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--------------------------------------------- month pay, and separation pay would be released.

Employees who
145. MILAN v. NLRC signed the memorandum of agreement were considered to have agreed to
G.R. No. 202961 vacate SMI Village, and to the demolition of the constructed houses
February 04, 2015 inside as condition for the release of their termination benefits and
Digested By: Joyce Baylon separation pay. Milan et.al. refused to sign the documents and demanded
--------------------------------------------- to be paid their benefits and separation pay.
Petitioners: EMER MILAN, RANDY MASANGKAY, WILFREDO 7. Hence, they filed complaints before the Labor Arbiter for alleged non-
JAVIER, RONALDO DAVID, BONIFACIO MATUNDAN, NORA payment of separation pay, accrued sick and vacation leaves, and 13th
MENDOZA, ET AL., (Milan et.al) month pay. They argued that their accrued benefits and separation pay
Respondents: NATIONAL LABOR RELATIONS COMMISSION, SOLID should not be withheld because their payment is based on company
MILLS, INC., AND/OR PHILIP ANG policy and practice. Moreover, the 13th month pay is based on law,
specifically, Presidential Decree No. 851. Their possession of Solid Mills
Petition: Petition for Review of CA Decision property is not an accountability that is subject to clearance procedures.
Ponente: LEONEN They had already turned over to Solid Mills their uniforms and
equipment when Solid Mills ceased operations.
FACTS: 8. On the other hand, Solid Mills argued that Milan et.al.s complaint was
1. Milan et.al are Solid Mills, Inc.s (Solid Mills) employees. They are premature because they had not vacated its property.
represented by the National Federation of Labor Unions (NAFLU), their 9. The Labor Arbiter ruled in favor of Milan et.al. According to the Labor
collective bargaining agent. Arbiter, Solid Mills illegally withheld petitioners benefits and separation
2. As Solid Mills employees, Milan et.al. and their families were allowed pay. The memorandum of agreement dated September 1, 2003 stated no
to occupy SMI Village, a property owned by Solid Mills. According to condition to the effect that petitioners must vacate Solid Mills property
Solid Mills, this was [o]ut of liberality and for the convenience of its before their benefits could be given to them. Milan et.al.s possession
employees . . . [and] on the condition that the employees would vacate should not be construed as theiraccountabilities that must be cleared
the premises anytime the Company deems fit. first before the release of benefits. er.
3. In September 2003, Milan et.al were informed that effective October 10, 10. Silodd Mills appealed to the National Labor Relations Commission. The
2003, Solid Mills would cease its operations due to serious business National Labor Relations Commission affirmed part of the decision but
losses. NAFLU recognized Solid Mills closure due to serious business reversed and set aside another part and decided that Milan et.al.s
losses in the memorandum of agreement dated September 1, 2003. The monetary claims in the form of separation pay, accrued 13th month pay
memorandum of agreement provided for Solid Mills grant of separation for 2003, accrued vacation and sick leave pays are held in abeyance
pay less accountabilities, accrued sick leave benefits, vacation leave pending compliance of their accountabilities to respondent company by
benefits, and 13th month pay to the employees. The agreement was turning over the subject lots they respectively occupy at SMI Village
entered into with full knowledge by the parties of their rights under the Sucat Muntinlupa City, Metro Manila to Solid Mills. Linga and four
law and they bound themselves not to conduct any concerted action of other were already paid their respective separation pays and benefits.
whatsoever kind, otherwise the grant of financial assistance as discussed Meanwhile, Teodora Mahilom already retired long before Solid Mills
above will be withheld. closure. She was already given her retirement benefits.
4. Solid Mills filed its Department of Labor and Employment termination 11. The National Labor Relations Commission ruled that because of
report on September 2, 2003. petitioners failure to vacate Solid Mills property, Solid Mills was
5. Later, Solid Mills, through Alfredo Jingco, sent to Milan et.al individual justified in withholding their benefits and separation pay.35 Solid Mills
notices to vacate SMI Village. granted the petitioners the privilege to occupy its property on account of
6. Milan et.al. were no longer allowed to report for work by October 10, petitioners employment.36 It had the prerogative to terminate such
2003. They were required to sign a memorandum of agreement with privilege.37 The termination of Solid Mills and petitioners employer-
release and quitclaim before their vacation and sick leave benefits, 13th
employee relationship made it incumbent upon petitioners to turn over 3. In cases where the employer is authorized by law or regulations issued
the property to Solid Mills. by the Secretary of Labor and Employment.
12. The Court of Appeals ruled that Solid Mills act of allowing its
employees to make temporary dwellings in its property was a liberality The Civil Code provides that the employer is authorized to withhold wages
on its part. It may be revoked any time at its discretion. for debts due: Article 1706. Withholding of the wages, except for a debt due,
shall not be made by the employer. Debt in this case refers to any
ISSUE: Whether or not an employer is allowed to withhold terminal pay and obligation due from the employee to the employer. It includes any
benefits pending the employees return of its properties accountability that the employee may have to the employer. There is no
reason to limit its scope to uniforms and equipment, as petitioners would
RULING/RATIO: Yes. The fact that majority of NAFLUs members were argue.
not occupants of respondent Solid Mills property is evidence that possession
of the property was not contemplated in the agreement. Accountabilities More importantly, respondent Solid Mills and NAFLU, the union
should be interpreted to refer only to accountabilities that were incurred by representing petitioners, agreed that the release of petitioners benefits shall
petitioners while they were performing their duties as employees at the be less accountabilities. Accountabilities of employees are personal. They
worksite. Moreover, applicable laws, company practice, or policies do not need not be uniform among all employees in order to be included in
provide that 13th month pay, and sick and vacation leave pay benefits, may accountabilities incurred by virtue of an employer-employee relationship.
be withheld pending satisfaction of liabilities by the employee. Milan et.al. do not categorically deny Solid Mills ownership of the property,
and they do not claim superior right to it. What can be gathered from the
Requiring clearance before the release of last payments to the employee is a findings of the Labor Arbiter, National Labor Relations Commission, and the
standard procedure among employers, whether public or private. Clearance Court of Appeals is that Solid Mills allowed the use of its property for the
procedures are instituted to ensure that the properties, real or personal, benefit of Milan et.al. as its employees. Milan et.al were merely allowed to
belonging to the employer but are in the possession of the separated possess and use it out of Solid Mills liberality. The employer may, therefore,
employee, are returned to the employer before the employees departure. demand the property at will.

As a general rule, employers are prohibited from withholding wages from DISPOSITIVE: Solid Mills won.
employees (Art. 116, Labor Code). The Labor Code also prohibits the DOCTRINE: An employer is allowed to withhold terminal pay and benefits
elimination or diminution of benefits (Art. 100, Labor Code). pending the employees return of its properties. As a general rule, No
employer, in his own behalf or in behalf of any person, shall make any
However, our law supports the employers institution of clearance procedures deduction from the wages of his employees. The following cases are
before the release of wages. As an exception to the general rule that wages considered exceptions:
may not be withheld and benefits may not be diminished, the Labor Code 1. In cases where the worker is insured with his consent by the
provides: Art. 113. Wage deduction. No employer, in his own behalf or in employer, and the deduction is to recompense the employer for the
behalf of any person, shall make any deduction from the wages of his amount paid by him as premium on the insurance;
employees, except: 2. For union dues, in cases where the right of the worker or his union to
1. In cases where the worker is insured with his consent by the employer, check-off has been recognized by the employer or authorized in
and the deduction is to recompense the employer for the amount paid writing by the individual worker concerned; and
by him as premium on the insurance; 3. In cases where the employer is authorized by law or regulations
2. For union dues, in cases where the right of the worker or his union to issued by the Secretary of Labor and Employment.
check-off has been recognized by the employer or authorized in
writing by the individual worker concerned; and

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