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In 1986, PD 851 was amended and the ceiling of P1,000 basic salary per month was removed. Hence, all employers are now required
to pay all their rank-and-file employees 13th month pay.
FACTS:
Private respondents Marbella, et al. were employed as welders, upholsterers and painters by Dentech Manufacturing
Corporation, a firm engaged in the manufacture and sale of dental equipment and supplies. They were dismissed from the firm
beginning February 14, 1985 due to their alleged abandonment of work without informing the company about their reasons for
doing so.
Marbella et al filed a complaint with the arbitration branch of the NLRC for illegal dismissal and violation of Presidential Decree
No. 851, seeking reinstatement as well as the payment of their 13th month pay and service incentive leave pay, and separation
pay in the event that they are not reinstated.
Petitioners:
o Private respondents are not entitled to a 13th month pay.
o Each of the private respondents receive a total monthly compensation of more that Pl,000.00 and under Section 1 of
Presidential Decree No. 851, such employees are not entitled to receive a 13th month pay.
o The company is in bad financial shape and pursuant to Section 3 of the Decree, the firm is exempted from complying
with the provisions of the Decree.
We also find respondent's contention for exemption in the payment of (the) 13th month pay as without validity
(sic). The ceiling of P1,000.00 a month in the matter of 13th month pay has been removed and complainants are
entitled to receive from respondents at least the unprescribed 13th month pay for the last three years based on
their uncontroverted pleadings.
Petitioners appealed to the NLRC, contending that no provision of law was cited in the Decision of the labor arbiter to support
the view therein that the 13th month pay ceiling of P1,000.00 had been duly eliminated.
For the record, Memorandum Order No. 28 issued by President Corazon C. Aquino modified Presidential Decree
No. 851 to the extent that all employers are ... (now) required to pay all their rank-and-file employees 13th month
pay, thus in effect removing from exclusion from entitlement to the (sic) 13th month pay those employees who
were receiving a basic salary of more than P1,000.00 a month.
At any rate the simple assertion of the respondent that it is in financial distress and thus exempt (sic) from
payment of 13th month pay (sic) to the complainants is not in itself sufficient to evade payment of the 13th month
pay to which complainants were entitled prior to the commencement of the respondent's financial problems.
The petitioners elevated the case to the SC, contending that Memorandum Order No. 28 cited by the NLRC cannot apply to the
case at bar. They point out that the said Memorandum Order was signed into law only in 1986, long after the case was
instituted with the NLRC and, accordingly, the same cannot be given a retroactive effect.
HELD: YES. The P1,000 ceiling refers to basic salary, NOT monthly compensation. Since private respondents basic salary is less than
P1,000, they are entitled to 13th month pay. Moreover, petitioner cannot claim exemption as a financially distressed employer since
it failed to obtain the prior authorization from the SOLE.
RATIO:
Presidential Decree No. 851 was signed into law in 1975 by then President Ferdinand Marcos. Under the original provisions of
Section 1 thereof, all employers are required to pay all their employees receiving a basic salary of not more than Pl,000.00 a
month, regardless of the nature of their employment, a 13th month pay not later than December 24 of every year. Under
Section 3 of the rules and regulations implementing said Presidential Decree, financially distressed employers, i., e., those
currently incurring substantial losses, are not covered by the Decree. Section 7 thereof requires, however, that such distressed
employers must obtain the prior authorization of the Secretary of Labor and Employment before they may qualify for such
exemption.
On May 1, 1978, Presidential Decree No. 1364 was signed into law. The Decree enjoined the Department of Labor and
Employment to stop accepting applications for exemption under, inter alia, Presidential Decree No. 851.
On August 13, 1986, President Corazon C. Aquino issued Memorandum Order No. 28 which modified Section 1 of Presidential
Decree No. 851. The said issuance eliminated the Pl,000.00 salary ceiling.
From the foregoing, it clearly appears that the petitioners have no basis to claim that the company is exempted from complying
with the pertinent provisions of the law relating to the payment of 13th month compensation.
The Pl,000.00 salary ceiling provided in Presidential Decree No. 851 pertains to basic salary, not total monthly compensation.
The petitioners admit that the private respondents work only five days a week and that they each receive a basic daily wage of
P40.00 only. A simple computation of the basic daily wage multiplied by the number of working days in a month results in an
amount of less than Pl,000.00. Thus, there is no basis for the contention that the company is exempted from the provision of
Presidential Decree No. 851 which mandated the payment of 13th month compensation to employees receiving less than
P1,000.00 a month.
Even assuming, arguendo, that the private respondents are each paid a monthly salary of over Pl,000.00, the company is still not
in a position to claim exemption. The rules and regulations implementing Presidential Decree No. 851 provide that a distressed
employer shall qualify for exemption from the requirements of the Decree only upon prior authorization from the Secretary of
Labor and Employment. As correctly pointed out by the Solicitor General, no such prior authorization had been obtained by the
petitioner firm.
Bellosillo
CASE LAW/ DOCTRINE:
Although the reinstatement aspect of the decision is immediately executory, it does not follow that it is self executory. There must
be a writ of execution issued in order to allow the employer to exercise his option to merely reinstate the employee in the payroll
under Article 223 of the Labor Code.
FACTS:
Private respondents were employed by Archilles to work in its steel factory. They receive a daily wage of Php 96.00.
Within the steel factory, there is a bunkhouse where employees, such as responents, may rest.
In 1988, a mauling incident occurred involving a relative of an employee. This resulted to Archilles ordering its employees to
desist from bringing their relatives into the bunkhouse. Respondents ignored this directive.
In May 1990, Archilles ordered the respondents to remove their families from the bunkhouse. They complied; however,
respondents failed to report this to the management, as required.
Instead, they chose to absent themselves from work. Hence, on 18 May 1990, they were terminated in violation of the
bunkhouse order.
Respondents filed for illegal dismissal against Archilles.
LA: In favor of respondents. Ordered their reinstatement and payment of backwages and 13 th month pay for 1990.
NLRC: Respondents filed a motion for execution pending appeal. Petitioners opposed.
NLRC ruled in favor of Archilles, stating that the dismissal was valid because of the violation of the bunkhouse order.
IMPORTANT: While the NLRC ruled in favor of Archilles, the latter filed a motion for partial reconsideration insofar as this
part of the decision is concerned
NLRC ordered ARCHILLES to pay private respondents their "withheld" salaries from 19 September 1991 when it
filed its opposition to the motion for issuance of a writ of execution until the promulgation of the NLRC Decision
(11 August 1992) on the ground that the order of reinstatement of the Labor Arbiter was immediately executory,
even pending appeal. And since ARCHILLES in its opposition alleged that actual reinstatement was no longer
possible as it would affect the peace and order situation in the steel factory, clearly, ARCHILLES had opted for
payroll reinstatement of private respondents. NLRC also ordered ARCHILLES to pay their proportionate 13th month
pay for 1990 and P12,351.30 representing 10% of the total judgment award of P123,513.00 as attorney's fees
Archilles now prays for the Court to partially annul the decision insofar as the above quoted portion is concerned.
ISSUE(S):
1. W/N a writ of execution is necessary despite pending appeal.
2. W/N the award of 13th month pay was proper.
It is important to note that the motions of private respondents for the issuance of a writ of execution were not acted upon by NLRC.
It was not shown that respondent exerted efforts to have their motions resolved. They are deemed to have abandoned their
motions for execution pending appeal. They cannot now ask that the writ of execution be issued since their dismissal was found to
be for cause.
On the second issue, which refers to the propriety of the award of a 13th month pay, paragraph 6 of the Revised Guidelines on the
Implementation of the 13th Month Pay Law (P. D. 851) provides that "(a)n employee who has resigned or whose services were
terminated at any time before the payment of the 13th month pay is entitled to this monetary benefit in proportion to the length of
time he worked during the year, reckoned from the time he started working during the calendar year up to the time of his
resignation or termination from the
service . . . The payment of the 13th month pay may be demanded by the employee upon the cessation of employer-employee
relationship. This is consistent with the principle of equity that as the employer can require the employee to clear himself of all
liabilities and property accountability, so can the employee demand the payment of all benefits due him upon the termination of the
relationship."
Furthermore, Sec. 4 of the original Implementing Rules of P.D. 851 mandates employers to pay their employees a 13th month pay
not later than the 24th of December every year provided that they have worked for at least one (1) month during a calendar year. In
effect, this statutory benefit is automatically vested in the employee who has at least worked for one month during the calendar
year. As correctly stated by the Solicitor General, such benefit may not be lost or forfeited even in the event of the employee's
subsequent dismissal for cause without violating his property rights.
RELEVANT PROVISION:
Article 223(3), Labor Code:
In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as the reinstatement aspect is
concerned, shall be immediately executory, even pending appeal. The employee shall either be admitted back to work under the
same terms and conditions prevailing prior to his dismissal or separation or, at the option of the employer, merely reinstated in the
payroll. The posting of the bond by the employer shall not stay the execution for reinstatement provided herein.
4. JOSE SONGCO, ROMEO CIPRES, and AMANCIO MANUEL v. AUTHOR: ACIDO (edited MENDOZAs digest)
NATIONAL LABOR RELATIONS COMMISSION (FIRST DIVISION), NOTES: Parang wala namang about 13th month pay haha
LABOR ARBITER FLAVIO AGUAS, and F.E. ZUELLIG (M), INC
G.R. No. 50999-51000. March 23, 1990
TOPIC: 13th Month Pay Basic Wage/Commissions PONENTE:
Medialdea
Supreme Court said that, including commissions in the computation of the 13th month pay, the second paragraph of Section 5(a) of
the Revised Guidelines on the Implementation of the 13th Month Pay Law unduly expanded the concept of "basic salary" as defined
in P.D. 851. It is a fundamental rule that implementing rules cannot add to or detract from the provisions of the law it is designed to
implement. Administrative regulations adopted under legislative authority by a department must be in harmony with the provisions
of the law they are intended to carry into effect. They cannot widen its scope. An administrative agency cannot amend an act of
Congress.
Just In Case: Present case distinguished from Songco v. National Labor Relations Commission.Respondents would do well to
distinguish this case from Songco vs. National Labor Relations Commission upon which they rely so heavily. What was involved
therein was the term salary without the restrictive adjective basic. Thus, in said case, we construed the term in its generic sense
to refer to all types of direct remunerations for services rendered, including commissions. In the same case, we also took judicial
notice of the fact that some salesmen do not receive any basic salary but depend on commissions and allowances or commissions
alone, although an employer-employee relationship exists, which statement is quite significant in that it speaks of a basic salary
apart and distinct from commissions and allowances. Instead of supporting respondents stand, it would appear that Songco
itself recognizes that commissions are not part of basic salary.
The case of Phil. Duplicators is that of a sales commission and should thus be included in the "basic salary" for the computation
of their 13th month pay.
o Sales commissions were an integral part of the basic salary structure of Philippine Duplicators' employees salesmen.
o These commissions are NOT overtime payments, nor profit-sharing payments nor any other fringe benefit.
o Thus, the salesmen's commissions, comprising a pre-determined percent of the selling price of the goods sold by each
salesman, were properly included in the term "basic salary" for purposes of computing their 13th month pay.
Supplementary Rules and Regulations Implementing P.D. No. 851 (later issued by former Labor Minister Ople) sought to clarify
the scope of items excluded in the computation of the 13th month pay: Sec. 4. Overtime pay, earnings and other
remunerations which are NOT part of the basic salary shall not be included in the computation of the 13th month pay.
o 3rd item excluded from "basic salary" is cast in open ended and circular terms (other remunerations which are not part
of the basic salary)
o However, what particular types of earnings and remuneration are or are not properly included or integrated in the
basic salary are questions to be resolved on a case to case basis, in the light of the specific and detailed facts of each
case.
o In principle, where these earnings and remuneration are closely akin to fringe benefits, overtime pay or profit-sharing
payments, they are properly EXCLUDED in computing the 13th month pay.
o Sales commissions (an integral portion of the basic salary structure of an employee), shall be included in determining
his 13th month pay.
FACTS:
Iran is engaged in softdrinks merchandising and distribution. Respondent-Employees serve as drivers, salesmen, field
personnel, etc.
Due to cash shortages discovered by Iran, the Respondents were terminated.
Respondents filed for illegal dismissal and underpayment of 13th month pay.
In response, Iran presented vouchers denominated as 13 th month pay signed by Respondents as proof that the latter has
already received the 13th month pay.
LA, NLRC: valid dismissal, but Iran must pay 13th month pay
ISSUE(S): W/N the vouchers prove due payment was made by Iran
HELD: Yes. However, the amount covered by the vouchers does not meet the value of the 13th month pay. Iran must pay difference
between amount due and voucher amount. Also, the vouchers do not cover the entire period of employment, hence, for the years
Iran failed to pay, he must pay. (In sum, 13th month pay is still due. But Iran can credit the amount paid as reflected in vouchers.)
Not-related: Dismissal for just cause, but there was failure to follow procedural due process, hence damages must be awarded.
RATIO:
Amount of 13th month pay = 1/12 of the employees basic salary (annual)
PD 851, which provides for the payment of 13th month pay, intends to grant additional income (in the form of the 13 th
month pay) to employees NOT YET receiving the same. It does not intend for a double burden to be imposed on the
employer. Hence, if the employer already pays the equivalent of 1/12 of the employees basic salary (i.e. 13 th month pay)
on his own initiative, he is already deemed complying with PD 851.
Hence, the amount already paid by Iran to Respondents must be credited from the 13 th month pay amount due to them.
DISSENTING/CONCURRING OPINION(S):
FACTS:
In April 1980, eighteen (18) employees of the petitioners filed against their employer, and the other petitioners two labor standard
cases alleging that in 1977 to 1979 they were not paid emergency cost of living allowance (ECOLA) minimum wage, 13th month pay,
holiday pay, and service incentive leave pay.
Petitioners (company) alleged that the private respondents were not regular workers on their hacienda but were migratory
(sacadas) or pakyaw workers who worked on-and-off and were hired seasonally, or only during the milling season, to do piece-work
on the farms, hence, they were not entitled to the benefits claimed by them. They also alleged that under the decrees, the living
allowance shall be paid on a monthly, not percentage, basis depending on the total assets or authorized capital stock of the
employer, whichever is higher and applicable. They admitted that their total assets and authorized capital stock exceeded P2 million.
However, in 1977 they had applied for exemption under PDs 525 and 1123 but no ruling has been issued by the Ministry of Labor on
their application.
The claims for holiday pay, service incentive leave pay, social amelioration bonus and underpayment of minimum wage were not
controverted. With respect to the complainants' other claims, the petitioners submitted only random payrolls which showed that
the women workers were underpaid as they were receiving an average daily wage of P5.94 only, although the male workers
received P10 more or less, per day.
Deputy Minister clarified that pakyaw workers were excluded from holiday and service incentive leave pay
Upon the denial of its motion for reconsideration, Framanlis Farms, Inc. filed this petition for certiorari alleging that the Deputy
Minister erred:
2. in requiring the petitioners to pay 13th month pay despite the fact that they (petitioners) had substantially
complied with the requirement by extending yearly bonuses and other benefits in kind and in cash to the complainants,
pursuant to Section 3(c) of PD 851 which exempts the employer from paying 13th month pay when its equivalent has
already been given;
3. in not precisely stating who among the private respondents are pakyaw and non-pakyaw workers.
ISSUE(S): W/N the petitioner complied with the requirement of 13th month pay
HELD: No.
RATIO: petitioners admitted that they failed to pay their workers 13th month pay in 1978 and 1979. However, they argued that they
substantially complied with the law by giving their workers a yearly bonus and other non-monetary benefits amounting to not less
than 1/12th of their basic salary, in the form of:
1. a weekly subsidy of choice pork meat for only P9.00 per kilo and later increased to P11 per kilo in March 1980,
instead of the market price of P10 to P15 per kilo;
2. free choice pork meat in May and December of every year; and
4. all of which were allegedly "the equivalent" of the 13th month pay.
Unfortunately, under Section 3 of PD No. 851, such benefits in the form of food or free electricity, assuming they were given, were
not a proper substitute for the 13th month pay required by law. PD 851 provides:
Section 3. Employees covered The Decree shall apply to all employees except to:
x x x. xxx xxx
The term 'its equivalent' as used in paragraph (c) hereof shall include Christmas bonus, mid-year bonus, profit-sharing
payments and other cash bonuses amounting to not less than 1/12 of the basic salary but shall not include cash and stock
dividends, cost of living allowances and all other allowances regularly enjoyed by the employee, as well as non-monetary
benefits.
Where an employer pays less than 1/12 of the employee's basic salary, the employer shall pay the difference."
Neither may year-end rewards for loyalty and service be considered in lieu of 13th month pay. Section 10 of the Rules and
Regulations Implementing Presidential Decree No. 851 provides:
Section 10. Prohibition against reduction or elimination of benefits-Nothing herein shall be construed to authorize any
employer to eliminate, or diminish in any way, supplements, or other employee benefits or favorable practice being
enjoyed by the employee at the time of promulgation of this issuance."
The failure of the Minister's decision to identify the pakyaw and non-pakyaw workers does not render said decision invalid. The
workers may be identified or determined in the proceedings for execution of the judgment.
DISSENTING/CONCURRING OPINION(S):