Sevilla Trading Company v. A.V. A.Tomas E. Semana, Sevilla Trading Workers Unionsuper.

Facts:

For two (2) to three (3) years, petitioner Sevilla Trading was paying its employees 13 th
month pay based on a figure which included the amount of benefits other than the basic pay. In
computing, petitioner added to the basic pay the following benefits: (a) overtime premium, (b)
legal holiday pay, (c) night premium, (d) bereavement leave pay, (e) union leave pay, (f)
maternity leave pay, (g) paternity leave pay, (h) company vacation and sick leave pay and (i)
cash conversion of unused company vacation and sick leave. Thereafter, petitioner changed its
computation to exclude the aforementioned benefits in the computation of 13th month pay. It
cited the implementing rules of PD 851 which provides, Basic salary shall include all
remunerations or earnings paid by an employer to an employee for services rendered but may
not include cost-of-living allowances granted pursuant to P.D. No. 525 or Letter of Instruction
No. 174, profit-sharing payments, and all allowances and monetary benefits which are not
considered or integrated as part of the regular or basic salary of the employee at the time of
the promulgation of the Decree on December 16, 1975.. The petitioner blamed the alleged
error in computation to its previous personnel who was in charge of payroll.

Private respondent Union contested the new computation which reduced the
employees thirteenth month pay. The issue was submitted to respondent Accredited Voluntary
Arbitrator Tomas Semana. The Union alleged that petitioner violated the rule prohibiting the
diminution of employees benefits, as provided by Art. 100 of Labor Code. Petitioner
maintained that the change is only a rectification of the mistake committed by its personnel in
previous years.

AVA Semana decided in favor of the Union. Petitioner filed a petition for certiorari
before the Court of Appeals but it was dismissed. Hence, the present case.

Issue: Whether or not the change in computation of 13th month pay constitutes diminution of
benefits.

Held: Yes, there is diminution of benefits. The claim of petitioner that the inclusion of other
benefits in the previous computation of 13th month pay was only a mistake cannot stand. The
law on 13th month pay and jurisprudence at that time was clear. Also, the petitioner prepares
its financial statement regularly thru a certified public accountant. Hence, it cannot set up
mistake as a defense. In many cases decided by the Supreme Court, it was held that grant of
benefits which ripened into company/employer practice or policy cannot be withdrawn
peremptorily. In the case at bar, the petitioner used to include non-basic benefits in computing
13th month pay for at least two (2) years. This constitutes a voluntary employer practice which
cannot be unilaterally withdrawn by the employer without violating Art 100 of Labor Code.