Soriano vs NLRC
FELICIANO, J.:
Petitioner started working with respondent commodities
trading Corporation in November 1977 as Investment
Counselor and eventually became Vice-President, Marketing.
On 18 September 1984, petitioner was charged with allowing
or failing to supervise and monitor certain activities of
investment counselors in her department, which included the
signing of a contract opening an account for a client by an
investment counselor without authority from the client,
transfers of funds from one account to another without the
knowledge and authority of the clients involved, unauthorized
transactions in foreign currency with clients of the respondent
Corporation, unauthorized approval of leave for members of
her department, and resulting in loss of confidence in
petitioner. Petitioner was preventively suspended and required
to explain her acts or failure to act. Two (2) days later,
petitioner submitted her detailed answer or explanation. On 27
September, 1984, the Executive Vice-President and General
Manager of respondent Corporation found petitioner's written
explanation unsatisfactory and notified petitioner that the
Corporation had lost confidence on her ability to discharge the
functions of her office and accordingly terminated her
services.
Petitioner filed a complaint for illegal suspension and
dismissal against respondent Corporation and Mr. Guil Rivera,
Senior Vice-President, and Mr. Richard Tan, Executive Vice-
President and General Manager. She asked for reinstatement
with backwages, as well as moral and exemplary damages,
medical expenses, attorney's fees and other litigation
expenses.
On 8 July 1985, Labor Arbiter A.L Sevilla rendered a Decision
requiring the respondent Corporation to pay petitioner: (1)
separation pay in the amount of P10,500.00; (2) six (6) months
backwages in the amount of P120,000.00; (3) moral damages
in the amount of P500,000.00; (4) exemplary damages in the
amount of P100,000.00; and (5) attorney's fees equivalent to
10% of the award.
On appeal by the private respondents, public respondent
NLRC, in a Decision dated 10 March 1986, modified the
Labor Arbiter's award by deleting the award of moral and
exemplary damages and requiring respondent Corporation to
pay: (1) separation pay amounting to P21,000.00; (2) three (3)
months backwages without qualification and deduction
amounting to P9,000.00; and (3) 10% of the award as
attorney's fees.
Both the Labor Arbiter and respondent NLRC found that
because of the strained relations between petitioner and
respondent Corporation, reinstatement of petitioner was not
feasible. Respondent Corporation had alleged that petitioner
had immediately found employment with Onapal Philippines
Commodities, which had not been denied or refuted by
petitioner. Because respondent Corporation had failed to
specify the definite date of her employment, respondent
NLRC granted petitioner three (3) months backwages without
qualification and deduction.
In the present Petition for Certiorari, petitioner seeks the
annulment of the Decision of respondent NLRC dated 10
March 1986 and the revival or reinstatement of the Decision
of Iabor Arbiter Sevilla dated 8 July 1985.
Petitioner claims that respondent Corporation acted in bad
faith in suspending and terminating her services. Petitioner
asserts that:
1. respondent Corporation had violated her right to due
process by suspending her immediately without the benefit of
hearing. She argues that the notice of preventive suspension
served her on 18 September 1986 was "living proof" that the
corporation had already concluded she was guilty of the
charges levelled against her even before she could submit her
written explanation.
2. the "true reason" for her "illegal dismissal" was the
"personal grudge which Rivera harbored against her.
3. respondent Corporation's bad faith was also
demonstrated in discrimination against her in relation to other
employees of the Corporation who had been in the past
similarly charged with alleged infractions of the corporation's
rules. More specifically, petitioner asserts discrimination
against herself consisting of the failure of the respondent
Corporation to dismiss the two (2) immediate supervisors of
the investment counselor who had carried out the unauthorized
manipulations of clients' accounts in petitioner's department.
4. petitioner also charges respondent Corporation with
having misrepresented the extent of her participation in or the
scope of her duties in respect of unauthorized acts and
transactions of her subordinates in the marketing department
of respondent company.
The Court considers that petitioner has failed to show a grave
abuse of discretion, or an act performed without or in excess
of jurisdiction, on the part of the respondent NLRC.
In respect of Item 1, preventive suspension does not in itself
prove that the company had prejudged that petitioner was
guilty of the charges she was asked to answer and explain.
Preventive suspension may be necessary for the protection of
the company, its operations and assets, pending investigation
of the alleged malfeasance or misfeasance on the part of
officers or employees of the company and pending a decision
on the part of the company (See Sec. 3 of Rule XIV, Book V,
of the Omnibus Rules Implementing the Labor Code).
Considering the very senior and sensitive character of
petitioner's position as head of a Department, a fine position as
distinguished from a staff or planning position, and
considering the unauthorized transactions then just discovered
by the respondent Corporation, we do not believe that the
preventive suspension was an arbitrary and capricious act
amounting to bad faith on the part of the respondent
Corporation.
In respect of Item 2, the alleged personal motive behind
petitioner's dismissal-personal envy or feelings of personal
insecurity on the part of Guil Rivera, Senior Vice-President,
respondent NLRC found that petitioner had not sufficiently
established her assertion. Petitioner's assertion on this point
appears no more than a conjecture or supposition and does not
afford an adequate basis for overturning respondent NLRC's
finding on this point. Further, if petitioner had clearly proven
such personal ill-will on the part of Mr. Rivera, a serious
question would arise as to whether the respondent Corporation
(as distinguished from Mr. Rivera) could be held liable at all
for Mr. Rivera's acts in the absence of clear authorization for,
or approval or adoption of, such act by the respondent
Corporation with knowledge of the personal malice on the part
of Mr. Rivera.
In respect of Item 3, respondent NLRC's decision was silent.
The Court believes, however, that respondent Corporation
must be accorded reasonable latitude in determining who
among erring officers or employees should be punished by the
company and to what extent. In the instant case, respondent
Corporation presumably found it was not necessary to
terminate the services also of the two (2) section heads in
petitioner's department, who clearly are much lower in the
corporate hierarchy than petitioner.
With respect to the last and most important of the above listed
items, the scope of petitioner's responsibility for the operations
of her department and the extent of her supervisory authority
over her subordinates in the marketing department, respondent
NLRC set forth the following discussion and evaluation:
Appellants stressed the point that complainant, as vice
president, marketing, is actually a department head of one of
the company's sales department (sic). As such, her basic
function is the supervision and monitoring the daily activities
of her department and the employees she supervises (sic). By
the nature of the company's business, complainant as a
department head should see to it that the clients' trust and
confidence in the company is upheld through above-board
transactions, untainted relations, satisfactory servicing and
unquestioned integrity of its officers and staff, aside from the
promotion of cordial employee relations among her personnel
through unbiased and uniform implementation of company
policies affecting employee benefits and welfare.
According to the appellants, the finding of the Labor Arbiter
that 'complainant is not expected to keep an eye or be aware of
all day-to-day transactions of her workers particularly
Investment Consultants in her department' does not conform to
the facts prevailing in this case.
In the Panemanglor case, which is the crucial point at issue,
Panemanglor opened an account with the respondent
corporation on June 28, 1984 by depositing the amount of
P50,000.00 through Sofia Nazareno, investment counselor.
Instead of the client signing the Customers Agreement, it was
Nazareno who signed the agreement and the signature card in
the name of the client, which is highly irregular. Had she
exercised prudence in the supervision of her investment
consultants, the irregularity could hate been earlier detected.
As a result, the sum of P25,000.00 from Panemanglor's
account was transferred by Nazareno to the account of Ramon
Lopez, without the knowledge of Panemanglor on July 9,
1984. On July 13, 1984 the said client withdrew the sum of
P25,000.00 through a Payment Instruction Form that was
approved by the complainant. On August 6, 1964, the amount
of P4,052.59 was transferred by Nazareno to the account of
Panemanglor from the account of Ramon Lopez. This
transaction was with the approval of the complainant. On
September 3, 1984, Panemanglor demanded the payment of
the balance of P25,000.00 from the respondent company to
close his account and the letter of Panemanglor was referred to
complainant by respondent Guil Rivera for necessary action.
In her memorandum to senior vice president Guil Rivera
complainant confirmed the irregularity in the handling of the
account of Panemanglor, but she failed to take appropriate
action against the erring employee which was within her
power to discipline employees under her supervision ater on
February 4, 1985, a complaint was filed before the Securities
and Exchange Commission by Panemanglor for the recovery
of the P25,000.00 plus damages against the respondent
corporation, contrary to her claim that the client will not file a
recovery suit against the corporation since the obligation was
purely personal to Nazareno.
Respondents contend that complainant could have
immediately discovered the unauthorized signature of Sofia
Nazareno that led to the illegal transfers of fund, had she
followed the company procedure and practice for her to be
personally acquainted with new clients and her admission that
she was not aware of the complained acts has brought to light
that she was remiss in her supervisory and monitoring
function. On top of this, she failed to institute disciplinary
action
xxx xxx xxx
As head of one of the company's sales department (sic) and a
managerial employee at that, complainant is expected to
monitor the daily activities of the investment counselors and
the transactions of clients in her department. As a matter of
practice and procedure, complainant, as vice-president
marketing, is always informed of new clients for her to be
personally acquainted with the client. We agree with the
appellants that had the complainant adhered to this procedure,
she could have immediately noticed the unauthorized
signature by Sofia Nazareno that enabled her to transfer funds
from one account to another. Likewise, since the complainant
approved the payment instruction for P25,000.00 on July 13,
1984, the transfer of P4,052.59 on August 6, 1984 from the
account of Ramon Lopez to Panemanglor's account, and the
withdrawal of the transferred amount on August 7, 1984, she
could have easily suspected that something was irregular with
the transaction Yet, it took several months before she knew of
the anomaly and it took her superior, respondent Guil Rivera,
to bring the matter to her attention. Under the circumstances, it
cannot be truthfully said that complainant has not been
without any fault whatsoever. For this reason, the basis for the
award of the moral and exemplary damages has not been
suffiiciently or satisfactorily against the erring employee.
gently or satisfactorily established by the complainant. And
besides the dismissal of the complainant by the respondent
was done in good faith. ... (Emphasis supplied)
Petitioner's argument that, because she was head of the entire
marketing (sales) department, she could not be expected to
monitor the detailed or day-to-day acts and behaviour of the
staff members of her department, does not address what
appears to be the thrust of the respondent NLRC's decision,
And that is, that as head of the department, it was her
responsibility to adopt ways and means of keeping herself
sufficiently informed of the activities of her staff members so
as to prevent or at least discover at an early stage, e.g.,
unauthorized or illegal transactions and manipulation of
clients' accounts. On the one hand, the above position taken by
the respondent NLRC cannot be regarded as so obviously
unreasonable and despotic as to constitute a grave abuse of
discretion, given the character of the business of a
commodities trading company and the fact that very
substantial sums of money are handled daily by petitioner's
department. Upon the other hand, petitioner's logic would lead
to the conclusion that the more senior the management
position, the slighter the responsibility for malfeasance or
nonfeasance that can be laid upon the position holder; the
chief executive officer of a corporation would effectively
have, under this logic, little or no responsibility at all.
Turning to the specific award made by respondent NLRC, the
salary base properly used in computing the separation pay and
the backwages due to petitioner should include not just the
basic salary but also the regular allowances that petitioner had
been receiving (See Santos v. National Labor Relations
Commission G.R. No. 76721, 21 September 1987). In
petitioner's case, the base figure properly includes her: (a)
basic salary of P3,000.00 a month; and (b) living allowance of
P2,400 a month (petitioner's Affidavit, dated 12 April 1985,
Exhibit "G", Rollo, p. 105). The commissions also claimed by
petitioner ("override commission" plus "net deposit
incentive") are not properly includible in such base figure
since such commissions must be earned by actual market
transactions attributable to petitioner. Neither should "travels
equivalent" [an unusual and unexplained term; P10,000.00 a
month] and "commission in trading personal clients"
P3,000.00 a month] be included in such base figure.
Considering that the charge of bad faith on the part of private
respondents was not proven, the respondent NLRC having, on
the contrary, made a finding that petitioner's dismissal was
made in good faith there appears no real basis for the award of
attorney's fees (Art. 2208 5 Civil Code). This award should
not exceed a nominal amount which we set at P1,500.00.
Thus, the appropriate computation would be:
A. Separationpay-P5,400.00/month 7 = P37,800.00
(in view of petitioner's seven (7) years of service)
B. Backwages-P5,400.00/month x 3 mos. = P16,200.00
Sub-Total P54,000.00
plus nominal attorney's fees 1,500.00
TOTAL P55,500.00
ACCORDINGLY, the Court Resolved to DISMISS the
Petition for certiorari for lack of merit. The Decision of the
respondent NLRC dated 10 March 1986 is modified so as to
award petitioner the following items: a) separation pay in the
amount of P37,800.00; b) backwages for three (3) months in
the amount of P16,200.00; and c) attorney's fees of P1,500.00,
making a total of P55,500.00.
SO ORDERED.
Songco vs NLRC
MEDIALDEA, J.:
This is a petition for certiorari seeking to modify the decision
of the National Labor Relations Commission in NLRC Case
No. RB-IV-20840-78-T entitled, "Jose Songco and Romeo
Cipres, Complainants-Appellants, v. F.E. Zuellig (M), Inc.,
Respondent-Appellee" and NLRC Case No. RN- IV-20855-
78-T entitled, "Amancio Manuel, Complainant-Appellant, v.
F.E. Zuellig (M), Inc., Respondent-Appellee," which
dismissed the appeal of petitioners herein and in effect
affirmed the decision of the Labor Arbiter ordering private
respondent to pay petitioners separation pay equivalent to their
one month salary (exclusive of commissions, allowances, etc.)
for every year of service.
The antecedent facts are as follows:
Private respondent F.E. Zuellig (M), Inc., (hereinafter referred
to as Zuellig) filed with the Department of Labor (Regional
Office No. 4) an application seeking clearance to terminate the
services of petitioners Jose Songco, Romeo Cipres, and
Amancio Manuel (hereinafter referred to as petitioners)
allegedly on the ground of retrenchment due to financial
losses. This application was seasonably opposed by petitioners
alleging that the company is not suffering from any losses.
They alleged further that they are being dismissed because of
their membership in the union. At the last hearing of the case,
however, petitioners manifested that they are no longer
contesting their dismissal. The parties then agreed that the sole
issue to be resolved is the basis of the separation pay due to
petitioners. Petitioners, who were in the sales force of Zuellig
received monthly salaries of at least P40,000. In addition, they
received commissions for every sale they made.
The collective Bargaining Agreement entered into between
Zuellig and F.E. Zuellig Employees Association, of which
petitioners are members, contains the following provision (p.
71, Rollo):
ARTICLE XIV Retirement Gratuity
Section l(a)-Any employee, who is separated from
employment due to old age, sickness, death or permanent lay-
off not due to the fault of said employee shall receive from the
company a retirement gratuity in an amount equivalent to one
(1) month's salary per year of service. One month of salary as
used in this paragraph shall be deemed equivalent to the salary
at date of retirement; years of service shall be deemed
equivalent to total service credits, a fraction of at least six
months being considered one year, including probationary
employment. (Emphasis supplied)
On the other hand, Article 284 of the Labor Code then
prevailing provides:
Art. 284. Reduction of personnel. The termination of
employment of any employee due to the installation of labor
saving-devices, redundancy, retrenchment to prevent losses,
and other similar causes, shall entitle the employee affected
thereby to separation pay. In case of termination due to the
installation of labor-saving devices or redundancy, the
separation pay shall be equivalent to one (1) month pay or to
at least one (1) month pay for every year of service, whichever
is higher. In case of retrenchment to prevent losses and other
similar causes, the separation pay shall be equivalent to one
(1) month pay or at least one-half (1/2) month pay for every
year of service, whichever is higher. A fraction of at least six
(6) months shall be considered one (1) whole year. (Emphasis
supplied)
In addition, Sections 9(b) and 10, Rule 1, Book VI of the
Rules Implementing the Labor Code provide:
xxx
Sec. 9(b). Where the termination of employment is due to
retrechment initiated by the employer to prevent losses or
other similar causes, or where the employee suffers from a
disease and his continued employment is prohibited by law or
is prejudicial to his health or to the health of his co-employees,
the employee shall be entitled to termination pay equivalent at
least to his one month salary, or to one-half month pay for
every year of service, whichever is higher, a fraction of at least
six (6) months being considered as one whole year.
xxx
Sec. 10. Basis of termination pay. The computation of the
termination pay of an employee as provided herein shall be
based on his latest salary rate, unless the same was reduced by
the employer to defeat the intention of the Code, in which case
the basis of computation shall be the rate before its deduction.
(Emphasis supplied)
On June 26,1978, the Labor Arbiter rendered a decision, the
dispositive portion of which reads (p. 78, Rollo):
RESPONSIVE TO THE FOREGOING, respondent should be
as it is hereby, ordered to pay the complainants separation pay
equivalent to their one month salary (exclusive of
commissions, allowances, etc.) for every year of service that
they have worked with the company.
SO ORDERED.
The appeal by petitioners to the National Labor Relations
Commission was dismissed for lack of merit.
Hence, the present petition.
On June 2, 1980, the Court, acting on the verified "Notice of
Voluntary Abandonment and Withdrawal of Petition dated
April 7, 1980 filed by petitioner Romeo Cipres, based on the
ground that he wants "to abide by the decision appealed from"
since he had "received, to his full and complete satisfaction,
his separation pay," resolved to dismiss the petition as to him.
The issue is whether or not earned sales commissions and
allowances should be included in the monthly salary of
petitioners for the purpose of computation of their separation
pay.
The petition is impressed with merit.
Petitioners' position was that in arriving at the correct and
legal amount of separation pay due them, whether under the
Labor Code or the CBA, their basic salary, earned sales
commissions and allowances should be added together. They
cited Article 97(f) of the Labor Code which includes
commission as part on one's salary, to wit;
(f) 'Wage' paid to any employee shall mean the remuneration
or earnings, however designated, capable of being expressed
in terms of money, whether fixed or ascertained on a time,
task, piece, or commission basis, or other method of
calculating the same, which is payable by an employer to an
employee under a written or unwritten contract of employment
for work done or to be done, or for services rendered or to be
rendered, and includes the fair and reasonable value, as
determined by the Secretary of Labor, of board, lodging, or
other facilities customarily furnished by the employer to the
employee. 'Fair reasonable value' shall not include any profit
to the employer or to any person affiliated with the employer.
Zuellig argues that if it were really the intention of the Labor
Code as well as its implementing rules to include commission
in the computation of separation pay, it could have explicitly
said so in clear and unequivocal terms. Furthermore, in the
definition of the term "wage", "commission" is used only as
one of the features or designations attached to the word
remuneration or earnings.
Insofar as the issue of whether or not allowances should be
included in the monthly salary of petitioners for the purpose of
computation of their separation pay is concerned, this has been
settled in the case of Santos v. NLRC, et al., G.R. No. 76721,
September 21, 1987, 154 SCRA 166, where We ruled that "in
the computation of backwages and separation pay, account
must be taken not only of the basic salary of petitioner but also
of her transportation and emergency living allowances." This
ruling was reiterated in Soriano v. NLRC, et al., G.R. No.
75510, October 27, 1987, 155 SCRA 124 and recently, in
Planters Products, Inc. v. NLRC, et al., G.R. No. 78524,
January 20, 1989.
We shall concern ourselves now with the issue of whether or
not earned sales commission should be included in the
monthly salary of petitioner for the purpose of computation of
their separation pay.
Article 97(f) by itself is explicit that commission is included in
the definition of the term "wage". It has been repeatedly
declared by the courts that where the law speaks in clear and
categorical language, there is no room for interpretation or
construction; there is only room for application (Cebu
Portland Cement Co. v. Municipality of Naga, G.R. Nos.
24116-17, August 22, 1968, 24 SCRA 708; Gonzaga v. Court
of Appeals, G.R.No. L-2 7455, June 28,1973, 51 SCRA 381).
A plain and unambiguous statute speaks for itself, and any
attempt to make it clearer is vain labor and tends only to
obscurity. How ever, it may be argued that if We correlate
Article 97(f) with Article XIV of the Collective Bargaining
Agreement, Article 284 of the Labor Code and Sections 9(b)
and 10 of the Implementing Rules, there appears to be an
ambiguity. In this regard, the Labor Arbiter rationalized his
decision in this manner (pp. 74-76, Rollo):
The definition of 'wage' provided in Article 96 (sic) of the
Code can be correctly be (sic) stated as a general definition. It
is 'wage ' in its generic sense. A careful perusal of the same
does not show any indication that commission is part of salary.
We can say that commission by itself may be considered a
wage. This is not something novel for it cannot be gainsaid
that certain types of employees like agents, field personnel and
salesmen do not earn any regular daily, weekly or monthly
salaries, but rely mainly on commission earned.
Upon the other hand, the provisions of Section 10, Rule 1,
Book VI of the implementing rules in conjunction with
Articles 273 and 274 (sic) of the Code specifically states that
the basis of the termination pay due to one who is sought to be
legally separated from the service is 'his latest salary rates.
x x x.
Even Articles 273 and 274 (sic) invariably use 'monthly pay or
monthly salary'.
The above terms found in those Articles and the particular
Rules were intentionally used to express the intent of the
framers of the law that for purposes of separation pay they
mean to be specifically referring to salary only.
.... Each particular benefit provided in the Code and other
Decrees on Labor has its own pecularities and nuances and
should be interpreted in that light. Thus, for a specific
provision, a specific meaning is attached to simplify matters
that may arise there from. The general guidelines in (sic) the
formation of specific rules for particular purpose. Thus, that
what should be controlling in matters concerning termination
pay should be the specific provisions of both Book VI of the
Code and the Rules. At any rate, settled is the rule that in
matters of conflict between the general provision of law and
that of a particular- or specific provision, the latter should
prevail.
On its part, the NLRC ruled (p. 110, Rollo):
From the aforequoted provisions of the law and the
implementing rules, it could be deduced that wage is used in
its generic sense and obviously refers to the basic wage rate to
be ascertained on a time, task, piece or commission basis or
other method of calculating the same. It does not, however,
mean that commission, allowances or analogous income
necessarily forms part of the employee's salary because to do
so would lead to anomalies (sic), if not absurd, construction of
the word "salary." For what will prevent the employee from
insisting that emergency living allowance, 13th month pay,
overtime, and premium pay, and other fringe benefits should
be added to the computation of their separation pay. This
situation, to our mind, is not the real intent of the Code and its
rules.
We rule otherwise. The ambiguity between Article 97(f),
which defines the term 'wage' and Article XIV of the
Collective Bargaining Agreement, Article 284 of the Labor
Code and Sections 9(b) and 10 of the Implementing Rules,
which mention the terms "pay" and "salary", is more apparent
than real. Broadly, the word "salary" means a recompense or
consideration made to a person for his pains or industry in
another man's business. Whether it be derived from
"salarium," or more fancifully from "sal," the pay of the
Roman soldier, it carries with it the fundamental idea of
compensation for services rendered. Indeed, there is eminent
authority for holding that the words "wages" and "salary" are
in essence synonymous (Words and Phrases, Vol. 38
Permanent Edition, p. 44 citing Hopkins vs. Cromwell, 85
N.Y.S. 839,841,89 App. Div. 481; 38 Am. Jur. 496). "Salary,"
the etymology of which is the Latin word "salarium," is often
used interchangeably with "wage", the etymology of which is
the Middle English word "wagen". Both words generally refer
to one and the same meaning, that is, a reward or recompense
for services performed. Likewise, "pay" is the synonym of
"wages" and "salary" (Black's Law Dictionary, 5th Ed.).
Inasmuch as the words "wages", "pay" and "salary" have the
same meaning, and commission is included in the definition of
"wage", the logical conclusion, therefore, is, in the
computation of the separation pay of petitioners, their salary
base should include also their earned sales commissions.
The aforequoted provisions are not the only consideration for
deciding the petition in favor of the petitioners.
We agree with the Solicitor General that granting, in gratia
argumenti, that the commissions were in the form of
incentives or encouragement, so that the petitioners would be
inspired to put a little more industry on the jobs particularly
assigned to them, still these commissions are direct
remuneration services rendered which contributed to the
increase of income of Zuellig . Commission is the
recompense, compensation or reward of an agent, salesman,
executor, trustees, receiver, factor, broker or bailee, when the
same is calculated as a percentage on the amount of his
transactions or on the profit to the principal (Black's Law
Dictionary, 5th Ed., citing Weiner v. Swales, 217 Md. 123, 141
A.2d 749, 750). The nature of the work of a salesman and the
reason for such type of remuneration for services rendered
demonstrate clearly that commission are part of petitioners'
wage or salary. We take judicial notice of the fact that some
salesmen do not receive any basic salary but depend on
commissions and allowances or commissions alone, are part of
petitioners' wage or salary. We take judicial notice of the fact
that some salesman do not received any basic salary but
depend on commissions and allowances or commissions
alone, although an employer-employee relationship exists.
Bearing in mind the preceeding dicussions, if we adopt the
opposite view that commissions, do not form part of wage or
salary, then, in effect, We will be saying that this kind of
salesmen do not receive any salary and therefore, not entitled
to separation pay in the event of discharge from employment.
Will this not be absurd? This narrow interpretation is not in
accord with the liberal spirit of our labor laws and considering
the purpose of separation pay which is, to alleviate the
difficulties which confront a dismissed employee thrown the
the streets to face the harsh necessities of life.
Additionally, in Soriano v. NLRC, et al., supra, in resolving
the issue of the salary base that should be used in computing
the separation pay, We held that:
The commissions also claimed by petitioner ('override
commission' plus 'net deposit incentive') are not properly
includible in such base figure since such commissions must be
earned by actual market transactions attributable to petitioner.
Applying this by analogy, since the commissions in the
present case were earned by actual market transactions
attributable to petitioners, these should be included in their
separation pay. In the computation thereof, what should be
taken into account is the average commissions earned during
their last year of employment.
The final consideration is, in carrying out and interpreting the
Labor Code's provisions and its implementing regulations, the
workingman's welfare should be the primordial and paramount
consideration. This kind of interpretation gives meaning and
substance to the liberal and compassionate spirit of the law as
provided for in Article 4 of the Labor Code which states that
"all doubts in the implementation and interpretation of the
provisions of the Labor Code including its implementing rules
and regulations shall be resolved in favor of labor" (Abella v.
NLRC, G.R. No. 71812, July 30,1987,152 SCRA 140; Manila
Electric Company v. NLRC, et al., G.R. No. 78763, July
12,1989), and Article 1702 of the Civil Code which provides
that "in case of doubt, all labor legislation and all labor
contracts shall be construed in favor of the safety and decent
living for the laborer.
ACCORDINGLY, the petition is hereby GRANTED. The
decision of the respondent National Labor Relations
Commission is MODIFIED by including allowances and
commissions in the separation pay of petitioners Jose Songco
and Amancio Manuel. The case is remanded to the Labor
Arbiter for the proper computation of said separation pay.
SO ORDERED.
Javier vs Fly ace
MENDOZA, J.:
This is a petition under Rule 45 of the Rules of Civil
Procedure assailing the March 18, 2010 Decision[1] of the
Court of Appeals (CA) and its June 7, 2010 Resolution,[2] in
CA-G.R. SP No. 109975, which reversed the May 28, 2009
Decision[3] of the National Labor Relations Commission
(NLRC) in the case entitled Bitoy Javier v. Fly Ace/Flordelyn
Castillo,[4] holding that petitioner Bitoy Javier (Javier) was
illegally dismissed from employment and ordering Fly Ace
Corporation (Fly Ace) to pay backwages and separation pay in
lieu of reinstatement.
Antecedent Facts
On May 23, 2008, Javier filed a complaint before the NLRC
for underpayment of salaries and other labor standard benefits.
He alleged that he was an employee of Fly Ace since
September 2007, performing various tasks at the respondents
warehouse such as cleaning and arranging the canned items
before their delivery to certain locations, except in instances
when he would be ordered to accompany the companys
delivery vehicles, as pahinante; that he reported for work from
Monday to Saturday from 7:00 oclock in the morning to 5:00
oclock in the afternoon; that during his employment, he was
not issued an identification card and payslips by the company;
that on May 6, 2008, he reported for work but he was no
longer allowed to enter the company premises by the security
guard upon the instruction of Ruben Ong (Mr. Ong), his
superior;[5] that after several minutes of begging to the guard
to allow him to enter, he saw Ong whom he approached and
asked why he was being barred from entering the premises;
that Ong replied by saying, Tanungin mo anak mo; [6] that he
then went home and discussed the matter with his family; that
he discovered that Ong had been courting his daughter
Annalyn after the two met at a fiesta celebration in Malabon
City; that Annalyn tried to talk to Ong and convince him to
spare her father from trouble but he refused to accede; that
thereafter, Javier was terminated from his employment without
notice; and that he was neither given the opportunity to refute
the cause/s of his dismissal from work.
To support his allegations, Javier presented an affidavit of one
Bengie Valenzuela who alleged that Javier was a stevedore or
pahinante of Fly Ace from September 2007 to January 2008.
The said affidavit was subscribed before the Labor Arbiter
(LA).[7]
For its part, Fly Ace averred that it was engaged in the
business of importation and sales of groceries. Sometime in
December 2007, Javier was contracted by its employee, Mr.
Ong, as extra helper on a pakyaw basis at an agreed rate of
300.00 per trip, which was later increased to 325.00 in
January 2008. Mr. Ong contracted Javier roughly 5 to 6 times
only in a month whenever the vehicle of its contracted hauler,
Milmar Hauling Services, was not available. On April 30,
2008, Fly Ace no longer needed the services of Javier.
Denying that he was their employee, Fly Ace insisted that
there was no illegal dismissal.[8] Fly Ace submitted a copy of
its agreement with Milmar Hauling Services and copies of
acknowledgment receipts evidencing payment to Javier for his
contracted services bearing the words, daily manpower
(pakyaw/piece rate pay) and the latters signatures/initials.
Ruling of the Labor Arbiter
On November 28, 2008, the LA dismissed the complaint for
lack of merit on the ground that Javier failed to present proof
that he was a regular employee of Fly Ace. He wrote:
Complainant has no employee ID showing his employment
with the Respondent nor any document showing that he
received the benefits accorded to regular employees of the
Respondents. His contention that Respondent failed to give
him said ID and payslips implies that indeed he was not a
regular employee of Fly Ace considering that complainant was
a helper and that Respondent company has contracted a
regular trucking for the delivery of its products.
Respondent Fly Ace is not engaged in trucking business but in
the importation and sales of groceries. Since there is a regular
hauler to deliver its products, we give credence to
Respondents claim that complainant was contracted on pakiao
basis.
As to the claim for underpayment of salaries, the payroll
presented by the Respondents showing salaries of workers on
pakiao basis has evidentiary weight because although the
signature of the complainant appearing thereon are not
uniform, they appeared to be his true signature.
xxxx
Hence, as complainant received the rightful salary as shown
by the above described payrolls, Respondents are not liable for
salary differentials. [9]
Ruling of the NLRC
On appeal with the NLRC, Javier was favored. It ruled that the
LA skirted the argument of Javier and immediately concluded
that he was not a regular employee simply because he failed to
present proof. It was of the view that a pakyaw-basis
arrangement did not preclude the existence of employer-
employee relationship. Payment by result x x x is a method of
compensation and does not define the essence of the relation.
It is a mere method of computing compensation, not a basis
for determining the existence or absence of an employer-
employee relationship.[10] The NLRC further averred that it
did not follow that a worker was a job contractor and not an
employee, just because the work he was doing was not directly
related to the employers trade or business or the work may be
considered as extra helper as in this case; and that the
relationship of an employer and an employee was determined
by law and the same would prevail whatever the parties may
call it. In this case, the NLRC held that substantial evidence
was sufficient basis for judgment on the existence of the
employer-employee relationship. Javier was a regular
employee of Fly Ace because there was reasonable connection
between the particular activity performed by the employee (as
a pahinante) in relation to the usual business or trade of the
employer (importation, sales and delivery of groceries). He
may not be considered as an independent contractor because
he could not exercise any judgment in the delivery of
company products. He was only engaged as a helper.
Finding Javier to be a regular employee, the NLRC ruled that
he was entitled to a security of tenure. For failing to present
proof of a valid cause for his termination, Fly Ace was found
to be liable for illegal dismissal of Javier who was likewise
entitled to backwages and separation pay in lieu of
reinstatement. The NLRC thus ordered:
WHEREFORE, premises considered, complainants appeal is
partially GRANTED. The assailed Decision of the labor
arbiter is VACATED and a new one is hereby entered holding
respondent FLY ACE CORPORATION guilty of illegal
dismissal and non-payment of 13th month pay. Consequently,
it is hereby ordered to pay complainant DANILO Bitoy
JAVIER the following:
1. Backwages -45,770.83
2. Separation pay, in lieu of reinstatement - 8,450.00
3. Unpaid 13th month pay (proportionate) - 5,633.33
TOTAL -59,854.16
All other claims are dismissed for lack of merit.
SO ORDERED.[11]
Ruling of the Court of Appeals
On March 18, 2010, the CA annulled the NLRC findings that
Javier was indeed a former employee of Fly Ace and
reinstated the dismissal of Javiers complaint as ordered by the
LA. The CA exercised its authority to make its own factual
determination anent the issue of the existence of an employer-
employee relationship between the parties. According to the
CA:
xxx
In an illegal dismissal case the onus probandi rests on the
employer to prove that its dismissal was for a valid cause.
However, before a case for illegal dismissal can prosper, an
employer-employee relationship must first be established. x x
x it is incumbent upon private respondent to prove the
employee-employer relationship by substantial evidence.

xxx
It is incumbent upon private respondent to prove, by
substantial evidence, that he is an employee of petitioners, but
he failed to discharge his burden. The non-issuance of a
company-issued identification card to private respondent
supports petitioners contention that private respondent was not
its employee.[12]
The CA likewise added that Javiers failure to present salary
vouchers, payslips, or other pieces of evidence to bolster his
contention, pointed to the inescapable conclusion that he was
not an employee of Fly Ace. Further, it found that Javiers
work was not necessary and desirable to the business or trade
of the company, as it was only when there were scheduled
deliveries, which a regular hauling service could not deliver,
that Fly Ace would contract the services of Javier as an extra
helper. Lastly, the CA declared that the facts alleged by Javier
did not pass the control test.
He contracted work outside the company premises; he was not
required to observe definite hours of work; he was not
required to report daily; and he was free to accept other work
elsewhere as there was no exclusivity of his contracted service
to the company, the same being co-terminous with the trip
only.[13] Since no substantial evidence was presented to
establish an employer-employee relationship, the case for
illegal dismissal could not prosper.
The petitioners moved for reconsideration, but to no avail.
Hence, this appeal anchored on the following grounds:
I.
WHETHER THE HONORABLE COURT OF APPEALS
ERRED IN HOLDING THAT THE PETITIONER WAS NOT
A REGULAR EMPLOYEE OF FLY ACE.
II.
WHETHER THE HONORABLE COURT OF APPEALS
ERRED IN HOLDING THAT THE PETITIONER IS NOT
ENTITLED TO HIS MONETARY CLAIMS.[14]
The petitioner contends that other than its bare allegations and
self-serving affidavits of the other employees, Fly Ace has
nothing to substantiate its claim that Javier was engaged on a
pakyaw basis. Assuming that Javier was indeed hired on a
pakyaw basis, it does not preclude his regular employment
with the company. Even the acknowledgment receipts bearing
his signature and the confirming receipt of his salaries will not
show the true nature of his employment as they do not reflect
the necessary details of the commissioned task. Besides,
Javiers tasks as pahinante are related, necessary and desirable
to the line of business by Fly Ace which is engaged in the
importation and sale of grocery items. On days when there
were no scheduled deliveries, he worked in petitioners
warehouse, arranging and cleaning the stored cans for delivery
to clients.[15] More importantly, Javier was subject to the
control and supervision of the company, as he was made to
report to the office from Monday to Saturday, from 7:00
oclock in the morning until 5:00 oclock in the afternoon. The
list of deliverable goods, together with the corresponding
clients and their respective purchases and addresses, would
necessarily have been prepared by Fly Ace. Clearly, he was
subjected to compliance with company rules and regulations
as regards working hours, delivery schedule and output, and
his other duties in the warehouse.[16]
The petitioner chiefly relied on Chavez v. NLRC,[17] where
the Court ruled that payment to a worker on a per trip basis is
not significant because this is merely a method of computing
compensation and not a basis for determining the existence of
employer-employee relationship. Javier likewise invokes the
rule that, in controversies between a laborer and his master, x
x x doubts reasonably arising from the evidence should be
resolved in the formers favour. The policy is reflected is no
less than the Constitution, Labor Code and Civil Code.[18]
Claiming to be an employee of Fly Ace, petitioner asserts that
he was illegally dismissed by the latters failure to observe
substantive and procedural due process. Since his dismissal
was not based on any of the causes recognized by law, and
was implemented without notice, Javier is entitled to
separation pay and backwages.
In its Comment,[19] Fly Ace insists that there was no
substantial evidence to prove employer-employee relationship.
Having a service contract with Milmar Hauling Services for
the purpose of transporting and delivering company products
to customers, Fly Ace contracted Javier as an extra helper or
pahinante on a mere per trip basis. Javier, who was actually a
loiterer in the area, only accompanied and assisted the
company driver when Milmar could not deliver or when the
exigency of extra deliveries arises for roughly five to six times
a month. Before making a delivery, Fly Ace would turn over to
the driver and Javier the delivery vehicle with its loaded
company products. With the vehicle and products in their
custody, the driver and Javier would leave the company
premises using their own means, method, best judgment and
discretion on how to deliver, time to deliver, where and [when]
to start, and manner of delivering the products.[20]
Fly Ace dismisses Javiers claims of employment as baseless
assertions. Aside from his bare allegations, he presented
nothing to substantiate his status as an employee. It is a basic
rule of evidence that each party must prove his affirmative
allegation. If he claims a right granted by law, he must prove
his claim by competent evidence, relying on the strength of his
own evidence and not upon the weakness of his opponent.[21]
Invoking the case of Lopez v. Bodega City,[22] Fly Ace insists
that in an illegal dismissal case, the burden of proof is upon
the complainant who claims to be an employee. It is essential
that an employer-employee relationship be proved by
substantial evidence. Thus, it cites:

In an illegal dismissal case, the onus probandi rests on the
employer to prove that its dismissal of an employee was for a
valid cause. However, before a case for illegal dismissal can
prosper, an employer-employee relationship must first be
established.
Fly Ace points out that Javier merely offers factual assertions
that he was an employee of Fly Ace, which are unfortunately
not supported by proof, documentary or otherwise.[23] Javier
simply assumed that he was an employee of Fly Ace, absent
any competent or relevant evidence to support it. He
performed his contracted work outside the premises of the
respondent; he was not even required to report to work at
regular hours; he was not made to register his time in and time
out every time he was contracted to work; he was not
subjected to any disciplinary sanction imposed to other
employees for company violations; he was not issued a
company I.D.; he was not accorded the same benefits given to
other employees; he was not registered with the Social
Security System (SSS) as petitioners employee; and, he was
free to leave, accept and engage in other means of livelihood
as there is no exclusivity of his contracted services with the
petitioner, his services being co-terminus with the trip only.
All these lead to the conclusion that petitioner is not an
employee of the respondents.[24]
Moreover, Fly Ace claims that it had no right to control the
result, means, manner and methods by which Javier would
perform his work or by which the same is to be accomplished.
[25] In other words, Javier and the company driver were given
a free hand as to how they would perform their contracted
services and neither were they subjected to definite hours or
condition of work.
Fly Ace likewise claims that Javiers function as a pahinante
was not directly related or necessary to its principal business
of importation and sales of groceries. Even without Javier, the
business could operate its usual course as it did not involve the
business of inland transportation. Lastly, the acknowledgment
receipts bearing Javiers signature and words pakiao rate,
referring to his earned salaries on a per trip basis, have
evidentiary weight that the LA correctly considered in arriving
at the conclusion that Javier was not an employee of the
company.
The Court affirms the assailed CA decision.
It must be noted that the issue of Javiers alleged illegal
dismissal is anchored on the existence of an employer-
employee relationship between him and Fly Ace. This is
essentially a question of fact. Generally, the Court does not
review errors that raise factual questions. However, when
there is conflict among the factual findings of the antecedent
deciding bodies like the LA, the NLRC and the CA, it is
proper, in the exercise of Our equity jurisdiction, to review
and re-evaluate the factual issues and to look into the records
of the case and re-examine the questioned findings.[26] In
dealing with factual issues in labor cases, substantial evidence
that amount of relevant evidence which a reasonable mind
might accept as adequate to justify a conclusion is sufficient.
[27]
As the records bear out, the LA and the CA found Javiers
claim of employment with Fly Ace as wanting and deficient.
The Court is constrained to agree. Although Section 10, Rule
VII of the New Rules of Procedure of the NLRC[28] allows a
relaxation of the rules of procedure and evidence in labor
cases, this rule of liberality does not mean a complete
dispensation of proof. Labor officials are enjoined to use
reasonable means to ascertain the facts speedily and
objectively with little regard to technicalities or formalities but
nowhere in the rules are they provided a license to completely
discount evidence, or the lack of it. The quantum of proof
required, however, must still be satisfied. Hence, when
confronted with conflicting versions on factual matters, it is
for them in the exercise of discretion to determine which party
deserves credence on the basis of evidence received, subject
only to the requirement that their decision must be supported
by substantial evidence.[29] Accordingly, the petitioner needs
to show by substantial evidence that he was indeed an
employee of the company against which he claims illegal
dismissal.
Expectedly, opposing parties would stand poles apart and
proffer allegations as different as chalk and cheese. It is,
therefore, incumbent upon the Court to determine whether the
party on whom the burden to prove lies was able to hurdle the
same. No particular form of evidence is required to prove the
existence of such employer-employee relationship. Any
competent and relevant evidence to prove the relationship may
be admitted. Hence, while no particular form of evidence is
required, a finding that such relationship exists must still rest
on some substantial evidence. Moreover, the substantiality of
the evidence depends on its quantitative as well as its
qualitative aspects.[30] Although substantial evidence is not a
function of quantity but rather of quality, the x x x
circumstances of the instant case demand that something more
should have been proffered. Had there been other proofs of
employment, such as x x x inclusion in petitioners payroll, or a
clear exercise of control, the Court would have affirmed the
finding of employer-employee relationship.[31]
In sum, the rule of thumb remains: the onus probandi falls on
petitioner to establish or substantiate such claim by the
requisite quantum of evidence.[32] Whoever claims
entitlement to the benefits provided by law should establish
his or her right thereto x x x.[33] Sadly, Javier failed to adduce
substantial evidence as basis for the grant of relief.
In this case, the LA and the CA both concluded that Javier
failed to establish his employment with Fly Ace. By way of
evidence on this point, all that Javier presented were his self-
serving statements purportedly showing his activities as an
employee of Fly Ace. Clearly, Javier failed to pass the
substantiality requirement to support his claim. Hence, the
Court sees no reason to depart from the findings of the CA.
While Javier remains firm in his position that as an employed
stevedore of Fly Ace, he was made to work in the company
premises during weekdays arranging and cleaning grocery
items for delivery to clients, no other proof was submitted to
fortify his claim. The lone affidavit executed by one Bengie
Valenzuela was unsuccessful in strengthening Javiers cause. In
said document, all Valenzuela attested to was that he would
frequently see Javier at the workplace where the latter was
also hired as stevedore.[34] Certainly, in gauging the evidence
presented by Javier, the Court cannot ignore the inescapable
conclusion that his mere presence at the workplace falls short
in proving employment therein. The supporting affidavit could
have, to an extent, bolstered Javiers claim of being tasked to
clean grocery items when there were no scheduled delivery
trips, but no information was offered in this subject simply
because the witness had no personal knowledge of Javiers
employment status in the company. Verily, the Court cannot
accept Javiers statements, hook, line and sinker.
The Court is of the considerable view that on Javier lies the
burden to pass the well-settled tests to determine the existence
of an employer-employee relationship, viz: (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
employees conduct. Of these elements, the most important
criterion is whether the employer controls or has reserved the
right to control the employee not only as to the result of the
work but also as to the means and methods by which the result
is to be accomplished.[35]
In this case, Javier was not able to persuade the Court that the
above elements exist in his case. He could not submit
competent proof that Fly Ace engaged his services as a regular
employee; that Fly Ace paid his wages as an employee, or that
Fly Ace could dictate what his conduct should be while at
work. In other words, Javiers allegations did not establish that
his relationship with Fly Ace had the attributes of an
employer-employee relationship on the basis of the above-
mentioned four-fold test. Worse, Javier was not able to refute
Fly Aces assertion that it had an agreement with a hauling
company to undertake the delivery of its goods. It was also
baffling to realize that Javier did not dispute Fly Aces denial
of his services exclusivity to the company. In short, all that
Javier laid down were bare allegations without corroborative
proof.
Fly Ace does not dispute having contracted Javier and paid
him on a per trip rate as a stevedore, albeit on a pakyaw basis.
The Court cannot fail to note that Fly Ace presented
documentary proof that Javier was indeed paid on a pakyaw
basis per the acknowledgment receipts admitted as competent
evidence by the LA. Unfortunately for Javier, his mere denial
of the signatures affixed therein cannot automatically sway us
to ignore the documents because forgery cannot be presumed
and must be proved by clear, positive and convincing evidence
and the burden of proof lies on the party alleging forgery.[36]
Considering the above findings, the Court does not see the
necessity to resolve the second issue presented.
One final note. The Courts decision does not contradict the
settled rule that payment by the piece is just a method of
compensation and does not define the essence of the relation.
[37] Payment on a piece-rate basis does not negate regular
employment. The term wage is broadly defined in Article 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 the petitioner is not covered by the SSS affect the
employer-employee relationship. However, in determining
whether the relationship is that of employer and employee or
one of an independent contractor, each case must be
determined on its own facts and all the features of the
relationship are to be considered.[38] Unfortunately for Javier,
the attendant facts and circumstances of the instant case do not
provide the Court with sufficient reason to uphold his claimed
status as employee of Fly Ace.
While the Constitution is committed to the policy of social
justice and the protection of the working class, it should not be
supposed that every labor dispute will be automatically
decided in favor of labor. Management also has its rights
which are entitled to respect and enforcement in the interest of
simple fair play. Out of its concern for the less privileged in
life, the Court has inclined, more often than not, toward the
worker and upheld his cause in his conflicts with the
employer. Such favoritism, however, has not blinded the Court
to the rule that justice is in every case for the deserving, to be
dispensed in the light of the established facts and the
applicable law and doctrine.[39]
WHEREFORE, the petition is DENIED. The March 18, 2010
Decision of the Court of Appeals and its June 7, 2010
Resolution, in CA-G.R. SP No. 109975, are hereby
AFFIRMED.
SO ORDERED.
SLL International vs NLRC
MENDOZA, J.:
Assailed in this petition for review on certiorari are the
January 11, 2006 Decision1 and the March 31, 2006
Resolution2 of the Court of Appeals (CA), in CA-G.R. SP No.
00598 which affirmed with modification the March 31, 2004
Decision3 and December 15, 2004 Resolution4 of the National
Labor Relations Commission (NLRC). The NLRC Decision
found the petitioners, SLL International Cables Specialist
(SLL) and its manager, Sonny L. Lagon (petitioners), not
liable for the illegal dismissal of Roldan Lopez, Danilo Caete
and Edgardo Zuiga (private respondents) but held them
jointly and severally liable for payment of certain monetary
claims to said respondents.
A chronicle of the factual antecedents has been succinctly
summarized by the CA as follows:
Sometime in 1996, and January 1997, private respondents
Roldan Lopez (Lopez for brevity) and Danilo Caete (Caete
for brevity), and Edgardo Zuiga (Zuiga for brevity)
respectively, 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. After their training,
Zuiga, Caete and Lopez were engaged as project employees
by the petitioners in 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 by
the Regional Wage Board (RWB) and in October of the same
year, the latter was increased to P155.00. Sometime in March
1998, Zuiga and Caete were engaged again by Lagon as
project employees for its PLDT Antipolo, Rizal project, which
ended sometime in (sic) the late September 1998. As a
consequence, Zuiga and Caetes employment was
terminated. For this project, Zuiga and Caete received only
the wage of P145.00 daily. The minimum prescribed wage for
Rizal at that time was P160.00.
Sometime in late November 1998, private respondents re-
applied in the Racitelcom project of Lagon in Bulacan. Zuiga
and Caete were re-employed. Lopez was also hired for the
said specific project. For this, private respondents received the
wage of P145.00. Again, after the completion of their project
in March 1999, private respondents went home to Cebu City.
On May 21, 1999, private respondents for the 4th time worked
with Lagons 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, 13th month pay for 1997 and 1998 and service
incentive leave pay as well as damages and attorneys fees.
In their answers, petitioners admit employment of private
respondents but claimed that the latter were only project
employees[,] for their services were merely engaged for a
specific project or undertaking and the same were covered by
contracts duly signed by private respondents. Petitioners
further alleged that the food allowance of P63.00 per day as
well as private respondents allowance for lodging house,
transportation, electricity, water and snacks allowance should
be added to their basic pay. With these, petitioners claimed
that private respondents received higher wage rate than that
prescribed in Rizal and Manila.
Lastly, petitioners alleged that since the workplaces of private
respondents were all in Manila, the complaint should be filed
there. Thus, petitioners prayed for the dismissal of the
complaint for lack of jurisdiction and utter lack of merit.
(Citations omitted.)
On January 18, 2001, Labor Arbiter Reynoso Belarmino (LA)
rendered his decision5 declaring that his office had jurisdiction
to hear and decide the complaint filed by private respondents.
Referring to Rule IV, Sec. 1 (a) of the NLRC Rules of
Procedure prevailing at that time,6 the LA ruled that it had
jurisdiction because the "workplace," as defined in the said
rule, included the place where the employee was supposed to
report back after a temporary detail, assignment or travel,
which in this case was Cebu.
As to the status of their employment, the LA opined that
private respondents were regular employees because they were
repeatedly hired by petitioners and they performed activities
which were usual, necessary and desirable in the business or
trade of the employer.
With regard to the underpayment of wages, the LA found that
private respondents were underpaid. It ruled that the free
board and lodging, electricity, water, and food enjoyed by
them could not be included in the computation of their wages
because these were given without their written consent.
The LA, however, found that petitioners were not liable for
illegal dismissal. The LA viewed private respondents act of
going home as an act of indifference when petitioners decided
to prohibit overtime work.7
In its March 31, 2004 Decision, the NLRC affirmed the
findings of the LA. In addition, the NLRC noted that not a
single report of project completion was filed with the nearest
Public Employment Office as required
by the Department of Labor and Employment (DOLE)
Department Order No. 19, Series of 1993.8 The NLRC later
denied9 the motion for reconsideration10 subsequently filed
by petitioners.
When the matter was elevated to the CA on a petition for
certiorari, it affirmed the findings that the private respondents
were regular employees. It considered the fact that they
performed functions which were the regular and usual
business of petitioners. According to the CA, they were clearly
members of a work pool from which petitioners drew their
project employees.
The CA also stated that the failure of petitioners to comply
with the simple but compulsory requirement to submit a report
of termination to the nearest Public Employment Office every
time private respondents employment was terminated was
proof that the latter were not project employees but regular
employees.
The CA likewise found that the private respondents were
underpaid. It ruled that the board and lodging, electricity,
water, and food enjoyed by the private respondents could not
be included in the computation of their wages because these
were given without their written consent. The CA added that
the private respondents were entitled to 13th month pay.
The CA also agreed with the NLRC that there was no illegal
dismissal. The CA opined that it was the petitioners
prerogative to grant or deny any request for overtime work
and that the private respondents act of leaving the workplace
after their request was denied was an act of abandonment.
In modifying the decision of the labor tribunal, however, the
CA noted that respondent Roldan Lopez did not work in the
Antipolo project and, thus, was not entitled to wage
differentials. Also, in computing the differentials for the period
January and February 2000, the CA disagreed in the award of
differentials based on the minimum daily wage of P223.00, as
the prevailing minimum daily wage then was only P213.00.
Petitioners sought reconsideration but the CA denied it in its
March 31, 2006 Resolution.11
In this petition for review on certiorari,12 petitioners seek the
reversal and setting aside of the CA decision anchored on this
lone:
GROUND/ASSIGNMENT OF ERROR
THE PUBLIC RESPONDENT NLRC COMMITTED A
SERIOUS ERROR IN LAW IN AWARDING WAGE
DIFFERENTIALS TO THE PRIVATE COMPLAINANTS
ON THE BASES OF MERE TECHNICALITIES, THAT IS,
FOR LACK OF WRITTEN CONFORMITY x x x AND
LACK OF NOTICE TO THE DEPARTMENT OF LABOR
AND EMPLOYMENT (DOLE)[,] AND THUS, THE COURT
OF APPEALS GRAVELY ERRED IN AFFIRMING WITH
MODIFICATION THE NLRC DECISION IN THE LIGHT
OF THE RULING IN THE CASE OF JENNY M. AGABON
and VIRGILIO AGABON vs, NLRC, ET AL., GR NO.
158963, NOVEMBER 17, 2004, 442 SCRA 573, [AND
SUBSEQUENTLY IN THE CASE OF GLAXO WELLCOME
PHILIPPINES, INC. VS. NAGAKAKAISANG
EMPLEYADO NG WELLCOME-DFA (NEW DFA), ET
AL., GR NO. 149349, 11 MARCH 2005], WHICH FINDS
APPLICATION IN THE INSTANT CASE BY ANALOGY.13
Petitioners reiterated their position that the value of the
facilities that the private respondents enjoyed should be
included in the computation of the "wages" received by them.
They argued that the rulings in Agabon v. NLRC14and Glaxo
Wellcome Philippines, Inc. v. Nagkakaisang Empleyado Ng
Wellcome-DFA15 should be applied by analogy, in the sense
that the lack of written acceptance of the employees of the
facilities enjoyed by them should not mean that the value of
the facilities could not be included in the computation of the
private respondents "wages."
On November 29, 2006, the Court resolved to issue a
Temporary Restraining Order (TRO) enjoining the public
respondent from enforcing the NLRC and CA decisions until
further orders from the Court.
After a thorough review of the records, however, the Court
finds no merit in the petition.
This petition generally involves factual issues, such as,
whether or not there is evidence on record to support the
findings of the LA, the NLRC and the CA that private
respondents were project or regular employees and that their
salary differentials had been paid. This calls for a re-
examination of the evidence, which the Court cannot entertain.
Settled is the rule that factual findings of labor officials, who
are deemed to have acquired expertise in matters within their
respective jurisdiction, are generally accorded not only respect
but even finality, and bind the Court when supported by
substantial evidence. It is not the Courts function to assess
and evaluate the evidence
all over again, particularly where the findings of both the
Labor tribunals and the CA concur. 16
As a general rule, on payment of wages, a party who alleges
payment as a defense has the burden of proving it.17
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.18
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 probandi.
Private respondents, on the other hand, are entitled to be paid
the minimum wage, whether they are regular or non-regular
employees.
Section 3, Rule VII of the Rules to Implement the Labor
Code19 specifically enumerates those who are not covered by
the payment of minimum wage. Project employees are not
among them.
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.20 Mere availment is not sufficient to allow
deductions from employees wages.21
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
employees 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.
No. 68642, entitled "Rolando Adana, Wenefredo Loveres, et.
al. vs. National Labor Relations Commission (NLRC), Mayon
Hotel & Restaurant/Pacita O. Po, et al.," and the Resolution2
denying petitioners' motion for reconsideration. The assailed
CA decision reversed the NLRC Decision which had
dismissed all of respondents' complaints,3 and reinstated the
Joint Decision of the Labor Arbiter4 which ruled that
respondents were illegally dismissed and entitled to their
money claims.
The facts, culled from the records, are as follows:5

The Court, at this point, makes a distinction between
"facilities" and "supplements." It is of the view that the food
and lodging, or the electricity and water allegedly consumed
by private respondents in this case were not facilities but
supplements. In the case of Atok-Big Wedge Assn. v. Atok-Big
Wedge Co.,22 the two terms were distinguished from one
another in this wise:
"Supplements," therefore, constitute extra remuneration or
special privileges or benefits given to or received by the
laborers over and above their ordinary earnings or wages.
"Facilities," on the other hand, are items of expense necessary
for the laborer's and his family's existence and subsistence so
that by express provision of law (Sec. 2[g]), they form part of
the wage and when furnished by the employer are deductible
therefrom, since if they are not so furnished, the laborer would
spend and pay for them just the same.
Petitioner Mayon Hotel & Restaurant is a single proprietor
business registered in the name of petitioner Pacita O. Po,6
whose mother, petitioner Josefa Po Lam, manages the
establishment.7 The hotel and restaurant employed about
sixteen (16) employees.
Records show that on various dates starting in 1981, petitioner
hotel and restaurant hired the following people, all
respondents in this case, with the following jobs:8
1. Wenefredo Loveres
Accountant and Officer-in-charge
2. Paterno Llarena
Front Desk Clerk

In short, the benefit or privilege given to the employee which 3. Gregorio Nicerio
constitutes an extra remuneration above and over his basic or
ordinary earning or wage is supplement; and when said benefit Supervisory Waiter
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 4. Amado Macandog
(food, lodging, bonus or sick leave) given, but in the purpose
for which it is given.23 In the case at bench, the items Roomboy
provided were given freely by SLL for the purpose of
maintaining the efficiency and health of its workers while they 5. Luis Guades
were working at their respective projects.1avvphi1
Utility/Maintenance Worker
For said reason, the cases of Agabon and Glaxo are
inapplicable in this case. At any rate, these were cases of 6. Santos Broola
dismissal with just and authorized causes. The present case
involves the matter of the failure of the petitioners to comply Roomboy
with the payment of the prescribed minimum wage.
7. Teodoro Laurenaria
The Court sustains the deletion of the award of differentials
with respect to respondent Roldan Lopez. As correctly pointed Waiter
out by the CA, he did not work for the project in Antipolo.
8. Eduardo Alamares
WHEREFORE, the petition is DENIED. The temporary
restraining order issued by the Court on November 29, 2006 is Roomboy/Waiter
deemed, as it is hereby ordered, DISSOLVED.
9. Lourdes Camigla
SO ORDERED.
Cashier
Mayon Hotel vs Adana
PUNO, J.: 10. Chona Bumalay

This is a petition for certiorari to reverse and set aside the Cashier
Decision issued by the Court of Appeals (CA)1 in CA-G.R. SP
11. Jose Atractivo
Technician
12. Amado Alamares
Dishwasher and Kitchen Helper
13. Roger Burce
Cook
14. Rolando Adana
Waiter
15. Miguel Torrefranca
Cook
16. Edgardo Torrefranca
Cook
Due to the expiration and non-renewal of the lease contract for
the rented space occupied by the said hotel and restaurant at
Rizal Street, the hotel operations of the business were
suspended on March 31, 1997.9 The operation of the
restaurant was continued in its new location at Elizondo
Street, Legazpi City, while waiting for the construction of a
new Mayon Hotel & Restaurant at Pearanda Street, Legazpi
City.10 Only nine (9) of the sixteen (16) employees continued
working in the Mayon Restaurant at its new site.11
On various dates of April and May 1997, the 16 employees
filed complaints for underpayment of wages and other money
claims against petitioners, as follows:12
Wenefredo Loveres, Luis Guades, Amado Macandog and Jose
Atractivo for illegal dismissal, underpayment of wages,
nonpayment of holiday and rest day pay; service incentive
leave pay (SILP) and claims for separation pay plus damages;
Paterno Llarena and Gregorio Nicerio for illegal dismissal
with claims for underpayment of wages; nonpayment of cost
of living allowance (COLA) and overtime pay; premium pay
for holiday and rest day; SILP; nightshift differential pay and
separation pay plus damages;
Miguel Torrefranca, Chona Bumalay and Lourdes Camigla for
underpayment of wages; nonpayment of holiday and rest day
pay and SILP;
Rolando Adana, Roger Burce and Amado Alamares for
underpayment of wages; nonpayment of COLA, overtime,
holiday, rest day, SILP and nightshift differential pay;
Eduardo Alamares for underpayment of wages, nonpayment of
holiday, rest day and SILP and night shift differential pay;
Santos Broola for illegal dismissal, underpayment of wages,
overtime pay, rest day pay, holiday pay, SILP, and damages;13
and
Teodoro Laurenaria for underpayment of wages; nonpayment
of COLA and overtime pay; premium pay for holiday and rest
day, and SILP.
On July 14, 2000, Executive Labor Arbiter Gelacio L. Rivera,
Jr. rendered a Joint Decision in favor of the employees. The
Labor Arbiter awarded substantially all of respondents' money
claims, and held that respondents Loveres, Macandog and
Llarena were entitled to separation pay, while respondents
Guades, Nicerio and Alamares were entitled to their retirement
pay. The Labor Arbiter also held that based on the evidence
presented, Josefa Po Lam is the owner/proprietor of Mayon
Hotel & Restaurant and the proper respondent in these cases.
On appeal to the NLRC, the decision of the Labor Arbiter was
reversed, and all the complaints were dismissed.
Respondents filed a motion for reconsideration with the
NLRC and when this was denied, they filed a petition for
certiorari with the CA which rendered the now assailed
decision.
After their motion for reconsideration was denied, petitioners
now come to this Court, seeking the reversal of the CA
decision on the following grounds:
I. The Honorable Court of Appeals erred in reversing the
decision of the National Labor Relations Commission (Second
Division) by holding that the findings of fact of the NLRC
were not supported by substantial evidence despite ample and
sufficient evidence showing that the NLRC decision is indeed
supported by substantial evidence;
II. The Honorable Court of Appeals erred in upholding the
joint decision of the labor arbiter which ruled that private
respondents were illegally dismissed from their employment,
despite the fact that the reason why private respondents were
out of work was not due to the fault of petitioners but to
causes beyond the control of petitioners.
III. The Honorable Court of Appeals erred in upholding the
award of monetary benefits by the labor arbiter in his joint
decision in favor of the private respondentS, including the
award of damages to six (6) of the private respondents, despite
the fact that the private respondents have not proven by
substantial evidence their entitlement thereto and especially
the fact that they were not illegally dismissed by the
petitioners.
IV. The Honorable Court of Appeals erred in holding that
Pacita Ong Po is the owner of the business establishment,
petitioner Mayon Hotel and Restaurant, thus disregarding the
certificate of registration of the business establishment
ISSUED by the local government, which is a public document,
and the unqualified admissions of complainants-private
respondents.14
In essence, the petition calls for a review of the following
issues:
1. Was it correct for petitioner Josefa Po Lam to be held liable
as the owner of petitioner Mayon Hotel & Restaurant, and the
proper respondent in this case?
2. Were respondents Loveres, Guades, Macandog, Atractivo,
Llarena and Nicerio illegally dismissed?
3. Are respondents entitled to their money claims due to
underpayment of wages, and nonpayment of holiday pay, rest
day premium, SILP, COLA, overtime pay, and night shift
differential pay?
It is petitioners' contention that the above issues have already
been threshed out sufficiently and definitively by the NLRC.
They therefore assail the CA's reversal of the NLRC decision,
claiming that based on the ruling in Castillo v. NLRC,15 it is
non sequitur that the CA should re-examine the factual
findings of both the NLRC and the Labor Arbiter, especially
as in this case the NLRC's findings are allegedly supported by
substantial evidence.
We do not agree.
There is no denying that it is within the NLRC's competence,
as an appellate agency reviewing decisions of Labor Arbiters,
to disagree with and set aside the latter's findings.16 But it
stands to reason that the NLRC should state an acceptable
cause therefore, otherwise it would be a whimsical, capricious,
oppressive, illogical, unreasonable exercise of quasi-judicial
prerogative, subject to invalidation by the extraordinary writ
of certiorari.17 And when the factual findings of the Labor
Arbiter and the NLRC are diametrically opposed and this
disparity of findings is called into question, there is,
necessarily, a re-examination of the factual findings to
ascertain which opinion should be sustained.18 As ruled in
Asuncion v. NLRC,19
Although, it is a legal tenet that factual findings of
administrative bodies are entitled to great weight and respect,
we are constrained to take a second look at the facts before us
because of the diversity in the opinions of the Labor Arbiter
and the NLRC. A disharmony between the factual findings of
the Labor Arbiter and those of the NLRC opens the door to a
review thereof by this Court.20
The CA, therefore, did not err in reviewing the records to
determine which opinion was supported by substantial
evidence.
Moreover, it is explicit in Castillo v. NLRC21 that factual
findings of administrative bodies like the NLRC are affirmed
only if they are supported by substantial evidence that is
manifest in the decision and on the records. As stated in
Castillo:
[A]buse of discretion does not necessarily follow from a
reversal by the NLRC of a decision of a Labor Arbiter. Mere
variance in evidentiary assessment between the NLRC and the
Labor Arbiter does not automatically call for a full review of
the facts by this Court. The NLRC's decision, so long as it is
not bereft of substantial support from the records, deserves
respect from this Court. As a rule, the original and exclusive
jurisdiction to review a decision or resolution of respondent
NLRC in a petition for certiorari under Rule 65 of the Rules of
Court does not include a correction of its evaluation of the
evidence but is confined to issues of jurisdiction or grave
abuse of discretion. Thus, the NLRC's factual findings, if
supported by substantial evidence, are entitled to great respect
and even finality, unless petitioner is able to show that it
simply and arbitrarily disregarded the evidence before it or
had misappreciated the evidence to such an extent as to
compel a contrary conclusion if such evidence had been
properly appreciated. (citations omitted)22
After careful review, we find that the reversal of the NLRC's
decision was in order precisely because it was not supported
by substantial evidence.
1. Ownership by Josefa Po Lam
The Labor Arbiter ruled that as regards the claims of the
employees, petitioner Josefa Po Lam is, in fact, the owner of
Mayon Hotel & Restaurant. Although the NLRC reversed this
decision, the CA, on review, agreed with the Labor Arbiter
that notwithstanding the certificate of registration in the name
of Pacita Po, it is Josefa Po Lam who is the owner/proprietor
of Mayon Hotel & Restaurant, and the proper respondent in
the complaints filed by the employees. The CA decision states
in part:
[Despite] the existence of the Certificate of Registration in the
name of Pacita Po, we cannot fault the labor arbiter in ruling
that Josefa Po Lam is the owner of the subject hotel and
restaurant. There were conflicting documents submitted by
Josefa herself. She was ordered to submit additional
documents to clearly establish ownership of the hotel and
restaurant, considering the testimonies given by the
[respondents] and the non-appearance and failure to submit
her own position paper by Pacita Po. But Josefa did not
comply with the directive of the Labor Arbiter. The ruling of
the Supreme Court in Metropolitan Bank and Trust Company
v. Court of Appeals applies to Josefa Po Lam which is stated
in this wise:
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.
Furthermore, in ruling that Josefa Po Lam is the real owner of
the hotel and restaurant, the labor arbiter relied also on the
testimonies of the witnesses, during the hearing of the instant
case. When the conclusions of the labor arbiter are sufficiently
corroborated by evidence on record, the same should be
respected by appellate tribunals, since he is in a better position
to assess and evaluate the credibility of the contending
parties.23 (citations omitted)
Petitioners insist that it was error for the Labor Arbiter and the
CA to have ruled that petitioner Josefa Po Lam is the owner of
Mayon Hotel & Restaurant. They allege that the documents
they submitted to the Labor Arbiter sufficiently and clearly
establish the fact of ownership by petitioner Pacita Po, and not
her mother, petitioner Josefa Po Lam. They contend that
petitioner Josefa Po Lam's participation was limited to merely
(a) being the overseer; (b) receiving the month-to-month
and/or year-to-year financial reports prepared and submitted
by respondent Loveres; and (c) visitation of the premises.24
They also put emphasis on the admission of the respondents in
their position paper submitted to the Labor Arbiter, identifying
petitioner Josefa Po Lam as the manager, and Pacita Po as the
owner.25 This, they claim, is a judicial admission and is
binding on respondents. They protest the reliance the Labor
Arbiter and the CA placed on their failure to submit additional
documents to clearly establish ownership of the hotel and
restaurant, claiming that there was no need for petitioner
Josefa Po Lam to submit additional documents considering
that the Certificate of Registration is the best and primary
evidence of ownership.
We disagree with petitioners. We have scrutinized the records
and find the claim that petitioner Josefa Po Lam is merely the
overseer is not borne out by the evidence.
First. It is significant that only Josefa Po Lam appeared in the
proceedings with the Labor Arbiter. Despite receipt of the
Labor Arbiter's notice and summons, other notices and Orders,
petitioner Pacita Po failed to appear in any of the proceedings
with the Labor Arbiter in these cases, nor file her position
paper.26 It was only on appeal with the NLRC that Pacita Po
signed the pleadings.27 The apathy shown by petitioner Pacita
Po is contrary to human experience as one would think that the
owner of an establishment would naturally be concerned when
all her employees file complaints against her.
Second. The records of the case belie petitioner Josefa Po
Lam's claim that she is merely an overseer. The findings of the
Labor Arbiter on this question were based on credible,
competent and substantial evidence. We again quote the Joint
Decision on this matter:
Mayon Hotel and Restaurant is a [business name] of an
enterprise. While [petitioner] Josefa Po Lam claims that it is
her daughter, Pacita Po, who owns the hotel and restaurant
when the latter purchased the same from one Palanos in 1981,
Josefa failed to submit the document of sale from said Palanos
to Pacita as allegedly the sale was only verbal although the
license to operate said hotel and restaurant is in the name of
Pacita which, despite our Order to Josefa to present the same,
she failed to comply (p. 38, tsn. August 13, 1998). While
several documentary evidences were submitted by Josefa
wherein Pacita was named therein as owner of the hotel and
restaurant (pp. 64, 65, 67 to 69; vol. I, rollo)[,] there were
documentary evidences also that were submitted by Josefa
showing her ownership of said enterprise (pp. 468 to 469; vol.
II, rollo). While Josefa explained her participation and interest
in the business as merely to help and assist her daughter as the
hotel and restaurant was near the former's store, the
testimonies of [respondents] and Josefa as well as her
demeanor during the trial in these cases proves (sic) that
Josefa Po Lam owns Mayon Hotel and Restaurant.
[Respondents] testified that it was Josefa who exercises all the
acts and manifestation of ownership of the hotel and restaurant
like transferring employees from the Greatwall Palace
Restaurant which she and her husband Roy Po Lam previously
owned; it is Josefa to whom the employees submits (sic)
reports, draws money for payment of payables and for
marketing, attending (sic) to Labor Inspectors during ocular
inspections. Except for documents whereby Pacita Po appears
as the owner of Mayon Hotel and Restaurant, nothing in the
record shows any circumstance or manifestation that Pacita Po
is the owner of Mayon Hotel and Restaurant. The least that
can be said is that it is absurd for a person to purchase a hotel
and restaurant in the very heart of the City of Legazpi
verbally. Assuming this to be true, when [petitioners],
particularly Josefa, was directed to submit evidence as to the
ownership of Pacita of the hotel and restaurant, considering
the testimonies of [respondents], the former should [have]
submitted the lease contract between the owner of the building
where Mayon Hotel and Restaurant was located at Rizal St.,
Legazpi City and Pacita Po to clearly establish ownership by
the latter of said enterprise. Josefa failed. We are not surprised
why some employers employ schemes to mislead Us in order
to evade liabilities. We therefore consider and hold Josefa Po
Lam as the owner/proprietor of Mayon Hotel and Restaurant
and the proper respondent in these cases.28
Petitioners' reliance on the rules of evidence, i.e., the
certificate of registration being the best proof of ownership, is
misplaced. Notwithstanding the certificate of registration,
doubts were cast as to the true nature of petitioner Josefa Po
Lam's involvement in the enterprise, and the Labor Arbiter had
the authority to resolve this issue. It was therefore within his
jurisdiction to require the additional documents to ascertain
who was the real owner of petitioner Mayon Hotel &
Restaurant.
Article 221 of the Labor Code is clear: technical rules are not
binding, and the application of technical rules of procedure
may be relaxed in labor cases to serve the demand of
substantial justice.29 The rule of evidence prevailing in court
of law or equity shall not be controlling in labor cases and it is
the spirit and intention of the Labor Code that the Labor
Arbiter shall use every and all reasonable means to ascertain
the facts in each case speedily and objectively and without
regard to technicalities of law or procedure, all in the interest
of due process.30 Labor laws mandate the speedy
administration of justice, with least attention to technicalities
but without sacrificing the fundamental requisites of due
process.31
Similarly, the fact that the respondents' complaints contained
no allegation that petitioner Josefa Po Lam is the owner is of
no moment. To apply the concept of judicial admissions to
respondents who are but lowly employees - would be to
exact compliance with technicalities of law that is contrary to
the demands of substantial justice. Moreover, the issue of
ownership was an issue that arose only during the course of
the proceedings with the Labor Arbiter, as an incident of
determining respondents' claims, and was well within his
jurisdiction.32
Petitioners were also not denied due process, as they were
given sufficient opportunity to be heard on the issue of
ownership.33 The essence of due process in administrative
proceedings is simply an opportunity to explain one's side or
an opportunity to seek reconsideration of the action or ruling
complained of.34 And there is nothing in the records which
would suggest that petitioners had absolute lack of opportunity
to be heard.35 Obviously, the choice not to present evidence
was made by petitioners themselves.36
But more significantly, we sustain the Labor Arbiter and the
CA because even when the case was on appeal with the
NLRC, nothing was submitted to negate the Labor Arbiter's
finding that Pacita Po is not the real owner of the subject hotel
and restaurant. Indeed, no such evidence was submitted in the
proceedings with the CA nor with this Court. Considering that
petitioners vehemently deny ownership by petitioner Josefa Po
Lam, it is most telling that they continue to withhold evidence
which would shed more light on this issue. We therefore agree
with the CA that the failure to submit could only mean that if
produced, it would have been adverse to petitioners' case.37
Thus, we find that there is substantial evidence to rule that
petitioner Josefa Po Lam is the owner of petitioner Mayon
Hotel & Restaurant.
2. Illegal Dismissal: claim for separation pay
Of the sixteen employees, only the following filed a case for
illegal dismissal: respondents Loveres, Llarena, Nicerio,
Macandog, Guades, Atractivo and Broola.38
The Labor Arbiter found that there was illegal dismissal, and
granted separation pay to respondents Loveres, Macandog and
Llarena. As respondents Guades, Nicerio and Alamares were
already 79, 66 and 65 years old respectively at the time of the
dismissal, the Labor Arbiter granted retirement benefits
pursuant to Article 287 of the Labor Code as amended.39 The
Labor Arbiter ruled that respondent Atractivo was not entitled
to separation pay because he had been transferred to work in
the restaurant operations in Elizondo Street, but awarded him
damages. Respondents Loveres, Llarena, Nicerio, Macandog
and Guades were also awarded damages.40
The NLRC reversed the Labor Arbiter, finding that "no clear
act of termination is attendant in the case at bar" and that
respondents "did not submit any evidence to that effect, but
the finding and conclusion of the Labor Arbiter [are] merely
based on his own surmises and conjectures."41 In turn, the
NLRC was reversed by the CA.
It is petitioners contention that the CA should have sustained
the NLRC finding that none of the above-named respondents
were illegally dismissed, or entitled to separation or retirement
pay. According to petitioners, even the Labor Arbiter and the
CA admit that when the illegal dismissal case was filed by
respondents on April 1997, they had as yet no cause of action.
Petitioners therefore conclude that the filing by respondents of
the illegal dismissal case was premature and should have been
dismissed outright by the Labor Arbiter.42 Petitioners also
claim that since the validity of respondents' dismissal is a
factual question, it is not for the reviewing court to weigh the
conflicting evidence.43
We do not agree. Whether respondents are still working for
petitioners is a factual question. And the records are
unequivocal that since April 1997, when petitioner Mayon
Hotel & Restaurant suspended its hotel operations and
transferred its restaurant operations in Elizondo Street,
respondents Loveres, Macandog, Llarena, Guades and Nicerio
have not been permitted to work for petitioners. Respondent
Alamares, on the other hand, was also laid-off when the
Elizondo Street operations closed, as were all the other
respondents. Since then, respondents have not been permitted
to work nor recalled, even after the construction of the new
premises at Pearanda Street and the reopening of the hotel
operations with the restaurant in this new site. As stated by the
Joint Decision of the Labor Arbiter on July 2000, or more than
three (3) years after the complaint was filed:44
[F]rom the records, more than six months had lapsed without
[petitioner] having resumed operation of the hotel. After more
than one year from the temporary closure of Mayon Hotel and
the temporary transfer to another site of Mayon Restaurant,
the building which [petitioner] Josefa allege[d] w[h]ere the
hotel and restaurant will be transferred has been finally
constructed and the same is operated as a hotel with bar and
restaurant nevertheless, none of [respondents] herein who
were employed at Mayon Hotel and Restaurant which was
also closed on April 30, 1998 was/were recalled by [petitioner]
to continue their services...
Parenthetically, the Labor Arbiter did not grant separation pay
to the other respondents as they had not filed an amended
complaint to question the cessation of their employment after
the closure of Mayon Hotel & Restaurant on March 31,
1997.45
The above factual finding of the Labor Arbiter was never
refuted by petitioners in their appeal with the NLRC. It
confounds us, therefore, how the NLRC could have so
cavalierly treated this uncontroverted factual finding by ruling
that respondents have not introduced any evidence to show
that they were illegally dismissed, and that the Labor Arbiter's
finding was based on conjecture.46 It was a serious error that
the NLRC did not inquire as to the legality of the cessation of
employment. Article 286 of the Labor Code is clear there is
termination of employment when an otherwise bona fide
suspension of work exceeds six (6) months.47 The cessation
of employment for more than six months was patent and the
employer has the burden of proving that the termination was
for a just or authorized cause.48
Moreover, we are not impressed by any of petitioners' attempts
to exculpate themselves from the charges. First, in the
proceedings with the Labor Arbiter, they claimed that it could
not be illegal dismissal because the lay-off was merely
temporary (and due to the expiration of the lease contract over
the old premises of the hotel). They specifically invoked
Article 286 of the Labor Code to argue that the claim for
separation pay was premature and without legal and factual
basis.49 Then, because the Labor Arbiter had ruled that there
was already illegal dismissal when the lay-off had exceeded
the six-month period provided for in Article 286, petitioners
raise this novel argument, to wit:
It is the firm but respectful submission of petitioners that
reliance on Article 286 of the Labor Code is misplaced,
considering that the reason why private respondents were out
of work was not due to the fault of petitioners. The failure of
petitioners to reinstate the private respondents to their former
positions should not likewise be attributable to said petitioners
as the private respondents did not submit any evidence to
prove their alleged illegal dismissal. The petitioners cannot
discern why they should be made liable to the private
respondents for their failure to be reinstated considering that
the fact that they were out of work was not due to the fault of
petitioners but due to circumstances beyond the control of
petitioners, which are the termination and non-renewal of the
lease contract over the subject premises. Private respondents,
however, argue in their Comment that petitioners themselves
sought the application of Article 286 of the Labor Code in
their case in their Position Paper filed before the Labor
Arbiter. In refutation, petitioners humbly submit that even if
they invoke Article 286 of the Labor Code, still the fact
remains, and this bears stress and emphasis, that the temporary
suspension of the operations of the establishment arising from
the non-renewal of the lease contract did not result in the
termination of employment of private respondents and,
therefore, the petitioners cannot be faulted if said private
respondents were out of work, and consequently, they are not
entitled to their money claims against the petitioners.50
It is confounding how petitioners have fashioned their
arguments. After having admitted, in effect, that respondents
have been laid-off since April 1997, they would have this
Court excuse their refusal to reinstate respondents or grant
them separation pay because these same respondents
purportedly have not proven the illegality of their dismissal.
Petitioners' arguments reflect their lack of candor and the
blatant attempt to use technicalities to muddle the issues and
defeat the lawful claims of their employees. First, petitioners
admit that since April 1997, when hotel operations were
suspended due to the termination of the lease of the old
premises, respondents Loveres, Macandog, Llarena, Nicerio
and Guades have not been permitted to work. Second, even
after six months of what should have been just a temporary
lay-off, the same respondents were still not recalled to work.
As a matter of fact, the Labor Arbiter even found that as of the
time when he rendered his Joint Decision on July 2000 or
more than three (3) years after the supposed "temporary lay-
off," the employment of all of the respondents with petitioners
had ceased, notwithstanding that the new premises had been
completed and the same operated as a hotel with bar and
restaurant. This is clearly dismissal or the permanent
severance or complete separation of the worker from the
service on the initiative of the employer regardless of the
reasons therefor.51
On this point, we note that the Labor Arbiter and the CA are in
accord that at the time of the filing of the complaint,
respondents had no cause of action to file the case for illegal
dismissal. According to the CA and the Labor Arbiter, the lay-
off of the respondents was merely temporary, pending
construction of the new building at Pearanda Street.52
While the closure of the hotel operations in April of 1997 may
have been temporary, we hold that the evidence on record
belie any claim of petitioners that the lay-off of respondents
on that same date was merely temporary. On the contrary, we
find substantial evidence that petitioners intended the
termination to be permanent. First, respondents Loveres,
Macandog, Llarena, Guades, Nicerio and Alamares filed the
complaint for illegal dismissal immediately after the closure of
the hotel operations in Rizal Street, notwithstanding the
alleged temporary nature of the closure of the hotel operations,
and petitioners' allegations that the employees assigned to the
hotel operations knew about this beforehand. Second, in their
position paper submitted to the Labor Arbiter, petitioners
invoked Article 286 of the Labor Code to assert that the
employer-employee relationship was merely suspended, and
therefore the claim for separation pay was premature and
without legal or factual basis.53 But they made no mention of
any intent to recall these respondents to work upon completion
of the new premises. Third, the various pleadings on record
show that petitioners held respondents, particularly Loveres,
as responsible for mismanagement of the establishment and
for abuse of trust and confidence. Petitioner Josefa Po Lam's
affidavit on July 21, 1998, for example, squarely blamed
respondents, specifically Loveres, Bumalay and Camigla, for
abusing her leniency and causing petitioner Mayon Hotel &
Restaurant to sustain "continuous losses until it is closed." She
then asserts that respondents "are not entitled to separation pay
for they were not terminated and if ever the business ceased to
operate it was because of losses."54 Again, petitioners make
the same allegation in their memorandum on appeal with the
NLRC, where they alleged that three (3) years prior to the
expiration of the lease in 1997, the operation of the Hotel had
been sustaining consistent losses, and these were solely
attributed to respondents, but most especially due to Loveres's
mismanagement and abuse of petitioners' trust and
confidence.55 Even the petition filed in this court made
reference to the separation of the respondents due to "severe
financial losses and reverses," again imputing it to
respondents' mismanagement.56 The vehemence of
petitioners' accusation of mismanagement against respondents,
especially against Loveres, is inconsistent with the desire to
recall them to work. Fourth, petitioners' memorandum on
appeal also averred that the case was filed "not because of the
business being operated by them or that they were supposedly
not receiving benefits from the Labor Code which is true, but
because of the fact that the source of their livelihood, whether
legal or immoral, was stopped on March 31, 1997, when the
owner of the building terminated the Lease Contract."57 Fifth,
petitioners had inconsistencies in their pleadings (with the
NLRC, CA and with this Court) in referring to the closure,58
i.e., in the petition filed with this court, they assert that there is
no illegal dismissal because there was "only a temporary
cessation or suspension of operations of the hotel and
restaurant due to circumstances beyond the control of
petitioners, and that is, the non-renewal of the lease
contract..."59 And yet, in the same petition, they also assert
that: (a) the separation of respondents was due to severe
financial losses and reverses leading to the closure of the
business; and (b) petitioner Pacita Po had to close shop and
was bankrupt and has no liquidity to put up her own building
to house Mayon Hotel & Restaurant.60 Sixth, and finally, the
uncontroverted finding of the Labor Arbiter that petitioners
terminated all the other respondents, by not employing them
when the Hotel and Restaurant transferred to its new site on
Pearanda Street.61 Indeed, in this same memorandum,
petitioners referred to all respondents as "former employees of
Mayon Hotel & Restaurant."62
These factors may be inconclusive individually, but when
taken together, they lead us to conclude that petitioners really
intended to dismiss all respondents and merely used the
termination of the lease (on Rizal Street premises) as a means
by which they could terminate their employees.
Moreover, even assuming arguendo that the cessation of
employment on April 1997 was merely temporary, it became
dismissal by operation of law when petitioners failed to
reinstate respondents after the lapse of six (6) months,
pursuant to Article 286 of the Labor Code.
We are not impressed by petitioners' claim that severe business
losses justified their failure to reinstate respondents. The
evidence to prove this fact is inconclusive. But more
important, serious business losses do not excuse the employer
from complying with the clearance or report required under
Article 283 of the Labor Code and its implementing rules
before terminating the employment of its workers.63 In the
absence of justifying circumstances, the failure of petitioners
to observe the procedural requirements set out under Article
284, taints their actuations with bad faith, especially since they
claimed that they have been experiencing losses in the three
years before 1997. To say the least, if it were true that the lay-
off was temporary but then serious business losses prevented
the reinstatement of respondents, then petitioners should have
complied with the requirements of written notice. The
requirement of law mandating the giving of notices was
intended not only to enable the employees to look for another
employment and therefore ease the impact of the loss of their
jobs and the corresponding income, but more importantly, to
give the Department of Labor and Employment (DOLE) the
opportunity to ascertain the verity of the alleged authorized
cause of termination.64
And even assuming that the closure was due to a reason
beyond the control of the employer, it still has to accord its
employees some relief in the form of severance pay.65
While we recognize the right of the employer to terminate the
services of an employee for a just or authorized cause, the
dismissal of employees must be made within the parameters of
law and pursuant to the tenets of fair play.66 And in
termination disputes, the burden of proof is always on the
employer to prove that the dismissal was for a just or
authorized cause.67 Where there is no showing of a clear,
valid and legal cause for termination of employment, the law
considers the case a matter of illegal dismissal.68
Under these circumstances, the award of damages was proper.
As a rule, moral damages are recoverable where the dismissal
of the employee was attended by bad faith or fraud or
constituted an act oppressive to labor, or was done in a manner
contrary to morals, good customs or public policy.69 We
believe that the dismissal of the respondents was attended with
bad faith and meant to evade the lawful obligations imposed
upon an employer.
To rule otherwise would lead to the anomaly of respondents
being terminated from employment in 1997 as a matter of fact,
but without legal redress. This runs counter to notions of fair
play, substantial justice and the constitutional mandate that
labor rights should be respected. If doubts exist between the
evidence presented by the employer and the employee, the
scales of justice must be tilted in favor of the latter the
employer must affirmatively show rationally adequate
evidence that the dismissal was for a justifiable cause.70 It is a
time-honored rule that in controversies between a laborer and
his master, doubts reasonably arising from the evidence, or in
the interpretation of agreements and writing should be
resolved in the former's favor.71 The policy is to extend the
doctrine to a greater number of employees who can avail of
the benefits under the law, which is in consonance with the
avowed policy of the State to give maximum aid and
protection of labor.72
We therefore reinstate the Labor Arbiter's decision with the
following modifications:
(a) Separation pay for the illegal dismissal of respondents
Loveres, Macandog and Llarena; (Santos Broola cannot be
granted separation pay as he made no such claim);
(b) Retirement pay for respondents Guades, Nicerio, and
Alamares, who at the time of dismissal were entitled to their
retirement benefits pursuant to Article 287 of the Labor Code
as amended;73 and
(c) Damages for respondents Loveres, Macandog, Llarena,
Guades, Nicerio, Atractivo, and Broola.
3. Money claims
The CA held that contrary to the NLRC's ruling, petitioners
had not discharged the burden of proving that the monetary
claims of the respondents have been paid.74 The CA thus
reinstated the Labor Arbiter's grant of respondents' monetary
claims, including damages.
Petitioners assail this ruling by repeating their long and
convoluted argument that as there was no illegal dismissal,
then respondents are not entitled to their monetary claims or
separation pay and damages. Petitioners' arguments are not
only tiring, repetitive and unconvincing, but confusing and
confused entitlement to labor standard benefits is a separate
and distinct concept from payment of separation pay arising
from illegal dismissal, and are governed by different
provisions of the Labor Code.
We agree with the CA and the Labor Arbiter. Respondents
have set out with particularity in their complaint, position
paper, affidavits and other documents the labor standard
benefits they are entitled to, and which they alleged that
petitioners have failed to pay them. It was therefore
petitioners' burden to prove that they have paid these money
claims. One who pleads payment has the burden of proving it,
and even where the employees must allege nonpayment, the
general rule is that the burden rests on the defendant to prove
nonpayment, rather than on the plaintiff to prove non
payment.75 This petitioners failed to do.
We also agree with the Labor Arbiter and the CA that the
documents petitioners submitted, i.e., affidavits executed by
some of respondents during an ocular inspection conducted by
an inspector of the DOLE; notices of inspection result and
Facility Evaluation Orders issued by DOLE, are not sufficient
to prove payment.76 Despite repeated orders from the Labor
Arbiter,77 petitioners failed to submit the pertinent employee
files, payrolls, records, remittances and other similar
documents which would show that respondents rendered work
entitling them to payment for overtime work, night shift
differential, premium pay for work on holidays and rest day,
and payment of these as well as the COLA and the SILP
documents which are not in respondents' possession but in the
custody and absolute control of petitioners.78 By choosing not
to fully and completely disclose information and present the
necessary documents to prove payment of labor standard
benefits due to respondents, petitioners failed to discharge the
burden of proof.79 Indeed, petitioners' failure to submit the
necessary documents which as employers are in their
possession, inspite of orders to do so, gives rise to the
presumption that their presentation is prejudicial to its
cause.80 As aptly quoted by the CA:
[W]hen 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.81
Petitioners next claim that the cost of the food and snacks
provided to respondents as facilities should have been
included in reckoning the payment of respondents' wages.
They state that although on the surface respondents appeared
to receive minimal wages, petitioners had granted respondents
other benefits which are considered part and parcel of their
wages and are allowed under existing laws.82 They claim that
these benefits make up for whatever inadequacies there may
be in compensation.83 Specifically, they invoked Sections 5
and 6, Rule VII-A, which allow the deduction of facilities
provided by the employer through an appropriate Facility
Evaluation Order issued by the Regional Director of the
DOLE.84 Petitioners also aver that they give five (5) percent
of the gross income each month as incentives. As proof of
compliance of payment of minimum wages, petitioners
submitted the Notice of Inspection Results issued in 1995 and
1997 by the DOLE Regional Office.85
The cost of meals and snacks purportedly provided to
respondents cannot be deducted as part of respondents'
minimum wage. As stated in the Labor Arbiter's decision:86
While [petitioners] submitted Facility Evaluation Orders (pp.
468, 469; vol. II, rollo) issued by the DOLE Regional Office
whereby the cost of meals given by [petitioners] to
[respondents] were specified for purposes of considering the
same as part of their wages, We cannot consider the cost of
meals in the Orders as applicable to [respondents].
[Respondents] were not interviewed by the DOLE as to the
quality and quantity of food appearing in the applications of
[petitioners] for facility evaluation prior to its approval to
determine whether or not [respondents] were indeed given
such kind and quantity of food. Also, there was no evidence
that the quality and quantity of food in the Orders were
voluntarily accepted by [respondents]. On the contrary; while
some [of the respondents] admitted that they were given meals
and merienda, the quality of food serve[d] to them were not
what were provided for in the Orders and that it was only
when they filed these cases that they came to know about said
Facility Evaluation Orders (pp. 100; 379[,] vol. II, rollo; p. 40,
tsn[,] June 19, 1998). [Petitioner] Josefa herself, who applied
for evaluation of the facility (food) given to [respondents],
testified that she did not inform [respondents] concerning said
Facility Evaluation Orders (p. 34, tsn[,] August 13, 1998).
Even granting that meals and snacks were provided and indeed
constituted facilities, such facilities could not be deducted
without compliance with certain legal requirements. As stated
in Mabeza v. NLRC,87 the employer simply cannot deduct the
value from the employee's wages without satisfying the
following: (a) proof that such facilities are customarily
furnished by the trade; (b) the provision of deductible facilities
is voluntarily accepted in writing by the employee; and (c) the
facilities are charged at fair and reasonable value. The records
are clear that petitioners failed to comply with these
requirements. There was no proof of respondents' written
authorization. Indeed, the Labor Arbiter found that while the
respondents admitted that they were given meals and
merienda, the quality of food served to them was not what was
provided for in the Facility Evaluation Orders and it was only
when they filed the cases that they came to know of this
supposed Facility Evaluation Orders.88 Petitioner Josefa Po
Lam herself admitted that she did not inform the respondents
of the facilities she had applied for.89
Considering the failure to comply with the above-mentioned
legal requirements, the Labor Arbiter therefore erred when he
ruled that the cost of the meals actually provided to
respondents should be deducted as part of their salaries, on the
ground that respondents have availed themselves of the food
given by petitioners.90 The law is clear that mere availment is
not sufficient to allow deductions from employees' wages.
More important, we note the uncontroverted testimony of
respondents on record that they were required to eat in the
hotel and restaurant so that they will not go home and there is
no interruption in the services of Mayon Hotel & Restaurant.
As ruled in Mabeza, food or snacks or other convenience
provided by the employers are deemed as supplements if they
are granted for the convenience of the employer. The criterion
in making a distinction between a supplement and a facility
does not so much lie in the kind (food, lodging) but the
purpose.91 Considering, therefore, 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
petitioners' business.92 The deduction of the cost of meals
from respondents' wages, therefore, should be removed.
We also do not agree with petitioners that the five (5) percent
of the gross income of the establishment can be considered as
part of the respondents' wages. We quote with approval the
Labor Arbiter on this matter, to wit:
While complainants, who were employed in the hotel,
receive[d] various amounts as profit share, the same cannot be
considered as part of their wages in determining their claims
for violation of labor standard benefits. Although called profit
share[,] such is in the nature of share from service charges
charged by the hotel. This is more explained by [respondents]
when they testified that what they received are not fixed
amounts and the same are paid not on a monthly basis (pp. 55,
93, 94, 103, 104; vol. II, rollo). Also, [petitioners] failed to
submit evidence that the amounts received by [respondents] as
profit share are to be considered part of their wages and had
been agreed by them prior to their employment. Further, how
can the amounts receive[d] by [respondents] be considered as
profit share when the same [are] based on the gross receipt of
the hotel[?] No profit can as yet be determined out of the gross
receipt of an enterprise. Profits are realized after expenses are
deducted from the gross income.
On the issue of the proper minimum wage applicable to
respondents, we sustain the Labor Arbiter. We note that
petitioners themselves have admitted that the establishment
employs "more or less sixteen (16) employees,"93 therefore
they are estopped from claiming that the applicable minimum
wage should be for service establishments employing 15
employees or less.
As for petitioners repeated invocation of serious business
losses, suffice to say that this is not a defense to payment of
labor standard benefits. The employer cannot exempt himself
from liability to pay minimum wages because of poor
financial condition of the company. The payment of minimum
wages is not dependent on the employer's ability to pay.94
Thus, we reinstate the award of monetary claims granted by
the Labor Arbiter.
4. Conclusion
There is no denying that the actuations of petitioners in this
case have been reprehensible. They have terminated the
respondents' employment in an underhanded manner, and have
used and abused the quasi-judicial and judicial processes to
resist payment of their employees' rightful claims, thereby
protracting this case and causing the unnecessary clogging of
dockets of the Court. They have also forced respondents to
unnecessary hardship and financial expense. Indeed, the
circumstances of this case would have called for exemplary
damages, as the dismissal was effected in a wanton,
oppressive or malevolent manner,95 and public policy requires
that these acts must be suppressed and discouraged.96
Nevertheless, we cannot agree with the Labor Arbiter in
granting exemplary damages of P10,000.00 each to all
respondents. While it is true that other forms of damages
under the Civil Code may be awarded to illegally dismissed
employees,97 any award of moral damages by the Labor
Arbiter cannot be based on the Labor Code but should be
grounded on the Civil Code.98 And the law is clear that
exemplary damages can only be awarded if plaintiff shows
proof that he is entitled to moral, temperate or compensatory
damages.99
As only respondents Loveres, Guades, Macandog, Llarena,
Nicerio, Atractivo and Broola specifically claimed damages
from petitioners, then only they are entitled to exemplary
damages.sjgs1
Finally, we rule that attorney's fees in the amount to
P10,000.00 should be granted to each respondent. It is settled
that in actions for recovery of wages or where an employee
was forced to litigate and incur expenses to protect his rights
and interest, he is entitled to an award of attorney's fees.100
This case undoubtedly falls within this rule.
IN VIEW WHEREOF, the petition is hereby DENIED. The
Decision of January 17, 2003 of the Court of Appeals in CA-
G.R. SP No. 68642 upholding the Joint Decision of July 14,
2000 of the Labor Arbiter in RAB V Case Nos. 04-00079-97
and 04-00080-97 is AFFIRMED, with the following
MODIFICATIONS:
(1) Granting separation pay of one-half (1/2) month for every
year of service to respondents Loveres, Macandog and
Llarena;
(2) Granting retirement pay for respondents Guades, Nicerio,
and Alamares;
(3) Removing the deductions for food facility from the
amounts due to all respondents;
(4) Awarding moral damages of P20,000.00 each for
respondents Loveres, Macandog, Llarena, Guades, Nicerio,
Atractivo, and Broola;
(5) Deleting the award of exemplary damages of P10,000.00
from all respondents except Loveres, Macandog, Llarena,
Guades, Nicerio, Atractivo, and Broola; and
(6) Granting attorney's fees of P10,000.00 each to all
respondents.
The case is REMANDED to the Labor Arbiter for the
RECOMPUTATION of the total monetary benefits awarded
and due to the employees concerned in accordance with the
decision. The Labor Arbiter is ORDERED to submit his
compliance thereon within thirty (30) days from notice of this
decision, with copies furnished to the parties.
SO ORDERED.
Mabeza vs NLRC
KAPUNAN, J.:
This petition seeking the nullification of a resolution of public
respondent National Labor Relations Commission dated April
28, 1994 vividly illustrates why courts should be ever vigilant
in the preservation of the constitutionally enshrined rights of
the working class. Without the protection accorded by our
laws and the tempering of courts, the natural and historical
inclination of capital to ride roughshod over the rights of labor
would run unabated.
The facts of the case at bar, culled from the conflicting
versions of petitioner and private respondent, are illustrative.
Petitioner Norma Mabeza contends that around 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. 1
The instrument provides: 2
JOINT AFFIDAVIT
We, SYLVIA IGANA, HERMINIGILDO AQUINO,
EVELYN OGOY, MACARIA JUGUETA, ADELAIDA
NONOG, NORMA MABEZA, JONATHAN PICART and
JOSE DIZON, all of legal ages (sic), Filipinos and residents of
Baguio City, under oath, depose and say:
1. That we are employees of Mr. Peter L. Ng of his
Hotel Supreme situated at No. 416 Magsaysay Ave., Baguio
City.
2. That the said Hotel is separately operated from the
Ivy's Grill and Restaurant;
3. That we are all (8) employees in the hotel and
assigned in each respective shifts;
4. That we have no complaints against the management
of the Hotel Supreme as we are paid accordingly and that we
are treated well.
5. That we are executing this affidavit voluntarily
without any force or intimidation and for the purpose of
informing the authorities concerned and to dispute the alleged
report of the Labor Inspector of the Department of Labor and
Employment conducted on the said establishment on February
2, 1991.
IN WITNESS WHEREOF, we have hereunto set our hands
this 7th day of May, 1991 at Baguio City, Philippines.
(Sgd.) (Sgd.) (Sgd.)
SYLVIA IGAMAHERMINIGILDO AQUINO
EVELYN OGOY
(Sgd.) (Sgd.) (Sgd.)
MACARIA JUGUETA ADELAIDA NONOG
NORMA MABEZA.
(Sgd.) (Sgd.)
JONATHAN PICART JOSE DIZON
SUBSCRIBED AND SWORN to before me this 7th day of
May, 1991, at Baguio City, Philippines.
Asst. City Prosecutor
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.
As gleaned from the affidavit, the same was drawn by
management for the sole purpose of refuting findings of the
Labor Inspector of DOLE (in an inspection of respondent's
establishment on February 2, 1991) apparently adverse to the
private respondent. 3
After she refused to proceed to the City Prosecutor's Office
on the same day the affidavit was submitted to the Cordillera
Regional Office of DOLE petitioner avers 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. 4 According to her, respondent strongly chided her
for refusing to proceed to the City Prosecutor's Office to attest
to the affidavit. 5 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 10, 1991, the
hotel's cashier, Margarita Choy, informed her that she should
not report to work and, instead, continue with her unofficial
leave of absence. Consequently, on May 13, 1991, 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. The complaint was docketed as NLRC Case
No. RAB-CAR-05-0198-91 and assigned to Labor Arbiter
Felipe P. Pati.
Responding to the allegations made in support of petitioner's
complaint for illegal dismissal, private respondent Peter Ng
alleged before Labor Arbiter Pati that petitioner
"surreptitiously left (her job) without notice to the
management" 6 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 employee.
7 Pointing to the Affidavit of May 7, 1991, the private
respondent asserted that his employees actually have no
problems with management. In a supplemental answer
submitted eleven (11) months after the original complaint for
illegal dismissal was filed, private respondent raised a new
ground, loss of confidence, which was supported by a criminal
complaint for Qualified Theft he filed before the prosecutor's
office of the City of Baguio against petitioner on July 4, 1991.
8
On May 14, 1993, Labor Arbiter Pati rendered a decision
dismissing petitioner's complaint on the ground of loss of
confidence. His disquisitions in support of his conclusion read
as follows:
It appears from the evidence of respondent that complainant
carted away or stole one (1) blanket, 1 piece bedsheet, 1 piece
thermos, 2 pieces towel (Exhibits "9", "9-A," "9-B," "9-C" and
"10" pages 12-14 TSN, December 1, 1992).
In fact, this was the reason why respondent Peter Ng lodged a
criminal complaint against complainant for qualified theft and
perjury. The fiscal's office finding a prima facie evidence that
complainant committed the crime of qualified theft issued a
resolution for its filing in court but dismissing the charge of
perjury (Exhibit "4" for respondent and Exhibit "B-7" for
complainant). As a consequence, complainant was charged in
court for the said crime (Exhibit "5" for respondent and
Exhibit "B-6" for the complainant).
With these pieces of evidence, complainant committed serious
misconduct against her employer which is one of the just and
valid grounds for an employer to terminate an employee
(Article 282 of the Labor Code as amended). 9
On April 28, 1994, respondent NLRC promulgated its assailed
Resolution 10 affirming the Labor Arbiter's decision. The
resolution substantially incorporated the findings of the Labor
Arbiter. 11 Unsatisfied, petitioner instituted the instant special
civil action for certiorari under Rule 65 of the Rules of Court
on the following grounds: 12
1. WITH ALL DUE RESPECT, THE HONORABLE
NATIONAL LABOR RELATIONS COMMISSION
COMMITTED A PATENT AND PALPABLE ERROR
AMOUNTING TO GRAVE ABUSE OF DISCRETION IN
ITS FAILURE TO CONSIDER THAT THE ALLEGED LOSS
OF CONFIDENCE IS A FALSE CAUSE AND AN
AFTERTHOUGHT ON THE PART OF THE RESPONDENT-
EMPLOYER TO JUSTIFY, ALBEIT ILLEGALLY, THE
DISMISSAL OF THE COMPLAINANT FROM HER
EMPLOYMENT;
2. WITH ALL DUE RESPECT, THE HONORABLE
NATIONAL LABOR RELATIONS COMMISSION
COMMITTED A PATENT AND PALPABLE ERROR
AMOUNTING TO GRAVE ABUSE OF DISCRETION IN
ADOPTING THE RULING OF THE LABOR ARBITER
THAT THERE WAS NO UNDERPAYMENT OF WAGES
AND BENEFITS ON THE BASIS OF EXHIBIT "8" (AN
UNDATED SUMMARY OF COMPUTATION PREPARED
BY ALLEGEDLY BY RESPONDENT'S EXTERNAL
ACCOUNTANT) WHICH IS TOTALLY INADMISSIBLE
AS AN EVIDENCE TO PROVE PAYMENT OF WAGES
AND BENEFITS;
3. WITH ALL DUE RESPECT, THE HONORABLE
NATIONAL LABOR RELATIONS COMMISSION
COMMITTED A PATENT AND PALPABLE ERROR
AMOUNTING TO GRAVE ABUSE OF DISCRETION IN
FAILING TO CONSIDER THE EVIDENCE ADDUCED
BEFORE THE LABOR ARBITER AS CONSTITUTING
UNFAIR LABOR PRACTICE COMMITTED BY THE
RESPONDENT.
The Solicitor General, in a Manifestation in lieu of Comment
dated August 8, 1995 rejects private respondent's principal
claims and defenses and urges this Court to set aside the
public respondent's assailed resolution. 13
We agree.
It is settled that in termination cases the employer bears the
burden of proof to show that the dismissal is for just cause, the
failure of which would mean that the dismissal is not justified
and the employee is entitled to reinstatement. 14
In the case at bar, the private respondent initially claimed that
petitioner abandoned her job when she failed to return to work
on May 8, 1991. Additionally, in order to strengthen his
contention that there existed sufficient cause for the
termination of petitioner, he belatedly included a complaint for
loss of confidence, supporting this with charges that petitioner
had stolen a blanket, a bedsheet and two towels from the hotel.
15 Appended to his last complaint was a suit for qualified theft
filed with the Baguio City prosecutor's office.
From the evidence on record, it is crystal clear that the
circumstances upon which private respondent anchored his
claim that petitioner "abandoned" her job were not enough to
constitute just cause to sanction the termination of her services
under Article 283 of the Labor Code. For abandonment to
arise, there must be concurrence of two things: 1) lack of
intention to work; 16 and 2) the presence of overt acts
signifying the employee's intention not to work. 17
In the instant case, respondent does not dispute the fact that
petitioner tried to file a leave of absence when she learned that
the hotel management was displeased with her refusal to attest
to the affidavit. The fact that she made this attempt clearly
indicates not an intention to abandon but an intention to return
to work after the period of her leave of absence, had it been
granted, shall have expired.
Furthermore, while absence from work for a prolonged period
may suggest abandonment in certain instances, mere absence
of one or two days would not be enough to sustain such a
claim. The overt act (absence) ought
to unerringly point to the fact that the employee has no
intention to return to work, 18 which is patently not the case
here. In fact, several days after she had been advised to take an
informal leave, petitioner tried to resume working with the
hotel, to no avail. It was only after she had been repeatedly
rebuffed that she filed a case for illegal dismissal. These acts
militate against the private respondent's claim that petitioner
abandoned her job. As the Solicitor General in his
manifestation observed:
Petitioner's absence on that day should not be construed as
abandonment of her job. She did not report because the cashier
told her not to report anymore, and that private respondent Ng
did not want to see her in the hotel premises. But two days
later or on the 10th of May, after realizing that she had to
clarify her employment status, she again reported for work.
However, she was prevented from working by private
respondents. 19
We now come to the second cause raised by private
respondent to support his contention that petitioner was
validly dismissed from her job.
Loss of confidence as a just cause for dismissal was never
intended to provide employers with a blank check for
terminating their employees. Such a vague, all-encompassing
pretext as loss of confidence, if unqualifiedly given the seal of
approval by this Court, could readily reduce to barren form the
words of the constitutional guarantee of security of tenure.
Having this in mind, loss of confidence should ideally apply
only to cases involving employees occupying positions of trust
and confidence or to those situations where the employee is
routinely charged with the care and custody of the employer's
money or property. To the first class belong managerial
employees, i.e., those vested with the powers or prerogatives
to lay down management policies and/or to hire, transfer,
suspend, lay-off, recall, discharge, assign or discipline
employees or effectively recommend such managerial actions;
and to the second class belong cashiers, auditors, property
custodians, etc., or those who, in the normal and routine
exercise of their functions, regularly handle significant
amounts of money or property. Evidently, an ordinary
chambermaid who has to sign out for linen and other hotel
property from the property custodian each day and who has to
account for each and every towel or bedsheet utilized by the
hotel's guests at the end of her shift would not fall under any
of these two classes of employees for which loss of
confidence, if ably supported by evidence, would normally
apply. Illustrating this distinction, this Court in Marina Port
Services, Inc. vs. NLRC, 20 has stated that:
To be sure, every employee must enjoy some degree of trust
and confidence from the employer as that is one reason why
he was employed in the first place. One certainly does not
employ a person he distrusts. Indeed, even the lowly janitor
must enjoy that trust and confidence in some measure if only
because he is the one who opens the office in the morning and
closes it at night and in this sense is entrusted with the care or
protection of the employer's property. The keys he holds are
the symbol of that trust and confidence.
By the same token, the security guard must also be considered
as enjoying the trust and confidence of his employer, whose
property he is safeguarding. Like the janitor, he has access to
this property. He too, is charged with its care and protection.
Notably, however, and like the janitor again, he is entrusted
only with the physical task of protecting that property. The
employer's trust and confidence in him is limited to that
ministerial function. He is not entrusted, in the Labor Arbiter's
words, with the duties of safekeeping and safeguarding
company policies, management instructions, and company
secrets such as operation devices. He is not privy to these
confidential matters, which are shared only in the higher
echelons of management. It is the persons on such levels who,
because they discharge these sensitive duties, may be
considered holding positions of trust and confidence. The
security guard does not belong in such category. 21
More importantly, we have repeatedly held that loss of
confidence should not be simulated in order to justify what
would otherwise be, under the provisions of law, an illegal
dismissal. "It should not be used as a subterfuge for causes
which are illegal, improper and unjustified. It must be
genuine, not a mere afterthought to justify an earlier action
taken in bad faith." 22
In the case at bar, the suspicious delay in private respondent's
filing of qualified theft charges against petitioner long after the
latter exposed the hotel's scheme (to avoid its obligations as
employer under the Labor Code) by her act of filing illegal
dismissal charges against the private respondent would hardly
warrant serious consideration of loss of confidence as a valid
ground for dismissal. Notably, the Solicitor General has
himself taken a position opposite the public respondent and
has observed that:
If petitioner had really committed the acts charged against her
by private respondents (stealing supplies of respondent hotel),
private respondents should have confronted her before
dismissing her on that ground. Private respondents did not do
so. In fact, private respondent Ng did not raise the matter
when petitioner went to see him on May 9, 1991, and handed
him her application for leave. It took private respondents 52
days or up to July 4, 1991 before finally deciding to file a
criminal complaint against petitioner, in an obvious attempt to
build a case against her.
The manipulations of private respondents should not be
countenanced. 23
Clearly, the efforts to justify petitioner's dismissal on top of
the private respondent's scheme of inducing his employees to
sign an affidavit absolving him from possible violations of the
Labor Code taints with evident bad faith and deliberate
malice petitioner's summary termination from employment.
Having said this, we turn to the important question of whether
or not the dismissal by the private respondent of petitioner
constitutes an unfair labor practice.
The answer in this case must inevitably be in the affirmative.
The pivotal question in any case where unfair labor practice
on the part of the employer is alleged is 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. 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.
We agree with the Solicitor General's observation in his
manifestation that "[t]his actuation . . . is analogous to the
situation envisaged in paragraph (f) of Article 248 of the
Labor Code" 24 which distinctly makes it an unfair labor
practice "to dismiss, discharge or otherwise prejudice or
discriminate against an employee for having given or being
about to give testimony" 25 under the Labor Code. For in not
giving positive testimony in favor of her employer, petitioner
had reserved not only her right to dispute the claim and proffer
evidence in support thereof but also to work for better terms
and conditions of employment.
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.
This Court does not normally overturn findings and
conclusions of quasi-judicial agencies when the same are ably
supported by the evidence on record. However, where such
conclusions are based on a misperception of facts or where
they patently fly in the face of reason and logic, we will not
hesitate to set aside those conclusions. Going into the issue of
petitioner's money claims, we find one more salient reason in
this case to set things right: the labor arbiter's evaluation of the
money claims in this case incredibly ignores existing law and
jurisprudence on the matter. Its blatant one-sidedness simply
raises the suspicion that something more than the facts, the
law and jurisprudence may have influenced the decision at the
level of the Arbiter.
Labor Arbiter Pati accepted hook, line and sinker the private
respondent's bare claim that the reason the monetary benefits
received by petitioner between 1981 to 1987 were less than
minimum wage was because petitioner did not factor in the
meals, lodging, electric consumption and water she received
during the period in her computations. 26 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 ages. First, proof must
be shown that such facilities are customarily furnished by the
trade. Second, the provision of deductible facilities must be
voluntarily accepted in writing by the employee. Finally,
facilities must be charged at fair and reasonable value. 27
These requirements were not met in the instant case. Private
respondent "failed to present any company policy or guideline
to show that the meal and lodging . . . (are) part of the salary;"
28 he failed to provide proof of the employee's written
authorization; and, he failed to show how he arrived at the
valuations. 29
Curiously, in the case at bench, the only valuations relied upon
by the labor arbiter in his decision were figures furnished by
the private respondent's own accountant, without
corroborative evidence. On the pretext that records prior to the
July 16, 1990 earthquake were lost or destroyed, respondent
failed to produce payroll records, receipts and other relevant
documents, where he could have, as has been pointed out in
the Solicitor General's manifestation, "secured certified copies
thereof from the nearest regional office of the Department of
Labor, the SSS or the BIR." 30
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. 31 Considering,
therefore, 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.
It is therefore evident that petitioner is entitled to the payment
of the deficiency in her wages equivalent to the full wage
applicable from May 13, 1988 up to the date of her illegal
dismissal.
Additionally, petitioner is entitled to payment of service
incentive leave pay, emergency cost of living allowance, night
differential pay, and 13th month pay for the periods alleged by
the petitioner as the private respondent has never been able to
adduce proof that petitioner was paid the aforestated benefits.
However, the claims covering the period of October 1987 up
to the time of filing the case on May 13, 1988 are barred by
prescription as P.D. 442 (as amended) and its implementing
rules limit all money claims arising out of employer-employee
relationship to three (3) years from the time the cause of action
accrues. 32
We depart from the settled rule that an employee who is
unjustly dismissed from work normally should be reinstated
without loss of seniority rights and other privileges. Owing to
the strained relations between petitioner and private
respondent, allowing the former to return to her job would
only subject her to possible harassment and future
embarrassment. In the instant case, separation pay equivalent
to one month's salary for every year of continuous service with
the private respondent would be proper, starting with her job
at the Belfront Hotel.
In addition to separation pay, backwages are in order. Pursuant
to R.A. 6715 and our decision in Osmalik Bustamante, et al.
vs. National Labor Relations Commission, 33 petitioner is
entitled to full backwages from the time of her illegal
dismissal up to the date of promulgation of this decision
without qualification or deduction.
Finally, in dismissal cases, the law requires that the employer
must furnish the employee sought to be terminated from
employment with two written notices before the same may be
legally effected. The first is a written notice containing a
statement of the cause(s) for dismissal; the second is a notice
informing the employee of the employer's decision to
terminate him stating the basis of the dismissal. During the
process leading to the second notice, the employer must give
the employee ample opportunity to be heard and defend
himself, with the assistance of counsel if he so desires.
Given the seriousness of the second cause (qualified theft) of
the petitioner's dismissal, it is noteworthy that the private
respondent never even bothered to inform petitioner of the
charges against her. Neither was petitioner given the
opportunity to explain the loss of the articles. It was only
almost two months after petitioner had filed a complaint for
illegal dismissal, as an afterthought, that the loss was reported
to the police and added as a supplemental answer to
petitioner's complaint. Clearly, the dismissal of petitioner
without the benefit of notice and hearing prior to her
termination violated her constitutional right to due process.
Under the circumstance an award of One Thousand Pesos
(P1,000.00) on top of payment of the deficiency in wages and
benefits for the period aforestated would be proper.
WHEREFORE, premises considered, the RESOLUTION of
the National Labor Relations Commission dated April 24,
1994 is REVERSED and SET ASIDE, with costs. For clarity,
the economic benefits due the petitioner are hereby
summarized as follows:
1) Deficiency wages and the applicable ECOLA from
May 13, 1988 up to the date of petitioner's illegal dismissal;
2) Service incentive leave pay; night differential pay
and 13th month pay for the same period;
3) Separation pay equal to one month's salary for every
year of petitioner's continuous service with the private
respondent starting with her job at the Belfront Hotel;
4) Full backwages, without qualification or deduction,
from the date of petitioner's illegal dismissal up to the date of
promulgation of this decision pursuant to our ruling in
Bustamante vs. NLRC. 34
5) P1,000.00.
SO ORDERED.
Our Haus Realty vs Parian
BRION, J.:
We resolve in this petition for review on certiorari1 the
challenge to the May 7, 2012 decision2 and the November 27,
2012 resolution3 (assailed CA rulings) of the Court of Appeals
(CA) in CA-G.R. SP No. 123273. These assailed CA rulings
affirmed the July 20, 2011 decision4 and the December 2,
2011 resolution5 (NLRC rulings) of the National Labor
Relations Commission (NLRC) in NLRC LAC No. 02-
000489-11 (NLRC NCR Case No. 06-08544-10). The NLRC
rulings in turn reversed and set aside the December 10, 2010
decision6 of the labor arbiter (LA).
Factual Antecedents
Respondents Alexander Parian, Jay Erinco, Alexander Canlas,
Jerry Sabulao and Bernardo Tenederowere all laborers
working for petitioner Our Haus Realty Development
Corporation (Our Haus), a company engaged in the
construction business.The respondents respective
employment records and daily wage rates from 2007 to 2010
are summarized in the table7 below:
Name Date Hired Years of Service Year and Place of
Assignment Daily Rate
Alexander M. Parian October 1999 10 years 2007-
2010- Quezon City P353.50
Jay C. Erinco January 2000 10 years 2008- Quezon
City 2009- Antipolo 2010- Quezon City P342.00
Alexander R. Canlas 2005 5 years 2007-2010-
Quezon City P312.00
Jerry Q. Sabulao August 1999 10 years 2008- Quezon
City 2009- Antipolo 2010- Quezon City P342.00
Bernardo N. Tenedero 1994 16 years 2007-2010-
Quezon City P383.50
Sometime in May 2010, Our Haus experienced financial
distress. To alleviate its condition, Our Haus suspended some
of its construction projects and asked the affected workers,
including the respondents, to take vacation leaves.8
Eventually, the respondents were asked to report back to work
but instead of doing so, they filed with the LA a complaint for
underpayment of their daily wages. They claimed that except
for respondent Bernardo N. Tenedero, their wages were below
the minimum rates prescribed in the following wage orders
from 2007 to 2010:
1. Wage Order No. NCR-13, which provides for a daily
minimum wage rate of P362.00for the non-agriculture sector
(effective from August 28, 2007 until June 13, 2008); and
2. Wage Order No. NCR-14, which provides for a daily
minimum wage rate of P382.00for the non-agriculture sector
(effective from June 14, 2008 until June 30, 2010).
The respondents also alleged thatOur Haus failed to pay them
their holiday, service incentive leave (SIL), 13th month and
overtime pays.9
The Labor Arbitration Rulings
Before the LA, Our Haus primarily argued that the
respondents wages complied with the laws minimum
requirement. Aside from paying the monetary amount of the
respondents wages, Our Haus also subsidized their meals (3
times a day), and gave them free lodging near the construction
project they were assigned to.10 In determining the total
amount of the respondents daily wages, the value of these
benefits should be considered, in line with Article 97(f)11 of
the Labor Code.
Our Haus also rejected the respondents other monetary claims
for lack of proof that they were entitled to it.12
On the other hand, the respondents argued that the value of
their meals should not be considered in determining their
wages total amount since the requirements set under Section
413 of DOLE14 Memorandum Circular No. 215 were not
complied with.
The respondents pointed out that Our Haus never presented
any proof that they agreed in writing to the inclusion of their
meals value in their wages.16 Also, Our Haus failed to prove
that the value of the facilities it furnished was fair and
reasonable.17 Finally, instead of deducting the maximum
amount of 70% of the value of the meals, Our Haus actually
withheld its full value (which was Php290.00 per week for
each employee).18
The LA ruled in favor of Our Haus. He held that if the
reasonable values of the board and lodging would be taken
into account, the respondents daily wages would meet the
minimum wage rate.19 As to the other benefits, the LA found
that the respondents were not able to substantiate their claims
for it.20
The respondents appealed the LAs decision to the NLRC,
which in turn, reversed it. Citing the case of Mayon Hotel &
Restaurant v. Adana,21 the NLRC noted that the respondents
did not authorize Our Haus in writing to charge the values of
their board and lodging to their wages. Thus, the samecannot
be credited.
The NLRC also ruled that the respondents are entitled to their
respective proportionate 13th month payments for the year
2010 and SIL payments for at least three years,immediately
preceding May 31, 2010, the date when the respondents
leftOur Haus. However, the NLRC sustained the LAs ruling
that the respondents were not entitled to overtime pay since
the exact dates and times when they rendered overtime work
had not been proven.22
Our Haus moved for the reconsideration23 of the NLRCs
decision and submitted new evidence (the five kasunduans) to
show that the respondents authorized Our Haus in writing to
charge the values of their meals and lodging to their wages.
The NLRC denied Our Haus motion, thus it filed a Rule 65
petition24 with the CA. In its petition, Our Haus propounded a
new theory. It made a distinction between deduction and
charging. A written authorization is only necessary if the
facilitys value will be deducted and will not be needed if it
will merely be charged or included in the computation of
wages.25 Our Haus claimed that it did not actually deduct the
values of the meals and housing benefits. It only considered
these in computing the total amount of wages paid to the
respondents for purposes of compliance with the minimum
wage law. Hence, the written authorization requirement should
not apply.
Our Haus also asserted that the respondents claim for SIL pay
should be denied as this was not included in their pro
formacomplaint. Lastly, it questioned the
respondentsentitlement to attorneys fees because they were
not represented by a private lawyer but by the Public
Attorneys Office (PAO).
The CAs Ruling
The CA dismissed Our Haus certiorari petition and affirmed
the NLRC rulings in toto. It found no real distinction between
deduction and charging,26 and ruled that the legal
requirements before any deduction or charging can be made,
apply to both. Our Haus, however, failed to prove that it
complied with any of the requirements laid down in Mabeza v.
National Labor Relations Commission.27 Accordingly, it
cannot consider the values of its meal and housing facilities in
the computation of the respondents total wages.
Also, the CA ruled that since the respondents were able to
allege non-payment of SIL in their position paper, and Our
Haus, in fact, opposed it in its various pleadings,28 then the
NLRC properly considered it as part of the respondents
causes of action. Lastly, the CA affirmed the respondents
entitlement to attorneys fees.29
Our Haus filed a motion for reconsideration but the CA denied
its motion, prompting it to file the present petition for review
on certiorari under Rule 45.
The Petition
Our Haus submits that the CA erred in ruling that the legal
requirements apply without distinction whether the facilitys
value will be deducted or merely included in the computation
of the wages. At any rate, it complied with the requirements
for deductibility of the value of the facilities. First, the five
kasunduans executed by the respondents constitute the written
authorization for the inclusion of the board and lodgings
values to their wages. Second, Our Haus only withheld the
amount of P290.00 which represents the foods raw value; the
weekly cooking cost (cooks wage, LPG, water) at P239.40
per person is a separate expense that Our Haus did not
withhold from the respondents wages.30 This disproves the
respondentsclaim that it deducted the full amount of the
meals value.
Lastly, the CA erred in ruling that the claim for SIL pay may
still be granted though not raised in the complaint; and that the
respondents are entitled to an award of attorneys fees.31
The Case for the Respondents
The respondents prayed for the denial of the petition.32 They
maintained that the CA did not err inruling that the values of
the board and lodging cannot be deducted from their wages for
failure to comply with the requirements set by law.33 And
though the claim for SIL pay was not included in their pro
forma complaint, they raised their claims in their position
paper and Our Haus had the opportunity to contradict it in its
pleadings.34
Finally, under the PAO law, the availment of the PAOs legal
services does not exempt its clients from an award of
attorneys fees.35
The Courts Ruling
We resolve to DENYthe petition.
The nature of a Rule 45 petition only questions of law
Basic is the rule that only questions of lawmay be raised in a
Rule 45 petition.36 However, in this case, weare confronted
with mixed questions of fact and law that are subsumed under
the issue of whether Our Haus complied with the legal
requirements on the deductibility of the value of facilities.
Strictly, factual issues cannot be considered under Rule 45
except in the course of resolving if the CA correctly
determined whether or not the NLRC committed grave abuse
of discretion in considering and appreciating the factual issues
before it.37
In ruling for legal correctness, we have to view the CA
decision in the same context that the petition for certiorariit
ruled upon was presented to it; we have to examine the CA
decision from the prism of whether it correctly determined the
presence or absence of grave abuse of discretion in the NLRC
decision before it, not on the basis of whether the NLRC
decision, on the merits of the case, was correct. In other
words, we have to be keenly aware that the CA undertook a
Rule 65 review, not a review on appeal, of the NLRC decision
challenged before it. This is the approach that should bebasic
in a Rule 45 review of a CA ruling in a labor case. In question
form, the question to ask in the present case is: did the CA
correctly determine that the NLRC did not commit grave
abuse of discretion in ruling on the case?38 We rule that the
CA correctly did.
No substantial distinction between deducting and charging a
facilitys value from the employees wage; the legal
requirements for creditability apply to both
To justify its non-compliance with the requirements for the
deductibility of a facility, Our Haus asks us to believe that
there is a substantial distinction between the deduction and the
charging of a facilitys value to the wages. Our Haus explains
that in deduction, the amount of the wage (which may already
be below the minimum) would still be lessened by the
facilitys value, thus needing the employees consent. On the
other hand, in charging, there is no reduction of the
employees wage since the facilitys value will just be
theoretically added to the wage for purposes of complying
with the minimum wage requirement.39
Our Haus argument is a vain attempt to circumvent the
minimum wage law by trying to create a distinction where
none exists.
In reality, deduction and charging both operate to lessen the
actual take-home pay of an employee; they are two sides of
the same coin. In both, the employee receives a lessened
amount because supposedly, the facilitys value, which is part
of his wage, had already been paid to him in kind. As there is
no substantial distinction between the two, the requirements
set by law must apply to both.
As the CA correctly ruled, these requirements, as summarized
in Mabeza, are the following:
a. proof must be shown thatsuch facilities are customarily
furnished by the trade;
b. the provision of deductiblefacilities must be voluntarily
accepted in writingby the employee; and
c. The facilities must be charged at fair and reasonable
value.40
We examine Our Haus compliance with each of these
requirements in seriatim.
a. The facility must be customarily furnished by the trade
In a string of cases, we have concluded that one of the badges
to show that a facility is customarily furnished by the trade is
the existence of a company policy or guideline showing that
provisions for a facility were designated as part of the
employees salaries.41 To comply with this, Our Haus
presented in its motion for reconsideration with the NLRC the
joint sinumpaang salaysayof four of its alleged employees.
These employees averred that they were recipients of free
lodging, electricity and water, as well as subsidized meals
from Our Haus.42
We agree with the NLRCs finding that the sinumpaang
salaysay statements submitted by Our Haus are self-
serving.1wphi1 For one, Our Haus only produced the
documents when the NLRC had already earlier determined
that Our Haus failed to prove that it was traditionally giving
the respondents their board and lodging. This document did
not state whether these benefits had been consistently enjoyed
by the rest of Our Haus employees. Moreover, the records
reveal that the board and lodging were given on a per project
basis. Our Haus did not show if these benefits were also
provided inits other construction projects, thus negating its
claimed customary nature. Even assuming the sinumpaang
salaysay to be true, this document would still work against
Our Haus case. If Our Haus really had the practice of freely
giving lodging, electricity and water provisions to its
employees, then Our Haus should not deduct its values from
the respondents wages. Otherwise, this will run contrary to
the affiants claim that these benefits were traditionally given
free of charge.
Apart from company policy, the employer may also prove
compliance with the first requirement by showing the
existence of an industry-wide practice of furnishingthe
benefits in question among enterprises engaged in the same
line of business. If it were customary among construction
companies to provide board and lodging to their workers and
treat their values as part of their wages, we would have more
reason to conclude that these benefits were really facilities.
However, Our Haus could not really be expected to prove
compliance with the first requirement since the living
accommodation of workers in the construction industry is not
simply a matter of business practice. Peculiar to the
construction business are the occupational safety and health
(OSH) services which the law itself mandates employers to
provide to their workers. This isto ensure the humane working
conditions of construction employees despite their constant
exposure to hazardous working environments. Under Section
16 of DOLE Department Order (DO) No. 13, series of
1998,43 employers engaged in the construction business are
required to providethe following welfare amenities:
16.1 Adequate supply of safe drinking water
16.2 Adequate sanitaryand washing facilities
16.3 Suitable living accommodation for workers, and as may
be applicable, for their families
16.4 Separate sanitary, washing and sleeping facilitiesfor men
and women workers. [emphasis ours]
Moreover, DOLE DO No. 56, series of 2005, which sets out
the guidelines for the implementation ofDOLE DO No. 13,
mandates that the cost of the implementation of the
requirements for the construction safety and health of workers,
shall be integrated to the overall project cost.44 The rationale
behind this isto ensure that the living accommodation of the
workers is not substandard and is strictly compliant with the
DOLEs OSH criteria.
As part of the project cost that construction companies already
charge to their clients, the value of the housing of their
workers cannot be charged again to their employees salaries.
Our Haus cannot pass the burden of the OSH costs of its
construction projects to its employees by deducting it as
facilities. This is Our Haus obligation under the law.
Lastly, even if a benefit is customarily provided by the trade, it
must still pass the purpose testset by jurisprudence. Under this
test, if a benefit or privilege granted to the employee is clearly
for the employers convenience, it will not be considered as a
facility but a supplement.45 Here, careful consideration is
given to the nature of the employers business in relation to
the work performed by the employee. This test is used to
address inequitable situations wherein employers consider a
benefit deductible from the wages even if the factual
circumstances show that it clearly redounds to the employers
greater advantage.
While the rules serve as the initial test in characterizing a
benefit as a facility, the purpose test additionally recognizes
that the employer and the employee do not stand at the same
bargaining positions on benefits that must or must not
formpart of an employees wage. In the ultimate analysis, the
purpose test seeks to prevent a circumvention of the minimum
wage law.
a1. The purpose test in jurisprudence
Under the law,46 only the value of the facilities may be
deducted from the employees wages but not the value of
supplements. Facilities include articles or services for the
benefit of the employee or his family but exclude tools of the
trade or articles or services primarily for the benefit of the
employer or necessary to the conduct of the employers
business.47
The law also prescribes that the computation of wages shall
exclude whatever benefits, supplementsor allowances given to
employees. Supplements are paid to employees on top of their
basic pay and are free of charge.48 Since it does not form part
of the wage, a supplements value may not be includedin the
determination of whether an employer complied with the
prescribed minimum wage rates.
In the present case, the board and lodging provided by Our
Haus cannot be categorized asfacilities but as supplements. In
SLL International Cables Specialist v. National Labor
Relations Commission,49 this Court was confronted with the
issue on the proper characterization of the free board and
lodging provided by the employer. We explained:
The Court, at this point, makes a distinction between
"facilities" and "supplements". It is of the view that the food
and lodging, or the electricity and water allegedly consumed
by private respondents in this case were not facilities but
supplements. In the case of Atok-Big Wedge Assn. v. Atok-Big
Wedge Co., the two terms were distinguished from one
another in this wise:
"Supplements", therefore, constitute extra remuneration or
special privileges or benefits given to or received by the
laborers overand above their ordinary earnings or wages.
"Facilities", on the other hand, are items of expense necessary
for the laborer's and his family's existence and subsistence so
thatby express provision of law (Sec. 2[g]), they form part of
the wage and when furnished by the employer are deductible
therefrom, since if they are not so furnished, the laborer would
spend and pay for them just the same.
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 SLLfor the purpose of maintaining the
efficiency and health of its workers while they were working
attheir respective projects.50
Ultimately, the real difference lies not on the kind of the
benefit but on the purpose why it was given by the employer.
If it is primarily for the employees gain, then the benefit is a
facility; if its provision is mainly for the employers
advantage, then it is a supplement. Again, this is to ensure that
employees are protected in circumstances where the employer
designates a benefit as deductible from the wages even though
it clearly works to the employers greater convenience or
advantage.
Under the purpose test, substantial consideration must be
given to the nature of the employers business inrelation to the
character or type of work performed by the employees
involved.
Our Haus is engaged in the construction business, a
laborintensive enterprise. The success of its projects is largely
a function of the physical strength, vitality and efficiency of its
laborers. Its business will be jeopardized if its workers are
weak, sickly, and lack the required energy to perform
strenuous physical activities. Thus, by ensuring that the
workers are adequately and well fed, the employer is actually
investing on its business.
Unlike in office enterprises where the work is focused on desk
jobs, the construction industry relies heavily and directly on
the physical capacity and endurance of its workers. This is not
to say that desk jobs do not require muscle strength; wesimply
emphasize that in the construction business, bulk of the work
performed are strenuous physical activities.
Moreover, in the construction business, contractors are usually
faced with the problem ofmeeting target deadlines. More often
than not, work is performed continuously, day and night, in
order to finish the project on the designated turn-over date.
Thus, it will be more convenient to the employer if itsworkers
are housed near the construction site to ensure their ready
availability during urgent or emergency circumstances. Also,
productivity issues like tardiness and unexpected absences
would be minimized. This observation strongly bears in the
present case since three of the respondents are not residents of
the National Capital Region. The board and lodging provision
might have been a substantial consideration in their
acceptance of employment in a place distant from their
provincial residences.
Based on these considerations, we conclude that even under
the purpose test, the subsidized meals and free lodging
provided by Our Haus are actually supplements. Although
they also work to benefit the respondents, an analysis of the
nature of these benefits in relation to Our Haus business
shows that they were given primarily for Our Haus greater
convenience and advantage. If weighed on a scale, the balance
tilts more towards Our Haus side. Accordingly, their values
cannot be considered in computing the total amount of the
respondents wages. Under the circumstances, the dailywages
paid to the respondents are clearly below the prescribed
minimum wage rates in the years 2007-2010.
b. The provision of deductible facilities must be voluntarily
accepted in writing by the employee
In Mayon Hotel, we reiterated that a facility may only be
deducted from the wage if the employer was authorized in
writingby the concerned employee.51 As it diminishes the
take-home pay of an employee, the deduction must be with his
express consent.
Again, in the motion for reconsideration with the NLRC, Our
Haus belatedly submitted five kasunduans, supposedly
executed by the respondents, containing their conformity to
the inclusion of the values of the meals and housing to their
total wages. Oddly, Our Haus only offered these documents
when the NLRC had already ruled that respondents did not
accomplish any written authorization, to allow deduction from
their wages. These five kasunduans were also undated, making
us wonder if they had reallybeen executed when respondents
first assumed their jobs.
Moreover, in the earlier sinumpaang salaysay by Our Haus
four employees, it was not mentioned that they also executed a
kasunduanfor their board and lodging benefits. Because of
these surrounding circumstances and the suspicious timing
when the five kasunduanswere submitted as evidence, we
agree withthe CA that the NLRC committed no grave abuse of
discretion in disregarding these documents for being self
serving.
c. The facility must be charged at a fair and reasonable value
Our Haus admitted that it deducted the amount of P290.00 per
week from each of the respondents for their meals. But it now
submits that it did not actually withhold the entire amount as it
did not figure in the computation the money it expended for
the salary of the cook, the water, and the LPG used for
cooking, which amounts to P249.40 per week per person.
From these, it appears that the total meal expense per week for
each person is P529.40,making Our Haus P290.00 deduction
within the 70% ceiling prescribed by the rules.
However, Our Haus valuation cannotbe plucked out of thin
air. The valuation of a facility must besupported by relevant
documents such as receipts and company records for it to be
considered as fair and reasonable. In Mabeza, we noted:
Curiously, in the case at bench, the only valuations relied upon
by the labor arbiter in his decision were figures furnished by
the private respondent's own accountant, without
corroborative evidence.On the pretext that records prior to the
July 16, 1990 earthquake were lost or destroyed, respondent
failed to produce payroll records, receipts and other relevant
documents, where he could have, as has been pointedout in the
Solicitor General's manifestation, "secured certified copies
thereof from the nearest regional office of the Department of
Labor, the SSS or the BIR".52 [emphasis ours]
In the present case, Our Haus never explained how it came up
with the valuesit assigned for the benefits it provided; it
merely listed its supposed expenses without any supporting
document. Since Our Haus is using these additional expenses
(cooks salary, water and LPG) to support its claim that it did
not withhold the full amount of the meals value, Our Haus is
burdened to present evidence to corroborate its claim. The
records however, are bereft of any evidence to support Our
Haus meal expense computation. Eventhe value it assigned
for the respondents living accommodations was not supported
by any documentary evidence. Without any corroborative
evidence, it cannot be said that Our Haus complied withthis
third requisite.
A claim not raised in the pro forma complaint may still
beraised in the position paper.
Our Haus questions the respondents entitlement to SIL pay by
pointing out that this claim was not included in the pro forma
complaint filed with the NLRC. However, we agree with the
CA that such omission does not bar the labor tribunals from
touching upon this cause of action since this was raised and
discussed inthe respondents position paper. In Samar-Med
Distribution v. National Labor Relations Commission,53 we
held:
Firstly, petitioners contention that the validity of Gutangs
dismissal should not be determined because it had not been
included in his complaint before the NLRC is bereft of merit.
The complaint of Gutang was a mere checklist of possible
causes of action that he might have against Roleda. Such
manner of preparing the complaint was obviously designed to
facilitate the filing of complaints by employees and laborers
who are thereby enabled to expediently set forth their
grievances in a general manner. But the non-inclusion in the
complaint of the issue on the dismissal did not necessarily
mean that the validity of the dismissal could not be an
issue.The rules of the NLRC require the submission of
verified position papers by the parties should they fail to agree
upon an amicable settlement, and bar the inclusion of any
cause of action not mentioned in the complaint or position
paper from the time of their submission by the parties. In view
of this, Gutangs cause of action should be ascertained not
from a reading of his complaint alone but also from a
consideration and evaluation of both his complaint and
position paper.54
The respondents entitlement to the other monetary benefits
Generally a party who alleges payment as a defense has the
burden of proving it.Particularly in labor cases, the burden of
proving payment of monetary claims rests on the employeron
the reasoning 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.55
Unfortunately, records will disclose the absence of any
credible document which will show that respondents had been
paid their 13th month pay, holiday and SIL pays. Our Haus
merely presented a handwritten certification from its
administrative officer that its employees automatically become
entitled to five days of service incentive leave as soon as they
pass probation. This certification was not even subscribed
under oath. Our Haus could have at least submitted its payroll
or copies of the pay slips of respondents to show payment of
these benefits. However, it failed to do so.
Respondents are entitled to attorneys fees.
Finally, we affirm that respondents are entitled to attorneys
fees. Our Haus asserts that respondents availment of free
legal services from the PAO disqualifies them from such
award. We find this untenable.
It is settled that in actions for recovery of wages or where an
employee was forced to litigate and, thus, incur expenses to
protect his rights and interest, the award of attorney's fees is
legally and morally justifiable.56 Moreover, under the PAO
Law or Republic Act No. 9406, the costs of the suit, attorney's
fees and contingent fees imposed upon the adversary of the
PAO clients after a successful litigation shall be deposited in
the National Treasury as trust fund and shall be disbursed for
special allowances of authorized officials and lawyers of the
PAO.57
Thus, the respondents are still entitled to attorney's fees. The
attorney's fees awarded to them shall be paid to the PAO. It
serves as a token recompense to the PAO for its provision of
free legal services to litigants who have no means of hiring a
private lawyer.
WHEREFORE, in light of these considerations, we conclude
that the Court of Appeals correctly found that the National
Labor Relations Commission did not abuse its discretion in its
decision of July 20, 2011 and Resolution of December 2,
2011.1wphi1 Consequently we DENY the petition and
AFFIRM the Court of Appeals' decision dated May 7, 2012
and resolution dated November 27, 2012 in CA-G.R. SP No.
123273. No costs.
SO ORDERED.
Manila Mandarin vs NLRC
NARVASA, C.J.:
The petitioner in this special civil action of certiorari seeks
nullification of the September 11, 1992 Decision of the
Second Division of the National Labor Relations Commission
reversing the judgment of the Labor Arbiter in NLRC NCR
Case No. 10-4336-86 and dismissing the case for lack of
merit, as well as of the Commissions November 24, 1992
Resolution denying reconsideration of said decision.
On October 30, 1986, the Manila Mandarin Employees Union
(hereafter UNION), as exclusive bargaining agent of the rank-
and-file employees of the Manila Mandarin Hotel, Inc.
(hereafter MANDARIN), filed with the NLRC Arbitration
Branch a complaint in its members behalf to compel
MANDARIN to pay the salary differentials of the individual
employees concerned because of wage distortions in their
salary structure allegedly created by the upward revisions of
the minimum wage pursuant to various Presidential Decrees
and Wage Orders, and the failure of MANDARIN to
implement the corresponding increases in the basic salary rate
of newly-hired employees.
The relevant Presidential Decrees and Wage Orders were
specified by the UNION as follows:
a. PD 1389, amending PD 928, mandating an increase in the
statutory minimum wage by P3.00 spread out over a period of
three years, as follows: P1.00 starting July 1, 1978; P1.00
starting May 1, 1979; and P1.00 starting May 1, 1980.
b. PD 1614, providing that workers covered by PD 1389,
whether agricultural or non-agricultural, should receive an
increase of P2.00 in their statutory minimum wage effective
April 1, 1979, the same representing an acceleration of the
remaining increases under PD 1389; and that all non-
agricultural workers in Metro Manila shall receive a minimum
wage of P12.00;
c. PD 1713, issued on august 18, 1980 providing an increase
in the minimum daily wage rates and for additional allowance;
increasing the minimum daily wage rates by P1.00 and
providing that all private employers shall pay their employees
with wages or salaries not exceeding P1,500.00 a month, an
additional mandatory living allowance of P60.00 a month for
non-agricultural workers, P45.00 for plantation workers and
P30.00 a month for agricultural non-plantation workers;
d. PD 1751, issued on December 14, 1980, increasing the
statutory daily minimum wages by integrating the P4.00
mandatory allowance under PD 525 and PD 1123 into the
basic pay of all covered workers;
e. Wage Order No. 1, issued on March 26, 1981, increasing the
mandatory emergency living allowance of all workers with
salaries or wages of P1,500.00 a month by P2.00 a day for
non-agricultural workers, P1.50 a day for agricultural
plantation workers, P1.00 a day for agricultural non-plantation
workers, effective March 22, 1981;
f. Wage Order No. 2 issued on July 6, 1983 increasing the
mandatory basic minimum wage and living allowance for non-
agricultural and agricultural workers in the following manner:
1) For non-agricultural employees, receiving not more than
P1,800.00 monthly, P1.00 a day as minimum wage and P1.50
a day as cost of living allowance;
2) For plantation agricultural employees, P1.00 a day as
minimum wage and P0.50 a day as cost of living allowance
subject to the same salary ceiling provided in the immediately
preceding section; and
3) For non-plantation agricultural employees, P1.00 a day as
minimum wage; and
also, providing that effective October 1, 1983, the living
allowances rates as adjusted in the preceding section shall be
further increased subject to the same salary ceiling, for non-
agricultural employees, by P1.00.
g. Wage Order No. 3 issued November 7, 1983 increasing the
statutory minimum wage rates for workers in the private sector
by P1.00 per day effective November 1, 1983, and also
increasing the statutory wage rates by P1.00 per day, effective
December 1, 1983;
h. Wage Order No. 4 issued on May 1, 1984 increasing the
statutory daily minimum wages, after integrating the
mandatory living allowance under PDs 1614, 1634, 1678 and
1713 into the basic pay of all covered employees, effective
May 1, 1984; -- after the integration, the minimum daily wage
rate was increased by P11.00 for non-agricultural workers.
i. Wage Order No. 5 issued on June 11, 1984 increasing the
statutory daily minimum wage rates and living allowances of
workers in the private sector by P3.00 effective June 16, 1984
-- the minimum daily wage rates became P35.00 for Metro
Manila and P34.00 for outside Metro Manila; and
j. Wage Order No. 6, effective November 1, 1984, increasing
the statutory minimum wage rate by P2.00 per day.
On January 15, 1987, the UNION filed its Position Paper
amplifying the allegations of its complaint and setting forth
the legal bases of its demands against MANDARIN; and on
March 25, 1987, it filed an Amended Complaint presenting an
additional claim for payment of salary differentials to the
union members affected, allegedly resulting from
underpayment of wages.
The Labor Arbiter eventually ruled in favor of the UNION,
holding that there were in fact wage distortions entitling its
members to salary adjustments totalling P26,173,601.25 -- for
541 employees -- as well as underpayments amounting to
P1,978,296.18 -- 182 employees. The dispositive portion of
his decision reads:[1]
WHEREFORE, judgment is hereby rendered ordering the
respondent Hotel to pay the individual complainants who are
members of the respondent Union whose names appear on the
respective computations embodied in this Decision, the
aggregate amount of P26,173,601.25 representing their salary
adjustments by way of correcting the wage distortions in their
respective salary structure, for the period from October 30,
1983 up to October 31, 1990, and continuously thereafter to
pay the corresponding amounts due them as such salary
adjustments until the same are properly and finally restored in
their basic monthly rates; to pay the aggregate amount of
P1,978,296.18 representing their salary differentials resulting
from underpayment of wages in violation of the minimum
wage laws, Presidential Decrees and Wage Orders for the
period from March 25, 1984 up to October 31, 1990, and
continuously thereafter to pay the corresponding amounts due
them as such salary differentials until the same are properly
and finally restored into their basic monthly rates.
Likewise, the respondent Hotel is ordered to pay an amount
equivalent to ten percent (10%) of the total awards granted to
individual complainants, by way of and as attorneys fees.
On appeal, the Second Division of respondent Commission
(composed of Commissioner Domingo H. Zapanta, ponente,
and Presiding Commissioner Edna Bonto-Perez) rendered the
dispositions already referred to and now assailed -- setting
aside the Labor Arbiters judgment and dismissing the
UNIONs complainant, and later denying the UNIONs motion
for reconsideration.[2]
The principal issues raised in this Court are: (1) Whether or
not the NLRC had jurisdiction to take cognizance of
MANDARINS appeal from the Labor Arbiters decision; and
(2) if so, whether or not it gravely abused its discretion in
setting aside the Labor Arbiters judgment and dismissing the
UNIONS complaint.
The issue of jurisdiction is grounded on the posited tardiness
of private respondents appeal from the Labor Arbiters
judgment to the NLRC, and fatal defect in their supersedeas
bond.
The UNION contends[3] that the records indubitably show
that MANDARIN received on January 22, 1991 its copy of the
Labor Arbiters Decision (of January 15, 1991), but filed its
appeal and paid the appeal fee only on February 4, 1991, three
(3) days beyond the reglementary ten-day period for doing so.
It also condemns as anomalous the certification of Deputy
Executive Clerk Gaudencio P. Demaisip, Jr., NLRC, to the
effect that MANDARINs lawyer had approached Hon.
Domingo H. Zapanta, a member of the Second Division,
NLRC, for assistance to have the appeal including the appeal
fee in said case duly received and acknowledged on February
1, 1991, at 4:40 P.M; and claims that the anomally was
aggravated when it was Commissioner Zapanta who wrote the
Decision for the Second Division[4]-- reversing the Labor
Arbiters judgment, as aforesaid -- despite the UNIONS motion
for his disqualification and/or inhibition. The UNION finally
argues that MANDARINS appeal was not only tardy but also
fatally flawed in that its supersedeas bond had been issued by
a surety company -- Plaridel Surety & Insurance Company --
which had pending obligations and liabilities at the time, the
Insurance Commissioner having in fact issued a Cease-and-
Desist Order against said company for issuing bonds of no
little magnitude without authority; and that moreover, the
replacement bond of the Commonwealth Insurance Company
-- subsequently filed by order of the NLRC -- was just as
defective because the latter company had an authorized
maximum net retention level in the amount of only
P686,582.80, way below the monetary award subject of
MANDARINS appeal to the Commission.
The Court rules that respondent Commission acted correctly in
accepting and acting on MANDARINs appeal. The
circumstances attendant upon the filing of the appeal and
supersedeas bond are clearly set forth in the Certification of
Deputy Executive Clerk Demaisip, Jr.[5] above mentioned,
viz.:
This is to certify that when Atty. Godofredo Labay filed the
appeal in NLRC NCR Case No. 10-4335-86 entitled Manila
Mandarin Employees Union vs. Manila Mandarin on Friday,
February 1, 1991, the Cashier and the Docket Section, NCR,
were not around, that no one would receive the pleadings and
the appeal fee. He therefore approached Commissioner
Domingo H. Zapanta for assistance and to have the appeal
including the appeal bond in said case duly received on
February 1, 1991 at 4:50 p.m.
with respect to the appeal fee, since no one was authorized to
act as substitute for the Cashier of the NCR for purposes of
receiving the appeal fee and issuing a temporary receipt and/or
official receipt therefor, Commissioner Zapanta requested
Atty. Gaudencio P. Demaisip, Jr. to receive said pleadings and
allowed Atty. Labay to pay the appeal fee on Monday,
February 4, 1991.
This certification is issued upon request of Atty. Labay for
whatever purpose it may serve him.
(SGD.) GAUDENCIO P. DEMAISIP, JR.
Deputy Executive Clerk
Second Division
MANDARIN cannot be faulted for paying the appeal fee only
on February 4, 1991. The fact is that on February 1, 1991, its
lawyer was in the NLRC premises, ready to pay said fee, but
was unable to do so because the NLRC Cashier or any other
employee authorized to receive payment in his stead, was no
longer around. This is why Commissioner Zapanta allowed
payment of the appeal fee to be made on the next business day,
as in fact the appeal fee was paid on, February 4, 1991. This
Court has ruled that the failure to pay the appeal docketing fee
within the reglementary period confers a directory, not
mandatory, power to dismiss an appeal, to be exercised with
circumspection in light of all the relevant facts.[6] In view of
these considerations, and the meritoriousness of
MANDARINs appeal -- as later pronounced by respondent
NLRC -- the interest of justice was quite evidently served
when MANDARINs appeal was given due course despite
delayed payment of the docketing fee.
The contention concerning MANDARINs ostensibly defective
appeal bond, issued by Plaridel Surety and Insurance
Company, deserves short shrift, too. The issuance of the bond
antedated this Courts resolution of January 15, 1992 -- to
which the attention of respondent NLRC had been invited by
the UNION -- declaring said surety company to be of doubtful
solvency. More important, the issue was mooted when
MANDARIN posted a new surety bond, through
Commonwealth Insurance Company, in compliance with the
Order of the respondent Commission dated December 10,
1991. The UNIONs contention that this new bond was equally
defective because the bonding company had an authorized
maximum net retention level lower than the sum of
P30,967,087.17 involved in this dispute, is inconsequential,
the new bonding company being duly accredited by this Court
and licensed by the Insurance Commission.
At any rate, this Court has invariably ruled that Article 223 of
the Labor Code, requiring a bond in appeals involving
monetary awards, must be liberally construed, in line with the
desired objective of resolving controversies on their merits.[7]
The circumstance under which the bond was filed in this case
adequately justify such liberal application of the provision.
As to the alleged partiality of Commissioner Domingo
Zapanta, the Court finds that his intervention on February 1,
1991 in the matter of payment of the appeal docketing fee did
not, in the circumstances already related, constitute
impropriety or pre-judgment of the case and a ground for his
disqualification as a member of the Second Division to which
the case was thereafter raffled. Significantly, in its motion to
inhibit, the UNION mentioned that the case was assigned
particularly to the late Commissioner Rustico Diokno ** (but)
that upon the latters demise, the case was reassigned to
Commissioner Domingo Zapanta as the new ponente.[8] As
Commissioner Zapanta had always been a member of the
Second Division, the UNIONs motion for his inhibition, filed
more than a year after the occurrence of the incident on which
it was based, becomes suspect as a mere afterthought. In any
case, Commissioner Zapanta did inhibit himself from taking
part in the resolution of the UNIONS motion for
reconsideration of the assailed decision of September 11,
1992, thus dispelling what doubts might linger about his
impartiality.
Coming now to the issue of wage distortion, prior to the
effectivity on June 9, 1989 of Republic Act No. 6727 which,
among others, amended Article 124 (Standards/Criteria for
Minimum Wage Fixing) of the Labor Code, the concept to
wage distortion was relatively obscure. So it was observed by
this Court in National Federation of Labor vs. NLRC,[9] a
case involving the same subject Wage Orders:
We note that neither the Wage Orders noted above, nor the
Implementing Rules promulgated by the Department of Labor
and Employment, set forth a clear and specific notion of wage
distortion. What the Wage Orders and the Implementing Rules
did was simply to recognize that implementation of the Wage
Orders could result in a distortion of the wage structure of an
employer, and to direct the employer and the union to
negotiate with each other to correct the distortion. Thus,
Section 6 of Wage Order No. 3, dated 7 November 1983,
provided as follows:
Section 6. Where the application of the minimum wage rate
prescribed herein results in distortions of the wage structure of
an establishment, the employer and the union shall negotiate
to correct the distortions. Any dispute arising from wage
distortions shall be resolved through the grievance procedure
under their collective bargaining agreement of through
conciliation.
In case where there is no collective bargaining agreement or
recognized labor organization, the employer shall endeavor to
correct such distortions in consultation with their workers.
Any dispute arising from wage distortions shall be resolved
through conciliation by the appropriate Regional Office of the
Ministry of Labor and Employment or through arbitration by
the NLRC Arbitration Branch having jurisdiction over the
work-place. (Underscoring supplied)
It is therefore opportune to re-state the general principles
enunciated in that case, summarized in Metro Transit
Organization, Inc. vs. NLRC, et al.[10] as follows:
(a) The concept of wage distortion assumes an existing
grouping or classification of employees which establishes
distinctions among such employees on some relevant or
legitimate basis. This classification is reflected in a differing
wage rate for each of the existing classes of employees.
(b) Wage distortions have often been the result of government-
decreed increases in minimum wages. There are, however,
other causes of wage distortions, like the merger of two (2)
companies (with differing classification of employees and
different wage rates) where the surviving company absorbs all
the employees of the dissolved corporation. (In the present
Metro case, as already noted, the wage distortion arose
because the effectivity dates of wage increases given to each
of the two (2) classes of employees (rank-in-file and
supervisory) had not been synchronized in their respective
CBAs.)
(c) Should a wage distortion exist, there is no legal
requirement that, in the rectification of that distortion by re-
adjustment of the wage rates of the differing classes of
employees, the gap which had previously or historically
existed be restored in precisely the same amount. In other
words, correction of a wage distortion may be done by re-
establishing a substantial or significant gap (as distinguished
from the historical gap) between the wage rates of the
differing classes of employees.
(d) The re-establishment of a significant difference in wage
rates may be the result of resort to grievance procedures or
collective bargaining negotiations.
It was only on June 9, 1989, upon the enactment of R.A. No.
6727 (Wage Rationalization Act, amending, among others,
Article 124 of the Labor Code),[11] that the term wage
distortion came to be 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.
The same provision lays down the procedure to be followed
where wage distortion arises from the implementation of a
wage increase prescribed by law or ordered by a Regional
Wage Board, viz.:
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. Unless otherwise
agreed by the parties in writing, such dispute shall be decided
by the voluntary arbitrator or panel of voluntary arbitrators
within ten (10) calendar days from the time said dispute was
referred to voluntary arbitration.
In cases where there are no collective agreements or
recognized labor unions, the employers and workers shall
endeavor to correct such distortions. Any dispute arising
therefrom shall be settled through the National Conciliation
and Mediation Board and, if it remains unresolved after ten
(10) calendar days of conciliation, shall be referred to the
appropriate branch of the National Labor Relations
Commission (NLRC). It shall be mandatory for the NLRC to
conduct continuous hearings and decide the dispute within
twenty (20) calendar days from the time said dispute is
submitted for compulsory arbitration.
The pendency of a dispute arising from a wage distortion shall
not in any way delay the applicability of any increase in
prescribed wage rates pusurant to the provisions of law or
Wage Order.
The issue of whether or not a wage distortion exists as a
consequence of the grant of a wage increase to certain
employees, is a question of fact;[12] and as a rule, factual
findings in labor cases, where grounded on substantial
evidence, are not reviewed.[13] However, a disharmony such
as exists here, between the factual findings of the Labor
Arbiter and those of the NLRC, opens the door to a review
thereof by this Court.[14]
The Labor Arbiter ruled that a wage distortion existed, and
that the only and logical way to correct ** (it) in the salary
structure of the employees of respondent Hotel is to apply the
corresponding increase made by way of revising upward the
minimum wage or integration of the ECOLA into the basic
wage as embodied in the various Presidential Decrees and
Wage Orders, across-the-board, so that employees whose
salaries are above the minimum set by law who have already
been long in the service will not be discriminated against.[15]
On the other hand, respondent Commission declared in its
decision[16] that there was no wage distortion arising from the
implementation of said Presidential Decrees and Wage Orders
such as warranted across-the-board increases to all employees:
On the issue of wage distortion, we have examined the various
presidential decrees and wage orders referred to by the
complainant and in the Labor Arbiters decision and we found
nothing therein that would justify the award of across-the-
board increases to all employees. The apparent intention of the
law is only to upgrade the salaries or wages of the employees
receiving lower than the minimum daily wage set therein. For
example, Section 1 of Wage Order No. 6 provides that
effective November 1, 1984, the statutory minimum daily
wage rates workers in the private sector shall be increased by
P2.00. Also, Section 1 of Presidential Decree 1389 provides
that Presidential Decree 928 is hereby amended by increasing
all existing statutory minimum wages in the country by Three
Pesos (P3.00) spread equally over a period of three years, as
follows: 1)One Peso (P1.00) starting July 1, 1978; 2)One
Peso(P1.00) starting May 1, 1979; and One Peso (P1.00)
starting May 1, 1980. Thus, it is clear that the presidential
decrees and wage orders merely provide for a floor wage to be
observed by the employers in the private sector.
It indeed appears that the clear mandate of those issuances was
merely to increase the prevailing minimum wages of particular
employee groups. There were no across-the-board increases to
all employees; increases were required only as regards those
specified therein.[17] It was therefore incorrect for the
UNION to claim that all its members became automatically
entitled to across-the-board increases upon the effectivity of
the Decrees and Wage Orders in question. And even if there
were wage distortions, which is not the case here, the
appropriate remedy thereunder prescribed is for the employer
and the union to negotiate to correct them; or, if the dispute be
not thereby resolved, to thresh out the controversy through the
grievance procedure in the collective bargaining agreement, or
through conciliation or arbitration.
A review of the records convinces this Court that respondent
NLRC committed no grave abuse of discretion in holding that
no wage distortion was demonstrated by the UNION. It was,
to be sure, incumbent on the UNION to prove by substantial
evidence its assertion of the existence of a wage distortion.
This it failed to do. It presented no such evidence to establish,
as required by the law, what, if any, were the designed
quantitative differences in wage or salary rates between
employee groups, and if there were any severe contractions or
elimination of these quantitative differences.
Name Position Date Hired Basic Rate
(12/30/85)
1. Pablo Trinidad -- Waiter -- 9/1/78 P1,300
2. Eduardo Vito -- Waiter -- 10/16/80 P1,375
3. Camilo Sanchez -- Busboy -- 8/1/83 P 954
4. Renato Solomon -- Busboy -- 7/19/84 P1,096
5. Buenconsejo Monico -- Busboy -- 4/15/85 P 968
HOUSEKEEPING DEPT.
1. Ruben A. Rillo -- Linen Uniform Att. -- 6/19/76 P 984
2. Hubert Malolot -- Linen Uniform Att. -- 1/16/80 P1,238
3. Aurella Kilat -- Linen Uniform Att. -- 5/2/79 P1,272
4. Rogelio Molaco -- Cloakroom Attn. -- 9/1/80 P 946
5. David Pineda -- Cloakroom Attn. -- 9/14/81 P1,194
6. Nemesio Matro -- Houseman Attn. -- 6/10/76 P1,142
7. Domgo Sabando -- Houseman Attn. -- 3/8/82 P1,194
8. Renato Guina -- Houseman Attn. -- 8/24/81 P1,194
SUBMITTED:
(SGD.) ATTY. R. E. ESPINOSA
9/17/87.
The UNIONs Internal Vice-President, Arnulfo Castro, deposed
that the employees named in this list were the more or less
(13) persons found to have suffered wage distortion,[19] and
the UNION pointed out that while these thirteen employees
occupied similar positions, they were receiving different rates
of salary.
Respondent Commission however found that as explained by
respondents, such disparity was due simply to the fact that the
employees mentioned had been hired on different dates and
were thus receiving different salaries; or that an employee was
hired initially at a position level carrying a hiring rate than the
others; or that an employee failed to meet the cut-off date in
the grant of yearly CBA increase; or that the union did not get
the correct data on salaries. The Commission accepted as more
accurate the data presented by MANDARIN respecting the
same employees, to wit:[20]
ANNEX2
F & B Dept.
NAME Position Date Hired Basic Rate
per Hotel Records as of 12/30/85

The UNIONs effort to prove wage distortion consisted only of
the presentation of an unverified list of thirteen (13)
employees denominated a Sample Comparison of Salary Rates
Affected by Wage Distortion,[18] viz.:
SAMPLE COMPARISON OF SALARY RATES
COMPLAINANTS
AFFECTED BY WAGE DISTORTION
F & B DEPT.
1. Pablo Trinidad Waiter 09/01/78 P1,302.00*
2. Eduardo Vito Waiter 10/16/80 1,375.00*
3. Camilo Sanchez Busboy 08/01/83 1,194.00
4. Renato Solomon Busboy 07/19/84 1,096.00
5. Buenconsejo Monico Busboy 14/15/85 968.00
OF
Housekeeping Dept.
1. Ruben A. Rillo Linen Uniform Att. 06/19/76 1,417.00
2. Hubert Malolot Linen Uniform Att. 01/16/80 1.238.00
3. Aurella Kilat Linen Uniform Att. 05/02/79 1,272.00
4. Rogelio Molaco Cloakroom Attn. 09/01/80 1,272.00
5. David Pineda Cloakroom Attn. 09/14/81 1,213.00
6. Nemesio Matro Houseman Attn. 06/10/77 1,342.00
7. Domingo Sabando Houseman Attn. 03/08/82 1,194.00
8. Renato Guina Houseman Attn. 08/24/81 1,194.00
* Vito was hired at a higher position with a higher hiring rate
than that given to Trinidad, i.e. Vito was hired at P366/mo.
While Trinidad at P301/mo. Prior to hiring, Vito already
worked as a waiter at the Metropolitan Club.
The Court agrees that the claimed wage distortion was actually
a result of the UNIONS failure to appreciate various
circumstances relating to the employment of the thirteen
employees. For instance, while some of these employees
mentioned by UNION Vice-President Arnulfo Castro occupied
the same or similar positions, they were hired by the Hotel on
different dates and at different salaries. As explained in part by
MANDARIN:
With respect to the case of Pablo Trinidad and Eduardo Vito,
while they were both occupying the position of waiter in 1987,
with monthly salaries of P2,044.00 and P2,217.00,
respectively, a comparative study of the records of these
employees shows one of them was initially hired at a higher
position level which naturally carried a higher hiring rate.
Trinidad was originally hired in 1978 as a mere Houseman at
the Banquet Department with a basic starting rate of P301.00 a
month. On the other hand, Vito was originally hired in 1980
already a Busboy at the Food and Beverage Department with a
starting salary of P366.00 a month. Before he was hired at the
Mandarin Hotel, Vito had already been working as Waiter at
the Metropolitan Club. Rrecords also show that it was only
after some time that Trinidad was promoted to Busboy but still
with the smaller Banquet Department. The headway in rate
was carried by Vito although at some point in their careers,
these two employees achieved the same position as Waiter.
Not long after, Vito was promoted to Captain Waiter while
Trinidad remained Waiter. There is therefore no reason to
compare the remuneration of these two employees as the
circumstances attendant to their employment are different.[21]
Respondent Commission correctly concluded that these did
not represent cases of wage distortion contemplated by the law
(Article 124, Labor Code, as amended), i.e., 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 employees groups in
an establishment as to effectively obliterate the distinctions
embodied in such wage structure based on skills, length of
service, or other logical basis of differentation.
Moreover, even assuming arguendo that there was really a
wage distortion, it was wrong for the Labor Arbiter, after first
acknowledging that some of the money claims had prescribed
under Article 291 of the Labor Code,[22] to nevertheless order
the computation of salary differentials retroactive to the
effective dates of PDs 1389,1614,1713, 1751 and Wage Orders
Nos. 2,3,4,5,and 6: in 1978, 1979, 1980, 1980, July 1983,
November 1983, May 1984, June 1981 and November 1984,
respectively. Clearly, five of these Decrees and Wage Orders
took effect after the lapse of the three-year prescriptive period
for litigating claims for wage distortion differentials, the
original complaint for wage distortion having been filed on
October 30, 1986 and the amended complaint for
underpayment of wages, on March 25, 1987. Consequently,
the applicable cut-off dates, for purposes of prescription, were
October 30, 1983 and March 25, 1984, respectively.
Finally, the records show that the matter of wage distortion,
actual or imputed under the various issuances up to Wage
Order No. 6, had been settled by the parties as early as July
30, 1985. On that day they executed a Compromise Agreement
with the assistance of the then Regional Director of the
National Capital Region, Severo M. Pucan in which they
affirmed that with the implementation by MANDARIN of
Wage Order Nos. 4 and 6 as well as P.D. 1634, the latter was
deemed for all legal and purposes to have fully satisfied all its
legal and contractual obligations to its employees under all
presidential issuances on wages,[23]
The Compromise Agreement pertinently states:
1. That the respondent shall implement Wage Order No. 6
effective July 1, 1985, without prejudice to the outcome of the
application for exemption as distressed employer filed by said
respodent with the National Wage Council as regards benefits
that might be due between November 1, 1985 and June 30,
inclusive;
2. The the respondent shall also implement effective August 1,
1985 the integration of the P90.00 a month cost of living
allowance under P.D. 1634 into the basic wages of its
employees as called for under Wage Order No. 4 in
accordance with the Guidelines contained in the Explanatory
Bulletin issued by the Bureau of Working Conditions on
August 8, 1985;
3. That as soon as the respondent shall have complied with the
above terms of this Compromise Agreement, said respondent
shall be deemed for all legal intents and puposes to have fully
satisfied all the legal and contractual obligations to its
employees under all presidential issuances on wages,
including Wage Orders No. 4 and 6, and Article XI of the
collective bargaining agreement,
The Labor Code recognizes the conclusiveness of
compromises as a means to settle and end labor disputes.
Article 227 provides that (a)ny compromise settlement,
including those involving labor standard laws, voluntary
agreed upon by the parties with the assistance of the Bureau or
the regional office 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 vs. NLRC,[24] this Court had occasion, in a labor
dispute, to apply the rule that compromises and settlements
have the effect and conclusiveness of res judicata upon the
parties.
Thus, and again assuming arguendo the existence of a wage
distortion, this was corrected under the fully implemented
Compromise Agreement;[25] and such correction having been
explicitly acknowledge by the UNION, it is now estopped
from claiming that a distortion still subsists. In the same
manner, when the UNION entered into a new collective
agreement with MANDARIN, providing for wage increases in
1987, it is deemed to have thereby settled any remaining
question of wage distortion, since the subject of wages and
wage distortions were plainly and unavoidably an economic
issue and the proper subject of collective bargaining.[26]
Neither did respondent Commission gravely abuse its
discretion in ruling against the UNION on the issue of
underpayment of wages.
The UNIONs theory was that since the employees of
MANDARIN are paid on a monthly basis under the Group III
category, the applicable increase in daily wage must be
multiplied by 365 and then divided by 12 to determine the
equivalent monthly rate. MANDARINs position, on the other
hand, was that it had consistently been using the multiplier
313, and not 365, for the purpose of deriving salary related
benefits of its employees who are paid by the month,
excluding from 365, the 52 unpaid rest days in a year. This
appears to have been the consistent practice of MANDARIN,
following the formula for daily paid employees under Group II
category as prepared by the Bureau of Labor Standards:[27]
AR x 313 days = EMR
____________
12
Where: 313 days = 303 actual working days a year
plus the paid 10 unworked regular
holidays.
Actual working days . 303
10 legal holidays 10
_____
Total No. of Days 313.
MANDARIN presented evidence of its practice regarding the
use of the factor 313 in computing the monthly equivalent of
the minimum daily wages and other related benefits of its
employees; i.e., Annexes 3 and 4 of its Supplemental Appeal
dated November 12, 1991. This was corroborated by the
UNIONs Internal Vice President, Arnulfo Castro, who
admitted during cross-examination that in his research and
study, he found that the divisor used in arriving at the daily
rate of the hotel employees was 313 days, which meant that
the days-off or rest days are not paid.[28] The admission
confirms that the hotel employees pertain to Group II category
under the Bureau of Labor Standards Guidelines for
computing the equivalent monthly minimum wage rates.[29]
Thus, instead of multiplying the applicable minimum daily
wage by 365 and dividing the result by 12 to derive the
applicable minimum monthly salary, the factor used is 313,
composed of 303 actual working days and the 10 unworked
but paid regular holidays in a year.
In his explanatory Bulletin on the payment of Holiday Pay --
Ref. No. 85-08 dated 6 November 1985 -- then Secretary
Augusto Sanchez of the Department of Labor and
Employment, expatiating on the implications of the Chartered
Bank case,[30] stated:
6. Monthly Paid Employees
Oftentime confusion arises from the different interpretations
as to who is a monthly-paid employee. A monthly-paid
employee is one whose monthly salary includes payments for
everyday of the month although he does not regularly work on
his rest days or Sundays and on regular and special holidays.
Group III in the above illustration covers monthly paid
employees. Employees falling under Group I, II and IV are in
reality daily paid employees but whose daily rate is translated
into its monthly equivalent. The fact, therefore, that an
employee is regularly paid a fixed monthly rate does not
necessarily mean that he is a monthly-paid employee as
defined above. (Italics supplied)
As applied to the UNION, the monthly equivalent of the
minimum wage under the various Presidential Decrees and
Wage Orders based on the above formula should be as
follows:
PD/WO NO. Effectivity Minimum Daily Equivalent
Wage Rate Monthly Rate
PD 1389 01 July 1978 P 11.00 P 286.96
PD 1614 1 March 1979 13.00 339.00
PD 1813 18 Aug. 1980 14.00 365.17
WO # 2 06 July 1983 19.00 495.58
WO # 3 01 Nov. 1983 20.00 521.67
WO # 4 01 May 1984 32.00 834.67
WO # 5 01 Nov. 1984 35.00 912.92
WO # 6 01 Nov. 1984 37.00 965.08
On the other hand, the monthly pay of the Hotel employees
and their hiring rate may be illustrated as follows:
PD/WO NO. Effectivity Equivalent Lowest Salary
Monthly Rate in the Hotel
PD 1389 01 July 1978 P 286.92 P 350.00
PD 1614 01 March 1979 339.08 411.00
PD 1813 18 Aug. 1980 365.17 562.00
WO # 2 06 July 1983 495.58 960.00
WO # 3 01 Nov. 1983 521.67 960.00
WO # 4 01 May 1984 834.67 960.00
WO # 5 16 May 1984 912.92 960.00
WO # 6 01 Nov. 1984 965.08 1,015.00.
A comparative analysis of the wages of the Hotels employees
from 1978 to 1984 vis a vis the minimum wages fixed by law
for the same period reveals that at no time during the said
period was there any underpayment of wages by the
respondent Hotel. On the contrary, the prevailing monthly
salaries of the subject hotel employees appear to be and above
the minimum amounts required under the applicable
Presidential Decrees and Wage Orders.
WHEREFORE, the assailed Decision of respondent
Commission promulgated on September 11, 1992 -- reversing As a result of the implementation of Wage Order No. 6, casual
the judgment of the Labor Arbiter and dismissing the employees received an increase of their daily wage from
UNIONS complaint - - being based on substantial evidence P34.00 to P36.00. At the same time, the Company unilaterally
and in accord with applicable laws and jurisprudence, as well granted an across-the-board increase of P2.00 in the daily rate
as said Commissions Resolution dated November 24, 1992 -- of all regular employees, thus increasing their daily wage from
denying reconsideration -- are hereby AFFIRMED in toto. P35.84 to P37.84. Further, on 1 July 1985, the anniversary
date of the increases under the CBA, all regular employees
SO ORDERED. who were members of the collective bargaining unit got a raise
of P1.76 in their basic daily wage, which pushed that daily
National Federation of Labor vs NLRC wage from P37.84 to P39.60, as against the non-regular's basic
FELICIANO, J.: wage of P36.00 per day. Finally, by November 1987, the
lowest paid regular employee had a basic daily rate of P64.64,
Between 1 November 1983 and 1 November 1984, Wage or P10.64 more than the statutory minimum wage paid to a
Orders Nos. 3, 4, 5 and 6 were promulgated by the then non-regular employee.
President Ferdinand E. Marcos. Wage Order No. 3 became
effective as of 1 November 1983; Wage Order No. 4, as of 1 The development of the wage scales of the Company's
May 1984; Wage Order No. 5, as of 16 June 1984; and Wage employees after the effectivity date of Wage Order No. 5 is
Order No. 6 went into effect on 1 November 1984. All these presented in the following table:
Wage Orders increased the statutory minimum wages of
workers with differing increases being specified for Effectivity Wage of Wage of Gap
agricultural plantation and non-agricultural workers.
Date RegularsCasuals
Before the effectivity of Wage Order No. 3, the wage rates of
regular employees and of casual (or non-regular) employees of After W.O. No. 5 16 June 1984 34.00 34.00
private respondent Franklin Baker Company of the Philippines 0.00
(Davao Plant) ("Company") were such that there was a CBA Increase 1 July 1984 35.84 34.00 1.84
positive differential between the two (2) in the amount of After W.O. No. 6 1 Nov. 1984 37.84 36.00
P4.56. The effect of the implementation of the successive 1.84
Wage Orders upon the daily wage rates of these two (2) CBA Anniversary1 July 1985 39.60 36.00 3.60
groups of employees was summarized by petitioner in the
following table: Increase

Effectivity Wage of Wage of Gap Meantime, while the above wage developments were
unfolding, the Company experienced a work output slow
Date RegularsCasuals down. The Company directed some 205 workers to explain the
reduction in their work output. The workers failed to comply
Before W.O. No. 3 P22.56 P18.00 P4.56 and they were accordingly issued notices of dismissal by the
After W.O. No. 3 1 Nov. 1983 22.56 20.00 Company. As a response to its decreasing productivity levels,
2.56 the Company suspended operations on 16 August 1984.
After W.O. No. 4 1 May 1984 32.64 31.00 Operations were resumed on 14 September 1984; the
1.64 Company, however, refused to take back the 205 dismissed
After W.O. No. 5 16 June 1984 34.00 34.00 employees. Petitioner Union then went on strike alleging a
0.00 1 lock-out on the part of the Company and demanding
rectification of the wage distortion. The case was certified by
Upon the effectivity of Wage Order No. 5, grievance meetings the Secretary of Labor to the National Labor Relations
were held by petitioner National Federation of Labor ("NFL") Commission ("NLRC") for compulsory conciliation.
and private respondent Company sometime in June 1984,
addressing the impact which implementation of the various On 19 June 1985, the Union and the Company reached an
Wage Orders had on the wage structure of the Company. agreement with respect to the lock-out issue. The agreement,
which was approved by the NLRC En Banc, granted the 205
On 21 June 1984, all the casual or non-regular employees of employees "financial assistance" equivalent to thirty (30) days'
private respondent Company (at least in its Davao Plant) were separation pay. This left unresolved only the wage distortion
"regularized," or converted into regular employees, pursuant issue.
to the request of petitioner NFL.
On 11 November 1987, the NLRC En Banc rendered a
On 1 July 1984, the effectivity date of the 1984 Collective decision which in effect found the existence of wage distortion
Bargaining Agreement between NFL and the Company, all and required the Company to pay a P1.00 wage increase
regular employees of the Company received an increase of effective 1 May 1984:
P1.84 in their daily wage; the regular daily wage of the regular
employees thus became P35.84 as against P34.00 per day for In the computation submitted by the Union, there is a need to
non-regular employees. restore the P2.56 gap between non-regulars or "casuals" and
"regular workers." This difference in the basic wage of these
workers was existing at the time of the conclusion of the
collective bargaining agreement and before the
implementation of Wage Orders No. 4 & 5. The imprecise
claim of respondent that there is P3.60 gap between non-
regular and regulars may not be sustained because as
aforestated, this amount represents negotiated wage increase
which should not be considered covered and in compliance
with the wage orders. Considering, however, the present
economic conditions and the outlay involved in correcting the
distortion in the wages of respondent's workers, this
Commission, in the exercise of its arbitral powers, feels that
an increase of P1.00 on the present basic wage of regular
workers would significantly rectify or minimize the distortion
in the wage structure of respondent company caused by the
implementation of the various wage orders. Respondent is,
therefore, required to implement the P1.00 wage increase
effective May 1, 1984 when Wage Order 4 took effect. 2
(Emphasis supplied)
On motion for partial reconsideration filed by the Company,
the above quoted portion of the NLRC En Banc's decision was
reconsidered and set aside by the NLRC Fifth Division. 3 The
Fifth Division of the NLRC in effect found that while a wage
distortion did exist commencing 16 June 1984, the distortion
persisted only for a total of fifteen (15) days and accordingly
required private respondent company to pay "a wage increase
of P2.00 per day to all regular workers effective June 16, 1984
up to June 30, 1984 or a total of fifteen (15) days." 4 The rest
of the decision of 11 November 1987 was left untouched.
In its decision dated 16 December 1991, the NLRC (Fifth
Division) said:
. . . At the time Wage Order No. 4 was implemented on May 1,
1984, casual employees were increased to P34.00 per day,
placing them on equal salary footing with the regular
employees who were likewise receiving P34.00 per day. But
effective July 1, 1984 when the 1984 CBA took effect, the
regular employees of the company admittedly received the
basic wage of P35.84 or an increase of P1.84 as against the
daily wage of P34.00 of the casual employees.
Thus, the apparent wage distortion did not last long but only
for 15 days, that is from June 16, 1984 when Wage Order No.
5 took effect and lasted only up to June 30, 1984. From July 1,
1984, the regular employees received an increase of P1.84
making their daily wage P35.84 as against the wage of casual
employees of P34.00 per day. And as rightly pointed out
respondent-movant, the difference in the wage scale between
the two (2) groups of employees was maintained even after the
implementation of Wage Order No. 6 which took effect on
November 1, 1984. 5 (Emphasis supplied)
The bottom line issue presented to the Court is thus whether or
not, under the facts as summarized above, the NLRC (Fifth
Division) committed a grave abuse of discretion amounting to
lack or excess of jurisdiction, when it concluded that the wage
distortion had ceased to exist, after 1 July 1984.
The principal contention of petitioner NFL is that a wage
distortion in the wage structure of private respondent
Company continued to exist although a gap of P1.84 between
the daily wage rate of regular employees and that of casual
employees had been re-established upon the effectivity of the
CBA increase on 1 July 1984. The original claim of NFL was
that the initial prior to effectivity of Wage Order No. 3
differential of P4.56 in the wage rate of regular employees and
that of casual employees, should be re-created this time
between the wage rates of the newly "regularized" employees
(i.e., the casual employees regularized by the Company on 21
June 1984) and the "old" regular employees (employees who,
allegedly, had been regular employees for at least three [3]
years before the "regularization" of the casuals). 6 NFL
stresses that seniority is a valid basis of distinction between
differing groups of employees, under the Labor Code.
We note that neither the Wage Orders noted above, nor the
Implementing Rules promulgated by the Department of Labor
and Employment, set forth a clear and specific notion of
"wage distortion." What the Wage Orders and the
Implementing Rules did was simply to recognize that
implementation of the Wage Orders could result in a
"distortion of the wage structure" of an employer, and to direct
the employer and the union to negotiate with each other to
correct the distortion. Thus, Section 6 of Wage Order No. 3,
dated 7 November 1983, provided as follows:
Sec. 6. Where the application of the minimum wage rate
prescribed herein results in distortions of the wage structure of
an establishment, the employer and the union shall negotiate
to correct the distortions. Any dispute arising from wage
distortions shall be resolved through the grievance procedure
under their collective bargaining agreement or through
conciliation.
In case where there is no collective bargaining agreement or
recognized labor organization, the employer shall endeavor to
correct such distortions in consultation with their workers.
Any dispute shall be resolved through conciliation by the
appropriate Regional Office of the Ministry of Labor and
Employment or through arbitration by the NLRC Arbitration
Branch having jurisdiction over the work-place. 7 (Emphasis
supplied)
In its Resolution dated 11 November 1987, the NLRC En
Banc provided some elaboration of the notion of wage
distortion, in the following terms:
Wage distortion presupposes a classification of positions and
ranking of these positions at various levels. One visualizes a
hierarchy of positions with corresponding ranks basically in
terms of wages and other emoluments. Where a significant
change occurs at the lowest level of positions in terms of basic
wage without a corresponding change in the other level in the
hierarchy of positions, negating as a result thereof the
distinction between one level of position from the next higher
level, and resulting in a disparity [should be "parity"] between
the lowest level [and] the next higher level or rank, between
new entrants and old hires, there exists a wage distortion.
The various issuances on wages anticipated this occurrence so
that it had been commonly provided for in these issuances that
negotiations may be initiated for the purposes of correcting the
resulting distortion. 8 (Emphases and brackets supplied)
A statutory definition of "wage distortion" is now found in
Article 124 of the Labor Code as amended by Republic Act.
No. 6727 (dated 9 June 1989) which reads as follows:
Article 124. Standards/Criteria for Minimum Wage
Fixing . . .
xxx xxx xxx
As used herein, a wage distortion shall mean 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. 9 (Emphasis
supplied)
From the above quoted material, it will be seen that the
concept of wage distortion assumes an existing grouping or
classification of employees which establishes distinctions
among such employees on some relevant or legitimate basis.
This classification is reflected in a differing wage rate for each
of the existing classes of employees. The wage distortion
anticipated in Wage Orders Nos. 3, 4, 5 and 6 was a
"distortion" (or "compression") which ensued from the impact
of those Wage Orders upon the different wage rates of the
several classes of employees. Thus distortion ensued where
the result of implementation of one or another of the several
Wage Orders was the total elimination or the severe reduction
of the differential or gap existing between the wage rates of
the differing classes of employees. 10
It is important to note that the remedy contemplated in the
Wage Orders, and now in Article 124 of the Labor Code, for a
wage distortion consisted of negotiations between employer
and employees for the rectification of the distortion by re-
adjusting the wage rates of the differing classes of employees.
As a practical matter, this ordinarily meant a wage increase for
one or more of the affected classes of employees so that some
gap or differential would be
re-established. There was no legal requirement that the
historical gap which existed before the implementation of the
Wage Orders be restored in precisely the same form or
amount.
Applying the above concept to the case at bar, we note that
there did exist a two-fold classification of employees within
the private respondent Company: regular employees on the
one hand and casual (or non-regular) employees on the other.
As can be seen from the figures referred to earlier, the
differential between these two (2) classes of employees
existing before Wage Order No. 3 was reduced to zero upon
the effectivity of Wage Order No. 5 on 16 June 1984.
Obviously, distortion consisting of complete elimination of
the wage rate differential had occurred. It is equally clear,
however, that fifteen (15) days later, on 1 July 1984, upon
effectivity of the wage increase stipulated in the collective
bargaining agreement between the parties, a gap or differential
of P1.84 was re-created. This restored differential persisted
after the effectivity of Wage Order No. 6 on 1 November
1984. By operation of the same CBA, by 1 July 1985, the
wage differential had grown to P3.60.
We believe and so hold that the re-establishment of a
significant gap or differential between regular employees and
casual employees by operation of the CBA was more than
substantial compliance with the requirements of the several
Wage Orders (and of Article 124 of the Labor Code). That this
re-establishment of a significant differential was the result of
collective bargaining negotiations, rather than of a special
grievance procedure, is not a legal basis for ignoring it. The
NLRC En Banc was in serious error when it disregarded the
differential of P3.60 which had been restored by 1 July 1985
upon the ground that such differential "represent[ed]
negotiated wage increase[s] which should not be considered
covered and in compliance with the Wage Orders." 11 The
Wage Orders referred to above had provided for the crediting
of increases in wages or allowances granted or paid by
employers within a specified time against the statutorily
prescribed increases in minimum wages. 12 A similar
provision recognizing crediting of increases in daily basic
wage rates granted by employers pursuant to collective
bargaining agreements, is set out in Section 4(d) of R.A. No.
6727, a statute which sought to "rationalize wage policy
determination by establishing the mechanism and proper
standards therefor ." In Apex Mining Company, Inc. v.
National Labor Relations Commission, 13 the Supreme Court
said:
It is important to note that the creditability provisions in Wage
Orders Nos. 5 and 6 (as well as the parallel provisions in Wage
Orders Nos. 2, 3 and 4) are grounded in an important public
policy. That public policy may be seen to be the
encouragement of employers to grant wage and allowance
increases to their employees higher than the minimum rates of
increases prescribed by statute or administrative regulation.
To obliterate the creditability provisions in the Wage Orders
through interpretation or otherwise, and to compel employers
simply to add legislated increases in salaries or allowances
without regard to what is already being paid, would be to
penalize employers who grant their workers more than the
statutorily prescribed minimum rates of increases. Clearly, this
would be counter-productive so far as securing the interests of
labor is concerned. The creditability provisions in the Wage
Orders prevent the penalizing of employers who are industry
leaders and who do not wait for statutorily prescribed
increases in salary or allowances and pay their workers more
than what the law or regulations require. 14 (Emphases in the
original)
We believe that the same public policy requires recognition
and validation, as it were, of wage increases given by
employers either unilaterally or as a result of collective
bargaining negotiations, in the effort to correct wage
distortions.
We consider, still further, that the "regularization" of the
casual or non-regular employees on 21 June 1984 which was
unilaterally effected by the Company (albeit upon the request
of petitioner NFL), in conjunction with the coming into effect
of the increases in daily wage stipulated in the CBA, had the
effect of rendering the whole problem of wage distortion
academic. The act of "regularization" eliminated the
classification scheme in respect of which the wage distortion
had existed.
Petitioner NFL's principal contention that the wage distortion
persisted with respect to the "old" regular employees and the
"newly regularized" employees, is realistically a claim or
demand that the classification of "regular" employees be
broken down into a sub-classification of "new regulars" and
"old regulars." A basic problem with this contention is that,
per the record of this case and during the period of time here
relevant, there was in fact no pre-existing sub-classification of
regular employees into "new regulars" and "old regulars" (i.e.,
on the basis of seniority or longevity) in the Company. It
follows that, as pointed out by the Solicitor-General, 15 no
wage distortion within the meaning of Wage Orders Nos. 3
through 6 (and of Article 124 of the Labor Code) continued
beyond the "regularization" of the casual employees on
21 June 1984. It may be though here again the record is
silent that the Company had some other sub-grouping of
regular employees on the basis, for instance, of the kind of
functions discharged by employees (e.g., rank and file;
supervisory; middle management; senior management; highly
technical, etc.).
The basic point which needs to be stressed is that whether or
not a new or additional scheme of classification of employees
for compensation purposes should be established by the
Company (and the legitimacy or viability of the bases of
distinction there embodied) is properly a matter for
management judgment and discretion, and ultimately, perhaps,
a subject matter for bargaining negotiations between employer
and employees. It is assuredly something that falls outside the
concept of "wage distortion." The Wage Orders and Article
124 as amended do not require the establishment of new
classifications or sub-classifications by the employer. The
NLRC is not authorized unilaterally to impose, directly or
indirectly, under the guise of rectifying a "wage distortion,"
upon an employer a new scheme of classification of
employees where none has been established either by
management decision or by collective bargaining.
We conclude that petitioner NFL has not shown any grave
abuse of discretion amounting to lack of excess of jurisdiction
on the part of the NLRC in rendering its decision (through its
Fifth Division) dated 16 December 1991.
WHEREFORE, the Petition for Certiorari is hereby
DISMISSED for lack of merit. No pronouncement as to costs.
SO ORDERED.
Bankard EEs Union vs NLRC
CARPIO MORALES, J.:
The present Petition for Review on Certiorari under Rule 45 of
the Rules of Court raises the issue of whether the unilateral
adoption by an employer of an upgraded salary scale that
increased the hiring rates of new employees without
increasing the salary rates of old employees resulted in wage
distortion within the contemplation of Article 124 of the Labor
Code.
Bankard, Inc. (Bankard) classifies its employees by levels, to
wit: Level I, Level II, Level III, Level IV, and Level V. On
May 28, 1993, its Board of Directors approved a "New Salary
Scale", made retroactive to April 1, 1993, for the purpose of
making its hiring rate competitive in the industrys labor
market. The "New Salary Scale" increased the hiring rates of
new employees, to wit: Levels I and V by one thousand pesos
(P1,000.00), 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.
Bankards move drew the Bankard Employees Union-WATU
(petitioner), the duly certified exclusive bargaining agent of
the regular rank and file employees of Bankard, to press for
the increase in the salary of its old, regular employees.
Bankard took the position, however, that there was no
obligation on the part of the management to grant to all its
employees the same increase in an across-the-board manner.
As the continued request of petitioner for increase in the
wages and salaries of Bankards regular employees remained
unheeded, it filed a Notice of Strike on August 26, 1993 on the
ground of discrimination and other acts of Unfair Labor
Practice (ULP).
A director of the National Conciliation and Mediation Board
treated the Notice of Strike as a "Preventive Mediation Case"
based on a finding that the issues therein were "not strikeable".
Petitioner filed another Notice of Strike on October 8, 1993 on
the grounds of refusal to bargain, discrimination, and other
acts of ULP - union busting. The strike was averted, however,
when the dispute was certified by the Secretary of Labor and
Employment for compulsory arbitration.
The Second Division of the NLRC, by Order of May 31, 1995,
finding no wage distortion, dismissed the case for lack of
merit.
Petitioners motion for reconsideration of the dismissal of the
case was, by Resolution of July 28, 1995, denied.
Petitioner thereupon filed a petition for certiorari before this
Court, docketed as G.R. 121970. In accordance with its ruling
in St. Martin Funeral Homes v. NLRC,1 the petition was
referred to the Court of Appeals which, by October 28, 1999,
denied the same for lack of merit.
Hence, the present petition which faults the appellate court as
follows:
(1) It misapprehended the basic issues when it concluded that
under Bankards new wage structure, the old salary gaps
between the different classification or level of employees were
"still reflected" by the adjusted salary rates2; and
(2) It erred in concluding that "wage distortion does not appear
to exist", which conclusion is manifestly contrary to law and
jurisprudence.3
Upon the enactment of R.A. No. 6727 (WAGE
RATIONALIZATION ACT, amending, among others, Article
124 of the Labor Code) on June 9, 1989, the term "wage
distortion" was explicitly defined as:
... a situation where an increase in prescribed wage rates
results in the elimination or severe contraction of intentional
quantitative differences in wage or salary rates between and
among employee groups in an establishment as to effectively
obliterate the distinctions embodied in such wage structure
based on skills, length of service, or other logical bases of
differentiation.4
Prubankers Association v. Prudential Bank and Trust
Company5 laid down the four elements of wage distortion, to
wit: (1.) An existing hierarchy of positions with corresponding
salary rates; (2) A significant change in the salary rate of a
lower pay class without a concomitant increase in the salary
rate of a higher one; (3) The elimination of the distinction
between the two levels; and (4) The existence of the distortion
in the same region of the country.
Normally, a company has a wage structure or method of
determining the wages of its employees. In a problem dealing
with "wage distortion," the basic assumption is that there
exists a grouping or classification of employees that
establishes distinctions among them on some relevant or
legitimate bases.6
Involved in the classification of employees are various factors
such as the degrees of responsibility, the skills and knowledge
required, the complexity of the job, or other logical basis of
differentiation. The differing wage rate for each of the existing
classes of employees reflects this classification.
Petitioner maintains that for purposes of wage distortion, the
classification is not one based on "levels" or "ranks" but on
two groups of employees, the newly hired and the old, in each
and every level, and not between and among the different
levels or ranks in the salary structure.
Public respondent National Labor Relations Commission
(NLRC) refutes petitioners position, however. It, through the
Office of the Solicitor General, essays in its Comment of April
12, 2000 as follows:
To determine the existence of wage distortion, the "historical"
classification of the employees prior to the wage increase must
be established. Likewise, it must be shown that as between the
different classification of employees, there exists a "historical"
gap or difference.
xxx
The classification preferred by petitioner is belied by the wage
structure of private respondent as shown in the new salary
scale it adopted on May 28, 1993, retroactive to April 1, 1993,
which provides, thus:
Hiring Minimum Maximum
Level From To From To From To
I 3,100 4,100 3,200 4,200 7,200 9,250
II 3,200 4,100 3,300 4,200 7,500 9,500
III 3,300 4,200 3,400 4,300 8,000 10,000
IV 3,500 4,400 3,600 4,500 8,500 10,500
V 3,700 4,700 3,800 4,800 9,000 11,000
Thus the employees of private respondent have been
"historically" classified into levels, i.e. I to V, and not on the
basis of their length of service. Put differently, the entry of
new employees to the company ipso facto place[s] them under
any of the levels mentioned in the new salary scale which
private respondent adopted retroactive [to] April 1, 1993.
Petitioner cannot make a contrary classification of private
respondents employees without encroaching upon recognized
management prerogative of formulating a wage structure, in
this case, one based on level.7 (Emphasis and underscoring
supplied)
The issue of whether wage distortion exists being a question
of fact that is within the jurisdiction of quasi-judicial
tribunals,8 and it being a basic rule that findings of facts of
quasi-judicial agencies, like the NLRC, are generally accorded
not only respect but at times even finality if they are supported
by substantial evidence, as are the findings in the case at bar,
they must be respected. For these agencies have acquired
expertise, their jurisdiction being confined to specific
matters.9
It is thus clear that there is no hierarchy of positions between
the newly hired and regular employees of Bankard, hence, the
first element of wage distortion provided in Prubankers is
wanting.lawphi1.nt
While seniority may be a factor in determining the wages of
employees, it cannot be made the sole basis in cases where the
nature of their work differs.
Moreover, for purposes of determining the existence of wage
distortion, employees cannot create their own independent
classification and use it as a basis to demand an across-the-
board increase in salary.
As National Federation of Labor v. NLRC, et al.10 teaches,
the formulation of a wage structure through the classification
of employees is a matter of management judgment and
discretion.
[W]hether or not a new additional scheme of classification of
employees for compensation purposes should be established
by the Company (and the legitimacy or viability of the bases
of distinction there embodied) is properly a matter of
management judgment and discretion, and ultimately, perhaps,
a subject matter for bargaining negotiations between employer
and employees. It is assuredly something that falls outside the
concept of "wage distortion."11 (Emphasis and underscoring
supplied)
As did the Court of Appeals, this Court finds that the third
element provided in Prubankers is also wanting. For, as the
appellate court explained:
In trying to prove wage distortion, petitioner union presented a
list of five (5) employees allegedly affected by the said
increase:
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.
x x x (Italics and emphasis supplied)

Article 124 is entitled "Standards/Criteria for Minimum Wage

Pay of Old/ Pay of Newly Difference Fixing." It is found in CHAPTER V on "WAGE STUDIES,
Regular Employees Hired Employees WAGE AGREEMENTS AND WAGE DETERMINATION"
A. Prior to April 1, 1993 which principally deals with the fixing of minimum wage.
Level I P4,518.75 Article 124 should thus be construed and correlated in relation
(Sammy Guce) P3,100 P1,418.75 to minimum wage fixing, the intention of the law being that in
Level II P6,242.00 the event of an increase in minimum wage, the distinctions
(Nazario Abello) P3,200 P3,042.00 embodied in the wage structure based on skills, length of
Level IIIP4,850.00 service, or other logical bases of differentiation will be
(Arthur Chavez) P3,300 P1,550.00 preserved.
Level IVP5,339.00
Melissa Cordero) P3,500 P1,839.00 If the compulsory mandate under Article 124 to correct "wage
Level V P7,090.69 distortion" is applied to voluntary and unilateral increases by
(Ma. Lourdes Dee) P3,700 P3,390.69 the employer in fixing hiring rates which is inherently a
B. Effective April 1, 1993 business judgment prerogative, then the hands of the employer
Level I P4,518.75 would be completely tied even in cases where an increase in
Sammy Guce) P4,100 P418.75 wages of a particular group is justified due to a re-evaluation
Level II P6,242.00 of the high productivity of a particular group, or as in the
(Nazario Abello) P4,100 P2,142.00 present case, the need to increase the competitiveness of
Level IIIP4,850.00 Bankards hiring rate. An employer would be discouraged
(Arthur Chavez) P4,200 P650.00 from adjusting the salary rates of a particular group of
Level IVP5,330.00 employees for fear that it would result to a demand by all
(Melissa Cordero) P4,400 P939.00 employees for a similar increase, especially if the financial
Level V P7,090.69 conditions of the business cannot address an across-the-board
(Ma. Lourdes Dee) P4,700 P2,390.69 increase.
Even assuming that there is a decrease in the wage gap
between the pay of the old employees and the newly hired Petitioner cites Metro Transit Organization, Inc. v. NLRC13 to
employees, to Our mind said gap is not significant as to support its claim that the obligation to rectify wage distortion
obliterate or result in severe contraction of the intentional is not confined to wage distortion resulting from government
quantitative differences in the salary rates between the decreed law or wage order.
employee group. As already stated, the classification under the
wage structure is based on the rank of an employee, not on Reliance on Metro Transit is however misplaced, as the
seniority. For this reason, ,wage distortion does not appear to obligation therein to rectify the wage distortion was not by
exist.12 (Emphasis and underscoring supplied) virtue of Article 124 of the Labor Code, but on account of a
then existing "company practice" that whenever rank-and-file
Apart from the findings of fact of the NLRC and the Court of employees were paid a statutorily mandated salary increase,
Appeals that some of the elements of wage distortion are supervisory employees were, as a matter of practice, also paid
absent, petitioner cannot legally obligate Bankard to correct the same amount plus an added premium. Thus this Court held
the alleged "wage distortion" as the increase in the wages and in said case:
salaries of the newly-hired was not due to a prescribed law or
wage order. We conclude that the supervisory employees, who then (i.e.,
on April 17, 1989) had, unlike the rank-and-file employees, no
The wordings of Article 124 are clear. If it was the intention of CBA governing the terms and conditions of their employment,
the legislators to cover all kinds of wage adjustments, then the had the right to rely on the company practice of unilaterally
language of the law should have been broad, not restrictive as correcting the wage distortion effects of a salary increase
it is currently phrased: given to the rank-and-file employees, by giving the
supervisory employees a corresponding salary increase plus a
Article 124. Standards/Criteria for Minimum Wage Fixing. premium. . . .14 (Emphasis supplied)

xxx Wage distortion is a factual and economic condition that may

be brought about by different causes. In Metro Transit, the
Where the application of any prescribed wage increase by reduction or elimination of the normal differential between the
virtue of a law or Wage Order issued by any Regional Board wage rates of rank-and-file and those of supervisory
results in distortions of the wage structure within an employees was due to the granting to the former of wage
increase which was, however, denied to the latter group of
employees.
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.
Unlike in Metro Transit then where there existed a "company
practice," no such management practice is herein alleged to
obligate Bankard to provide an across-the-board increase to all
its regular employees.
Bankards right to increase its hiring rate, to establish
minimum salaries for specific jobs, and to adjust the rates of
employees affected thereby is embodied under Section 2,
Article V (Salary and Cost of Living Allowance) of the
parties Collective Bargaining Agreement (CBA), to wit:
Section 2. Any salary increase granted under this Article shall
be without prejudice to the right of the Company to establish
such minimum salaries as it may hereafter find appropriate for
specific jobs, and to adjust the rates of the employees thereby
affected to such minimum salaries thus established.15 (Italics
and underscoring supplied)
This CBA provision, which is based on legitimate business-
judgment prerogatives of the employer, is a valid and legally
enforceable source of rights between the parties.
In fine, absent any indication that the voluntary increase of
salary rates by an employer was done arbitrarily and illegally
for the purpose of circumventing the laws or was devoid of
any legitimate purpose other than to discriminate against the
regular employees, this Court will not step in to interfere with
this management prerogative. Employees are of course not
precluded from negotiating with its employer and lobby for
wage increases through appropriate channels, such as through
a CBA.
This Court, time and again, has shown concern and
compassion to the plight of workers in adherence to the
Constitutional provisions on social justice and has always
upheld the right of workers to press for better terms and
conditions of employment. It does not mean, however, that
every dispute should be decided in favor of labor, for
employers correspondingly have rights under the law which
need to be respected.
WHEREFORE, the present petition is hereby DENIED.
SO ORDERED.
Prubankers vs Prudential
PANGANIBAN, J.:
Wage distortion presupposes an increase in the compensation
of the lower ranks in an office hierarchy wirhout a
corresponding raise for higher-tiered employees in the same
region of the country, resulting in the elimination or the severe
diminution of the distinction between the two groups. Such
distortion does not arise when a wage order gives employees
in one branch of a bank higher compensation than that given
to their counterparts in other regions occupying the same pay
scale, who are not covered by said wage order. In short, the
implementation of wage orders in one region but not in others
does not in itself necessarily result in wage distortion.
The Case
Before us is a Petition for Review on Certiorari, challenging
the November 6, 1997 Decision 1 of the Court of Appeals in
CA-GR SP No. 42525. The dispositive portion of the
challenged Decision reads:
WHEREFORE, the petition is GRANTED. The assailed
decision of the Voluntary Arbitration Committee dated June
18, 1996 is hereby REVERSED and SET ASIDE for having
been issued with grave abuse of discretion tantamount to lack
of or excess of jurisdiction, and a new judgment is rendered
finding that no wage distortion resulted from the petitioner's
separate and regional implementation of Wage Order No. VII-
03 at its Cebu, Mabolo and P. del Rosario.
The June 18, 1996 Decision of the Voluntary Arbitration
Commitee, 2 which the Court of Appeals reversed and set
aside, disposed as follows:
WHEREFORE, it is hereby ruled that the Bank's separate and
regional implementation of Wage Order No. VII-03 at its
Cebu, Mabolo and P. del Rosario branches created a wage
distortion in the Bank nationwide which should be resolved in
accordance with Art. 124 of the Labor Code. 3
The Facts
The facts of the case are summarized by the Court of Appeals
thus:
On November 18, 1993, the Regional Tripartite Wages and
Productivity Board of Region V issued Wage Order No. RB
05-03 which provided for a Cost of Living Allowance (COLA)
to workers in the private sector who ha[d] rendered service for
at least three (3) months before its effectivity, and for the same
period [t]hereafter, in the following categories: SEVENTEEN
PESOS AND FIFTY CENTAVOS (P17.50) in the cities of
Naga and Legaspi; FIFTEEN PESOS AND FIFTY
CENTAVOS (P15.50) in the municipalities of Tabaco, Daraga,
Pili and the city of Iriga; and TEN PESOS (P10.00) for all
other areas in the Bicol Region.
Subsequently on November 23, 1993, the Regional Tripartite
Wages and Productivity Board of Region VII issued Wage
Order No. RB VII-03, which directed the integration of the
COLA mandated pursuant to Wage Order No. RO VII-02-A
into the basic pay of all workers. It also established an
increase in the minimum wage rates for all workers and and
employees in the private sector as follows: by Ten Pesos
(P10.00) in the cities of Cebu, Mandaue and Lapulapu; Five
Pesos (P5.00) in the municipalities of Compostela, Liloan,
Consolacion, Cordova, Talisay, Minglanilla, Naga and the
cities of Davao, Toledo, Dumaguete, Bais, Canlaon and
Tagbilaran.
The petitioner then granted a COLA of P17.50 to its
employees at its Naga Branch, the only branch covered by
Wage Order No. RB 5-03, and integrated the P150.00 per
month COLA into the basic pay of its rank-and-file employees
at its Cebu, Mabolo and P. del Rosario branches, the branches
covered by Wage Order No. RB VII-03.
On June 7, 1994, respondent Prubankers Association wrote the
petitioner requesting that the Labor Management Committee
be immediately convened to discuss and resolve the alleged
wage distortion created in the salary structure upon the
implementation of the said wage orders. Respondent
Association then demanded in the Labor Management
Committee meetings that the petitioner extend the application
of the wage orders to its employees outside Regions V and
VII, claiming that the regional implementation of the said
orders created a wage distortion in the wage rates of
petitioner's employees nationwide. As the grievance could not
be settled in the said meetings, the parties agreed to submit the
matter to voluntary arbitration. The Arbitration Committee
formed for that purpose was composed of the following:
public respondent Froilan M. Bacungan as Chairman, with
Attys. Domingo T. Anonuevo and Emerico O. de Guzman as
members. The issue presented before the Committee was
whether or not the bank's separate and regional
implementation of Wage Order No. 5-03 at its Naga Branch
and Wage Order No. VII-03 at its Cebu, Mabolo and P. del
Rosario branches, created a wage distortion in the bank
nationwide.
The Arbitration Committee on June 18, 1996 rendered
questioned decision. 4
Ruling of the Court of Appeals
In ruling that there was no wage distortion, the Court of
Appeals held that the variance in the salary rates of employees
in different regions of the country was justified by RA 6727. It
noted that "the underlying considerations in issuing the wage
orders are diverse, based on the distinctive situations and
needs existing in each region. Hence, there is no basis to apply
the salary increases imposed by Wage Order No. VII-03 to
employees outside of Region VII." Furthermore, the Court of
Appeals ruled that "the distinctions between each employee
group in the region are maintained, as all employees were
granted an increase in minimum wage rate. 5
The Issues
In its Memorandum, petitioner raises the following issues: 6
I imposed a sanction in this wise: "A violation of the rule shall
Whether or not the Court of Appeals departed from the usual
course of judicial procedure when it disregarded the factual
findings of the Voluntary Arbitration Committee as to the
existence of wage distortion.
II
Whether or not the Court of Appeals committed grave error in
law when it ruled that wage distortion exists only within a
region and not nationwide.
III
Whether or not the Court of Appeals erred in implying that the
term "establishment" as used in Article 125 of the Labor Code
refers to the regional branches of the bank and not to the bank
as a whole.
The main issue is whether or not a wage distortion resulted
from respondent's implementation of the aforecited Wage
Orders. As a preliminary matter, we shall also take up the
question of forum-shopping.
The Court's Ruling
The petition is devoid of merit. 7
Preliminary Issue: Forum-Shopping
Respondent asks for the dismissal of the petition because
petitioner allegedly engaged in forum-shopping. It maintains
that petitioner failed to comply with Section 2 of Rule 42 of
the Rules of Court, which requires that parties must certify
under oath that they have not commenced any other action
involving the same issues in the Supreme Court, the Court of
Appeals, or different divisions thereof, or any other tribunal or
agency; if there is such other action or proceeding, they must
state the status of the same; and if they should thereafter learn
that a similar action or proceeding has been filed or is pending
before the said courts, they should promptly inform the
aforesaid courts or any other tribunal or agency within five
days therefrom. Specifically, petitioner accuses respondent of
failing to inform this Court of the pendency of NCMB-NCR-
RVA-O4-012-97 entitled "In Re: Voluntary Arbitration
between Prudential Bank and Prubankers Association"
(hereafter referred to as "voluntary arbitration case"), an action
involving issues allegedly similar to those raised in the present
controversy.
In its Reply, petitioner effectively admits that the voluntary
arbitration case was already pending when it filed the present
petition. However, it claims no violation of the rule against
forum-shopping, because there is no identity of causes of
action and issues between the two cases.
We sustain the respondent. The rule on forum-shopping was
first included in Section 17 of the Interim Rules and
Guidelines issued by this Court on January 11, 1983, which
constitute contempt of court and shall be a cause for the
summary dismissal of both petitions, without prejudice to the
taking of appropriate action against the counsel or party
concerned." Thereafter, the Court restated the rule in Revised
Circular No. 28-91 and Administrative Circular No. 04-94.
Ultimately, the rule was embodied in the 1997 amendments to
the Rules of Court.
As explained by this Court in First Philippine International
Bank v. Court of Appeals, 8 forum-shopping exists where the
elements of litis pendentia are present, and where a final
judgment in one case will amount to res judicata in the other.
Thus, there is forum-shopping when, between an action
pending before this Court and another one, there exist: "a)
identity of parties, or at least such parties as represent the
same interests in both actions, b) identity of rights asserted and
relief prayed for, the relief being founded on the same facts,
and c) the identity of the two preceding particulars is such that
any judgement rendered in the other action, will, regardless of
which party is successful amount to res judicata in the action
under consideration; said requisites also constitutive of the
requisites for auter action pendant or lis pendens." 9 Another
case elucidates the consequence of forum-shopping: "[W]here
a litigant sues the same party against whom another action or
actions for the alleged violation of the same right and the
enforcement of the same relief is/are still pending, the defense
of litis pendentia in one case is a bar to the others; and, a final
judgment in one would constitute res judicata and thus would
cause the dismissal of the rest." 10
The voluntary arbitration case involved the issue of whether
the adoption by the Bank of regionalized hiring rates was valid
and binding. On the other hand, the issue now on hand
revolves around the existence of a wage distortion arising
from the Bank's separate and regional implementation of the
two Wage Orders in the affected branches. A closer look
would show that, indeed, the requisites of forum-shopping are
present.
First, there is identity of parties. Both cases are between the
Bank and the Association acting on behalf of all its members.
Second, although the respective issues and reliefs prayed for
in the two cases are stated differently, both actions boil down
to one single issue: the validity of the Bank's regionalization
of its wage structure based on RA 6727. Even if the voluntary
arbitration case calls for striking, down the Bank's
regionalized hiring scheme while the instant petition calls for
the correction of the alleged wage distortion caused by the
regional implementation of Wage Order No. VII-03, the
ultimate relief prayed for in both cases is the maintenance of
the Bank's national wage structure. Hence, the final
disposition of one would constitute res judicata in the other.
Thus, forum-shopping is deemed to exist and, on this basis,
the summary dismissal of both actions is indeed warranted.
Nonetheless, we deem it appropriate to pass upon the main
issue on its merit in view of its importance.
Main Issue: Wage Distortion
The statutory definition of wage distortion is found in Article
124 of the Labor Code, as amended by Republic Act No.
6727, which reads:
Art. 124.Standards/Criteria for Minimum Wage Fixing . . .
As used herein, a wage distortion shall mean a situation where
an increase in prescribed wage results in the elimination of
severe contraction of intentional quantitative differences in
wage or salary rates between and among employee groups in
an establishment as to effectively obliterate the distinctions
embodied in such wage structure based on skills, length of
service, or other logical bases of differentiation.
Elaborating on this statutory definition, this Court ruled:
"Wage distortion presupposes a classification of positions and
ranking of these positions at various levels. One visualizes a
hierarchy of positions with corresponding ranks basically in
terms of wages and other emoluments. Where a significant
change occurs at the lowest level of positions in terms of basic
wage without a corresponding change in the other level in the
hierarchy of positions, negating as a result thereof the
distinction between one level of position from the next higher
level, and resulting in a parity between the lowest level and
the next higher level or rank, between new entrants and old
hires, there exists a wage distortion. . . . . The concept of a
wage distortion assumes an existing grouping or classification
of employees which establishes distinctions among such
employees on some relevant or legitimate basis. This
classification is reflected in a differing wage rate for each of
the existing classes of employees" 11
Wage distortion involves four elements:
1. An existing hierarchy of positions with
corresponding salary rates
2. A significant change in the salary rate of a lower pay
class without a concomitant increase in the salary rate of a
higher one
3. The elimination of the distinction between the two
levels
4. The existence of the distortion in the same region of
the country
In the present case, it is clear that no wage distortion resulted
when respondent implemented the subject Wage Orders in the
covered branches. In the said branches, there was an increase
in the salary rates of all pay classes. Furthermore, the
hierarchy of positions based on skills, lengh of service and
other logical bases of differentiation was preserved. In other
words, the quantitative difference in compensation between
different pay classes remained the same in all branches in the
affected region. Put differently, the distinction between Pay
Class 1 and Pay Class 2, for example, was not eliminated as a
result of the implementation of the two Wage Orders in the
said region. Hence, it cannot be said that there was a wage
distortion.
Petitioner argues that a wage distortion exists, because the
implementation of the two Wage Orders has resulted in the
discrepancy in the compensation of employees of similar pay
classification in different regions. Hence, petitioner maintains
that, as a result of the two Wage Orders, the employees in the
affected regions have higher compensation than their
counterparts of the same level in other regions. Several tables
are presented by petitioner to illustrate that the employees in
the regions covered by the Wage Orders are receiving more
than their counterparts in the same pay scale in other regions.
The Court is not persuaded. A wage parity between employees
in different rungs, is not at issue here, but a wage disparity
between employees in the same rung but located in different
regions of the country.
Contrary to petitioner's postulation, a disparity in wages
between employees holding similar positions but in different
regions does not constitute wage distortion as contemplated by
law. As previously enunciated, it is the hierarchy of positions
and the disparity of their corresponding wages and other
emoluments that are sought to be preserved by the concept of
wage distortion. Put differently, a wage distortion arises when
a wage order engenders wage parity between employees in
different rungs of the organizational ladder of the same
establishment. It bears emphasis that wage distortion involves
a parity in the salary rates of different pay classes which, as a
result, eliminates the distinction between the different ranks in
the same region.
Different Regional Wages
Mandated by RA 6727
Petitioner's claim of wage distortion must also be denied for
one other reason. The difference in wages between employees
in the same pay scale in different regions is not the mischief
sought to be banished by the law. In fact, Republic Act No.
6727 (the Wage Rationalization Act), recognizes "existing
regional disparities in the cost of living." Section 2 of said law
provides:
Sec 2. It is hereby declared the policy of the State to
rationalize the fixing of minimum wages and to promote
productivity-improvement and gain-sharing measures to
ensure a decent standard of living for the workers and their
families; to guarantee the rights of labor to its just share in the
fruits of production; to enhance employment generation in the
countryside through industry dispersal; and to allow business
and industry reasonable returns on investment, expansion and
growth.
The State shall promote collective bargaining as the primary
mode of settling wages and other terms and conditions of
employment; and whenever necessary, the minimum wage
rates shall be adjusted in a fair and equitable manner,
considering existing regional disparities in the cost of living
and other socio-economic factors and the national economic
and social development plans.
RA 6727 also amended Article 124 of the Labor Code, thus:
Art. 124.Standards/Criteria for Minimum Wage Fixing. The
regional minimum wages to be established by the Regional
Board shall be as nearly adequate as is economically feasible
to maintain the minimum standards of living necessary for the
health, efficiency and general well-being of the employees
within the frame work of the national economic and social
development program. In the determination of such regional
minimum wages, the Regional Board shall, among other
relevant factors, consider the following:
The demand for living wages;
Wage adjustment vis-a-vis the consumer price index;
The cost of living and changes or increases therein;
The needs of workers and their families;
The need to induce industries to invest in the countryside;
Improvements in standards of living;
The prevailing wage levels;
Fair return of the capital invested and capacity to pay of
employers;
Effects on employment generation and family income; and
The equitable distribution of income and wealth along the
imperatives of social and economic development.
From the above-quoted rationale of the law, as well as the
criteria enumerated, a disparity in wages between employees
with similar positions in different regions is necessarily
expected. In insisting that the employees of the same pay class
in different regions should receive the same compensation,
petitioner has apparently misunderstood both the meaning of
wage distortion and the intent of the law to regionalize wage
rates.
It must be understood that varying in each region of the
country are controlling factors such as the cost of living;
supply and demand of basic goods, services and necessities;
and the purchasing power of the peso. Other considerations
underscore the necessity of the law. Wages in some areas may
be increased in order to prevent migration to the National
Capital Region and, hence, to decongest the metropolis.
Therefore, what the petitioner herein bewails is precisely what
the law provides in order to achieve its purpose.
Petitioner claims that it "does not insist that the Regional
Wage Boards created pursuant to RA 6727 do not have the
authority to issue wage orders based on the distinctive
situations and needs existing in each region. So also, . . . it
does not insist that the [B]ank should not implement regional
wage orders. Neither does it seek to penalize the Bank for
following Wage Order VII-03. . . . What it simply argues is
that it is wrong for the Bank to peremptorily abandon a
national wage structure and replace the same with a
regionalized structure in violation of the principle of equal pay
for equal work. And, it is wrong to say that its act of
abandoning its national wage structure is mandated by law."
As already discussed above, we cannot sustain this argument.
Petitioner contradicts itself in not objecting, on the one hand,
to the right of the regional wage boards to impose a
regionalized wage scheme; while insisting, on the other hand,
on a national wage structure for the whole Bank. To reiterate,
a uniform national wage structure is antithetical to the purpose
of RA 6727.
The objective of the law also explains the wage disparity in
the example cited by petitioner: Armae Librero, though only in
Pay Class 4 in Mabolo, was, as a result of the Wage Order,
receiving more than Bella Cristobal, who was already in Pay
Class 5 in Subic. 12 RA 6727 recognizes that there are
different needs for the different situations in different regions
of the country. The fact that a person is receiving more in one
region does not necessarily mean that he or she is better off
than a person receiving less in another region. We must
consider, among others, such factors as cost of living,
fulfillment of national economic goals, and standard of living.
In any event, this Court, in its decisions, merely enforces the
law. It has no power to pass upon its wisdom or propriety.
Equal Pay for Equal Work
Petitioner also avers that the implementation of the Wage
Order in only one region violates the equal-pay-for-equal-
work principle. This is not correct. At the risk of being
repetitive, we stress that RA 6727 mandates that wages in
every region must be set by the particular wage board of that
region, based on the prevailing situation therein. Necessarily,
the wages in different regions will not be uniform. Thus, under
RA 6727, the minimum wage in Region 1 may be different
from that in Region 13, because the socioeconomic conditions
in the two regions are different.
Meaning of "Establishment"
Petitioner further contends that the Court of Appeals erred in
interpreting the meaning of "establishment" in relation to wage
distortion. It quotes the RA 6727 Implementing Rules,
specifically Section 13 thereof which speaks of "workers
working in branches or agencies of establishments in or
outside the National Capital Region." Petitioner infers from
this that the regional offices of the Bank do not themselves
constitute, but are simply branches of, the establishment which
is the whole bank. In effect, petitioner argues that wage
distortion covers the pay scales even of employees in different
regions, and not only those of employees in the same region or
branch. We disagree.
Sec. 13 provides that the "minimum wage rates of workers
working in branches or agencies of establishments in or
outside the National Capital Region shall be those applicable
in the place where they are sanctioned" The last part of the
sentence was omitted by petitioner in its argument. Given the
entire phrase, it is clear that the statutory provision does not
support petitioner's view that "establishment" includes all
branches and offices in different regions.
Further negating petitioner's theory is NWPC Guideline No. 1
(S. 1992) entitled "Revised Guidelines on Exemption From
Compliance With the Prescribed Wage/Cost of Living
Allowance Increases Granted by the Regional Tripartite
Wages and Productivity Board," which states that
"establishment" "refers to an economic unit which engages in
one or predominantly one kind of economic activity with a
single fixed location."
Management Practice
Petitioner also insists that the Bank has adopted a uniform
wage policy, which has attained the status of an established
management practice; thus, it is estopped from implementing a
wage order for a specific region only. We are not persuaded.
Said nationwide uniform wage policy of the Bank had been
adopted prior to the enactment of RA 6727. After the passage
of said law, the Bank was mandated to regionalize its wage
structure. Although the Bank implemented Wage Order Nos.
NCR-01 and NCR-02 nationwide instead of regionally even
after the effectivity of RA 6727, the Bank at the time was still
uncertain about how to follow the new law. In any event, that
single instance cannot be constitutive of "management
practice."
WHEREFORE, the petition is DENIED and the assailed
Decision is AFFIRMED. Costs against petitioner.1wphi1.nt
SO ORDERED.