitioner was replaced by Liza R. Fuentes as Manager and was allegedly
required to sign a prepared resolution for the replacement but was assured that she will still be
connected with Kasei Corporation as Technical Assistant to Seiji Kamura and in charge of all BIR
matters. Thereafter, Kasei Corporation reduced her salary. Petitioner made repeated follow-ups
with the company cashier but she was advised that the company was not earning well.

On October 15, 2001, petitioner asked for her salary but she was informed that she is no longer
connected with the company. Since she was no longer paid her salary, petitioner did not report
for work and filed an action for constructive dismissal before the labor arbiter. The Labor
Arbiter found that petitioner was illegally dismissed.

Issue:
Whether there was an employer-employee relationship between petitioner and private
respondent Kasei Corporation

17

Ruling:
The answer is in the affirmative.

The court held that the better approach would therefore be to adopt a two-tiered test
involving: (1) the putative employers 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.
Hence, determination of such a relationship 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 employers business; (2) the extent of the workers investment in equipment and
facilities; (3) the nature and degree of control exercised by the employer; (4) the workers
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
corporations Technical Consultant. It is therefore apparent that petitioner is economically
dependent on the respondent corporation for her continued employment in the latters 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. More importantly, Respondent Corporation had the power to control petitioner with
the means and methods by which the work is to be accomplished.


11. CHARLIE JAO, petitioner, vs. BCC PRODUCST SALES INC., and TERRANCE TY, respondents.

G.R. No. 163700.
April 18, 2012.

Facts:
Petitioner maintained that respondent BCC Product Sales Inc. (BCC) and its President,
respondent Terrance Ty (Ty), employed him as comptroller starting from September 1995 with
a monthly salary of P20,000.00 to handle the financial aspect of BCCs business; that on October
19,1995, the security guards of BCC, acting upon the instruction of Ty, barred him from entering
18

the premises of BCC where he then worked; that his attempts to report to work in November
and December 12, 1995 were frustrated because he continued to be barred from entering the
premises of BCC; and that he filed a complaint dated December 28, 1995 for illegal dismissal,
reinstatement with full backwages, non-payment of wages, damages and attorneys fees.

Respondents countered that petitioner was not their employee but the employee of Sobien
Food Corporation (SFC), the major creditor and supplier of BCC; and that SFC had posted him as
its comptroller in BCC to oversee BCCs finances and business operations and to look after SFCs
interests or investments in BCC.

Labor Arbiter ruled in favor of petitioner NLRC vacated the ruling and remanded the case for
further proceedings. Thereafter, Labor Arbiter rendered a new decision dismissing petitioners
complaint for want of an employer-employee relationship between the parties. NLRC rendered
a decision reversing Labor Arbiter Mayors decision, and declaring that petitioner had been
illegally dismissed. Respondents moved for the reconsideration of the NLRC decision, but their
motion for reconsideration was denied. Thence, respondents assailed the NLRC decision
on certiorari in the CA which found that no employer-employee relationship existed between
petitioner BCC and the private respondent.

Issue:
Whether or not petitioner was respondents employee.

Ruling:
We cannot side with petitioner.

Our perusal of the affidavit of petitioner compels a conclusion similar to that reached by the CA
and the Labor Arbiter to the effect that the affidavit actually supported the contention that
petitioner had really worked in BCC as SFCs representative. It does seem more natural and
more believable that petitioners affidavit was referring to his employment by SFC even while
he was reporting to BCC as a comptroller in behalf of SFC. As respondents pointed out, it was
implausible for SFC to still post him to oversee and supervise the collections of accounts
receivables due from BCC beyond December 1995 if, as he insisted, BCC had already illegally
dismissed him and had even prevented him from entering the premises of BCC. Given the
patent animosity and strained relations between him and respondents in such circumstances,
indeed, how could he still efficiently perform in behalf of SFC the essential responsibility to
oversee and supervise collections at BCC? Surely, respondents would have vigorously
objected to any arrangement with SFC involving him.

We note that petitioner executed the affidavit in March 1996 to refute a statement Ty himself
made in his own affidavit dated December 11, 1995 to the effect that petitioner had illegally
appropriated some checks without authority from BCC. Petitioner thereby sought to show that
19

he had the authority to receive the checks pursuant to the arrangements between SFC and BCC.
This showing would aid in fending off the criminal charge respondents filed against him arising
from his mishandling of the checks.
Further, an affidavit dated September 5, 2000 by Alfredo So, the President of SFC, whom
petitioner offered as a rebuttal witness, lent credence to respondents denial of petitioners
employment. So declared in that affidavit, among others, that he had known petitioner for
being earlier his retained accountant having his own office but did not hold office in SFCs
premises; that Ty had approached him (So) looking for an accountant or comptroller to be
employed by him (Ty) in *BCCs+ distribution business of SFCs general merchandise, and had
later asked him on his opinion about petitioner; and that he (So) had subsequently learned that
Ty had already employed *petitioner+ as his comptroller as of September 1995.

The statements of So really supported respondents position in that petitioners association
with SFC prior to his supposed employment by BCC went beyond mere acquaintance with So.
That So, who had earlier merely retained petitioner as his accountant, thereafter employed
petitioner as a retained accountant after his supposed illegal dismissal by BCC raised a doubt
as to his employment by BCC, and rather confirmed respondents assertion of petitioner being
an employee of SFC while he worked at BCC.

Moreover, in determining the presence or absence of an employer-employee relationship, the
Court has consistently looked for the following incidents, to wit: (a) the selection and
engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the
employers 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.

Hereunder are some of the circumstances and incidents occurring while petitioner was
supposedly employed by BCC that debunked his claim against respondents. It can be deduced
from the March 1996 affidavit of petitioner that respondents challenged his authority to deliver
some 158 checks to SFC. Considering that he contested respondents challenge by pointing to
the existing arrangements between BCC and SFC, it should be clear that respondents did not
exercise the power of control over him, because he thereby acted for the benefit and in the
interest of SFC more than of BCC.

In addition, petitioner presented no document setting forth the terms of his employment by
BCC. The failure to present such agreement on terms of employment may be understandable
and expected if he was a common or ordinary laborer who would not jeopardize his
employment by demanding such document from the employer, but may not square well with
his actual status as a highly educated professional. Petitioners admission that he did not
receive his salary for the three months of his employment by BCC, as his complaint for illegal
dismissal and non-payment of wages and the criminal case for estafa he later filed against the
respondents for non-payment of wages indicated, further raised grave doubts about his
20

assertion of employment by BCC. If the assertion was true, we are puzzled how he could have
remained in BCCs employ in that period of time despite not being paid the first salary
ofP20,000.00/month. Moreover, his name did not appear in the payroll of BCC despite him
having approved the payroll as comptroller.

Lastly, the confusion about the date of his alleged illegal dismissal provides another indicium of
the insincerity of petitioners assertion of employment by BCC. In the petition for review
on certiorari, he averred that he had been barred from entering the premises of BCC
on October 19, 1995, and thus was illegally dismissed. Yet, his complaint for illegal dismissal
stated that he had been illegally dismissed on December 12, 1995 when respondents security
guards barred him from entering the premises of BCC, causing him to bring his complaint only
on December 29, 1995, and after BCC had already filed the criminal complaint against him. The
wide gap between October 19, 1995 and December 12, 1995 cannot be dismissed as a trivial
inconsistency considering that the several incidents affecting the veracity of his assertion of
employment by BCC earlier noted herein transpired in that interval.

With all the grave doubts thus raised against petitioners claim, we need not dwell at length on
the other proofs he presented, like the affidavits of some of the employees of BCC, the ID, and
the signed checks, bills and receipts. Suffice it to be stated that such other proofs were easily
explainable by respondents and by the aforestated circumstances showing him to be the
employee of SFC, not of BCC.



12. ANGELITO L. LAZARO, Proprietor of Royal Star Marketing, petitioner, vs. SOCIAL SECURITY
COMMISSION, ROSALINA LAUDATO, SOCIAL SECURITY SYSTEM and THE HONORABLE
COURT OF APPEALS, respondents.

G.R. No. 138254.
July 30, 2004.

Facts:
Rosalina Laudato filed a case against 3 of her employers including Royal Star Marketing for
remittance of her unpaid monthly SSC contributions. Despite her being a supervisor of sales
agents for Royal Star Marketing, said company failed to report her to SSC for compulsory
coverage. As a defense, Royal Star claims that Laudato was merely an agent paid on a
commission basis and that she was not subject to definite hours and conditions of work, hence,
she is not even an employee of Royal Star. Applying the control test, SSC ruled that Laudato
was an employee of Royal Star, on the other hand, Royal Star claims that they had no control
over her activities and hence, she was not employee;

21

Issue
Whether or not Laudato is an employee considering that she does not have fixed hours of
work?

Ruling:
Yes. Citing Cosmopolitan Funeral Homes v. Maalat, 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. The proper determination is 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.


13. LEGEND HOTEL (MANILA), owned by TITANIUM CORPORATION, and/or, NELSON NAPUD,
in his capacity as the President of Petitioner Corporation, petitioner, vs. HERNANI S.
REALUYO, also known as JOEY ROA, respondents.

G.R. No. 153511.
July 18, 2012.

Facts:
This labor case for illegal dismissal involves a pianist employed to perform in the restaurant of a
hotel.
On August 9, 1999, respondent, whose stage name was Joey R. Roa, filed a complaint for
alleged unfair labor practice, constructive illegal dismissal, and the underpayment/nonpayment
of his premium pay for holidays, separation pay, service incentive leave pay, and 13th month
pay.

Respondent averred that he had worked as a pianist at the Legend Hotels Tanglaw Restaurant
from September 1992 with an initial rate of P400.00/night that was given to him after each
nights performance; that his rate had increased to P750.00/night; and that during his
employment, he could not choose the time of performance, which had been fixed from 7:00
pm to 10:00 pm for three to six times/week. He added that the Legend Hotels restaurant
manager had required him to conform with the venues motif; that he had been subjected to
the rules on employees representation checks and chits, a privilege granted to other
employees; that on July 9, 1999, the management had notified him that as a cost-cutting
measure his services as a pianist would no longer be required effective July 30, 1999; that he
disputed the excuse, insisting that Legend Hotel had been lucratively operating as of the filing
of his complaint; and that the loss of his employment made him bring his complaint.

22

In its defense, petitioner denied the existence of an employer- employee relationship with
respondent, insisting that he had been only a talent engaged to provide live music at Legend
Hotels Madison Coffee Shop for three hours/day on two days each week; and stated that the
economic crisis that had hit the country constrained management to dispense with his services.

Issue:
Whether or not there exists an Employee-Employer relationship between the petitioner or the
respondent.

Ruling:
Employer-employee relationship existed between the parties

A review of the circumstances reveals that respondent was, indeed, petitioners employee. He
was undeniably employed as a pianist in petitioners Madison Coffee Shop/Tanglaw Restaurant
from September 1992 until his services were terminated on July 9, 1999.

Petitioner could not seek refuge behind the service contract entered into with respondent. It is
the law that defines and governs an employment relationship, whose terms are not restricted
to those fixed in the written contract, for other factors, like the nature of the work the
employee has been called upon to perform, are also considered. The law affords protection to
an employee, and does not countenance any attempt to subvert its spirit and intent. Any
stipulation in writing can be ignored when the employer utilizes the stipulation to deprive the
employee of his security of tenure. The inequality that characterizes employer-employee
relations generally tips the scales in favor of the employer, such that the employee is often
scarcely provided real and better options.

Secondly, petitioner argues that whatever remuneration was given to respondent were only
his talent fees that were not included in the definition of wage under theLabor Code; and that
such talent fees were but the consideration for the service contract entered into between
them.
The argument is baseless.

Respondent was paid P400.00 per three hours of performance from 7:00 pm to 10:00 pm, three
to six nights a week. Such rate of remuneration was later increased to P750.00 upon restaurant
manager Velazcos recommendation. There is no denying that the remuneration denominated
as talent fees was fixed on the basis of his talent and skill and the quality of the music he played
during the hours of performance each night, taking into account the prevailing rate for similar
talents in the entertainment industry.

Respondents remuneration, albeit denominated as talent fees, was still considered as included
23

in the term wage in the sense and context of the Labor Code, regardless of how petitioner
chose to designate the remuneration. Anent this, Article 97(f) of the Labor Code clearly states:
xxx wage paid to any employee shall mean the remuneration or earnings, however designated,
capable of being expressed in terms of money, whether fixed or ascertained on a time, task,
piece, or commission basis, or other method of calculating the same, which is payable by an
employer to an employee under a written or unwritten contract of employment for work done
or to be done, or for services rendered or to be rendered, and includes the fair and reasonable
value, as determined by the Secretary of Labor, of board, lodging, or other facilities customarily
furnished by the employer to the employee.


14. CESAR C LIRIO, doing business under the name and style of CELKOR AD SONICMIX,
petitioner, vs. WILMER D. GENOVIA, respondents.
G.R. No. 169757.
November 23, 2011.

Facts:
Respondent Genovia alleged he was hired as studio manager by petitioner Lirio, owner of
Celkor Ad Sonicmix Recording Studio (Celkor). He was employed to manage and operate Celkor
and to promote and sell the recording studio's services to music enthusiasts and other
prospective clients. Respondent stated that a few days after he started working as a studio
manager, petitioner approached him and told him about his project to produce an album for his
15-year-old daughter, Celine Mei Lirio, a former talent of ABS-CBN Star Records. Petitioner
asked respondent to compose and arrange songs for Celine and promised that he (Lirio) would
draft a contract to assure respondent of his compensation for such services. As agreed upon,
the additional services that respondent would render included composing and arranging
musical scores only, while the technical aspect in producing the album, such as digital editing,
mixing and sound engineering would be performed by respondent in his capacity as studio
manager for which he was paid on a monthly basis. Petitioner instructed respondent that his
work on the album as composer and arranger would only be done during his spare time, since
his other work as studio manager was the priority. Respondent then started working on the
album.

He reminded petitioner about his compensation as composer and arranger of the album.
Respondent again reminded petitioner about the contract on his compensation as composer
and arranger of the album. Petitioner told respondent that since he was practically a nobody
and had proven nothing yet in the music industry, respondent did not deserve a high
compensation, and he should be thankful that he was given a job to feed his family. Petitioner
informed respondent that he was entitled only to 20% of the net profit, and not of the gross
sales of the album, and that the salaries he received and would continue to receive as studio
manager of Celkor would be deducted from the said 20% net profit share. Respondent objected
24

and insisted that he be properly compensated. On March 14, 2002, petitioner verbally
terminated respondents services, and he was instructed not to report for work.
Labor Arbiter rendered a decision, finding that an employer-employee relationship existed
between petitioner and respondent, and that respondent was illegally dismissed. NLRC
reversed and set aside the decision of the Labor Arbiter. Respondents motion for
reconsideration was denied by the NLRC. Court of Appeals rendered a decision reversing and
setting aside the resolution of the NLRC, and reinstating the decision of the Labor Arbiter.
Petitioners motion for reconsideration was denied for lack of merit by the Court of Appeals.

Issue:
Whether there exists an employer-employee relationship between the parties.

Ruling:
Petitioners argument lacks merit. Before a case for illegal dismissal can prosper, it must first be
established that an employer-employee relationship existed between petitioner and
respondent.

It is settled that no particular form of evidence is required to prove the existence of an
employer-employee relationship. Any competent and relevant evidence to prove the
relationship may be admitted.
In this case, the documentary evidence presented by respondent to prove that he was an
employee of petitioner are as follows: (a) a document denominated as "payroll" (dated July 31,
2001 to March 15, 2002) certified correct by petitioner, which showed that respondent
received a monthly salary of P7,000.00 (P3,500.00 every 15th of the month and
another P3,500.00 every 30th of the month) with the corresponding deductions due to
absences incurred by respondent; and (2) copies of petty cash vouchers, showing the amounts
he received and signed for in the payrolls.

The said documents showed that petitioner hired respondent as an employee and he was paid
monthly wages of P7,000.00. Petitioner wielded the power to dismiss as respondent stated that
he was verbally dismissed by petitioner, and respondent, thereafter, filed an action for illegal
dismissal against petitioner. The power of control refers merely to the existence of the
power. It is not essential for the employer to actually supervise the performance of duties of
the employee, as it is sufficient that the former has a right to wield the power. Nevertheless,
petitioner stated in his Position Paper that it was agreed that he would help and teach
respondent how to use the studio equipment. In such case, petitioner certainly had the power
to check on the progress and work of respondent.

On the other hand, petitioner failed to prove that his relationship with respondent was one of
partnership. Such claim was not supported by any written agreement. The Court notes that in
the payroll dated July 31, 2001 to March 15, 2002, there were deductions from the wages of
25

respondent for his absence from work, which negates petitioners claim that the wages paid
were advances for respondents work in the partnership.

In termination cases, the burden is upon the employer to show by substantial evidence that the
termination was for lawful cause and validly made. Article 277 (b) of the Labor Code puts the
burden of proving that the dismissal of an employee was for a valid or authorized cause on the
employer, without distinction whether the employer admits or does not admit the
dismissal. For an employees dismissal to be valid, (a) the dismissal must be for a valid cause,
and (b) the employee must be afforded due process. Procedural due process requires the
employer to furnish an employee with two written notices before the latter is dismissed: (1) the
notice to apprise the employee of the particular acts or omissions for which his dismissal is
sought, which is the equivalent of a charge; and (2) the notice informing the employee of his
dismissal, to be issued after the employee has been given reasonable opportunity to answer
and to be heard on his defense. Petitioner failed to comply with these legal requirements;
hence, the Court of Appeals correctly affirmed the Labor Arbiters finding that respondent was
illegally dismissed, and entitled to the payment of backwages, and separation pay in lieu of
reinstatement.




15. MANILA GOLF & COUNTRY CLUB, INC., petitioner, vs. INTERMEDIATE APPELLATE COURT
and FERMIN LLAMAR, respondents.
G.R. No. 64948.
September 27, 1994.

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:
26

Whether or not persons 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).

Ruling:
SC ruled in favor of the petitioner. Llamar is not an employee of the Manila Golf and Country
Club, Inc. The club is under no obligation to report him for compulsory coverage to the SSS.

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.



16. ROGELIO P. NOGALES, for himself and on behalf of the minors, ROGER ANTHONY,
ANGELICA, NANCY, and MICHAEL CHRISTOPHER, all surnamed NOGALES, petitioners, vs.
CAPITOL MEDICAL CENTER, DR. OSCAR ESTRADA, DR. ELY VILLAFLOR, DR. ROSA UY, DR. JOEL
ENRIQUEZ, DR. PERPETUA LACSON, DR. NOE ESPINOLA, and NURSE J. DUMLAO, respondents.
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. While Corazon was on her last trimester of
pregnancy, Dr. Estrada noted an increase in her blood pressure and development of leg edema

indicating preeclampsia,

which is a dangerous complication of pregnancy.

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).

On 26 May 1976, Corazon was admitted at 2:30 a.m. at the CMC after the staff nurse noted the
written admission request

of Dr. Estrada. Upon Corazons admission at the CMC, Rogelio
27

Nogales (Rogelio) executed and signed the Consent on Admission and Agreement and
Admission Agreement.

Corazon was then brought to the labor room of the CMC.

Eventually, Corazon died after giving birth to the child, which prompted the petitioners to file a
complaint for damages against CMC, Dr. Estrada and other physicians and a certain nurse for
Corazons death. Petitioners mainly contended that defendant physicians and CMC personnel
were negligent in the treatment and management of Corazon's condition. Petitioners charged
CMC with negligence in the selection and supervision of defendant physicians and hospital
staff.

Issue:
Whether or not there exists an employer-employee relationship

Ruling:
Dr. Estrada is not an employee of CMC, but an independent contractor.

CMC disclaims liability by asserting that Dr. Estrada was a mere visiting physician and that it
admitted Corazon because her physical condition then was classified an emergency obstetrics
case.

CMC alleges that Dr. Estrada is an independent contractor for whose actuations CMC would be
a total stranger. CMC maintains that it had no control or supervision over Dr. Estrada in the
exercise of his medical profession.

In other words, private hospitals, hire, fire and exercise real control over their attending and
visiting consultant staff. While consultants are not, technically employees, a point which
respondent hospital asserts in denying all responsibility for the patients condition, the control
exercised, the hiring, and the right to terminate consultants, all fulfills the important hallmarks
of an employer-employee relationship, with the exception of the payment of wages. In
assessing whether such a relationship in fact exists, the control test is determining. Accordingly,
on the basis of the foregoing, we rule that for the purpose of allocating responsibility in medical
negligence cases, an employer-employee relationship in effect exists between hospitals and
their attending and visiting physicians.

While the Court in Ramos did not expound on the control test, such test essentially determines
whether an employment relationship exists between a physician and a hospital based on the
exercise of control over the physician as to details. Specifically, the employer (or the hospital)
must have the right to control both the means and the details of the process by which the
employee (or the physician) is to accomplish his task.

28

After a thorough examination of the voluminous records of this case, the Court finds no single
evidence pointing to CMCs exercise of control over Dr. Estradas treatment and management
of Corazons condition. It is undisputed that throughout Corazons pregnancy, she was under
the exclusive prenatal care of Dr. Estrada. At the time of Corazons admission at CMC and
during her delivery, it was Dr. Estrada, assisted by Dr. Villaflor, who attended to Corazon. There
was no showing that CMC had a part in diagnosing Corazons condition. While Dr. Estrada
enjoyed staff privileges at CMC, such fact alone did not make him an employee of CMC. CMC
merely allowed Dr. Estrada to use its facilities when Corazon was about to give birth, which
CMC considered an emergency. Considering these circumstances, Dr. Estrada is not an
employee of CMC, but an independent contractor.


17. PHILIPPINE GLOBAL COMMUNICATIONS, INC., petitioner, vs. RICARDO DE VERA,
respondent.
G.R. No. 157214.
June 7, 2005.

Facts:
Philippine Global Communications inc. is a corporation engaged in the business of
communication services and allied activities while Ricardo de Vera is a physician by profession
whom petitioner enlisted to attend to the medical needs of its employees. The controversy rose
when petitioner terminated his engagement.

In 1981, Dr. de Vera offered his services to petitioner. The parties agreed and formalized the
respondents proposal in a document denominated as retainership contract which will be for a
period of one year, subject to renewal and clearly stated that respondent will cover the
retainership the company previously with Dr. Eulau. The agreement went until 1994, in the
years 1995-1996, it was renewed verbally. The turning point of the parties relationship was
when petitioner, thru a letter bearing the subject TERMINATION RETAINERSHIP CONTRACT,
informed Dr. de Vera of its decision to discontinue the latters retainer contract because the
management has decided that it would be more practical to provide medical services to its
employees through accredited hospitals near the company premises.

On January 1997, de Vera filled a complaint for illegal dismissal before the NLRC, alleging that
he had been actually employed by the company as its company physician since 1991. The
commission rendered decision in favor of Philcom and dismissed the complaint saying that de
Vera was an independent contractor. On appeal to NLRC, it reversed the decision of the Labor
Arbiter stating that de Vera is a regular employee and directed the company to reinstate him.
Philcom appealed to the CA where it rendered decision deleting the award but reinstating de
Vera. Philcom filed this petition involving the difference of a job contracting agreements from
employee-employer relationship.
29


Issue:
Whether or not there exists an employee-employer relationship between the parties.

Ruling:
SC ruled that there was no such relationship existing between Dr. de Vera and Phil. Com.

Upon reading the contract dated September 6, 1982, signed by the complainant himself , it
clearly states that is a retainership contract. The retainer fee is indicated thereon and the
duration of the contract for one year is also clearly indicated in paragraph 5 of the Retainership
Contract. The complainant cannot claim that he was unaware that the contract was good only
for one year, as he signed the same without any objections. The complainant also accepted its
renewal every year thereafter until 1994. As a literate person and educated person, the
complainant cannot claim that he does not know what contract he signed and that it was
renewed on a year to year basis. The labor arbiter added the indicia, not disputed by
respondent, that from the time he started to work with petitioner, he never was included in its
payroll; was never deducted any contribution for remittance to the Social Security System (SSS);
and was in fact subjected by petitioner to the ten (10%) percent withholding tax for his
professional fee, in accordance with the National Internal Revenue Code, matters which are
simply inconsistent with an employer-employee relationship.

The elements of an employer-employee relationship are wanting in this case. The record are
replete with evidence showing that respondent had to bill petitioner for his monthly
professional fees. It simply runs against the grain of common experience to imagine that an
ordinary employee has yet to bill his employer to receive his salary. The power to terminate the
parties relationship was mutually vested on both. Either may terminate the arrangement at
will, with or without cause.

Remarkably absent is the element of control whereby the employer 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 to be accomplished. Petitioner had no control over the means
and methods by which respondent went about performing his work at the company premises.
In fine, the parties themselves practically agreed on every terms and conditions of the
engagement, which thereby negates the element of control in their relationship.



18. ROGELIO E. RAMOS and ERLINDA RAMOS, in their own behalf and as natural guardians of
the minors, ROMMEL RAMOS, ROY RODERICK RAMOS, and RON RAYMOND RAMOS,
petitioners, vs. COURT OF APPEALS, DE LOS SANTOS MEDICAL CENTER, DR. ORLINO HOSAKA
and DR. PERFECTA GUTIERREZ, respondents.
30


G.R. No. 124354.
April 11, 2002.

Facts:
Petitioner Erlinda Ramos, after seeking professional medical help, was advised to undergo
an operation for the removal of a stone in her gall bladder (cholecystectomy). She was
referred to Dr. Hosaka, a surgeon, who agreed to perform the operation on her. The
operation was scheduled for June 17, 1985 at 9:00 in the morning at private respondent De
Los Santos Medical Center (DLSMC). Since neither petitioner Erlinda nor her husband,
petitioner Rogelio, knew of any anesthesiologist, Dr. Hosaka recommended to them the
services of Dr. Gutierrez. 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 exists an employer-employee relationship between the medical center
and Drs. Hosaka and Guiterrez.

Ruling:
SC ruled that there was no employee-employer relationship between de Los Santos Medical
Center and Drs. Hosaka and Gutierrez.

After a careful consideration of the arguments raised by DLSMC, the Court finds that
respondent hospitals position on this issue is meritorious. There is no employer-employee
relationship between DLSMC and Drs. Gutierrez and Hosaka which would hold DLSMC solidarily
liable for the injury suffered by petitioner Erlinda under Article 2180 of the Civil Code.

As explained by respondent hospital, that the admission of a physician to membership in
DLSMCs medical staff as active or visiting consultant is first decided upon by the Credentials
Committee. Neither is there any showing that it is DLSMC which pays any of its consultants for
medical services rendered by the latter to their respective patients. Moreover, the contract
between the consultant in respondent hospital and his patient is separate and distinct from the
contract between respondent hospital and said patient. The first has for its object the rendition
of medical services by the consultant to the patient, while the second concerns the provision by
31

the hospital of facilities and services by its staff such as nurses and laboratory personnel
necessary for the proper treatment of the patient.

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 hospitals obligation is limited to providing the patient with the preferred room
accommodation and other things that will ensure that the doctors orders are carried out.


19. MARTICIO SEMBLANTE and DUBRICK PILAR petitioners, vs. COURT OF APPEALS, 19
TH

DIVISION, now SPECIAL FORMER 19
TH
DIVISION, GALLERA DE MANDAUE / SPOUSES VICENTE
and MARIA LUISA LOOT, respondents.

G.R. No. 196426.
August 15, 2011.

Facts:
Petitioners Marticio Semblante (Semblante) and Dubrick Pilar (Pilar) assert that they were hired
by respondents-spouses Vicente and Maria Luisa Loot, the owners of Gallera de Mandaue (the
cockpit), as the official masiador and sentenciador, respectively, of the cockpit sometime in
1993. Petitioners had both been issued employees identification cards that they wear every
time they report for duty. They alleged never having incurred any infraction and/or violation of
the cockpit rules and regulations. petitioners were denied entry into the cockpit upon the
instructions of respondents, and were informed of the termination of their services effective
that date. This prompted petitioners to file a complaint for illegal dismissal against
respondents.

Labor Arbiter Julie C. Rendoque found petitioners to be regular employees of respondents as
they performed work that was necessary and indispensable to the usual trade or business of
respondents for a number of years. NLRC denied the appeal for its non-perfection. The NLRC
held that there was no employer-employee relationship between petitioners and respondents,
respondents having no part in the selection and engagement of petitioners, and that no
separate individual contract with respondents was ever executed by petitioners. , the appellate
court found for respondents, noting that referees and bet-takers in a cockfight need to have the
kind of expertise that is characteristic of the game to interpret messages conveyed by mere
gestures. Hence, petitioners are akin to independent contractors who possess unique skills,
expertise, and talent to distinguish them from ordinary employees. Further, respondents did
not supply petitioners with the tools and instrumentalities they needed to perform work.
Petitioners only needed their unique skills and talents to perform their job as masiador and
sentenciador. The CA refused to reconsider its Decision.
32


Issue:
Whether or not there is an employer-employee relationship.

Ruling:
While respondents had failed to post their bond within the 10-day period provided above, it is
evident, on the other hand, that petitioners are NOT employees of respondents, since their
relationship fails to pass muster the four-fold test of employment. As found by both the NLRC
and the CA, respondents had no part in petitioners selection and management; petitioners
compensation was paid out of the arriba (which is a percentage deducted from the total bets),
not by petitioners; and petitioners performed their functions as masiador and sentenciador free
from the direction and control of respondents. In the conduct of their work, petitioners relied
mainly on their "expertise that is characteristic of the cockfight gambling," and were never
given by respondents any tool needed for the performance of their work.
Respondents, not being petitioners employers, could never have dismissed, legally or illegally,
petitioners, since respondents were without power or prerogative to do so in the first place.
The rule on the posting of an appeal bond cannot defeat the substantive rights of respondents
to be free from an unwarranted burden of answering for an illegal dismissal for which they
were never responsible.


20. SINGER SEWING MACHINE COMPANY, petitioner, vs. HON. FRANKLIN M. DRILON, MED-
ARBITER FELIX B. CHAGUILE, JR., and SINGER MACHINE COLLECTORS UNION-BAGUIO
(SIMACUB), respondents.

G.R. No. 91307.
January 24, 1991.

Facts:
Singer Machine Collectors Union-Baguio (SIMACUBA), the respondent union, filed a petition for
direct certification as the sole and exclusive bargaining agent of all collectors of the Singer
Sewing Machine Company, Baguio City branch (hereinafter referred to as "the Company").
The Company opposed the petition mainly on the ground that the union members are actually
not employees but are independent contractors as evidenced by the collection agency
agreement which they signed. The respondent Med-Arbiter, finding that there exists an
employer-employee relationship between the union members and the Company, granted the
petition for certification election. On appeal, Secretary of Labor Franklin M. Drilon affirmed it.

Issue:
Whether or not there exists an employee-employer relationship between the parties.

33

Ruling:
SC ruled in favor of petitioner. Private respondents are independent contractors, not
employees. As such, they cannot enter into a collective bargaining agreement with the
petitioner.

The present case mainly calls for the application of the control test, which if not satisfied, would
lead us to conclude that no employer-employee relationship exists. Hence, if the union
members are not employees, no right to organize for purposes of bargaining, nor to be certified
as such bargaining agent can ever be recognized. The following elements are generally
considered in the determination of the employer-employee relationship; "(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 although the latter 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 collectors could fall under either
category depending on the facts of each case.

A thorough examination of the facts of the case leads us to the conclusion that the existence of
an employer-employee relationship between the Company and the collection agents cannot be
sustained. 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 join or form a labor organization for purposes of collective
bargaining. Accordingly, there is no constitutional and legal basis for their "union" to be granted
their petition for direct certification.


21. JOSE Y. SONZA, petitioner, vs. ABS-CBN BROADCASTING CORPORATION, respondent.

G.R. No. 138051.
June 10, 2004.

Facts:
Respondent ABS-CBN Broadcasting Corporation ("ABS-CBN") signed an Agreement
("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 Carmela Tiangco ("TIANGCO"), as EVP and Treasurer.
34

Referred to in the Agreement as "AGENT," MJMDC agreed to provide SONZAs services
exclusively to ABS-CBN as talent for radio and television.

ABS-CBN agreed to pay for SONZAs services a monthly talent fee of P310,000 for the first year
and P317,000 for the second and third year of the Agreement. ABS-CBN would pay the talent
fees on the 10th and 25th days of the month. SONZA filed a complaint against ABS-CBN before
the Department of Labor and Employment, National Capital Region in Quezon City. SONZA
complained that ABS-CBN did not pay his salaries, separation pay, service incentive leave pay,
13th month pay, signing bonus, travel allowance and amounts due under the Employees Stock
Option Plan ("ESOP").

Issue:
Whether or not Jay Sonza is an employee of ABS-CBN.

Ruling:
SC ruled that Sonza is an independent contractor.

Selection and Engagement of Employees. 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. If SONZA did not possess such unique skills, talent and
celebrity status, ABS-CBN would not have entered into the Agreement with SONZA but would
have hired him through its personnel department just like any other employee.

Payment of Wages. All the talent fees and benefits paid to SONZA were the result of
negotiations that led to the Agreement. If SONZA were ABS-CBNs employee, there would be no
need for the parties to stipulate on benefits such as "SSS, Medicare, x x x and 13th month
pay"20 which the law automatically incorporates into every employer-employee contract.
Whatever benefits SONZA enjoyed arose from contract and not because of an employer-
employee relationship. SONZAs talent fees, amounting to P317,000 monthly in the second and
third year, are so huge and out of the ordinary that they indicate more an independent
contractual relationship rather than an employer-employee relationship.

Power of Dismissal. During the life of the Agreement, ABS-CBN agreed to pay SONZAs talent
fees as long as "AGENT and Jay Sonza shall faithfully and completely perform each condition of
this Agreement."24 Even if it suffered severe business losses, ABS-CBN could not retrench
SONZA because ABS-CBN remained obligated to pay SONZAs talent fees during the life of the
Agreement. This circumstance indicates an independent contractual relationship between
SONZA and ABS-CBN.

35

Power of Control. 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.29 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.



22. ASHMOR M. TESORO, PEDRO ANG and GREGORIO SHARP, petitioners, vs. METRO MANILA
RETREADERS, INC. (BANDAG) and/or NORTHERN LUZON RETREADERS, INC. (BANDAG) and/or
POWER TIRE AND RUBBER CORP. (BANDAG), respondents.
G.R. No. 171482.
March 12, 2014.

Facts:
On various dates between 1991 and 1998, petitioners Ashmor M. Tesoro, Pedro Ang, and
Gregorio Sharp used to work as salesmen for respondents Metro Manila Retreaders, Inc.,
Northern Luzon Retreaders, Inc., or Power Tire and Rubber Corporation. These are sister
companies collectively called Bandag. Bandag offered repair and retread services for used
tires. In 1998, however, Bandag developed a franchising scheme that would enable others to
operate tire and retreading businesses using its trade name and service system. Petitioners quit
their jobs as salesmen and entered into separate Service Franchise Agreements (SFAs) with
Bandag for the operation of their respective franchises. Under this SFA, Bandag would provide
funding with the petitioners subject to regular liquidation of revolving funds. The expenses of
these funds will be deducted from their sale in order to determine their income. After some
time, petitioners began to default on their obligations to submit periodic liquidations of their
operational expenses in relation to the revolving funds Bandag provided them. Bandag
terminated their SFA.

Aggrieved, petitioners filed a complaint for constructive dismissal, nonpayment of wages,
incentive pay, 13th month pay and damages against Bandag with the National Labor Relations
Commission (NLRC). Petitioners contend that despite the SFA, they remained employees of
Bandag. For its part, Bandag pointed out that petitioners freely resigned from their
employment and decided to avail themselves of the opportunity to be independent
entrepreneurs under the franchise scheme that Bandag had. Thus, no employeremployee
relationship existed between petitioners and Bandag.

Issue:
36

Whether or not petitioners remained to be Bandags salesmen under the franchise scheme it
entered into with them.

Ruling:
No, petitioners were no longer employees of Bandag the moment they entered into the SFA.
Franchising is a business method of expansion that allows an individual or group of individuals
to market a product or a service and to use of the patent, trademark, trade name and the
systems prescribed by the owner.

The tests for determining employeremployee relationship are: (a) the selection and
engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the
employers power to control the employee with respect to the means and methods by which
the work is to be accomplished. The last is called the control test, the most important
element.

When petitioners agreed to operate Bandags franchise branches in different parts of the
country, they knew that this substantially changed their former relationships. They were to
cease working as Bandags salesmen, the positions they occupied before they ventured into
running separate Bandag branches. They were to cease receiving salaries or commissions. Their
incomes were to depend on the profits they made. Yet, petitioners did not then complain of
constructive dismissal. They took their chances, ran their branches, Gregorio Sharp in La Union
for several months and Ashmor Tesoro in Baguio and Pedro Ang in Pangasinan for over a year.
Clearly, their belated claim of constructive dismissal is quite hollow.

It is pointed out that Bandag continued, like an employer, to exercise control over petitioners
work. It points out that Bandag: (a) retained the right to adjust the price rates of products and
services; (b) imposed minimum processed tire requirement (MPR); (c) reviewed and regulated
credit applications; and (d) retained the power to suspend petitioners services for failure to
meet service standards. But uniformity in prices, quality of services, and good business
practices are the essence of all franchises. A franchisee will damage the franchisors business if
he sells at different prices, renders different or inferior services, or engages in bad business
practices. These business constraints are needed to maintain collective responsibility for
faultless and reliable service to the same class of customers for the same prices.

This is not the control contemplated in employeremployee relationships. Control in such
relationships addresses the details of day to day work like assigning the particular task that has
to be done, monitoring the way tasks are done and their results, and determining the time
during which the employee must report for work or accomplish his assigned task.

Petitioners cannot use the revolving funds feature of the SFAs as evidence of their employer
employee relationship with Bandag. These funds do not represent wages. They are more in the
37

nature of capital advances for operations that Bandag conceptualized to attract prospective
franchisees. Petitioners incomes depended on the profits they make, controlled by their
individual abilities to increase sales and reduce operating costs.



23. THE NEW PHILIPPINE SKYLANDERS, INC. and/or JENNIFER M. ENANO-BOTE, petitioners, vs.
FRANCISCO N. DAKILA, respondent.

G.R. No. 199547.
September 24, 2012.

Facts:
Dakila was employed by New Philippine Skylanders as early as 1987 and terminated for cause in
April 1997 when the corporation was sold. In May 1997, he was rehired as consultant by the
petitioners under a Contract for Consultancy Services dated April 30, 1997.

In a letter dated April 19, 2007, Dakila informed the corporation of his compulsory retirement
effective May 2, 2007 and sought for the payment of his retirement benefits pursuant to the
Collective Bargaining Agreement. However, his request was not acted upon. Instead, he was
terminated from service effective May 1, 2007.

Dakila filed a complaint for constructive illegal dismissal, non-payment of retirement benefits,
under/non-payment of wages and other benefits of a regular employee. He contends that the
consultancy contract was a scheme to deprive him of the benefits of regularization. He
submitted, among others, copies of his time cards, Official Business Itinerary Slips, Daily
Attendance Sheets and other documents in support of his claim. The corporation, on the other
hand, asserted that no employer-employee relationship existed between them.

Issue:
Whether or not Dakila was an employee entitled to the relief sought?

Ruling:
The records reveal that both the LA and the NLRC, as affirmed by the CA, have found
substantial evidence to show that respondent Dakila was a regular employee who was
dismissed without cause.

The LA, as sustained by the NLRC, declared respondent Dakila to be a regular employee on the
basis of the unrebutted documentary evidence showing that he was under the corporations
direct control and supervision and performed tasks that were either incidental or usually
desirable and necessary in the trade or business of the corporation for a period of ten years.
38


There was no showing of palpable error or arbitrary disregard of evidence in the findings of the
LA and NLRC and thus such finding was adopted by the Supreme Court. Therefore, Dakila was
an employee of the corporation thus entitled to backwages and payment of his retirement
benefits pursuant to the CBA.



24. GREGORIO V. TONGKO, petitioner, vs. THE MANUFACTURERS LIFE INSURANCE CO.
(PHILS.), INC. and RENATO A. VERGEL DE DIOS, respondents.

G.R. No. 167622.
January 25, 2011.

Facts:
Manufacturers Life Insurance Co. (Phils.), Inc. (Manulife) is a domestic corporation engaged in
life insurance business.Renato A. Vergel De Dios was, during the period material, its President
and Chief Executive Officer. Gregorio V. Tongko started his professional relationship with
Manulife on July
1, 1977 by virtue of a Career Agent's Agreement (Agreement) he executed with Manulife. In
the Agreement, it is provided that: It is understood and agreed that the Agent is an
independent contractor and nothing contained herein shall be construed or interpreted as
creating an employer-employee relationship between the Company and the Agent. The
Company may terminate this Agreement for any breach or violation of any of the provisions
hereof by the Agent by giving written notice to the Agent within fifteen (15) days from the
time of the discovery of the breach. No waiver, extinguishment, abandonment, withdrawal or
cancellation of the right to terminate this Agreement by the Company shall be construed for
any previous failure to exercise its right under any provision of this Agreement.

Either of the parties hereto may likewise terminate his Agreement at any time without cause,
by giving to the other party fifteen (15) days notice in writing. In 1983, Tongko was named as
a Unit Manager in Manulife's Sales Agency Organization.In 1990, he became a Branch
Manager. As the CA found, Tongko's gross earnings from his work at Manulife, consisting of
commissions, persistency income, and management overrides. The problem started
sometime in 2001, when Manulife instituted manpower development programs in the
regional sales management level. Relative thereto, De Dios addressed a letter dated
November 6, 2001 to Tongko regarding an October 18, 2001 Metro North Sales Managers
Meeting. Stating that Tongkos Region was the lowest performer (on a per Manager basis) in
terms of recruiting in 2000 and, as of today, continues to remain one of the laggards in this
area.

39

Other issues were:"Some Managers are unhappy with their earnings and would want to
revert to the position of agents." And "Sales Managers are doing what the company asks
them to do but, in the process, they earn less." Tongko was then terminated.
Therefrom, Tongko filed a Complaint dated November 25, 2002 with the NLRC against
Manulife for illegal dismissal in the Complaint. In a Decision dated April 15, 2004, Labor
Arbiter dismissed the complaint for lack of an employer-employee relationship. The NLRC's
First Division, while finding an employer-employee relationship between Manulife
and Tongko applying the four-fold test, held Manulife liable for illegal dismissal. Thus,
Manulife filed an appeal with the CA. Thereafter, the CA issued the assailed Decision dated
March 29, 2005, finding the absence of an employer-employee relationship between the
parties and deeming the NLRC with no jurisdiction over the case.Hence, Tongko filed this
petition.

Issue:
Whether or not Tongko was an employee of Manulife.

Ruling:
Yes. In the instant case, Manulife had the power of control over Tongko that would make him
its employee. Several factors contribute to this conclusion. In the Agreement dated July 1,
1977 executed between Tongko and Manulife, it is provided that: The Agent hereby agrees to
comply with all regulations and requirements of the Company as herein provided as well as
maintain a standard of
knowledge and competency in the sale of the Company's products which satisfies those set
by the Company and sufficiently meets the volume of new business required of Production
Club membership.Under this provision, an agent of Manulife must comply with three (3)
requirements: (1) compliance with the regulations and requirements of the company; (2)
maintenance of a level of knowledge of the company's products that is satisfactory to the
company; and (3) compliance with a quota of new businesses. Among the company
regulations of Manulife are the different codes of
conduct such as the Agent Code of Conduct, Manulife Financial Code of Conduct, and
Manulife Financial Code of Conduct Agreement, which demonstrate the power of control
exercised by the company over Tongko. The fact that Tongko was obliged to obey and comply
with the codes of
conduct was not disowned by respondents. Thus, with the company regulations and
requirements alone, the fact that Tongko was an employee of Manulife may already be
established. Certainly, these requirements controlled the means and methods by
which Tongko was to achieve the company's goals.

More importantly, Manulife's evidence establishes the fact that Tongko was tasked to
perform administrative duties that establishes his employment with Manulife. Additionally, it
must be pointed out that the fact that Tongko was tasked with recruiting a certain number of
40

agents, in addition to his other administrative functions, leads to no other conclusion that he
was an employee of Manulife.


III. HIRING OF EMPLOYEE


1. HON. FRANCISCO G. VARONA, JR., HON. ROMUALDO S. MARANAN, HON. NESTOR C.
PONCE, JR., HON. HUMBERTO B. BASCO, HON. FLAVIANO F. CONCEPCION, JR., HON.
ROMEO G. RIVERA, HON. MANUEL M. ZARCAL, HON. PEDRO S. DE JESUS, HON.
BERNARDITO C. ANG, HON. MANUEL L. QUIN, HON. JHOSEP Y. LOPEZ, HON. CHIKA G. GO,
HON. VICTORIANO A. MELENDEZ, HON. ERNESTO V.P. MACEDA, JR., HON. ROLANDO P.
NIETO, HON. DANILO V. ROLEDA, HON. GERINO A. TOLENTINO, JR., HON. MA. PAZ E.
HERRERA, HON. JOEY D. HIZON, HON. FELIXBERTO D. ESPIRITU, HON. KARLO Q. BUTIONG,
HON. ROGELIO P. DELA PAZ, HON. BERNARDO D. RAGAZA, HON. MA. CORAZON R.
CABALLES, HON. CASIMIRO C. SISON, HON. BIENVENIDO M. ABANTE, JR., HON. MA.
LOURDES M. ISIP, HON. ALEXANDER S. RICAFORT, HON. ERNESTO F. RIVERA, HON.
LEONARDO L. ANGAT, and HON. JOCELYN B. DAWIS, in their capacity as councilors of the
City of Manila, petitioners, vs. HON. PERFECTO A.S. LAGUIO, JR., as Presiding Judge, RTC,
Manila and MALATE TOURIST DEVELOPMENT CORPORATION, respondents.

G.R. No. 118127.
April 12, 2005.
Facts:
Private respondent Malate Tourist Development Corporation (MTDC) is a corporation engaged
in the business of operating hotels, motels, hostels and lodging houses. It built and opened
Victoria Court in Malate which was licensed as a motel although duly accredited with the
Department of Tourism as a hotel.

On June 1993, MTDC filed a Petition for Declaratory Relief with Prayer for a Writ of Preliminary
Injunction and/or Temporary Restraining Order with the lower court impleading as defendants,
herein petitioners City of Manila, Hon. Alfredo S. Lim, Hon. Joselito L. Atienza, and the members
of the City Council of Manila. MTDC prayed that the Ordinance, insofar as it includes motels
and inns as among its prohibited establishments, be declared invalid and unconstitutional.

Enacted by the City Council on 9 March 1993 and approved by petitioner City Mayor on 30
March 1993, the said Ordinance is entitled AN ORDINANCE PROHIBITING THE ESTABLISHMENT
OR OPERATION OF BUSINESSES PROVIDING CERTAIN FORMS OF AMUSEMENT,
ENTERTAINMENT, SERVICES AND FACILITIES IN THE ERMITA-MALATE AREA, PRESCRIBING
PENALTIES FOR VIOLATION THEREOF, AND FOR OTHER PURPOSES.

41

MTDC argued that the Ordinance erroneously and improperly included in its enumeration of
prohibited establishments, motels and inns such as MTDCs Victoria Court considering that
these were not establishments for amusement or entertainment and they were not
services or facilities for entertainment, nor did they use women as tools for entertainment,
and neither did they disturb the community, annoy the inhabitants or adversely affect the
social and moral welfare of the community.

Issue:
Whether or not the aforementioned Ordinance is valid and constitutional.

Ruling:
SC ruled that the ordinance is null and void. Said ordinance is ultra vires, thus, unconstitutional.

The Court is of the opinion, and so holds, that the lower court did not err in declaring the
Ordinance, as it did, ultra vires and therefore null and void. The Ordinance is so replete with
constitutional infirmities that almost every sentence thereof violates a constitutional provision.
The prohibitions and sanctions therein transgress the cardinal rights of persons enshrined by
the Constitution. The Court is called upon to shelter these rights from attempts at rendering
them worthless.

A long line of decisions has held that for an ordinance to be valid, it must not only be within the
corporate powers of the local government unit to enact and must be passed according to the
procedure prescribed by law, it must also conform to the following substantive requirements:
(1) must not contravene the Constitution or any statute; (2) must not be unfair or oppressive;
(3) must not be partial or discriminatory; (4) must not prohibit but may regulate trade; (5) must
be general and consistent with public policy; and (6) must not be unreasonable.

Ordinances shall only be valid when they are not contrary to the Constitution and to the laws.
The Ordinance must satisfy two requirements: it must pass muster under the test of
constitutionality and the test of consistency with the prevailing laws. That ordinances should be
constitutional uphold the principle of the supremacy of the Constitution. The requirement that
the enactment must not violate existing law gives stress to the precept that local government
units are able to legislate only by virtue of their derivative legislative power, a delegation of
legislative power from the national legislature. The delegate cannot be superior to the principal
or exercise powers higher than those of the latter.

The prohibition of the enumerated establishments will not per se protect and promote the
social and moral welfare of the community; it will not in itself eradicate the alluded social ills of
prostitution, adultery, fornication nor will it arrest the spread of sexual disease in Manila.

42

Conceding for the nonce that the Ermita-Malate area teems with houses of ill-repute and
establishments of the like which the City Council may lawfully prohibit, it is baseless and
insupportable to bring within that classification sauna parlors, massage parlors, karaoke bars,
night clubs, day clubs, super clubs, discotheques, cabarets, dance halls, motels and inns. This is
not warranted under the accepted definitions of these terms. The enumerated establishments
are lawful pursuits which are not per se offensive to the moral welfare of the community.

That these are used as arenas to consummate illicit sexual affairs and as venues to further the
illegal prostitution is of no moment. We lay stress on the acrid truth that sexual immorality,
being a human frailty, may take place in the most innocent of places that it may even take place
in the substitute establishments enumerated under Section 3 of the Ordinance.

The problem, it needs to be pointed out, is not the establishment, which by its nature cannot
be said to be injurious to the health or comfort of the community and which in itself is amoral,
but the deplorable human activity that may occur within its premises. While a motel may be
used as a venue for immoral sexual activity, it cannot for that reason alone be punished. It
cannot be classified as a house of ill-repute or as a nuisance per se on a mere likelihood or a
naked assumption. If that were so and if that were allowed, then the Ermita-Malate area would
not only be purged of its supposed social ills, it would be extinguished of its soul as well as
every human activity, reprehensible or not, in its every nook and cranny would be laid bare to
the estimation of the authorities.

The Ordinance seeks to legislate morality but fails to address the core issues of morality. Try as
the Ordinance may to shape morality, it should not foster the illusion that it can make a moral
man out of it because immorality is not a thing, a building or establishment; it is in the hearts of
men. The City Council instead should regulate human conduct that occurs inside the
establishments, but not to the detriment of liberty and privacy which are covenants, premiums
and blessings of democracy.

In the instant case, there is a clear invasion of personal or property rights, personal in the case
of those individuals desirous of owning, operating and patronizing those motels and property in
terms of the investments made and the salaries to be paid to those therein employed. If the
City of Manila so desires to put an end to prostitution, fornication and other social ills, it can
instead impose reasonable regulations such as daily inspections of the establishments for any
violation of the conditions of their licenses or permits; it may exercise its authority to suspend
or revoke their licenses for these violations; and it may even impose increased license fees. In
other words, there are other means to reasonably accomplish the desired end.


2. ALFONSO DEL CASTILLO, plaintiff-appellant, vs. SHANNON RICHMOND, defendant-
appellee.
43


G.R. No. 21127.
February 9, 1924.
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 restraint is reasonable.

Ruling:
SC ruled that 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 contracts 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 a contract in restraint of trade is valid provided 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 invalid.

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
44

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 to refrain at 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.


3. DEL MONTE PHILIPPINES, INC., petitioner, vs. LOLITA VELASCO, respondent.

G.R. No. 153477.
March 6, 2007.

Facts:
Lolita Velasco was hired by Del Monte as seasonal employee and was subsequently regularized
by Del Monte. On June 1987, petitioner warned Velasco of its absences and was repeatedly
reminded that her absence without permission may result to forfeiture of her vacation leave.
Another warning was sent due to her absences without permission which eventually led to the
forfeiture of her vacation entitlement. On September 1994, a notice of hearing was sent to
Velasco informing her of the charges filed against her for violating the Absence without leave
rule. On January 1995, after the hearing, Del Monte terminated the services of Velasco due to
excessive absence without leave. Feeling aggrieved, Velasco filed a case for illegal dismissal. She
asserted that she was absent since she was suffering urinary tract infection and she was
pregnant.
She sent an application for leave to the supervisor. Upon check up of the company doctor,
Velasco was advised to rest. On the following check-ups, she was again advised to rest where
this time, she was not able to get secure a leave.

The Labor Arbiter rendered decision that she was an incorrigible absentee. Respondent
appealed to the NLRC. NLRC vacated the decision of the Labor Arbiter. It decided that
respondent was illegally dismissed and was entitled to reinstatement. Petitioner appealed to CA
where it dismissed its claim and affirmed NLRC. Thus, this petition.

Issue:
Whether or not the dismissal was illegal?

Ruling:
Yes. In this case, by the measure of substantial evidence, what is controlling is the finding of the
NLRC and the CA that respondent was pregnant and suffered from related ailments. It would be
unreasonable to isolate such condition strictly to the dates stated in the Medical Certificate or
45

the Discharge Summary. It can be safely assumed that the absences that are not covered by,
but which nonetheless approximate, the dates stated in the Discharge Summary and Medical
Certificate, are due to the continuing condition of pregnancy and related illnesses, and, hence,
are justified absences.

The termination was illegal since it comes within the purview of the prohibited acts provided in
Article 137 of the Labor Code. Based on Art. 137, it shall be unlawful for any employer (1) to
deny any woman employee the benefits provided for in this Chapter or to discharge any
woman employed by him for the purpose of preventing her from enjoying any of the benefits
provided under this Code; (2) to discharge such woman on account of her pregnancy, or while
on leave or in confinement due to her pregnancy; and (3) to discharge or refuse the admission
of such woman upon returning to her work for fear that she may again be pregnant. The
respondent was illegally dismissed by the petitioner on account of her pregnancy. The act of
the employer is unlawful, it being contrary to law.



4. DUNCAN ASSOCIATION OF DETAILMAN-PTGWO and PEDRO A. TECSON, petitioners, vs.
GLAXO WELLCOME PHILIPPINES, INC., respondent.

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 employees 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.

46

Tecson was initially assigned to market Glaxos 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 Astras 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 Glaxos policy was a valid one. Aggrieved, Tecson filed a
petition to the CA where CA held that Glaxos 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.

Ruling:
SC ruled that the prohibition is valid. It is an exercise of the companys management
prerogative.

There is no error to the Court of Appeals when it ruled that Glaxos 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 Glaxos 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
47

workers. The law also recognizes that management has rights which are also entitled to respect
and enforcement in the interest of fair play.


5. WILLIAM OLLENDORFF, plaintiff-appellee, vs. IRA ABRAHAMSON, defendant-appellant.

G.R. No. 13228.
September 13, 1918.

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
48

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 contract is valid.

Ruling:
SC ruled that the contract is valid.

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.



49

6. PHILIPPINE TELEGRAPH AND TELEPHONE COMPANY, petitioner, vs. NATIONAL LABOR
RELATIONS COMMISSION and GRACE DE GUZMAN, respondents.

G.R. No. 118978.
May 23, 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 respondents
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 a representation that she was single even
though 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 companys
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.

Ruling:
SC ruled that the stipulation is violative of Art. 136 of the Labor Code.

50

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. Petitioners 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.

Respondents 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.

Petitioners 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 petitioners policy against legitimate marital bonds would encourage illicit or
common-law relations and subvert the sacrament of marriage.

51



7. STAR PAPER CORPORATION, JOSEPHINE ONGSITCO & SEBASTIAN CHUA, petitioners, vs.
RONALDO D. SIMBOL, WILFREDA N. COMIA & LORNA E. ESTRELLA, respondents.

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 Zuiga (Zuiga), also a co-worker.
Petitioners stated that Zuiga, 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 attorneys 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.

52

Issue:
Whether or not the said policy is a valid exercise of the companys management prerogative.

Ruling:
SC ruled that it not a valid exercise of its management prerogative. There is no reasonable
business necessity of the policy.

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 employees 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 employers
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
53

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 legislatures 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.




8. ARMANDO G. YRASUEGUI, petitioner, vs. PHILIPPINE AIRLINES, INC., respondent.

G.R. No. 168081.
October 17, 2008.

Facts:
This case portrays the peculiar story of an international flight steward who was dismissed
because of his failure to adhere to the weight standards of the airline company.

Petitioner Armando G. Yrasuegui was a former international flight steward of Philippine
Airlines, Inc. (PAL). He stands five feet and eight inches (58) with a large body frame. The
proper weight for a man of his height and body structure is from 147 to 166 pounds, the ideal
weight being 166 pounds, as mandated by the Cabin and Crew Administration Manual of PAL.

The weight problem of petitioner dates back to 1984. Back then, PAL advised him to go on an
extended vacation leave from December 29, 1984 to March 4, 1985 to address his weight
concerns. Apparently, petitioner failed to meet the companys weight standards,
prompting another leave without pay from March 5, 1985 to November 1985.

After meeting the required weight, petitioner was allowed to return to work. But petitioners
weight problem recurred. He again went on leave without pay from October 17, 1988 to
February 1989.

On April 26, 1989, petitioner weighed 209 pounds, 43 pounds over his ideal weight. In line with
company policy, he was removed from flight duty effective May 6, 1989 to July 3, 1989. He was
formally requested to trim down to his ideal weight and report for weight checks on several
54

dates. He was also told that he may avail of the services of the company physician should
he wish to do so. He was advised that his case will be evaluated on July 3, 1989.

On February 25, 1989, petitioner underwent weight check. It was discovered that he gained,
instead of losing, weight. He was overweight at 215 pounds, which is 49 pounds beyond the
limit. Consequently, his off-duty status was retained.

Despite efforts, he remained to be overweight based on the companys weight standards. He
was served Notice of Administrative Charge for violation of company standards on weight
requirements. He did not deny his being overweight. What he claimed, instead, is that his
violation, if any, had already been condoned by PAL since no action has been taken by the
company regarding his case since 1988. He also claimed that PAL discriminated against him
because the company has not been fair in treating the cabin crew members who are similarly
situated.

On June 15, 1993, petitioner was formally informed by PAL that due to his inability to attain his
ideal weight, and considering the utmost leniency extended to him which spanned a period
covering a total of almost five (5) years, his services were considered terminated effective
immediately.

His motion for reconsideration having been denied, petitioner filed a complaint for illegal
dismissal against PAL.

Issue:
Whether or not the dismissal of Yrasuegui was a valid exercise of management prerogative.

Ruling:
SC ruled that the dismissal of Yrasuegui was a valid exercise of management prerogative. The
weight standard is considered a continuing qualification for an employees position.

The obesity of petitioner is a ground for dismissal under Article 282(e) of the Labor Code.

A reading of the weight standards of PAL would lead to no other conclusion than that they
constitute a continuing qualification of an employee in order to keep the job. Tersely put, an
employee may be dismissed the moment he is unable to comply with his ideal weight as
prescribed by the weight standards. The dismissal of the employee would thus fall under
Article 282(e) of the Labor Code. As explained by the CA:

x x x *T+he standards violated in this case were not mere orders of the
employer; they were the prescribed weights that a cabin crew must maintain
in order to qualify for and keep his or her position in the company. In other
55

words, they were standards that establish continuing qualifications for an
employees position. In this sense, the failure to maintain these standards does
not fall under Article 282(a) whose express terms require the element of
willfulness in order to be a ground for dismissal. The failure to meet the
employers qualifying standards is in fact a ground that does not squarely fall
under grounds (a) to (d) and is therefore one that falls under Article 282(e) the
other causes analogous to the foregoing.

By its nature, these qualifying standards are norms that apply prior to
and after an employee is hired. They apply prior to employment because these
are the standards a job applicant must initially meet in order to be hired. They
apply after hiring because an employee must continue to meet these standards
while on the job in order to keep his job. Under this perspective, a violation is
not one of the faults for which an employee can be dismissed pursuant to pars.
(a) to (d) of Article 282; the employee can be dismissed simply because he no
longer qualifies for his job irrespective of whether or not the failure to qualify
was willful or intentional. x x x

After a meticulous consideration of all arguments pro and con, We uphold the legality of
dismissal. Separation pay, however, should be awarded in favor of the employee as an act of
social justice or based on equity. This is so because his dismissal is not for serious
misconduct. Neither is it reflective of his moral character.


IV.WAGE & THE WAGE RATIONALIZATION ACT

1. BANKARD EMPLOYEES UNION-WORKERS ALLIANCE TRADE UNIONS, petitioner, vs.
NATIONAL LABOR RELATIONS COMMISSION and BANKARD, INC., respondents.

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 industrys labor market. The
New Salary Scale increased the hiring rates of new employees, to wit: Levels I and V by one
thousand pesos (P1,000.00), 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.
56

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. Petitioners 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.

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.
57

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 Bankards 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.
58


2. C. PLANAS COMMERCIAL and/or MARCIAL COHU, petitioners, vs. NATIONAL LABOR
RELATIONS COMMISSION (Second Division), ALFREDO OFIALDA, DIOLETO MORENTE and
RUDY ALLAUIGAN, respondents.

G.R. No. 144619.
November 11, 2005.

Facts:

C. Planas Commercial, owned by Cohu, (the petitioner) is engaged in the wholesale of plastic
products and fruits of different kinds in Divisoria. Morente, Allauigan, Ofialda and several
others (the employees) are its laborers who accompany the delivery trucks and helped in the
loading and unloading of merchandise being distributed to clients.

The employees filed a complaint with the Arbitration Branch of the NLRC against the petitioner
for underpayment of wages, nonpayment of overtime pay, holiday pay, service incentive leave
pay and premium pay for holiday and rest day. The employees alleged that petitioner was
obliged to pay these to them as petitioner is employing more than 24 employees, and thus
covered by the minimum wage law.

Petitioner, on the other hand, alleged that the employees were not entitled to their claims for
they were employed in a retail and service establishment regularly employing less than ten
workers.

Two of the employees eventually executed quitclaims after receiving P3,000.00 and P6,000.00
respectively, from petitioner.

Issues:
1. Are the employees entitled to the salary differentials (difference between minimum and
actual wages), holiday pay and service incentive leave?
2. Are the employees entitled to overtime pay and premium pay for holidays and rest
days?
3. Are the quitclaims executed by the two employees in favor of the petitioner valid?

Ruling and rationale:

1) Yes, the employees are entitled to salary differentials, holiday pay and service incentive
leave. The petitioner is covered under RA 6727 which provides for these benefits.

Sec. 4 of RA 6726 (Wage Rationalization Act) provides:
59


xxx
(c) Exempted from the provisions of this Act are household or domestic
helpers and persons employed in the personal service of another,
including family drivers.

Retail/service establishments regularly employing not more than ten (10)
workers may be exempted from the applicability of this Act upon
application with and as determined by the appropriate Regional Board in
accordance with the applicable rules and regulations issued by the
Commission. xxx

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 workers and had applied for exemptions with and as determined by the
appropriate Regional Board in accordance with the applicable rules and regulations
issued by the Commission. Petitioners main defense in controverting the employees
claim for underpayment of wages is that they are exempted from the application of the
minimum wage law, thus the burden of proving such exemption rests on
petitioners. Petitioners had not shown any evidence to show that they had applied for
such exemption and if they had applied, the same was granted


2) No, the employees are not entitled to overtime pay and premium pay for holidays and
rest days.


There is no sufficient factual basis to award the claims because the employees
failed to substantiate that they rendered overtime and worked during holidays
and rest days. These claims, unlike claims for underpayment and non-payment of
fringe benefits mandated by law, need to be proven by the employees.


3) Yes, the quitclaims executed by the two employees in favor of the petitioner are valid.

It has been held that not all quitclaims are per se invalid or against public policy, except
(1) where there is clear proof that the waiver was wangled from an unsuspecting or
gullible person, or (2) where the terms of settlement are unconscionable on their
face. In these cases, the law will step in to annul the questionable transactions.

60

These two instances are not present in the case of the two employees who executed the
quitclaims. They failed to refute petitioners allegation that the settlement was
voluntarily made as they had not filed any pleadings before the CA. These employees
were required by SC to file their comment on the instant petition, however, they failed
to do so. They were then required to show cause why they should not be disciplinarily
dealt with or held in contempt. However, they still failed to file their comment, thus,
they were imposed fines. The SC then ordered the National Bureau of Investigation to
arrest and detain these two employees and for the latter to file their comment.
However, they could not be located at their given address and they are not known in
their locality, so the order of arrest and commitment was returned unserved. Such
inaction on the part of these two employees are an indication that they already relented
in their claims and gives credence to petitioners claim that they had voluntarily
executed the release and quitclaim.


3. EJR CRAFTS CORPORATION, petitioner, vs. HON. COURT OF APPEALS, DIRECTOR
BARTOLOME C. AMOGUIS, NATIONAL CAPITAL REGION, DEPARTMENT OF LABOR AND
EMPLOYMENT, UNDERSECRETARY JOSE M. ESPAOL, JR., DEPARTMENT OF LABOR AND
EMPLOYMENT, NIVEA MAHILUM, MICHELLE JAVIER, CONDANCIA SANTOS, ELIZABETH
RAMOS, VIRGINIA FROTUGO, NOEMI PASIG, NELIA RICOHERMOSA, NIMFA CORTAN,
AMELIA MATAMOROSA, BABYLYN 1 ANDAL, MARGARITA SALASIBAO, MERCEDES GALLO,
STEFANNY MORENO, AMY DEL MUNDO, VIRGINIA SUMALVALOG, BERNARDO ACERO,
VIRGINIA SANTOS, RAPELO RELLETA, LOUISE CAMAEG, PRICILLA CANLAS, LOREN LOLITA,
LORNA BUCARILLE, MERLA FERNANDEZ, GLORIA ABAD, LIGAYA SUPINA, PATIRICO
LOURDES, RITA BATAN, MA. FE BERNALES, MARCELINA ADONGA, RODOLFO DOMINGO,
ESTEVA WESIN, ANALYN EUGENIO, JOSEPHINE ARGONIA, LINA MAGNO, YOLLY BOCO,
JEAN ARO, ALMANZA GERARDO, MIRA SOLON, MAYLIN SABALILAG, MERCY QUITOLA,
MARIBEL LAVILLA, JOSEPHINE ESGUERDO, FORTEL MEGMINDA, ALMA DIAZ, LEA
CALISURA, MAMERTA BALLESTEROS, MELY GENOGUIN, LORNA DACASIN, CARMEN
MARIETA, AUREA AMBAHAN and ANNIE RESA, respondents.

G.R. No. 154101.
March 10, 2006.

Facts:
In 1997, private respondents filed a complaint for underpayment of wages, regular holiday pay,
overtime pay, non-payment 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.
61

On August 1997, an inspection was conducted on the premises of petitioners 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 non-payment 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 corporations 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 the private
respondents.

Ruling:
Regional Director has jurisdiction to hear and decide the instant case.
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
62

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.


4. EMPLOYEES CONFEDERATION OF THE PHILIPPINES, petitioners, vs. NATIONAL WAGES AND
PRODUCTIVITY COMMISSION AND REGIONAL TRIPARTITE WAGES AND PRODUCTIVITY
BOARD-NCR, TRADE UNION CONGRESS OF THE PHILIPPINES, respondents.

G.R. No. 96169.
September 24, 1991.

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.

Bankers 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:
63

Whether or not the wage order is void thus it has no legal effect and the RTWPB acted in excess
of its jurisdiction.

Ruling:
SC 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.
64

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.


5. EQUITABLE BANKING CORPORATION (now known as EQUITABLE-PCI BANK), petitioner,
vs. RICARDO SADAC, respondent.
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 Banks 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 Sadacs 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 Sadacs computation. The Labor Arbiter
favor Sadacs 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.
65


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 formers
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 Sadacs computation of his full backwages which includes
his prospective salary increases cannot be permitted.


6. ILAW AT BUKLOD NG MANGGAGAWA (IBM), petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION (First Division), HON. CARMEN TALUSAN and SAN MIGUEL CORPORATION,
respondents.

G.R. No. 91980.
June 27, 1991.

Facts:
The controversy at bar had its origin in the wage distortions affecting the employees of
respondent San Miguel Corporation allegedly caused by RA 6727, otherwise known as Wage
Rationalization Act.
66


Upon the effectivity of the said Act, the union known as Ilaw at Buklod ng Mangagawasaid to
represent more or less 4, 500 employees of San Miguel Corporation who are working at various
plants, offices and warehouses located at the National Capital Regionpresented to the
Company a demand for the correction of the significant distortion in the workers wages. In
that demand, the Union invoked Section 4(d) of RA 6727. The provision provided that should
there be any dispute regarding wage distortions, shall first be settled voluntarily between the
parties and in the event of a deadlock, the same shall be finally resolved through compulsory
arbitration such disputes by the regional branches of the NLRC having jurisdiction over the
workplace. But the demand according to the Union has been ignored by the company. The
Union averred that the company offered a measly across-the board wage increase of P7.00 per
day, per employee, as against the proposal of the Union of P25.00 per day, per employee. Later,
the Union reduced its proposal to P15.00 per day, per employee by way of amicable settlement.
When the company rejected the reduced proposal of the Union the members thereof in their
own accord, the workers refused to render overtime services, most especially at the Beer
Bottling Plans at Polo. The work schedule of the workers constitutes a built-in automatic
overtime. They work 10 hours for the first shift and 10 to 14 hours for the second shift, from
Mondays to Fridays and on Saturdays, 8 hours for both shifts. The refusal of the workers to
work more than 8-hours caused substantial losses to the company. This led SMC to file a
complaint before NLRC against the Union. It sought to declare the strike or slowdown illegal
and to terminate the employment of the union officers and shop stewards.

Issue:
Whether or not the partial or limited strike, with the purpose of correction of the wage
distortion, of the Union is valid .

Ruling:
SC ruled that the concerted activity of the Union is illegal.

The partial strike or concerted refusal by the Union members to follow the five-year-old work
schedule which they had therefore been observing, resorted to as a means of coercing
correction of "wage distortions," was therefore forbidden by law and contract and, on this
account, illegal.

Awareness by the Union of the proscribed character of its members' collective activities, is
clearly connoted by its attempt to justify those activities as a means of protesting and obtaining
redress against said members working overtime every day from Monday to Friday (on an
average of 12 hours), and every Saturday (on 8 hour shifts), rather than as a measure to bring
about rectification of the wage distortions caused by RA 6727 which was the real cause of its
differences with SMC. By concealing the real cause of their dispute with management (alleged
failure of correction of wage distortion), and trying to make it appear that the controversy
67

involved application of the eight-hour labor law, they obviously hoped to remove their case
from the operation of the rules implementing RA 6727 that "Any issue involving wage distortion
shall not be a ground for a strike/lockout." The stratagem cannot succeed.

In view of the foregoing factual and legal considerations, it leads to the basic conclusion that
the concerted acts of the members of petitioner Union in question are violative of the law and
their formal agreement with the employer.


7. INTERNATIONAL SCHOOL ALLIANCE OF EDUCATORS (ISAE), petitioner, vs. HON.
LEONARDO A. QUISUMBING in his capacity as the Secretary of Labor and Employment;
HON. CRESENCIANO B. TRAJANO in his capacity as the Acting Secretary of Labor and
Employment; DR. BRIAN MACCAULEY in his capacity as the Superintendent of
International School-Manila; and INTERNATIONAL SCHOOL, INC., respondents.


G.R. No. 128845.
June 1, 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
68

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 should be granted the same salary as foreign hire teachers

Ruling:
SC ruled that local hire teachers should be granted the same salary as that of foreign hire
teachers.

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.


8. JOY BROTHERS, INC., petitioner, vs. NATIONAL WAGES AND PRODUCTIVITY COMMISSION,
respondent.
69


G.R. No. 122932.
June 17, 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.

Ruling:
SC ruled that petitioner company does not fall under the exemptions given to distressed
establishments.

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
70

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.



9. NORMA MABEZA, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, PETER
NG/HOTEL SUPREME, respondents.

G.R. No. 118506.
April 18, 1997.

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.
71


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.

Ruling:
SC 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
72

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.



10. METROPOLITAN BANK and TRUST COMPANY, INC., petitioner, vs. NATIONAL WAGES AND
PRODUCTIVITY COMMISSION and REGIONAL TRIPARTITE WAGES AND PRODUCTIVITY
BOARD REGION II, respondents.

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.

Bankers 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
73

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.

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
74

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.


11. LIDUVINO M. MILLARES, J. CAPISTRANO CORDITA, et. al. , petitioners, vs. NATIONAL
LABOR RELATIONS COMMISSION, (FIFTH DIVISION), and PAPER INDUSTRIES
CORPORATION OF THE PHILIPPINES (PICOP), respondents.

G.R. No. 122827.
March 29, 1999.

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.

Ruling:
SC ruled that allowances are not part of the wages of the employees.
75


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
76

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.


12. CEZAR ODANGO in his behalf and in behalf of 32 complainants, petitioners, vs. NATIONAL
LABOR RELATIONS COMMISSION and ANTIQUE ELECTRIC COOPERATIVE, INC.,
respondents.

G.R. No. 147420.
June 10, 2004.

Facts:
33 monthly-paid employees of Antique Electric Cooperative, Inc. (ANTECO) are asking for wage
differentials. Their work is from Monday to Friday and half day on Saturdays. The controversy
started with the routine inspection made by the Regional Branch of DOLE finding ANTECO liable
for underpayment of monthly salaries of its employees and directed it to pay. Because of the
failure of ANTECO to do so, the employees file complaints with the NLRC Sub-regional Branch VI
in Iloilo City. The Labor Arbiter granted all employees, except one, wage differentials amounting
to P1,017,507.73 and 10% attorneys fees. ANTECO appealed to the NLRC. The NLRC reversed
the Labor Arbiters Decision. Petitioners elevated it to the Supreme Court through a petition for
certiorari which referred the case to the Court of Appeals. The Court of Appeals dismissed the
case. Aggrieved, petitioners made the present petition.

Petitioners allege that ANTECO was underpaying them because ANTECO used only 304 as a
divisor for their leave credits. And since Section 2 Rule IV of the Implementing Rules and
Regulations of the Labor Code (Section 2) states that monthly-paid employees are considered
paid for all the days in a month, there are 61 days, the difference between 365 and 304, that
they were not paid. The Labor Arbiter sided with petitioners. The NLRC reversed the decision
arguing that applying the formula in Section 2 that Daily Wage = (Wage x 12) /365 and
substituting wage with the current monthly salary of the petitioners, their daily wage is still
above the minimum wage. Hence, ANTECO is not liable for any amount since it is still paying its
employees above the minimum wage. The Court of Appeals dismissed the case based on a
procedural lapse since the petition was not able to allege the specific instances where the
actions of the NLRC amounted to grave abuse of discretion. The petition only averred to
sweeping generalizations. The Supreme Court sided with the Court of Appeals dismissing the
case because of the procedural lapse. Not disregarding the procedural lapse, the Supreme
Court went on to discuss the issues raised just to illustrate the extent by which petitioners
have haphazardly pursued their claim.

77

Issue:
Whether or not petitioners are entitled to claim wage differentials?

Ruling:
No, they are not entitled to claim differentials. The Supreme Court discussed that petitioners
basis for their claim Section 2 has long been declared void in the 1984 case of Insular Bank
Asia vs Inciong because it amended the Labor Codes provisions on holiday pay by including
monthly-paid employees to those who are excluded from the benefits of the holiday pay. But
even though Section 2 was valid, their claim would still fail because of the rule of no work, no
pay prevalent in the Philippines. An exception to this rule is the 10 legal holidays in a year. It is
a mistaken notion that Section 2 gives monthly employees the right to be paid for un-worked
non-legal-holiday days. It also creates unjust classification. It is clearly in violation of the no
work, no pay rule and of the equal protection clause because sustaining the claim would make
monthly-paid employees a privileged class who are paid even if they do not work.

Regarding the 304 days, the Supreme Court says the minimum allowable divisor is 287 (365
days less 52 Sundays less 26 Saturdays). Since they are using 304, they are not even
underpaying the employees for their leave credits.



13. PAG-ASA STEEL WORKS, INC., petitioner, vs. COURT OF APPEALS, FORMER SIXTH DIVISION
and PAG-ASA STEEL WORKERS UNION (PSWU), respondents.

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.
78


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.

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
79

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.


14. PRUBANKERS ASSOCIATION, petitioner, vs. PRUDENTIAL BANK & TRUST COMPANY,
respondent.

G.R. No. 131247.
January 25, 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.
80


Ruling:
SC 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.



15. ROYAL PLANT WORKERS UNION, petitioner, vs. COCA-COLA BOTTLERS PHILIPPINES, INC.-
CEBU PLANT, respondent.

G.R. No. 198783.
April 15, 2013.

Facts:
Under the employ of each bottling plant of Coca-Cola are bottling operators. In the case of the
plant in Cebu City, there are 20 bottling operators who work for its Bottling Line 1 while there
are 12-14 bottling operators who man its Bottling Line 2. All of them are male and they are
members of herein respondent Royal Plant Workers Union (ROPWU).

In 1974, the bottling operators of then Bottling Line 2 were provided with chairs upon their
request. In 1988, the bottling operators of then Bottling Line 1 followed suit and asked to be
81

provided also with chairs. Their request was likewise granted. Sometime in September 2008,
the chairs provided for the operators were removed pursuant to a national directive of
petitioner. This directive is in line with the "I Operate, I Maintain, I Clean" program of petitioner
for bottling operators, wherein every bottling operator is given the responsibility to keep the
machinery and equipment assigned to him clean and safe. The program reinforces the task of
bottling operators to constantly move about in the performance of their duties and
responsibilities.

With this task of moving constantly to check on the machinery and equipment assigned to him,
a bottling operator does not need a chair anymore, hence, petitioners directive to remove
them. Furthermore, CCBPI rationalized that the removal of the chairs is implemented so that
the bottling operators will avoid sleeping, thus, prevent injuries to their persons. As bottling
operators are working with machines which consist of moving parts, it is imperative that they
should not fall asleep as to do so would expose them to hazards and injuries. In addition,
sleeping will hamper the efficient flow of operations as the bottling operators would be unable
to perform their duties competently.

Issue:
Whether or not the removal of the bottling operators chairs was a valid exercise of
management prerogative.

Ruling:
According to the Union, such removal constitutes a violation of the 1) Occupational Health and
Safety Standards which provide that every worker is entitled to be provided by the employer
with appropriate seats, among others; 2) policy of the State to assure the right of workers to a
just and humane condition of work as provided for in Article 3 of the Labor Code;8 3) Global
Workplace Rights Policy of CCBPI which provides for a safe and healthy workplace by
maintaining a productive workplace and by minimizing the risk of accident, injury and exposure
to health risks; and 4) diminution of benefits provided in Article 100 of the Labor Code.

The Court has held that management is free to regulate, according to its own discretion and
judgment, all aspects of employment, including hiring, work assignments, working methods,
time, place, and manner of work, processes to be followed, supervision of workers, working
regulations, transfer of employees, work supervision, lay-off of workers, and discipline,
dismissal and recall of workers. The exercise of management prerogative, however, is not
absolute as it must be exercised in good faith and with due regard to the rights of labor.

In the present controversy, it cannot be denied that CCBPI removed the operators chairs
pursuant to a national directive and in line with its "I Operate, I Maintain, I Clean" program,
launched to enable the Union to perform their duties and responsibilities more efficiently. The
chairs were not removed indiscriminately. They were carefully studied with due regard to the
82

welfare of the members of the Union. The removal of the chairs was compensated by: a) a
reduction of the operating hours of the bottling operators from a two-and-one-half (2 )-hour
rotation period to a one-and-a-half (1 ) hour rotation period; and b) an increase of the break
period from 15 to 30 minutes between rotations.
Apparently, the decision to remove the chairs was done with good intentions as CCBPI wanted
to avoid instances of operators sleeping on the job while in the performance of their duties and
responsibilities and because of the fact that the chairs were not necessary considering that the
operators constantly move about while working. In short, the removal of the chairs was
designed to increase work efficiency. Hence, CCBPIs exercise of its management prerogative
was made in good faith without doing any harm to the workers rights.

The rights of the Union under any labor law were not violated. There is no law that requires
employers to provide chairs for bottling operators. There was no violation either of the Health,
Safety and Social Welfare Benefit provisions under Book IV of the Labor Code of the Philippines.
As shown in the foregoing, the removal of the chairs was compensated by the reduction of the
working hours and increase in the rest period. The directive did not expose the bottling
operators to safety and health hazards.

The Union should not complain too much about standing and moving about for one and one-
half (1 ) hours because studies show that sitting in workplaces for a long time is hazardous to
ones health. The CBA between the Union and CCBPI contains no provision whatsoever
requiring the management to provide chairs for the operators in the production/manufacturing
line while performing their duties and responsibilities.

The Court completely agrees with the CA ruling that the removal of the chairs did not violate
the general principles of justice and fair play because the bottling operators working time was
considerably reduced from two and a half (2 ) hours to just one and a half (1 ) hours and the
break period, when they could sit down, was increased to 30 minutes between rotations. The
bottling operators new work schedule is certainly advantageous to them because it greatly
increases their rest period and significantly decreases their working time. A break time of thirty
(30) minutes after working for only one and a half (1 ) hours is a just and fair work schedule.

The operators chairs cannot be considered as one of the employee benefits covered in Article
10016 of the Labor Code. In the Courts view, the term "benefits" mentioned in the non-
diminution rule refers to monetary benefits or privileges given to the employee with monetary
equivalents.

Such benefits or privileges form part of the employees wage, salary or compensation making
them enforceable obligations.

83

This Court has already decided several cases regarding the non-diminution rule where the
benefits or privileges involved in those cases mainly concern monetary considerations or
privileges with monetary equivalents. Without a doubt, equating the provision of chairs to the
bottling operators is something within the ambit of "benefits'' in the context of Article 100 of
the Labor Code is unduly stretching the coverage of the law. The interpretations of Article 100
of the Labor Code do not show even with the slightest hint that such provision of chairs for the
bottling operators may be sheltered under its mantle.



16. S.I.P. FOOD HOUSE and MR. and MRS. ALEJANDRO PABLO, petitioners, vs. RESTITUTO
BATOLINA, ALMER CALUMPISAN, ARIES MALGAPO, ARMANDO MALGAPO, FLORDELIZA
MATIAS, PERCIVAL MATIAS, ARWIN MIRANDA, LOPE MATIAS, RAMIL MATIAS, ALLAN STA.
INES, respondents.
G.R. No. 192473.
October 11, 2010.

Facts:
The GSIS Multi-Purpose Cooperative (GMPC) is an entity organized by the employees of the
Government Service Insurance System (GSIS). Incidental to its purpose, GMPC wanted to
operate a canteen in the new GSIS Building, but had no capability and expertise in this
area. Thus, it engaged the services of the petitioner S.I.P. Food House (SIP), owned by the
spouses Alejandro and Esther Pablo, as concessionaire. The respondents Restituto Batolina
and nine (9) others (the respondents) worked as waiters and waitresses in the canteen

In February 2004, GMPC terminated SIPs contract as GMPC concessionaire, because of
GMPCs decision to take direct investment in and management of the GMPC canteen; SIPs
continued refusal to heed GMPCs directives for service improvement; and the alleged
interference of the Pablos two sons with the operation of the canteen. The termination of
the concession contract caused the termination of the respondents employment, prompting
them to file a complaint for illegal dismissal, with money claims, against SIP and the spouses
Pablo.

The employer of the respondents claimed that it was merely a labor-only contractor of GMPC.
Hence, it could not be liable.

Issue:
Whether or not there exist an employer-employee relationship.

Ruling:
84

We affirm the CA ruling that SIP was the respondents employer. The NLRC decision, which the
CA affirmed, states:

Respondents have been the concessionaire of GMPC canteen for nine (9)
years. During this period, complainants were employed at the said
canteen. On February 29, 2004, respondents concession with GMPC was
terminated. When respondents were prevented from entering the premises as a
result of the termination of their concession, they sent a protest letter
dated April 14, 2004 to GMPC thru their counsel. Pertinent portion of the letter:

We write this letter in behalf of our client Mr. & Mrs.
Alejandro C. Pablo, the concessionaires who used to occupy
and/or rent the area for a cafeteria/canteen at the 2
nd
Floor of
the GSIS Building for the past several years.

Last March 12, 2004, without any court writ or order, and
with the aid of your armed agents, you physically barred our
clients & their employees/helpers from entering the said premises
and from performing their usual duties of serving the food
requirements of GSIS personnel and others.

Clearly, no less than respondents, thru their counsel, admitted that
complainants herein were their employees.

That complainants were employees of respondents is further bolstered by
the fact that respondents do not deny that they were the ones who paid
complainants salary. When complainants charged them of underpayment,
respondents even interposed the defense of file (sic) board and lodging given to
complainants.

The CA ruled out SIPs claim that it was a labor-only contractor or a mere agent of
GMPC. We agree with the CA; SIP and its proprietors could not be considered as mere agents
of GMPC because they exercised the essential elements of an employment relationship with
the respondents such as hiring, payment of wages and the power of control, not to mention
that SIP operated the canteen on its own account as it paid a fee for the use of the building and
for the privilege of running the canteen. The fact that the respondents applied with GMPC in
February 2004 when it terminated its contract with SIP, is another clear indication that the two
entities were separate and distinct from each other. We thus see no reason to disturb the CAs
findings.


85


17. SLL INTERNATIONAL CABLES SPECIALIST and SONNY L. LAGON, petitioners, vs. NATIONAL
LABOR RELATIONS COMMISSION, 4TH DIVISION, ROLDAN LOPEZ, EDGARDO ZUIGA and
DANILO CAETE, respondents.

G.R. No. 172161.
March 2, 2011.

Facts:
Sometime in 1996, and January 1997, private respondents were hired by petitioner Lagon as
apprentice or trainee cable/lineman. The three were paid the full minimum wage and other
benefits but since they were only trainees, they did not report for work regularly but came in as
substitutes to the regular workers or in undertakings that needed extra workers to expedite
completion of work. Soon after they were engaged as private employees for their Islacom
project in Bohol. Private respondents started on March 15, 1997 until December 1997. Upon
the completion of their project, their employment was also terminated. Private respondents
received the amount of P145.00, the minimum prescribed daily wage for Region VII. In July
1997, the amount of P145 was increased to P150.00 and in October of the same year, the latter
was increased to P155.00.

On May 21, 1999, private respondents for the 4
th
time worked with Lagon's project in Camarin,
Caloocan City with Furukawa Corporation as the general contractor. Their contract would
expire on February 28, 2000, the period of completion of the project. From May 21, 1997-
December 1999, private respondents received the wage of P145.00. At this time, the minimum
prescribed rate for Manila was P198.00. In January to February 28, the three received the wage
of P165.00. The existing rate at that time was P213.00.

For reasons of delay on the delivery of imported materials from Furukawa Corporation, the
Camarin project was not completed on the scheduled date of completion. Face[d] with
economic problem[s], Lagon was constrained to cut down the overtime work of its worker[s][,]
including private respondents. Thus, when requested by private respondents on February 28,
2000 to work overtime, Lagon refused and told private respondents that if they insist, they
would have to go home at their own expense and that they would not be given anymore time
nor allowed to stay in the quarters. This prompted private respondents to leave their work and
went home to Cebu. On March 3, 2000, private respondents filed a complaint for illegal
dismissal, non-payment of wages, holiday pay, 13
th
month pay for 1997 and 1998 and service
incentive leave pay as well as damages and attorney's fees
86


Issue:
Whether or not the respondent should be allowed to recover the differential due to the failure
of the petitioner to pay the minimum wage.
Whether or not value of the facilities that the private respondents enjoyed should be included
in the computation of the "wages" received by them

Ruling:
As a general rule, on payment of wages, a party who alleges payment as a defense has the
burden of proving it. Specifically with respect to labor cases, the burden of proving payment of
monetary claims rests on the employer, the rationale being that the pertinent personnel files,
payrolls, records, remittances and other similar documents -- which will show that overtime,
differentials, service incentive leave and other claims of workers have been paid -- are not in
the possession of the worker but in the custody and absolute control of the employer. In this
case, petitioners, aside from bare allegations that private respondents received wages higher
than the prescribed minimum, failed to present any evidence, such as payroll or payslips, to
support their defense of payment. Thus, petitioners utterly failed to discharge the onus
proband.

On whether the value of the facilities should be included in the computation of the "wages"
received by private respondents, Section 1 of DOLE Memorandum Circular No. 2 provides that
an employer may provide subsidized meals and snacks to his employees provided that the
subsidy shall not be less that 30% of the fair and reasonable value of such facilities. In such
cases, the employer may deduct from the wages of the employees not more than 70% of the
value of the meals and snacks enjoyed by the latter, provided that such deduction is with the
written authorization of the employees concerned. Moreover, before the value of facilities can
be deducted from the employees' wages, the following requisites must all be attendant: 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; and
finally, facilities must be charged at reasonable value.
[]
Mere availment is not sufficient to allow
deductions from employees' wages. These requirements, however, have not been met in this
case. SLL failed to present any company policy or guideline showing that provisions for meals
and lodging were part of the employee's salaries. It also failed to provide proof of the
employees' written authorization, much less show how they arrived at their valuations. At any
rate, it is not even clear whether private respondents actually enjoyed said facilities.

87

In short, the benefit or privilege given to the employee which constitutes an extra
remuneration above and over his basic or ordinary earning or wage is supplement; and when
said benefit or privilege is part of the laborers' basic wages, it is a facility. The distinction lies
not so much in the kind of benefit or item (food, lodging, bonus or sick leave) given, but in the
purpose for which it is given. In the case at bench, the items provided were given freely by SLL
for the purpose of maintaining the efficiency and health of its workers while they were working
at their respective projects. For said reason, the cases of Agabon and Glaxo are inapplicable in
this case. At any rate, these were cases of dismissal with just and authorized causes. The
present case involves the matter of the failure of the petitioners to comply with the payment of
the prescribed minimum wage. The Court sustains the deletion of the award of differentials
with respect to respondent Roldan Lopez. As correctly pointed out by the CA, he did not work
for the project in Antipolo.

18. THE NATIONAL WAGES AND PRODUCTIVITY COMMISSION (NWPC) and THE REGIONAL
TRIPARTITE WAGES AND PRODUCTIVITY BOARD (RTWPB)-NCR, petitioners, vs. THE
ALLIANCE OF PROGRESSIVE LABOR (APL) and THE TUNAY NA NAGKAKAISANG
MANGGAGAWA SA ROYAL (TNMR-APL), respondents.
G.R. No. 150326.
March 12, 2014.

Facts:
On June 9, 1989, Republic Act No. 6727 was enacted into law. In order to rationalize wages
throughout the Philippines, Republic Act No. 6727 created the NWPC and the RTWPBs of the
different regions.

Article 121 of the Labor Code, as amended by Section 3 of Republic Act No. 6727, empowered
the NWPC to formulate policies and guidelines on wages, incomes and productivity
improvement at the enterprise, industry and national levels; to prescribe rules and guidelines
for the determination of appropriate minimum wage and productivity measures at the regional,
provincial or industry levels; and to review regional wage levels set by the RTWPBs to
determine whether the levels were in accordance with the prescribed guidelines and national
development plans, among others.

On the other hand, Article 122(b) of the Labor Code, also amended by Section 3 of Republic Act
No. 6727, tasked the RTWPBs to determine and fix minimum wage rates applicable in their
region, provinces or industries therein; and to issue the corresponding wage orders, subject to
the guidelines issued by the NWPC.

88

Consequently, the RTWPBNCR issued Wage Order No. NCR07 on October 14, 1999 imposing
an increase of P25.50/day on the wages of all private sector workers and employees in the NCR
and pegging the minimum wage rate in the NCR at P223.50/day. However, Section 2 and
Section 9 of Wage Order No. NCR07 exempted certain sectors and industries from its
coverage.

Feeling aggrieved by their noncoverage by the wage adjustment, the Alliance of Progressive
Labor (APL) and the Tunay na Nagkakaisang Manggagawa sa Royal (TNMR) filed an appeal with
the NWPC assailing Section 2(A) and Section 9(2) of Wage Order No. NCR07. They contended
that neither the NWPC nor the RTWPBNCR had the authority to expand the noncoverage and
exemptible categories under the wage order; hence, the assailed sections of the wage order
should be voided.

The NWPC upheld the validity of Section 2(A) and Section 9(2) of Wage Order No. NCR07. It
observed that the RTWPBs power to determine exemptible categories was adjunct to its wage
fixing function conferred by Article 122(e) of the Labor Code, as amended by Republic Act No.
6727; that such authority of the RTWPB was also recognized in NWPC Guidelines No. 01, Series
of 1996.

The APL and TNMR assailed the decisions of the NWPC on certiorari in the CA, contending that
the power of the RTWPBNCR to determine exemptible categories was not an adjunct to its
wage fixing function. CA favored the respondents and granted the petition for certiorari.

Hence, this appeal by petition for review on certiorari by the NWPC and RTWPBNCR.

Issue:
Whether or not the RTWPBNCR had

Ruling:
The RTWPBNCR had the authority to provide additional exemptions from the minimum wage
adjustments embodied in Wage Order No. NCR07

The NWPC promulgated NWPC Guidelines No. 00195 (Revised Rules of Procedure on Minimum
Wage Fixing) to govern the proceedings in the NWPC and the RTWPBs in the fixing of minimum
wage rates by region, province and industry. Section 1 of Rule VIII of NWPC Guidelines No. 001
95 recognized the power of the RTWPBs to issue exemptions from the application of the wage
orders subject to the guidelines issued by the NWPC.

Under the guidelines, the RTWPBs could issue exemptions from the application of the wage
orders as long as the exemptions complied with the rules of the NWPC. In its rules, the NWPC
enumerated four exemptible establishments, but the list was not exclusive. The RTWPBs had
89

the authority to include in the wage orders establishments that belonged to, or to exclude from
the four enumerated exemptible categories.

If the exemption was outside of the four exemptible categories, like here, the exemptible
category should be: (1) in accord with the rationale for exemption; (2) reviewed/approved by
the NWPC; and (3) upon review, the RTWPB issuing the wage order must submit a strong and
justifiable reason or reasons for the inclusion of such category. It is the compliance with the
second requisite that is at issue here.

The NWPC, in arriving at its decision, weighed the arguments of the parties and ruled that the
RTWPBNCR had substantial and justifiable reasons in exempting the sectors and
establishments enumerated in Section 2(A) and Section 9(2) based on the public hearings and
consultations, meetings, socialeconomic data and informations gathered prior to the issuance
of Wage Order No. NCR07. The very fact that the validity of the assailed sections of Wage
Order No. NCR07 had been already passed upon and upheld by the NWPC meant that the
NWPC had already given the wage order its necessary legal imprimatur. Accordingly, the
requisite approval or review was complied with.

The RTWPBs are the thinking group of men and women guided by statutory standards and
bound by the rules and guidelines prescribed by the NWPC. In the nature of their functions, the
RTWPBs investigate and study all the pertinent facts to ascertain the conditions in their
respective regions. Hence, they are logically vested with the competence to determine the
applicable minimum wages to be imposed as well as the industries and sectors to exempt from
the coverage of their wage orders.

Lastly, Wage Order No. NCR07 is presumed to be regularly issued in the absence of any strong
showing of grave abuse of discretion on the part of RTWPBNCR. The presumption of validity is
made stronger by the fact that its validity was upheld by the NWPC upon review.


19. RICARDO E. VERGARA, JR., petitioner, vs. COCA-COLA BOTTLERS PHILIPPINES, INC.,
respondent.

G.R. No. 176985.
April 1, 2013.

Fact:
Petitioner Ricardo E. Vergara, Jr. was an employee of respondent Coca-Cola Bottlers Philippines,
Inc. from May 1968 until he retired on January 31, 2002 as a District Sales Supervisor (DSS) for
Las Pias City, Metro Manila.

90

As stipulated in respondent's existing Retirement Plan Rules and Regulations at the time, the
Annual Performance Incentive Pay of RSMs, DSSs, and SSSs shall be considered in the
computation of retirement benefits, as follows: Basic Monthly Salary + Monthly Average
Performance Incentive (which is the total performance incentive earned during the year
immediately preceding 12 months) No. of Years in Service.

Claiming his entitlement to an additional PhP474,600.00 as Sales Management Incentives
(SMI) and to the amount of PhP496,016.67 which respondent allegedly deducted illegally,
representing the unpaid accounts of two dealers within his jurisdiction, petitioner filed a
complaint before the NLRC on June 11, 2002 for the payment of his "Full Retirement Benefits,
Merit Increase, Commission/Incentives, Length of Service, Actual, Moral and Exemplary
Damages, and Attorney's Fees."

(Apparently, Petitioner argued that the granting of SMI to all retired DSSs regardless of whether
or not they qualify to the same had ripened into company practice. The only two pieces of
evidence that he stubbornly presented throughout the entirety of this case are the sworn
statements of Renato C. Hidalgo (Hidalgo) and Ramon V. Velazquez (Velasquez), former DSSs of
respondent who retired in 2000 and 1998, respectively. They claimed that the SMI was included
in their retirement package even if they did not meet the sales and collection qualifiers.
Therefore, the failure of employer to grant him his SMI is a violation on the principle of non-
diminution of benefits.)

Issue:
Whether or not the granting of SMI to all retired DSSs regardless of whether or not they qualify
to the same had ripened into company practice

Ruling:
Generally, employees have a vested right over existing benefits voluntarily granted to them by
their employer. Thus, any benefit and supplement being enjoyed by the employees cannot be
reduced, diminished, discontinued or eliminated by the employer. The principle of non-
diminution of benefits is actually founded on the Constitutional mandate to protect the rights
of workers, to promote their welfare, and to afford them full protection. In turn, said mandate
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."
There is diminution of benefits when the following requisites are present:
(1) the grant or benefit is founded on a policy or has ripened into a practice over a long
period of time;
(2) the practice is consistent and deliberate;
(3) the practice is not due to error in the construction or application of a doubtful or
difficult question of law; and
91

(4) the diminution or discontinuance is done unilaterally by the employer. To be
considered as a regular company practice, the employee must prove by substantial evidence
that the giving of the benefit is done over a long period of time, and that it has been made
consistently and deliberately. Jurisprudence has not laid down any hard-and-fast rule as to the
length of time that company practice should have been exercised in order to constitute
voluntary employer practice. The common denominator in previously decided cases appears to
be the regularity and deliberateness of the grant of benefits over a significant period of time. It
requires an indubitable showing that the employer agreed to continue giving the benefit
knowing fully well that the employees are not covered by any provision of the law or
agreement requiring payment thereof. In sum, the benefit must be characterized by regularity,
voluntary and deliberate intent of the employer to grant the benefit over a considerable period
of time.

Upon review of the entire case records, We find no substantial evidence to prove that the grant
of SMI to all retired DSSs regardless of whether or not they qualify to the same had ripened into
company practice.

The granting of the SMI in the retirement package of Velazquez was an isolated incident and
could hardly be classified as a company practice that may be considered an enforceable
obligation. To repeat, the principle against diminution of benefits is applicable only if the grant
or benefit is founded on an express policy or has ripened into a practice over a long period of
time which is consistent and deliberate; it presupposes that a company practice, policy and
tradition favorable to the employees has been clearly established; and that the payments made
by the company pursuant to it have ripened into benefits enjoyed by them. Certainly, a practice
or custom is, as a general rule, not a source of a legally demandable or enforceable
right. Company practice, just like any other fact, habits, customs, usage or patterns of conduct,
must be proven by the offering party who must allege and establish specific, repetitive conduct
that might constitute evidence of habit or company practice.



V. VIOLATION OF WAGE ORDERS
VI.WAGE ENFORCEMENT AND RECOVERY

1. EX-BATAAN VETERANS SECURITY AGENCY, INC., petitioner, vs. THE SECRETARY OF LABOR
BIENVENIDO E. LAGUESMA, REGIONAL DIRECTOR BRENDA A. VILLAFUERTE, ALEXANDER
POCDING, FIDEL
BALANGAY, BUAGEN CLYDE, DENNIS EPI, DAVID MENDOZA, JR., GABRIEL TAMULONG,
ANTON PEDRO, FRANCISCO PINEDA, GASTON DUYAO, HULLARUB, NOLI DIONEDA, ATONG
92

CENON, JR., TOMMY BAUCAS, WILLIAM PAPSONGAY, RICKY DORIA, GEOFREY MINO,
ORLANDO RILLASE, SIMPLICIO TELLO, M. G. NOCES, R. D. ALEJO, and P. C. DINTAN,
respondents.
G.R. No. 152396.
November 20, 2007.

Facts:
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 the following violations were noted:
1) non-presentation of records;
2) non-payment of holiday pay;
3) non-payment of rest day premium;
4) underpayment of night shift differential pay;
5) non-payment of service incentive leave;
6) underpayment of 13
th
month pay;
7) no registration;
8) no annual medical report;
9) no annual work accidental report;
10) no safety committee; and
11) no trained first aider.
On 19 August 1996, the Director of the Regional Office (Regional Director) issued an Order.
(Compliance Order). EBVSAI filed a motion for reconsideration

and alleged that the Regional
Director does not have jurisdiction over the subject matter of the case because the money
claim of each private respondent exceeded P5,000. EBVSAI pointed out that the Regional
Director should have endorsed the case to the Labor Arbiter.

Issues:
Whether the Secretary of Labor or his duly authorized representatives have jurisdiction over
the money claims of private respondents which exceed P5,000.

Ruling:
On the Regional Directors Jurisdiction over the Money Claims
In Allied Investigation Bureau, Inc. v. Sec. of Labor, we ruled that: While it is true that
under Articles 129 and 217 of the Labor Code, the Labor Arbiter has jurisdiction to hear
and decide cases where the aggregate money claims of each employee
93

exceedsP5,000.00, said provisions of law do not contemplate nor cover the visitorial and
enforcement powers of the Secretary of Labor or his duly authorized representatives.
Art. 128 Visitorial and enforcement power. --- x x x
(b) Notwithstanding the provisions of Article[s] 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.
x x x x
The aforequoted provision explicitly excludes from its coverage Articles 129 and
217 of the Labor Code by the phrase (N)otwithstanding the provisions of
Articles 129 and 217of this Code to the contrary x x x thereby retaining and
further strengthening the power of the Secretary of Labor or his duly authorized
representatives to issue compliance orders to give effect to the labor standards
provisions of said Code and other labor legislation based on the findings of labor
employment and enforcement officer or industrial safety engineer made in the
course of inspection.
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:
1) that the employer contests the findings of the labor regulations officer and
raises issues thereon;
2) that in order to resolve such issues, there is a need to examine evidentiary
matters; and
3) 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.

94

Petition denied.


14. FRANCISCO GUICO, JR., doing business under the name and style of COPYLANDIA
SERVICES & TRADING, petitioner, vs. THE HON. SECRETARY OF LABOR & EMPLOYMENT
LEONARDO A. QUISUMBING, THE OFFICE OF REGIONAL DIRECTOR OF REGION I, DEPT. OF
LABOR & EMPLOYMENT, ROSALINA CARRERA, ET. AL., respondents.

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.

On October 30, 1995, Regional Director Guerrero N. Cirilo issued an Order favorable to the 21
employees. First, he ruled that the purported Receipt, Waiver and Quitclaim dated December
21 and 22, 1994, could not cause the dismissal of the labor standards case against the
petitioner since the same were executed before the filing of the said case. Moreover, the
employees repudiated said waiver and quitclaim. Second, he held that despite the salary
increase granted by the petitioner, the daily salary of the employees was still below the
minimum daily wage rate of P119.00 under Wage Order No. RB-I-03. Thirdly, he held that the
removal of the commission and incentive schemes during the pendency of the case violated the
prohibition against elimination or diminution of benefits under Article 100 of the Labor Code, as
amended. The Regional Director awarded the claimants ONE MILLION EIGHTY ONE THOUSAND
SEVEN HUNDRED FIFTY SIX PESOS AND SEVENTY CENTAVOS (P1,081,756.70) representing their
backwages, well over P5,000.

On October 24, 1997, the respondent Secretary denied the Motion for Reconsideration. He
ruled that the Regional Director has jurisdiction over the case citing Article 128 (b) of the Labor
Code, as amended. He pointed out that Republic Act No. 7730 repealed the jurisdictional
limitations imposed by Article 129 on the visitorial and enforcement powers of the Secretary of
Labor and Employment or his duly authorized representatives. In addition, he held that
petitioner is now estopped from questioning the computation made by the Regional Director as
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a result of the compromise agreement he entered into with the employees. Lastly, he
reiterated his ruling that the Receipt, Waiver and Quitclaim signed by the employees was not
valid.

Issue:
Whether or not the Regional Director of the Department of Labor and employment can award
claims even more than P5,000.

Ruling:
Yes, the Regional Director can award claims of over P5,000. The visitorial power of the
Secretary of Labor to order and enforce compliance with labor standard laws cannot be
exercised where the individual claim exceeds P5,000.00, can no longer be applied in view of the
enactment of R.A. No. 7730 amending Article 128(b) of the Labor Code, viz:
Art. 128 (b) Notwithstanding the provisions of Articles 129 and 217 of this Code to the
contrary, and in cases where the relationship of employer-employee still exists, the Secretary of
Labor and Employment or his duly authorized representatives shall have the power to issue
compliance orders to give effect to the labor standards provisions of the Code and other labor
legislation based on the findings of the labor employment and enforcement officers or
industrial safety engineers made in the course of inspection. The Secretary or his duly
authorized representatives shall issue writs of execution to the appropriate authority for the
enforcement of their orders, except in cases where the employer contests the findings of the
labor employment and enforcement officer and raises issues supported by documentary proofs
which were not considered in the course of inspection.


15. THE HON. SECRETARY OF LABOR AND EMPLOYMENT, EDGARDO M. AGAPAY and
SAMILLANO A. ALONSO, JR., petitioners, vs. PANAY VETERAN'S SECURITY AND
INVESTIGATION AGENCY, INC. and JULITO JALECO, respondents.

G.R. No. 167708.
August 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. He asserted that he is a regular employee having been engaged
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to perform works which are usually necessary and desirable to respondents business. He also
contended that he received a daily wage lower than that mandated by the wage order. He
further alleged that he was made to sign two payroll sheets, the first bearing the actual amount
he received wherein his signature was affixed to the last column opposite his name, and the
second containing only his name and signature. He also averred that his salary from 18 to 30
May 1998 was withheld by respondents. Respondent on the other hand argued that petitioner
was hired as a project employee and that there was no underpayment of wages as evidenced
by the payrolls presented.

The Labor Arbiter in resolving this controversy ruled that the complainant was indeed a project
employee. However, it ordered the respondent to pay the Sapio his unpaid wage and salary
differential.

Issue:
Whether or not Petitioner is entitled to the Salary Differential

Ruling:
Yes. He is entitled to the salary differential. Petitioners claim of salary differential represents
the difference between the daily wage he actually received and the statutory minimum. To
counter petitioners assertions, respondents submitted typewritten and signed payroll sheets
from 2 September to 8 December 1996, from 26 May to 15 June 1997, and from 12 January
to 31 May 1998. These payroll sheets clearly indicate that petitioner did receive a daily salary
of P141.00.

In turn, petitioner presented the December 1995 payroll sheet written in pencil in tandem with
the assertion that he, together with his co-employees, was required to sign two sets of payroll
sheets in different colors: white, which bears the actual amount he received with his signature
affixed in the last column opposite his name, and yellow, where only his name appears thereon
with his signature also affixed in the last column opposite his name. In the December 1995
payroll sheet, petitioner appears to have received P90.00 only as his daily salary but he did not
sign the same.

Banking on the fact that the December 1995 payroll sheet was written in pencil, the Labor
Arbiter concluded that the entries were susceptible to change or erasure and that that
susceptibility in turn rendered the other payroll sheets though typewritten less credible. The
appellate court however, ruled on the contrary. It contended that the allegations of fraud in the
preparation of payroll sheets must be substantiated by evidence and not by mere suspicions or
conjectures, which the petitioner failed to do. There being no evidence that there was an
alteration in his payroll sheet dated December 1995.

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The Supreme Court subscribed to the findings of the appellate court but it nonetheless found
that the petitioner is still entitled to a salary differential. The Court found that from 1 January
to 30 August 1996 and 1 July 1997 to 31 May 1998, petitioner had received a wage less than the
minimum mandated by law. The total salary differential that petitioner is lawfully entitled to
amounts to P6,578.00 However, pursuant to Section 12 of Republic Act (R.A.) No. 6727, as
amended by R.A. No. 8188. Respondents are required to pay double the amount owed to
petitioner, bringing their total liability to P13,156.00.


4. JETHRO INTELLIGENCE & SECURITY CORPORATION and YAKULT PHILS., INC., petitioners, vs.
THE HON. SECRETARY OF LABOR AND EMPLOYMENT, FREDERICK GARCIA, GIL CORDERO,
LEONIELYN UDALBE, MICHAEL BENOZA, EDWIN ABLITER, CELEDONIO SUBERE and MA.
CORAZON LANUZA, respondents.
G.R. No. 172537.
August 14, 2009.

Facts:
Jethro is a security service contractor with a security service contract agreement with co-
petitioner Yakult Phils. Respondent Frederick Garcia (Garcia), one of the security guards
deployed by Jethro, file a complaint for underpayment of wages, legal/special holiday pay,
premium pay for rest day, 13th month pay, and night shift differential, the Department of Labor
and Employment (DOLE)-Regional Office No. IV conducted an inspection at Yakults premises in
Calamba, Laguna in the course of which several labor standards violations were noted,
including keeping of payrolls and daily time records in the main office, underpayment of wages,
overtime pay and other benefits, and non-registration with the DOLE as required under
Department Order No. 18-02.

Petitioners attribute grave abuse of discretion on the part of the DOLE Regional Director and
the SOLE in this wise: (1) the SOLE has no jurisdiction over the case because, following Article
129 of the Labor Code, the aggregate money claim of each employee exceeded P5,000.00

Issue:
Whether or not the SOLE has the power to determine the violations of Labor Standards.

Ruling:
While it is true that under Articles 129 and 217 of the Labor Code, the Labor Arbiter has
jurisdiction to hear and decide cases where the aggregate money claims of each employee
exceeds P5,000.00, said provisions do not contemplate nor cover the visitorial and enforcement
powers of the Secretary of Labor or his duly authorized representatives.

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The Secretary of Labor, under Art. 106, LC, exercises quasi-judicial power, at least to the extent
necessary to determine violations of labor standards provisions of the Code. He, or the regional
directors, can issue compliance orders and writs of execution for the execution thereof. 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 finding of the labor employment and enforcement officer and raises issues
supported by documentary proofs which were not considered in the course of inspection.


5. NATIONAL MINES and ALLIED WORKERS UNION (NAMAWU), petitioner, vs. MARCOPPER
MINING CORPORATION, respondent.
G.R. No. 174641.
November 11, 2008.

Facts:
DENR ordered the indefinite suspension of MARCOPPER's operations for causing damage to the
environment of the Province of Marinduque by spilling the company's mine waste or tailings
from an old underground impounding area into the Boac River, in violation of its ECC.
NAMAWU was the exclusive bargaining representative of the rank-and-file workers of
MARCOPPER. It filed a complaint with the NLRC against MARCOPPER for nonpayment of wages,
separation pay, damages, and attorney's fees.

NAMAWU claimed that due to the indefinite suspension of MARCOPPER's operations, its
members were not paid the wages due them for six months. It further claimed that its
members are also entitled to be paid their separation pay pursuant to their collective
bargaining agreement with MARCOPPER and under existing implementing rules of the Labor
Code. There had been an illegal strike which occurred.
Issue:
Whether or not it is necessary that MARCOPPER file an appeal bond

Ruling:
In the context of the NLRC appeal bond that is directly at issue, MARCOPPER had every reason
to claim in its April 10, 2000 appeal to the NLRC that it should be excused from filing an appeal
bond with respect to the NAMAWU members who were no longer company employees. The CA
decision decreeing the termination of employment of those involved in the illegal strike case
had already been issued at that time. We subsequently ruled on the same issue during the time
the environmental incident case was pending before the NLRC. Thus, when the NLRC dismissed
MARCOPPER's appeal for failure to file the requisite appeal bond corresponding to the 615
NAMAWU members, the termination of employment of these NAMAWU members was already
a settled matter that the NLRC was in no position to disregard. In this light, the CA was correct
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in reversing the dismissal of MARCOPPER's appeal for failure to file an appeal bond. Pursued to
its logical end, the CA conclusions should lead to the dismissal of NAMAWU's complaint with
respect to its 615 previously dismissed members.


6. PEOPLE'S BROADCASTING SERVICE (BOMBO RADYO PHILS., INC.), petitioner, vs. THE
SECRETARY OF THE DEPARTMENT OF LABOR AND EMPLOYMENT, THE REGIONAL DIRECTOR,
DOLE REGION VII, and JANDELEON JUEZAN, respondents.
G.R. No. 179652.
March 6, 2012.

Facts:
Jandeleon Juezan (Juezan) filed a complaint before the DOLE against Bombo Radyo Phils.
(Bombo Radyo) for illegal deduction, non-payment of service incentive leave, 13th month
pay, premium pay for holiday and rest day and illegal diminution of benefits, delayed payment
of wages and non-coverage of SSS, PAG-IBIG and Philhealth. On the basis of the complaint, the
DOLE conducted a plant level inspection. The Labor Inspector in his report wrote,
Management representative informed that (Juezan) complainant is a drama talent hired on a
per drama participation basis hence no employer-employer relationship existed between
them. As proof of this, management presented photocopies of cash vouchers, billing statement,
employments of specific undertaking, etc. The management has no control of the talent if he
ventures into another contract with other broadcasting industries.

Issue:
Whether or not the Secretary of Labor has the power to determine the existence of an
employer-employee relationship.

Ruling:
Yes. No limitation in the law was placed upon the power of the DOLE to determine the
existence of an employer-employee relationship. No procedure was laid down where the DOLE
would only make a preliminary finding, that the power was primarily held by the NLRC. The law
did not say that the DOLE would first seek the NLRCs determination of the existence of an
employer-employee relationship, or that should the existence of the employer-employee
relationship be disputed, the DOLE would refer the matter to the NLRC. The DOLE must have
the power to determine whether or not an employer-employee relationship exists, and from
there to decide whether or not to issue compliance orders in accordance with Art. 128(b) of the
Labor Code, as amended by RA 7730.

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The DOLE, in determining the existence of an employer-employee relationship, has a ready set
of guidelines to follow, the same guide the courts themselves use. The elements to determine
the existence of an employment relationship are: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal; (4) the employers power to
control the employees conduct. The use of this test is not solely limited to the NLRC. The DOLE
Secretary, or his or her representatives, can utilize the same test, even in the course of
inspection, making use of the same evidence that would have been presented before the NLRC.

The determination of the existence of an employer-employee relationship by the DOLE must be
respected. The expanded visitorial and enforcement power of the DOLE granted by RA 7730
would be rendered nugatory if the alleged employer could, by the simple expedient of disputing
the employer-employee relationship, force the referral of the matter to the NLRC. The Court
issued the declaration that at least a prima facie showing of the absence of an employer-
employee relationship be made to oust the DOLE of jurisdiction. But it is precisely the DOLE
that will be faced with that evidence, and it is the DOLE that will weigh it, to see if the same
does successfully refute the existence of an employer-employee relationship.

If the DOLE makes a finding that there is an existing employer-employee relationship, it takes
cognizance of the matter, to the exclusion of the NLRC. The DOLE would have no jurisdiction
only if the employer-employee relationship has already been terminated, or it appears, upon
review, that no employer-employee relationship existed in the first place.

It must also be remembered that the power of the DOLE to determine the existence of an
employer-employee relationship need not necessarily result in an affirmative finding. The DOLE
may well make the determination that no employer-employee relationship exists, thus
divesting itself of jurisdiction over the case. It must not be precluded from being able to reach
its own conclusions, not by the parties, and certainly not by this Court.

Under Art. 128(b) of the Labor Code, as amended by RA 7730, the DOLE is fully empowered to
make a determination as to the existence of an employer-employee relationship in the exercise
of its visitorial and enforcement power, subject to judicial review, not review by the NLRC.

To recapitulate, if a complaint is brought before the DOLE to give effect to the labor standards
provisions of the Labor Code or other labor legislation, and there is a finding by the DOLE that
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there is an existing employer-employee relationship, the DOLE exercises jurisdiction to the
exclusion of the NLRC. If the DOLE finds that there is no employer-employee relationship, the
jurisdiction is properly with the NLRC. If a complaint is filed with the DOLE, and it is
accompanied by a claim for reinstatement, the jurisdiction is properly with the Labor Arbiter,
under Art. 217(3) of the Labor Code, which provides that the Labor Arbiter has original and
exclusive jurisdiction over those cases involving wages, rates of pay, hours of work, and other
terms and conditions of employment, if accompanied by a claim for reinstatement. If a
complaint is filed with the NLRC, and there is still an existing employer-employee relationship,
the jurisdiction is properly with the DOLE. The findings of the DOLE, however, may still be
questioned through a petition for certiorari under Rule 65 of the Rules of Court.


7. PHILIPPINE HOTELIERS, INC., DUSIT HOTEL NIKKO-MANILA, petitioner, vs. NATIONAL UNION
OF WORKERS IN HOTEL, RESTAURANT, AND ALLIED INDUSTRIES (NUWHRAIN-APL-IUF)-DUSIT
HOTEL NIKKO CHAPTER, respondents.

G.R. No. 181972.
August 25, 2009.

Facts:
RTWPB issued Wage Order No. 9 that took effect on November 5, 2001. It grants P30.00 ECOLA
to particular employees and workers of all private sectors, identified as follows in Section 1
thereof:

Section 1. Upon the effectivity of this Wage Order, all private sector workers and employees in
the National Capital Region receiving daily wage rates of TWO HUNDRED FIFTY PESOS (P250.00)
up to TWO HUNDRED NINETY PESOS (P290.00) shall receive an emergency cost of living
allowance in the amount of THIRTY PESOS (P30.00) per day payable in two tranches as follows:

Amount of ECOLA Effectivity
P15.00 5 November 2001
P15.00 1 February 2002

Respondent National Union of Workers in Hotel, Restaurant and Allied Industries-Dusit Hotel
Nikko Chapter (Union), through its President, Reynaldo C. Rasing (Rasing), sent a letter to
Director Alex Maraan (Dir. Maraan) of the Department of Labor and Employment-National
Capital Region (DOLE-NCR), reporting the non-compliance of Dusit Hotel with WO No. 9, while
there was an on-going compulsory arbitration before the National Labor Relations Commission
(NLRC) due to a bargaining deadlock between the Union and Dusit Hotel; and requesting
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immediate assistance on this matter. Rasing sent Dir. Maraan another letter following-up his
previous request for assistance.

Acting on Rasings letters, the DOLE-NCR sent Labor Standards Officer Estrellita Natividad (LSO
Natividad) to conduct an inspection of Dusit Hotel premises on 24 April 2002. LSO Natividads
Inspection Results Report dated 2 May 2002 stated:

Based on interviews/affidavits of employees, they are receiving more than P290.00 average
daily rate which is exempted in the compliance of Wage Order NCR-09;

Remarks: There is an ongoing negotiation under Case # NCMB-NCR-NS-12-369-01 & NCMB-
NCR-NS-01-019-02 now forwarded to the NLRC office for the compulsory arbitration.

NOTE: Payrolls to follow later upon request including position paper of [Dusit Hotel].

By virtue of Rasings request for another inspection, LSO Natividad conducted a second
inspection of Dusit Hotel premises on 29 May 2002. In her Inspection Results Report dated 29
May 2002, LSO Natividad noted:

*Non-presentation of records/payrolls

*Based on submitted payrolls & list of union members by NUWHRAIN-DUSIT HOTEL NIKKO
Chapter, there are one hundred forty-four (144) affected in the implementation of Wage Order
No. NCR-09-> ECOLA covering the periods from Nov.5/01 to present.

Accordingly, the DOLE-NCR issued a Notice of Inspection Result directing Dusit Hotel to effect
restitution and/or correction of the noted violations within five days from receipt of the Notice,
and to submit any question on the findings of the labor inspector within the same period,
otherwise, an order of compliance would be issued. The Notice of Inspection Result was duly
received by Dusit Hotel Assistant Personnel Manager Rogelio Santos.

In the meantime, the NLRC rendered a Decision dated 9 October 2002 in NLRC-NCR-CC No.
000215-02 the compulsory arbitration involving the Collective Bargaining Agreement (CBA)
deadlock between Dusit Hotel and the Union granting the hotel employees the following
wage increases, in accord with the CBA:

Effective January 1, 2001- P500.00/month

Effective January 1, 2002- P550.00/month

Effective January 1, 2003- P600.00/month
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On 22 October 2002, based on the results of the second inspection of Dusit Hotel premises,
DOLE-NCR, through Dir. Maraan, issued the Order directing Dusit Hotel to pay 144 of its
employees the total amount of P1,218,240.00, corresponding to their unpaid ECOLA under WO
No. 9; plus, the penalty of double indemnity, pursuant to Section 12 of Republic Act No.
6727,11 as amended by Republic Act No. 8188.

The employer concerned shall be ordered to pay an amount equivalent to double the unpaid
benefits owing to the employees: Provided, that payment of indemnity shall not absolve the
employer from the criminal liability under this Act.

If the violation is committed by a corporation, trust or firm, partnership, association or any
other entity, the penalty of imprisonment shall be imposed upon the entitys responsible
officers including but not limited to the president, vice president, chief executive officer,
general manager, managing director or partner.

Dusit Hotel filed a Motion for Reconsideration of the DOLE-NCR Order dated 22 October 2002,
arguing that the NLRC Decision dated 9 October 2002, resolving the bargaining deadlock
between Dusit Hotel and the Union, and awarding salary increases under the CBA to hotel
employees retroactive to 1 January 2001, already rendered the DOLE-NCR Order moot and
academic. With the increase in the salaries of the hotel employees ordered by the NLRC
Decision of 9 October 2002, along with the hotel employees share in the service charges, the
144 hotel employees, covered by the DOLE-NCR Order of 22 October 2002, would already be
receiving salaries beyond the coverage of WO No. 9.

Acting on the Motion, DOLE-NCR issued a Resolution setting aside its earlier Order for being
moot and academic, in consideration of the NLRC decision and dismissing the complaint of the
Union against Dusit Hotel, for non-compliance with WO No. 9, for lack of merit.

The Union appealed before the DOLE Secretary maintaining that the wage increases granted by
the NLRC Decision of 9 October 2002 should not be deemed as compliance by Dusit Hotel with
WO No. 9. The DOLE, through Acting Secretary Manuel G. Imson, issued an Order granting the
appeal of the Union. The DOLE Secretary reasoned that the NLRC Decision dated 9 October
2002 categorically declared that the wage increase under the CBA finalized between Dusit Hotel
and the Union shall not be credited as compliance with WOs No. 8 and No. 9. Furthermore,
Section 1 of Rule IV of the Rules Implementing WO No. 9, which provides that wage increases
granted by an employer in an organized establishment within three months prior to the
effectivity of said Wage Order shall be credited as compliance with the ECOLA prescribed
therein, applies only when an agreement to this effect has been forged between the parties or
a provision in the CBA allowing such crediting exists.

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Expectedly, Dusit Hotel sought reconsideration of the Order of the DOLE Secretary. In an Order,
the DOLE Secretary granted the Motion for Reconsideration of Dusit Hotel and reversed his
Order dated 22 July 2004. The DOLE Secretary, in reversing his earlier Order, admitted that he
had disregarded therein that the wage increase granted by the NLRC in the latters Decision
dated 9 October 2002 retroacted to 1 January 2001. The said wage increase, taken together
with the hotel employees share in the service charges of Dusit Hotel, already constituted
compliance with the WO No. 9.

It was then the turn of the Union to file a Motion for Reconsideration, but it was denied by the
DOLE Secretary. The DOLE Secretary found that it would be unjust on the part of Dusit Hotel if
the hotel employees were to enjoy salary increases retroactive to 1 January 2001, pursuant to
the NLRC Decision dated 9 October 2002, and yet said salary increases would be disregarded in
determining compliance by the hotel with WO No. 9.

The Union appealed the Orders dated 16 December 2004 and 13 October 2005 of the DOLE
Secretary with the Court of Appeals, the Court of Appeals promulgated its Decision ruling in
favor of the Union. Referring to Section 13 of WO No. 9, the Court of Appeals declared that
wage increases/allowances granted by the employer shall not be credited as compliance with
the prescribed increase in the same Wage Order, unless so provided in the law or the CBA itself;
and there was no such provision in the case at bar. The appellate court also found that Dusit
Hotel failed to substantiate its position that receipt by its employees of shares in the service
charges collected by the hotel was to be deemed substantial compliance by said hotel with the
payment of ECOLA required by WO No. 9. The Court of Appeals adjudged that Dusit Hotel
should be liable for double indemnity for its failure to comply with WO No. 9 within five days
from receipt of notice. The appellate court stressed that ECOLA is among the laborers financial
gratifications under the law, and is distinct and separate from benefits derived from negotiation
or agreement with their employer.

The Motion for Reconsideration of Dusit Hotel was denied for lack of merit by the Court of
Appeals.

Issue:
Whether the 144 hotel employees were still entitled to ECOLA granted by WO No. 9 despite the
increases in their salaries, retroactive to 1 January 2001, ordered by NLRC in the latters
Decision dated 9 October 2002.

Ruling:
The reliance of the Union on Section 13 of WO No. 9 in this case is misplaced. Dusit Hotel is not
contending creditability of the hotel employees salary increases as compliance with the ECOLA
mandated by WO No. 9. Creditability means that Dusit Hotel would have been allowed to pay
its employees the salary increases in place of the ECOLA required by WO No. 9. This, however,
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is not what Dusit Hotel is after. The position of Dusit Hotel is merely that the salary increases
should be taken into account in determining the employees entitlement to ECOLA. The
retroactive increases could raise the hotel employees daily salary rates above P290.00,
consequently, placing said employees beyond the coverage of WO No. 9. Evidently, Section 13
of WO No. 9 on creditability is irrelevant and inapplicable herein.

The Court agrees with Dusit Hotel that the increased salaries of the employees should be used
as bases for determining whether they were entitled to ECOLA under WO No. 9. The very fact
that the NLRC decreed that the salary increases of the Dusit Hotel employees shall be
retroactive to 1 January 2001 and 1 January 2002, means that said employees were already
supposed to receive the said salary increases beginning on these dates. The increased salaries
were the rightful salaries of the hotel employees by 1 January 2001, then again by 1 January
2002. Although belatedly paid, the hotel employees still received their salary increases.

It is only fair and just, therefore, that in determining entitlement of the hotel employees to
ECOLA, their increased salaries by 1 January 2001 and 1 January 2002 shall be made the bases.
There is no logic in recognizing the salary increases for one purpose (i.e., to recover the unpaid
amounts thereof) but not for the other (i.e., to determine entitlement to ECOLA). For the Court
to rule otherwise would be to sanction unjust enrichment on the part of the hotel employees,
who would be receiving increases in their salaries, which would place them beyond the
coverage of Section 1 of WO No. 9, yet still be paid ECOLA under the very same provision.

The NLRC, in its Decision dated 9 October 2002, directed Dusit Hotel to increase the salaries of
its employees by P500.00 per month, retroactive to 1 January 2001. After applying the said
salary increase, only 82 hotel employees would have had daily salary rates falling within the
range of P250.00 to P290.00. Thus, upon the effectivity of WO No. 9 on 5 November 2001, only
the said 82 employees were entitled to receive the first tranch of ECOLA, equivalent to P15.00
per day.

The NLRC Decision also ordered Dusit Hotel to effect a second round of increase in its
employees salaries, equivalent to P550.00 per month, retroactive to 1 January 2002. As a result
of this increase, the daily salary rates of all hotel employees were already above P290.00.
Consequently, by 1 January 2002, no more hotel employee was qualified to receive ECOLA.

The assertion of Dusit Hotel that the receipt by said hotel employees of their shares in the
service charges already constituted substantial compliance with the prescribed payment of
ECOLA under WO No. 9.

It must be noted that the hotel employees have a right to their share in the service charges
collected by Dusit Hotel, pursuant to Article 96 of the Labor Code of 1991, to wit:

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Article 96. Service charges. All service charges collected by hotels, restaurants and similar
establishments shall be distributed at the rate of eighty-five percent (85%) for all covered
employees and fifteen percent (15%) for management. The share of employees shall be equally
distributed among them. In case the service charge is abolished, the share of the covered
employees shall be considered integrated in their wages.

Since Dusit Hotel is explicitly mandated by the afore-quoted statutory provision to pay its
employees and management their respective shares in the service charges collected, the hotel
cannot claim that payment thereof to its 82 employees constitute substantial compliance with
the payment of ECOLA under WO No. 9. Undoubtedly, the hotel employees right to their
shares in the service charges collected by Dusit Hotel is distinct and separate from their right to
ECOLA; gratification by the hotel of one does not result in the satisfaction of the other.

SC finds no basis to hold Dusit Hotel liable for double indemnity
Under Section 2(m) of DOLE Department Order No. 10, Series of 1998, the Notice of Inspection
Result "shall specify the violations discovered, if any, together with the officers
recommendation and computation of the unpaid benefits due each worker with an advice that
the employer shall be liable for double indemnity in case of refusal or failure to correct the
violation within five calendar days from receipt of notice." A careful review of the Notice of
Inspection Result dated 29 May 2002, issued herein by the DOLE-NCR to Dusit Hotel, reveals
that the said Notice did not contain such an advice. Although the Notice directed Dusit Hotel to
correct its noted violations within five days from receipt thereof, it was not sufficiently apprised
that failure to do so within the given period would already result in its liability for double
indemnity. The lack of advice deprived Dusit Hotel of the opportunity to decide and act
accordingly within the five-day period, as to avoid the penalty of double indemnity. By 22
October 2002, the DOLE-NCR, through Dir. Maraan, already issued its Order directing Dusit
Hotel to pay 144 of its employees the total amount of P1,218,240.00, corresponding to their
unpaid ECOLA under WO No. 9; plus the penalty of double indemnity, pursuant to Section 12 of
Republic Act No. 6727, as amended by Republic Act No. 8188.

SC AFFIRMED WITH THE FOLLOWING MODIFICATIONS: (1) Dusit Hotel Nikko is ORDERED to
pay its 82 employees who, after applying the salary increases for 1 January 2001, had daily
salaries of P250.00 to P290.00 the first tranch of Emergency Cost of Living Allowance,
equivalent to P15.00 per day, from 5 November 2001 to 31 December 2001, within ten (10)
days from finality of this Decision; and (2) the penalty for double indemnity is DELETED. No
costs.

Although the Court is mindful of the fact that labor embraces individuals with a weaker and
unlettered position as against capital, it is equally mindful of the protection that the law
accords to capital. While the Constitution is committed to the policy of social justice and the
protection of the working class, it should not be supposed that every labor dispute will be
107

automatically decided in favor of labor. Management also has its own rights which, as such, are
entitled to respect and enforcement in the interest of simple fair play.


8. VIRGILIO SAPIO, petitioner, vs. UNDALOC CONSTRUCTION and/or ENGR. CIRILO UNDALOC,
respondents.
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 avers that he was
paid a daily salary way below the minimum wage provided for by law.

His claim of salary
differential represents the difference between the daily wage he actually received and the
statutory minimum wage.

Issue:
Whether or not petitioner is entitled to salary differential after his termination.

Ruling:
The total salary differential that petitioner is lawfully entitled to amounts to P6,578.00
However, pursuant to Section 12 of Republic Act (R.A.) No. 6727, as amended by R.A. No. 8188.
Respondents are required to pay double the amount owed to petitioner, bringing their total
liability to P13,156.00. The employer concerned shall be ordered to pay an amount equivalent
to double the unpaid benefits owing to the employees: Provided, That payment of indemnity
shall not absolve the employer from the criminal liability imposable under this Act.


9. SUPERIOR PACKAGING CORPORATION, petitioner, vs. ARNEL BALAGSAY,
ZALDY ALFORGNE, JAIME ANGELES, REY APURA, GERALD CABALAN, JONALD
CALENTENG, et. al., respondents.

G.R. No. 178909.
October 10, 2012.

Facts:
The petitioner engaged the services of Lancer to provide reliever services to its business, which
involves the manufacture and sale of commercial and industrial corrugated boxes. According to
108

petitioner, the respondents were engaged for four (4) months from February to June 1998 and
their tasks included loading, unloading and segregation of corrugated boxes.
Thereafter, respondents filed complaint against the petitioner and President, Cesar Luz (Luz),
for underpayment of wages, non-payment of premium pay for worked rest, overtime pay and
non-payment of salary. Upon receipt Department of Labor and Employment (DOLE) conducted
an inspection of the petitioners premises and found several violations, to wit:
(1) Non-presentation of payrolls and daily time records;
(2) Non-submission of annual report of safety organization;
(3) Medical and accident/illness reports;
(4) Non-registration of establishment under Rule 1020 of Occupational and Health
Standards; and
(5) No trained first aide

Due to the petitioners failure to appear in the summary investigations conducted by the DOLE,
an Order

was issued on June 18, 2003 finding in favor of the respondents and adopting the
computation of the claims submitted. Petitioner and Luz were ordered, among others, to pay
respondents their total claims in the amount of Eight Hundred Forty Thousand Four Hundred
Sixty-Three Pesos and 38/100 (P 840,463.38).

Petitioner filed a motion for reconsideration on the ground that respondents are not its
employees but of Lancer and that they pay Lancer in lump sum for the services rendered. The
DOLE, however, denied its motion because petitioner failed to support its claim that the
respondents are not its employees, and even assuming that they were employed by Lancer, the
petitioner still cannot escape liability as Section 13 of the Department Order No. 10, Series of
1997, makes a principal jointly and severally liable with the contractor to contractual
employees to the extent of the work performed when the contractor fails to pay its employees
wages.

Their appeal to the Secretary of DOLE was dismissed thus, l petitioner and Luz filed a petition
for certiorari with the Court of Appeals (CA). On November 17, 2006, the CA affirmed the
Secretary of DOLEs orders, with the modification in that Luz was absolved of any personal
liability under the award.

Hence, this petition for review under Rule 45 of the Rules of Court.

Issue:
Whether or not DOLE has authority to determine the existence of an employer-employee
relationship?
Whether Superior Packaging Corporation may be held solidarily liable with Lancer Staffing &
Services Network, Inc. (Lancer) for respondents unpaid money claims?

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Ruling:
The petition is bereft of merit.

The DOLE clearly acted within its authority when it determined the existence of an employer-
employee relationship between the petitioner and respondents as it falls within the purview of
its visitorial and enforcement power under Article 128(b) of the Labor Code. The determination
of the existence of an employer-employee relationship by the DOLE must be respected.

With regard to the contention that there is no evidence to support the finding that the
respondents rendered overtime work and that they worked on their rest day, the resolution of
this argument requires a review of the factual findings and the evidence presented, Court said
that it is not a trier of facts and it applies with greater force in labor cases. Hence, where the
factual findings of the labor tribunals or agencies conform to, and are affirmed by, the CA, the
same are accorded respect and finality, and are binding to Supreme Court.

It was the consistent conclusion of the DOLE and the CA that Lancer was not an independent
contractor but was engaged in "labor-only contracting"; hence, the petitioner was considered
an indirect employer of respondents and liable to the latter for their unpaid money claims.

At the time of the respondents employment in 1998, the applicable regulation was DOLE
Department Order No. 10, Series of 1997. Under said Department Order, labor-only contracting
was defined as follows:
Sec. 9. Labor-only contracting. (a) Any person who undertakes to supply workers to an
employer shall be deemed to be engaged in labor-only contracting where such person:
(1) Does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises and other materials; and
(2) The workers recruited and placed by such persons are performing activities which are
directly related to the principal business or operations of the employer in which workers are
habitually employed.

Labor-only contracting is prohibited and the person acting as contractor shall be considered
merely as an agent or intermediary of the employer who shall be responsible to the workers in
the same manner and extent as if the latter were directly employed by him.

According to the CA, the totality of the facts and surrounding circumstances of this case point
to such conclusion that Lancer was, indeed, a labor-only contractor. Aside from these is the
undisputed fact that the petitioner failed to produce any written service contract that might
serve as proof of its alleged agreement with Lancer.

Finally, a finding that a contractor is a "labor-only" contractor is equivalent to declaring that
there is an employer-employee relationship between the principal and the employees of the
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supposed contractor, and the "labor only" contractor is considered as a mere agent of the
principal, the real employer. The former becomes solidarily liable for all the rightful claims of
the employees.

Petitioner therefore, being the principal employer and Lancer, being the labor-only contractor,
are solidarily liable for respondents unpaid money claims.


10. TIGER CONSTRUCTION AND DEVELOPMENT CORPORATION, petitioner, vs. REYNALDO
ABAY, RODOLFO ARCENAL, et. al., respondents.
G.R. No. 164141.
February 26, 2010.

Facts:
On the basis of a complaint filed by respondents Reynaldo Abay and fifty-nine (59) others before the
Regional Office of the Department of Labor and Employment (DOLE), an inspection was conducted by
DOLE officials at the premises of petitioner TCDC. Several labor standard violations were noted, such as
deficiencies in record keeping, non-compliance with various wage orders, non-payment of holiday pay,
and underpayment of 13
th
month pay. The case was then set for summary hearing.

However, before the hearing could take place, the Director of Regional Office No. V, Ma. Glenda A.
Manalo (Director Manalo), issued an Order on July 25, 2002, referring the instant case back to the NLRC
,pursuant with Article 129 of LC in relation to Article 217, on the ground that the aggregate money claim
of each worker execeeds the jurisdictional amoun of her office which is Five Thousand Pesos.

Before the NLRC could take any action, DOLE Secretary Patricia A. Sto. Tomas (Secretary Sto. Tomas), in
an apparent reversal of Director Manalos endorsement, issued another inspection authority on August
2, 2002 in the same case. Pursuant to such authority, DOLE officials conducted another investigation of
petitioners premises and the same violations were discovered.

The DOLE officials issued a Notice of Inspection Results to petitioner directing it to rectify the violations
within five days from notice. For failure to comply with the directive, the case was set for summary
hearing on August 19, 2002. On even date, petitioner allegedly questioned the inspectors findings and
argued that the proceedings before the regional office had been rendered moot by the issuance of
the July 25, 2002 Order endorsing the case to the NLRC. According to petitioner, this July 25, 2002
Order was tantamount to a dismissal on the ground of lack of jurisdiction, which dismissal had attained
finality; hence, all proceedings before the DOLE regional office after July 25, 2002 were null and void for
want of jurisdiction.

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On September 30, 2002, Director Manalo issued an Order directing TCDC to pay P2,123,235.90 to its
employees representing underpayment of salaries, 13
th
month pay, and underpayment of service
incentive leave pay and regular holiday pay. TCDC filed a Motion for Reconsideration on October 17,
2002 and a Supplemental Pleading to the Motion for Reconsideration on November 21, 2002,
reiterating the argument that Director Manalo had lost jurisdiction over the matter. Apparently
convinced by petitioners arguments, Director Manalo again endorsed the case to the NLRC Regional
Arbitration Branch V (Legaspi City). On January 27, 2003, the NLRC returned the entire records of the
case to Director Manalo on the ground that the NLRC does not have jurisdiction over the complaint.

Having the case in her office once more, Director Manalo finally issued an Order dated January 29,
2003 denying petitioners motion for reconsideration for lack of merit. Since TCDC did not interpose an
appeal within the prescribed period, Director Manalo issued forthwith a Writ of Execution on February
12, 2003. On May 14, 2003, while the sheriff was in the process of enforcing the Writ of Execution, and
more than three months after the denial of its motion for reconsideration, TCDC filed an admittedly
belated appeal with the DOLE Secretary. There it reiterated its argument that, subsequent to the July
25, 2002 Order, all of Director Manalos actions concerning the case are null and void for having been
issued without jurisdiction.

Acting on the ill-timed appeal, Secretary Sto. Tomas issued an Order dated January 19, 2004 dismissing
petitioners appeal for lack of merit. Citing Guico v. Quisumbing Secretary Sto. Tomas held that
jurisdiction over the case properly belongs with the regional director; hence, Director Manalos
endorsement to the NLRC was a clear error. Such mistakes of its agents cannot bind the State, thus
Director Manalo was not prevented from continuing to exercise jurisdiction over the case. Undaunted,
TCDC filed a Motion for Reconsideration insisting that the CA erred in dismissing its petition for certiorari
on a mere technicality. Petitioner argues that the strict application of the rule on verification and
certification of non-forum shopping will result in a patent denial of substantial justice.

Since respondents did not file a comment on the motion for reconsideration, we resolved to grant the
same and to reinstate the petition.

Issue:
Whether or not petitioner can still assail the January 29, 2003 Order of Director Manalo allegedly on the
ground of lack of jurisdiction, after said Order has attained finality and is already in the execution
stage. (affirmative)

Ruling:
While it is true that orders issued without jurisdiction are considered null and void and, as a general rule,
may be assailed at any time, the fact of the matter is that in this case, Director Manalo acted within
her jurisdiction. Under Article 128 (b) of the Labor Code, as amended by Republic Act (RA) No.
7730, the DOLE Secretary and her representatives, the regional directors, have jurisdiction over labor
standards violations based on findings made in the course of inspection of an employers premises. The
112

said jurisdiction is not affected by the amount of claim involved, as RA 7730 had effectively removed
the jurisdictional limitations found in Articles 129 and 217 of the Labor Code insofar as inspection cases,
pursuant to the visitorial and enforcement powers of the DOLE Secretary, are concerned. The last
sentence of Article 128(b) of the Labor Code recognizes an exception to the jurisdiction of the DOLE
Secretary and her representatives, but such exception is neither an issue nor applicable here.

Director Manalos initial endorsement of the case to the NLRC, on the mistaken opinion that the claim
was within the latters jurisdiction, did not oust or deprive her of jurisdiction over the case. She
therefore retained the jurisdiction to decide the case when it was eventually returned to her office by
the DOLE Secretary. Jurisdiction or authority to try a certain case is conferred by law and not by the
interested parties, much less by one of them, and should be exercised precisely by the person in
authority or body in whose hands it has been placed by the law.

We also cannot accept petitioners theory that Director Manalos initial endorsement of the case to the
NLRC served as a dismissal of the case, which prevented her from subsequently assuming jurisdiction
over the same. The said endorsement was evidently not meant as a final disposition of the case; it was
a mere referral to another agency, the NLRC, on the mistaken belief that jurisdiction was lodged with
the latter. It cannot preclude the regional director from subsequently deciding the case after the
mistake was rectified and the case was returned to her by the DOLE Secretary, particularly since it was a
labor case where procedural lapses may be disregarded in the interest of substantial justice.


11. RAJAH HUMABON HOTEL, INC., RAJAH SOLIMAN HOTEL, INC. and/or PETER
PO, petitioners, vs. HON. CRESENCIANO B. TRAJANO, as Undersecretary of
Department of Labor and Employment, et. al., respondents.

G.R. No. 100222-23
September 14, 1993.

Facts:
For redress in regard to underpaid wages and non-payment of benefits, the herein respondent-
employees turned to the regional director of the Department of Labor and Employment. The
jurisdictional competence of such official is, however, disputed and challenged by the
employers in the instant petition who contend that it is the labor arbiter who may properly
entertain the grievance. 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.

Issue:
Who between the Regional Director of the Department of Labor and Employment and the
Labor Arbiter has jurisdiction over the complaint of private respondents.

113

Ruling:
The Labor Arbiter has exclusive jurisdiction over the complaint of private respondents which
involves a money claim exceeding P5,000. The principle of continuous jurisdiction of the
regional director, as applied by the Secretary of Labor to the suit filed by herein private
respondents on March 14, 1989 prior to the effectivity of Republic Act No. 6715, is therefore
incorrect. To sustain otherwise would sanction a situation where all employees' claims,
regardless of amount, can be heard and determined by the Secretary of Labor under his
visitorial power. This does not, however, appear to be the legislative intent. The Secretary of
Labor should be held as possessed of his plenary visitorial powers to order the inspection of all
establishments where labor is employed, to look into all possible violations of labor laws and
regulations but the power to hear and decide employees' claims 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.
Regional directors under Republic Act No. 6715, can try money claims only if the
following requisites concur:
The claim is presented by an employee or person employed in domestic or
household service, or househelper under the code;

the claimant, no longer being employed, does not seek reinstatement; and,

The aggregate money claim of the employee or housekeeper does not
exceed five thousand pesos (P5,000.00).



VII. WAGE PROTECTION PROVISIONS & PROHIBITIONS REGARDING
WAGES

1. JENNY M. AGABON and VIRGILIO C. AGABON, petitioners, vs. NATIONAL LABOR RELATIONS
COMMISSION (NLRC), RIVIERA HOME IMPROVEMENTS, INC. and VICENTE ANGELES,
respondents.
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 petitioner Virgilio Agabon and
114

Jenny Agabon as gypsum board and cornice installers on Jan. 2.1992 until February 23,1999
when they were dismissed for abandonment of work.

Petitioners filed a complaint for illegal dismissal and payments of money claims and the LA
rendered in favor of the petitioners ordering the private respondents to pay the monetary
claims.

On appeal, NLRC reversed the decision because it found that petitioners abandoned their work
and not entitled to backwages so the petitioners filed for a petition for certiorari in CA.

CA ruled that the dismissal was not illegal because they had abandoned their employment but
ordered the payment of money claims including their holiday pay and incentives.

Petitioners assert that they were dismissed because private respondent refused to give them
assignments unless they agreed to work on pakyawbasis and that private respondent did not
comply with the twin requirements of notice and hearing.

Private respondent said that it sent two letters to petitioners advising them to report for work
and talked over the phone about the cornice installation at Pacific Plaza Towers.However,
petitioners did not report for work because they had subcontracted another installation from
another company.

Issue:
Whether or not the petitioners illegally dismissed and WON they are entitled to benefits?

Ruling:
Dismissal was legal and they are entitled to benefits.

In February 1999, petitioners were frequently absent having subcontracted for an installation
work for another company. Subcontracting for another company clearly showed the intention
to sever the employer-employee relationship with private respondent. This was not the first
time they did this. In January 1996, they did not report for work because they were working for
another company. Private respondent at that time warned petitioners that they would be
dismissed if this happened again. Petitioners disregarded the warning and exhibited a clear
intention to sever their employer-employee relationship. The record of an employee is a
relevant consideration in determining the penalty that should be meted out to him.

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
115

full backwages 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 employees last known
address. Thus, it should be held liable for non-compliance with the procedural requirements of
due process.

As a general rule, one who pleads payment has the burden of proving it. Even where the
employee must allege non-payment, the general rule is that the burden rests on the employer
to prove payment, rather than on the employee to prove non-payment. The reason for the rule
is that the pertinent personnel files, payrolls, records, remittances and other similar documents
which will show that overtime, differentials, service incentive leave and other claims of
workers have been paid are not in the possession of the worker but in the custody and
absolute control of the employer.

In the case at bar, if private respondent indeed paid petitioners holiday pay and service
incentive leave pay, it could have easily presented documentary proofs of such monetary
benefits to disprove the claims of the petitioners. But it did not, except with respect to the
116

13
th
month pay wherein it presented cash vouchers showing payments of the benefit in the
years disputed. Allegations by private respondent that it does not operate during holidays and
that it allows its employees 10 days leave with pay, other than being self-serving, do not
constitute proof of payment. Consequently, it failed to discharge the onus probandi thereby
making it liable for such claims to the petitioners.

Anent the deduction of SSS loan and the value of the shoes from petitioner Virgilio Agabons
13
th
month pay, we find the same to be unauthorized. The evident intention of Presidential
Decree No. 851 is to grant an additional income in the form of the 13
th
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 13
th
month pay is included in the
definition of wage under Article 97(f) of the Labor Code

The Court ruled that respondent is liable for petitioners holiday pay, service incentive leave pay
and 13
th
month pay without deductions. The evident intention of Presidential Decree No. 851
is to grant an additional income in the form of the 13
th
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 13
th
month pay is included in the definition of
wage under Article 97(f) of the Labor Code.


2. GUALBERTO AGUANZA, petitioner, vs. ASIAN TERMINAL, INC., KEITH JAMES, RICHARD
BARCLAY, and ATTY. RODOLFO CORVITE, respondents.
G.R. No. 163505.
August 14, 2009.

Facts:
Petitioner GualbertoAguanza was employed with respondent company Asian Terminal, Inc.
from April 15, 1989 to October 1997. He was initially employed as Derickman or Crane Operator
and was assigned as such aboard Bismark IV, a floating crane barge owned by Asian Terminals,
Inc. based at the port of Manila. Aside from his basic pay, he received meal allowance, fixed
overtime pay and out-of port allowance [when the barge is assigned outside Metro Manila].

Sometime in September 1997, the Bismark IV, together with its crew, was temporarily assigned
at the Mariveles Grains Terminal in Mariveles, Bataan. Then, on October 20, 1997, respondent
James Keith issued a memo to the crew of Bismark IV stating that the barge had been
permanently transferred to the Mariveles Grains terminal beginning October 1, 1997 and
because of that, its crew would no longer be entitled to out of port benefits of 16 hours
overtime and P200 a day out-of port allowance.

117

Due to the said development, Aguanza questioned the diminution of his benefits. Aguanza
insisted on reporting to work in Manila although his barge, Bismark IV, and its other crew were
already permanently based in Mariveles, Bataan. Aguanza was not allowed to time in in Manila
because his work was in Mariveles, Bataan. He therefore was not able to render his services,
and was accordingly not paid for doing nothing.

Because of private respondents refusal to give him any work assignment and pay his salary,
Aguanza filed a complaint for illegal dismissal against respondents.

Issue:
Was Aguanza constructively dismissed?

Ruling:
No. The transfer of operations is a valid exercise of management prerogative. Aguanza asserts
that his transfer constituted constructive dismissal, while ATI asserts that Aguanzas transfer
was a valid exercise of management prerogative.

ATIs transfer of Bismark IVs base from Manila to Bataan was, contrary to Aguanzas assertions,
a valid exercise of management prerogative. The transfer of employees has been traditionally
among the acts identified as a management prerogative subject only to limitations found in law,
collective bargaining agreement, and general principles of fair play and justice. Even as the law
is solicitous of the welfare of employees, it must also protect the right of an employer to
exercise what are clearly management prerogatives. The free will of management to conduct its
own business affairs to achieve its purpose cannot be denied. On the other hand, the transfer
of an employee may constitute constructive dismissal "when continued employment is
rendered impossible, unreasonable or unlikely; when there is a demotion in rank and/or a
diminution in pay; or when a clear discrimination, insensibility or disdain by an employer
becomes unbearable to the employee." Aguanzas situation is not within the purview of this
discussion.

When ATI transferred Bismark IVs operations to Bataan, ATI offered Aguanza similar terms:
basic pay for 40 hours of work from Monday to Friday, overtime pay for work done in excess of
eight hours per day, overtime pay for work done on Saturdays and Sundays, no additional
allowance and no transportation for working in Bataan. The circumstances of the case made no
mention of the salary structure in case Bismark IV being assigned work outside of Bataan;
however, we surmise that it would not be any different from the salary structure applied for
work done out-of-port. We, thus, agree with the NLRC and the appellate court when they
stated that the fixed overtime of 16 hours, out-of-port allowance and meal allowance
previously granted to Aguanza were merely supplements or employment benefits given on
condition that Aguanzas assignment was out-of-port. The fixed overtime and allowances were
118

not part of Aguanzas basic salary. Aguanzas basic salary was not reduced; hence, there was no
violation of the rule against diminution of pay.


3. AMERICAN WIRE AND CABLE DAILY RATED EMPLOYEES UNION, petitioner, vs. AMERICAN
WIRE AND CABLE CO., INC. and THE COURT OF APPEALS, respondents.
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 employees 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.

Ruling:
The 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.

119


4. ARCO METAL PRODUCTS, CO., INC., and MRS. SALVADOR UY, petitioners, vs. SAMAHAN NG
MGA MANGGAGAWA SA ARCO METAL-NAFLU (SAMARM-NAFLU), respondent. citing Davao
Fruits vs. Asso. Labor Union, 225 SCRA 562 and Sevilla Trading vs. AVA Tomas Services, G.R.
No. 152456, April 28, 2004
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). The parties submitted
the case for voluntary arbitration.

The voluntary arbitrator, Apron M. Mangabat, ruled in favor of petitioner and found that the
giving of the contested benefits in full, irrespective of the actual service rendered within one
year has not ripened into a practice. He also interpreted the phrase "for each year of service"
found in the pertinent CBA provisions to mean that an employee must have rendered one year
of service in order to be entitled to the full benefits provided in the CBA.

Respondent filed a Petition for Review before the Court of Appeals. The appellate court found
that petitioner had an existing voluntary practice of paying the aforesaid benefits in full to its
employees; thereby rejecting the claim that petitioner erred in paying full benefits to its seven
employees. The appellate court noted that aside from the affidavit of petitioner's officer, it has
not presented any evidence in support of its position that it has no voluntary practice of
granting the contested benefits in full and without regard to the service actually rendered
within the year.

Issues;
1. Whether or not the petitioners should grant 13th month pay, bonus and leave encashment in
full regardless of actual service rendered.
2. Whether or not the prorated payment of the said benefits constitutes diminution of benefits
under Article 100 of the Labor Code.

120

Ruling:
On the first issue, according to petitioner, there is a one-year cutoff in the entitlement to the
benefits provided in the CBA, which is evident from the wording of its pertinent provisions as
well as of the existing law. There is no doubt that in order to be entitled to the full monetization
of sixteen (16) days of vacation and sick leave, one must have rendered at least one year of
service. The clear wording of the provisions does not allow any other interpretation. Anent the
13th month pay and bonus, the CBA provisions did not give any meaning different from that
given by the law, thus it should be computed at 1/12 of the total compensation, which an
employee receives for the whole calendar year. The bonus is also equivalent to the amount of
the 13th month pay given, or in proportion to the actual service rendered by an employee
within the year.

On the second issue, it is a settled rule that 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."

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.

Petitioner claims that its full payment of benefits regardless of the length of service to the
company does not constitute voluntary employer practice. It points out that the payments had
been erroneously made and they occurred in isolated cases in the years 1992, 1993, 1994,
1999, 2002 and 2003. According to petitioner, it was only in 2003 that the accounting
department discovered the error. Petitioner further argues that for a grant of a benefit to be
considered a practice, it should have been practiced over a long period of time and must be
shown to be consistent, deliberate and intentional, which is not what happened in this case.

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. 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.
Petition denied.


121

5. BLUER THAN BLUE JOINT VENTURES COMPANY/MARY ANN DELA VEGA, petitioners, vs.
GLYZA ESTEBAN, respondent.
G.R. No. 192582.
April 7, 2014.

Facts:
The respondent was employed as a sales clerk and assigned at the petitioners boutique. Her
primary tasks were attending to all customer needs, ensuring efficient inventory, coordinating
orders from clients, cashiering and reporting to the accounting department. The petitioner
learned that some of their employees had access to their POS system with the use of a
universal password given to them by a certain Elmer Flores, who in turn learned of the
password from the respondent. The petitioner then conducted an investigation and asked the
petitioner to explain why she should not be disciplinarily dealt with. During the investigation
the respondent was placed under preventive suspension. After investigation the petitioner
terminated the respondent on the grounds of loss of trust or confidence. This respondent was
given her final wage and benefits less the inventory variance incurred by the store. This urged
the respondent to file a complaint for illegal dismissal, illegal suspension, holiday pay, rest day
and separation pay. The labor arbiter ruled in her favour awarding her backwages. The
petitioner appealed the decision in the NLRC and the decision was reversed. However, upon the
respondents petition for certiorari in the court of appeals the decision was reinstated. Hence,
this petition.

Issue:
Whether the negative sales variance could be validly deducted from the respondents wage?

Ruling:
No, it cannot be deducted in this case.

Article 113 of the Labor Code provides that no employer, in his own behalf or in behalf of any
person, shall make any deduction from the wages of his employees, except in cases where the
employer is authorized by law or regulations issued by the Secretary of Labor and Employment,
among others. The Omnibus Rules Implementing the Labor Code, meanwhile, provides:
SECTION 14. Deduction for loss or damage. Where the employer is engaged in a
trade, occupation or business where the practice of making deductions or requiring
deposits is recognized to answer for the reimbursement of loss or damage to tools,
materials, or equipment supplied by the employer to the employee, the employer may
make wage deductions or require the employees to make deposits from which
deductions shall be made, subject to the following conditions:
(a) That the employee concerned is clearly shown to be responsible for the loss or
damage;
122

(b) That the employee is given reasonable opportunity to show cause why deduction
should not be made;
(c) That the amount of such deduction is fair and reasonable and shall not exceed the
actual loss or damage; and
(d) That the deduction from the wages of the employee does not exceed 20 percent of
the employee's wages in a week.

In this case, the petitioner failed to sufficiently establish that Esteban was responsible for the
negative variance it had in its sales for the year 2005 to 2006 and that Esteban was given the
opportunity to show cause the deduction from her last salary should not be made.

Furthermore, the court ruled, in Nina Jewelry Marketing of Metal Arts, Inc. v. Montecillo, that:
[T]he petitioners should first establish that the making of deductions from the salaries is
authorized by law, or regulations issued by the Secretary of Labor. Further, the posting
of cash bonds should be proven as a recognized practice in the jewelry manufacturing
business, or alternatively, the petitioners should seek for the determination by the
Secretary of Labor through the issuance of appropriate rules and regulations that the
policy the former seeks to implement is necessary or desirable in the conduct of
business. The petitioners failed in this respect. It bears stressing that without proofs that
requiring deposits and effecting deductions are recognized practices, or without
securing the Secretary of Labor's determination of the necessity or desirability of the
same, the imposition of new policies relative to deductions and deposits can be made
subject to abuse by the employers. This is not what the law intends.


6. CENTRAL AZUCARERA DE TARLAC, petitioner, vs. CENTRAL AZUCARERA DE TARLAC LABOR
UNION-NLU, respondent.
G.R. No. 188949.
July 26, 2010.

Facts:
In compliance with Presidential Decree (P.D.) No. 851, petitioner-employer granted its
employees the mandatory (13th) - month pay since 1975. The formula used by petitioner in
computing the 13th-month pay was: Total Basic Annual Salary divided by twelve (12). Included
in petitioners computation of the Total Basic Annual Salary were the following: basic monthly
salary; first eight (8) hours overtime pay on Sunday and legal/special holiday; night premium
pay; and vacation and sick leaves for each year. Throughout the years, petitioner used this
computation until 2006.

123

On November 6, 2004, respondent-union staged a strike. During the pendency of the strike,
petitioner declared a temporary cessation of operations but it was only on December 2005, all
the striking union members were allowed to return to work. Subsequently, petitioner declared
another temporary cessation of operations for the months of April and May 2006. Which was
later on lifted on June 2006, but the rank-and-file employees were allowed to report for work
on a fifteen (15) day-per-month rotation basis that lasted until September 2006. In December
2006, petitioner gave the employees their 13th-month pay based on the employees total
earnings during the year divided by 12.

However, the respondent union objected to this computation. It averred that petitioner did not
adhere to the usual computation of the 13th-month pay. It claimed that the divisor should
have been eight (8) instead of 12, because the employees worked for only 8 months in 2006. It
likewise asserted that petitioner did not observe the company practice of giving its employees
the guaranteed amount equivalent to their one month pay, in instances where the computed
13th-month pay was less than their basic monthly pay.

Petitioner explained that the change in the computation of the 13th-month pay was intended
to rectify an error in the computation, particularly the concept of basic pay which should have
included only the basic monthly pay of the employees.

Issue:
Whether petitioner's interpretation of the term basic pay, essential in the computation of the
13th-month pay, is correct

Ruling:
No. It is not correct.

The Rules and Regulations Implementing P.D. No. 851, promulgated on December 22, 1975,
defines 13th-month pay and basic salary as follows:
Sec. 2. Definition of certain terms. - As used in this issuance:
(a) "Thirteenth-month pay" shall mean one twelfth (1/12) of the basic salary of an
employee within a calendar year;
(b) "Basic salary" shall include all remunerations or earnings paid by an employer to
an employee for services rendered but may not include cost-of-living allowances
granted pursuant to Presidential Decree No. 525 or Letter of Instructions No. 174, profit-
sharing payments, and all allowances and monetary benefits which are not considered
or integrated as part of the regular or basic salary of the employee at the time of the
promulgation of the Decree on December 16, 1975.

On January 16, 1976, the Supplementary Rules and Regulations Implementing P.D. No. 851 was
issued. The Supplementary Rules clarifies that overtime pay, earnings, and other remuneration
124

that are not part of the basic salary shall not be included in the computation of the 13th-month
pay.

On November 16, 1987, the Revised Guidelines on the Implementation of the 13th-Month Pay
Law was issued. Significantly, under this Revised Guidelines, it was specifically stated that the
minimum 13th-month pay required by law shall not be less than one-twelfth (1/12) of the total
basic salary earned by an employee within a calendar year.

Furthermore, the term basic salary of an employee for the purpose of computing the 13th
month pay was interpreted to include all remuneration or earnings paid by the employer for
services rendered, but does not include allowances and monetary benefits which are not
integrated as part of the regular or basic salary, such as the cash equivalent of unused vacation
and sick leave credits, overtime, premium, night differential and holiday pay, and cost-of-living
allowances. However, these salary-related benefits should be included as part of the basic
salary in the computation of the 13th- month pay if, by individual or collective agreement,
company practice or policy, the same are treated as part of the basic salary of the employees.

The guidelines set by the law are not difficult to decipher. The voluntariness of the grant of the
benefit was manifested by the number of years the employer had paid the benefit to its
employees. Petitioner only changed the formula in the computation of the 13th-month pay
after almost 30 years and only after the dispute between the management and employees
erupted. This act of petitioner in changing the formula at this time cannot be sanctioned, as it
indicates a badge of bad faith.


7. FIVE J TAXI and/or JUAN S. ARMAMENTO, petitioners, vs. NATIONAL LABOR RELATIONS
COMMISSION, DOMINGO MALDIGAN and GILBERTO SABSALON, respondents.
G.R. No. 111474.
August 22, 1994.

Facts:
Private respondents Domingo Maldigan and Gilberto Sabsalon were hired by the petitioners as
taxi drivers. Aside from the daily "boundary", 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.

Issue:
Whether or not the car wash payment is an illegal deduction as contemplated in the Labor
Code.

125

Ruling:
SC held that the amount doled out was paid directly to the person who washed the unit, thus
we find nothing illegal in this practice, much more 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.Car washing after a tour of duty is a practice in the taxi industry, and is, in
fact, dictated by fair play.


8. ROSARIO A. GAA, petitioner, vs. THE HONORABLE COURT OF APPEALS, EUROPHIL
INDUSTRIES CORPORATION, and CESAR R. ROXAS, Deputy Sheriff of Manila, respondents
G.R.No. L-44169
December 3, 1985.

Facts:
Rosario Gaa is occupying a managerial/ supervisory position in El Grande Hotel. 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.

Issue:
Whether or not the renumeration of Gaa are exempted from execution or attachment pursuant
to Art. 1708 of the Civil Code.

Ruling:
SC held that, 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 Rosario A. Gaa is definitely not within that class.


9. GENESIS TRANSPORT SERVICE, INC. and RELY L. JALBUNA, petitioners, vs. UNYON NG
MALAYANG MANGGAGAWA NG GENESIS TRANSPORT (UMMGT), and JUAN TAROY,
respondents.
G.R. No. 182114.
April 5, 2010.

126

Facts:
Respondent Juan Taroy was hired by petitioner Genesis Transport as driver on commission
basis at 9% of the gross revenue per trip. He, after due notice and hearing, terminated from
employment after an accident on April 20, 2002 where he was deemed to have been driving
recklessly. He then filed a complaint for illegal dismissal and payment of service incentive leave
pay, claiming that he was singled out for termination because of his union activities, other
drivers who had met accidents not having been dismissed from employment. He later amended
his complaint to implead his co-respondent union and add as grounds unfair labor practice and
reimbursement of illegal deductions on tollgate fees, and payment of service incentive leave
pay.

Upon appeal, with respect to Taroys claim for refund, the Labor Arbiter ruled in his favor for if,
as contended by Genesis Transport, tollgate fees form part of overhead expense, why were not
expenses for fuel and maintenance also charged to overhead expense. The Labor Arbiter thus
concluded that it would appear that the tollgate fees are deducted from the gross revenues
and not from the salaries of drivers and conductors, but certainly the deduction thereof
diminishes the take home pay of the employees.

Issue:
Whether the tollgate fee deductions which resulted to an underpayment given to Taroy is
illegal?

Ruling:
The deduction is considered illegal.
The amounts representing tollgate fees were deducted from gross revenues and not directly
from Taroys commissions, the labor tribunal and the appellate court correctly held that the
withholding of those amounts reduced the amount from which Taroys 9% commission would
be computed. Such a computation not only marks a change in the method of payment of
wages, resulting in a diminution of Taroys wages in violation of Article 113 vis--vis Article 100
of the Labor Code, as amended. It need not be underlined that without Taroys written consent
or authorization, the deduction is considered illegal.
Besides, the invocation of the rule on company practice is generally used with respect to the
grant of additional benefits to employees, not on issues involving diminution of benefits.


10. HONDA PHILS., INC., petitioner, vs. SAMAHAN NG MALAYANG MANGGAGAWA SA
HONDA, respondent.
G.R. No. 145561.
June 15, 2005.

127

Facts:
Petitioner Honda and Respondent union forged a Collective Bargaining Agreement which
averred that Honda shall maintain the present practice in the implementation of the 13
th
and
14
th
month pay. Such CBA is effective until 2000. In the later part of 1998, the parties started
re-negotiations. However, when the talk between the parties did not go well, respondent union
filed a Notice to Strike on the ground of bargaining deadlock. Honda then filed a notice of
Lockout in which the DOLE ordered the party to cease and desist from committing acts.

The union filed a second Notice of Strike on ground of unfair labor, in which they went into
pocketing of the premises of Honda. DOLE then assumed jurisdiction and subjected the issue to
the NLRC for compulsory arbitration for which the employees were ordered to return to work.
The management of Honda, on 22 Nov. 1999, then issued a memorandum announcing its new
computation of the 13
th
and 14
th
month pay to be granted to employees whereby the 31-day
strike shall be considered unworked days for purposes of computing said benefits.

Thus, the union opposed the pro-rated computation of the bonuses and the matter was
brought before the Grievance Machinery. The Labor Arbiter ordered Honda to compute each
provision in full month basic pay. CA affirmed the decision of the labor arbiter.

Issue:
Whether or not the pro-rated computation of the 13
th
month pay and the other bonuses in
question is valid and lawful.

Ruling:
Such pro-rated computation is invalid.
It is well noted that the CBA refers to the negotiated contract between a legitimate labor
organization and the employer. It is the law between the parties and compliance therewith is
mandated by express policy of the law.

Honda did not adduce evidence to show that the 13
th
month, 14
th
month and financial
assistance benefits were previously subject to pro-rating. Thus, such was an implicit acceptance
that prior to the strike, a full month basic pay computation was the present practice intended
to be maintained in the CBA.

Lastly, to allow pro-ration of the 13
th
month pay is to undermine the wisdom behind the law
and the mandate that the workingmans welfare should be the primordial and paramount
consideration.

DENIED.


128


11. ANGEL JARDIN, DEMETRIO CALAGOS, URBANO MARCOS, ROSENDO MARCOS, LUIS DE LOS
ANGELES, JOEL ORDENIZA and AMADO CENTENO, petitioners, vs. NATIONAL LABOR
RELATIONS COMMISSION (NLRC) and GOODMAN TAXI (PHILJAMA INTERNATIONAL, INC.),
respondents.
G.R. No. 119268.
February 23, 2000.

Facts:
Petitioners were drivers of respondent, a domestic corporation engaged in the operation of
"Goodman Taxi". Petitioners used to drive respondent's taxicabs every other day on a 24 hour
work schedule under the boundary system. Under this arrangement, petitioners earned an
average of P400 daily. Nevertheless, respondent admittedly regularly deducts from petitioners,
daily earnings the amount of P30 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, respondent refused to let petitioners drive their
taxicabs when they reported for work. 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 respondent for unfair labor practice,
illegal dismissal and illegal deduction of washing fees. In a decision, the labor arbiter dismissed
the complaint for lack of merit.

On appeal, the NLRC, in a decision, reversed and set aside the judgment of the labor arbiter.
The labor tribunal declared that petitioners are employees of respondent and, as such, their
dismissal must be for just cause and after due process.

Respondent's first motion for reconsideration was denied. Respondent filed another motion for
reconsideration. The NLRC, in its decision, granted the second motion for reconsideration. It
ruled that it lacks jurisdiction over the case as petitioners and respondent have no employer
employee relationship. It held that the relationship of the parties is leasehold which is covered
by the Civil Code rather than the Labor Code.

Issue:
Whether or not there is an employer employee relationship so as to entitle them to payment
of backwages.

Ruling:
129

The court ruled that the relationship between jeepney owners/ operators on one hand and
jeepney drivers on the other under the boundary system is that of employer employee and
not of lessor lessee. The court has explained that in the lease of chattels, the lessor loses
complete control over the chattel leased although the lessee cannot be reckless in the use
thereof, otherwise he would be responsible for the damages to the lessor. In the case of
jeepney owners/ operators and jeepney drivers, the former exercise supervision and control
over the latter. The management of the business is in the owner's hands. The owner as holder
of the certificate of public convenience must see to it that the driver follows the route
prescribed by the franchising authority and the rules promulgated as regards its operation.
Now, the fact that the drivers do not receive fixed wages but get only that in excess of the so-
called "boundary" they pay to the owner/ operator is not sufficient to withdraw the
relationship between them from that of employer and employee. The court has applied by
analogy the doctrine to the relationships between bus owner/ operator and bus conductor,
auto-calesa owner/ operator and driver and between taxi owners/ operators and taxi drivers.
Hence, petitioners are undoubtedly employees of respondent because as taxi drivers they
perform activities which are usually necessary or desirable in the usual business or trade of
their employer.

As consistently held by the court, termination of employment must be effected in accordance
with law. The just and authorized causes for termination of employment are enumerated under
Articles 282, 283 and 284 of the Labor Code. The requirement of notice and hearing is set-out in
Article 277 of the said Code. Hence, petitioners, being employees of respondent, can be
dismissed only for just and authorized cause and after affording them notice and hearing prior
to termination. In the instant case, respondent had no valid cause to terminate the
employment of petitioners. Neither were there two written notices sent by respondent
informing each of the petitioners that they had been dismissed from work. These lack of valid
cause and failure on the part of respondent to comply with the twin-notice requirement
underscored the illegality surrounding petitioners' dismissal.

Under the law, 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. It
must be emphasized though that recent judicial pronouncements distinguish between
employees illegally dismissed prior to the effectivity of Republic Act No. 6715 on March 21,
1989 and those whose illegal dismissals were effected after such date. Thus, employees illegally
dismissed prior to March 21, 1989, are entitled to backwages up to three years without
deduction or qualification, while those illegally dismissed after that date are granted full
backwages inclusive of allowances and other benefits or their monetary equivalent from the
time their actual compensation was withheld from them up to the time of their actual
reinstatement. The legislative policy behind Republic Act No. 6715 points to "full backwages" as
130

meaning exactly that, i.e., without deducting from backwages the earnings derived elsewhere
by the concerned employee during the period of his illegal dismissal. Considering that
petitioners were terminated from work on August 1, 1991, they are entitled to full backwages
on the basis of their last daily earnings.

With regard to the amount deducted daily by respondent from petitioners for washing of the
taxi units, the court is of the view that the same is not illegal in the context of the law. The court
notes 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.


12. ANTONIO LOCSIN II, petitioner, vs. MEKENI FOOD CORPORATION, respondent.
.
G.R. No. 192105.
December 9, 2013.

Facts:
Petitioner Antonio Locsin II was the Regional Sales Manager of respondent Mekeni Food
Corporation. He was hired on February 2004 to oversee the NCR and Luzon operation. In
addition to his compensation and benefit package, a car was offered to him under which one-
half of the cost of the vehicle is to be paid by the company and the other half to be deducted
from petitioner's salary. The car valued at 280,000 which Locsin paid through salary deductions
of 5,000 per month.

On February 2006, Locsin resigned. A total of 112,500.00 had already been deducted from his
monthly salary and applied as part of his share in the car plan. Upon resignation, petitioner
made personal and written follow-ups regarding his unpaid salaries, commissions, benefits, and
offer to purchase his service vehicle. Mekeni replied that the company car plan benefit applied
only to employees who have been with the company for five years; for this reason, the balance
that petitioner should pay on his service vehicle stood at P116,380.00 if he opts to purchase the
same.

On May 3, 2007, petitioner filed against Mekeni and/or its President, Prudencio S. Garcia, a
Complaint for the recovery of monetary claims consisting of unpaid salaries, commissions,
sick/vacation leave benefits, and recovery of monthly salary deductions which were earmarked
for his cost-sharing in the car plan.

Issue:
131

Whether or not petitioner is entitled to a refund of all the amounts applied to the cost of the
service vehicle under the car plan.

Ruling:
Any benefit or privilege enjoyed by petitioner from using the service vehicle was merely
incidental and insignificant, because for the most part the vehicle was under Mekeni's control
and supervision. Free and complete disposal is given to the petitioner only after the vehicle's
cost is covered or paid in full. Until then, the vehicle remains at the beck and call of Mekeni.
Given the vast territory petitioner had to cover to be able to perform his work effectively and
generate business for his employer, the service vehicle was an absolute necessity, or else
Mekeni's business would suffer adversely. Thus, it is clear that while petitioner was paying for
half of the vehicle's value, Mekeni was reaping the full benefits from the use thereof.

Under Article 22 of the Civil Code, every person who through an act of performance by
another, or any other means, acquires or comes into possession of something at the expense of
the latter without just or legal ground, shall return the same to him." Article 2142 of the same
Code likewise clarifies that there are certain lawful, voluntary and unilateral acts which give rise
to the juridical relation of quasi-contract, to the end that no one shall be unjustly enriched or
benefited at the expense of another. In the absence of specific terms and conditions governing
the car plan arrangement between the petitioner and Mekeni, a quasi-contractual relation was
created between them. Consequently, Mekeni may not enrich itself by charging petitioner for
the use of its vehicle which is otherwise absolutely necessary to the full and effective
promotion of its business. It may not, under the claim that petitioner's payments constitute
rents for the use of the company vehicle, refuse to refund what petitioner had paid, for the
reasons that the car plan did not carry such a condition; the subject vehicle is an old car that is
substantially, if not fully, depreciated; the car plan arrangement benefited Mekeni for the most
part; and any personal benefit obtained by petitioner from using the vehicle was merely
incidental.

Conversely, petitioner cannot recover the monetary value of Mekeni's counterpart contribution
to the cost of the vehicle; that is not property or money that belongs to him, nor was it
intended to be given to him in lieu of the car plan. Mekeni's share of the vehicle's cost was not
part of petitioner's compensation package. The vehicle is an asset that belonged to Mekeni.
Just as Mekeni is unjustly enriched by failing to refund petitioner's payments, so should
petitioner not be awarded the value of Mekeni's counterpart contribution to the car plan, as
this would unjustly enrich him at Mekeni's expense.

Thus, Mekeni Food Corporation should refund petitioner Antonio Locsin II's payments under
the car plan agreement amounting only to the extent of the contribution Locsin made, totalling
to the amount of P112,500.00.

132


13. MANILA JOCKEY CLUB EMPLOYEES LABOR UNION-PTGWO, petitioner, vs. MANILA JOCKEY
CLUB, INC., respondent

G.R. No. 167760.
March 7, 2007.

Facts:
Manila Jockey Club, Inc., a corporation with a legislative franchise to conduct, operate and
maintain horse races, entered into a Collective Bargaining Agreement (CBA) with Manila Jockey
Club Employees Labor Union-PTGWO. Under Section 1 Article IV of their 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. 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 with exception to those monthly compensation which includes work
performed during Saturday, Sunday, and Holiday when races are held at the Club. The CBA
likewise reserved in management prerogatives including the determination of the work
schedule. An inter-office memorandum was later issued declaring that 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, sustained the 9:00 a.m.
to 5:00 p.m. schedule for non-race days.

Before the voluntary arbitrators of the National Conciliation and Mediation Board, petitioners
questioned the memorandum as violative of the prohibition against non-diminution of wages
and benefits guaranteed the CBA which specified the work schedule of respondent's employees
to be from 9:00 a.m. to 5:00 p.m. They 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.

Issue:
Whether or not the change in the work schedule violated Article 100 of the Labor Code on the
non-diminution of wages and benefits guaranteed under the parties CBA.

Ruling:
No. It was evident that the change in work schedule was justified, it being a management
prerogative. Respondent, as employer, cited the change in the program of horse races as
reason for the adjustment of the employees work schedule. It rationalized that when the CBA
was signed, the horse races started at 10:00 a.m. When the races were moved to 2:00 p.m.,
there was no other choice for management but to change the employees' work schedule as
there was no work to be done in the morning. It is true that Section 1, Article IV of the CBA
provides for 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. from Mondays to Saturdays. However, Section 2, Article XI expressly reserves on
133

respondent the prerogative to change existing methods or facilities to change the schedules of
work.

Moreover, Manila Jockey Club 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.


14. NESTLE PHILIPPINES, INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION,
EUGENIA C. NUEZ, LIZA T. VILLANUEVA, EMMANUEL S. VILLENA, RUDOLPH C. ARMAS,
RODOLFO M. KUA and RODOLFO A. SOLIDUM, respondents.

G.R. No. 85197.
March 18, 1991.

Facts:
The private respondents were employed by the petitioner either as sales representatives or
medical representatives. By reason of the nature of their work they were each allowed to avail
of the company's car loan policy. Under that policy, the company advances the purchase price
of a car to be paid back by the employee through monthly deductions from his salary, the
company retaining the ownership of the motor vehicle until it shall have been fully paid for. All
of the private respondents availed of the petitioner's car loan policy.

Respondents were dismissed from service because of their participation in the strike/ certain
irregularities. As such, they filed a case of illegal dismissal before the NLRC. In the Notices of
Dismissal, they were asked by the Company to settle the accounts payable of their car loans or
return the car for proper disposition. The Company filed a civil suit to recover possession of the
cars. Private respondents sought a temporary restraining order in the NLRC to stop the
company from cancelling their car loans and collecting their monthly amortizations pending the
final resolution of their appeals in the illegal dismissal case. NLRC granted the TRO.

Issue:
Whether or not NLRC is correct in granting the TRO in favor of the respondents pending the
case of illegal dismissal.

Ruling:
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Nestl's demand for payment of the private respondents' amortizations on their car loans, or,
in the alternative, the return of the cars to the company, is not a labor, but a civil, dispute. It
involves debtor-creditor relations, rather than employee-employer relations. The NLRC gravely
abused its discretion and exceeded its jurisdiction by issuing the writ of injunction to stop the
company from enforcing the civil obligation of the private respondents under the car loan
agreements and from protecting its interest in the cars which, by the terms of those
agreements, belong to it (the company) until their purchase price shall have been fully paid by
the employee. The terms of the car loan agreements are not in issue in the labor case. The
rights and obligations of the parties under those contracts may be enforced by a separate civil
action in the regular courts, not in the NLRC.


15. NIA JEWELRY MANUFACTURING OF METAL ARTS, INC. (otherwise known as NIA
MANUFACTURING AND METAL ARTS, INC.) and ELISEA B. ABELLA, petitioners, vs. MADELINE
C. MONTECILLO and LIZA M. TRINIDAD, respondents.
G.R. No. 188169.
November 28, 2011.

Facts:
Respondents were employed as goldsmiths by the petitioner Nia Jewelry Manufacturing of
Metal Arts, Inc.There were incidents of theft involving goldsmiths in Nia Jewelry's employ: The
petitioner imposed a policy for goldsmiths, which were intended to answer for any loss or
damage which Nia Jewelry may sustain by reason of the goldsmiths' fault or negligence in
handling the gold entrusted to them, requiring them to post cash bonds or deposits in varying
amounts but in no case exceeding 15% of the latter's salaries per week.

The petitioner alleged that the goldsmiths were given the option not to post deposits, but to
sign authorizations allowing the former to deduct from the latter's salaries amounts not
exceeding 15% of their take home pay should it be found that they lost the gold entrusted to
them. The deposits shall be returned upon completion of the goldsmiths' work and after an
accounting of the gold received.The respondents claimed otherwise insisting that petitioner left
the goldsmiths with no option but to post the deposits.

The next day after the policy was imposed, the respondents no longer reported for work and
signified their defiance against the new policy which at that point had not even been
implemented yet. The respondents alleged that they were constructively dismissed by the
petitioner as their continued employments were made dependent on their readiness to post
the required deposits. The respondents then filed a complaint for illegal dismissal and for the
award of separation pay against the petitioner, and later filed their amended complaint which
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excluded their earlier prayer for separation pay but sought reinstatement and payment of
backwages, attorney's fees and 13th month pay.

Issues:
1) Whether or not Nia Jewelry Manufacturing of Metal Arts, Inc. may impose the policy for
their goldsmiths requiring them to post cash bonds or deposits; and
2) Whether or not there is constructive dismissal.

Ruling:
1) NO, the Nia Jewelry may not impose the policy. Articles 113 and 114 of the Labor Code are
clear as to what are the exceptions to the general prohibition against requiring deposits and
effecting deductions from the employees' salaries.
ART. 113. Wage Deduction No employer, in his own behalf or in behalf of any person,
shall make any deduction from the wages of his employees, except:
(a)In cases where the worker is insured with his consent by the employer, and the
deduction is to recompense the employer for the amount paid by him as premium on
the insurance;
(b)For union dues, in cases where the right of the worker or his union to check-off has
been recognized by the employer or authorized in writing by the individual worker
concerned; and
(c)In cases where the employer is authorized by law or regulations issued by the
Secretary of Labor.
Article 114.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.

The petitioners should first establish that the making of deductions from the salaries is
authorized by law, or regulations issued by the Secretary of Labor. The petitioners failed to
prove that their imposition of the new policy upon the goldsmiths under Nia Jewelry's employ
falls under the exceptions specified in Articles 113 and 114 of the Labor Code.

2) There is NO constructive dismissal. Constructive dismissal occurs when there is cessation of
work because continued employment is rendered impossible, unreasonable or unlikely; when
there is a demotion in rank or diminution in pay or both; or when a clear discrimination,
insensibility, or disdain by an employer becomes unbearable to the employee.

The petitioners did not whimsically or arbitrarily impose the policy to post cash bonds or make
deductions from the workers' salaries. As attested to by the respondents' fellow goldsmiths in
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their Joint Affidavit, the workers were convened and informed of the reason behind the
implementation of the new policy. Instead of airing their concerns, the respondents just
promptly stopped reporting for work.


15. PRODUCERS BANK OF THE PHILIPPINES, petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION and PRODUCERS BANK EMPLOYEES ASSOCIATION, respondents

G.R. No.100701.
March 28, 2001.

Facts:
Private respondent filed a complaint on 11 February 1988 with the Arbitration Branch, National
Capital Region, National Labor Relations Commission (NLRC), charging petitioner with
diminution of benefits and non-payment of holiday pay. In addition, private respondent prayed
for damages. On 31 March 1989, Labor Arbiter found private respondent's claims to be
unmeritorious and dismissed its complaint. In a complete reversal, however, the NLRC granted
all of private respondent's claims, except for damages.
ARGUMENTS
Petitioner:
1) It cannot be compelled to pay the alleged bonus differentials due to its depressed financial
condition, as evidenced by the fact that in 1984 it was placed under conservatorship by the
Monetary Board. According to petitioner, it sustained losses in the millions of pesos from 1984
to 1988, an assertion which was affirmed by the labor arbiter. Moreover, the collective
bargaining agreement of the parties does not provide for the payment of any mid-year or
Christmas bonus.
2) It is not covered by PD 851 since the mid-year and Christmas bonuses it has been giving its
employees from 1984 to 1988 exceeds the basic salary for one month (except for 1985 where a
total of one month basic salary was given). Hence, this amount should be applied towards the
satisfaction of the 13th month pay, pursuant to Section 2 of PD 851.
Respondent:
1) The mid-year and Christmas bonuses, by reason of their having been given for thirteen
consecutive years, have ripened into a vested right and, as such, can no longer be unilaterally
withdrawn by petitioner without violating Article 100 of Presidential Decree No. 4429 which
prohibits the diminution or elimination of benefits already being enjoyed by the employees.
Although private respondent concedes that the grant of a bonus is discretionary on the part of
the employer, it argues that, by reason of its long and regular concession, it may become part
of the employee's regular compensation.
2) The conservator was not justified in diminishing or not paying the 13th month pay and that
petitioner should have instead applied for an exemption, in accordance with section 7 of
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Presidential Decree No. 851, as amended by Presidential Decree No. 1364, but that it did not do
so. The actions of the conservator ran counter to the provisions of PD 851.

Issue:
Whether or not petitioner is entitled to pay the bonuses and 13th month pay.

Ruling:
NO, THEY ARE NOT.
A bonus is an amount granted and paid to an employee for his industry and loyalty which
contributed to the success of the employer's business and made possible the realization of
profits. It is an act of generosity granted by an enlightened employer to spur the employee to
greater efforts for the success of the business and realization of bigger profits. The granting of a
bonus is a management prerogative, something given in addition to what is ordinarily received
by or strictly due the recipient. Thus, a bonus is not a demandable and enforceable obligation,
except when it is made part of the wage, salary or compensation of the employee.

However, an employer cannot be forced to distribute bonuses which it can no longer afford to
pay. To hold otherwise would be to penalize the employer for his past generosity. Private
respondent's contention, that the decrease in the mid-year and year-end bonuses constituted a
diminution of the employees' salaries, is not correct, for bonuses are not part of labor
standards in the same class as salaries, cost of living allowances, holiday pay, and leave
benefits, which are provided by the Labor Code.

Petitioner was placed under conservatorship by the Monetary Board, pursuant to its authority
under Section 28-A of Republic Act No. 265,21 as amended by Presidential Decree No. 72.
Under Section 28-A, the Monetary Board may place a bank under the control of a conservator
when it finds that the bank is continuously unable or unwilling to maintain a condition of
solvency or liquidity.

Petitioner was not only experiencing a decline in its profits, but was reeling from tremendous
losses triggered by a bank-run which began in 1983. In such a depressed financial condition,
petitioner cannot be legally compelled to continue paying the same amount of bonuses to its
employees. Thus, the conservator was justified in reducing the mid-year and Christmas bonuses
of petitioner's employees. To hold otherwise would be to defeat the reason for the
conservatorship which is to preserve the assets and restore the viability of the financially
precarious bank. Ultimately, it is to the employees' advantage that the conservatorship achieve
its purposes for the alternative would be petitioner's closure whereby employees would lose
not only their benefits, but their jobs as well.

With regard to 13th month pay, PD 851, which was issued by President Marcos on 16
December 1975, requires all employers to pay their employees receiving a basic salary of not
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more than P 1,000 a month, regardless of the nature of the employment, a 13th month pay, not
later than December 24 of every year. However, employers already paying their employees a
13th month pay or its equivalent are not covered by the law. Under the Revised Guidelines on
the Implementation of the 13th-Month Pay Law, the term "equivalent" shall be construed to
include Christmas bonus, mid-year bonus, cash bonuses and other payments amounting to not
less than 1/12 of the basic salary. The intention of the law was to grant some relief - not to all
workers - but only to those not actually paid a 13th month salary or what amounts to it, by
whatever name called. It was not envisioned that a double burden would be imposed on the
employer already paying his employees a 13th month pay or its equivalent whether out of pure
generosity or on the basis of a binding agreement. To impose upon an employer already giving
his employees the equivalent of a 13th month pay would be to penalize him for his liberality
and in all probability, the employer would react by withdrawing the bonuses or resist further
voluntary grants for fear that if and when a law is passed giving the same benefits, his prior
concessions might not be given due credit.

In the case at bar, even assuming the truth of private respondent's claims as contained in its
position paper or Memorandum regarding the payments received by its members in the form
of 13th month pay, mid-year bonus and Christmas bonus, it is noted that, for each and every
year involved, the total amount given by petitioner would still exceed, or at least be equal to,
one month basic salary and thus, may be considered as an "equivalent" of the 13th month pay
mandated by PD 851.
Thus, petitioner is justified in crediting the mid-year bonus and Christmas bonus as part of the
13th month pay.


17. PHILIPPINE APPLIANCE CORPORATION (PHILACOR), petitioner, vs. THE COURT OF
APPEALS, THE HONORABLE SECRETARY OF LABOR BIENVENIDO E. LAGUESMA and UNITED
PHILACOR WORKERS UNION-NAFLU, respondents.
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
(for the last two years of the collective bargaining agreement covering the period of July 1,
1997 to August 31, 1999), petitioner offered the amount of four thousand pesos (P4,000.00) to
each employee as an "early conclusion bonus". Upon conclusion of the CBA negotiations,
petitioner accordingly gave this early signing bonus. After the expiration of the CBA, both
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parties negotiated for a new CBA. However, it resulted to a deadlock. The respondent union
filed before the NCMB a notice of strike due to bargaining deadlock. The Department of Labor
and Employment took cognizance of the case and ordered, among other things, herein
petitioner to award signing bonus. Petitioner argued that the award of the signing bonus was
patently erroneous since it was not part of the employees salaries or benefits or of the
collective bargaining agreement. It is not demandable or enforceable since it is in the nature of
an incentive.

Issue:
Whether or not the award of a signing bonus by the Secretary of Labor is correct.

Ruling:
SC held that the signing bonus must not be awarded.
The CBA negotiation between petitioner and respondent union failed notwithstanding the
intervention of the NCMB. Respondent union went on strike for eleven days and blocked the
ingress to and egress from petitioners two work plants. The labor dispute had to be referred to
the Secretary of Labor and Employment because neither of the parties was willing to
compromise their respective positions regarding the four remaining items which stood
unresolved. While we do not fault any one party for the failure of the negotiations, it is
apparent that there was no more goodwill between the parties and that the CBA was clearly
not signed through their mutual efforts alone. Hence, the payment of the signing bonus is no
longer justified and to order such payment would be unfair and unreasonable for petitioner.

Furthermore, we have consistently ruled that a bonus is not a demandable and enforceable
obligation.


18. PHILIPPINE VETERANS BANK, petitioner, vs. HONORABLE NATIONAL LABOR RELATIONS
COMMISSION, HON. POTENCIANO CAIZARES, JR., and DR. TEODORICO V. MOLINA,
respondents.
G.R. No. 130439.
October 26, 1999.

Facts:
Due to financial losses, the Philippine Veterans Bank was placed in receivership pursuant to the
order of the Central Bank of the Philippines. Consequently, its employees, including private
respondent Dr. Jose Teodorico V. Molina, were terminated from work and given their
respective separation pay and other benefits. Dr. Molina filed a complaint before NLRC. He
demanded the implementation of the Wage Orders No. 1 and 2. Both the Labor Arbiter and
NLRC granted the petition of Molina.
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Issue:
Whether or not Molina is entitled to the increase of his salary pursuant to Wage Orders No. 1
and 2.

Ruling:
SC held that Molinas salary is within the coverage of the said wage orders. W.O. 1 expressly
states that employees having a monthly salary of not more than P3,802.08 are entitled to
receive the mandated wage increase. Undeniably, MOLINA was receiving a monthly salary of
P3,754.60. This fact alone leaves no doubt that he should benefit from said wage order. On the
other hand, W.O. 2 raised the ceiling for entitlement to the wage increase. If MOLINA was
covered by the earlier wage order, with more reason should the later wage order apply to him.


19. SAN MIGUEL CORPORATION, ANDRES SORIANO III, FRANCISCO C. EIZMENDI, JR., and
FAUSTINO F. GALANG, petitioners, vs. NUMERIANO LAYOC, JR., CARLOS APONESTO, PAULINO
BALDUGO, QUEZON BARIT, BONIFACIO BOTOR, HERMINIO CALINA, DANILO CAMINGAL, JUAN
DE MESA, REYNOLD DESEMBRANA, BERNARDITO DEUS, EDUARDO FILLARTA, MAXIMIANO
FRANCISCO, MARIO MARILIM, DEMETRIO MATEO, FILOMENO MENDOZA, CONRADO NIEVA,
FRANCISCO PALINES, FELIPE POLINTAN, MALCOLM SATORRE, and ALEJANDRO TORRES,
respondents.
G.R. No. 149640.
October 19, 2007.

Facts:
Respondents were among the Supervisory Security Guards of the Beer Division of the San
Miguel Corporation. 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 companys work place. As such, the private respondents were availing the
benefits for overtime, holiday and night premium duty through time card punching. However,
in the early 1990s, the San Miguel Corporation embarked on a Decentralization Program.

The Beer Division of the San Miguel Corporation implemented no time card policy whereby
the supervising security guards of the Beer Division were no longer required to punch their time
cards. 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.

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Aggrieved, respondents filed a complaint 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 or not the No Time Card Policy constitutes a violation of Article 100 of the Labor
Code.

Ruling:
SC ruled in favor of the petitioners. Petitioners exercised management prerogative in the
implementation of the No Time Card Policy. As a general rule, managerial employees 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.

Respondents assert that Article 100 of the Labor Code prohibits the elimination or diminution
of benefits. However, contrary to the nature of benefits, petitioners did not freely give the
payment for overtime work to respondents. Petitioners paid respondents overtime pay as
compensation for services rendered in addition to the regular work hours. Respondents
rendered overtime work only when their services were needed after their regular working
hours and only upon the instructions of their superiors. Respondents even differ as to the
amount of overtime pay received on account of the difference in the additional hours of
services rendered.

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.


20. SAN MIGUEL CORPORATION, petitioner, vs. ANGEL C. PONTILLAS, respondent.
G.R. No. 155178.
May 7, 2008.

Facts:
On October 24, 1980, San Miguel Corporation (petitioner) employed Angel C.
Pontillas(respondent) as a daily-wage company guard and on 1984 respondent became a
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monthly-paid employee which entitled him to yearly increase in the salary. On October 19,
1993, respondent filed an action for recovery of damages due to discrimination under Article
100 of the labor Code of the Philippines against the company security commander, Capt.
Segundino D. Fortich (Capt. Fortich), and Francisco Manzon, VP Brewery Director. He alleged
that the increases in his salary were only percentage of what the other security guard received.

On December 6, 1993, a memorandum ordering the transfer of responsibility of the Oro Verde
warehouse to the newly- organized VisMin Logistics Operation, in effect, transferring the
security guards of the Oro Verde warehouse to Vismin Logistics Operations.
However, respondent continued to report at Oro Verde Warehouse, alleging that he was not
notified by the transfer by his direct superior (Capt. Fortich).

Petitioner alleged that respondent was properly notified of the transfer but he refused to
receive 14 memoranda issued by Major Enriquez from 14-27 February 1994. Petitioner also
alleged that respondent was given notices of Guard Detail dated 9 February 1994 and 15
February 1994 but he still refused to report for duty at the VisMin Logistics Operations.

After the administrative investigation, respondent was terminated for violating company rules
and regulations, particularly for insubordination of willful disobedience in carrying out
reasonable instructions of his superior. Respondent filed an amended complaint against
petitioner for illegal dismissal.

The Labor Arbiter found nothing prejudicial, unjust, or unreasonable to petitioner's decision on
petitioners transfer of materials and security guard assignments. Respondent appealed.
The NLRC ruled that respondent was not informed of his transfer from Oro Verde Warehouse to
VisMin Logistics Operations. The notices allegedly sent to respondent did not indicate any
receipt from respondent. The NLRC further ruled that respondent was a victim of
discrimination. The NLRC declared that petitioner failed to justify why respondent was not
entitled to the full rate of salary increases enjoyed by other security guards. The CA affirmed
the decision of the NLRC.

Issue:
Whether there was an illegal dismissal of Pontillas by San Miguel Corporation

Ruling:
Petition was granted. The issue about the alleged violation of Article 100 of the LCP was not
discussed by SC. 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
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known to the employee, and must pertain to the duties which he had been engaged to
discharge.

As early as 9 February 1994, Major Enriquez, the head of the VisMin Logistics Operations issued
several notice and successive memoranda to respondent officially informing him of his transfer
to the VisMin Logistics Operations but respondent refused to sign all the notices.
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, SC 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.


21. SHS PERFORATED MATERIALS, INC., WINFRIED HARTMANNSHENN, and HINRICH JOHANN
SCHUMACHER, petitioners, vs. MANUEL F. DIAZ, respondent.

G.R. No. 185814.
October 13, 2010.

Facts:
Petitioner SHS Perforated Materials, Inc. (SHS) is a start-up corporation organized and existing
under the laws of the Republic of the Philippines and registered with the Philippine Economic
Zone Authority. Petitioner Winfried Hartmannshenn (Hartmannshenn), a German national, is its
president. Thus, the wages of SHS employees are paid out by ECCP, through its Accounting
Services Department headed by Juliet Taguiang (Taguiang). Manuel F. Diaz (respondent) was
hired by petitioner SHS as Manager for Business Development on probationary status

During respondents employment, Hartmannshenn was often abroad and, because of business
exigencies, his instructions to respondent were either sent by electronic mail or relayed
through telephone or mobile phone. During meetings with the respondent, Hartmannshenn
expressed his dissatisfaction over respondents poor performance. respondent acknowledged
his poor performance and offered to resign from the company.

144

On November 18, 2005, Hartmannshenn arrived in the Philippines from Germany, and on
November 22 and 24, 2005, notified respondent of his arrival through electronic mail messages
and advised him to get in touch with him. Respondent claimed that he never received the
messages. Hartmannshenn instructed Taguiang not to release respondents salary.

Respondent served on SHS a demand letter and a resignation letter. It is precisely because of
illegal and unfair labor practices such as these that I offer my resignation with neither regret
nor remorse.
Appealing for the release of his salary respondent filed a Complaint against the petitioners for
illegal dismissal; non-payment of salaries/wages and 13th month pay with prayer for
reinstatement and full backwages; exemplary damages, and attorneys fees, costs of suit, and
legal interest.

Isse:
Whether or not the temporary withholding of respondents salary/wages by petitioners was a
valid exercise of management prerogative.

Ruling:
Withholding respondents salary was not a valid exercise of management prerogative.
Management prerogative refers to the right of an employer to regulate all aspects of
employment, such as the freedom to prescribe work assignments, working methods, processes
to be followed, regulation regarding transfer of employees, supervision of their work, lay-off
and discipline, and dismissal and recall of work. Although management prerogative refers to
the right to regulate all aspects of employment, it cannot be understood to include the right
to temporarily withhold salary/wages without the consent of the employee.

Any withholding of an employees wages by an employer may only be allowed in the form of
wage deductions under the circumstances provided in Article 113 of the Labor Code, as set
forth below:
ART. 113. Wage Deduction. No employer, in his own behalf or in behalf of any person,
shall make any deduction from the wages of his employees, except:
(a) In cases where the worker is insured with his consent by the employer, and the
deduction is to recompense the employer for the amount paid by him as premium on
the insurance;
(b) For union dues, in cases where the right of the worker or his union to check-off has
been recognized by the employer or authorized in writing by the individual worker
concerned; and
(c) In cases where the employer is authorized by law or regulations issued by the
Secretary of Labor.
There is constructive dismissal if an act of clear discrimination, insensibility, or disdain by an
employer becomes so unbearable on the part of the employee that it would foreclose any
145

choice by him except to forego his continued employment. It exists where there is cessation of
work because continued employment is rendered impossible, unreasonable or unlikely, as an
offer involving a demotion in rank and a diminution in pay.

In this case, the withholding of respondents salary does not fall under any of the circumstances
provided under Article 113. Neither was it established with certainty that respondent did not
work from November 16 to November 30, 2005. Hence, the Court agrees with the LA and the
CA that the unlawful withholding of respondents salary amounts to constructive dismissal.


22. T & H SHOPFITTERS CORPORATION/GIN QUEEN CORPORATION, STINNES HUANG, BEN
HUANG and ROGELIO MADRIAGA, petitioners, vs. T & H SHOPFITTERS CORPORATION/GIN
QUEEN WORKERS UNION, ELPIDIO ZALDIVAR, DARIOS GONZALES, WILLIAM DOMINGO,
BOBBY CASTILLO, JIMMY M. PASCUA, GERMANO M. BAJO, RICO L. MANZANO, ALLAN L.
CALLORINA, ROMEO BLANCO, GILBERT M. GARCIA, CARLOS F. GERILLO, EDUARDO A.
GRANDE, EDILBRANDO MARTICIO, VIVENCIO SUSANO, ROLANDO GARCIA, JR., MICHAEL
FABABIER, ROWELL MADRIAGA, PRESNIL TOLENTINO, MARVIN VENTURA, FRANCISCO
RIVARES, PLACIDO TOLENTINO and ROLANDO ROMERO, respondents.

G.R. No. 191714.
February 26, 2014.

Facts:
On September 7, 2004, the T&H Shopfitters Corporation/ Gin Queen Corporation workers union
(THS-GQ Union) filed their Complaint for Unfair Labor Practice (ULP) by way of union busting,
and Illegal Lockout, with moral and exemplary damages and attorneys fees, against T&H
Shopfitters Corporation (T&H Shopfitters) and Gin Queen Corporation before the Labor Arbiter
(LA).

1st CAUSE:
In their desire to improve their working conditions, respondents and other employees of held
their first formal meeting on November 23, 2003 to discuss the formation of a union. The
following day, seventeen (17) employees were barred from entering petitioners factory
premises located in Castillejos, Zambales, and ordered to transfer to T&H Shopfitters
warehouse at Subic Bay Freeport Zone (SBFZ) purportedly because of its expansion. Afterwards,
the said seventeen (17) employees were repeatedly ordered to go on forced leave due to the
unavailability of work.

Respondents contended that the affected employees were not given regular work assignments,
while subcontractors were continuously hired to perform their functions. Respondents sought
the assistance of the National Conciliation and Mediation Board. Subsequently, an agreement
146

between petitioners and THS-GQ Union was reached. Petitioners agreed to give priority to
regular employees in the distribution of work assignments. Respondents averred, however, that
petitioners never complied with its commitment but instead hired contractual workers. Instead,
Respondents claimed that the work weeks of those employees in the SBFZ plant were
drastically reduced to only three (3) days in a month.

2nd CAUSE:
On March 24, 2004, THS-GQ Union filed a petition for certification election and an order was
issued to hold the certification election in both T&H Shopfitters and Gin Queen.
On October 10, 2004, petitioners sponsored a field trip to Iba, Zambales, for its employees. The
officers and members of the THS-GQ Union were purportedly excluded from the field trip. On
the evening of the field trip, a certain Angel Madriaga, a sales officer of petitioners, campaigned
against the union in the forthcoming certification election.

When the certification election was scheduled on October 11, 2004, the employees were
escorted from the field trip to the polling center in Zambales to cast their votes. The remaining
employees situated at the SBFZ plant cast their votes as well. Due to the heavy pressure
exerted by petitioners, the votes for "no union" prevailed.

3rD CAUSE:
A memorandum was issued by petitioner Ben Huang (Huang), Director for Gin Queen, informed
its employees of the expiration of the lease contract between Gin Queen and its lessor in
Castillejos, Zambales and announced the relocation of its office and workers to Cabangan,
Zambales.
When the respondents, visited the site in Cabangan, discovered that it was a "talahiban" or
grassland. The said union officers and members were made to work as grass cutters in
Cabangan, under the supervision of a certain Barangay Captain Greg Pangan. Due to these
circumstances, the employees assigned in Cabangan did not report for work. The other
employees who likewise failed to report in Cabangan were meted out with suspension.

PETITIONERS DEFENSE:
In its defense, Petitioners also stress that they cannot be held liable for ULP for the reason that
there is no employer-employee relationship between the former and respondents. Further, Gin
Queen avers that its decision to implement an enforced rotation of work assignments for
respondents was a management prerogative permitted by law, justified due to the decrease in
orders from its customers, they had to resort to cost cutting measures to avoid anticipated
financial losses. Thus, it assigned work on a rotational basis. It explains that its failure to present
concrete proof of its decreasing orders was due to the impossibility of proving a negative
assertion. It also asserts that the transfer from Castillejos to Cabangan was made in good faith
and solely because of the expiration of its lease contract in Castillejos. It was of the impression
147

that the employees, who opposed its economic measures, were merely motivated by spite in
filing the complaint for ULP against it.

Issue:
Whether ULP acts were committed by petitioners against respondents.

Ruling:
ULP were committed by petitioners against respondents.
Petitioners are being accused of violations of paragraphs (a), (c), and (e) of Article 257 (formerly
Article 248) of the Labor Code,13 to wit:
Article 257. Unfair labor practices of employers.It shall be unlawful for an employer to
commit any of the following unfair labor practices:
(a) To interfere with, restrain or coerce employees in the exercise of their right to self-
organization;
x x x x
(c) To contract out services or functions being performed by union members when such
will interfere with, restrain, or coerce employees in the exercise of their right to self-
organization;
x x x x
(e) To discriminate in regard to wages, hours of work, and other terms and conditions of
employment in order to encourage or discourage membership in any labor organization.
x x x

The questioned acts of petitioners, namely: 1) sponsoring a field trip to Zambales for its
employees, to the exclusion of union members, before the scheduled certification election; 2)
the active campaign by the sales officer of petitioners against the union prevailing as a
bargaining agent during the field trip; 3) escorting its employees after the field trip to the
polling center; 4) the continuous hiring of subcontractors performing respondents functions; 5)
assigning union members to the Cabangan site to work as grass cutters; and 6) the enforcement
of work on a rotational basis for union members, taken together, reasonably support an
inference that, indeed, such were all orchestrated to restrict respondents free exercise of their
right to self-organization.

The Court is of the considered view that petitioners undisputed actions prior and immediately
before the scheduled certification election, while seemingly innocuous, unduly meddled in the
affairs of its employees in selecting their exclusive bargaining representative.


23. WESLEYAN UNIVERSITY-PHILIPPINES, petitioner, vs. WESLEYAN UNIVERSITY-FACULTY and
STAFF ASSOCIATION, respondent.
148

G.R. No. 181806.
March 12, 2014.

Facts:
Petitioner Wesleyan University-Philippines is a non-stock, non-profit educational institution
duly organized and existing under the laws of the Philippines. Respondent Wesleyan University-
Philippines Faculty and Staff Association, on the other hand, is a duly registered labor
organization acting as the sole and exclusive bargaining agent of all rank-and-file faculty and
staff employees of petitioner.
In December 2003, the parties signed a 5-year CBA effective June 1, 2003 until May 31, 2008.
On August 16, 2005, petitioner, through its President, Atty. Maglaya , issued a Memorandum
providing guidelines on the implementation of vacation and sick leave credits as well as
vacation leave commutation which states that vacation and sick leave credits are not automatic
as leave credits would be earned on a month-to-month and only vacation leave is commuted or
monetized to cash which is effected after the second year of continuous service of an
employee.

Respondents questioned the guidelines for being violative of existing practices and the CBA
which provide that all covered employees are entitled to 15 days sick leave and 15 days
vacation leave with pay every year and that after the second year of service, all unused
vacation leave shall be converted to cash and paid to the employee at the end of each school
year, not later than August 30 of each year.
Respondent file a grievance complaint on the implementation of the vacation and sick leave
policy. Petitioner also announced its plan of implementing a one-retirement policy which was
unacceptable to respondent.

Respondent submitted affidavits to prove that there is an established practice of giving two
retirement benefits, one from the Private Education Retirement Annuity Association (PERAA)
Plan and another from the CBA Retirement Plan.

The Voluntary Arbitrator rendered a Decision declaring the one-retirement policy and the
Memorandum dated August 16, 2005 contrary to law. CA also affirmed the ruling of the
Voluntary Arbitrator.
Petitioner argues that there is only one retirement plan as the CBA Retirement Plan and the
PERAA Plan are one and the same. It maintains that there is no established company practice or
policy of giving two retirement benefits to its employees. Respondent belies the claims of
petitioner and asserts that there are two retirement plans as the PERAA Retirement Plan, which
has been implemented for more than 30 years, is different from the CBA Retirement Plan.
Respondent further avers that it has always been a practice of petitioner to give two retirement
benefits and that this practice was established by substantial evidence as found by both the
Voluntary Arbitrator and the CA.
149


Issue:
Whether or not the respondents are entitled to two retirement plans.

Ruling:
The Non-Diminution Rule found in Article 100 of the Labor Code explicitly prohibits employers
from eliminating or reducing the benefits received by their employees. This rule, however,
applies only if the benefit is based on an express policy, a written contract, or has ripened into a
practice. To be considered a practice, it must be consistently and deliberately made by the
employer over a long period of time. Respondent was able to present substantial evidence in
the form of affidavits to support its claim that there are two retirement plans. Based on the
affidavits, petitioner has been giving two retirement benefits as early as 1997. Petitioner, on
the other hand, failed to present any evidence to refute the veracity of these affidavits.
Petitioner's assertion that there is only one retirement plan as the CBA Retirement Plan and the
PERAA Plan are one and the same is not supported by any evidence.

The Memorandum dated August 16, 2005 is contrary to the existing CBA. It limits the available
leave credits of an employee at the start of the school year. The Memorandum dated imposes a
limitation not agreed upon by the parties nor stated in the CBA, so it must be struck down.


VIII. PAYMENT OF WAGES

1. DOMINICO C. CONGSON, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, NOE
BARGO, ROGER HIMENO, RAYMUNDO BADAGOS, PATRICIO SALVADOR, SR., NEHIL BARGO,
JOEL MENDOZA, and EMMANUEL CALIXIHAN, respondents.

G.R. No. 114250.
April 5, 1995.

Facts:
Dominico C. Congson is the registered owner of Southern Fishing Industry. Respondents were
hired as piece-rate employees uniformly paid at a rate of P1.00 per tuna weighing thirty (30) to
eighty (80) kilos per movement. They work for 7 days a week. Due to alleged scarcity of tuna,
Congson notified his proposal to reduce the rate-per-tuna movement. When they reported the
following day, they found out that they were already replaced with new set of workers. They
wanted to have a dialogue with the management, but they waited in vain. Thus, they filed a
case before NLRC for underpayment of wages (violation of the minimum wage law) 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.
150


Petitioner conceded that his payment of wages falls below the minimum wage law. He averred
that NLRC should have considered as forming a substantial part of private respondents' total
wages the cash value of the tuna liver and intestines private respondents were entitled to
retrieve. He argued that the combined value of the cash wage and monetary value of the tuna
liver and intestines clearly exceeded the minimum wage fixed by law.

Both the Labor Arbiter and the NLRC ruled in favor of the respondents.

Issue:
Whether or not the form of payment by Congson is valid pursuant to Article 102 of the Labor
Code.


Ruling:
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 above cited 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 informs 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.



2. HOUSE OF SARA LEE, petitioner, vs. CYNTHIA F. REY, respondent.
G.R. No. 149013.
August 31, 2006.

Facts:
The Heir 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,
151

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 respondents 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
152

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.

Issue:
Whether or not the respondent is entitled to 13th month pay.

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 companys fiscal situation, the employees
future performance on the job, or the employees continued stay in a position. In short, absent
any proof, there is no vested right to salary increases.


3. NATIONAL FEDERATION OF LABOR (NFL), CENON BANGA, ROGELIO VILLACORTE, NAZARIO
HATAM, JULIO CUGAL, JUANITO GAVIOLA, et. al., petitioners, vs. THE HON. COURT OF
APPEALS (8TH DIV.), NATIONAL LABOR RELATIONS COMMISSION, EXECUTIVE LABOR ARBITER
RHETT JULIUS J. PLAGATA, SIME DARBY PILIPINAS, INC., AMERICAN RUBBER COMPANY, INC.,
SEAN O'KELLEY and/or EXPEDITO DOQUILLO, SR., respondents.
G.R. No. 149464.
October 19, 2004.

Facts:
American Rubber Company, Inc. (ARCI) entered into a Farm Management Agreement (FMA)
with Sime Darby Pilipinas, Inc. (SDPI) to manage, administer, develop, cultivate and improve the
rubber plantation in Latuan, Isabela, Basilan. However, SDPI decided to terminate the FMA with
ARCI and cease operation of the rubber plantation in Latuan, Isabela, Basilan effective January
17, 1998. Thus on December 17, 1997, SDPI served formal notices of termination to all
employees of the plantation effective January 17, 1997. In complaince with the collective
bargaining agreement of the National Federation of Labor (NFL), which was the duly registered
153

bargaining agent of SDPI, and SDPI, the separation pay of the employees was computed in
accordance with the provisions of the Labor Code. On January 17, 1998, each of the herein
petitioners received their separation pay which was equivalent to one-half pay for every year of
service, and other benefits which were all lumped in one check. However, the petitioners filed a
complaint for deficiency in separation pay raising the issue of non-payment of the exact
computation of separation pay. They contended that the private respondents is bound by its
policy of granting separation pay equivalent to one-month pay for every year of service to its
retrenched employees.

Issue:
Whether or not the petitioners are entitled to separation pay equivalent to one month pay for
every year of employment with private respondents.

Ruling:
According to the Supreme Court, Article 283 of the Labor Code provides that employees who
are dismissed due to closures that are not due to business insolvency should be paid separation
pay equivalent to one-month pay or at least one-half month pay for every year of service,
whichever is higher. In the case at bar, the petitioners had served the respondent SDPI for a
period longer than six months. Hence, their separation pay computed at one-half month pay
per year of service is more than the minimum one month pay. Also, the court emphasized that
the collective bargaining agreement should prevail as a contract governing the employer and
the employees respecting the terms of employment, which in this case, they agreed on the
terms of termination pay should be in accordance with the provisions of the Labor Code.
Consequently, Artcle 283 of the Labor Code, which grants separation pay equivalent to one-
month pay or one-half month pay for every year of service, whichever is higher, to the
employees retrenched due to business closures, should apply.


16. NORTH DAVAO MINING CORPORATION and ASSET PRIVATIZATION TRUST, petitioners, vs.
NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER ANTONIO M. VILLANUEVA
and WILFREDO GUILLEMA, respondents.

G.R. No. 112546.
March 13, 1996.

Facts:
Due to financial losses, North Davao Mining Corporation laid off workers. Respondent Wilfredo
Guillema is one among several employees of North Davao who were separated by reason of the
companys closure on May 31, 1992. 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 (30) days pay for every year of service. Moreover,
154

inasmuch as the region where North Davao operated was plagued by insurgency and other
peace and order problems, the employees had to collect their salaries at a bank in Tagum,
Davao del Norte, some 58 kilometers from their workplace and about 2 hours travel time by
public transportation; this arrangement lasted from 1981 up to 1990.

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.

Ruling:
SC, affirming the decision of the Labor Arbiter, finds 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 2 hours
by travel and the risks in commuting all the time in collecting complainants salaries, would
justify the granting of backwages equivalent to two (2) days in a month as prayed for. Corollary,
we likewise hold respondents liable for the transportation expenses incurred by complainants
at P40.00 round trip fare during pay days.


IX. CONDITIONS OF EMPLOYMENT

1. BISIG MANGGAGAWA SA TRYCO and/or FRANCISCO SIQUIG, as Union President, JOSELITO
LARIO, VIVENCIO B. BARTE, SATURNINO EGERA and SIMPLICIO AYA-AY, petitioners, vs.
NATIONAL LABOR RELATIONS COMMISSION, TRYCO PHARMA CORPORATION, and/or
WILFREDO C. RIVERA, respondents.
G.R. No. 151309.
October 15, 2008.

Facts:
Tryco Pharma Corporation (Tryco) is a manufacturer of veterinary medicines and its principal
office is located in Caloocan City. Petitioners are its regular employees, occupying the positions
of helper, shipment helper and factory workers, assigned to the Production Department. They
are members of Bisig Manggagawa sa Tryco (BMT), the exclusive bargaining representative of
the rank-and-file employees.

Tryco and the petitioners signed a Memorandum of Agreement (MOA), providing for a
compressed workweek schedule to be implemented in the company effective May 20, 1996. As
provided, 8:00 a.m. to 6:12 p.m., from Monday to Friday, shall be considered as the regular
155

working hours, and no overtime pay shall be due and payable to the employee for work
rendered during those hours. The MOA specifically stated that the employee waives the right to
claim overtime pay for work rendered after 5:00 p.m. until 6:12 p.m. from Monday to Friday
considering that the compressed workweek schedule is adopted in lieu of the regular workweek
schedule which also consists of 46 hours. However, should an employee be permitted or
required to work beyond 6:12 p.m., such employee shall be entitled to overtime pay.

On a letter dated March 26, 1997, the Bureau of Animal Industry of the Department of
Agriculture reminded Tryco that its production should be conducted in San Rafael, Bulacan, not
in Caloocan City.
Accordingly, Tryco issued a Memorandum dated April 7, 1997 which directed petitioner Aya-ay
to report to the companys plant site in Bulacan. When petitioner Aya-ay refused to obey, Tryco
reiterated the order on April 18, 1997. Subsequently, through a Memorandum dated May 9,
1997, Tryco also directed the other petitioners Egera, Lario and Barte to report to the
companys plant site in Bulacan.
BMT opposed the transfer of its members to San Rafael, Bulacan, contending that it constitutes
unfair labor practice. In protest, BMT declared a strike on May 26, 1997.

In August 1997, petitioners filed their separate complaints for illegal dismissal, underpayment
of wages, nonpayment of overtime pay and service incentive leave, and refusal to bargain
against Tryco and its President, Wilfredo C. Rivera. Petitioners alleged that the company acted
in bad faith during the CBA negotiations because it sent representatives without authority to
bind the company, and this was the reason why the negotiations failed. Also, the management
transferred petitioners from Caloocan to San Rafael, Bulacan to paralyze the union. They
prayed for the company to pay them their salaries from May 26 to 31, 1997, service incentive
leave, and overtime pay, and to implement Wage Order No. 4.

Issue:
Whether or not the company committed Unfair Labor Practices

Ruling:
NO.
Petitioners mainly contend that the transfer orders amount to a constructive dismissal. They
maintain that the letter of the Bureau of Animal Industry is not credible because it is not
authenticated; it is only a ploy, solicited by respondents to give them an excuse to effect a
massive transfer of employees. There is not proof to support this claim. Absent any evidence,
the allegation is not only highly irresponsible but is grossly unfair to the government agency
concerned.

156

Also, Trycos decision to transfer its production activities to San Rafael, Bulacan, regardless of
whether it was made pursuant to the letter of the Bureau of Animal Industry, was within the
scope of its inherent right to control and manage its enterprise effectively.

When the transfer is not unreasonable, or inconvenient, or prejudicial to the employee, and it
does not involve a demotion in rank or diminution of salaries, benefits, and other privileges, the
employee may not complain that it amounts to a constructive dismissal. In this case, the
transfer orders do not entail a demotion in rank or diminution of salaries, benefits and other
privileges of the petitioners. Petitioners, therefore, anchor their objection solely on the ground
that it would cause them great inconvenience since they are all residents of Metro Manila and
they would incur additional expenses to travel daily from Manila to Bulacan. Such contention is
untenable because the Court has previously declared that mere incidental inconvenience is not
sufficient to warrant a claim of constructive dismissal. The distance from Caloocan to San
Rafael, Bulacan is not considerably great so as to compel petitioners to seek living
accommodations in the area and prevent them from commuting to Metro Manila daily to be
with their families.

Finally, MOA is enforceable and binding against the petitioners. Where it is shown that the
person making the waiver did so voluntarily, with full understanding of what he was doing, and
the consideration for the quitclaim is credible and reasonable, the transaction must be
recognized as a valid and binding undertaking. In addition, D.O. No. 21 sanctions the waiver of
overtime pay in consideration of the benefits that the employees will derive from the adoption
of a compressed workweek scheme. Moreover, the adoption of a compressed workweek
scheme in the company will help temper any inconvenience that will be caused the petitioners
by their transfer to a farther workplace. Notably, the MOA complied with the following
conditions set by the DOLE, under D.O. No. 21, to protect the interest of the employees in the
implementation of a compressed workweek scheme

Considering that the MOA clearly states that the employee waives the payment of overtime pay
in exchange of a five-day workweek, there is no room for interpretation and its terms should be
implemented as they are written.


2. LINTON COMMERCIAL CO., INC. and DESIREE ONG, petitioners, vs. ALEX A. HELLERA,
FRANCISCO RACASA, DANTE ESCARLAN, DONATO SASA, et. al.,respondents.
G.R. No. 163147.
October 10, 2007.

Facts:
157

On 17 December 1997, Linton issued a memorandum addressed to its employees informing
them of the company's decision to suspend its operations from December 18, 1997 to January
5, 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 January 6, 1998. On January 7, 1997, Linton issued another
memorandum informing them that effective January 12, 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.

Ruling:
The compressed workweek arrangement was unjustified and illegal.
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.

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
158

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.


3. PHILIPPINE AIRLINES, INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION,
LABOR ARBITER ROMULUS PROTACIO and DR. HERMINIO A. FABROS, respondents.
G.R. No. 132805.
February 2, 1999.

Facts:
Private respondent (Dr. Herminio A. Fabros) was employed as flight surgeon at petitioner
company ( PAL). He was assigned at (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. Upon receiving the call 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 was rushed by Mr. Eusebio 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, in turn, 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.

159

Finding private respondents explanation unacceptable, the management charged private
respondent with abandonment of post while on duty. Petitioner argues that being a full-time
employee, private respondent 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.

Issue:
Whether or not being a full-time employee, private respondent is obliged to stay in the
company premises for not less than eight (8) hours.

Ruling:
NO. Employees are not prohibited from going out of the premises as long as they return to their
post on time.

Articles 83 and 85 of the Labor Code read:
Art. 83. 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. (emphasis supplied)
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;
160

(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 respondents act, therefore, of going home to take his dinner does not constitute
abandonment.


17. SAN JUAN DE DIOS HOSPITAL EMPLOYEES ASSOCIATION-AFW/MA. CONSUELO
MAQUILING, LEONARDO MARTINEZ, DOMINGO ELA, JR., RODOLFO CALUCIN, JR., PERLA
MENDOZA, REX RAPHAEL REYES, ROGELIO BELMONTE, AND 375 OTHER EMPLOYEE-
UNION MEMBERS, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, and SAN
JUAN DE DIOS HOSPITAL, respondents.
G.R. No. 126383.
November 28, 1997.

Facts:
Petitioners, the rank-and-file employee-union officers and members of San Juan De Dios
Hospital Employees Association, sent a letter requesting for the expeditious implementation
and payment by respondent, San Juan De Dios Hospital, of the '40-hours/5-day workweek' with
compensable weekly two (2) days off provided for by Policy Instruction No. 54 issued by the
Secretary of Labor. Said policy instruction purports to implement R.A. No. 5901, otherwise
known as An Act Prescribing Forty Hours A Week of Labor For Government and Private
Hospitals Or Clinic Personnel. 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. However, the Labor Arbiter and, subsequently, NLRC dismissed the
complaint. Hence, this petition ascribing grave abuse of discretion on the part of NLRC in
concluding that Policy Instructions No. 54 proceeds from a wrong interpretation of R.A. 5901
and Article 83 of the Labor Code.

Issue:
Whether or not Policy Instruction No. 54, entitling a full weekly wage of 7 days upon
completion of 40-hour/5-day workweek, is valid based on existing labor laws.

161

Ruling:
Policy Instruction No. 54 is void, it being inconsistent with and repugnant to the provision of
Article 83 of the Labor Code, as well as to R.A. No. 5901.

A perusal of R. A. No. 5901 reveals nothing therein that gives two days off with pay for health
personnel who complete a 40-hour work or 5-day workweek. In fact, the Explanatory Note of
House Bill No. 16630 (later passed into law as Republic Act No. 5901) explicitly states that the
bill's sole purpose is to shorten the working hours of health personnel and not to dole out a two
days off with pay. Petitioners' position is also negated by the very rules and regulations
promulgated by the Bureau of Labor Standards which implement Republic Act No. 5901.
Section 15 of aforementioned implementing rules grants specific rate of additional
compensation for work performed on Sunday or for work performed in excess of forty hours a
week. Policy Instruction No. 54 unduly extended the statute.

Article 83 merely provides: (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 and petitioners
assertion. 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.

162

5. SIME DARBY PILIPINAS, INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION
(2ND DIVISION) and SIME DARBY SALARIED EMPLOYEES ASSOCIATION (ALU-TUCP),
respondents.
G.R. No. 119205.
April 15, 1998.

Facts:
Prior to the present controversy, the factory employees of Sime Darby Pilipinas, Inc. enjoyed a
30-minute paid on call lunch break in their daily work schedule of 7:45 am to 3:45 pm. The
petitioner company passed a memorandum dated Aug 12 1992 advising all factory-based
workers, except those in the Warehouse and Quality Assurance Department, of a change in
work schedule that discontinued the 30-minute paid on call lunch break and set an
uninterrupted 1 hour lunch break in lieu thereof.
Private respondents then filed a complaint for unfair labor practice, discrimination, and evasion
of liability with the Labor Arbiter who dismissed the complaint, ruling that the elimination of
the 30-minute lunch break was a valid exercise of management prerogative. Appeal was made
to respondent NLRC who reversed the decision of the Labor Arbiter, declaring that the new
work schedule deprived the employees of the benefits of a time-honored company practice and
that such change also resulted in an unjust diminution of employee benefits.

The OSG recommended the present petition to be granted, alleging that the new memorandum
containing the work schedule was not discriminatory not did it constitute unfair labor practice.

Issue:
Whether or not the memorandum dated Aug 14 1992 discontinuing the 30-minute paid on
call lunch break constituted unfair labor practice and diminution of benefits

Ruling:
The Supreme Court sustained petitioner, holding that it is clearly a management prerogative to
fix the work schedules of company employees. Under the old schedule, the employees are
compensated during their 30-minute lunch break, but in essence it is still working time since
the workers could be called upon to work. Whereas in the new schedule, the employees are
given a longer break of 1 hour, though uncompensated, it is uninterrupted as workers on their
break are no longer on call. The change in schedule would improve company productivity as
well as enhance the comfort of workers who could enjoy an uninterrupted break.
The Supreme Court also reiterated the policy that while social justice and the protection of the
working class is ensured by the Constitution, the same fundamental law also protects the right
of the management to regulate all aspects of employment as well as to retain the prerogative
of changing work schedules according to the exigencies of the enterprise. So long as this
prerogative is exercised in good faith, the Court upholds such exercise.
163




X. MINIMUM LABOR STANDARDS BENEFITS.

1. ASIAN TRANSMISSION CORPORATION, petitioner, vs. The Hon. COURT OF APPEALS,
Thirteenth Division, HON. FROILAN M. BACUNGAN as Voluntary Arbitrator, KISHIN A.
LALWANI, Union, Union representative to the Panel Arbitrators; BISIG NG ASIAN
TRANSMISSION LABOR UNION (BATLU); HON. BIENVENIDO T. LAGUESMA in his capacity as
Secretary of Labor and Employment; and DIRECTOR CHITA G. CILINDRO in her capacity as
Director of Bureau of Working Conditions, respondents.
G.R. No. 144664.
March 15, 2004.

Facts:
The Department of Labor and Employment (DOLE), through Undersecretary Cresenciano B.
Trajano, issued an Explanatory Bulletin dated March 11, 1993 wherein it clarified, inter alia, that
employees are entitled to 200% of their basic wage on April 9, 1993, whether unworked,
which[,] apart from being Good Friday [and, therefore, a legal holiday], is also Araw ng
Kagitingan [which is also a legal holiday].
Said bulletin was reproduced on January 23, 1998, when April 9, 1998 was both Maundy
Thursday and Araw ng Kagitingan.

Despite the explanatory bulletin, petitioner, 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.

The Voluntary Arbitrator favored the Bisig ng Asian Transmission Labor Union (BATLU), and 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.
In the assailed decision, the Court of Appeals upheld the findings of the Voluntary Arbitrator.

Issue:
Whether or not daily-paid employees are entitled to be paid for two regular holidays which fall
on the same day.


164

Ruling:
The Court dismissed the petition and ruled that petitioners should pay its 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.

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." 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.


2. AUTO BUS TRANSPORT SYSTEMS, INC., petitioner, vs. ANTONIO BAUTISTA, respondent.
G.R. No. 156367.
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.

165

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.

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--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.

166

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.
167



3. BAHIA SHIPPING SERVICES, INC., petitioner, vs. REYNALDO CHUA, respondent.
G.R. No. 162195.
April 8, 2008.

Facts:
Reynaldo Chua, herein respondent, was under the employ of Bahia Shipping Services, Inc.,
herein petitioner, as a restaurant waiter on board the M/S Black Watch , a luxury cruise ship
liner. His employment is 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, respondent, on board the cruise ship, left Manila for Heathrow, England.
About four months into his employment, or on February 15, 1997, responded reported to work
an hour and a half (1 ) late. Due to the incident, respondent was issued a warning-
termination form by the master of the cruise ship, Thor Fleten on February 17, 1997, who
likewise conducted an inquisitorial hearing to investigate the incident on March 8, 1997.

Thereafter, on March 9, 1997, respondent was dismissed from service on the strength of an
unsigned and undated notice of dismissal. Attached to the dismissal notice is the alleged
minutes or records of the investigation and hearing.

On March 24, 1997, respondent filed a complaint for illegal dismissal and other monetary
claims. He claims that he was underpaid in the amount of US$110.00 per month for a period of
five (5) months, since he was only paid US$300.00 per month, instead of US$410.00 per
month, which was stipulated in his contract. Aside from underpayment, he alleged that
US$20.00 per month was also deducted from his salary by petitioner for union dues.

Issue:
In the computation of the award, should the guaranteed overtime pay per month be included
as part of his salary?

Ruling:
There is no factual or legal basis in the inclusion of his "guaranteed overtime" pay into his
monthly salary computation for the entire unexpired period of his contract.

The Court ruled in Cagampan v. National Labor Relations Commission, that although an
overseas employment contract may guarantee the right to overtime pay, entitlement to such
benefit must first be established, otherwise the same cannot be allowed. Petitioners
168

contention that there is no factual or legal basis for the inclusion of said amount since
respondents repatriation is well-taken.


4. LABOR CONGRESS OF THE PHILIPPINES (LCP) for and in behalf of its members, ANA MARIE
OCAMPO, MARY INTAL, ANNABEL CARESO, MARLENE MELQIADES, et. al., petitioners, vs.
NATIONAL LABOR RELATIONS COMMISSION, EMPIRE FOOD PRODUCTS, its
Proprietor/President & Manager, MR. GONZALO KEHYENG and MRS. EVELYN KEHYENG,
respondents.

G.R. No. 123938.
May 21, 1998.

Facts:
The 99 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

Issue:
Whether or not petitioners are entitled back wages.

Ruling:
Petitioners are therefore entitled to reinstatement with full back wages pursuant to Article 279
of the Labor Code, as amended by R.A. No. 6715. Nevertheless, the records disclose that taking
into account the number of employees involved, the length of time that has lapsed since their
dismissal, and the perceptible resentment and enmity between petitioners and private
respondents which necessarily strained their relationship, reinstatement would be impractical
and hardly promotive of the best interests of the parties. In lieu of reinstatement then,
separation pay at the rate of one month for every year of service, with a fraction of at least six
(6) months of service considered as one (1) year, is in order.
That being said, the amount of backwages to which each petitioner is entitled, however, cannot
be fully settled at this time. Petitioners, as piece-rate workers, have been paid by the piece.
There is need to determine the varying degrees of production and days worked by each worker.


5. AVELINO LAMBO and VICENTE BELOCURA, petitioners, vs. NATIONAL LABOR RELATIONS
COMMISSION and J.C. TAILOR SHOP and/or JOHNNY CO, respondents.
G.R. No. 111042.
October 26, 1999.

169

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 attorneys 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.

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 employers 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.
170


In this case, private respondents exercised control over the work of petitioners. As tailors,
petitioners worked in the companys 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.


18. LEYTE IV ELECTRIC COOPERATIVE, INC., petitioner, vs. LEYECO IV Employees Union-ALU,
respondent.citing Wellington Investment vs. Trajano, 245 SCRA 561 [1995], and
Odango vs. NLRC, G.R. No. 147420, June 10, 2004

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
171

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.

Ruling:
Leyte IV Electric Cooperative is not liable for underpayment of holiday pay.
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
172

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.


19. MERCIDAR FISHING CORPORATION represented by its President DOMINGO B. NAVAL,
petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and FERMIN AGAO, JR.,
respondents.

G.R. No. 112574.
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, violatiion 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, 1998. He complained that he had been
constructively dismissed by the petitioner when the latter refused him assignments aboard its
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 enf 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 certificateon 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.

Ruling:
Art. 82 of the Labor Code provides:
173

"The provisions of this title[Working Conditions and Rest Periods] shall apply to all
eployees in all establishments and undertakings whether to profit or not, but not to
govenrment employees, field personnel, members of the family of the employer who are
dependent on him for support, domestic helpers, persons in 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 ofiice of the employer and whose actual
hours of workin the field cannot be determined with reasonable certatinty.
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 petitioners businessoffices, 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.


8. NATIONAL SUGAR REFINERIES CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION and NBSR SUPERVISORY UNION, (PACIWU) TUCP, respondents.

G.R. No.101761.
March 24, 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
174

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.

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,
175

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
176

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.

177

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.


9. CHARLITO PEARANDA, petitioner, vs. BAGANGA PLYWOOD CORPORATION and HUDSON
CHUA, respondents.
G.R. No. 159577.
May 3, 2006.

Sometime in June 1999, Petitioner Charlito Pearanda 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, Pearanda 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.

Pearanda 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
178

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, Pearanda 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. Petitioners 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.

Ruling:
Whether or not Pearanda 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.

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
179

(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 petitioners 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."

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.


10. PNCC SKYWAY TRAFFIC MANAGEMENT AND SECURITY DIVISION WORKERS
ORGANIZATION (PSTMSDWO), represented by its President, RENE SORIANO, petitioner, vs.
PNCC SKYWAY CORPORATION, respondent.

G.R. No. 171231.
180

February 17, 2010.

Facts:
Petitioner PNCC Skyway Corporation Traffic Management and Security Division Workers'
Organization (PSTMSDWO) is a labor union duly registered with the Department of Labor and
Employment (DOLE). Respondent PNCC Skyway Corporation is a corporation duly organized and
operating under and by virtue of the laws of the Philippines. On November 15, 2002, petitioner
and respondent entered into a Collective Bargaining Agreement (CBA) incorporating the terms
and conditions of their agreement which included vacation leave and expenses for security
license provisions.

A memorandum was passed by the respondents scheduling the leaves of the laborers.
Petitioner objected to the implementation of this memorandum and contended that their
union members have the preference in scheduling their vacation leave. On the other hand,
respondent argued that Article VIII, Section 1 (b) gives the management the final say regarding
the vacation leave schedule of its employees. Respondent may take into consideration the
employees' preferred schedule, but the same is not controlling.

Issue:
Whether or not it is the prerogative of PNCC to schedule leaves of its employees.

Ruling:
Yes. The rule is that where the language of a contract is plain and unambiguous, its meaning
should be determined without reference to extrinsic facts or aids. The intention of the parties
must be gathered from that language, and from that language alone. Stated differently, where
the language of a written contract is clear and unambiguous, the contract must be taken to
mean that which, on its face, it purports to mean, unless some good reason can be assigned to
show that the words used should be understood in a different sense.

In the case at bar, the contested provision of the CBA is clear and unequivocal. Article VIII,
Section 1 (b) of the CBA categorically provides that the scheduling of vacation leave shall be
under the option of the employer. The preference requested by the employees is not
controlling because respondent retains its power and prerogative to consider or to ignore said
request. Thus, if the terms of a CBA are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of its stipulation shall prevail. In fine, the CBA must be
strictly adhered to and respected if its ends have to be achieved, being the law between the
parties.


11. RADIO MINDANAO NETWORK, INC. and ERIC S. CANOY, petitioners, vs. DOMINGO Z.
YBAROLA, JR. and ALFONSO E. RIVERA, JR., respondents.
181

G.R. No. 198662.
September 12, 2012.

Facts:
Respondents Domingo Z. Ybarola, Jr. and Alfonso E. Rivera, Jr. were hired on June 15, 1977 and
June 1, 1983, respectively, by RMN. They eventually became account managers, soliciting
advertisements and servicing various clients of RMN.

The respondents services were terminated as a result of RMNs reorganization/restructuring;
they were given their separation pay P 631,250.00 for Ybarola, and P 481,250.00 for Rivera.
Sometime in December 2002, they executed release/quitclaim affidavits.

Dissatisfied with their separation pay, the respondents filed separate complaints (which were
later consolidated) against RMN and its President, Eric S. Canoy, for illegal dismissal with
several money claims, including attorneys fees. They indicated that their monthly salary rates
were P 60,000.00 for Ybarola and P 40,000.00 for Rivera.

The respondents argued that the release/quitclaim they executed should not be a bar to the
recovery of the full benefits due them; while they admitted that they signed release
documents, they did so due to dire necessity.

The petitioners denied liability, contending that the amounts the respondents received
represented a fair and reasonable settlement of their claims, as attested to by the
release/quitclaim affidavits which they executed freely and voluntarily. They belied the
respondents claimed salary rates, alleging that they each received a monthly salary of P
9,177.00, as shown by the payrolls.

The Labor Arbiter Patricio Libo-on dismissed the illegal dismissal complaint, but ordered the
payment of additional separation pay to the respondents P 490,066.00 for Ybarola and P
429,517.55 for Rivera.

On appeal by the petitioners to the National Labor Relations Commission (NLRC), the NLRC set
aside the labor arbiters decision and dismissed the complaint for lack of merit. It ruled that the
withholding tax certificate cannot be the basis of the computation of the respondents
separation pay as the tax document included the respondents cost-of-living allowance and
commissions; as a general rule, commissions cannot be included in the base figure for the
computation of the separation pay because they have to be earned by actual market
transactions attributable to the respondents From the NLRC, the respondents sought relief
from the CA through a petition for certiorari under Rule 65 of the Rules of Court.

182

The CA granted the petition and set aside the assailed NLRC dispositions. It reinstated the labor
arbiters separation pay award, rejecting the NLRCs ruling that the respondents commissions
are not included in the computation of their separation pay. It pointed out that in the present
case, the respondents earned their commissions through actual market transactions
attributable to them; these commissions, therefore, were part of their salary.

The appellate court declared the release/quitclaim affidavits executed by the respondents
invalid for being against public policy, citing two reasons: (1) the terms of the settlement are
unconscionable; the separation pay the respondents received was deficient by at least P
400,000.00 for each of them; and (2) the absence of voluntariness when the respondents
signed the document, it was their dire circumstances and inability to support their families that
finally drove them to accept the amount the petitioners offered. Significantly, they dallied and
it took them three months to sign the release/quitclaim affidavits.

Issue:
Whether or not the release/quitclaim affidavits are invalid for being against public policy.

Ruling:
Release/Quitclaim; Separation pay. The release/quitclaim affidavits are invalid for being against
public policy for two reasons: (1) the terms of the settlement are unconscionable; the
separation pay for termination due to reorganization/restructuring was deficient by
Php400,000.00 for each employee; they were given only half of the amount they were legally
entitled to; and (2) the absence of voluntariness when the employees signed the document, it
was their dire circumstances and inability to support their families that finally drove them to
accept the amount offered. Without jobs and with families to support, they dallied in executing
the quitclaim instrument, but were eventually forced to sign given their circumstances. To be
sure, a settlement under these terms is not and cannot be a reasonable one, given especially
the respondents length of service 25 years for Ybarola and 19 years for Rivera. Radio
Mindanao Network, Inc. and Eric S. Canoy vs. Domingo Z. Ybarola, et al. G.R. No. 198662.
September 12, 2012.


12. R & E TRANSPORT, INC., and HONORIO ENRIQUEZ, petitioners, vs. AVELINA P. LATAG,
representing her deceased husband, PEDRO M. LATAG, respondent.
G.R. No. 155214.
February 13, 2004.

Facts:
Pedro Latag was a regular employee of La Mallorca Taxi since March 1, 1961. However, he was
transferred to the petitioner R & E Transport, Inc. upon cessation of La Mallorcas business
183

operations. In January 1995, he got sick and was forced to apply for partial disability with the
SSS, which was then granted. Upon recovery, he reported back to work in September 1998 but
was no longer allowed on account of his old age. Latag asked the petitioner, through its
administrative officer for his retirement pay pursuant to Republic Act 7641 but he was ignored.
Latag filed a case for payment of his retirement pay before the NLRC.

Upon Pedro Latags death on April 30, 1999, he was substituted by his wife, the respondent
Avelina Latag. Labor Arbiter rendered a decision in favour of Latag. Petitioner filed the quitclaim
and motion to dismiss where the Labor Arbiter issued an order for Writ of Execution.
Petitioners interposed an appeal before NLRC. Appeal was dismissed for failure to post a cash
or surety bond, as mandated by law.
Issue:
Whether or not Latag is entitled to retirement benefits considering she signed a waiver of
quitclaim.

Ruling:
The Supreme Court ruled that the respondent is entitled to retirement benefits despite of the
waiver of quitclaims.

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.
184


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. Hence, it is
clear that the late Pedro M. Latag is entitled to retirement benefits.


13. ENGINEER LEONCIO V. SALAZAR, petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION (2nd Division) and H.L. CARLOS CONSTRUCTION, CO. INC., respondents.

G.R. No. 109210.
April 17, 1996.

Facts:
17 April 1990. HL Carlos Construction Inc (HLCC), private respondent, employed the petitioner,
Engr. Leoncio V. Salazar (Engr. S), as construction/project engineer for the construction of a
building in QC at a monthly salary of P4,500. 16 April 1991. Engr. S received a memorandum
informing him of the termination of his services effective on 30 April 1991. 13 September 1991.
Engr. S filed a complaint against HLCC 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.

The Labor Arbiter ruled that Engr. S was a managerial employee and therefore exempt from
payment of benefits such as overtime pay, service incentive leave pay and premium pay for
holidays and rest days. Engr. S was also not entitled to separation pay. He was hired as a project
employee and his services were terminated due to the completion of the project.

Issues:
1) Whether or not petitioner is entitled to overtime pay, premium pay for services rendered on
rest days and holidays and service incentive leave pay, pursuant to Articles 87, 93, 94 and 95 of
the Labor Code;
2) Whether or not petitioner is a field personnel since he performs his duties in the project site
or away from the principal place of business of his employer.
3) Whether or not petitioner is entitled to separation pay.

Ruling:
(1) On the first issue, the NLRC concurred with the Labor Arbiters ruling that petitioner was a
managerial employee and, therefore, exempt from payment of overtime pay, premium pay for
holidays and rest days and service incentive leave pay under the law. The NLRC declared that:
185

Book III on conditions of employment exempts managerial employees from its coverage on the
grant of certain economic benefits, which are the ones the complainant-appellant was
demanding from respondent. It is an undisputed fact that appellant was a managerial employee
and such, he was not entitled to the economic benefits he sought to recover.

(2) Petitioner claims that since he performs his duties in the project site or away from the
principal place of business of his employer (herein private respondent), he falls under the
category of field personnel. However, petitioner accentuates that his case constitutes the
exception to the exception because his actual working hours can be determined as evidenced
by thedisbursement vouchers containing payments of petitioners salaries and overtime
services. Strangely, petitioner is of the view that field personnel may include managerial
employees. We are constrained to disagree with petitioner.

In his original complaint, petitioner stated that the nature of his work is supervisory-
engineering. Similarly, in his own petition and in other pleadings submitted to this Court,
petitioner confirmed 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:
Sec. 2. Exemption. - The provisions of this Rule shall not apply to the following persons if
the qualify for exemption under the condition set forth herein:
xxx xxx xxx
(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.

(3) On the last issue, we rule that petitioner is a project employee and, therefore, not entitled
to separation pay.
186

The applicable provision is Article 280 of the Labor Code which defines the term project
employee, thus:
ART. 280. Regular and Casual Employment. - The provisions of written agreement to the
contrary notwithstanding and regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the employee has been engaged to
perform activities which are usually necessary or desirable in the usual business or trade
of the employer, except where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of
the engagement of the employee or where the work or services to be performed is
seasonal in nature and the employment is for the duration of the season.

In the case at bench, it was duly established that private respondent hired petitioner as project
or construction engineer specifically for its Monte de Piedad building project. In his own words,
petitioner declared:
2. That complainant-petitioner herein, by virtue of an oral agreement entered into with
private respondent herein through its proprietor, president and general manager, Engr.
Honorio L. Carlos, on April 17, 1990, began to work as a duly licensed Civil Engineer as
construction or project engineer of its contracted project, the Monte de Piedad Bank
Building, at Cubao, Quezon City, on the following terms and conditions, to wit:

Accordingly, as project employee, petitioners services are deemed co-terminous with the
project, that is, petitioners services may be terminated as soon as the project for which he was
hired is completed.
There can be no dispute that petitioners dismissal was due to the completion of the
construction of the Monte de Piedad building. Petitioner himself stated that it took him and his
assisting laborers until 15 May 1991 to complete the finishing touches on the said building.

Petitioner, thus, has no legal right to demand separation pay. Policy Instruction No. 20 entitled
Stabilizing Employer-Employee Relations in the Construction Industry explicitly mandates
that:
Project employees are not entitled to termination pay if they are terminated as a result
of the completion of the project or any phase thereof in which they are employed,
regardless of the number of projects in which they have been employed by a particular
construction company. Moreover, the company is not required to obtain a clearance
from the Secretary of Labor in connection with such termination. What is required of
the company is a report to the nearest Public Employment Office for statistical
purposes.


14. SAN MIGUEL CORPORATION, petitioner, vs. THE HONORABLE COURT OF APPEALS-
FORMER THIRTEENTH DIVISION, HON. UNDERSECRETARY JOSE M. ESPAOL, JR., Hon.
187

CRESENCIANO B. TRAJANO, and HON. REGIONAL DIRECTOR ALLAN M. MACARAYA,
respondents.
G.R. No. 146775.
January 30, 2002.

Facts:
On 17 October 1992, the Department of Labor and Employment (DOLE), Iligan District Office,
conducted a routine inspection in the premises of San Miguel Corporation (SMC) in Sta.
Filomena, Iligan City. 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, Alan M. Macaraya, Director IV of DOLE Iligan District Office issued a
compliance order, dated 17 December 1993, 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 to the DOLE main office in Manila. However, the appeal was dismissed for lack of
merit and the order of Director Macaraya was affirmed. SMC went to SC for relief via a petition
for certiorari, which the Court referred to the Court of Appeals. The appellate court modified
the order with regards the payment of Muslim holiday pay from 200% to 150% of the
employee's basic salary. Its motion for reconsideration having been denied for lack of merit,
SMC filed a petition for certiorari before the SC.

Ruling:
(a) Whether or not public respondents seriously erred and committed grave abuse of discretion
when they granted Muslim Holiday Pay to non-Muslim employees of SMC.
(b) Whether or not SMC was not accorded with due process of law in the issuance of the
compliance order.
(c) Whether or not regional director Macaraya, undersecretary Trajano and undersecretary
Espanol have jurisdiction in issuing the assailed compliance orders.

Ruling:
The court ruled the issues in negative.
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:
Art. 169. Official Muslim holidays. - The following are hereby recognized as legal Muslim
holidays:
188

(a) Amun Jadd (New Year), which falls on the first day of the first lunar month of
Muharram;
(b) Maulid-un-Nab (Birthday of the Prophet Muhammad), which falls on the twelfth day
of the third lunar month of Rabi-ul-Awwal;
(c) Lailatul Isr Wal Mirj (Nocturnal Journey and Ascension of the Prophet
Muhammad), which falls on the twenty-seventh day of the seventh lunar month of
Rajab;
(d) d-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) d-l-Adh (Hari Raya Haji),which falls on the tenth day of the twelfth lunar month of
Dhl-Hijja.
Art. 170. 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:
Art. 94. 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.

Petitioner asserts that Article 3(3) of Presidential Decree No. 1083 provides that "the provisions
of this Code shall be applicable only to Muslims." However, there should be no distinction
between Muslims and non-Muslims as regards payment of benefits for Muslim holidays. 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 workers faith or religion. In
addition, the 1999 Handbook on Workers Statutory Benefits, categorically stated: 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.

On the question regarding the jurisdiction of the Regional Director Allan M. Macaraya, Article
128, Section B of the Labor Code, as amended by Republic Act No. 7730, provides: Article 128.
Visitorial and enforcement power. -
189

(b) Notwithstanding the provisions of Article 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 the inspection. The
Secretary or his duly authorized representative 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.

In the case before us, Regional Director Macaraya acted as the duly authorized representative
of the Secretary of Labor and Employment and it was within his power to issue the compliance
order to SMC. In addition, the Court agrees with the Solicitor General that the petitioner did not
deny that it was not paying Muslim holiday pay to its non-Muslim employees. Indeed,
petitioner merely contends that its non-Muslim employees are not entitled to Muslim holiday
pay. Hence, the issue could be resolved even without documentary proofs. In any case, there
was no indication that Regional Director Macaraya failed to consider any documentary proof
presented by SMC in the course of the inspection.
Anent the allegation that petitioner was not accorded due process, the court finds that SMC
was furnished a copy of the inspection order and it was received by and explained to its
Personnel Officer. Further, a series of summary hearings were conducted by DOLE on 19
November 1992, 28 May 1993 and 4 and 5 October 1993. Thus, SMC could not claim that it was
not given an opportunity to defend itself.


15. SAN MIGUEL CORPORATION, petitioner, vs. CAROLINE C. DEL ROSARIO, respondent.

G.R. No. 168194 & 168603.
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 petitioners premises. On June 24, 2002, respondent filed a complaint against
petitioner for illegal dismissal and underpayment/non-payment of monetary benefits.

Issue:
Whether or not respondent is a regular employee of petitioner.
190


Ruling:
Affirmative:
In termination cases, like the present controversy, the burden of proving the circumstances that
would justify the employees 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. Hence, respondent whose employment
exceeded six months is undoubtedly a regular employee of petitioner.

Moreover, even assuming that the employment of respondent from April 7, 2000 to September
3, 2000, is only temporary, and that the reckoning period of her probationary employment is
September 4, 2000, she should still be declared a regular employee because by the time she
was dismissed on March 12, 2001, her alleged probationary employment already exceeded six
months, i.e., six months and eight days to be precise. A worker was found to be a regular
employee notwithstanding the presentation by the employer of a Payroll Authority indicating
that said employee was hired on probation, since it was shown that he was terminated four
days after the 6th month of his purported probationary employment.

Neither will petitioners belated claim that respondent became a probationary employee
starting October 1, 2000 work against respondent. As earlier stated, the payroll authorities
indicating that respondents probationary status became effective as of such date are of scant
evidentiary value since it does not show the conformity of respondent. At any rate, in the
interpretation of employment contracts, whether oral or written, all doubts must be resolved in
favor of labor.
Hence, the contract of employment in the instant case, which appears to be an oral agreement
since no written form was presented by petitioner, should be construed as one vesting
respondent with a regular status and security of tenure.

Regarding the argument of redundancy, 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.
191


The determination that the employees services are no longer necessary or sustainable and,
therefore, properly terminable is an exercise of business judgment of the employer. The
wisdom or soundness of this judgment is not subject to discretionary review of the Labor
Arbiter and the NLRC, provided there is no violation of law and no showing that it was
prompted by an arbitrary or malicious act. In other words, it is not enough for a company to
merely declare that it has become overmanned. It must produce adequate proof of such
redundancy to justify the dismissal of the affected employees.
The following evidence may be proffered to substantiate redundancy: the new staffing pattern,
feasibility studies/proposal, on the viability of the newly created positions, job description and
the approval by the management of the restructuring.

In the case at bar, petitioner presented an affidavit of its Sales Manager and a memorandum of
the company both to the effect that there is a need to redeploy its regular employees and
terminate the employment of temporary employees, in view of an excess in manpower. These
documents, however, do not satisfy the requirement of substantial evidence that a reasonable
mind might accept as adequate to support a conclusion.

Moreover, the lingering doubt as to the existence of redundancy or of petitioners so called
restructuring, realignment or reorganization which resulted in the dismissal of not only
probationary employees but also of regular employees, is highlighted by the non-presentation
by petitioner of the required notice to the DOLE and to the separated employees. If there was
indeed a valid redundancy effected by petitioner, these notices and the proof of payment of
separation pay to the dismissed regular employees should have been offered to establish that
there was excess manpower in petitioners GMA-KAG caused by a decline in the sales volume.

In balancing the interest between labor and capital, the prudent recourse in termination cases
is to safeguard the prized security of tenure of employees and to require employers to present
the best evidence obtainable, especially so because in most cases, the documents or proof
needed to resolve the validity of the termination, are in the possession of employers. A
contrary ruling would encourage employers to prevent the regularization of an employee by
simply invoking a feigned or unsubstantiated redundancy program.

Granting that petitioner was able to substantiate the validity of its reorganization or
restructuring, it nevertheless, failed to effect a fair and reasonable criterion in dismissing
respondent. The criteria in implementing a redundancy are: (a) less preferred status, e.g.
temporary employee; (b) efficiency; and (c) seniority.

It is evident from the foregoing that the criterion allegedly used by petitioner in reorganizing its
sales unit was the employment status of the employee. However, in the implementation
thereof, petitioner erroneously classified respondent as a probationary employee, resulting in
192

the dismissal of the latter. Verily, the absence of criteria and the erroneous implementation of
the criterion selected, both render invalid the redundancy because both have the ultimate
effect of illegally dismissing an employee.

Considering that respondent was illegally dismissed, she is entitled not only to reinstatement
but also to payment of full backwages, computed from the time her compensation was actually
withheld from her on March 13, 2001, up to her actual reinstatement. As a regular employee
of petitioner from the date of her employment on April 17, 2000, 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, however, 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.
Anent attorneys fees, in actions for recovery of wages or where an employee was forced to
litigate and thus incurred expenses to protect his rights and interests, a maximum of 10% of the
total monetary award by way of attorneys fees is justifiable under Article 111 of the Labor
Code, Section 8, Rule VIII, Book III of its Implementing Rules, and paragraph 7, Article 2208 of
the Civil Code. The award of attorneys fees is proper and there need not be any showing that
the employer acted maliciously or in bad faith when it withheld the wages. There need only be
a showing that the lawful wages were not paid accordingly, as in the instant controversy.


16. ROLANDO Y. TAN, petitioner, vs. LEOVIGILDO LAGRAMA and THE HONORABLE COURT OF
APPEALS, respondents.
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
193

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.

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.

194

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.


17. UNION OF FILIPRO EMPLOYEES (UFE), petitioner, vs. BENIGNO VIVAR, JR., NATIONAL
LABOR RELATIONS COMMISSION and NESTLE PHILIPPINES, INC. (formerly FILIPRO, INC.),
respondents.

G.R. No. 79256.
January 20, 1992.

Facts:
On November 8, 1985, respondent Filipro, Inc. (now Nestle Philippines, Inc.) filed with the NLRC
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 Filipino Employees (UFE) agreed to submit the case for voluntary
arbitration with respondent Vivar as the voluntary 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.

Filipro filed a motion for clarification seeking (1) the limitation of the award to three years, (2)
the exclusion of salesmen, sales representatives, truck drivers, merchandisers and medical
representatives (hereinafter referred to as sales personnel) from the award of the holiday pay,
and (3) deduction from the holiday pay award of overpayment for overtime, night differential,
vacation and sick leave benefits due to the use of 251 divisor.

Petitioner UFE answered that the award should be made effective from the date of effectivity
of the Labor Code, that their sales personnel are not field personnel and are therefore entitled
to holiday pay, and that the use of 251 as divisor is an established employee benefit which
cannot be diminished.
195

Respondent Vivar issued an order declaring that:
1. the effectivity of the holiday pay award shall retroact to November 1, 1974, the
date of effectivity of the Labor Code
2. the company's sales personnel are field personnel and, as such, are not entitled
to holiday pay
3. with the grant of 10 days' holiday pay, the divisor should be changed from 251 to
261 and ordered the reimbursement of overpayment for overtime, night differential,
vacation and sick leave pay due to the use of 251 days as divisor

Both parties filed motions for partial reconsideration but Vivar forwarded the case to the NLRC
which issued a resolution remanding the case to the respondent arbitrator on the ground that it
has no jurisdiction to review decisions in voluntary arbitration. However, Vivar refused to take
cognizance of the case reasoning that he had resigned from service.

Issue:
Whether or not Nestle's sales personnel are entitled to holiday pay

Ruling:
The Court ruled that the company's sales personnel are not entitled to holiday pay.
Under Article 82, field personnel are not entitled to holiday pay. Said article defines field
personnel as "non-agritultural 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."

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.

As disposed by the respondent arbitrator, the period between 8:00 a.m. and 4:00 or 4:30 p.m.
comprises their hours of work in the field, the extent or scope and result of which are subject to
their individual capacity and industry and which "cannot be determined with reasonable
certainty." This is the reason why effective supervision over field work of salesmen and medical
representatives, truck drivers and merchandisers is practically a physical impossibility.
Consequently, they are excluded from the ten holidays with pay award.
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
196

Sec. 1. Coverage This rule shall apply to all employees except:
xxx xxx xxx
(e) Field personnel and other employees whose time and performance is unsupervised
by the employer . . .

Contrary to the contention of the petitioner that the rule added another element not found in
the law, the Court finds that the aforementioned rule did not add another element to the Labor
Code definition of field personnel. The clause "whose time and performance is unsupervised by
the employer" did not amplify but merely interpreted and expounded the clause "whose actual
hours of work in the field cannot be determined with reasonable certainty." 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.



XI. OTHER SPECIAL BENEFITS

1. ELIAS VILLUGA, RENATO ABISTADO, JILL MENDOZA, ANDRES ABAD, BENJAMIN BRIZUELA,
NORLITO LADIA, MARCELO AGUILAN, DAVID ORO, NELIA BRIZUELA, FLORA ESCOBIDO,
JUSTILITA CABANIG, and DOMINGO SAGUIT, petitioners, vs. NATIONAL LABOR RELATIONS
COMMISSION (THIRD DIVISION) and BROAD STREET TAILORING and/or RODOLFO ZAPANTA,
respondents.
G.R. No. 75038.
August 23, 1993.


Facts:
A basic factor underlying the exercise of rights and the filing of claims for benefits under the
Labor Code and other presidential issuances or labor legislations is the status and nature of
one's employment.

Petitioner Elias Villuga was employed as cutter in the tailoring shop owned by private
respondent Rodolfo Zapanta and known as Broad Street Tailoring located at Shaw Boulevard,
Mandaluyong, Metro Manila. As cutter, he was paid a fixed monthly salary of P840.00 and a
monthly transportation allowance of P40.00. In addition to his work as cutter, Villuga was
assigned the chore of distributing work to the shop's tailors or sewers when both the shop's
manager and assistant manager would be absent. He saw to it that their work conformed with
the pattern he had prepared and if not, he had them redone, repaired or re-sewn.
197


The other petitioners were ironers, repairmen and sewers. They were paid a fixed amount for
every item ironed, repaired or sewn, regardless of the time consumed in accomplishing the
task. Petitioners did not fill up any time record since they did not observe regular or fixed hours
of work. They were allowed to perform their work at home especially when the volume of
work, which depended on the number of job orders, could no longer be coped up with.

From February 17 to 22, 1978, petitioner Villuga failed to report for work allegedly due to
illness. For not properly notifying his employer, he was considered to have abandoned his work.
In a complaint filed with the Regional Office of the Department of Labor, Villuga claimed that he
was refused admittance when he reported for work after his absence, allegedly due to his
active participation in the union organized by private respondent's tailors. He further claimed
that he was not paid overtime pay, holiday pay, premium pay for work done on rest days and
holidays, service incentive leave pay and 13th month pay.

On May 1979, Labor Arbiter rendered a decision ordering the dismissal of the complaint for
unfair labor practices, illegal dismissal and other money claims except petitioner Villuga's claim
for 13th month pay for the years 1976, 1977 and 1980.

Issue:
Whether or not such employment is managerial in character or that of a rank and file employee
are primordial considerations before extending labor benefits.

Ruling:
The Court ruled that the characterization of such employment is important in the
determination of benefits since some employees are exempted to such benefits.

Under Rule I, Section 2(c), Book III of the Implementing Rules of the Labor Code, to be a
member of a managerial staff, the following elements must concur or co-exist, to wit:
(1) that his primary duty consists of the performance of work directly related to
management policies;
(2) that he customarily and regularly exercises discretion and independent judgment in
the performance of his functions;
(3) that he regularly and directly assists in the management of the establishment; and
(4) that he does not devote twenty per cent of his time to work other than those
described above.

Applying the above criteria to petitioner Villuga's case, it is undisputed that his primary work or
duty is to cut or prepare patterns for items to be sewn, not to lay down or implement any of
the management policies, as there is a manager and an assistant manager who perform said
functions.
198


It is true that in the absence of the manager and assistant manager, he distributes and assigns
work to employees but such duty, though involving discretion, is occasional and not regular or
customary. He had also the authority to order the repair or resewing of defective items but
such authority is part and parcel of his function as cutter to see to it that the items cut are sewn
correctly lest the defective nature of the workmanship be attributed to his "poor cutting."
Villuga does not participate in policy-making. Rather, the functions of his position involve
execution of approved and established policies.

In Franklin Baker Company of the Philippines v. Trajano, it was held that employees who do not
participate in policy-making but are given ready policies to execute and standard practices to
observe are not managerial employees. The test of "supervisory or managerial status" depends
on whether a person possesses authority that is not merely routinary or clerical in nature but
one that requires use of independent judgment. In other words, the functions of the position
are not managerial in nature if they only execute approved and established policies leaving little
or no discretion at all whether to implement said policies or not.

Consequently, the exclusion of Villuga from the benefits claimed under Article 87 (overtime pay
and premium pay for holiday and rest day work), Article 94, (holiday pay), and Article 95
(service incentive leave pay) of the Labor Code, on the ground that he is a managerial employee
is unwarranted. He is definitely a rank and file employee hired to perform the work of a cutter
and not hired to perform supervisory or managerial functions. The fact that he is uniformly paid
by the month does not exclude him from the benefits of holiday pay. He should therefore be
paid in addition to the 13th month pay, his overtime pay, holiday pay, premium pay for holiday
and rest day, and service incentive leave pay.


2. CJC TRADING, INC. and/or MS. CELIA J. CARLOS, petitioners, vs. NATIONAL LABOR
RELATIONS COMMISSION, RICARDO AUSAN, JR. and ERNESTO ALANAN, respondents.

G.R. No. 115884.
July 20, 1995.

Facts:
Private respondents Ricardo Ausan, Jr. and Ernesto Alanan were employed by petitioner since
1983 and 1978 as truck drivers and were paid on a "per trip or task basis." They filed separate
complaints on against petitioner CJC Trading, Incorporated and/or Ms. Celia J. Carlos for illegal
dismissal and non-payment of premium pay for holiday and rest day, service incentive leave pay
and thirteenth month pay. These cases were consolidated.

199

On 22 July 1993, a decision was rendered by the Labor Arbiter dismissing the complaints and
were not entitled to the labor standards benefits claimed by them because they were paid on a
"per trip or per task basis.

On appeal, NLRC affirmed in toto the decision of the Labor Arbiter.

Issue:
Whether or not the respondents are entitled to the benefits provided by law.

Ruling:
The employees are granted to retirement benefits. An employee who voluntarily resigns is not
entitled to separation pay unless otherwise stipulated in an employment contract or collective
bargaining agreement, or sanctioned by established employer practice or policy. The Labor
Code is devoid of any provision which grants separation pay to employees who voluntarily
resign. Neither was there anything in the record that shows that, in the instant case, there is a
collective bargaining agreement or any other agreement or established company policy
concerning the payment of separation pay to employees who resign.

Considering that private respondents were close to the age of sixty (60) at the time they
stopped working for petitioner and that they had been in the employ of petitioner for several
years, the Court, considers that this could be deemed to be in effect a prayer for the grant of
retirement benefits.

The pertinent law is Article 287 of the Labor Code, as amended by R.A. No. 7641, which reads:
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: Provided, however, That an employee's retirement benefits under any collective
bargaining and other agreements shall not be less than those provided herein.

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 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.

R.A. No. 7641 may be given effect where (1) the claimant for retirement benefits was still the
employee of the employer at the time the statute took effect; and (2) the claimant was in
200

compliance with the requirements for eligibility under the statute for such retirement benefits.
It appears that private respondents did not qualify for the benefits of R.A. No. 7641 under the
terms of this law itself. Since the record does not show any retirement plan or collective
bargaining agreement providing for retirement benefits to petitioner's employees, the
applicable retirement benefits to petitioner's employees, the applicable retirement age is the
optional retirement age of sixty (60) years according to Article 287, which would qualify the
retiree to retirement benefits equivalent to one-half (1/2) month's salary for every year of
service. Unfortunately, at the time private respondent stopped working for petitioner, they had
not yet reached the age of sixty (60) years. The Court stresses that there is nothing to prevent
petitioners from voluntarily giving private respondents some financial assistance on an ex gratia
basis.


3. PANTRANCO NORTH EXPRESS, INC., petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION and URBANO SUIGA, respondents.
G.R. No. 95940
July 24, 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.

Ruling:
The Court ruled that the CBA stipulation is legal and enforceable.
201

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.
202


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.


4. R & E TRANSPORT, INC., and HONORIO ENRIQUEZ, petitioners, vs. AVELINA P. LATAG,
representing her deceased husband, PEDRO M. LATAG, respondent.
G.R. No. 155214.
Feb. 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.

203

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.

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.

204

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.


5. RUFINA PATIS FACTORY, and JESUS LUCAS, SR., petitioners, vs. JUAN ALUSITAIN,
respondent.
G.R. No. 146202.
July 14, 2004

Facts:
On March 1948, Alusitain was hired as a laborer at the Rufina Patis Factory owned and
operated by petitioner Lucas. After close to forty three years, Alusitain admittedly tendered his
letter of resignation. On May 22, 1991, Alusitain executed a duly notarized affidavit of
separation from employment and submitted the same on even date to the Pensions
Department of the Social Security System (SSS).

On January 7, 1993, Republic Act No. 7641 (R.A. 7641) Sometime in 1995, Alusitain, claiming
that he retired from the company on January 31, 1995, having reached the age of 65 and due to
poor health, verbally demanded from petitioner Lucas for the payment of his retirement
benefits. By his computation, he claimed that he was entitled to P86,710.00.

Petitioner Lucas, however, refused to pay the retirement benefits of Alusitain, prompting the
latter to make a written demand on September 20, 1995. Lucas, however, remained adamant in
his refusal to give in to Alusitain's demands. Having failed to arrive at an amicable settlement,
Alusitain filed on November 17, 1995 a complaint before the NLRC against petitioners Rufina
Patis Factory and Lucas for non-payment of retirement benefits.

Issue:
Whether or not the respondent is entitled to the benefits granted by the amendment of the
law.

Ruling:
The respondent is entitled to the retirement benefits.
Republic Act No. 7641 (R.A. 7641), "AN ACT AMENDING ARTICLE 287 OF PRESIDENTIAL DECREE
NO. 442, AS AMENDED OTHERWISE KNOWN AS THE LABOR CODE OF THE PHILIPPINES, BY
PROVIDING FOR RETIREMENT PAY TO QUALIFIED PRIVATE SECTOR EMPLOYEES IN THE ABSENCE
205

OF ANY RETIREMENT PLAN IN THE ESTABLISHMENT," took effect providing, among other things,
thusly:
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 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 and shall be
entitled to retirement pay equivalent to at least one half () 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.

Violation of this provision is hereby declared unlawful and subject to the penal provisions under
Article 288 of this Code.

The Court believes that the respondent nevertheless maintained that he continued working for
petitioners until January 1995, the date of actual retirement, due to illness and old age, and
that he merely accomplished the foregoing documents in compliance with the requirements of
the SSS in order to avail of his retirement benefits.


6. STA. CATALINA COLLEGE and SR. LORETA ORANZA, petitioners, vs. NATIONAL LABOR
RELATIONS COMMISSION and HILARIA G. TERCERO, respondents.

G.R. No. 144483.
November 19, 2003

Facts:
In June 1955, Hilaria was hired as an elementary school teacher at the Sta. Catalina College. In
1970, she applied for and was granted a one year leave of absence without pay on account of
the illness of her mother. After the expiration in 1971 of her leave of absence, she had not been
heard from by Sta. Catalina College. In the meantime, she was employed as a teacher at the San
Pedro Parochial School during school year 1980-1981 and at the Liceo de San Pedro, Bian,
Laguna during school year 1981-1982.

206

In 1982, she applied anew at petitioner school which hired her. On March 1997, during the
51st Commencement Exercises of petitioner school, Hilaria was awarded a Plaque of
Appreciation for thirty years of service and P12,000.00 as gratuity pay. On May 1997, Hilaria
reached the compulsory retirement age of 65. Retiring pursuant to Article 287 of the Labor
Code, as amended by Republic Act 7641, petitioner school pegged her retirement benefits at
P59,038.35, computed on the basis of fifteen years of service from 1982 to 1997. Her service
from 1955 to 1970 was excluded in the computation, petitioner school having asserted that she
had, in 1971, abandoned her employment. Hilaria insisted, that her retirement benefits should
be computed on the basis of her thirty years of service, inclusive of the period from 1955 to
1970 and that the gratuity pay earlier given to her should not be deducted there from.

The parties having failed to agree on how the retirement benefits should be computed, Hilaria
filed a complaint before the NLRC for non-payment of retirement benefits. Labor Arbiter
rendered ordering the respondents to pay the complainant the amount of P18,185.26 only as
the differential of her retirement benefits.

Issue:
Whether or not Hilaria's services for the school during the period from 1955 to 1970 should be
factored in the computation of her retirement benefits.

Ruling:
Hilaria cannot be credited for her services in 1955-1970 in the determination of her retirement
benefits. This Court is not unmindful of Hilaria's rendition of a total of thirty years of teaching in
petitioner school and should be accorded ample support in her twilight years. Petitioner school
in fact acknowledges her dedicated service to its students. She can, however, only be awarded
with what she is rightfully entitled to under the law.


Retirement benefits, on the other hand, 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 his loyalty to the employer.

In Hilaria's case, her retirement pay as computed by petitioners amounts to P59,038.35,
P28,853.09 of which had already been given to her under the PERAA. Since the computed
amount of her retirement pay is much lower than that provided under the law, she is entitled
to receive the difference between the actual amount of her retirement benefits as required by
law and that provided for under the PERAA.

Article 287 of the Labor Code, as amended by Republic Act 7641 or the New Retirement Law,
provides: Retirement. Any employee may be retired upon reaching the retirement age
established in the collective bargaining agreement or other applicable employment contract. In
207

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: Provided, however, That an employee's retirement benefits under any collective
bargaining and other agreements shall not be less than those provided herein.

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 and shall be
entitled to retirement pay equivalent to at least one-half () 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.

Likewise, Section 3.3, Rule II of the Rules Implementing R.A. 7641 provides: 3.3. Where both the
employer and the employee contribute to a retirement fund in accordance with an individual or
collective agreement or other applicable employment contract, the employer's total
contribution thereto shall not be less than the total retirement benefits to which the employee
would have been entitled had there been no such retirement fund. In case the employer's
contribution is less than the retirement benefits provided under this Rule, the employer shall
pay the difference.

Hence, Hilaria is entitled to receive P98,706.45 computed as follows:
One-half month salary = (15 days x latest salary per day) + (5 days leave x
latest salary per day) + (1/12 of 13th month pay)
= P4,512.30 + P1,504.10 + P547.33
= P6,563.73
Retirement Pay = number of years in service x one-half month salary
= 5 years x P6,580.43
= P98,455.95

Since petitioner school had already paid Hilaria P28,853.09 representing employer
contributions under the PERAA, the same should be deducted from the retirement pay due her,
to thereby leave a balance of P69,602.86 still due her.


7. HONDA PHILS., INC., petitioner, vs. SAMAHAN NG MALAYANG MANGGAGAWA SA HONDA,
respondent.
208

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 14
th
month pay as the same as 13
th
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 13
th
month and 14
th
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 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 companys implementation of the
pro-rated computation is invalid.

Issue:
Whether or not the pro-rated computation of the 13
th
and 14
th
month pays and other bonuses
in question is valid and lawful.

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 13
th
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 13
th

month pay shall constitute a violation of Article 100 of the Labor Code.

209


8. ALPHA C. JACULBE, petitioner, vs. SILLIMAN UNIVERSITY, respondent.
G.R. No. 156934.
March 16, 2007.

Facts:
Sometime in 1958, petitioner began working for respondents 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 35
th
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 respondents 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 petitioners 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 arbiters decision and
dismissed the complaint. the CA affirmed the NLRC.

Issue:
Whether or not the respondents retirement plan imposing automatic retirement after 35 years
of service contravenes the security of tenure clause in the 1987 Constitution and the Labor
Code.

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.

210

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 employees
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 3% 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
Universitys 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 employers offer to lower the
retirement age if they feel they can get a better deal with the retirement plan presented by the
211

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.


9. INTERCONTINENTAL BROADCASTING CORPORATION (IBC), represented by ATTY. RENATO
Q. BELLO, in his capacity as CEO and President, petitioner, vs. NOEMI B. AMARILLA, CORSINI
R. LAGAHIT, ANATOLIO G. OTADOY, and CANDIDO C. QUIONES, JR., respondents.
G.R. No. 162775.
October 27, 2006.

Facts:
On various dates, petitioner employed the following persons at its Cebu station: Candido C.
Quiones, 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. Cabaero 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.

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
212

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
213

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.

214

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.

10. LETRAN CALAMBA FACULTY and EMPLOYEES ASSOCIATION, petitioner, vs. NATIONAL
LABOR RELATIONS COMMISSION and COLEGIO DE SAN JUAN DE LETRAN CALAMBA, INC.,
respondents.
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
215

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.

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.

216

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
217

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.


11. ROGELIO REYES, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, Fifth Division,
and UNIVERSAL ROBINA CORPORATION GROCERY DIVISION, respondents.
G.R. No. 160233.
August 8, 2007.

Facts:
Petitioner was employed as a salesman at private respondent's Grocery Division in Davao City
on August 12, 1977. He was eventually appointed as unit manager of Sales Department-South
Mindanao District, a position he held until his retirement on November 30, 1997. Thereafter, he
received a letter regarding the computation of his separation pay. Insisting that his retirement
benefits and 13th month pay must be based on the average monthly salary of P42,766.19,
which consists of P10,919.22 basic salary and P31,846.97 average monthly commission,
petitioner refused to accept the check issued by private respondent in the amount of
P200,322.21. Instead, he filed a complaint before the arbitration branch of the NLRC for
retirement benefits, 13th month pay, tax refund, earned sick and vacation leaves, financial
assistance, service incentive leave pay, damages and attorney's fees.

Petitioner contends that the commissions form part of the basic salary, citing the case of
Philippine Duplicators, Inc. v. National Labor Relations Commission, wherein the Court held that
commissions earned by salesmen form part of their basic salary. Private respondent counters
that petitioner knew that the overriding commission is not included in the basic salary because
it had not been considered as such for a long time in the computation of the 13th month pay,
leave commissions, absences and tardiness.

Issue:
Whether or not the average monthly sales commission of thirty one thousand eight hundred
forty six and 97/100 (Php31,846.97) should be included in the computation of his retirement
benefits and 13
th
month pay.

Ruling:
This Court has held, in Philippine Duplicators that, the salesmen's commissions, comprising a
pre-determined percentage of the selling price of the goods sold by each salesman, were
properly included in the term basic salary for purposes of computing the 13th month pay. The
salesmen's commission are not overtime payments, nor profit-sharing payments nor any other
218

fringe benefit but a portion of the salary structure which represents an automatic increment to
the monetary value initially assigned to each unit of work rendered by a salesman.

Contrarily, in Boie-Takeda, the so-called commissions paid to or received by medical
representatives of Boie-Takeda Chemicals or by the rank and file employees of Philippine Fuji
Xerox Co., were excluded from the term basic salary because these were paid to the medical
representatives and rank-and-file employees as productivity bonuses, which are generally tied
to the productivity, or capacity for revenue production, of a corporation and such bonuses
closely resemble profit-sharing payments and have no clear direct or necessary relation to the
amount of work actually done by each individual employee. Further, commissions paid by the
Boie-Takeda Company to its medical representatives could not have been sales commissions in
the same sense that Philippine Duplicators paid the salesmen their sales commissions. Medical
representatives are not salesmen; they do not effect any sale of any article at all.

In fine, whether or not a commission forms part of the basic salary depends upon the
circumstances or conditions for its payment, which indubitably are factual in nature for they
will require a re-examination and calibration of the evidence on record.

As to the main issue whether petitioner's commissions be considered in the computation of his
retirement benefits and 13th month pay, we rule in the negative. Article 287 of the Labor Code,
as amended by Republic Act No. 7641, otherwise known as The New Retirement Law, 22
provides: Retirement. Any employee may be retired upon reaching the retirement age
established 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 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 (1/2) 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.

Petitioner filed for optional retirement upon reaching the age of 60. However, the basis in
computing his retirement benefits is his latest salary rate of P10,919.22 as the commissions he
received are in the form of profit-sharing payments specifically excluded by the foregoing rules.
Case law has it that when these earnings and remuneration are closely akin to fringe benefits,
overtime pay or profit-sharing statements, they are properly excluded in computing retirement
pay. However, sales commissions which are effectively an integral portion of the basic salary
structure of an employee, shall be included in determining the retirement pay.

219

At bar, petitioner Rogelio J. Reyes was receiving a monthly sum of P10,919.22 as salary
corresponding to his position as Unit Manager. Thus, as correctly ruled by public respondent
NLRC, the "overriding commissions" paid to him by Universal Robina Corp. could not have been
'sales commissions' in the same sense that Philippine Duplicators paid its salesmen sales
commissions. Unit Managers are not salesmen; they do not effect any sale of article at all.
Therefore, any commission which they receive is certainly not the basic salary which measures
the standard or amount of work of complainant as Unit Manager. Accordingly, the additional
payments made to petitioner were not in fact sales commissions but rather partook of the
nature of profit-sharing business. Certainly, from the foregoing, the doctrine in Boie-Takeda
Chemicals and Philippine Fuji Xerox Corporation, which pronounced that commissions are
additional pay that does not form part of the basic salary, applies to the present case. Aside
from the fact that as unit manager petitioner did not enter into actual sale transactions, but
merely supervised the salesmen under his control, the disputed commissions were not regularly
received by him. Only when the salesmen were able to collect from the sale transactions can
petitioner receive the commissions. Conversely, if no collections were made by the salesmen,
then petitioner would receive no commissions at all. In fine, the commissions which petitioner
received were not part of his salary structure but were profit-sharing payments and had no
clear, direct or necessary relation to the amount of work he actually performed. The collection
made by the salesmen from the sale transactions was the profit of private respondent from
which petitioner had a share in the form of a commission. Hence, petition is denied.


12. ARCO METAL PRODUCTS, CO., INC., and MRS. SALVADOR UY, petitioners, vs. SAMAHAN
NG MGA MANGGAGAWA SA ARCO METAL-NAFLU (SAMARM-NAFLU), respondent.
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 petitioners rank and file employees. Sometime in December 2003, petitioner
paid the 13
th
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:
220

Whether or not the grant of 13
th
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.

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 13
th
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 employers act of including non-basic benefits in the computation of the 13
th

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.


13. UNIVERSAL ROBINA SUGAR MILLING CORPORATION (URSUMCO) and/or RENATO CABATI,
as Manager, petitioners, vs. AGRIPINO CABALLEDA and ALEJANDRO CADALIN, respondents.

G.R. No. 156644.
July 28, 2008.

221

Facts:
Petitioner Universal Robina Sugar Milling Corporation (URSUMCO) is a domestic corporation
engaged in the sugar milling business and petitioner Renato Cabati

is URSUMCO's manager.
Respondent Agripino Caballeda (Agripino) worked as welder for URSUMCO from March 1989
until June 23, 1997 with a salary of P124.00 per day, while respondent Alejandro Cadalin
(Alejandro) worked for URSUMCO as crane operator from 1976 up to June 15, 1997 with a
salary of P209.30 per day.

On April 24, 1991, John Gokongwei, Jr., President of URSUMCO, issued a Memorandum

establishing the company policy on Compulsory Retirement (Memorandum) of its
employees. The memorandum provides that all employees corporate-wide who attain 60 years
of age on or before April 30, 1991 shall be considered retired on May 31, 1991.

On April 29, 1993, URSUMCO and the National Federation of Labor (NFL), a legitimate labor
organization and the recognized sole and exclusive bargaining representative of all the monthly
and daily paid employees of URSUMCO, of which Alejandro was a member, entered into a
Collective Bargaining Agreement (CBA).

Article XV of the said CBA particularly provided that the
retirement benefits of the members of the collective bargaining unit shall be in accordance with
law.

Agripino and Alejandro (respondents), having reached the age of 60, were allegedly forced to
retire by URSUMCO. Agripino averred that URSUMCO illegally dismissed him from employment
on June 24, 1997 when he was forced to retire upon reaching the age of sixty (60) years
old. Upon the termination of his employment, he accepted his separation pay and applied for
retirement benefits with the Social Security System (SSS). Earlier, on April 15, 1997, Alejandro
turned 60 years old. On May 28, 1997, he filed his application for retirement with URSUMCO,
attaching his birth and baptismal certificates. On July 23, 1997, he accepted his retirement
benefits and executed a quitclaim in favor of URSUMCO.

Thereafter, on August 6, 1997, Agripino filed a Complaint

for illegal dismissal, damages and
attorneys fees before the Labor Arbiter (LA) of Dumaguete City. He alleged that his
compulsory retirement was in violation of the provisions of Republic Act (R.A.) 7641 and, was in
effect, a form of illegal dismissal.

On August 26, 1997, Alejandro likewise filed a Complaint

for illegal dismissal, underpayment of
retirement benefits, damages and attorneys fees before the LA, alleging that he was given only
15 days per year of service
by way of retirement benefits and further assails that his compulsory retirement was
discriminatory considering that there were other workers over sixty (60) years of age who were
allowed to continuously report for work.

222

Issue:
Whether respondents were illegally terminated on account of compulsory retirement or the
same voluntarily retired.

Ruling:
SC ruled in favor of the respondents.
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 age of retirement is primarily determined by the
existing agreement between the employer and the employees. However, in the absence of such
agreement, the retirement age shall be fixed by law. Under Art. 287 of the Labor Code as
amended, the legally mandated age for compulsory retirement is 65 years, while the set
minimum age for optional retirement is 60 years.

In this case, it may be stressed that the CBA does not per se specifically provide for the
compulsory retirement age nor does it provide for an optional retirement plan. It merely
provides that the retirement benefits accorded to an employee shall be in accordance with
law. Thus, we must apply Art. 287 of the Labor Code which provides for two types of
retirement: (a) compulsory and (b) optional. The first takes place at age 65, while the second is
primarily determined by the collective bargaining agreement or other employment contract or
employer's retirement plan. In the absence of any provision on optional retirement in a
collective bargaining agreement, other employment contract, or employer's retirement plan, an
employee may optionally retire upon reaching the age of 60 years or more, but not beyond 65
years, provided he has served at least five years in the establishment concerned. That
prerogative is exclusively lodged in the employee.

Indubitably, the voluntariness of the respondents' retirement is the meat of the instant
controversy. Petitioners postulate that respondents voluntarily retired particularly when
Alejandro filed his application for retirement, submitted all the documentary requirements,
accepted the retirement benefits and executed a quitclaim in favor of URSUMCO. Respondents
claim otherwise, contending that they were merely forced to comply as they were no longer
given any work assignment and considering that the severance of their employment with
URSUMCO is a condition precedent for them to receive their retirement benefits.

Generally, the law looks with disfavor on quitclaims and releases by employees who have been
inveigled or pressured into signing them by unscrupulous employers seeking to evade their
legal responsibilities and frustrate just claims of employees.

They are frowned upon as contrary
to public policy. A quitclaim is ineffective in barring recovery of the full measure of a worker's
rights, and the acceptance of benefits therefrom does not amount to estoppels.

223

To be precise, only Alejandro was able to claim a partial amount of his retirement benefit. Thus,
it is clear from the decisions of the LA, NLRC and CA that petitioners are still liable to pay
Alejandro the differential on his retirement benefits. On the other hand, Agripino was actually
and totally deprived of his retirement benefit.

Moreover, the petitioners, not the respondents, have the burden of proving that the quitclaim
was voluntarily entered into. In previous cases, we have considered, among others, the
educational attainment of the
employees concerned in upholding the validity of the quitclaims which they have executed
in favor of their employers.


14. LOURDES A. CERCADO, petitioner, vs. UNIPROM, INC., respondent.
G.R. No. 188154.
October 13, 2010.

Facts:
Petitioner Lourdes A. Cercado (Cercado) started working for respondent UNIPROM, Inc.
(UNIPROM) on December 15, 1978 as a ticket seller assigned at Fiesta Carnival, Araneta Center,
Quezon City. Later on, she was promoted as cashier and then as clerk typist. On April 1, 1980,
UNIPROM instituted an Employees Non-Contributory Retirement Plan
4
which provides that any
participant with twenty (20) years of service, regardless of age, may be retired at his option or
at the option of the company. UNIPROM exercised its option under the retirement plan, and
decided to retire Cercado effective at the end of business hours on February 15, 2001. A check
of even date in the amount of P100,811.70, representing her retirement benefits under the
regular retirement package, was issued to her. Cercado refused to accept the check.

The CA, however, ruled that UNIPROMs retirement plan was consistent with Article 287 of the
Labor Code, which provides that "any employee may be retired upon reaching the retirement
age established in the collective bargaining agreement or other applicable employment
contract."

Issue:
Whether or not UNIPROM has a bona fide retirement plan.

Ruling:
The petition is meritorious.

x x x We reiterate the well-established meaning of retirement in this jurisdiction: Retirement is
the result of a bilateral act of the parties, a voluntary agreement between the employer and the
224

employee whereby the latter, after reaching a certain age, agrees to sever his or her
employment with the former.


Acceptance by the employees of an early retirement age option must be explicit, voluntary,
free, and uncompelled. While an employer may unilaterally retire an employee earlier than the
legally permissible ages under the Labor Code, this prerogative must be exercised pursuant to a
mutually instituted early retirement plan. In other words, only the implementation and
execution of the option may be unilateral, but not the adoption and institution of the
retirement plan containing such option. For the option to be valid, the retirement plan
containing it must be voluntarily assented to by the employees or at least by a majority of them
through a bargaining representative.

The following pronouncements in Jaculbe v. Silliman University are elucidating:

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 employers offer to lower the
retirement age if they feel they can get a better deal with the retirement plan presented by the
employer.

We disagree with the CAs conclusion that the retirement plan is part of petitioners
employment contract with respondent. It must be underscored that petitioner was hired in
1978 or 2 years before the institution of UNIPROMs retirement plan in 1980. Logically, her
employment contract did not include the retirement plan, much less the early retirement age
option contained therein


15. RADIO MINDANAO NETWORK, INC. and ERIC S. CANOY, petitioners, vs. DOMINGO Z.
YBAROLA, JR. and ALFONSO E. RIVERA, JR., respondents.

G.R. No. 198662.
September 12, 2012.

Facts:
Respondents Domingo Z. Ybarola, Jr. and Alfonso E. Rivera, Jr. were hired on June 15, 1977 and
June 1, 1983, respectively, by Radio Mindanao Network (RMN). They eventually became
account managers, soliciting advertisements and servicing various clients of RMN.
On September 15, 2002, the respondents' services were terminated as a result of RMN's
reorganization/restructuring; they were given their separation pay P631,250.00 for Ybarola,
and P481,250.00 for Rivera. Sometime in December 2002, they executed release/quitclaim
affidavits.
225

Dissatisfied with their separation pay, the respondents filed separate complaints (which were
later consolidated) against RMN and its President, Eric S. Canoy, for illegal dismissal with
several money claims, including attorney's fees. They indicated that their monthly salary rates
were P60,000.00 for Ybarola and P40,000.00 for Rivera.


Issue:
Whether the amounts the respondents received represented a fair and reasonable settlement
of their claims

Ruling:
The petitioners insist that the respondents' commissions were not part of their salaries,
because they failed to present proof that they earned the commission due to actual market
transactions attributable to them. They submit that the commissions are profit-sharing
payments which do not form part of their salaries. We are not convinced. If these commissions
had been really profit-sharing bonuses to the respondents, they should have received the same
amounts, yet, as the NLRC itself noted, Ybarola and Rivera received P372,173.11 and
P586,998.50 commissions, respectively, in 2002. The variance in amounts the respondents
received as commissions supports the CA's finding that the salary structure of the respondents
was such that they only received a minimal amount as guaranteed wage; a greater part of their
income was derived from the commissions they get from soliciting advertisements; these
advertisements are the "products" they sell. As the CA aptly noted, this kind of salary structure
does not detract from the character of the commissions being part of the salary or wage paid to
the employees for services rendered to the company, as the Court held in Philippine
Duplicators, Inc. v. NLRC.
The petitioners' reliance on our ruling in Talam v. National Labor Relations
Commission, regarding the "proper appreciation of quitclaims," as they put it, is misplaced.
While Talam, in the cited case, and Ybarola and Rivera, in this case, are not unlettered
employees, their situations differ in all other respects.
In Talam, the employee received a valuable consideration for his less than two years of service
with the company; he was not shortchanged and no essential unfairness took place. In this
case, as the CA noted, the separation pay the respondents each received was deficient by at
least P400,000.00; thus, they were given only half of the amount they were legally entitled to.
To be sure, a settlement under these terms is not and cannot be a reasonable one, given
especially the respondents' length of service 25 years for Ybarola and 19 years for Rivera.
The CA was correct when it opined that the respondents were in dire straits when they
executed the release/quitclaim affidavits. Without jobs and with families to support, they
226

dallied in executing the quitclaim instrument, but were eventually forced to sign given their
circumstances.


16. ELEAZAR S. PADILLO, + petitioner, vs. RURAL BANK OF NABUNTURAN, INC. and MARK S.
OROPEZA, respondents.

G.R. No. 199338.
January 21, 2013.

Facts:
On October 1, 1977, petitioner, the late Eleazar Padillo (Padillo), was employed by respondent
Rural Bank of Nabunturan, Inc. (Bank) as its SA Bookkeeper. Due to liquidity problems which
arose sometime in 2003, the Bank took out retirement/insurance plans with Philippine
American Life and General Insurance Company (Philam Life) for all its employees in anticipation
of its possible closure and the concomitant severance of its personnel. In this regard, the Bank
procured Philam Plan Certificate of Full Payment No. 88204, Plan Type 02FP10SC, Agreement
No. PP98013771 (Philam Life Plan) in favor of Padillo for a benefit amount of P100,000.00 and
which was set to mature on July 11, 2009. .During the latter part of 2007, Padillo suffered a
mild stroke due to hypertension which consequently impaired his ability to effectively pursue
his work.On September 10, 2007, he wrote a letter addressed to respondent Oropeza, the
president of the bank, expressing his intention to avail of an early retirement package. Despite
several follow-ups, his request remained unheeded. On October 3, 2007, Padillo was separated
from employment due to his poor and failing health as reflected in a Certification dated
December 4, 2007 issued by the Bank. Not having received his claimed retirement benefits,
Padillo filed with the NLRC a complaint for the recovery of unpaid retirement benefits.

Ruling:
The Labor Code provision on termination on the ground of disease under Article 297 does not
apply in this case, considering that it was the petitioner and not the Bank who severed the
employment relations. It was Padillo who voluntarily retired and that he was not terminated by
the Bank.

Under article 300 of the labor code, in the absence of any applicable agreement, an employee
must (1) retire when he is at least sixty (60) years of age and (2) serve at least (5) years in the
company to entitle him/her to a retirement benefit of at least one-half (1/2) month salary for
every year of service, with a fraction of at least six (6) months being considered as one whole
year. Notably, these age and tenure requirements are cumulative and non-compliance with one
negates the employee's entitlement to the retirement benefits under Article 300 of the Labor
Code.

227

In this case, it is undisputed that there exists no retirement plan, collective bargaining
agreement or any other equivalent contract between the parties which set out the terms and
condition for the retirement of employees, with the sole exception of the Philam Life Plan
which premiums had already been paid by the Bank. In the absence of any applicable contract
or any evolved company policy, Padillo should have met the age and tenure requirements set
forth under Article 300 of the Labor Code to be entitled to the retirement benefits provided
therein. Unfortunately, while Padillo was able to comply with the five (5) year tenure
requirement as he served for twenty-nine (29) years he, however, fell short with respect
to the sixty (60) year age requirement given that he was only fifty-five (55) years old when he
retired. Therefore, without prejudice to the proceeds due under the Philam Life Plan,
petitioners' claim for retirement benefits must be denied.



XII. 2011 NLRC RULES OF PROCEDURE

1. T/SGT ALDORA LARKINS, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, HON.
IRINEO BERNARDO, DANIEL HERRERA, MARIETTA DE GUZMAN, JOSELITO CATACUTAN,
JOSEPH GALANG, ROBERTO HERRERA, DELPIN PECSON, CARLOS CORTEZ, JAIME CORTEZ,
ARSENIO DIAZ, ROBERTO SAGAD and MARCELO LOZANO, respondents.
G.R. No. 92432.
February 23, 1995.

Facts:
Petitioner was a member of the United States Air Force (USAF) assigned to oversee the
dormitories of the Third Aircraft Generation Squadron (3 AGS) at Clark Air Base, Pampanga.

On August 10, 1988, 3 AGS terminated the contract for the maintenance and upkeep of the
dormitories with the De Guzman Custodial Services. The employees thereof, including private
respondents, were allowed to continue working for 3 AGS. It was left to the new contractor, the
JAC Maintenance Services owned by Joselito Cunanan, to decide whether it would retain their
services. Joselito Cunanan, however, chose to bring in his own workers. As a result, the workers
of the De Guzman Custodial Services were requested to surrender their base passes to Lt. Col.
Frankhauser or to petitioner.

It is petitioners contention that the questioned resolutions are null and void because
respondent Labor Arbiter did not acquire jurisdiction to entertain and decide the case.
Petitioner alleges that she never received nor was served, any summons or copies of the
228

original and amended complaints, and therefore the Labor Arbiter had no jurisdiction over her
person under Article XIV of the R.P. ? U.S. Military Bases Agreement.

Issue:
Whether or not the Labor Arbiter acquires jurisdiction over the respondent.

Ruling:
The Agreement Between the Republic of the Philippines and the United States of America
Concerning Military Bases, otherwise known as the R.P. ? U.S. Military Bases Agreement,
governed the rights, duties, authority, and the exercise thereof by Philippine and American
nationals inside the U.S. military bases in the country.

Article XIV thereof, governing the procedure for service of summons on persons inside U.S.
military bases, provides that:
. . . [N]o process, civil or criminal, shall be served within any base except with the permission of
the commanding officer of such base; but should the commanding officer refuse to grant such
permission he shall forthwith take the necessary steps . . . . to serve such process, as the case
may be, and to provide the attendance of the server of such process before the appropriate
court in the Philippines or procure such server to make the necessary affidavit or declaration to
prove such service as the case may require.
Summonses and other processes issued by Philippine courts and administrative agencies for
United States Armed Forces personnel within any U.S. base in the Philippines could be served
therein only with the permission of the Base Commander. If he withholds giving his permission,
he should instead designate another person to serve the process, and obtain the servers
affidavit for filing with the appropriate court. Respondent Labor Arbiter did not follow said
procedure. He instead, addressed the summons to Lt. Col. Frankhauser and not the Base
Commander (Rollo, p. 11).

Respondents do not dispute petitioners claim that no summons was ever issued and served on
her. They contend, however, that they sent notices of the hearings to her (Rollo, pp. 12-13).
Notices of hearing are not summonses. The provisions and prevailing jurisprudence in Civil
Procedure may be applied by analogy to NLRC proceedings (Revised Rules of the NLRC, Rule I,
Sec. 3). It is basic that the Labor Arbiter cannot acquire jurisdiction over the person of the
respondent without the latter being served with summons (cf. Vda. de Macoy v. Court of
Appeals, 206 SCRA 244 [1992]; Filmerco Commercial Co., Inc. v. Intermediate Appellate Court,
149 SCRA 193 [1987]). In the absence of service of summons or a valid waiver thereof, the
hearings and judgment rendered by the Labor Arbiter are null and void (cf. Vda. de Macoy v.
Court of Appeals, supra.)

Petitioner, in the case at bench, appealed to the NLRC and participated in the oral argument
before the said body. This, however, does not constitute a waiver of the lack of summons and a
229

voluntary submission of her person to the jurisdiction of the Labor Arbiter. (De los Santos v.
Montera, 221 SCRA 15 [1993]).

Be that as it may, on the assumption that petitioner validly waived service of summons on her,
still the case could not prosper. There is no allegation from the pleadings filed that Lt. Col.
Frankhauser and petitioner were being sued in their personal capacities for tortious acts
(United States of America v. Guinto, 182 SCRA 644 [1990]). However, private respondents
named 3 AGS as one of the respondents in their complaint (Rollo, p. 10).

Under the Agreement Between the Government of the Republic of the Philippines and the
Government of the United States of America Relating to the Employment of Philippine
Nationals in the United States Military Bases in the Philippines otherwise known as the Base
Labor Agreement of May 27, 1968, any dispute or disagreement between the United States
Armed Forces and Filipino employees should be settled under grievance or labor relations
procedures established therein (Art. II) or by the arbitration process provided in the
Romualdez-Bosworth Memorandum of Agreement dated September 5, 1985. If no agreement
was reached or if the grievance procedure failed, the dispute was appealable by either party to
a Joint Labor Committee established in Article III of the Base Labor Agreement.

Unquestionably therefore, no jurisdiction was ever acquired by the Labor Arbiter over the case
and the person of petitioner and the judgment rendered is null and void (Filmerco Commercial
Co. v. Intermediate Appellate Court, supra.; Sy v. Navarro, 81 SCRA 458 [1978]).
The petition for certiorari is GRANTED.


2. UERM-MEMORIAL MEDICAL CENTER and DR. ISIDRO CARINO, petitioners, vs. NATIONAL
LABOR RELATIONS COMMISSION and UERM EMPLOYEES ASSOCIATION, PRISCILLO
DALOGDOG and 516 MEMBERS-EMPLOYEES of UERM HOSPITAL, respondents.
G.R. No. 110419.
March 3, 1997.

Facts:
On December 14, 1987, RA 6640 took effect mandating a 10-peso increase on the prevailing
daily minimum wage (DMW) resulting to a 95-peso difference in the salaries of rank-and-file
employees (union members) and faculty members (non-union). On July 1, 1989, RA 6727 took
effect again increasing the DMW by 25 pesos resulting in a difference of P237.42 between the
salaries of the 2 employee groups. In September 1987, petitioners increased the hiring rate to
P188.00 per month. On 12 April 1988, Policy Instruction No. 54 was issued by the then
Secretary of Labor Franklin Drilon providing that the personnel in subject hospitals and clinics
230

are entitled to a full weekly wage of seven days if they have completed the 40-hour/5-day
workweek in any given workweek.

Consequently, a complaint was filed by the private respondents, represented by the Federation
of Free Workers (FFW), claiming salary differentials under Republic Act Nos. 6640 and 6727,
correction of the wage distortion and the payment of salaries for Saturdays and Sundays under
Policy Instruction No. 54.
Labor Arbiter Nieves de Castro sustained the private respondents except for their claim of wage
distortion and directed petitioner to pay P17,082,448.56 as salary differentials and P2,000.00
each as exemplary damages. Within the reglementary period for appeal, the petitioners filed
their Notice and Memorandum of Appeal with a Real Estate Bond consisting of land and various
improvements therein worth P102,345,650.

The private respondents moved to dismiss the appeal on the ground that Article 223 of the
Labor Code, as amended, requires the posting of a cash or surety bond. The NLRC directed
petitioners to post a cash or surety bond of P17,082,448.56 with a warning that failure to do so
would cause the dismissal of the appeal.

The petitioners filed a Motion for Reconsideration alleging it is not in a viable financial
condition to post a cash bond nor to pay the annual premium of P700,000.00 for a surety bond.
On 6 October 1992, the NLRC dismissed petitioners' appeal. Petitioners' MR was also denied by
the NLRC in a resolution dated 7 June 1993.

Issue:
Whether or not in perfecting an appeal to the National Labor Relations Commission (NLRC) a
property bond is excluded by the two forms of appeal bond cash or surety as enumerated
in Article 223 of the Labor Code.

Ruling:
The applicable law is Article 223 of the Labor Code, as amended by Republic Act No. 6715,
which provides:
"In case of a judgment involving a monetary award, an appeal by the employer may be
perfected only upon the posting of a cash or surety bond issued by a reputable bonding
company duly accredited by the Commission in the amount equivalent to the monetary
award in the judgment appealed from."
We have given a liberal interpretation to this provision. In YBL (Your Bus Line) v. NLRC we ruled:
"x x x that while Article 223 of the Labor Code, as amended by Republic Act No. 6715,
requiring a cash or surety bond in the amount equivalent to the monetary award in the
judgment appealed from for the appeal to be perfected, may be considered a
jurisdictional requirement, nevertheless, adhering to the principle that substantial
justice is better served by allowing the appeal on the merits threshed out by the NLRC,
231

the Court finds and so holds that the foregoing requirement of the law should be given a
liberal interpretation."
Then too, in Oriental Mindoro Electric Cooperative, Inc. v. National Labor Relations Commission
we held:
"The intention of the lawmakers to make the bond an indispensable requisite for the
perfection of an appeal by the employer is underscored by the provision that an appeal
by the employer may be perfected "only upon the posting of a cash or surety bond." The
word "only" makes it perfectly clear, that the lawmakers intended the posting of a cash
or surety bond by the employer to be the exclusive means by which an employer's
appeal may be perfected. The requirement is intended to discourage employers from
using an appeal to delay, or even evade, their obligation to satisfy their employees' just
and lawful claims.
Considering, however, that the current policy is not to strictly follow technical rules but
rather to take into account the spirit and intention of the Labor Code, it would be
prudent for us to look into the merits of the case, especially since petitioner disputes
the allegation that private respondent was illegally dismissed."

We reiterate this policy which stresses the importance of deciding cases on the basis of their
substantive merit and not on strict technical rules. In the case at bar, the judgment involved is
more than P17 million and its precipitate execution can adversely affect the existence of
petitioner medical center. Likewise, the issues involved are not insignificant and they deserve a
full discourse by our quasi-judicial and judicial authorities. We are also confident that the real
property bond posted by the petitioners sufficiently protects the interests of private
respondents should they finally prevail. It is not disputed that the real property offered by
petitioners is worth P102,345,650. The judgment in favor of private respondents is only a little
more than P17 million.

Case remanded to NLRC for continuation of proceedings.


3. PHILTRANCO SERVICE ENTERPRISE, INC., petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION and MR. ROBERTO NIEVA, respondents.
G.R. No. 124100.
April 1, 1998.

Facts:
Nieva was employed as a driver by petitioner assigned to the Legaspi City-Pasay City route.
Nieva sideswiped an owner-type jeep and a criminal complaint was filed against him. Philtranco
posted a bail bond for Nieva. After having been suspended for thirty days, he tried to report to
work but was told to wait until his case was settled. The case was finally settled, he again
232

reported to work but was requested to file a new application as he was no longer considered an
employee of Philtranco, allegedly for being absent without leave from October 19 to November
20, 1989.

Nieva filed a complaint for illegal dismissal and demanded for Thirteenth-Month Pay with the
NLRCs National Capital Region Arbitration Branch in Manila. Philtranco filed a motion to
dismiss on the ground of improper venue, stating that the complaint should have been lodged
with the NLRCs Regional Arbitration Branch in Legaspi City, not only because Nieva was a
resident thereof, but also because the latter was hired, assigned, and based in Legaspi City.

Issue:
Whether or not NLRCs NCR Arbitration Branch in Manila was the proper venue for the filing of
Nievas complaint for illegal dismissal?

Ruling:
Yes, the NLRCs NCR Arbitration Branch was the proper venue for the filing of the complaint.
The question of venue essentially pertains to the trial and relates more to the convenience of
the parties rather than upon the substance and merits of the case. Provisions on venue are
intended to assure convenience for the plaintiff and his witnesses and to promote the ends of
justice. In fact, Section 1 (a), Rule IV of the New Rules of Procedure of the NLRC, cited by
Philtranco in support of its contention that venue of the illegal dismissal case filed by Nieva is
improperly laid, speaks of the complainant/petitioner's workplace, evidently showing that the
rule is intended for the exclusive benefit of the worker. This being the case, the worker may
waive said benefit. Furthermore, the aforesaid Section has been declared by this Court to be
merely permissive. Moreover, Nieva, as a driver of Philtranco, was assigned to the Legazpi City-
Pasay City route. Sulpicio Lines, Inc. vs. NLRC is exactly in point. In said case, we held that:
"Section 1, Rule IV of the 1990 NLRC Rules additionally provides that, for purposes of venue,
workplace shall be understood as the place or locality where the employer is regularly assigned
when the cause of action arose." From the foregoing, it is obvious that the filing of the
complaint with the National Capital Region Arbitration Branch was proper, Manila being
considered as part of Nieva's workplace by reason of his plying the Legazpi City-Pasay City
route.


4. ST. MARTIN FUNERAL HOME, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION
and BIENVENIDO ARICAYOS, respondents.
G.R. No. 130866.
September 16, 1998.

Facts:
233

On September 16, 1998, the Supreme Court rendered the landmark decision in G.R. No.
130866, holding for the first time that all petitions for certiorari under Rule 65 assailing the
decisions of the NLRC should henceforth be filed with the CA, thus all references in the
amended section 9 of B.P. No. 129 to supposed appeals from the NLRC to the Supreme Court
are interpreted and refer to petitions for certiorari under Rule 65. Consequently, all such
petitions should henceforth be initially filed in the Court of Appeals in strict observance of the
doctrine on the hierarchy of courts as the appropriate forum for the relief desired.

Thus, the petition was remanded to the CA and redocketed as CA-G.R. SP No. 49183.
Subsequently, the CA rendered the assailed September 30, 1999 Decision, dismissing
petitioner's appeal for lack of merit with the finding that respondent NLRC did not commit
grave abuse of discretion, in its pronouncement that the Labor Arbiter did not make any finding
on the alleged employer-employee relationship between the parties, reasoning this way:

Actually the Labor Arbiter did not determine whether there is an employer-employee relation
between the parties because according to him, such issue should be resolved by the regular
court pursuant to the ruling of the Supreme Court in De la Salle University vs. NLRC (135 SCRA
674, 677 (1988)).
For its part, respondent NLRC, is remanding the case to the Labor Arbiter, reminded the latter
that he is authorized by the NLRC Rules to determine, in an appropriate proceeding the
existence of an employer-employee relationship.

Issue:
Whether or not the Labor Arbiter made a determination of the presence of an employer-
employee relationship.

Ruling:
At the outset, it is clear that the issue submitted for resolution is a question of fact which is
proscribed by the rule disallowing factual issues in appeal by certiorari to the Supreme Court
under Rule 45. This is explicit in Rule 45, Section 1 that petitions of this nature "shall raise only
questions of law which must be distinctly set forth." Petitioner St. Martin would like the Court
to examine the pleadings and documentary evidence extant on the records of the Labor Arbiter
to determine if said official indeed made a finding on the existence of the alleged employer-
employee nexus between the parties based on the facts contained in said pleadings and
evidence. Evidently this issue is embraced by the circumscription.

Even if we would like to relax the rule and allow the examination of the documentary evidence
as an exception to the general rule, we are precluded by the abject failure of petitioner to
attach to the petition important and material portions of the records as would support the
petition prescribed by Rule 45, Section 4. St. Martin asks us to find out if the Labor Arbiter was
correct in concluding that respondent Aricayos was not in its employ; but committed the
234

blunder of not attaching to the petition even the Decision of the Labor Arbiter sought to be
reviewed, the NLRC Decision, the position papers and memoranda of the parties filed with the
Labor Arbiter, the affidavits of petitioner's employees, and other pieces of evidence that we can
consider in resolving the factual issue on employment. Without these vital documents,
petitioner cannot be given the relief prayed for.


5. LUDO & LUYM CORPORATION, petitioner, vs. FERDINAND SAORNIDO as voluntary
arbitrator and LUDO EMPLOYEES UNION (LEU) representing 214 of its officers and members,
respondents.
G.R. No. 140960.
January 20, 2003.

Facts:
LUDO engaged the arrastre services of Cresencio Lu Arrastre Services (CLAS) for the loading and
unloading of its finished products at the wharf. Accordingly, several arrastre workers were
deployed by CLAS to perform the services needed by LUDO. These arrastre workers were
subsequently hired, on different dates, as regular rank-and-file employees of LUDO every time
the latter needed additional manpower services. Said employees thereafter joined respondent
union, the LUDO Employees Union (LEU), which acted as the exclusive bargaining agent of the
rank-and-file employees. Respondent union entered into a collective bargaining agreement
with LUDO which provides certain benefits to the employees, the amount of which vary
according to the length of service rendered by the availing employee. Thereafter, the union
requested LUDO to include in its members period of service the time during which they
rendered arrastre services to LUDO through the CLAS so that they could get higher benefits.
LUDO failed to act on the request. Thus, the matter was submitted for voluntary arbitration.
Voluntary Arbitrator ruled that: (1) the respondent employees were engaged in activities
necessary and desirable to the business of petitioner, and (2) CLAS is a labor-only contractor of
petitioner. The Court of Appeals affirmed in toto the decision of the Voluntary Arbitrator.
Petitioner contends that the appellate court erred when it upheld the award of benefits which
were beyond the terms of submission agreement and that the arbitrator must confine its
adjudication to those issues submitted by the parties for arbitration, which in this case is the
sole issue of the date of regularization of the workers. Hence, the award of benefits by the
arbitrator was done in excess of jurisdiction.

Issue:
Whether or not the appellate court gravely erred when it upheld the award of benefits which
were beyond the terms of submission agreement.

Ruling:
235

Generally, the arbitrator is expected to decide only those questions expressly delineated by the
submission agreement. Nevertheless, the arbitrator can assume that he has the necessary
power to make a final settlement since arbitration is the final resort for the adjudication of
disputes.13 The succinct reasoning enunciated by the CA in support of its holding, that the
Voluntary Arbitrator in a labor controversy has jurisdiction to render the questioned arbitral
awards, deserves our concurrence, thus: In general, the arbitrator is expected to decide those
questions expressly stated and limited in the submission agreement. However, since arbitration
is the final resort for the adjudication of disputes, the arbitrator can assume that he has the
power to make a final settlement. Thus, assuming that the submission empowers the arbitrator
to decide whether an employee was discharged for just cause, the arbitrator in this instance
can reasonable assume that his powers extended beyond giving a yes-or-no answer and
included the power to reinstate him with or without back pay.


6. HANJIN ENGINEERING & CONSTRUCTION, petitioner, vs. Court of Appeals, respondent.

G.R. No. 165910.
April 10, 2006.

Facts:
On October 18, 1991 and August 21, 1992, Hanjin and the Philippine Government, through the
National Irrigation Administration (NIA), executed contracts for the construction of the Malinao
Dam at Pilar, Bohol, with a projected completion period of 1,050 calendar days, including main
canal and lateral projects for 750 days.

From August 1995 to August 1996, Hanjin contracted
the services of 712 carpenters, masons, truck drivers, helpers, laborers, heavy equipment
operators, leadmen, engineers, steelmen, mechanics, electricians and others.

In April 1998, 712 employees filed complaints for illegal dismissal and for payment of benefits
against Hanjin and Nam Hyun Kim, the officer-in-charge of the project (herein petitioners),
before the National Labor Relations Commission (NLRC). The complainants averred that they
were regular employees of Hanjin and that they were separated from employment without any
lawful or just cause. Only 521 of the complainants affixed their signatures in the
complaints. Petitioners alleged that the complainants were mere project employees in its
Bohol Irrigation Project.

On May 12, 1998, the Labor Arbiter rendered judgment in favor of the 428 complainants,
granting separation pay and attorneys fees to each of them. According to the Labor Arbiter,
the complainants were regular employees of petitioner Hanjin, and their claims for
underpayment, holiday pay, premium pay for holiday and rest day, 13
th
month pay, and service
incentive leave would be computed after sufficient data were made available. Petitioners
236

appealed the decision to the NLRC, which affirmed with modification the Labor Arbiters ruling
on January 28, 2000.

Petitioners filed a Motion for the Reconsideration of the decision (with a motion to conduct
clarificatory hearings). On July 20, 2001, the NLRC issued a Resolution partially granting
petitioners motion.
Unsatisfied, petitioners filed a Petition for Certiorari under Rule 65 of the Revised Rules of Court
in the CA.

On March 18, 2004, the CA dismissed the petition and affirmed the NLRCs ruling that the
dismissed employees (respondents) were regular employees. The CA stressed that petitioners
failed to refute the claim of the respondents that they were regular employees. Petitioners
moved to reconsider the decision, which the CA denied.

Issue:
Whether or not respondents regular employees entitled to their moneys.


Ruling:
The CA, for its part, affirmed the findings of the Labor Arbiter and the NLRC, and held that
respondents were regular employees of petitioner Hanjin:

In the instant case, petitioners belatedly submitted copies of Appointment(s) as Contract
Worker(s) allegedly signed by private respondents at the time they commenced work, and
which provided for an employment of six (6) months only, a period applicable for probationary
employment. While it may be allowed that in the instant case the workers were initially hired
for specific projects or undertakings for a period of six (6) months or less, the repeated re-hiring
and the continuing need for their services over a long span of time (from 1991 to 1995) have
undeniably made them regular employees. Thus, we held that where the employment of
project employees is extended long after the supposed appointments has been finished, the
employees are removed from the scope of project employees and considered regular
employees. How can one properly explain private respondents continuous employment from
1991 to 1996 when their appointment was for a measly period of six months? It is clear,
therefore, that as aptly established by the NLRC, these piecemeal appointments have been
imposed to preclude the acquisition of tenurial security. While length of time may not be a
controlling test for project employment, it can be a strong factor in determining whether the
employee was hired for a specific undertaking or in fact tasked to perform functions which are
vital, necessary and indispensable to the usual business or trade of the employer.

Furthermore, it is noteworthy to emphasize that these appointments were submitted only as
attachments to petitioners motion for reconsideration. As borne out by the records and even
237

mentioned in the decision of the Labor Arbiter, petitioners were already required during the
initial hearings before the Labor Arbiter to submit additional documents in their possession
necessary to support their case. Instead of complying, petitioners still had to wait for the
adverse decision of the NLRC before they submitted the same. Likewise, in the NLRCs assailed
decision, petitioners failure to present these appointments were adverted to, thus, the NLRC
ruled that nowhere in the records can the said contracts be found. Despite sufficient time,
from the time they were required by the Labor Arbiter to present additional evidence up to the
time the appeal was resolved by the NLRC, petitioners were not able to present said
employment contracts. Petitioners hesitation to submit the same is well-founded. It is a well-
settled rule that when the evidence tends to prove a material fact which imposes a liability on a
party, and he has it in his power to produce evidence which from its very nature must
overthrow the case made against him if it is not founded on fact, and he refuses to produce
such evidence, the presumption arises that the evidence, if produced, would operate to his
prejudice, and support the case of his adversary.

Moreover, it is required under Policy Instruction No. 20, Series of 1993, that in case of project
employees, the termination of their employment in the particular project or undertaking must
be reported to the Department of Labor and Employment (DOLE) Regional Office having
jurisdiction over the workplace within thirty (30) days following the date of his separation from
work. In Ochoco v. National Labor Relations Commission, the failure of the employer to report
to the nearest employment office the termination of employment of workers everytime it
completed a project was considered by this Court as proof that the dismissed employees were
not project employees but regular employees. On this requirement, petitioners were silent,
until the Decision of the NLRC reminded them. To prove that petitioners allegedly complied
with said requirement, they again belatedly submitted machine copies of reports allegedly
made to the DOLE of Bohol. To explain away their failure to produce certified true copies of the
same, petitioners allege that the NLRC should have given evidentiary weight to the machine
copies which are for all legal intents and purposes already public records in the custody of the
DOLE duly recorded in a public office. The same argument can be taken against herein
petitioners in that, for all the time it took them to produce said machine copies, it would have
been more prudent for them to have it certified by the DOLE in Bohol. Under the Rules of
Evidence, and as stated by petitioners, the original document need not be produced when the
same is a public record in the custody of a public office or is recorded in a public office. Thus,
proof of such documents may be made by a duly authenticated copy of the original document
or record. It is essential, furthermore, that the copies be made in the manner provided by the
rules and that all requirements in connection therewith be complied with before such copy be
properly admissible in evidence. Considering that the documents submitted by petitioners are
mere machine copies, the NLRC cannot be compelled to give them evidentiary weight.

The appellate court, the NLRC and the Labor Arbiter are thus one in finding that respondents
were not project employees, and in sustaining respondents claim of illegal dismissal due to
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petitioners failure to adduce contrary evidence. Well-settled is the rule that findings of fact of
quasi-judicial agencies, like the NLRC, are accorded not only respect but at times even finality if
such findings are supported by substantial evidence. Such findings of facts can only be set aside
upon showing of grave abuse of discretion, fraud or error of law,none of which have been
shown in this case.


7. PHILIPPINE JOURNALISTS, INC., BOBBY DELA CRUZ, ARNOLD BANARES and ATTY. RUBY
RUIZ BRUNO, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, HON. COMMS.
LOURDES JAVIER, TITO GENILO and ERNESTO VERCELES, JOURNAL EMPLOYEES UNION, and
THE COURT OF APPEALS, respondents.
G.R. No. 166421.
September 5, 2006.

Facts:
In NLRCs Resolution dated May 31, 2001, petitioner Philippine Journalists, Inc. (PJI) was
adjudged liable in the total amount of P6,447,008.57 for illegally dismissing 31 complainants-
employees and that there was no basis for the implementation of petitioner's retrenchment
program. Thereafter, the parties executed a Compromise Agreement dated July 9, 2001, where
PJI undertook to reinstate the 31 complainant-employees effective July 1, 2001 without loss of
seniority rights and benefits; 17 of them who were previously retrenched were agreed to be
given full and complete payment of their respective monetary claims, while 14 others would be
paid their monetary claims minus what they received by way of separation pay.

The compromise agreement was submitted to the NLRC for approval. All the employees
mentioned in the agreement and in the NLRC Resolution affixed their signatures thereon. They
likewise signed the Joint Manifesto and Declaration of Mutual Support and Cooperation which
had also been submitted for the consideration of the labor tribunal. The NLRC forthwith issued
another Resolution on July 25, 2002, which among others declared that the compromise
agreement was approved and NCMB-NCR-NS-03-087-00 was deemed closed and terminated.

In the meantime, however, the Union filed another Notice of Strike on July 1, 2002. In an Order
dated September 16, 2002, the DOLE Secretary certified the case to the Commission for
compulsory arbitration. The case was docketed as NCMB-NCR- NS-07-251-02. In its Resolution
dated July 31, 2003, the NLRC ruled that the complainants were not illegally dismissed. The May
31, 2001 Resolution declaring the retrenchment program illegal did not attain finality as "it had
been academically mooted by the compromise agreement entered into between both parties
on July 9, 2001." The Union assailed the ruling of the NLRC before the CA via petition for
certiorari under Rule 65. In its Decision dated August 17, 2004, the appellate court held that the
NLRC gravely abused its discretion in ruling for PJI. The compromise agreement referred only to
239

the award given by the NLRC to the complainants in the said case, that is, the obligation of the
employer to the complainants.

Issue:
Whether or not the petitioner s petition for certiorari under Rule 65 of the Revised Rules of Civil
Procedure is a proper remedy in this case.

Ruling:
At the outset, we note that this case was brought before us via petition for certiorari under
Rule 65 of the Revised Rules of Civil Procedure. The proper remedy, however, was to file a
petition under Rule 45. It must be stressed that certiorari under Rule 65 is "a remedy narrow in
scope and inflexible in character. It is not a general utility tool in the legal workshop."
Moreover, the special civil action for certiorari will lie only when a court has acted without or in
excess of jurisdiction or with grave abuse of discretion.

Be that as it may, a petition for certiorari may be treated as a petition for review under Rule
45. Such move is in accordance with the liberal spirit pervading the Rules of Court and in the
interest of substantial justice. As the instant petition was filed within the prescribed fifteen-day
period, and in view of the substantial issues raised, the Court resolves to give due course to the
petition and treat the same as a petition for review on certiorari.


20. BALAGTAS MULTI-PURPOSE COOPERATIVE, INC., and AURELIO SANTIAGO, petitioners, vs.
COURT OF APPEALS, NATIONAL LABOR RELATIONS COMMISSION and JOSEFINA HIPOLITO-
HERRERO, respondents.

G.R. No. 159268.
October 27, 2006.

Facts:
Balagtas Multi-Purpose Cooperative, Inc. is a duly organized and existing cooperative under the
laws of the Philippines. Sometime in April 1991, Balagtas hired Josefina G. Hipolito-Herrero, as
part time manager in its office. Subsequently, Josefina made known of her intention to take a
leave of absence. Her proposal was immediately approved. However, after the lapse of her
leave of absence, Josefina did not report for work anymore. Later on, she filed her resignation.

Consequently Josefina filed a complaint with the Provincial Office of the Department of Labor in
Malolos, Bulacan for illegal dismissal, and non-payment of 13th month pay or Christmas Bonus.
She also prayed for reinstatement and paid backwages as well as moral damages.

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The Labor Arbiter rendered judgment in favor of complainant and against respondents and
ordered the latter to pay the former 13th month pay, backwages and separation pay.
Aggrieved, herein petitioners appealed the decision to NLRC but failed to post either a cash or
surety bond as required by Article 223 of the Labor Code. They filed a manifestation and motion
instead, stating, that under Republic Act No. 6938, Article 62(7) of the Cooperative Code of the
Philippines, petitioners are exempt from putting up a bond in an appeal from the decision of
the inferior court. NLRC ordered respondents to post a cash or surety bond in the amount of
P218,000.00, within 10 inextendible days from receipt of the Order, failure of which shall
constitute a waiver and non-perfection of the appeal. Balagtas appealed to CA, which dismissed
the petition holding that the exemption from putting up a bond by a cooperative applies to
cases decided by inferior courts only.

Issues:
1. WON cooperatives are exempted from filing a cash or surety bond required to
perfect an employers appeal under Section 223 of Presidential Decree No. 442 (the Labor
Code);
2. WON a certification issued by the Cooperative Development Authority constitutes
substantial compliance with the requirement for the posting of a bond.

Ruling:
1. No. Petitioners argue that there are certain benefits and privileges expressly granted
to cooperative under the Cooperative Code. It invoked the provision on Article 62 regarding the
exemption from payment of an appeal bond, to wit: (7)All cooperatives shall be exempt from
putting up a bond for bringing an appeal against the decision of an inferior court or for seeking
to set aside any third party claim: Provided, That a certification of the Authority showing that
the net assets of the cooperative are in excess of the amount of the bond required by the court
in similar cases shall be accepted by the court as a sufficient bond.

However, it is only one among a number of such privileges which appear under the article
entitled Tax and Other Exemptions of the code. The provision cited by petitioners cannot be
taken in isolation and must be interpreted in relation to the Cooperative Code in its entirety.
Exceptions are to be strictly but reasonably construed; they extend only so far as their language
warrants, and all doubts should be resolved in favor of the general provision rather than the
exceptions.

2. No. Article 119 of the Cooperative Code itself expressly embodies the legislative
intention to extend the coverage of labor statutes to cooperatives. For this reason, petitioners
must comply with the requirement set forth in Article 223 of the Labor Code in order to perfect
their appeal to the NLRC. It must be pointed out that the right to appeal is not a constitutional,
natural or inherent right. It is a privilege of statutory origin and, therefore, available only if
241

granted or provided by statute. The law may validly provide limitations or qualifications thereto
or relief to the prevailing party in the event an appeal is interposed by the losing party.

In this case, the obvious and logical purpose of an appeal bond is to insure, during the period of
appeal, against any occurrence that would defeat or diminish recovery by the employee under
the judgment if the latter is subsequently affirmed.

Therefore, no error can be ascribed to the CA for holding that the phrase inferior courts
appearing in Article 62 paragraph (7) of the Cooperative Code does not extend to quasi-judicial
agencies and that, petitioners are not exempt from posting the appeal bond required under
Article 223 of the Labor Code.

21. ST. MARTIN FUNERAL HOMES, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION,
AND BIENVENIDO ARICAYOS, respondents.

G.R. No. 142351.
November 22, 2006.

Facts:
On September 16, 1998, the Supreme Court rendered the landmark decision in G.R. No.
130866, holding for the first time that all petitions for certiorari under Rule 65 assailing the
decisions of the NLRC should henceforth be filed with the CA, thus all references in the
amended section 9 of B.P. No. 129 to supposed appeals from the NLRC to the Supreme Court
are interpreted and refer to petitions for certiorari under Rule 65. Consequently, all such
petitions should henceforth be initially filed in the Court of Appeals in strict observance of the
doctrine on the hierarchy of courts as the appropriate forum for the relief desired.

Thus, the petition was remanded to the CA and redocketed as CA-G.R. SP No. 49183.
Subsequently, the CA rendered the assailed September 30, 1999 Decision, dismissing
petitioner's appeal for lack of merit with the finding that respondent NLRC did not commit
grave abuse of discretion, in its pronouncement that the Labor Arbiter did not make any finding
on the alleged employer-employee relationship between the parties, reasoning this way:

Actually the Labor Arbiter did not determine whether there is an employer-employee relation
between the parties because according to him, such issue should be resolved by the regular
court pursuant to the ruling of the Supreme Court in De la Salle University vs. NLRC (135 SCRA
674, 677 (1988)).
For its part, respondent NLRC, is remanding the case to the Labor Arbiter, reminded the latter
that he is authorized by the NLRC Rules to determine, in an appropriate proceeding the
existence of an employer-employee relationship.

242

Issue:
Whether or not the Labor Arbiter made a determination of the presence of an employer-
employee relationship.

Ruling:
At the outset, it is clear that the issue submitted for resolution is a question of fact which is
proscribed by the rule disallowing factual issues in appeal by certiorari to the Supreme Court
under Rule 45. This is explicit in Rule 45, Section 1 that petitions of this nature "shall raise only
questions of law which must be distinctly set forth." Petitioner St. Martin would like the Court
to examine the pleadings and documentary evidence extant on the records of the Labor Arbiter
to determine if said official indeed made a finding on the existence of the alleged employer-
employee nexus between the parties based on the facts contained in said pleadings and
evidence. Evidently this issue is embraced by the circumscription.

Even if we would like to relax the rule and allow the examination of the documentary evidence
as an exception to the general rule, we are precluded by the abject failure of petitioner to
attach to the petition important and material portions of the records as would support the
petition prescribed by Rule 45, Section 4. St. Martin asks us to find out if the Labor Arbiter was
correct in concluding that respondent Aricayos was not in its employ; but committed the
blunder of not attaching to the petition even the Decision of the Labor Arbiter sought to be
reviewed, the NLRC Decision, the position papers and memoranda of the parties filed with the
Labor Arbiter, the affidavits of petitioner's employees, and other pieces of evidence that we can
consider in resolving the factual issue on employment. Without these vital documents,
petitioner cannot be given the relief prayed for.


10. DOLE Phils., et. al, petitioner, vs. Esteva, respondent.

G.R. No. 161115.
November 30, 2006.

Facts:
Petitioner is a corporation duly recognized and existing in accordance with Philippine laws,
engaged principally in the production and processing of pineapple for the export market. Its
plantation is located in Polomolok, South Cotabato .

Respondents are members of the Cannery Multi-Purpose Cooperative (CAMPCO). CAMPCO was
organized in accordance with R.A. No. 6938, otherwise known as the Cooperative Code of the
Philippines , and duly registered with the Cooperative Development Authority (CDA) on 6
January 1993. Members of CAMPCO live in communities surrounding petitioners plantation
and are relatives of petitioners employees.
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On 17 August 1993, petitioner and CAMPCO entered into a Service Contract. The Service
Contract referred to petitioner as the Company, while CAMPCO was the Contractor. The
said contract was good for six months.

Pursuant to the contract, CAMPCO members rendered services to petitioner. The parties
apparently extended or renewed the same for the succeeding years without executing another
written contract.

However, due to investigations and reliable information, the Regional Director of DOLE
exercised his visitorial and enforcement power and found out that CAMPCO is engaged in labor-
only contracting together with two other cooperatives.

The Law cited was Section 9, Rule VIII, Book III of the Omnibus Rules Implementing the Labor
Code. (pertaining to Labor-only contracting 1. no substantial capital; 2. work is directly
related to the principal business of the principal b. in such case, the one who alleges as
contractor is deemed an agent of the principal while the latter will latter is considered the
indirect employer for purposes of enforcement of the labor rights.)

Before the NLRC, respondents contended that they have been working more than one year too
petitioner. While some of the respondents were still working for petitioner, others were put on
stay home status on varying dates in the years 1994, 1995, and 1996 and were no longer
furnished with work thereafter. They, then, filed a case before the NLRC for illegal dismissal,
regularization, wage differentials, damages and attorneys fees.

Respondents argued that they should be considered regular employees of petitioner given that:
1. they were performing jobs that were usually necessary and desirable in the usual business of
petitioner; 2. petitioner exercised control over respondents, not only as to the results, but also
as to the manner by which they performed their assigned tasks; and 3. CAMPCO, a labor-only
contractor, was merely a conduit of petitioner. As regular employees of petitioner, respondents
asserted that they were entitled to security of tenure and those placed on stay home status
for more than six months had been constructively and illegally dismissed. Respondents further
claimed entitlement to wage differential, moral damages, and attorneys fees.

NLRC affirmed the Labor Arbiters decision. CA also affirmed.

Issue:
Whether the lower courts were correct in ruling that Petitioner is the employer of respondents
and that CAMPCO be considered merely as agent of the company


244

Ruling:
In summary, this Court finds that CAMPCO was a labor-only contractor and, thus, petitioner is
the real employer of the respondents, with CAMPCO acting only as the agent or intermediary of
petitioner. Due to the nature of their work and length of their service, respondents should be
considered as regular employees of petitioner. Petitioner constructively dismissed a number of
the respondents by placing them on "stay home status" for over six months, and was therefore
guilty of illegal dismissal. Petitioner must accord respondents the status of regular employees,
and reinstate the respondents who it constructively and illegally dismissed, to their previous
positions, without loss of seniority rights and other benefits, and pay these respondents
backwages from the date of filing of the Complaint with the NLRC on 19 December 1996 up to
actual reinstatement.

CRITERIA TO ESTABLISH THE EXISTENCE OF AN INDEPENDENT AND PERMISSIBLE CONTRACTOR
RELATIONSHIP

generally established by the following criteria: whether or not the contractor is carrying on an
independent business; the nature and extent of the work; the skill required; the term and
duration of the relationship; the right to assign the performance of a specified piece of work;
the control and supervision of the work to another; the employer's power with respect to the
hiring, firing and payment of the contractor's workers; the control of the premises; the duty to
supply the premises tools, appliances, materials and labor; and the mode, manner and terms of
payment

SEVERAL FACTORS ARE PRESENT IN THE CASE TO ESTABLISH A LABOR- ONLY CONTRACTING
ARRANGEMENT BY BETWEEN THE MANAGEMENT AND CAMPCO

While there is present in the relationship of petitioner and CAMPCO some factors suggestive of
an independent contractor relationship (i.e., CAMPCO chose who among its members should be
sent to work for petitioner; petitioner paid CAMPCO the wages of the members, plus a
percentage thereof as administrative charge; CAMPCO paid the wages of the members who
rendered service to petitioner), many other factors are present which would indicate a labor-
only contracting arrangement between petitioner and CAMPCO.

First, although petitioner touts the multi-million pesos assets of CAMPCO, it does well to
remember that such were amassed in the years following its establishment. In 1993, when
CAMPCO was established and the Service Contract between petitioner and CAMPCO was
entered into, CAMPCO only had P6,600.00 paid-up capital, which could hardly be considered
substantial. It only managed to increase its capitalization and assets in the succeeding years by
continually and defiantly engaging in what had been declared by authorized DOLE officials as
labor-only contracting.

245

Second, CAMPCO did not carry out an independent business from petitioner. It was precisely
established to render services to petitioner to augment its workforce during peak seasons.
Petitioner was its only client. Even as CAMPCO had its own office and office equipment, these
were mainly used for administrative purposes; the tools, machineries, and equipment actually
used by CAMPCO members when rendering services to the petitioner belonged to the latter.

Third, petitioner exercised control over the CAMPCO members, including respondents.
Petitioner attempts to refute control by alleging the presence of a CAMPCO supervisor in the
work premises. Yet, the mere presence within the premises of a supervisor from the
cooperative did not necessarily mean that CAMPCO had control over its members. Section 8(1),
Rule VIII, Book III of the implementing rules of the Labor Code, as amended, required for
permissible job contracting that the contractor undertakes the contract work on his account,
under his own responsibility, according to his own manner and method, free from the control
and direction of his employer or principal in all matters connected with the performance of the
work except as to the results thereof. As alleged by the respondents, and unrebutted by
petitioner, CAMPCO members, before working for the petitioner, had to undergo instructions
and pass the training provided by petitioners personnel. It was petitioner who determined and
prepared the work assignments of the CAMPCO members. CAMPCO members worked within
petitioners plantation and processing plants alongside regular employees performing identical
jobs, a circumstance recognized as an indicium of a labor-only contractorship.

Fourth, CAMPCO was not engaged to perform a specific and special job or service. In the
Service Contract of 1993, CAMPCO agreed to assist petitioner in its daily operations, and
perform odd jobs as may be assigned. CAMPCO complied with this venture by assigning
members to petitioner. Apart from that, no other particular job, work or service was required
from CAMPCO, and it is apparent, with such an arrangement, that CAMPCO merely acted as a
recruitment agency for petitioner. Since the undertaking of CAMPCO did not involve the
performance of a specific job, but rather the supply of manpower only, CAMPCO clearly
conducted itself as a labor-only contractor.

Lastly, CAMPCO members, including respondents, performed activities directly related to the
principal business of petitioner. They worked as can processing attendant, feeder of canned
pineapple and pineapple processing, nata de coco processing attendant, fruit cocktail
processing attendant, and etc., functions which were, not only directly related, but were very
vital to petitioners business of production and processing of pineapple products for export.

The findings enumerated in the preceding paragraphs only support what DOLE Regional
Director Parel and DOLE Undersecretary Trajano had long before conclusively established, that
CAMPCO was a mere labor-only contractor

246

EMPLOYER- EMPLOYEE RELATIONSHIP EXIST BETWEEN THE PETITIONER AND THE RESPONDENT
WITH THE DECLARATION THAT CAMPCO WAS ENGAGED IN THE PROHIBITED ACTS OF LABOR-
ONLY CONTRACTING

The declaration that CAMPCO is indeed engaged in the prohibited activities of labor-only
contracting, then consequently, an employer-employee relationship is deemed to exist
between petitioner and respondents, since CAMPCO shall be considered as a mere agent or
intermediary of petitioner

RESPONDENTS ARE CONSIDERED REGULAR EMPLOYEES FOR THEY PERFORMED ACTIVITIES
THAT ARE NECESSARY OR DESIRABLE TO THE USUAL BUSINESS OF THE PETITIONER

Since respondents are now recognized as employees of petitioner, this Court is tasked to
determine the nature of their employment. In consideration of all the attendant circumstances
in this case, this Court concludes that respondents are regular employees of petitioner.

In the instant Petition, petitioner is engaged in the manufacture and production of pineapple
products for export. Respondents rendered services as processing attendant, feeder of canned
pineapple and pineapple processing, nata de coco processing attendant, fruit cocktail
processing attendant, and etc., functions they performed alongside regular employees of the
petitioner. There is no doubt that the activities performed by respondents are necessary or
desirable to the usual business of petitioner.

Petitioner likewise want this Court to believe that respondents employment was dependent on
the peaks in operation, work backlogs, absenteeism, and excessive leaves. However, bearing in
mind that respondents all claimed to have worked for petitioner for over a year, a claim which
petitioner failed to rebut, then respondents continued employment clearly demonstrates the
continuing necessity and indispensability of respondents employment to the business of
petitioner.

THE COMPANYS ACT OF PLACING SOME OF THE RESPONDENTS ON "STAY HOME STATUS" AND
NOT GIVING THEM WORK ASSIGNMENTS FOR MORE THAN SIX MONTHS WERE ALREADY
TANTAMOUNT TO CONSTRUCTIVE AND ILLEGAL DISMISSAL

Respondents, as regular employees of petitioner, are entitled to security of tenure. They could
only be removed based on just and authorized causes as provided for in the Labor Code, as
amended, and after they are accorded procedural due process. Therefore, petitioners acts of
placing some of the respondents on "stay home status" and not giving them work assignments
for more than six months were already tantamount to constructive and illegal dismissal.


247

11. INTERCONTINENTAL BROADCASTING CORPORATION, petitioner, vs. IRENEO
PANGANIBAN, respondent.
G.R. No. 151407.
February 6, 2007.

Facts:
Petitioner employed persons as Studio Technician, Collector, Traffic Clerk in its Cebu branch.
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,
The government and Benedicto entered into a temporary agreement under which the latter
would retain its management and operation.

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. 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. Cabaero for unfair labor practice and non-payment of backwages before the NLRC.


Issue:
Whether or not the retirement benefits of respondents are taxable?


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.

For the retirement benefits to be exempt from the withholding tax, the taxpayer is burdened to
prove the concurrence of the following elements:
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(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
(4) the benefit had been availed of only once.

Article VIII of the 1993 COLLECTIVE BARGAINING AGREEMENT provides for two kinds of
retirement plans - compulsory and optional.

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.

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.

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.

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 National Internal Revenue Code (NIRC) Employer was obliged to
withhold the taxes on said benefits and remit the same to the BIR.
Section 80.
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.


12. FAR EAST AGRICULTURAL SUPPLY, INC. and/or ALEXANDER UY, petitioners, vs. JIMMY
LEBATIQUE and THE HONORABLE COURT OF APPEALS, respondents.
G.R. No. 162813.
February 12, 2007.

Facts:
249

On March 4, 1996, Far East hired Jimmy Lebatique as truck driver to animal feeds to the
companys clients. He had a daily wage of P223.50. On January 24, 2000, Lebatique complained
of nonpayment of overtime work particularly on January 22, 2000, when he was required to
make a second delivery in Novaliches, Quezon City. That same day Lebatique was suspended
apparently for illegal use of company vehicle. Even so, Lebatique reported for work the next
day but he was prohibited from entering the company premises.

On January 26, 2000, Lebatique sought the assistance of DOLE Public Assistance and Complaints
Unit concerning the nonpayment of his overtime pay. Lebatique explained that he had never
been paid for overtime work since he started working for the company. He also told Alexander
(general manager) that Manuel (Alexanders brother) had fired him. After talking to Manuel,
Alexander terminated Lebatique and told him to look for another job.

On March 20, 2000, Lebatique filed a complaint for illegal dismissal and nonpayment of
overtime pay. The Labor Arbiter found that Lebatique was illegally dismissed, and ordered his
reinstatement and the payment of his full back wages, 13th month pay, service incentive leave
pay, and overtime pay.

On appeal, the NLRC reversed the Labor Arbiter and dismissed the complaint for lack of merit.
The NLRC held that there was no dismissal to speak of since Lebatique was merely suspended.
Further, it found that Lebatique was a field personnel, hence, not entitled to overtime pay and
service incentive leave pay. Lebatique sought reconsideration but was denied.

The Court of Appeals, in reversing the NLRC decision, reasoned that Lebatique was suspended
on January 24, 2000 but was illegally dismissed on January 29, 2000 when Alexander told him to
look for another job. It also found that Lebatique was not a field personnel and therefore
entitled to payment of overtime pay, service incentive leave pay, and 13th month pay.

Issues:
1) WON Lebatique was illegally dismissed
2) WON Lebatique was a field personnel, not entitled to overtime pay

Ruling:
1) YES. It is well settled that in cases of illegal dismissal, the burden is on the employer to
prove that the termination was for a valid cause. In this case, petitioners failed to discharge
such burden. Petitioners aver that Lebatique was merely suspended for one day but he
abandoned his work thereafter. To constitute abandonment as a just cause for dismissal,
there must be: (a) absence without justifiable reason; and (b) a clear intention, as
manifested by some overt act, to sever the employer-employee relationship.

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When Lebatique was verbally told by Alexander Uy, the companys General Manager, to
look for another job, Lebatique was in effect dismissed. Even assuming earlier he was
merely suspended for illegal use of company vehicle, the records do not show that he was
afforded the opportunity to explain his side. It is clear also from the sequence of the events
leading to Lebatiques dismissal that it was Lebatiques complaint for nonpayment of his
overtime pay that provoked the management to dismiss him, on the erroneous premise
that a truck driver is a field personnel not entitled to overtime pay.

2) NO. Lebatique is not a field personnel. Article 82 of the Labor Code is decisive on the
question of who are referred to by the term "field personnel

"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.

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 employees
performance is unsupervised by the employer.

Lebatique is not a field personnel as defined above for the following reasons: (1) company
drivers, including Lebatique, are directed to deliver the goods at a specified time and place;
(2) they are not given the discretion to solicit, select and contact prospective clients; and (3)
Far East issued a directive that company drivers should stay at the clients premises during
truck-ban hours which is from 5:00 to 9:00 a.m. and 5:00 to 9:00 p.m. Lebatique, therefore,
is a regular employee whose tasks are usually necessary and desirable to the usual trade
and business of the company. Thus, he is entitled to the benefits accorded to regular
employees of Far East, including overtime pay and service incentive leave pay.

Note that all money claims arising from an employer-employee relationship shall be filed
within three years from the time the cause of action accrued; otherwise, they shall be
forever barred. Further, if it is established that the benefits being claimed have been
withheld from the employee for a period longer than three years, the amount pertaining to
the period beyond the three-year prescriptive period is therefore barred by prescription.
The amount that can only be demanded by the aggrieved employee shall be limited to the
amount of the benefits withheld within three years before the filing of the complaint.

Lebatique timely filed his claim for service incentive leave pay, considering that in this
situation, the prescriptive period commences at the time he was terminated. On the other
hand, his claim regarding nonpayment of overtime pay since he was hired in March 1996 is
a different matter. In the case of overtime pay, he can only demand for the overtime pay
withheld for the period within three years preceding the filing of the complaint on March
251

20, 2000. However, we find insufficient the selected time records presented by petitioners
to compute properly his overtime pay. The Labor Arbiter should have required petitioners
to present the daily time records, payroll, or other documents in managements control to
determine the correct overtime pay due Lebatique.


22. LETRAN CALAMBA FACULTY and EMPLOYEES ASSOCIATION, petitioner, vs. NATIONAL
LABOR RELATIONS COMMISSION and COLEGIO DE SAN JUAN DE LETRAN CALAMBA, INC.,
respondents.
G.R. No. 156225.
January 29, 2008.

Facts:
The Letran Calamba Faculty and Employees Association (petitioner) filed a complaint

against
Colegio de San Juan de Letran, Calamba, Inc. (respondent) for collection of various monetary
claims due its members. One of the allegations that petitioner alleged in its Position Paper is
that: 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.
The teaching overloads are rendered within eight (8) hours a day. The Labor Arbiter (LA)
handling the consolidated cases, denied and dismissed the respective complaints.

Issue: WON the pay of the faculty members for teaching overloads should be included as basis
in the computation of their 13
th
month pay?

Ruling:
Teaching overload may not be considered part of basic salary.
Under the Rules and Regulations Implementing PD 851, the following compensations are
deemed not part of the basic salary: a) cost-of-living allowances granted pursuant to PD 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 Dec 16, 1975.

Under a later set of Supplementary Rules and Regulations Implementing PD 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 13
th
-month pay.

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
252

night differentials. As such they are deemed not part of the basic salary and shall not be
considered in the computation of the 13
th
-month pay.

As provided for by Art 87 of the Labor Code, 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 PD 851.

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.


14. METRO TRANSIT ORGANIZATION, INC., and JOSE L. CORTEZ, JR., petitioners, vs. PIGLAS
NFWU-KMU, SAMMY MALUNES, ROMULO QUIGAO, RODULFO CAMERINO, BRENDO
MAKILING, MAXIMO VITANGCOL, PETER DIA, ELMER BOBADILLA, NOEL ESGASANE, ISIDRO
CORTEZ, CRISPIN YAPCHIONGCO, MARLON E. SANTOS, WILFREDO DE RAMOS, ARTEMIO
SALIG, et. al., respondents.

G.R. No. 175460.
April 14, 2008.

Facts:
Petitioner MTO is a government owned and controlled corporation which entered into a
Management and Operations Agreement (MOA) with the Light Rail Transit Authority (LRTA) for
the operation of the Light Rail Transit (LRT) Baclaran-Monumento Line. Petitioner Jose L.
Cortez, Jr. was sued in his official capacity as then Undersecretary of the Department of
Transportation and Communications and Chairman of the Board of Directors of petitioner MTO.

Respondents filed with the Labor Arbiter Complaints against petitioners and the LRTA for the
following: (1) illegal dismissal; (2) unfair labor practice for union busting; (3) moral and
exemplary damages; and (4) attorney's fees.

On 13 September 2004, the Labor Arbiter rendered judgment in favor of respondents.
Petitioners appealed to the National Labor Relations Commission (NLRC). In a Resolution dated
19 May 2006, the NLRC dismissed petitioners' appeal for non-perfection since it failed to post
the required bond. Without filing a Motion for Reconsideration of the afore-quoted NLRC
Resolution, petitioners filed a Petition for Certiorari with the Court of Appeals assailing the
same. On 24 August 2006, the Court of Appeals issued a Resolution dismissing the Petition.
253


Issue:
Whether or not petitioner can directly file the extraordinary remedy of certiorari without filing
first a motion for reconsideration with the NLRC.


Ruling:
Petitioners' failure to file a motion for reconsideration against the assailed Resolution of the
NLRC rendered its petition for certiorari before the appellate court as fatally defective.
It must be primarily established that petitioners contravened the procedural rule for the
extraordinary remedy of certiorari. The rule is, for the writ to issue, it must be shown that
there is no appeal, nor any plain, speedy and adequate remedy in the ordinary course of law.

The settled rule is that a motion for reconsideration is a condition sine qua non for the filing of
a petition for certiorari. Its purpose is to grant an opportunity for the court to correct any actual
or perceived error attributed to it by the re-examination of the legal and factual circumstances
of the case. The rationale of the rule rests upon the presumption that the court or
administrative body which issued the assailed order or resolution may amend the same, if given
the chance to correct its mistake or error.

We have held that the "plain," "speedy," and "adequate remedy" referred to in Section 1, Rule
65 of the Rules of Court is a motion for reconsideration of the questioned Order or Resolution.
As we consistently held in numerous cases, a motion for reconsideration is indispensable for it
affords the NLRC an opportunity to rectify errors or mistakes it might have committed before
resort to the courts can be had.

In the case at bar, petitioners directly went to the Court of Appeals on certiorari without filing a
motion for reconsideration with the NLRC. The motion for reconsideration would have aptly
furnished a plain, speedy, and adequate remedy. As a rule, the Court of Appeals, in the
exercise of its original jurisdiction, will not take cognizance of a petition for certiorari under
Rule 65, unless the lower court has been given the opportunity to correct the error imputed to
it. The Court of Appeals correctly ruled that petitioners' failure to file a motion for
reconsideration against the assailed Resolution of the NLRC rendered its petition for certiorari
before the appellate court as fatally defective.

We agree in the Court of Appeals' finding that petitioners' case does not fall under any of the
recognized exceptions to the filing of a motion for reconsideration, to wit: (1) when the issue
raised is purely of law; (2) when public interest is involved; (3) in case of urgency; or when the
questions raised are the same as those that have already been squarely argued and
exhaustively passed upon by the lower court. As the Court of Appeals reasoned, the issue
before the NLRC is both factual and legal at the same time, involving as it does the
254

requirements of the property bond for the perfection of the appeal, as well as the finding that
petitioners failed to perfect the same. Evidently, the burden is on petitioners seeking exception
to the rule to show sufficient justification for dispensing with the requirement. Certiorari
cannot be resorted to as a shield from the adverse consequences of petitioners' own omission
of the filing of the required motion for reconsideration.

Nonetheless, even if we are to disregard the petitioners' procedural faux pas with the Court of
Appeals, and proceed to review the propriety of the 19 May 2006 NLRC Resolution, we still
arrive at the conclusion that the NLRC did not err in denying petitioners' appeal for its failure to
file a bond in accordance with the Rules of Procedure of the NLRC.


15. J. K. MERCADO & SONS AGRICULTURAL ENTERPRISES, INC., petitioner, vs. HON. PATRICIA
A. STO. TOMAS, in her capacity as Secretary of Labor and Employment, ANICETO S.
TORREJOS, SR., JOHNNY MANGARIN, ZOSIMO ALBASIN, ALBERTO ABAD, RONALD ABAD,
EDGARDO FLORES, JOSEPH COSIDO, MAYORMITO VELCHES, EDUARDO BIGNO, BENEDICTO
NOTARTE, CARLOS LIBRE, DIOSDADO ORE, LITO DAGUPAN, EPIFANIO BULILAWA, JUSTINIANO
BADIANA, VALERIO VIADO, LORENZO GRAPA, LEONARDO BULILAWA, RUBEN BAYANSAW,
LUISITO DOCUSIN, CARLO MAGNO CANO, JOSEPH DUMAYANOS, FELIX BAYANG, NILO
PROCURATO, REY LACABO, ALEJANDRO NAGAYO, JR., DOMINADOR QUIBO, RICHARD
TAMPARONG, MANUEL LEOCADIO, GERSON PENA, REY MENDEZ, FERNANDO VALLEJO,
TOMAS DAHUNOG, DIONESIO FERNIS, ESTITIA PAQUERA, JOEL JAMOROL, GERSON RECTO,
ELADIO JAECTIN, JUDE PROCURATO, ERNESTO SOTTO, FAUSTINO MONTECILLO, RUDY QUIBO,
JUSTINIANO CAL, JR., ROSELITO GONZALES, CLET QUETE, ELDIE DAGUPAN, HENIA
PROCURATO, BIENVENIDO BORROMEO and CRISANTO MORALES, respondents.
G.R. No. 158084.
August 29, 2008.

Facts:
On December 3, 1993, the RTWPB of Region IX issued Wage Order No. 3 granting a Cost of
Living Allowance to covered workers. J.K. Mercado & Sons Agricultural Enterprises, Inc.,
petitioner, filed for an exemption from the coverage of such order. Said application was denied
by the regional wage board for lack of merit.

Despite denial of such application, private respondents were still not given benefits due them
from said wage order. Private respondents filed a Writ of Execution and Writ of Garnishment
seeking for its enforcement. Petitioner filed a motion to Quash the Writ of Execution arguing
that the rights of the respondents already prescribed as per stated in Article 291 of the Labor
Code regarding any issue concerning a wage order.
255


Ruling of the Regional Director:
The Motion to Quash was denied and held that unpaid benefits have not prescribed and that
the private respondents need not file a claim to be entitled thereto.

Petitioner filed a Notice of Appeal alleging that the Regional Director abused his discretion in
issuing the writ of execution in the absence of any motion filed by private respondents. Appeal
was then denied which prompted the petiotioner to file a Motion for Reconsideration.

Ruling of the Court of Appeals:
The Motion for Reconsideration was also denied due to lack of merit.

Hence, present petition.

Issues:
1. Whether or not the Honorable Court of Appeals committed an error in holding
that Article 291 of the Labor Code is not applicable to recovery of benefits under
the subject Wage Order No. RTWPB-XI-03, which entitled respondents to a cost
of living allowance (COLA).

2. Whether or not the Court of Appeals committed an error in holding that the
cost of living allowance (COLA) granted by Wage Order No. RTWPB-XI-03 can be
enforced without the appropriate case having been filed by herein private
respondents within the three (3) year prescriptive period.
3. Whether or not the claim of the private respondents for cost of living allowance
(COLA) pursuant to Wage Order No. RTWPB-XI-03 has already prescribed
because of the failure of the respondents to make the appropriate claim within
the three (3) year prescriptive period provided by Article 291 of the Labor Code,
as amended.


Ruling:
The Court sees no error on the part of the Court of Appeals.

Art. 291 of the Labor Code applies to money claims in general and provides for a 3-year
prescriptive period to file them.

On the other hand, respondent employees money claims in this case had been reduced to a
judgment, in the form of a Wage Order, which has become final and executory. The
prescription applicable, therefore, is not the general one that applies to money claims, but the
256

specific one applying to judgments. Thus, the right to enforce the judgment, having been
exercised within five years, has not yet prescribed.

Stated otherwise, a claimant has three years to press a money claim. Once judgment is
rendered in her favor, she has five years to ask for execution of the judgment, counted from its
finality. This is consistent with the rule on statutory construction that a general provision
should yield to a specific one and with the mandate of social justice that doubts should be
resolved in favor of labor.

WHEREFORE, the petition is DENIED.


16. J-PHIL MARINE, INC. and/or JESUS CANDAVA and NORMAN SHIPPING SERVICES,
petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION and WARLITO E. DUMALAOG,
respondents.
G.R. No. 175366.
August 11, 2008.

Facts:
The herein respondent, was a cook aboard vessels plying overseas, filed before the National
Labor Relations Commission (NLRC) a pro-forma complaint against petitioners for unpaid
money claims, moral and exemplary damages, and attorneys fees and thereafter filed two
amended pro forma complaints praying for the award of overtime pay, vacation leave pay, sick
leave pay, and disability/medical benefits, he having, by his claim, contracted enlargement of
the heart and severe thyroid enlargement in the discharge of his duties as cook which rendered
him disabled.

Labor Arbiter Fe Superiaso-Cellan dismissed respondents complaint for lack of merit but the
NLRC reversed the Labor Arbiters decision and awarded US$50,000.00 disability benefit to
respondent. The Court of Appeals dismissed petitioners petition for, inter alia, failure to attach
to the petition all material documents, and for defective verification and certification.
Petitioners Motion for Reconsideration of the appellate courts Resolution was denied; hence,
they filed the present Petition for Review on Certiorari.

During the pendency of the case, against the advice of his counsel, entered into a compromise
agreement with petitioners, he thereupon signed a Quitclaim and Release subscribed and
sworn to before the Labor Arbiter. Petitioners filed before this Court a Manifestation dated
May 7, 2007 informing that, inter alia, they and respondent had forged an amicable settlement.

257

Respondents counsel also filed before this Court, purportedly on behalf of respondent, a
Comment on the present petition. The parties having forged a compromise agreement as
respondent in fact has executed a Quitclaim and Release, the Court dismisses the petition.

Issue:
Whether or not the compromise agreement/deed of quit claim entered by the parties is valid?

Ruling:
Article 227 of the Labor Code provides:
Any compromise settlement, including those involving labor standard laws, voluntarily agreed
upon by the parties with the assistance of the Department of Labor, shall be final and binding
upon the parties. The National Labor Relations Commission or any court shall not assume
jurisdiction over issues involved therein except in case of non-compliance thereof or if there is
prima facie evidence that the settlement was obtained through fraud, misrepresentation, or
coercion.

In Olaybar v. NLRC , the Court, recognizing the conclusiveness of compromise settlements as a
means to end labor disputes, held that Article 2037 of the Civil Code, which provides that *a+
compromise has upon the parties the effect and authority of res judicata, applies suppletorily
to labor cases even if the compromise is not judicially approved.

That respondent was not assisted by his counsel when he entered into the compromise does
not render it null and void. Eurotech Hair Systems, Inc. v. Go so enlightens:
A compromise agreement is valid as long as the consideration is reasonable and the employee
signed the waiver voluntarily, with a full understanding of what he was entering into. All that is
required for the compromise to be deemed voluntarily entered into is personal and specific
individual consent. Thus, contrary to respondents contention, the employees counsel need
not be present at the time of the signing of the compromise agreement.
It bears noting that, as reflected earlier, the Quitclaim and Waiver was subscribed and sworn to
before the Labor Arbiter.

Petition DISMISSED.


17. MA. GREGORIETTA LEILA C. SY, petitioner, vs. ALC INDUSTRIES, INC. and DEXTER P.
CERIALES, respondents.
G.R. No. 168339.
October 10, 2008.

Facts:
258

Ma. Gregorietta Leila C. Sy (Sy) was hired by ALC Industries, Inc.(ALCII) as a supervisor in its
purchasing office. She was thereafter assigned to ALCII's construction project in Davao City as
business manager and supervisor of the Administrative Division from May 1997 to April 15,
1999. Sy filed a complaint before the labor arbiter alleging that ALCII refused to pay her salary
beginning August 1998 and allowances beginning June 1998. Despite several notices and
warnings, ALCII did not file a position paper to controvert Sy's claims.

The labor arbiter ordered ALCII and/or Dexter Ceriales to pay petitioner P282,560 representing
her unpaid salary and allowance. ALCII filed an appeal with the NLRC without posting any cash
or surety bond. NLRC dismissed respondents' appeal. Thereafter ALCII filed a motion for
reconsideration which was also denied by NLRC. ALCII questioned the NLRC's denial of their
motion for clarification and reconsideration in the CA via a petition for certiorari. The CA set
aside the resolutions of the NLRC and the decision of the labor arbiter. Sy filed a Rule 45
petition in the Supreme Court questioning the CA decision and resolution on the ground that
the decision of the labor arbiter had become final and executory.

Issues:
(1) Can the employer file an appeal with the NLRC without posting a cash bond? (2) Did the CA
acquire jurisdiction over the labor case?

Ruling:
(1) Article 223. Appeal. Decisions, awards, or orders of the Labor Arbiter are final and
executory unless appealed to the Commission by any or both parties within ten calendar days
from receipt of such decisions, awards, or orders In case of a judgment involving a monetary
award, an appeal by the employer may be perfected only upon the posting of a cash or surety
bond issued by a reputable bonding company duly accredited by the Commission in the amount
equivalent to the monetary award in the judgment appealed from.

As the right to appeal is merely a statutory privilege, it must be exercised only in the manner
and in accordance with the provisions of the law. Otherwise, the right to appeal is lost.

Liberal construction of the NLRC rules is allowed only in meritorious cases, where there is
substantial compliance with the NLRC Rules of Procedure or where the party involved
demonstrates a willingness to abide by the rules by posting a partial bond. Failure to post an
appeal bond during the reglementary period was directly violative of Article 223 of the Labor
Code.

The payment of the appeal bond is a jurisdictional requisite for the perfection of an appeal to
the NLRC. The lawmakers intended to make the posting of a cash or surety bond by the
employer the exclusive means by which an employer's appeal may be perfected. It is intended
to assure the workers that if they prevail in the case, they will receive the money judgment in
259

their favor upon the dismissal of the employers' appeal. It was intended to discourage
employers from using an appeal to delay, or even evade, their obligation to satisfy their
employee's just and lawful claims.

(2) The filing of a joint undertaking/declaration, filed way beyond the ten-day reglementary
period for perfecting an appeal and as a substitute for the cash or surety bond, did not operate
to validate the lost appeal. The decision of the labor arbiter therefore became final and
executory for failure of respondents to perfect their appeal within the reglementary period.
Clearly, the CA no longer had jurisdiction to entertain respondents' appeal from the labor
arbiter's decision.


18. PCI TRAVEL CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION
(3rd Division) & NUBE-AMEXPEA/PCI TRAVEL EMPLOYEES UNION, respondents.
G.R. No. 154379.
October 31, 2008.

Facts:
Sometime in 1994, respondent PCI Travel Employees Union filed a Complaint for unfair labor
practice against petitioner PCI Travel Corporation. It claimed that petitioner had been filling up
positions left by regular rank-and-file with contractual employees, but were performing work
which were usually necessary and desirable in the usual business or trade of the petitioner.
Respondent prayed that the Labor Arbiter order the petitioner to pay the contractual
employees the differentials between the wages/benefits of regular employees and the actual
wages/benefits paid to them from the first day of their employment, plus moral and exemplary
damages, and attorneys fees of not less than P300,000.00 per employee.

Petitioner manifested that while it was ready and willing to prove that said employees were
provided by independent legitimate contractors and that it was not engaged in labor-only
contracting in a position paper yet to be submitted, petitioner prayed that the Labor Arbiter
first resolve the issues raised in their motion to dismiss.

Labor Arbiter rendered a decision on the merits dated October 16, 1998, in favor of the
respondent.

Appeal, the NLRC affirmed with modification the decision of the Labor Arbiter deleting the
awards of damages for lack of sufficient basis.

Appeal, the CA issued the assailed Resolution dismissing the petition outright for petitioners
failure to attach copies of pleadings and documents relevant and pertinent to the
260

petition. More importantly, the verification and certification of non-forum shopping was signed
by Elizabeth Legarda, President of the petitioner-corporation, without submitting any proof
that she was duly authorized to sign for, and bind the petitioner-corporation in these
proceedings.

Issue:
Whether or not the president of the PCI Travel was not an authorized representative of the
petitioner to sign the verification and certification against forum shopping, without need of a
board resolution.

Ruling:
It must be borne in mind that Sec. 23, in relation to Sec. 25, of the Corporation Code, clearly
enunciates that all corporate powers are exercised, all business conducted, and all properties
controlled by the board of directors. A corporation has a separate and distinct personality from
its directors and officers and can only exercise its corporate powers through the board of
directors. Thus, it is clear that an individual corporate officer cannot solely exercise any
corporate power pertaining to the corporation without authority from the board of
directors. This has been our constant holding in cases instituted by a corporation.

In a slew of cases, however, we have recognized the authority of some corporate officers to
sign the verification and certification against forum shopping. The SC has held that the following
officials or employees of the company can sign the verification and certification without need of
a board resolution: (1) the Chairperson of the Board of Directors, (2) the President of a
corporation, (3) the General Manager or Acting General Manager, (4) Personnel Officer, and (5)
an Employment Specialist in a labor case.

With this issue settled, that the President of the corporation can sign the verification and
certification without need of a board resolution, there thus exists a compelling reason for the
reinstatement of the petition before the Court of Appeals.


19. LOLITA A. LOPEZ, et. al, petitioners, vs. QUEZON CITY SPORTS CLUB, INC., respondent.
G.R. No. 164032.
January 19, 2009.

Facts:
Claiming that it is a registered independent labor organization and the incumbent collective
bargaining agent of Quezon City Sports Club (QCSC), the Kasapiang Manggagawa sa Quezon City
Sports Club (union) filed a complaint for unfair labor practice against QCSC on 12 November
1997.

261

The Union averred that it was ordered to submit a new information sheet. It immediately
wrote a letter addressed to the general manager, Angel Sadang, to inquire about the
information sheet, only to be insulted by the latter. The members of the union were not paid
their salaries on 30 June 1997. A board member, Antonio Chua allegedly harassed one of the
employees and told him not to join the strike and even promised a promotion. On 4 July 1997,
the union wrote a letter to the management for the release of the members salaries for the
period 16-30 June 1997, implementation of Wage Order No. 5, and granting of wage increases
mandated by the Collective Bargaining Agreement (CBA). When its letter went unanswered,
the union filed a notice of strike on 10 July 1997 for violation of Article 248 (a)(c)(e) of the Labor
Code, nonpayment of overtime pay, refusal to hear its grievances, and malicious refusal to
comply with the economic provisions of the CBA. After conducting a strike vote, it staged a
strike on 12 August 1997. On 16 August 1997, the QCSC placed some of its employees under
temporary lay-off status due to redundancy. It appears that on 22 December 1997, QCSC also
filed a petition for cancellation of registration against the union.

The Labor Arbiter (Lustria) found QCSC guilty of unfair labor practice. QCSC appealed from the
labor arbiters decision. It also filed a motion for reduction of the appeal bond to
P4,000,000.00. The NLRC ordered the posting of an additional P6,000,000.00) .QCSC filed a
supplement to its appeal, citing a decision (Dinopol decision) dated 9 October 1998 of Labor
Arbiter Ernesto Dinopol declaring the strike of the union illegal. The dispositive portion reads:
WHEREFORE, in view of the Unions having violated the no-strike-no-lockout
provision of the Collective Bargaining Agreement, the strike it staged on August
12, 1998 is hereby declared illegal and consequently, pursuant to Article 264 of
the Labor Code, the individual respondents, namely: RONILO C. LEE, EDUARDO V.
SANTIA, CECILLE C. PANGAN, ROMEO M. MORGA, GENARO C. BANDO AND ALEX
J. SANTIAGO, who admitted in paragraph 1 of their position paper that they are
officers/members of the complaining Union are hereby declared to have lost their
employment status.

Meanwhile, the National Labor Relations Commission (NLRC) rendered a decision granting the
appeal and reversing the Lustria decision. It ratiocinated:

Be that as it may, We are of the view that the Decision in NLRC CASE NO. 00-09-0663-97 must
perforce prevail over the appealed Decision and the latter to yield to it. It must remain
undisturbed following the established doctrine on primacy and finality of decision. It bears
stressing at this juncture, at the risk of being repetitious, that in NLRC Case No. 00-09-0663-97
the employment status of herein individual complainants was already declared lost or forfeited
as of August 12, 1998, the day the illegal strike was staged. From then on, they ceased to be
employees of respondent Sports Club. The forfeiture of their employment status carries with it
the extinction of their right to demand for and be entitled to the economic benefits accorded
them by law and the existing CBA. For, such right is premised on the fact of employment.
262


The other complainants (petitioners) meanwhile filed a motion for reconsideration which was
denied by the NLRC. They filed a petition for certiorari under Rule 65 before the Court of
Appeals but was denied.

Issues:
1. Do the simultaneous filing of the motion to reduce the appeal bond and posting of the
reduced amount of bond within the reglementary period for appeal constitute substantial
compliance with Article 223 of the Labor Code?
2. Whether the NLRC erred in declaring them to have lost their employment contrary to the
Dinopol decision which only affected a few of the employees who were union members.

Ruling:
First issue:
Under the Rules, appeals involving monetary awards are perfected only upon compliance with
the following mandatory requisites, namely: (1) payment of the appeal fees; (2) filing of the
memorandum of appeal; and (3) payment of the required cash or surety bond.

Thus, the posting of a bond is indispensable to the perfection of an appeal in cases involving
monetary awards from the decision of the labor arbiter. The filing of the bond is not only
mandatory but also a jurisdictional requirement that must be complied with in order to confer
jurisdiction upon the NLRC. Non-compliance with the requirement renders the decision of the
labor arbiter final and executory. This requirement is intended to assure the workers that if
they prevail in the case, they will receive the money judgment in their favor upon the dismissal
of the employers appeal. It is intended to discourage employers from using an appeal to delay
or evade their obligation to satisfy their employees just and lawful claims.

However, Section 6 of the New Rules of Procedure of the NLRC also mandates, among others,
that no motion to reduce bond shall be entertained except on meritorious grounds and upon
the posting of a bond in a reasonable amount in relation to the monetary award. Hence, the
NLRC has the full discretion to grant or deny the motion to reduce the amount of the appeal
bond.

In the case of Nicol v. Footjoy Industrial Corporation ruled that the bond requirement on
appeals involving monetary awards had been and could be relaxed in meritorious cases such as:
(1) there was substantial compliance with the Rules; (2) the surrounding facts and
circumstances constitute meritorious grounds to reduce the bond; (3) a liberal interpretation of
the requirement of an appeal bond would serve the desired objective of resolving controversies
on the merits; or (4) the appellants, at the very least, exhibited their willingness and/or good
faith by posting a partial bond during the reglementary period. Applying these jurisprudential
263

guidelines, we find and hold that the NLRC did not err in reducing the amount of the appeal
bond and considering the appeal as having been filed within the reglementary period.

The posting of the amount of P4,000,000.00 simultaneously with the filing of the motion to
reduce the bond to that amount, as well as the filing of the memorandum of appeal, all within
the reglementary period, altogether constitute substantial compliance with the Rules.

Second issue:
We rule in favor of petitioners.

The assailed Dinopol decision involves a complaint for illegal strike filed by QCSC on the ground
of a no-strike no lockout provision in the CBA. The challenged decision was rendered in
accordance with law and is supported by factual evidence on record. In the notice of strike, the
union did not state in particular the acts which allegedly constitute unfair labor practice.
Moreover, by virtue of the no-strike no lockout provision in the CBA, the union was
prohibited from staging an economic strike, i.e., to force wage or other concessions from the
employer which he is not required by law to grant. However, it should be noted that while the
strike declared by the union was held illegal, only the union officers were declared as having
lost their employment status. In effect, there was a ruling only with respect to some union
members while the status of all others had remained disputed.

There is no conflict between the Dinopol and the Lustria decisions. While both rulings involve
the same parties and same issues, there is a distinction between the remedies sought by the
parties in these two cases. In the Dinopol decision, it was QCSC which filed a petition to declare
the illegality of the 12 August 1997 strike by the union. The consequence of the declaration of
an illegal strike is termination from employment, which the Labor Arbiter did so rule in said
case. However, not all union members were terminated. In fact, only a few union officers were
validly dismissed in accordance with Article 264 of the Labor Code. Corollarily, the other union
members who had merely participated in the strike but had not committed any illegal acts were
not dismissed from employment. Hence, the NLRC erred in declaring the employment status of
all employees as having been lost or forfeited by virtue of the Dinopol decision.

On the other hand, the Lustria decision involved the unfair labor practices alleged by the union
with particularity. In said case, Labor Arbiter Lustria sided with the Union and found QCSC guilty
of such practices. As a consequence, the affected employees were granted backwages and
separation pay. The grant of backwages and separation pay however was not premised on the
declaration of the illegality of the strike but on the finding that these affected employees were
constructively dismissed from work, as evidenced by the layoffs effected by the company.

Therefore, with respect to petitioners and union officers Alex J. Santiago, Ma. Cecilia Pangan,
Ronilo E. Lee, and Genaro Bando, who apparently had been substituted by present petitioner
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Teresita Bando, the Dinopol decision declaring them as having lost their employment status still
stands.

To recapitulate, the NLRC erred in setting aside the Lustria decision, as well as in deleting the
award of backwages and separation pay, despite the finding that the affected employees had
been constructively dismissed. Based on the foregoing, the Lustria decision should be upheld
and therefore reinstated except as regards the four petitioners.


20. LOCKHEED DETECTIVE AND WATCHMAN AGENCY, INC., petitioner, vs. UNIVERSITY OF THE
PHILIPPINES, respondent.
G.R. No. 185918.
April 18, 2012.

Facts:
The petition is for review on certiorari under Rule 45. Petitioner Lockheed entered into a
contract of security with the University of the Philippines. On 1998, several of the guards
assigned to UP filed a complaint for unpaid wages, 25% overtime pay, premium pay for rest
days and special holidays, holiday pay, service incentive leave pay, night shift differentials, 13th
month pay, refund of cash bond, refund of deductions for the Mutual Benefits Aids System
(MBAS), unpaid wages from December 16-31, 1998, and attorney's fees.

The Labor Arbiter declared UP solidarily liable. The decision was appealed but sustained by the
NLCR, albeit a few modifications. The parties motion to reconsider were likewise denied. On
July 25, 2005, a Notice of Garnishment 10 was issued to Philippine National Bank (PNB) UP
Diliman Branch for the satisfaction of the award of P12,142,522.69 (inclusive of execution fee).

On August 16, 2005, UP filed an Urgent Motion to Quash Garnishment. UP contended that the
funds being subjected to garnishment at PNB are government/public funds. However, the
execution of the garnishment was carried out. UP elevated their case to the court of appeals.
On reconsideration, however, the CA issued the assailed Amended Decision. It held that
without departing from its findings that the funds covered in the savings account sought to be
garnished do not fall within the classification of public funds, it reconsiders the dismissal of the
petition in light of the ruling in the case of National Electrification Administration v. Morales
which mandates that all money claims against the government must first be filed with the
Commission on Audit (COA).

Lockheed appealed this decision to the Supreme Court. Arguing mainly that the NEA case
should not apply and that UP could be both sued and held liable. And that the quashal of
garnishment sought was moot because it had already become fait accompli.
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Issues:
Whether or not the NEA Case applies and the funds be garnished directly bypassing the COA.
Whether or not the previous garnishment and withdrawal of funds was fait accompli.

Ruling:
YES. This Court finds that the CA correctly applied the NEA case. Like NEA, UP is a juridical
personality separate and distinct from the government and has the capacity to sue and be sued.
Thus, also like NEA, it cannot evade execution, and its funds may be subject to garnishment or
levy. However, before execution may be had, a claim for payment of the judgment award must
first be filed with the COA. (suability does not immediately mean liability).

NO. As to the fait accompli argument of Lockheed, contrary to its claim that there is nothing
that can be done since the funds of UP had already been garnished, since the garnishment was
erroneously carried out and did not go through the proper procedure (the filing of a claim with
the COA), UP is entitled to reimbursement of the garnished funds plus interest of 6% per
annum, to be computed from the time of judicial demand to be reckoned from the time UP
filed a petition for certiorari before the CA which occurred right after the withdrawal of the
garnished funds from PNB.


21. MARIETTA N. PORTILLO, petitioner, vs. RUDOLF LIETZ, INC., RUDOLF LIETZ and COURT OF
APPEALS, respondents.
G.R. No. 196539.
October 10, 2012.

Facts:
Potillo was hired by Rudolf in Lietz Co. under the condition that Potillo will not engage in any
other gainful employment by himself or with any other company either directly or indirectly
without written consent of Lietz Inc., otherwise Potillo will be liable for liquidated damages.

Upon his promotion, Potillo signed another letter agreement containing a Goodwill Clause
stating that:

on the termination of his employment and for a period of three (3) years
thereafter, he shall not engage directly or indirectly as employee, manager,
proprietor, or solicitor for himself or others in a similar or competitive business
or the same character of work which he was employed by Lietz Inc. to do and
perform. Should he breach this good will clause of this Contract, he shall pay
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Lietz Inc. as liquidated damages the amount of 100% of his gross compensation
over the last 12 months.

Three (3) years thereafter, on 6 June 2005, Portillo resigned from Lietz Inc. During her exit
interview, Portillo declared that she intended to engage in businessa rice dealership, selling rice
in wholesale.

On 15 June 2005, Lietz Inc. accepted Portillos resignation and reminded her of the "Goodwill
Clause" in the last letter agreement she had signed. Subsequently, Lietz Inc. learned that
Portillo had been hired by Ed Keller Philippines, Limited to head its Pharma Raw Material
Department. Ed Keller Limited is purportedly a direct competitor of Lietz Inc.

Meanwhile, Portillos demands from Lietz Inc. for the payment of her remaining salaries and
commissions went unheeded. Lietz Inc. gave Portillo the run around, on the pretext that her
salaries and commissions were still being computed.

Subsequently, Portillo filed a complaint with the National Labor Relations Commission (NLRC)
for non-payment of 1 months salary, two (2) months commission, 13th month pay, plus moral,
exemplary and actual damages and attorneys fees.

In its position paper, Lietz Inc. admitted liability for Portillos money claims in the total amount
of P110,662.16. However, Lietz Inc. raised the defense of legal compensation: Portillos money
claims should be offset against her liability to Lietz Inc. for liquidated damages for Portillos
alleged breach of the "Goodwill Clause" in the employment contract when she became
employed with Ed Keller Philippines, Limited.

Issues:
1. Who has jurisdiction over the present controversy?
2. Whether Portillos money claims for unpaid salaries may be offset against respondents
claim for liquidated damages.

Ruling:
1. Jurisdiction belongs to the Civil Courts.

Petitioner seeks protection under the civil laws and claims no benefits under the Labor
Code. The primary relief sought is for liquidated damages for breach of a contractual
obligation. The other items demanded are not labor benefits demanded by workers
generally taken cognizance of in labor disputes, such as payment of wages, overtime
compensation or separation pay. The items claimed are the natural consequences flowing
from breach of an obligation, intrinsically a civil dispute.

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Furthermore, non-compete clause, as in the "Goodwill Clause" refers to post-employment
relations of the parties. The "Goodwill Clause" or the "Non-Compete Clause" is a
contractual undertaking effective after the cessation of the employment relationship
between the parties. In accordance with jurisprudence, breach of the undertaking is a civil
law dispute, not a labor law case.

As it is, petitioner does not ask for any relief under the Labor Code. It merely seeks to
recover damages based on the parties contract of employment as redress for respondents
breach thereof. Such cause of action is within the realm of Civil Law, and jurisdiction over
the controversy belongs to the regular courts. More so must this be in the present case,
what with the reality that the stipulation refers to the postemployment relations of the
parties.

2. No, it may not be.

Indeed, the application of compensation in this case is effectively barred by Article 113 of
the Labor Code which prohibits wage deductions except in three circumstances:

ART. 113. Wage Deduction. No employer, in his own behalf or in behalf of any person,
shall make any deduction from wages of his employees, except:

(a) In cases where the worker is insured with his consent by the employer, and the
deduction is to recompense the employer for the amount paid by him as premium
on the insurance;

(b) For union dues, in cases where the right of the worker or his union to check-off has
been recognized by the employer or authorized in writing by the individual worker
concerned; and

(c) In cases where the employer is authorized by law or regulations issued by the
Secretary of Labor.


22. BUILDING CARE CORPORATION/LEOPARD SECURITY & INVESTIGATION AGENCY and/or
RUPERTO PROTACIO, petitioners, vs. MYRNA MACARAEG, respondent.
G.R. No. 198357.
December 10, 2012.

Facts:
Petitioners are in the business of providing security services to their clients.
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They hired respondent as a security guard beginning August 25, 1996, assigning her at Genato
Building in Caloocan City. However, on March 9, 2008, respondent was relieved of her post. She
was re-assigned to Bayview Park Hotel from March 9-13, 2008, but after said period, she was
allegedly no longer given any assignment.

Thus, on September 9, 2008, respondent filed a complaint against petitioners for illegal
dismissal, underpayment of salaries, non-payment of separation pay and refund of cash bond.
Respondent claimed that petitioners failed to give her an assignment for more than nine
months, amounting to constructive dismissal, and this compelled her to file the complaint for
illegal dismissal.

On the other hand, petitioners alleged in their position paper that respondent was relieved
from her post as requested by the client because of her habitual tardiness, persistent
borrowing of money from employees and tenants of the client, and sleeping on the job.

On May 13, 2009, the Labor Arbiter rendered a Decision dismissing the charge of illegal
dismissal as wanting in merit but ordering the Respondents Leopard Security and Investigation
Agency and Rupert Protacio to pay complainant a financial assistance in the amount of
P5,000.00.

Respondent then filed a Notice of Appeal with the National Labor Relations Commission (NLRC),
but in a Decision dated October 23, 2009, the NLRC dismissed the appeal for having been filed
out of time, thereby declaring that the Labor Arbiter's Decision had become final and executory
on June 16, 2009.

Upon elevating to the CA via a petition for certiorari, the court reversed and set aside the
Decision of the NLRC and in lieu thereof, a new judgment is entered declaring petitioner to
have been illegally dismissed.

Issue:
Whether the CA erred in liberally applying the rules of procedure and ruling that respondent's
appeal should be allowed and resolved on the merits despite having been filed out of time.


Ruling:
Yes, it erred.

It should be emphasized that the resort to a liberal application, or suspension of the application
of procedural rules, must remain as the exception to the well-settled principle that rules must
be complied with for the orderly administration of justice.
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The relaxation of procedural rules in the interest of justice was never intended to be a license
for erring litigants to violate the rules with impunity. Liberality in the interpretation and
application of the rules can be invoked only in proper cases and under justifiable causes and
circumstances.

The desired leniency cannot be accorded absent valid and compelling reasons for such a
procedural lapse.

Although the CA justified such a reversal of the NLRCs decision on the ground that the belated
filing of respondent's appeal before the NLRC was the fault of respondent's former counsel,
note, however, that neither respondent nor her former counsel gave any explanation or reason
citing extraordinary circumstances for her lawyer's failure to abide by the rules for filing an
appeal. Respondent merely insisted that she had not been remiss in following up her case with
said lawyer. It is a basic rule that the negligence and mistakes of counsel bind the client.

It should also be borne in mind that the right of the winning party to enjoy the finality of the
resolution of the case is also an essential part of public policy and the orderly administration of
justice. Hence, such right is just as weighty or equally important as the right of the losing party
to appeal or seek reconsideration within the prescribed period. When the Labor Arbiter's
Decision became final, petitioners attained a vested right to said judgment. They had the right
to fully rely on the immutability of said Decision.



















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