Labor Standards
COMPENSATION FOR REST DAY and laborers. They are also entitled to as much rest as other
San Juan vs. NLRC (1997)
ISSUE: WON the hospital employees are entitled to a full week salary with
paid 2 days off if they have completed the 40-hr/5-day workweek
8 Jul ’91: Rank-and-file employee-union officers and members of San
Juan De Dios Employees Assoc. sent a 4-page letter, requesting & pleading
for the implementation & payment by Juan De Dios Hospital of the 40-
hours/5-day workweek with compensable weekly 2 days off provided by
RA 5901 as clarified by Policy Instructions #54.
However, Hospital failed to give a favorable response. Thus, the
employees filed a complaint.
Employees’ contentions: the hospital employees are entitled to a full
week salary with paid 2 days off if they have completed the 40-hr/5-day
workweek
Republic Act 5901 took effect on 21 June 1969 prescribes a 40-hour/5
day work week for hospital/clinic personnel. At the same time, the Act
prohibits the diminution of the compensation of these workers who would
suffer a reduction in their weekly wage by reason of the shortened
workweek prescribed by the Act. In effect, RA 5901 requires that the
covered hospital workers who used to work seven (7) days a week should
be paid for such number of days for working only 5 days or 40 hours a
week.
The evident intention of RA 5901 is to reduce the number of hospital
personnel, considering the nature of their work, and at the same time
guarantee the payment to them of a full weekly wage for seven (7) days.
This is quite clear in the Exemplary Note of RA 5901 which states:
As compared with the other employees and laborers, these hospital and
health clinic personnel are over-worked despite the fact that their duties
are more delicate in nature. If we offer them better working conditions, it is
believed that the brain drain, that our country suffers nowadays as far as
these personnel are concerned will be considerably lessened. The fact that
these hospitals and health clinics personnel perform duties which are
directly concerned with the health and lives of our people does not mean
that they should work for a longer period than most employees and
laborers. They are also entitled to as much rest as other workers. Making
them work longer than is necessary may endanger, rather than protect the
health of their patients. Besides, they are not receiving better pay than the
other workers. Therefore, it is just and fair that they may be made to enjoy
the privileges of equal working hours with other workers except those
excepted by law. (Sixth Congress of the Republic of the Philippines, Third
Session, House of Representatives, H. No. 16630)
The Labor Code in its Article 83 adopts and incorporates the basic
provisions of RA 5901 and retains its spirit and intent which is to shorten
the workweek of covered hospital personnel and at the same time assure
them of a full weekly wage.
Consistent with such spirit and intent, it is the position of the
Department that personnel in subject hospital and clinics are entitled to a
full weekly wage for seven (7) days it they have completed the 40-hours/5-
day workweek in any given workweek.
Policy Instruction #54 relies & purports to implement RA 5901 (An Act
Prescribing Forty Hours a Week of Labor for Government & Private Hospitals
or Clinic Personnel). Reliance on RA 5901 is misplaced for it has long been
repealed with the passage of the Labor Code on 1 May ’74.
Negative. What Article 83 merely provides are: (1) the regular office
hour of eight hours a day, five days per week for health personnel, and (2)
where the exigencies of service require that health personnel work for six
days or forty-eight hours then such health personnel shall be entitled to an
additional compensation of at least thirty percent of their regular wage for
work on the sixth day. There is nothing in the law that supports then
Secretary of Labors assertion that personnel in subject hospitals and
clinics are entitled to a full weekly wage for 7 days if they have completed
the 40-hour/5-day workweek in any given workweek.
Hence, Secretary of Labor Drilon exceeded his authority by including a
2-days off with pay in contravention of the clear mandate of the statute.
Therefore, Policy Instruction #54 is invalid. A perusal of RA 5901 reveals
nothing therein that gives 2-days off with pay for health personnel who
complete a 40-hr work or 5-day workweek. The sole purpose of RA 5901 is
to shorten the working hours of health personnel and not to dole out 2-
days off with pay.
The fact that these hospitals and health clinic personnel perform duties
which are directly concerned with the health and lives of our people does
not mean that they should work for a longer period than most employees
Case Digest
workers. Making them work longer than is necessary may
endanger, rather than protect, the health of their patients.
Further, the employees’ position is negated by the IRR of RA 5901. If
they are entitled to two days off with pay, then there appears to be no
sense at all why Sec. 15 of the implementing rules grants additional
compensation equivalent to the regular rate plus at least twenty-five
percent thereof for work performed on Sunday to health personnel, or an
additional straight-time pay which must be equivalent at least to the
regular rate for work performed in excess of 40 hours a week.
REGULAR HOLIDAYS
MONTHLY-PAID EMPLOYEES
Insular Bank vs. Inciong (1984)
ISSUE: WON a law or statute can annul or modify a judicial order issued
prior to its promulgation
20 Jun ’75: Insular Bank of Asia & America Employees’ Union filed a
complaint against Insular Bank for payment of holiday pay.
LA Soriano rendered a decision, granting Union’s complaint. The
records disclosed that employees of Insular Bank were not paid their
wages on unworked regular holidays. This was deduced from the fact that
the daily rate of pay of the bank employees was computed in the past with
the unworked regular holidays as excluded for purposes of determining
the deductible amount for absences incurred.
Bank did not appeal but complied with the order of Soriano by paying
their holiday pay up to & including Jan ’76.
16 Dec ’75: PD 850 was promulgated amending, the provisions of the
Labor Code on the right to holiday pay, in Article 94. Accordingly, DOLE
promulgated the IRR of holidays with pay, which reads: The 10 paid legal
holidays law, to start with, is intended to benefit principally daily employees.
In the case of monthly, only those whose monthly salary did not yet include
payment for the 10 paid legal holidays are entitled to the benefit.
Bank stopped payment of holiday pay to its employees. So Union filed a
motion for a writ of execution to enforce LA’s decision, whereby the Bank
was ordered to pay its employees their daily wage for the unworked
regular holidays.
Bank’s contentions: its refusal to pay the unworked holiday pay is
based on & justified by Policy Instruction #9 which interpreted PD 850.
Also that said award is already repealed by PD 850, considering that its
monthly paid employees are not receiving less than P240, & their monthly
pay is uniform from Jan-Dec, & that no deductions are made from the
monthly salaries of its employees on account of holidays in months where
they occur.
Instead of issuing writ of execution, Soriano issued an order enjoining
Bank to continue paying its employees since the judgment is already final
& that since the decision had been partially implemented by the Bank,
appeal from said decision is no longer available.
Negative. it is patently unjust to deprive the members of petitioner
union of their vested right acquired by virtue of a final judgment on the
basis of a labor statute promulgated following the acquisition of the
"right". Neither the Constitution nor the statutes, except penal laws
favorable to the accused, have retroactive effect in the sense of annulling
or modifying vested rights, or altering contractual obligations.
When a court renders a decision or promulgates a resolution or order
on the basis of and in accordance with a certain law or rule then in force,
the subsequent amendment or even repeal of said law or rule may not
affect the final decision, order, or resolution already promulgated, in the
sense of revoking or rendering it void and of no effect.
As to contention that Bank’s partial compliance was involuntary
because it did so under pain of levy & execution: Bank clearly manifested
its voluntariness in complying with the decision of LA by not appealing to
the NLRC. A party who waives his right to appeal is deemed to have
accepted the judgment, adverse or not, as correct, especially if such party
readily acquiesced in the judgment by starting to execute said judgment
even before a writ of execution was issued, as in this case.
As to validity of Policy Instruction #9: Sec. 2, Rule IV, Book III of the
IRR and Policy Instruction #9 issued by the Secretary of Labor are null
and void since in the guise of clarifying the Labor Code's provisions on
holiday pay, they in effect amended them by enlarging the scope of their
exclusion. Monthly paid employees are not excluded from the benefits of
holiday pay. However, the implementing rules on holiday pay promulgated
by then Secretary of Labor excludes monthly paid employees from the
said benefits by inserting, under Rule IV, Book Ill of the implementing
 Labor Standards
rules, Sec. 2, which provides that: "employees who are uniformly
paid by the month, irrespective of the number of working days
therein, with a salary of not less than the statutory or established minimum
wage shall be presumed to be paid for all days in the month whether worked
or not."
The provisions of LC on the entitlement to the benefits of holiday pay
are clear and explicit - it provides for both the coverage of and exclusion
from the benefits. In Policy Instruction #9, then Secretary of Labor went as
far as to categorically state that the benefit is principally intended for daily
paid employees, when the law clearly states that every worker shall be
paid their regular holiday pay. This is a flagrant violation of the mandatory
directive of Article 4. Obviously, the Secretary of Labor had exceeded his
statutory authority granted by Article 5 of the Labor Code authorizing him
to promulgate the necessary implementing rules and regulations.
While it is true that the contemporaneous construction placed upon a
statute by executive officers whose duty is to enforce it should be given
great weight by the courts, still if such construction is so erroneous, the
same must be declared as null and void. Hence, Sec. 2 & Policy Instruction
#9 must be declared as null and void.
Mantrade vs. Bacungan (1986)
ISSUE: WON the Union members are entitled to holiday pay
In a complaint filed against Mantrade Devt. Corp., LA Bacungan ruled
that Mantrade is not under legal obligation to pay holiday pay (as provided
in Art. 94) to its monthly paid employees who are uniformly paid by the
month, irrespective of the number of working days therein, with a salary of
not less than the statutory or established minimum wage.
Bacungan’s opinion: Mantrade does not have any legal obligation to
grant its monthly salaried employees holiday pay unless it is argued that
pertinent section of the rules & regulations implementing Sec. 94 is not in
conformity with the law, and thus, without force and effect.
Mantrade/FMMC Division Employees & Workers Union questioned the
validity of the pertinent section of the IRR of the LC.
Mantrade’s contentions: Union is barred from pursuing the action in
view of Art. 263 of LC which provides in part that “voluntary arbitration
awards or decisions shall be final and executory and also of the CBA
between them.
Affirmative. Section 2, Rule IV, Book III of the implementing rules and
Policy Instruction No. 9 issued by then Secretary of Labor are null and
void since in the guise of clarifying the Labor Code’s provisions on holiday
pay, they in effect amended them enlarging the scope of their exclusion.
Monthly paid employees are not excluded from the benefits of holiday
pay. However, the implementing rules on holiday pay promulgated by the
then Secretary of Labor excludes monthly paid employees from the said
benefits by inserting under Rule IV, Book III of the implementing rules,
section 2, which provides that: ‘employees who are uniformly paid by the
month, irrespective of the number of working days therein, with the salary of
not less than the statutory or established minimum wage shall be presumed
to be paid for all days in the month whether worked or not."
The questioned Sec. 2, Rule IV, Book III of the Integrated Rules and the
Secretary’s Policy Instruction No. 9 add another excluded group, namely
‘employees who are uniformly paid by the month’. While additional exclusion
is only in the form of a presumption that all monthly paid employees have
already been paid holiday paid, it constitutes a taking away or a
deprivation which must be in the law if it is to be valid. An administrative
interpretation which diminishes the benefits of labor more than what the
statute delimits or withholds is obviously ultra vires.
Wherefore, Mantrade is ordered to grant holiday pay to its monthly
salaried employees.
Union of Filipro vs. Vivar (supra.)
ISSUE: WON the sales personnel are entitled to holiday pay
8 Nov ’85: Filipro, Inc. (now Nestle) filed with NLRC a petition for
declaratory relief seeking a ruling on its rights & obligations respecting
claims of its monthly paid employees for holiday pay.
2 Jan ’80: Abitrator Vivar rendered a decision, ordering Filipro to pay its
monthly paid employees holiday pay pursuant to Art. 94 LC, subject to
exclusions specified in Art. 82.
Filipro filed motion for clarification seeking, among others, the exclusion
of salesmen, sales representatives, truck drivers, merchandisers and
medical representatives (sales personnel) from award of the holiday pay.
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Union of Filipro Employees’ contention: their sales personnel
are not field personnel & are therefore, entitled to holiday pay.
Filipro’s contentions: they are field employees. The period between
8am to 4/4:30pm comprises the sales personnel’s working hours which
can be determined with reasonable certainty.
Negative. The controversy centers on the interpretation of the clause
"whose actual hours of work in the field cannot be determined with
reasonable certainty." Undisputed that these sales personnel start their field
work at 8am after having reported to the office and come back to the
office at 4pm or 4:30pm if they are Makati-based.
The requirement for the salesmen and other similarly situated
employees to report for work at the office at 8am and return at 4/4:30pm
is not within the realm of work in the field as defined in the Code but an
exercise of purely management prerogative of providing administrative
control over such personnel. This does not in any manner provide a
reasonable level of determination on the actual field work of the
employees which can be reasonably ascertained. Actual field work begins
after 8am, when the sales personnel follow their field itinerary, and ends
immediately before 4/4:30pm when they report back to their office. The
period between these hours comprises their hours of work in the field, the
extent or scope and result of which are subject to their individual capacity
and industry and which "cannot be determined with reasonable certainty."
Moreover, the requirement that "actual hours of work in the field cannot
be determined with reasonable certainty" must be read in conjunction
with Rule IV, Book III, IRR (“field personnel and other employees whose time
and performance is unsupervised by the employer”).
As to contention that company’s sales personnel are supervised shown
by the Supervisor of the Day schedule & company circular: The clause
"whose time and performance is unsupervised by the employer" did not
amplify but merely interpreted and expounded the clause "whose actual
hours of work in the field cannot be determined with reasonable certainty."
Hence, query must be made as to whether or not such employee's time
and performance is constantly supervised by the employer.
The SOD schedule adverted to by Filipro does not in the least signify
that these sales personnel's time and performance are supervised. The
purpose of this schedule is merely to ensure that the sales personnel are
out of the office not later than 8am and are back in the office not earlier
than 4pm. Court fails to see how the company can monitor the number of
actual hours spent in field work by an employee through the imposition of
sanctions on absenteeism contained in the company circular.
As to contention that the fact that they are given incentive bonus every
quarter based on performance is proof that their actual hours of work can
be determined: sales personnel are given incentive bonuses precisely
because of the difficulty in measuring their actual hours of field work.
These employees are evaluated by the result of their work and not by the
actual hours of field work which are hardly susceptible to determination.
Oceanic Pharmacal Employees vs. Inciong (1979)
ISSUE: WON Oceania Pharmacal may discontinue the holiday pay
Oceanic Pharmacal Employees Union & Oceanic Pharmacal, Inc. had a
collective bargaining agreement good from 1 Mar ’76 to 28 Feb ’79.
27 Apr ’76: letter was sent to the Union – “1) Emergency Allowance —
The management of OPI will continue its present practice of extending
emergency allowance to all employees receiving less than P1,000.00 per
month as basic pay. 2) Holiday Pay — OPI management will likewise continue
to give holiday pay to monthly-salaried employees.”
25 Oct ’76: Oceanic posted a memorandum re: the discontinuance of
the payment to regular employees of the regular holidays pay for regular
holidays. This was in view of Sec. 2, Rule IV, Bk III of the IRR, Policy
Instruction #9 & decision of Secretary of Labor in Chartered Bank Case.
Union objected to the discontinuance. It filed a complaint against
Oceanic for unfair labor practice and violation of CBA on holiday pay.
LA Reyes ordered company to resume payment of the holiday pay.
Negative. Sec. 2, Rule IV, Bk Ill of the IRR of LC was promulgated on 16
Feb ‘76. On the other hand, Policy Instruction No. 9 was issued on 23 Feb
‘76. Since the said rules and policy instructions were already existing and
effective prior to the execution of the Supplementary Agreement between
Union & Oceania on 27 Apr ‘76, it is clear that Oceania agreed to continue
giving holiday pay to its monthly paid employees knowing fully well that
they are not covered by the law requiring payment of holiday pay.
Granting arguendo that said issuance were promulgated after the
execution of the CBA, there is still no justification for withdrawal of holiday
pay benefits, in view of Sec. 11, Rule IV, Bk III of IRR – “Nothing in this Rule
 Labor Standards
shall justify an employer in withdrawing or reducing any benefits,
supplements or payments for unworked holidays as provided it)
existing individual or collective agreement or employer practice or policy.”
Nothing in the Act justified an employer in reducing the wage paid to
any of his employees in excess of the minimum wage established under
the Act or in reducing supplements furnished on the date of enactment.
Hence, there is no legal basis for the withdrawal of holiday benefits by
the Company. Consequently, its violation of the Supplementary Agreement
constitutes unfair labor practice.
Citibank vs. MOLE (1980)
ISSUE: WON the employees are entitled to holiday pay, considering their
contractual wage scale
5 Aug ’75: Citibank Phils. Employees Union filed the instant case for
payment of regular holiday pay pursuant to Art. 208(a) of LC. Parties failed
to reconcile so they agreed to submit their dispute to voluntary arbitration.
Voluntary Arbitrator ordered Citibank to pay the employees their
holiday pay on the basis of his finding that the monthly salary of said
employees does not include their pay for unworked holidays.
The award was partially implemented by Citibank when it paid the
employees their accrued holiday pay benefits covering the period Nov ’74
to Dec ’75.
However, when IRR of LC, pursuant to PD 850 & issuance of Policy
Instruction #9, was promulgated, Citibank stopped payment. Hence, Union
filed motion for execution to enforce the award. LA ordered Citibank to
continue paying the unworked regular holidays to its monthly paid
employees. Citibank appealed.
Minister’s position: assuming the final and executory character of the
award in question, the same could still be modified or set aside in
consequence of the supervening acts.
Affirmative. Court cannot sanction departure from the terms of a final
and executory judgment by reason of supervening events that would make
literal execution in whole or in part of such judgment unjust and
inequitable. The terms and conditions of a collective bargaining agreement
constitute the sacred law between the parties as long as they do not
contravene public order, interest or policy. The prohibition in the Bill of
Rights against the passage or promulgation of any law impairing the
obligation of contracts applies with perhaps greater force to collective
bargaining agreements, considering that these deal with the rights and
interests of labor to which the charter explicitly affords protection.
The award of the arbitrator in this case is not to be equated with a
judicial decision. In effect, when in relation to a controversy as to working
conditions, which necessarily include the amount of wages, allowances,
bonuses, overtime pay, holiday pay, etc., the parties submit their
differences to arbitration, they do not seek any judicial pronouncement
technically as such they are merely asking the arbitrator to fix for them
what would be the fair and just condition or term regarding the matter in
dispute that should govern further collective bargaining relations between
them. Stated differently, the arbitrator's award when stipulated by the
parties to be conclusive becomes part and parcel of the CBA.
The subsequent or supervening facts referred to by the Solicitor General
consisting of acts of none other than the respondent Minister may not be
invoked to alter, modify, reform, much less abrogate, the new terms, so to
speak, of the collective bargaining inserted by virtue of the award of the
arbitrator.
For an employer to agree either spontaneously or through arbitration to
pay to these workers higher compensation than that provided by law
cannot obviously be against public policy but, on the contrary, is a
magnificent contribution to the attainment of the social justice objectives
envisioned in the Constitution.
Chartered Bank vs. Ople (1985)
ISSUE: WON the Bank employees are entitled to holiday pay
20 May ’75: Chartered Bank Employees Assoc., in representation of its
monthly paid employees, instituted a complaint against Chartered Bank
for payment of 10 unworked legal holidays, as well as for premium and
overtime differentials for worked legal holidays from 1 Nov ’74.
Undisputed facts: the work force of Chartered Bank consists of 149
regular employees. Under their CBA, in computing overtime pay &
premium pay for work down during regular holidays, the divisor used in
arriving at the daily rate of pay is 251 days although formerly the divisor
used was 303 days and this was when Bank was still operating on a 6-day
Case Digest
work week basis. Also, all regular monthly paid employees of
Bank are receiving salaries way beyond the statutory or
minimum rates and are among the highest paid employees in the banking
industry. The salaries of Bank’s monthly paid employees suffer no
deduction for holidays occurring within the month.
NLRC’s decision: in favor of Union, ordered Bank to pay its monthly
paid employees their holiday pay for 10 legal holidays & to pay
premium/overtime pay differentials to all employees who rendered work
during said legal holidays.
Minister of Labor’s decision: set aside NLRC decision & dismissed
claim, based on Sec. 2, Rule IV, Bk III of IRR & Policy Instruction #9.
Union’s contentions: Minister abused his discretion in promulgating
Sec. 2 & Policy Instruction #9. While it is true that Minister has authority in
the performance of his duty to promulgate rules & regulations to
implement, construe and clarify the LC, such power is limited by
provisions of the statute sought to be implemented, construed or clarified.
The so-called “guidelines” promulgated by Minister contravened & violated
the Code by excluding the employees of Bank from the benefits of holiday
pay, when the Code itself did not provide for their expanding the Code’s
clear & concise conclusion.
Bank’s contentions: the questioned guidelines did not deprive the
employees of the benefits of holiday pay but merely classified those
monthly paid employees whose monthly salary already includes holiday
pay and those whose do not, and that the guidelines did not deprive the
employees of holiday pay.
Affirmative. The employees are entitled to payment of 10 legal holidays
under Arts. 82 & 94 of LC, aside from their monthly salary. They are not
among those excluded by law from the benefits of such holiday pay.
The questioned Sec. 2, Rule IV, Book III of the Integrated Rules and the
Secretary's Policy Instruction No. 9 add another excluded group, namely,
"employees who are uniformly paid by the month." While the additional
exclusion is only in the form of a presumption that all monthly paid
employees have already been paid holiday pay, it constitutes a taking
away or a deprivation which must be in the law if it is to be valid. An
administrative interpretation which diminishes the benefits of labor more
than what the statute delimits or withholds is obviously ultra vires.
The fact that Chartered Bank, in computing overtime compensation for
its employees, employs a "divisor" of 251 days is in strongly in favor of
Union. The 251 working days divisor is the result of subtracting all
Saturdays, Sundays and the 10 legal holidays from the total number of
calendar days in a year. If the employees are already paid for all non-
working days, the divisor should be 365 and not 251. (Applied Art. 4 LC)
Any remaining doubts which may arise from the conflicting or different
divisors used in the computation of overtime pay and employees'
absences are resolved by the manner in which work actually rendered on
holidays is paid. Thus, whenever monthly paid employees work on a
holiday, they are given an additional 100% base pay on top of a premium
pay of 50%. If the employees' monthly pay already includes their salaries
for holidays, they should be paid only premium pay but not both base pay
and premium pay.
As to contention that 100% base pay & 50% premium pay for work
actually rendered on holidays is given in addition to monthly salaries
only because the CBA so provides: the CBA already contemplated a
divisor of 251 days for holiday pay computations before the questioned
presumption in the Integrated Rules and the Policy Instruction was
formulated. There is furthermore a similarity between overtime pay, which
is computed on the basis of 251 working days a year, and holiday pay,
which should be similarly treated notwithstanding the public respondents'
issuances. In both cases overtime work and holiday work- the employee
works when he is supposed to be resting. In the absence of an express
provision of the CBA or the law to the contrary, the computation should be
similarly handled.
But SC is not unmindful of the fact that the Bank’s employees are
among the highest paid in the industry. It is not the intent of this Court to
impose any undue burdens on an employer which is already doing its best
for its personnel. The remedy lies in a clear redrafting of CBA with a
statement that monthly pay already includes holiday pay or an
amendment of the law to that effect but not an administrative rule or a
policy instruction.
FIELD PERSONNEL
Union of Filipro vs. Vivar (supra.)
Far East vs. Lebatique (2007)
 Labor Standards
ISSUE: WON Lebatique is a field personnel
4 Mar ’96: Far East Agricultural Supply, Inc. hired Jimmy
Lebatique as truck driver with daily wage of P223.50. He delivered animal
feeds to Far East’s clients.
24 Jan ’00: Lebatique complained of nonpayment of overtime work on
22 Jan 2000, when he was required to make a second delivery in
Novaliches, QC. On same day, Manuel Uy (brother of Far East’s GM
Alexander Uy) suspended Lebatique apparently for illegal use of company
vehicle. Even so, Lebatique reported for work the next day but he was
prohibited from entering the premises.
26 Jan: Lebatique sought assistance with DOLE, concerning
nonpayment of his overtime pay. According to him, he received a telegram
from Uy requiring him to report for work. When he did, Alexander asked
him why he was claiming overtime pay. Lebatique explained that he had
never been paid for overtime work since he started working for company.
He also told Alexander that Manuel fired him. After talking to Manuel,
Alexander terminated Lebatique & told him to look for another job.
20 Mar: Lebatique filed complaint for illegal dismissal and nonpayment
of overtime pay.
Far East’s contentions: Lebatique was not dismissed but merely
suspended for a day due to violation of company rules, that he was not
barred from entering the company premises since he never reported back
to work. Also, Lebatique, as a driver, is not entitled to overtime pay since
he is a field personnel whose time outside the company premises cannot
be determined with reasonable certainty. Drivers do not observe regular
working hours unlike the other office employees. The drivers may report
early in the morning to make their deliveries or in the afternoon,
depending on the production of animal feeds and the traffic conditions.
Also aver that Lebatique worked for less than eight hours a day.
A "field personnel" is not merely concerned with the location where the
employee regularly performs his duties but also with the fact that the
employee’s performance is unsupervised by the employer. Thus, in order
to determine whether an employee is a field employee, it is also necessary
to ascertain if actual hours of work in the field can be determined with
reasonable certainty by the employer. In so doing, an inquiry must be
made as to whether or not the employee’s time and performance are
constantly supervised by the employer.
Negative. (1) Company drivers, including Lebatique, are directed to
deliver the goods at a specified time and place; (2) they are not given the
discretion to solicit, select and contact prospective clients; and (3) Far East
issued a directive that company drivers should stay at the client’s
premises during truck-ban hours which is from 5-9am and 5-9 pm.
Far East admit that the drivers can report early in the morning, to make
their deliveries, or in the afternoon, depending on the production of animal
feeds. Drivers, like Lebatique, are under the control and supervision of
management officers. Lebatique, therefore, is a regular employee whose
tasks are usually necessary and desirable to the usual trade and business
of Far East. Thus, he is entitled to benefits accorded to regular employees
of Far East, including overtime pay & service incentive leave pay.
As to illegal dismissal: the burden is on the employer to prove that the
termination was for a valid cause. Far East failed to discharge such
burden. It averred that Lebatique was merely suspended but he
abandoned his work. To constitute abandonment as a just cause for
dismissal, there must be: (a) absence without justifiable reason; and (b) a
clear intention, as manifested by some overt act, to sever the employer-
employee relationship.
Far East failed to prove that Lebatique abandoned his job. Nor was
there a showing of a clear intention on the part of Lebatique to sever the
employer-employee relationship. When Lebatique was verbally told by
Alexander Uy, the company’s General Manager, to look for another job,
Lebatique was in effect dismissed. Even assuming earlier he was merely
suspended for illegal use of company vehicle, the records do not show that
he was afforded the opportunity to explain. Also clear that it was
Lebatique’s complaint for nonpayment of his overtime pay that provoked
the management to dismiss him, on the erroneous premise that a truck
driver is a field personnel not entitled to overtime pay.
PRIVATE SCHOOL TEACHERS
Jose Rizal Colleges vs. NLRC (1987)
ISSUE: WON the school faculty who are paid per lecture are entitled to
unworked holiday pay
Jose Rizal Colleges is a non-stock, non-profit educational institution. It
has 3 groups of employees: (a) personnel on monthly basis, who receive
Case Digest
their monthly salary uniformly throughout the year, irrespective
of the actual number of working days in a month without
deduction for holidays; (b) personnel on daily basis who are paid on
actual days worked and they receive unworked holiday pay and (c)
collegiate faculty who are paid on the basis of student contract hour.
National Alliance of Teachers & Office Workers, in behalf of faculty &
personnel of Jose Rizal College filed a complaint against the college for
alleged non-payment of holiday pay.
LA Andres’ Findings: faculty and personnel employed by JRC who are
paid their salaries monthly, are uniformly paid throughout the school year
regardless of working days, hence their holiday pay are included therein
while the daily paid employees are renumerated for work performed
during holidays per affidavit of JRC's treasurer. On the other hand, faculty
members who are paid on an hourly basis are not entitled to holiday pay.
JRC’s contentions: it is not covered by Book V of LC on Labor Relations
considering that it is a non-profit institution and that its hourly paid faculty
members are paid on a "contract" basis because they are required to hold
classes for a particular number of hours. In the programming of these
student contract hours, legal holidays are excluded and labelled in the
schedule as "no class day." On the other hand, if a regular week day is
declared a holiday, the school calendar is extended to compensate for that
day. It is argued that the advent of any of the legal holidays within the
semester will not affect the faculty's salary because this day is not
included in their schedule while the calendar is extended to compensate
for special holidays. Thus the programmed number of lecture hours is not
diminished.
Sol-Gen’s contentions: under Art. 94, holiday pay applied to all
employees except those in retail & service establishments.
Negative. Jose Rizal Colleges, although a non-profit institution is under
obligation to give pay even on unworked regular holidays to hourly paid
faculty members subject to terms and conditions provided by law. (cited
Art. 94 & Sec. 7, Rule IV, Bk III, IRR)
The implementing rule is not justified by the provisions of the law which
after all is silent with respect to faculty members paid by the hour who
because of their teaching contracts are obliged to work and consent to be
paid only for work actually done. Regular holidays specified as such by law
are known to both school and faculty members as no class days; certainly
the latter do not expect payment for said unworked days, and this was
clearly in their minds when they entered into the teaching contracts.
On the other hand, both the law and the Implementing Rules governing
holiday pay are silent as to payment on Special Public Holidays.
The declared purpose of the holiday pay which is the prevention of
diminution of the monthly income of the employees on account of work
interruptions is defeated when a regular class day is cancelled on account
of a special public holiday and class hours are held on another working
day to make up for time lost in the school calendar. Otherwise stated, the
faculty member, although forced to take a rest, does not earn what he
should earn on that day. Be it noted that when a special public holiday is
declared, the faculty member paid by the hour is deprived of expected
income, and it does not matter that the school calendar is extended in
view of the days or hours lost, for their income that could be earned from
other sources is lost during the extended days. Similarly, when classes are
called off or shortened on account of typhoons, floods, etc. these faculty
members must likewise be paid, whether or not extensions are ordered.
Wherefore, Jose Rizal Colleges is exempted from paying hourly paid
faculty members their pay for regular holidays, whether the same be
during the regular semesters of the school year or during semestral,
Christmas, or Holy Week vacations. However, it is ordered to pay said
faculty members their regular hourly rate on days declared as special
holidays or for some reason classes are called off or shortened for the
hours they are supposed to have taught, whether extensions of class days
be ordered or not; in case of extensions said faculty members shall
likewise be paid their hourly rates should they teach during said
extensions.
HOLIDAY ON A SUNDAY
Wellington vs. Trajano (1995)
ISSUE: WON a monthly-paid employee, receiving a fixed monthly
compensation, is entitled to an additional pay aside from his usual holiday
pay, whenever a regular holiday falls on a Sunday
6 Aug ’91: Labor Enforcement Officer made a routine inspection of
Wellington Flour Mills, an establishment owned & operated by Wellingtom
Investment & Manufacturing Corporation. He drew up a report of his
 Labor Standards
finding of nonpayment of regular holidays falling on a Sunday
for monthly-paid employees.
Wellington’s contentions: the monthly salary of the company's
monthly-salaried employees already includes holiday pay for all regular
holidays and hence, there is no legal basis for the finding of alleged non-
payment of regular holidays falling on a Sunday. It pays its monthly-paid
employees a fixed monthly compensation "using the 314 factor which
undeniably covers and already includes payment for all the working days in a
month as well as all the 10 unworked regular holidays within a year."
Negative. Every worker should be paid his regular daily wage during
regular holidays, except in retail and service establishments regularly
employing less than 10 workers, even if the worker does no work on these
holidays. The regular holidays include: "New Year's Day, Maundy
Thursday, Good Friday, the ninth of April, the first of May, the twelfth of
June, the fourth of July, the thirtieth of November, the twenty-fifth of
December, and the day designated by law for holding a general election.
As regards employees who are uniformly paid by the month, the
monthly minimum wage shall not be less than the statutory minimum
wage multiplied by 365 days divided by twelve. This monthly salary shall
serve as compensation "for all days in the month whether worked or not,"
and "irrespective of the number of working days therein." In other words,
whether the month is of 30 or 31 days duration, or 28 or 29 (as in
February), the employee is entitled to receive the entire monthly salary. So,
too, in the event of the declaration of any special holiday, or any fortuitous
cause precluding work on any particular day or days (such as
transportation strikes, riots, or typhoons or other natural calamities), the
employee is entitled to the salary for the entire month and the employer
has no right to deduct the proportionate amount corresponding to the
days when no work was done.
There is no question that at the time of the inspection conducted by the
Labor Enforcement Officer, it was and had been paying its employees "a
salary of not less than the statutory or established minimum wage," and that
the monthly salary thus paid was "not . . . less than the statutory minimum
wage multiplied by 365 days divided by twelve." Hence, Wellington complied
with the minimum norm laid down by law.
Apparently the monthly salary was fixed by Wellington to provide for
compensation for every working day of the year including the holidays
specified by law — and excluding only Sundays. In fixing the salary,
Wellington used what it calls the "314 factor;" that is to say, it simply
deducted 51 Sundays from the 365 days normally comprising a year and
used the difference, 314, as basis for determining the monthly salary. The
monthly salary thus fixed actually covers payment for 314 days of the
year, including regular and special holidays, as well as days when no work
is done by reason of fortuitous cause, as above specified, or causes not
attributable to the employees.
As found by the Labor Officer, in certain years, 2 or 3 regular holidays
had fallen on Sundays. Hence, LO argued that Wellington should pay for
317 days, instead of 314. Untenable.
There is no provision of law requiring any employer to make such
adjustments in the monthly salary rate set by him to take account of legal
holidays falling on Sundays in a given year, or, contrary to the legal
provisions bearing on the point, otherwise to reckon a year at more than
365 days. As earlier mentioned, what the law requires of employers opting
to pay by the month is to assure that "the monthly minimum wage shall not
be less than the statutory minimum wage multiplied by 365 days divided by
twelve," and to pay that salary "for all days in the month whether worked or
not," and "irrespective of the number of working days therein." That salary is
due and payable regardless of the declaration of any special holiday in the
entire country or a particular place therein, or any fortuitous cause
precluding work on any particular day or days or cause not imputable to
the worker. And as also earlier pointed out, the legal provisions governing
monthly compensation are evidently intended precisely to avoid re-
computations and alterations in salary on account of the contingencies
just mentioned, which, by the way, are routinely made between employer
and employees when the wages are paid on daily basis.
Azucena’s note: A legal holiday falling on a Sunday creates no legal
obligation for the employer to pay extra, aside from the usual holiday pay,
to its monthly-paid employees.
Case Digest
SERVICE INCENTIVE LEAVE
Cuajao vs. Chua Lo Tan (1962)
ISSUE: WON Cuajao is entitled to leave pay
Esteban Cuajao is the family driver of Chua Lo Tan, earning P5/day
from 1 Aug ’51 to 4 Nov ’56. Cuajao was hospitalized for 19 days in ’51,
13 days in ’52, & 3 days in ’53. He spent P435.80 for hospitalization and
medicine. During the period of his employment, he did not enjoy any
vacation leave pay, at the rate of 4 days a month for P1,580.
29 Nov ’56: Esteban Cuajao seeks to recover from Chua Lo Tan & Chua
Luan & Co., Inc. the aggregate sum of P2,015.80 allegedly representing
hospitalization expenses in the sum of P435.80 & vacation leave pay, as
former driver of the latter.
LC held that Cuajao is not entitled to recover the amount, upon ground
of waiver of this right thereto, in view of his failure to demand payment of
said vacation leave, as right thereto accrued.
Cuajao’s contentions: there has been no such waiver on his part. He
testified that he made seasonable demands to Chua. His right to vacation
leave cannot be waived.
Negative. Cuajao remained in the service of Chua for about 6 yrs,
despite the fact that Chua had allegedly not heeded his demands for
payment. The purpose of vacation leave is to afford to a laborer chance to
get a much-needed rest to replenish his worn out energies and acquire a
new vitality to enable him to efficient perform his duties, and not merely to
give him additional salary or bounty. This privilege must be demanded in
its opportunity time and if he allows the years to go by in silence, he was
it. It becomes a mere concession or act of grace of the employer.
On the other hand, the award for hospitalization expenses is based
upon Art. 1689 of CC – “Household service shall always be reasonably
compensated. Any stipulation that household service is without compensation
shall be void. Such compensation shall be in addition to the house helper's
lodging, food, and medical attendance.”
Cuajao has done no more than testify about the fact of his
hospitalization and the illness for which he had been treated - namely,
hemorrhoid aside - from identifying and presenting the bills allegedly paid
by him therefor. There is absolutely no evidence — expert or otherwise —
regarding the necessity of his confinement in a hospital. He did not even
try to prove that Chua Lo Tan had been advised of his illness or of his
hospitalization, either prior or subsequently thereto. Hence, Chua is not
obligated to pay for Cuajao’s medical expenses.
LCP vs. NLRC (1998)
ISSUE: WON the employees are entitled to service incentive leave pay
99 persons (petitioners) were rank & file employees of Empire Food
Products. They filed a complaint for payment of money claims and for
violations of labor standards laws.
23 Oct ’90: Empire & the employees entered into a MOA, where Labor
Congress of the Philippines and its Local Chapter as the sole & exclusive
bargaining agent and representative for all rank & file employees of
Empire, regarding their wages, hours of work, & other terms & conditions.
MOA was approved by Mediator Cortez & LCP was certified as the
bargaining agent among the employees of Empire.
23 Jan ’91: Petitioners filed a complaint for unfair labor practice, union
busting thru harassments, threats, & interfering with rights employees to
self-organization, violation of MOA, & underpayment of wages.
LA failed to rule on the other benefits prayed for by petitioners, such as
the holiday pay, premium pay, 13th month pay & service incentive leave.
Affirmative. Although the employees are piece-rate workers, they were
regular employees are Empire. First, as to the nature of petitioners' tasks,
their job of repacking snack food was necessary or desirable in the usual
business of Empire, who were engaged in the manufacture and selling of
such food products. Second, petitioners worked for Empire throughout the
year, their employment not having been dependent on a specific project or
season. Third, the length of time that petitioners worked for Empire. Thus,
while petitioners' mode of compensation was on a "per piece basis," the
status and nature of their employment was that of regular employees.
The Rules Implementing the Labor Code exclude certain employees
from receiving benefits such as nighttime pay, holiday pay, service
incentive leave and 13th month pay – “field personnel and other employees
whose time and performance is unsupervised by the employer, including
those who are engaged on task or contract basis, purely commission basis, or
 Labor Standards
those who are paid a fixed amount for performing work
irrespective of the time consumed in the performance thereof.”
Plainly, petitioners as piece-rate workers do not fall within this group.
Not only did petitioners labor under the control of Empire as their
employer, likewise did petitioners toil throughout the year with the
fulfillment of their quota as supposed basis for compensation.
As to overtime pay: the workers who are paid by results including those
who are paid on piece-work, takay, pakiao, or task basis, if their output
rates are in accordance with the standards prescribed under Sec. 8, Rule
VII, Book III are not entitled to receive overtime pay. However, Empire did
not allege adherence to the standards set forth in Sec. 8 nor with the rates
prescribed by the Secretary of Labor. As such, petitioners are beyond the
ambit of exempted persons and are therefore entitled to overtime pay.
Murillo vs. Sun Valley (1988)
ISSUE: WON the employees are entitled to service incentive leave pay
Apr ’67: Petitioners were employed as maintenance men tasked with
the upkeep of the roads & water system of Sun Valley Subd.
11 Jan ’80: they were notified by State Realty & Investment Corp. that
their services would be terminated effective 31 Jan ’80 in view of the
termination of contract between Sun Valley Realty & SRIC.
31 Jan ’80: petitioner’s employment was terminated without Sun Valley
having filed any application for clearance to terminate much less a prior
clearance from Ministry of Labor.
26 Feb: petitioners filed a complaint for illegal dismissal, emergency
living allowance & payment of service incentive leave.
Sun Valley’s contentions: the claims that accrued more than 3 yrs
before the complaint was filed had already prescribed. Petitioners are not
entitled to service incentive leave inasmuch as establishments employing
less than 10 employees are exempted from paying the same.
Affirmative. The clear policy of the Labor Code is to include all
establishments, except a few classes, under the coverage of the provision
granting service incentive leave to workers.
Sun Valley’s claim is that they fell within the exception. Hence, it was
incumbent upon them to prove that they belonged to a class excepted by
law from the general rule. Specifically, it was the duty of Sun Valley, not of
petitioners, to prove that there were less than 10 employees in the
company. Having failed to discharge its task, Sun Valley must be deemed
to be covered by the general rule, notwithstanding the failure of petitioners
to allege the exact number of employees of the corporation.
However, the other statutory benefits or claims that accrued more than
3 years before the complaint was filed on 26 Feb ’80 had prescribed.
(citing Art. 292 LC)
As to illegal dismissal: Affirmative. No clearance to terminate was ever
secured by Sun Valley prior to the termination of employment of
petitioners. In fact, even as petitioners were terminated on 31 Jan ‘80, it
was only on 14 Feb ‘80 that an application for clearance was filed by Sun
Valley. Hence, petitioners' dismissal must be conclusively presumed to be
without just cause.
It was contended that prior clearance was not required in cases of
complete cessation of operations. Fact that Sun Valley intended to shut
down operations due to business reverses is immaterial. Clearance is
likewise required before one could shut down his business.
Davao vs. Abarquez (1993)
ISSUE: WON the employees are entitled to sick leave with pay
16 Oct ’85: Davao Integrated Port Stevedoring Services & ATU-TUCP
(Union) entered into a CBA, which, under Secs. 1 &3, Art. VIII thereof,
provide for sick leave with pay benefits each year to its employees who
have rendered at least 1 year of service with the company. It provided that
Davao Integrated agrees to grant 15 days sick leave with pay each year to
every regular non-intermittent worker who already rendered at least one
year of service with the company. Also, all intermittent field workers of the
company who are members of the regular labor pool shall be entitled to
vacation & sick leaves per year of service with pay.
15 Apr ’89: Upon renewal of CBA, the provisions for sick leave with pay
benefits were reproduced but the coverage of said benefits was expanded
to include the “present regular extra labor pool as of the signing of this
agreement.”
During the effectivity of the ’85 CBA until 3 months after its renewal, all
the field workers of Davao Integrated who are members of the regular
labor pool & the present regular extra labor pool who had rendered at
Case Digest
least 750 hours up to 1,500 hours were extended sick leave with
pay benefits. Any unenjoyed portion thereof at the end of the
current year was converted to cash and paid at the end of the said one-
year period pursuant to Secs. 1 and 3, Art. VIII of the CBA. The number of
days of their sick leave per year depends on the number of hours of
service per calendar year in accordance with the schedule provided in Sec.
3.
However, the commutation of the unenjoyed portion of the sick leave
with pay benefits of the intermittent workers or its conversion to cash was
discontinued or withdrawn when Mr. Marzo (new assistant manager)
stopped the payment of its cash equivalent on the ground that they are
not entitled to said benefits.
Union’s contentions: the discontinuance of payment was a deviation
from the true intent of the parties that negotiated the CBA. It would
violated the principle in labor laws that benefits already extended shall not
be taken away and that it would result in discrimination between the non-
intermittent and the intermittent workers of the company.
Davao Integrated’s contentions: it is clear from the language and intent
of the last sentence of Sec. 1, Art. VIII of the ‘89 CBA that only the regular
workers whose work are not intermittent are entitled to the benefit of
conversion to cash of the unenjoyed portion of sick leave – “only those
regular workers of the Company whose work are not intermittent are entitled
to the herein sick leave privilege.” Further, while the intermittent workers
were paid the cash equivalent of their unenjoyed sick leave with pay
benefits during the previous management of Mr. Beltran who
misinterpreted Sec.s 1 and 3 of Art. VIII of the ‘85 CBA, it was well within
company's rights to rectify the error it had committed and stop the
payment of the said sick leave with pay benefits. An error in payment can
never ripen into a practice.
A CBA refers to a contract executed upon request of either the
employer or the exclusive bargaining representative incorporating the
agreement reached after negotiations with respect to wages, hours of work
and all other terms and conditions of employment, including proposals for
adjusting any grievances or questions arising under such agreement.
While the terms and conditions of a CBA constitute the law between the
parties, it is not, however, an ordinary contract to which is applied the
principles of law governing ordinary contracts. It is not merely contractual
in nature but impressed with public interest, thus, it must yield to the
common good. As such, it must be construed liberally rather than
narrowly and technically, and the courts must place a practical and
realistic construction upon it, giving due consideration to the context in
which it is negotiated and purpose which it is intended to serve.
Affirmative. It is erroneous for Davao Integrated to isolate Sec. 1, Art.
VIII of the ’89 CBA from the other related section on sick leave with pay
benefits. The manner the employees were deprived of the privilege
previously recognized and extended to them by the Company during the
lifetime of the CBA of ‘85 until 3 months from its renewal on 15 Apr ‘89,
or a period of 3 years and 9 months, is not only tainted with arbitrariness
but likewise discriminatory in nature.
The ’89 CBA has 2 sections on sick leave with pay benefits: (1) the
regular non-intermittent workers or those workers who render a daily 8-
hour service to the company and are governed by Sec. 1, Art. VIII of the
1989 CBA; and (2) intermittent field workers who are members of the
regular labor pool and the present regular extra labor pool as of the
signing of the agreement on 15 Apr ’89 or those workers who have
irregular working days and are governed by Sec. 3, Art. VIII of the ‘89 CBA.
Both classes of workers are entitled to sick leave with pay benefits
provided they comply with the conditions set forth under Section 1 in
relation to the last paragraph of Section 3, to wit: (1) the employee-
applicant must be regular or must have rendered at least one year of
service with the company; and (2) the application must be accompanied
by a certification from a company-designated physician.
Sick leave benefits, like other economic benefits stipulated in the CBA
such as maternity leave and vacation leave benefits, among others, are by
their nature, intended to be replacements for regular income which
otherwise would not be earned because an employee is not working
during the period of said leaves. They are non-contributory in nature, in
the sense that the employees contribute nothing to the operation of the
benefits. By their nature, upon agreement of the parties, they are intended
to alleviate the economic condition of the workers.
The parties to the CBA clearly intended the same sick leave privilege to
be accorded the intermittent workers in the same way that they are both
given the same treatment with respect to vacation leaves – non-
commutable and non-cumulative. Well-settled is it that the said privilege of
commutation or conversion to cash, being an existing benefit, the
petitioner-company may not unilaterally withdraw, or diminish such
benefits.
 Labor Standards
Mark Roche vs. NLRC (1999)
ISSUE: WON the respondents are entitled to service incentive leave pay
Eduardo Dayot & Susan Dayot were President & VP of Mark Roche
International, engaged in the garments business. Eileen Rufon, Lilia
Briones, Beatriz Managaytay, Delia Arellano, Anita Marcelo, Rio Mariano,
Marissa Sadili, Wilma Patacay, Estella Mallari, Delia Laroya and Divina
Villarba were employed as sewers of MRI with lengths of service varying
from 3-9 years.
The employees fled separate complaints for underpayment of wages &
non-payment of overtime pay against MRI. They alleged that they usually
worked 11-12 hrs daily, except on Mondays during which they worked 8
hrs, & were paid wages on a piece-rate basis amounting to P450-600/wk.
They also asserted that sometime in ’92, they were unable to avail of their
SSS benefits (salary loan, sickness benefits and maternity benefits)
because, they found out, MRI did not remit their contributions.
11 Oct ’92: respondents sought the assistance of a labor organization
which helped them organize the Mark Roche Workers Union.
When MRI received a notice of hearing, it ordered respondents to
withdraw their petition, threatening that should they insist in the
organization of a union, they would be dismissed. However, respondents
refused and so on 29 Oct ’92, they were discharged from work.
30 Oct: respondents amended their complaint to include illegal
dismissal, unfair labor practice, non-payment of 13th month pay,
underpayment for legal holidays, and for damages.
MRI’s contentions: respondents were not dismissed but they voluntarily
abandoned their jobs. They incurred numerous absences without prior
notice and clearance from their superiors as evidenced by several
company memos sent to them. Only Divina Villarba showed up and told
petitioners that she was voluntary resigning because she had found better
employment elsewhere. It was only later that petitioners learned that
private respondents' absences were due to their preoccupation with the
organization of a labor union. Also, disclaimed knowledge of any deficiency
owing to private respondents since all the benefits due them as required
by law were fully paid, except overtime pay which they were not entitled to
on account of their being piece-rate workers. Argued that it already paid.
Negative. The employer bears the burden to prove that employees have
received their wages and benefits and that the same were paid in
accordance with law. It is incumbent upon the employer to present the
necessary documents to prove such claims.
In their position paper, MRI failed to present necessary documentary
evidence to substantiate their allegation that respondents' money claims
were fully paid. They cannot use the absence of trial as an excuse for their
failure as they could have presented documentary evidence at any time
before the LA and, on appeal, before the NLRC. Hence, they cannot at this
late stage bewail that they were not afforded due process.
However, private respondents as piece-rate employees are not entitled
to service incentive leave pay as well as holiday pay even if they are
entitled to other benefits like COLA and 13th month pay. Service incentive
leave pay shall not apply to employees whose performance is
unsupervised by the employer, including those who are paid in a fixed
amount for performing work irrespective of the time consumed in the
performance thereof.
As to abandonment: there must be deliberate & unjustified refusal of an
employee to resume his employment. The burden of proof is on the
employer to show an unequivocal intent on the part of employee to
discontinue employment. The intent cannot be lightly inferred from certain
ambivalent acts. However, in this case, there were no overt acts
established by MRI from which to infer the clear intention of respondents
to desist from their employment. The company memos submitted by MRI
could not be the basis of such intention since they referred to absences
incurred by private respondents long before their dismissal.
Auto Bus vs. Bautista (2005)
ISSUE: WON Bautista is entitled to service incentive leave pay
24 May ’95: Antonio Bautista has been employed by Auto Bus
Transport Systems, Inc. as driver-conductor with travel routes Manila-
Tuguegarao, Baguio-Tuguegarao & Manila-Tabuk. He was paid on
commission basis, 7% of the total gross income/travel on a 2x/mo basis.
3 Jan ’00: While Bautista was driving, his bus accidentally bumped the
rear portion of another Autobus, as the latter vehicle suddenly stopped at
a sharp curve without giving any warning. Bautista averred that the
Case Digest
accident happened because he was compelled by the
management to go back to Roxas, Isabela, although he had not
slept for almost 24 hrs. He further alleged that he was not allowed to work
until he fully paid the amount P75k, representing 30% of the cost of repair
of the damages buses & that despite his pleas, he was ignored. After a
month, he was terminated through a letter of termination.
2 Feb: Bautista instituted a complaint for illegal dismissal with money
claims for nonpayment of 13th month pay & service incentive leave pay.
Auto Bus’ contentions: Bautista’s employment was replete with
offenses involving reckless imprudence, gross negligence, and dishonesty.
It presented copies of letters, memos, irregularity reports, and warrants of
arrest pertaining to several incidents wherein Bautista was involved.
Bautista is not entitled to service incentive leave because he was paid on
purely commission basis.
Affirmative. The grant of service incentive leave has been delimited by
the Implementing Rules and Regulations of the Labor Code to apply only
to those employees not explicitly excluded by Sec. 1 of Rule V. According
to IRR, Service Incentive Leave shall not apply to employees classified as
"field personnel." The phrase "other employees whose performance is
unsupervised by the employer" must not be understood as a separate
classification of employees to which service incentive leave shall not be
granted. Rather, it serves as an amplification of the interpretation of the
definition of field personnel under the Labor Code as those "whose actual
hours of work in the field cannot be determined with reasonable certainty."
The same is true with respect to the phrase "those who are engaged on
task or contract basis, purely commission basis." Said phrase should be
related with "field personnel," applying the rule on ejusdem generis that
general and unlimited terms are restrained and limited by the particular
terms that they follow. Hence, employees engaged on task or contract
basis or paid on purely commission basis are not automatically exempted
from the grant of service incentive leave, unless, they fall under the
classification of field personnel.
Therefore, Auto Bus’ contention is misplaced. What must be ascertained
in order to resolve the issue of propriety of the grant of service incentive
leave to Bautista is whether or not he is a field personnel.
The definition of a "field personnel" is not merely concerned with the
location where the employee regularly performs his duties but also with
the fact that the employee’s performance is unsupervised by the
employer. Field personnel are those who regularly perform their duties away
from the principal place of business of the employer and whose actual hours
of work in the field cannot be determined with reasonable certainty. Thus, in
order to conclude whether an employee is a field employee, it is also
necessary to ascertain if actual hours of work in the field can be
determined with reasonable certainty by the employer. In so doing, an
inquiry must be made as to whether or not the employee’s time and
performance are constantly supervised by the employer.
In the case at bar, records revealed that there are its inspectors
assigned at strategic places who board the bus and inspect the
passengers, the punched tickets, and the conductor’s reports. There is also
the mandatory once-a-week car barn or shop day, where the bus is
regularly checked as to its mechanical, electrical, and hydraulic aspects,
whether or not there are problems thereon as reported by the driver
and/or conductor. They too, must be at specific place as specified time, as
they generally observe prompt departure and arrival from their point of
origin to their point of destination. In each and every depot, there is always
the Dispatcher whose function is precisely to see to it that the bus and its
crew leave the premises at specific times and arrive at the estimated
proper time. These, are present in the case at bar. The driver, the
complainant herein, was therefore under constant supervision while in the
performance of this work. He cannot be considered a field personnel.
Hence, Bautista is a regular employee who performs tasks usually
necessary & desirable to the usual trade of Auto Bus.
As to issue on up to what amount of service incentive leave pay
Bautista is entitled to: Article 291 LC states that all money claims arising
from employer-employee relationship shall be filed within 3 years from the
time the cause of action accrued; otherwise, they shall be forever barred.
The cause of action of an entitled employee to claim his service
incentive leave pay accrues from the moment the employer refuses to
remunerate its monetary equivalent if the employee did not make use of
said leave credits but instead chose to avail of its commutation.
Bautista had not made use of his service incentive leave nor demanded
for its commutation until his employment was terminated. Neither did
Auto Bus compensate his accumulated service incentive leave pay at the
time of his dismissal. Since the prescriptive period of his claim only
commenced from the time of his dismissal, his money claim was filed
within the prescriptive period.
 Labor Standards
WAGES
1. Definition
Songco vs. NLRC (1990)
ISSUE: WON earned sales commission & allowances should be included in
the monthly salary of Songco, et. al. for the purpose of computation of
their separation pay
F.E Zuellig filed an application seeking clearance to terminate the
services of Jose Songco, Romeo Cipres, & Amancio Manuel allegedly on
the ground of retrenchment due to financial losses.
Songco, et. al. opposed, alleging that the company is not suffering from
any losses. They alleged that they are being dismissed because of their
membership in the union. However, at the last hearing, they manifested
that they are no longer contesting their dismissal. They agreed that the
sole issue to be resolved is the basis of separation pay due to them.
Songco, et. al., who were in the sales force of Zuellig, received monthly
salaries of at least P40k. In addition, they received commissions for every
sale they made.
Songco’s contention: their earned sales commissions & allowances
should be added together, citing Art. 97(f).
Zeullig’s arguments: if it were the intention of the LC to include
commission in the computation of separation pay, it could have explicitly
said so in clear & unequivocal terms. In the definition of “wage”,
“commission” is used only as one of the features or designation attached
to the word remuneration or earnings.
Yes. Article 97(f) by itself is explicit that commission is included in the
definition of the term "wage". Where the law speaks in clear and
categorical language, there is no room for interpretation or construction;
there is only room for application.
How ever, it may be argued that if We correlate Art. 97(f) with Art. XIV of
their, Art. 284 LC and Sec. 9(b) and 10 of IRR, there appears to be an
ambiguity.
CBA, Art. XIV – Retirement Gratuity. 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 salaryas 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.
Broadly, the word "salary" means a recompense or consideration made
to a person for his pains or industry in another man's business. It carries
with it the fundamental idea of compensation for services rendered.
Indeed, the words "wages" and "salary" are in essence synonymous.
"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.
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 Songco, their salary base should include also their earned sales
commissions.
Granting arguendo that the commissions were in the form of incentives
or encouragement, 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. It is part of Songco’s wage or salary. Take
note of the fact that some salesmen do not receive any basic salary but
depend on commissions and allowances or commissions alone.
As to WON allowances should be included in the computation: Yes. 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.
Cebu vs. Ople (1987)
ISSUES: WON allowances & other fringe benefits of faculty members &
other school employees may be charged against the 60% portion of the
tuition fee increases provided in Sec. 3(a), PD 451; WON the same items
may be charged against said portion under BP 232; WON schools & their
Case Digest
employees may enter into a CBA allocating more than 60% of
said incremental proceeds for salary increases & other benefits of
employees
This case consolidates six cases involving private schools, their teachers
& non-teaching school personnel, & even parents with children studying in
said schools.
The common problem requires an interpretation of Sec. 3(a) of PD
451: Limitations. — The increase in tuition or other school fees or other
charges as well as the new fees or charges authorized under the next
preceding section shall be subject to the following conditions; (a) That no
increase in tuition or other school fees or charges shall be approved unless
sixty (60%)per centum of the proceeds is allocated for increase in salaries or
wages of the members of the faculty and all other employees of the school
concerned, and the balance for institutional development, student assistance
and extension services, and return to investments: Provided That in no case
shall the return to investments exceed twelve (12%) per centum of the
incremental proceeds.
In a nutshell, the present controversy was precipitated by the claims of
some school personnel for allowances and other benefits and the refusal
of the private schools concerned to pay said allowances and benefits on
the ground that said items should be deemed included in the salary
increases they had paid out of the 60% portion of the proceeds from
tuition fee increases provided for in Sec. 3(a) of PD 451.
1) No. If the schools have no resources other than those derived from
tuition fee increases, allowances and benefits should be charged against
the proceeds of tuition fee increases which the law allows for return on
investments under Sec. 3(a) of PD 451. Therefore, it should not be
charged against the 60% portion allocated for increases in salaries and
wages. Sec. 3(a), PD 451 imposes among the conditions for the approval
of tuition fee increases, the allocation of 60% per cent of the incremental
proceeds thereof for increases in salaries or wages of school personnel
and not for any other item such as allowances or other fringe benefits.
The 60% incremental proceeds from the tuition increase are to be
devoted entirely to wage or salary increases which means increases in
basic salary. The law cannot be construed to include allowances which are
benefits over and above the basic salaries of the employees. To charge
such benefits to the 60% incremental proceeds would be to reduce the
increase in basic salary provided by law, an increase intended also to help
the teachers and other workers tide themselves and their families over
these difficult economic times. The legislative intent is to alleviate the sad
plight of private schools and that of their personnel wrought by slump in
enrollment and increasing operational costs on the part of the schools,
and the increasing costs of living on the part of the personnel.
In the light of existing laws which exclude allowances from the basic
salary or wage in the computation of the amount of retirement and other
benefits payable to an employee, this Court will not adopt a different
meaning of the terms "salaries or wages" to mean the opposite, i.e. to
include allowances in the concept of salaries or wages.
Consequently, the IRR of the MECS which provides that allowances &
other benefits may be charged against the 60% portion of the proceeds of
tuition fee increases in PD 451, is issued ultra vires.
2) Yes. PD 451 provides that 60% of the incremental proceeds of
tuition fee increases shall be applied or used to augment the salaries and
wages of members of the faculty and other employees of the school, while
BP 232 provides that the increment shall be applied or used in
accordance with the regulations promulgated by the MECS. The Court is in
favor of repeal.
First, the legislative authority under PD 451 retained the power to
apportion the incremental proceeds of the tuition fee increases. Second,
PD 451 limits the application or use of the increment to salary or wage
increase, institutional development, student assistance and extension
services and return on investment, whereas BP 232 gives the MECS
discretion to determine the application or use of the increments. Third, the
extent of the application or use of the increment under PD 451 is fixed at
the pre-determined percentage allocations; 60% for wage and salary
increases, 12% for return in investment and the balance of 28% to
institutional development, student assistance and extension services, while
under BP 232, the extent of the allocation or use of the increment is
likewise left to the discretion of the MECS.
The guidelines and regulations on tuition and other school fees issued
after the enactment of BP 232 consistently permit the charging of
allowances and other benefits against the 60% incremental proceeds.
3) Yes. Based on the MECS and DECS rules and regulations which
implement BP 232, the 60% portion of the proceeds of tuition fee
increases may now be allotted for both salaries and allowances and other
benefits. The 60% figure is, however, a minimum which means that
 Labor Standards
schools and their employees may agree on a larger portion, or
in this case, as much as 90% for salaries and allowances and
other benefits. This is not in anyway to allow diminution or loss of the
portion allotted for institutional development of the school concerned.
Thus, paragraph 7.5 of MECS Order No. 25, series of 1985 specifically
provides that other student fees and charges like registration, library,
laboratory or athletic fees shall be used exclusively for the purposes
indicated.
Plastic vs. NLRC (1989)
ISSUE: WON gratuity pay should be granted as equivalent to 1 month or 3
days salary; WON Plastic Town is bound by the CBA to grant an increase,
despite compliance with Wage Orders #4 and #5
7 Sep ’84: Nagkakaisang Lakas ng Manggagawa (NLM) Katipunan filed
a complaint against Plastic Town Center Corp, charging it with (1) violation
of Wage Order #5, by crediting P1/day increase in the CBA as part of the
compliance with said Wage Order & instead of 30 days equivalent to 1
month as gratuity pay to resigning employees, and (2) unfair labor
practice thru violation of CBA by giving only 26 days pay instead of 30
days equivalent to 1 month as gratuity pay to resigning employees.
Applicable provisions:
CBA -- The company agrees to grant permanent regular rank and file
workers covered by this Agreement who have rendered at least one year of
continuous service, across-the-board wage increases as follows: a. Effective 1
July, 1983-Pl.00 per worked day; b Effective 1 July, 1984-Pl.00 per worked
day; c. Effective 1 July, 1985-Pl.00 per worked day. Section 3. It is agreed
and understood by the parties herein that the aforementioned increase in pay
shall be credited against future allowances or wage orders hereinafter
implemented or enforced by virtue of Letters of Instructions, Decrees and
other labor legislation.
Wage Order #4 provided for the integration of the mandatory
emergency cost of living allowances (ECOLA) under PD 1614, 1634, 1678
and 1713 into the basic pay of all covered workers effective May 1, 1984.
It further provided that after the integration, the applicable statutory
minimum daily wage rate must be complied with, which is P32.
Plastic Town incurred a deficiency of P1 in the wage rate after
integrating the ECOLA with basic pay. So it advanced to 1 May ’84 or 2
months earlier the implementation of the 1-peso wage increase provided
in the CBA starting 1 Jul ’84 for the benefit of the workers.
Plastic Town’s contentions: the one month salary for daily paid workers
should be computed on the basis of 26 days and not 30 days since daily
wage workers do not work every day of the month including Sundays and
holidays. Also alleged that on 1 May ’84, it granted the P1 increase
pursuant to Wage Order #4, which in consonance with Sec. 3 of CBA was
to be credited to the 1 Jul ’84 increase under the CBA. Therefore, it was a
July increase, as in the CBA. As regards gratuity pay, under the principle of
"fair day's wage for fair day's labor", gratuity pay should be computed on
the basis of 26 days for one month salary considering that the employees
are daily paid.
Yes. Gratuity pay should be equivalent to 1 month or 30 days salary.
Grauity is defined as ‘something given freely, or without recompense; a gift;
something voluntarily given in return for a favor or services; a bounty; a tip.’
Gratuity pay is therefore, not intended to pay a worker for actual
services rendered. It is a money benefit given to the workers whose
purpose is "to reward employees or laborers, who have rendered
satisfactory and efficient service to the company." (Sec. 2, CBA) While it
may be enforced once it forms part of a contractual undertaking, the grant
of such benefit is not mandatory so as to be considered a part of labor
standard law unlike the salary, cost of living allowances, holiday pay, leave
benefits, etc., which are covered by the Labor Code. Nowhere has it ever
been stated that gratuity pay should be based on the actual number of
days worked over the period of years forming its basis.
Yes. The parties entered into a CBA. As a contract, it constitutes the law
between the parties.
Sec. 3 of CBA clearly states that CBA granted increases shall be
credited against future allowances or wage orders. Thus, the CBA increase
to be effected on July 1, 1984 can not be retroactively applied to mean
compliance with Wage Order #4 which took effect on May 1, 1984.
Between July 1, 1983 and July 1, 1984, there were actually two
increases mandated by Wage Order #4 on May 1, 1984 and by Wage
Order #5 on June 16, 1984. The fact that Plastic Town had complied with
Wage Order #4 and Wage Order #5 does not relieve it of its obligation to
grant the P1 increase under the CBA.
Case Digest
SSS vs. SSS (1982)
ISSUE: WON SSS is liable for the payment of wages of members of the
Union who admittedly did not work during the 17-day strike declared in
1968 by the rank & file employees of the Union
In connection with a labor case between the rank & file Union PAFLU
and SSS, PAFLU staged a 17-day strike in defiance of the CIR Order
‘enjoining the parties, for the sake of industrial peace, to maintain the status
quo’ and for ‘the Union not to declare any strike & the Management not to
dismiss nor suspend any of its employees nor to declare any lockout.’
3 Sep ’68: SSS filed a petition to declare the strike illegal.
26 Sep: Union filed a motion, alleging that it had not participated in the
strike, that its members wanted to report for work but were prevented by
picketers, that they were entitled to their salaries corresponding to the
duration of the strike, which could be deducted from the accrued leave
credits of their members.
SSS opposed the demand for the payment of salaries pertaining to the
entire period of the strike. However, Court directed SSS to pay the same,
chargeable in the meantime to the accrued leave credits of the members
pending the determination of the illegality of the strike.
No. A fair day’s wage for a fair day’s labor. If there is no work performed
by the employee there can be no wage or pay, unless of course the laborer
was able, willing and ready to work but was illegally locked out, dismissed
or suspended. It is hardly fair or just for an employee or laborer to fight or
litigate against his employer on the employer’s time.
The failure to work on the part of the members of Union was due to
circumstances not attributable to themselves. But neither should the
burden of the economic loss suffered by them be shifted to their
employer, the SSS, which was equally faultless, considering that the
situation was not a direct consequence of the employer’s lockout or unfair
labor practice. Under the circumstances, it is but fair that each party must
bear his own loss.
Durabuilt vs. NLRC (1987)
ISSUE: WON Bodegas is entitled to compensation during the days when
there were brownouts & machine trouble
11 Jul ’83: Reynaldo Bodegas filed an illegal dismissal complaint
against Durabuilt, a tire recapping plant.
13 Feb ’84: LA ordered reinstatement of Bodegas with full backwages
from the time he was terminated up to the time he is actually reinstated,
without loss of seniority rights and benefits accruing to him. Since
Durabuilt failed to file an appeal, decision became final. Pursuant to the
judgment, a computation of backwages, ECOLA, 13th month pay, sick &
vacation leave benefits was submitted. Amounted to P24,316.38
Durabuilt’s opposition, contentions: the computation contemplated a
straight computation of 26 working days in one month when the period
covered by the computation was intermittently interrupted due to frequent
brownouts and machine trouble and that Bodegas had only a total of
250.75 days of attendance in 1982 due to absences.
However, LA denied the opposition. NLRC affirmed LA.
No. Backwages, in general, are granted on grounds of equity for
earnings which a worker or employee has lost due to his dismissal from
work. The general principle is that an employee is entitled to receive as
backwages all the amounts he may have lost starting from the date of his
dismissal up to the time of his reinstatement. Court has established a
policy, fixing the amount of backwages to a just and reasonable level
without qualification or deduction. To fix the amount of backwages without
qualification/deduction simply means that the workers are to be paid their
backwages fixed as of the time of their dismissal or strike without
deduction for their earnings elsewhere during their law-off and without
qualification of their backwages as thus fixed; i.e. unqualified by any wage
increases or other benefits that may have been received by their co-
workers who were not dismissed or did not go on strike.
The age-old rule governing the relation between labor and capital, or
management and employee of a "fair day's wage for a fair day's labor"
remains as the basic factor in determining employees' wages, and for that
matter backwages. If there is no work performed by the employee there
can be no wage or pay unless, of course, the laborer was able, willing and
ready to work but was illegally locked out, or suspended.
In the case at bar, Durabuilt conceded to the illegal dismissal of
Bodegas. It is willing to pay backwages. However, it argued that for days
 Labor Standards
where no work was required and could be done by its
employees, no wages could have been earned and, thereafter,
lost by said employees to justify an award of backwages. It claimed that on
certain days, their business was not in actual operation due to brownouts
or power interruption. Hence, Bodegas should not be entitled to
backwages during these days.
Policy Instruction No. 36 provides, “Brownouts running for more than
twenty minutes may not be treated as hours worked provided that any of
the following conditions are present; a) The employees can leave their
work place or go elsewhere whether within or without the work premises;
or b) The employees can use the time effectively for their own interest.”
Where the failure of workers to work was not due to the employer's
fault, the burden of economic loss suffered by the employees should not
be shifted to the employer. Each party must bear his own loss.
Indeed, it would neither be fair nor just to allow Bodegas to recover
something he has not earned and could not have earned and to further
penalize Durabuilt over and above the losses it had suffered due to lack of
raw materials and the energy-saving programs of the government.
Bodegas cannot be allowed to enrich himself at the expense of Durabuilt.
The computation of backwages should be based on daily rather than on
monthly pay schedules where, as in the case at bar, such basis is more
realistic and accurate.
Wherefore, Durabuilt is ordered to pay Bodegas his backwages from the
time he was terminated up to the time he was actually reinstated
computed on the basis of the number of days when Durabuilt's business
was in actual operation. The number of days where no work was required
and could be done by Durabuilt's employees on account of shutdowns due
to electrical power interruptions, machine repair, and lack of raw materials
are not considered hours worked for purposes of computing the
Durabuilt's obligation to Bodegas.
Iran vs. NLRC (1998)
ISSUE: WON commissions are included in determining compliance with
the minimum wage requirement
Antonio Iran is engaged in softdrinks merchandising & distribution in
Mandaue, Cebu. He is employing truck drivers who double as salesmen,
truck helpers & non-field personnel. He hired Petralba, Cadalso, Labiaga &
Colina as drivers/salesmen while Tecson, Gimena, Bandilao, Martin &
Gonzalgo were hired as truck helpers.
The drivers/salesmen drove Iran's delivery trucks and promoted, sold
and delivered softdrinks to various outlets in Mandaue City. The truck
helpers assisted in the delivery of softdrinks to the different outlets
covered by the driver/salesmen.
As part of their compensation, the driver/salesmen and truck helpers of
petitioner received commissions per case of softdrinks sold at the
following rates:
§ Salesmen – 10 centavos per case of regular softdrinks & 12 centavos
per case of family size softdrinks
§ Truck Helpers – 8 centavos per case of regular softdrinks & 10
centavos per case of family size softdrinks
Jun ’91: Iran, while conducting an audit of his operations, discovered
cash shortages & irregularities allegedly committed by the respondents.
Pending investigation, he required them to report to work everyday. But
they were not allowed to go on their respective routes. Few days after,
respondents stopped reporting for work, prompting Iran to conclude that
they had abandoned their employment. Consequently, Iran terminated
their services & filed a complaint for estafa.
5 Dec ’91: respondents filed complaints against Iran for illegal
dismissal, illegal deduction, underpayment of wages, premium pay for
holiday and rest day, holiday pay, service incentive leave pay, 13th month
pay, allowances, separation pay, recovery of cash bond, damages and
attorney's fees.
Respondents’ contention: the commissions should be included in
determining compliance with the minimum wage due them.
NLRC’s assertion: the inclusion of commissions in the computation of
wages would negate the practice of granting commissions only after an
employee has earned the minimum wage or over.
Yes. The definition of “wage” in Art. 97(f) explicitly includes
commissions as part of wages. While commissions are, indeed, incentives
or forms of encouragement to inspire employees to put a little more
industry on the jobs particularly assigned to them, still these commissions
are direct remunerations for services rendered. In fact, commissions have
been defined as the recompense, compensation or reward of an agent,
salesman, executor, trustee, receiver, factor, broker or bailee, when the
Case Digest
same is calculated as a percentage on the amount of his
transactions or on the profit to the principal. The nature of the
work of a salesman and the reason for such type of remuneration for
services rendered demonstrate clearly that commissions are part of a
salesman's wage or salary.
Thus, the commissions earned by private respondents in selling
softdrinks constitute part of the compensation or remuneration paid to
drivers/salesmen and truck helpers for serving as such, and hence, must
be considered part of the wages paid them.
Take note of the fact that some salesmen do not receive any basic
salary but depend entirely on commissions and allowances or
commissions alone, although an employer-employee relationship exists.
Undoubtedly, this salary structure is intended for the benefit of the
corporation establishing such, on the apparent assumption that thereby its
salesmen would be moved to greater enterprise and diligence and close
more sales in the expectation of increasing their sales commissions. This,
however, does not detract from the character of such commissions as part
of the salary or wage paid to each of its salesmen for rendering services to
the corporation.
Likewise, there is no law mandating that commissions be paid only after
the minimum wage has been paid to the employee. Verily, the
establishment of a minimum wage only sets a floor below which an
employee's remuneration cannot fall, not that commissions are excluded
from wages in determining compliance with the minimum wage law.
Drivers and conductors who are compensated purely on a commission
basis are automatically entitled to the basic minimum pay mandated by
law should said commissions be less than their basic minimum for eight
hours work. It can, thus, be inferred that were said commissions equal to
or even exceed the minimum wage, the employer need not pay, in
addition, the basic minimum pay prescribed by law. It follows then that
commissions are included in determining compliance with minimum wage
requirements.
As to the vouchers presented: the vouchers presented by Iran covers
only a particular year. It does not cover amounts for other years claimed
by private respondents. It cannot be presumed that the same amounts
were given on said years. Hence, Iran is entitled to credit only the amounts
paid for the particular year covered by said vouchers.
It must be borne in mind that the intent of PD 851 is the granting of
additional income in the form of 13th month pay to employees not as yet
receiving the same and not that a double burden should be imposed on
the employer who is already paying his employees a 13th month pay or its
equivalent. An employer who pays less than 1/12th of the employees
basic salary as their 13th month pay is only required to pay the difference.
Millares vs. NLRC (1999)
ISSUE: WON the allowances granted to petitioners should be included in
the computation of their separation pay
Petitioners numbering 116 occupied the position of Technical Staff,
Unit Manager, Section Manager, Department Manager, Division Manager
and Vice President in the mill site of Paper Industries Corporation of the
Philippines in Bislig, Surigao del Sur.
1992: PICOP suffered a major financial setback allegedly brought about
by the joint impact of restrictive government regulations on logging &
economic crisis. To avert further losses, it undertook a retrenchment
program and terminated the services of petitioners. Accordingly,
petitioners received separation pay computed at the rate of 1 month basic
pay for every year of service.
Petitioners, however, believed that the allowances they allegedly
regularly received on a monthly basis during their employment should
have been included in the computation of their separation pay. They filed
a complaint for separation pay differentials.
1. Staff/Manager’s Allowance – PICOP provides free housing facilities to
supervisory & managerial employees assigned in Bislig. This includes
free water & electric consumption. However, due to the shortage of
such facilities, PICOP was constrained to grant Staff allowance
instead to those who live in rented houses outside but near the
vicinity of the mill site. But the allowance ceases whenever a vacancy
occurs in the company’s housing facilities.
2. Transportation Allowance – To relieve PICOP’s motor pool from a
barrage of requests for company vehicles & to stabilize company
vehicle requirements, PICOP grants transportation allowance to key
officers & Managers assigned in the mill site who use their own
vehicles in the performance of their duties. However, when the
conditions no longer obtain, the privilege is discontinued.
 Labor Standards
3. Bislig Allowance – given to Division Managers & corporate
officers assigned in Bislig on account of the hostile
environment prevailing therein. But once the recipient is transferred
outside Bislig, the allowance ceases.
LA’s Decision: the subject allowances were customarily furnished by
PICOP & regularly received by petitioners. Hence, it formed part of their
wages.
Petitioners’ contentions: their allowances are included in the definition
of “facilities” in Art. 97(f), being necessary & indispensable for their
existence & subsistence. They claim that their availment of the monetary
equivalent of those "facilities" on a monthly basis was characterized by
permanency, regularity and customariness.
No. When an employer customarily furnishes his employee board,
lodging or other facilities, the fair and reasonable value thereof, as
determined by the Secretary of Labor and Employment, is included in
"wage." In order to ascertain whether they form pay of the wages, divide
the discussion to – “customarily furnished”, “board, lodging or other
facilities”, & “fair reasonable value as determined by the SoL.”
As to “customarily furnished”, receipt of an allowance on a monthly
basis does not ipso facto characterize it as regular and forming part of
salary because the nature of the grant is a factor worth considering.
In this case, the allowances were temporarily, not regularly, received by
petitioners. When the conditions for availment ceased to exist, the
allowance reached the cutoff point. Hence, petitioners' continuous
enjoyment of the disputed allowances was based on contingencies the
occurrence of which wrote finis to such enjoyment.
As to the term “facilities”, IRR defined is as including articles or
services for the benefit of the employee or his family but excluding tools of
the trade or articles or service primarily for the benefit of the employer or
necessary to the conduct of the employer's business.
The Staff/Manager's allowance may fall under "lodging" but the
transportation and Bislig allowances are not embraced in "facilities". In
determining whether a privilege is a facility, the criterion is not so much its
kind but its purpose. That the assailed allowances were for the benefit and
convenience of respondent company was supported by the circumstance
that they were not subjected to withholding tax.
As to “fair reasonable value as determined by SoL”, the petitioners’
allowances do not represent such fair and reasonable value as determined
by the proper authority simply because the Staff/Manager's allowance and
transportation allowance were amounts given by respondent company in
lieu of actual provisions for housing and transportation needs whereas the
Bislig allowance was given in consideration of being assigned to the hostile
environment then prevailing in Bislig.
Hence, the subject allowances did not form part of their wages.
Lambo vs. NLRC (1999)
ISSUE:
Avelino Lambo & Vicente Belocura were employed as tailors by J.C.
Tailor Shop and/or Johnny Co. They worked from 8am-7pm daily,
including Sundays & holidays. They were paid on a piece-work basis,
according to the style of suits they made. Regardless of the number of
pieces they finished in a day, they were given a daily pay of at least P64.
17 Jan ’89: Lambo & Belocura filed a complaint against J.C. Tailor Shop
for illegal dismissal & sought recovery of overtime pay, holiday pay,
premium pay on holiday and rest day, service incentive leave pay,
separation pay, 13th month pay, and attorney’s fees.
LA’s Decision: guilty of illegal dismissal & ordered to pay the claims.
NLRC’s Decision: Lambo & Belocura were not dismissed from
employment but were merely threatened with a closure of business if they
insisted on their demand for a “straight payment of their minimum wage”
after they walked out of a meeting with J.C. & other employees. During
that meeting, the employees voted to maintain the company policy of
paying them according to the volume of work finished at the rate of
P18/dozen of tailored clothing materials. Only Lambo & Belocura allegedly
insisted that they be paid the minimum wage and other benefits. Hence,
they were guilty of abandonment of work.
Lambo & Belocura’s contention: they were dismissed by J.C. Tailor
Shop as they were about to file a petition for the payment of benefits, SSS
coverage, sick leave & vacation leave.
No dispure that Lambo & Belocura were employees of J.C. Tailor Shop,
although they were paid not on the basis of time spent on the job but
according to the quantity & quality of work produced.
Case Digest
There are two categories of employees paid by results: (1)
those whose time and performance are supervised by the
employer, and (2) those whose time and performance are unsupervised.
On the first, there is an element of control & supervision over the manner
as to how the work is to be performed. In the second, the employer’s
control is over the result of the work. Workers on pakyaw belong to the
second group. Both classes of workers are paid per unit accomplished.
Piece-rate payment is generally practiced in garment factories where work
is done in the company premises, while payment on pakyao and takay
basis is commonly observed in the agricultural industry, such as in sugar
plantations where the work is performed in bulk or in volumes difficult to
quantify.
Lambo & Belocura belong to the first category, i.e. supervised
employees. J.C. exercised control over the work of Lambo & Belocura. As
tailors, Lambo & Belocura worked in the company’s premises from 8am-
7pm daily, including Sundays and holidays. The mere fact that they were
paid on a piece-rate basis does not negate their status as regular
employees of J.C. The term "wage" is broadly defined in Art. 97 as
remuneration or earnings, capable of being expressed in terms of money
whether fixed or ascertained on a time, task, piece or commission basis.
Payment by the piece is just a method of compensation and does not
define the essence of the relations. Nor does the fact that petitioners are
not covered by the SSS affect the employer-employee relationship.
Although piece-rate workers, they were regular employees of J.C.: (1)
within the contemplation of Art. 280 LC, their work as tailors was
necessary or desirable in the usual business of J.C., which is engaged in
the tailoring business; (2) they worked for J.C. throughout the year, their
employment not being dependent on a specific project or season; and, (3)
they worked for J.C. for more than one year.
2. Coverage
C. Planas vs. NLRC (2005)
ISSUE: WON C. Planas is exempted from paying holiday & SIL pay
14 Sep ’93: Dioleto Morente, Rudy Allauigan & Alfredo Ofialda together
with 5 others filed a complaint for underpayment of wages, nonpayment
of overtime pay, holiday pay, service incentive leave pay and premium pay
for holiday and rest day and night shift differential against C. Planas
Commercial and/or Marcial Cohu.
Morente’s contentions: Cohu, owner of C. Planas, is engaged in
wholesale of plastic products & fruits of different kinds with more than 24
employees. They were hired as laborers. They were paid below the
minimum wage law for the past 3 yrs. They were requiredto work for more
than 8 hrs a day without overtime pay. They never enjoyed holiday pay &
did not have a rest day as they worked 7 days a week. They were not paid
service incentive leave pay although working for more than a year.
C. Planas’ contentions: admitted that respondents were their helpers
who used to accompany the delivery trucks & helped in the loading &
unloading of merchandise being distributed to clients. They start their
work from 10am-6pm. They stopped working with C. Planas in Sep ’93 as
they were already working in other establishments/stalls in Divisoria. They
only worked 6 days a week. They were not entitled to holiday & SIL pay for
they were employed in a retail & service establishment regularly
employing less than 10 workers.
No. RA 6727 known as the Wage Rationalization Act provides for the
statutory minimum wage of all workers & employees in the private sector.
Sec. 4 thereof provides that household or domestic helpers & persons
employed in the personal service of another, including family drivers, are
exempted from the Act.
Retail/service establishments regularly employing not more than 10
workers may be exempted from the applicability of this Act upon
application with and as determined by the appropriate Regional Board in
accordance with the applicable rules and regulations issued by the
Commission. For a retail/service establishment to be exempted from the
coverage of the minimum wage law, it must be shown that the
establishment is regularly employing not more than 10 workers and had
applied for exemptions with and as determined by the appropriate
Regional Board in accordance with the applicable rules and regulations
issued by the Commission.
The burden of proof of such exemption rests on C. Planas. However, it
had not shown any evidence to show that they had applied for such
exemption and if they applied, that the same was granted. Contrary to
their contention, C. Planas employed around 30 workers. As employer,
Manager Cohu ought to be the keeper of the employment records of all
 Labor Standards
his workers. Thus, it was well within his means to refute any
monetary claim alleged to be unpaid.
3. Prohibition Against Diminution/Elimination
Davao vs. Abarquez (supra.)
ISSUE: WON the cash conversion of unused sick leave paid by the
company may be withdrawn or diminished unilaterally
No. Davao Integrated had approved the commutation to cash of
unenjoyed portion of the sick leave with pay benefits to its intermittent
workers for 3 yrs and 9 mos.
The parties to the CBA clearly intended the same sick leave privilege to
be accorded the intermittent workers in the same way that they are both
given the same treatment with respect to vacation leaves – non-
commutable and non-cumulative. Well-settled is it that the said privilege of
commutation or conversion to cash, being an existing benefit, the
petitioner-company may not unilaterally withdraw, or diminish such
benefits.
Azucena: Cash conversion of unused sick leave pay by the company to
its intermittent workers has ripened into a practice after 3 yrs and may no
longer be withdrawn or diminished unilaterally by the employer.
Cebu vs. NLRC (1991)*
Tiangco vs. Leogardo (1983)
ISSUE: WON there was diminution of the benefits received by the laborers
Reynaldo Tiangco is a fishing operator who owns the Reynaldo Tiangco
Fishing Company and a fleet of fishing vessels engaged in deep-sea fishing
which operates from Navotas, Rizal. His business is capitalized at P2M
while Victoria Tiangco is a fish broker whose business is capitalized at
P100k.
Some of the private respondents are batillos engaged by Reynaldo to
unload the fish catch from the vessels and take them to the Fish Stall of
Victoria. The other private respondents were batillos engaged by Victoria.
Their work was limited to days of arrival of the fishing vessels & their
working days in a month are comparatively few. Their working hours
average 4 hours a day.
8 Apr ’80: they filed a complaint against Tiangcos with the MOLE for
non-payment of their legal holiday pay & SIL pay, as well as
underpayment of their ECOLA which used to be paid in full irrespective of
their working days but were reduced effective Feb ’80.
Tiangco’s contentions: the laborers were all given, in addition to their
regular daily wage, a daily extra pay in amounts ranging from 30 centavos
to 10 pesos which are sufficient to offset the laborers' claim for SIL and
legal holiday pay. As regards the claim for emergency allowance
differentials, they admitted that they discontinued their practice of paying
their employees a fixed monthly allowance, and effective Feb 1980, they
no longer paid allowances for non-working days. They argued that no law
was violated as their refusal to pay allowances for non-working days is in
consonance with the principle of "no work, no allowance".
Record shows that the private respondents work for Tiangcos on a part-
time basis and their work average only 4 days/week. It is not also disputed
that they work for more than one employer so that they should be paid
their living allowance only for the days they actually worked in a week or
month and all the employers of the employee shall share proportionately
in the payment of the allowance of the employee.
Yes. Since Tiangcos had been paying them a fixed monthly emergency
allowance since Nov 1976 to Feb 1980, as a matter of practice and/or
verbal agreement between them, the discontinuance of the practice
and/or agreement unilaterally by the petitioners contravened the
provisions of the Labor Code, particularly Art. 100 thereof which prohibits
the elimination or diminution of existing benefits.
Nothing in the LC shall prevent the employer and his employees from
entering into any agreement with terms more favorable to the employees
than those provided therein, or be construed to sanction the diminution of
any benefit granted to the employees under existing laws, agreements,
and voluntary employer practice.
However, a revision of the amount due to the complainants is in order
because the Deputy Minister of Labor failed to take into consideration, in
computing the amount due each worker, the fact that the private
respondents are employed by two different individuals whose businesses
are divergent and capitalized at various amounts. The amount of the
Case Digest
ECOLA to be paid to a worker is made to depend upon the
capitalization of the business of his employer or its total assets,
whichever is higher.
Accordingly, the 17 workers of Victoria Tiangco, whose business as fish
broker is capitalized at P100k, should receive a lesser amount of
allowance (P30.00) than those workers employed by Reynaldo Tiangco
whose business, as a fishing operator with a fleet of fishing vessels, is
capitalized at more than P2M, and are entitled to receive a fixed monthly
allowance of P50.00 a month, each.
Asis vs. MOLE (1989)
ISSUE: WON the temporary revocation of Asis’ monthly ration of fuel was
a diminution of his benefits
Mamerto Asis was appointed as Legal Counsel of Central Azucarera de
Pilar. Later, he was named Head of its Manpower and Services Dept.
In addition to his basic salaries & other fringe benefits, his employer
granted him & a few other officials, a monthly ration of 200 liters of
gasoline & a small tank of LPG. However, this was temporarily revoked 5
yrs later as a cost reduction measure of the Central.
Asis commenced an action against the Central, seeking restoration of
his monthly ration of gasoline & LPG. Afterwards, he filed another action,
complaining against Central’s memorandum ordaining his relief as the
Legal Counsel & Head of the Manpower Services Dept.
No. The temporary revocation of Asis’ monthly ration of fuel was
occasioned by force of circumstances affecting the Central’s business. The
monthly ration was not a part of his basic salary, and is not indeed found
in any of the management payroll vouchers pertinent to Asis. Moreover,
the adverse consequences of the suspension of the monthly rations had
been largely if not entirely negated by the Central's undertaking to
reimburse Asis for his actual consumption of fuel during the period of
suspension.
Lexal vs. CIR (1968)
ISSUE: WON per diems are included in backpay
29 Jun ’63: CIR directed Lexal Laboratories to reinstate Guillermo
Ponseca, a dismissed employee, to his former position "with full back
wages from the day of his dismissal up to the time he is actually reinstated
without loss of his seniority rights and of such other rights and privileges
enjoyed by him prior to his lay-off."
CIR ruled that that Ponseca was entitled to back wages from Nov 5,
1958 when he ceased reporting for work, to Nov 24, 1963 a day prior to
his reinstatement on Nov 25, 1963; and that for the number of days that
he was supposed to be in Manila, he was to earn P4.50 a day, and during
the periods when he should have been in the provinces, P4.50 a day plus
a per diem of P4.00 or a total of P8.50 daily.
Lexal objected to the inclusion of the P4 per diem in the computation of
Ponseca’s back wages because he “did not actually spend for his meals and
lodgings for he was all the time in Manila, his station.”
No. Per diems are not integral parts of regular wages or salaries.
Neither is it suggested in the record that per diems formed part of the
terms of employment between Lexal and National Chemical Industries
Workers Union (of which Ponseca is a member), or with Ponseca himself
for that matter. CIR simply hit upon the idea that per diems should be
paid as part of the back wages because they were "paid to him regularly."
Per diem is a daily allowance" given "for each day he (an officer or
employee) was away from his home base". It would seem to us that per
diem is intended to cover the cost of lodging and subsistence of officers
and employees when the latter are on duty outside of their permanent
station. Lexal concedes that whenever its employee, Guillermo Ponseca,
was out of Manila, he was allowed a per diem of P4 broken down as
follows: P1 for breakfast; P1 for lunch; P1 for dinner; and P1 for lodging.
Ponseca, during the period involved, did not leave Manila. Therefore, he
spent nothing for meals and lodging outside of Manila. Because he spent
nothing, there is nothing to be reimbursed. Since per diems are in the
nature of reimbursement, Ponseca should not be entitled to per diems.
Besides, back wages are what an employee has lost "in the way of
wages" due to his dismissal. So that, because Ponseca earned P4.50/day,
"then that is the amount which he lost daily by reason of his dismissal,
nothing more nothing less."
 Labor Standards
National Sugar vs. NBSR (1993)
ISSUE: WON there was diminution of the benefits of the employees
National Sugar Refineries Corp operates 3 sugar refineries located in
Bukidnon, Iloilo & Batangas. The Batangas refinery was privatized on 11
Apr ’92 pursuant to Proc. No. 50. NBSR Supervisory Union represents the
former supervisors of NASUREFCO Batangas Sugar Refinery.
1 Jun ’88: NASUREFCO implemented a Job Evaluation Program
affecting all employees, from rank-and-file to department heads. Jobs were
ranked according to effort, responsibility, training and working conditions
and relative worth of the job. As a result, all positions were re-evaluated &
all employees including the members of NBSR were granted salary
adjustments & increases in benefits commensurate to their actual duties.
About 10 yrs prior to the JE Program, members of NBSR were treated
in the same manner as rank-and-file employees. As such, they used to be
paid overtime, rest day & holiday pay. But with the implementation of the
Program, adjustments were made: 1) members of NBSR were re-classified
under levels S-5 to S-8 which are considered managerial staff for purposes
of compensation & benefits, 2) increase in basic pay, 3) longevity pay was
increased, 4) entitled to increased company COLA, 5) P100 allowance.
20 Jun ’90: members of NBSR fied a complaint with LA for non-
payment of overtime, rest day & holiday pay.
LA’s Decision: the comparative computations presented by the Union
showed that the P100 special allowance given by NASUREFCO fell short of
what the supervisors ought to receive had the overtime pay, rest day pay
and holiday pay not been discontinued, which arrangement, therefore,
amounted to a diminution of benefits.
No. The members of NBSR were paid the questioned benefits for the
reason that, at that time, they were rightfully entitled thereto. Prior to the
JE Program, they could not be categorically classified as members/officers
of the managerial staff considering that they were then treated on the
same level as rank-and-file. Hence, there is no voluntary employer
practice. To be considered as such, it should have been practiced over a
long period of time, and must be shown to have been consistent and
deliberate.
With their promotion, they are no longer entitled to the benefits. If the
union members really wanted to continue receiving the benefits which
attach to their former positions, there was nothing to prevent them from
refusing to accept their promotions and their corresponding benefits. Also,
there is no showing that the JE Program was intended to circumvent the
law & deprive the members of NBSR of the benefits they used to receive.
As to exemption: 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 own rights. In determining whether an
employee is within the terms of the statutes, the criterion is the character
of the work performed, rather than the title of the employee's position.
Cursory perusal of the Job Value Contribution Statements of the union
members will show that these supervisory employees are under the direct
supervision of their respective department superintendents and that
generally they assist the latter in planning, organizing, staffing, directing,
controlling communicating and in making decisions in attaining the
company's set goals and objectives. They are responsible for the effective
and efficient operation of their respective departments. Hence, they
discharge duties and responsibilities which ineluctably qualify them as
officers or members of the managerial staff.
Sec. 2, Rule I, Bk III, IRR: (1) their primary duty consists of the
performance of work directly related to management policies of their
employer; (2) they customarily and regularly exercise discretion and
independent judgment; (3) they regularly and directly assist the
managerial employee whose primary duty consist of the management of a
department of the establishment in which they are employed (4) they
execute, under general supervision, work along specialized or technical
lines requiring special training, experience, or knowledge; (5) they execute,
under general supervision, special assignments and tasks; and (6) they do
not devote more than 20% of their hours worked in a work-week to
activities which are not directly and clearly related to the performance of
their work hereinbefore described.
Therefore, they are exempt from the coverage of Art. 82 & not entitled
to overtime, rest day & holiday pay.
Case Digest
4. Withholding of Bonus
States Marine vs. Cebu (1963)
ISSUE: WON the withholding of the sum of P.40 for every meal of the crew
was valid
States Marine Corp. & Royal Line, Inc. were engaged in the business of
marine coastwise transportation, employing severa steamships of
Philippine registry. They had a CBA with Cebu Seamen’s Assoc. Inc.
12 Sep ’52: Union filed a petition against States Marine, alleging that
the officers and men working on board States Marine’s vessels have not
been paid their sick leave, vacation leave and overtime pay; that it
threatened or coerced them to accept a reduction of salaries, observed by
other shipowners; that after the Minimum Wage Law had taken effect, it
required their employees on board their vessels to pay the sum of P.40 for
every meal, while the masters and officers were not required to pay their
meals and that because Captain Carlos Asensi had refused to yield to the
general reduction of salaries, the petitioners dismissed said captain who
now claims for reinstatement and the payment of back wages.
States Marine’s contentions: They suffered financial losses in the
operation of their vessels. in fixing the minimum wage of employees,
Congress took into account the meals furnished by employers and that in
fixing the rate of 40 centavos per meal, the lawmakers had in mind that
the latter amount should be deducted from the daily wage, otherwise, no
rate for meals should have been provided.
No. Since the beginning of the operation of the States Marine's
business, all the crew of their vessels have been signing "shipping articles"
in which are stated opposite their names, the salaries or wages they would
receive. All seamen, whether members of the crew or deck officers or
engineers, have been furnished free meals by the ship owners or
operators. All the shipping articles signed by the master and the crew
members, contained, among others, a stipulation, that "in consideration of
which services to be duly performed, the said master hereby agrees to pay to
the said crew, as wages, the sums against their names respectively expressed
in the contract; and to supply them with provisions as provided herein.”
States Marines bound themselves to supply the crew with ship’s
provisions, daily subsistence or daily rations, which include food.
This was the situation before the Minimum Wage Law became effective.
After this date, however, the companies began deducting the cost of meals
from the wages or salaries of crew members; but no such deductions were
made from the salaries of the deck officers and engineers in all the boats
of States Marine.
Such deductions are not authorized. In the coastwise business of
transportation of passengers and freight, the men who compose the
complement of a vessel are provided with free meals by the shipowners,
operators or agents, because they hold on to their work and duties,
regardless of "the stress and strain concomitant of a bad weather, unmindful
of the dangers that lurk ahead in the midst of the high seas."
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 criterion is not so much with the kind of
the benefit or item (food, lodging, bonus or sick leave) given, but its
purpose. Considering, therefore, that the meals were freely given to crew
members prior to August 4, 1951, while they were on the high seas "not as
part of their wages but as a necessary matter in the maintenance of the
health and efficiency of the crew personnel during the voyage", the
deductions therein made for the meals given after August 4, 1951, should
be returned to them, and the operator of the coastwise vessels affected
should continue giving the same benefit.
Globe Mackay vs. NLRC (1988)
ISSUE: WON the payment in full (for 30 days) by Globe Mackay of the
COLA is constitutive of voluntary employer practice
Wage Order No. 6, which took effect on 30 October 1984, increased the
cost-of-living allowance of non-agricultural workers in the private sector.
Globe Mackay Cable & Radio Corp. complied with said Wage Order by
paying its monthly-paid employees the mandated P3/day COLA. However,
in computing said COLA, Globe Mackay multiplied the P3 daily COLA by
22 days, which is the number of working days in the company.
 Labor Standards
Union disagreed with the computation of the monthly COLA,
claiming that the daily COLA rate of P3 should be multiplied
by 30 days to arrive at the monthly COLA rate. It also alleged that prior to
the effectivity of Wage Order No. 6, Globe Mackay had been computing
and paying the monthly COLA on the basis of 30days/month and that this
constituted an employer practice, which should not be unilaterally
withdrawn.
Union filed a complaint against Globe Mackay for illegal deduction,
underpayment, unpaid allowances & violation of WO #6.
No. Payment in full by Globe Mackay of the COLA before the execution
of the CBA in 1982 and in compliance with Wage Orders Nos. 1 (26 March
1981) to 5 (11 June 1984), should not be construed as constitutive of
voluntary employer practice, which cannot now be unilaterally withdrawn
by Globe Mackay. To be considered as such, it should have been practiced
over a long period of time, and must be shown to have been consistent
and deliberate. Adequate proof is wanting in this respect. The test of long
practice is such that the company agreed to continue giving the benefits
knowing fully well that said employees are not covered.
The primordial consideration for entitlement to COLA is that basic wage
is being paid. In other words, the payment of COLA is mandated only for
the days that the employees are paid their basic wage, even if said days
are unworked. So that, on the days that employees are not paid their basic
wage, the payment of COLA is not mandated.
Applied to monthly-paid employees if their monthly salary covers all the
days in a month, they are deemed paid their basic wages for all those
days and they should be entitled to their COLA on those days "even if
unworked.” However, peculiar to this case is the circumstance that
pursuant to the CBA between Globe Mackay and the Union, the monthly
basic pay is computed on the basis of 5 days/week, or 22 days a month.
The LA also found that in determining the hourly rate of monthly paid
employees for purposes of computing overtime pay, the monthly wage is
divided by the number of actual work days in a month and then, by 8
working hours. If a monthly-paid employee renders overtime work, he is
paid his basic salary rate plus one-half thereof.
Hence, where the company observes a 5-day work week, it will have to
be held that the COLA should be computed on the basis of 22 days, which
is the period during which the monthly-paid employees of Globe Mackay
receive their basic wage. The CBA is the law between the parties and, if not
acceptable, can be the subject of future re-negotiation.
Atok Big Wedge vs. Atok (1953)
ISSUE: WON the efficiency bonus of the laborers is part of their wage
4 Sep ’50: Atok Big Wedge Mutual Benefit Assoc. submitted a demand
to Atok Big Wedge Mining Co. for various concession: (a) an increase of
P0.50 in wages, (b) commutation of sick and vacation leave if not enjoyed
during the year, (c) various privileges, such as free medical care, medicine,
and hospitalization, (d) right to a closed shop, check off, etc., (e) no
dismissal without prior just cause and with a prior investigation, etc.
Some demands were granted while the others were rejected.
Court’s Decision: Fixed the minimum wage for the laborers at P3.20,
declaring that additional compensation representing efficiency bonus
should not be included as part of the wage.
Atok Big Wedge’s contention: the efficiency bonus paid the laborer
should have been included in his minimum wage, in the same manner as
the value of living quarters.
No. Whether or not bonus forms part of wages depends upon the
circumstances or condition for its payment. If it is an additional
compensation which the employer promised and agreed to give without
any conditions imposed for its payment, such as success of business or
greater production or output, then it is part of the wage. But if it is paid
only if profits are realized or a certain amount of productivity achieved, it
cannot be considered part of the wages.
In the case at bar, it is not payable to all but to laborers only. It is also
paid on the basis of actual production or actual work accomplished. If the
desired goal of production is not obtained or the amount of actual work
accomplished, the bonus does not accrue. It is evident that under the
circumstances it is paid only when the labor becomes more efficient or
more productive. It is only an inducement for efficiency, a prize therefor,
not a part of the wage.
Atok Big Wedge’s contention: as the court found that the laborer and
his family at least need the amount of P2.58 for food, this should be the
basis for the determination of his wage, not what he actually spends. That
Case Digest
it is not justifiable to fix a wage higher than that provided by RA
No. 602. And that union made the demand in accordance with a
pernicious practice of claiming more after an original demand is granted.
Untenable. The court found that P2.58 is the minimum amount actually
needed by the laborer and his family. That does not mean that it is his
actual expense. A person's needs increase as his means increase. This is
true not only as to food but as to everything else – education, clothing,
entertainment, etc. The law guarantees the laborer a fair and just wage.
The minimum must be fair and just. The "minimum wage" can by no
means imply only the actual minimum. Some margin or leeway must be
provided, over and above the minimum, to take care of contingencies such
as increase of prices of commodities and desirable improvement in his
mode of living.
Certainly, the amount of P0.22 a day (difference between P2.80 fixed
and P2.58 actual) is not excessive for this purpose. That the P3 minimum
wage fixed in the law is still far below what is considered a fair and just
minimum is shown by the fact that this amount is only for the year after
the law takes effect, as thereafter the law fixes it at P4. Hence, P3.20 is the
minimum wage.
MERALCO vs. Quisumbing (2000)
ISSUE: WON the employees are entitled to Christmas bonus, special
Christmas bonus & signing bonus
Meralco Employees & Workers Assoc. is the duly recognized labor
organization of the rank-and-file employees of MERALCO.
7 Sep ’95: MEWA informed MERALCO of its intention to re-negotiate the
terms & conditions of their existing CBA covering the remaining period of
2 yrs starting 1 Dec ’95 to 30 Nov ’97.
MERALCO signified its willingness to re-negotiate. However, despite
several meetings, the parties failed to arrive at acceptable terms.
23 Apr ’96: MEWA filed a notice of strike on the grounds of bargaining
deadlock & unfair labor practices. The parties failed to reach an amicable
settlement.
The SoL resolved the dispute, awarding to MEWA longevity bonuses,
Christmas bonuses & special Christmas grants, mid-year bonuses,,
anniversary bonuses, signing bonuses, among others.
MERALCO’s contentions: (1) Christmas bonus. What it had given its
employees were special bonuses to mark or celebrate "special occasions",
not Christmas bonus. These grants were given on or about Christmas time,
and the timing of the grant apparently led the Secretary to the conclusion
that what were given were Christmas bonuses given by way of a "company
practice" on top of the legally required 13th month pay.
As to Christmas bonus: Yes. As a rule, a bonus is not a demandable
and enforceable obligation; it may nevertheless be granted on equitable
considerations as when the giving of such bonus has been the company's
long and regular practice. To be considered a "regular practice," the giving
of the bonus should have been done over a long period of time, and must
be shown to have been consistent and deliberate.
The test or rationale of this rule on long practice requires an indubitable
showing that the employer agreed to continue giving the benefits knowing
fully well that said employees are not covered by the law requiring
payment thereof.
Record shows that MERALCO, aside from complying with the regular
13th month bonus, has further been giving its employees an additional
Christmas bonus at the tail-end of the year since 1988. While the special
bonuses differed in amount and bore different titles, it can not be denied
that these were given voluntarily and continuously on or about Christmas
time. The considerable length of time MERALCO has been giving the
special grants to its employees indicates a unilateral and voluntary act on
its part, to continue giving said benefits knowing that such act was not
required by law.
Indeed, a company practice favorable to the employees has been
established and the payments made by MERALCO pursuant thereto
ripened into benefits enjoyed by the employees. Consequently, the giving
of the special bonus can no longer be withdrawn by the company as this
would amount to a diminution of the employee's existing benefits.
However, the 2-month special Christmas bonus cannot be granted
because there was no recognized company practice of giving a two-month
special grant. The two-month special bonus was given only in 1995 in
recognition of the employees prompt and efficient response during the
calamities. The 1-month special bonus is sufficient.
As to signing bonus: No. The signing bonus is a grant motivated by the
goodwill generated when a CBA is successfully negotiated and signed
 Labor Standards
between the employer and the union. In the present case, this
goodwill does not exist.
In contractual terms, a signing bonus is justified by and is the
consideration paid for the goodwill that existed in the negotiations that
culminated in the signing of a CBA. Without the goodwill, the payment of a
signing bonus cannot be justified and any order for such payment, to our
mind, constitutes grave abuse of discretion. This is more so where the
signing bonus is in the not insignificant total amount of P16M.
Traders vs. NLRC (1990)
ISSUE: WON TRB is liable for the mid-year/year-end bonus differential for
1986 to its employees
18 Nov ’86: Union filed a letter-complaint against Traders Royal Bank
claiming that – (a) that they were given their holiday pay but the basis of
computation was withheld by TRB, (b) that in the computation, there was
decrease in the daily salary rate of the employees, (c) there was
diminution of benefits enjoyed by the employees since time immemorial,
including mid-year bonus from 2mos gross to 2 mos basic & year-end
bonus from 3mos gross to only 2mos.
In the meantime, the parties who had been negotiating for a CBA
agreed on its terms: (1) The whole of the bonuses given in previous years
is not demandable, i.e., there is no diminution, as to be liable for a
differential, if the bonus given is less than that in previous years. (2) Since
only two months bonus is guaranteed, only to that extent are bonuses
deemed part of regular compensation. (3) As regards the third and fourth
bonuses, they are entirely dependent on the income of the bank, and not
demandable as part of compensation.
Despite the terms of CBA, Union insisted on pursuing the case, arguing
that the CBA would apply prospectively only to claims arising after it
effectivity.
TRB’s contention: the practice of giving them bonuses at year's end,
would depend on how profitable the operation of the bank had been.
Generally, the bonus given was 2 months basic mid-year and 2 months
gross end-year.
No. TRB may not be obliged to pay bonuses to its employees. The
matter of giving them bonuses over and above their lawful salaries and
allowances is entirely dependent on the profits, if any, realized by the Bank
from its operations during the past year.
From 1979-1985, the bonuses were less because the income of the
Bank had decreased. In 1986, the income of the Bank was only P20.2M,
but the Bank still gave out the usual 2-month basic mid-year and 2-month
gross year-end bonuses. TRB pointed out, however, that the Bank
weakened considerably after 1986 on account of political developments in
the country. Suspected to be a Marcos-owned or controlled bank, it was
placed under sequestration by the present administration and is now
managed by the PCGG.
Hence, the granting of bonuses to the employees had not ripened into a
company practice that may not be adjusted to the prevailing financial
condition of the Bank. The Bank may not be forced to distribute bonuses
which it can no longer afford to pay and, in effect, be penalized for its past
generosity to its employees.
As to contention that the decrease in the bonuses constituted
diminution of their salaries: No. Bonuses are not part of labor standards
in the same class as salaries, cost of living allowances, holiday pay, and
leave benefits, which are provided by the Labor Code.
Manilabank vs. NLRC (1997)
ISSUE: WON the respondents are entitled to additional benefits such as
wage increases, Christmas bonuses, mid-year bonuses, etc.
5 Jun ’84: Manilabank was placed under comptrollership by then
Central Bank Governor Jose Fernandez in view of the bank’s financial
distress. This was based on the findings that the bank was experiencing
liquidity problems and had incurred chronic reserve deficiencies against
deposit liabilities. In fact, a month before it was placed under
comptrollership, Manilabank was prohibited by the Monetary Board from
granting new loans and making new investments except investments in
government securities with Central Bank support, and from declaring cash
or stock dividends.
22 May ’87: Monetary Board issued Reso. #505 prohibiting Manilabank
from doing business in the PH. thereafter, Miranda Jr. was designated as
receiver. He immediately took charge of the bank’s assets & liabilities. He
also terminated the employment of about 343 officers & top managers of
Case Digest
the bank. They were paid whatever separation and/or retirement
benefits were due them.
Private respondents filed a complaint against Manilabank & its statutory
receiver.
Respondents’ contentions: claimed entitlement to the following
additional benefits alleged to have accrued from 1984 to their effective
dates of termination,viz: (a) Wage increases; (b) Christmas bonuses; (c)
Mid-year bonuses; (d) Profit sharing; (e) Car and travel plans; (f) Gasoline
allowances; (g) Differentials on accrued leaves, retirement and other
bonuses; (h) Longevity pay and loyalty pay; (i) Medical, dental and optical
benefits; and (j) Uniform allowances. Also alleged that the practice, policy
& tradition of awarding such benefits had ripened into vested property
rights in their favor.
Manilabank’s contentions: the benefits are conferred by management
only when it deems necessary to do so. The award of the said benefits is in
the nature of a "management prerogative" which, it contended, can be
withheld by management upon a clear showing that the company is not in
a position to grant them either because of financial difficulties or
circumstances which do not warrant conferment of such benefits. And
since it was experiencing financial distress, it claimed that it was in no
position to give the benefits sought.
No. A bonus is an amount given ex gratia to an employee by an
employer on account of success in business or realization of profits. How
then can an employer be made liable to pay additional benefits in the
nature of bonuses to its employees when it has been operating on
considerable net losses for a given period of time?
Manilabank was already in dire financial straits in the mid-80s. It had
been suffering financial losses. Clearly, there was no success in business
or realization of profits to speak of that would warrant the conferment of
additional benefits sought by private respondents.
No company should be compelled to act liberally and confer upon its
employees additional benefits over and above those mandated by law
when it is plagued by economic difficulties and financial losses. No act of
enlightened generosity and self-interest can be exacted from near empty,
if not empty, coffers.
The award of wage increases and Christmas and mid-year bonuses
from 1985 to 1988, being in the nature of gratuities and dependent as
they on Manilabank's liberality and capability to give, is likewise deleted for
same reasons above stated.
Marcos vs. NLRC (1995)
ISSUE: WON petitioners are entitled to payment of service awards & other
bonuses
Lourdes Marcos, et. al. were regular employees of Insular Life Assurance
Co. They were dismissed when their positions were declared redundant. A
special redundancy benefit was paid to them, which included payment of
accrued vacation leave and 50% of unused current sick leave, special
redundancy benefit, equivalent to 3 months salary for every year of
service; and additional cash benefits, in lieu of other benefits provided by
the company or required by law.
Before termination, Marcos had been in the employ of Insular for more
than 20 yrs, Andrada for more than 25 yrs, Lopez for exactly 30 yrs, &
Cruz for more than 20 yrs.
Lopez questioned the redundancy package, claiming that they should
receive their respective service awards and other prorated bonuses which
they had earned at the time they were dismissed.
Thereafter, Insular required petitioners to execute a "Release and
Quitclaim," and petitioners complied but with a written protest reiterating
their previous demand that they were nonetheless entitled to receive their
service awards.
Meanwhile, Insular celebrated its 80th anniversary wherein the
management approved the grant of an anniversary bonus equivalent to 1
month salary only to permanent and probationary employees as of
November 15, 1990.
26 Mar ’91: Insular announced the grant of performance bonus to both
rank and file employees and supervisory specialist grade and managerial
staff equivalent to 2 months salary and 2.75 basic salary, respectively, as
of December 30, 1990.
Marcos’ contentions: they are likewise entitled to the performance and
anniversary bonuses because, at the time the performance bonus was
announced to be given, they were only short of 2 months service to be
entitled to the full amount thereof as they had already served the
company for 10 months prior to the declaration of the grant of said
benefit. Also, they lacked only 15 days to be entitled to the full amount of
 Labor Standards
the anniversary bonus when it was announced to be given to
employees as of November 15, 1990.
Yes. The fact that an employee has signed a satisfaction receipt for his
claims does not necessarily result in the waiver thereof. The law does not
consider as valid any agreement whereby a worker agrees to receive less
compensation than what he is entitled to recover. A deed of release or
quitclaim cannot bar an employee from demanding benefits to which he is
legally entitled. There was no voluntariness.
A bonus is not a gift or gratuity, but is paid for some services or
consideration and is in addition to what would ordinarily be given. The
term "bonus" as used in employment contracts, also conveys an idea of
something which is gratuitous, or which may be claimed to be gratuitous,
over and above the prescribed wage which the employer agrees to pay.
If one enters into a contract of employment under an agreement that he
shall be paid a certain salary by the week or some other stated period and,
in addition, a bonus, in case he serves for a specified length of time, there
is no reason for refusing to enforce the promise to pay the bonus, if the
employee has served during the stipulated time, on the ground that it was
a promise of a mere gratuity.
This is true if the contract contemplates a continuance of the
employment for a definite term, and the promise of the bonus is made at
the time the contract is entered into. If no time is fixed for the duration of
the contract of employment, but the employee enters upon or continues in
service under an offer of a bonus if he remains therein for a certain time,
his service, in case he remains for the required time, constitutes an
acceptance of the offer of the employer to pay the bonus and, after that
acceptance, the offer cannot be withdrawn, but can be enforced by the
employee.
After the acceptance of a promise by an employer to pay the bonus, the
same cannot be withdrawn, but may be enforced by the employee.
However, in the case at bar, equity demands that the performance and
anniversary bonuses should be prorated to the number of months that
petitioners actually served respondent company in the year 1990.
5. Payment By Results
LCP vs. NLRC (supra.)
ISSUE: WON the piece-rate workers are entitled to holiday pay, premium
pay, 13th month pay, and SIL pay
Yes. The Rules Implementing the Labor Code exclude certain employees
from receiving benefits such as nighttime pay, holiday pay, service
incentive leave and 13th month pay – “field personnel and other employees
whose time and performance is unsupervised by the employer, including
those who are engaged on task or contract basis, purely commission basis, or
those who are paid a fixed amount for performing work irrespective of the
time consumed in the performance thereof.”
Plainly, petitioners as piece-rate workers do not fall within this group.
Not only did petitioners labor under the control of Empire as their
employer, likewise did petitioners toil throughout the year with the
fulfillment of their quota as supposed basis for compensation.
As to overtime pay: the workers who are paid by results including those
who are paid on piece-work, takay, pakiao, or task basis, if their output
rates are in accordance with the standards prescribed under Sec. 8, Rule
VII, Book III are not entitled to receive overtime pay. However, Empire did
not allege adherence to the standards set forth in Sec. 8 nor with the rates
prescribed by the Secretary of Labor. As such, petitioners are beyond the
ambit of exempted persons and are therefore entitled to overtime pay.
6. Forms of Payment
Jimenez vs. NLRC (1996)
ISSUE: WON Juanatas were paid their commissions in full
29 Jun ’90: Pedro & Fredelito Juanatas, father & son, filed a claim for
unpaid wages/commissions, separation pay & damages against JJ’s
Trucking and/or Dr. Bernardo Jimenez.
Juanatas’ allegations: Dec ’87, they were hired by Bernardo Jimenez as
driver/mechanic & helper in his trucking firm. They were assigned to a
ten-wheeler truck to haul soft drinks of Coca-Cola Bottling Company and
paid on commission basis, initially fixed at 17% but later increased to
20% in 1988. For the years 1988 and 1989 they received only a partial
commission of P84k from Jimenez's total gross income of almost P1M for
the said two years. Consequently, with their commission for that period
being computed at 20% of said income, there was an unpaid balance to
Case Digest
them of P106,211.86; that until March, 1990 when their services
were illegally terminated, they were further entitled to
P15,050.309.
Jimenez’s contentions: Fredelito Juanatas was not an employee of the
firm but was merely a helper of his father Pedro; that all commissions for
1988 and 1989, as well as those up to March, 1990, were duly paid; and
that the truck driven by Pedro Juanatas was sold to one Winston Flores in
1991 and, therefore, they were not illegally dismissed.
No. The entire amount of commissions was not paid, this by reason of
the evident failure of Jimenez to present evidence that full payment
thereof has been made. It is a basic rule in evidence that each party must
prove his affirmative allegation. Since the burden of evidence lies with the
party who asserts an affirmative allegation, the plaintiff or complainant has
to prove his affirmative allegations in the complaint and the defendant or
respondent has to prove the affirmative allegations in his affirmative
defenses and counterclaim.
Considering that Jimenez asserted that the disputed commissions have
been paid, they have the bounden duty to prove that fact. Even where the
plaintiff must allege non-payment, the general rule is that the burden rests
on the defendant to prove payment, rather than on the plaintiff to prove
non-payment.
The testimony of Jimenez which merely denied the claim of Juanatas,
unsupported by documentary evidence, is not sufficient to establish
payment. Although Jimenez submitted a notebook showing the alleged
vales of Juanatas for the year 1990, the same is inadmissible and cannot
be given probative value considering that it is not properly accomplished,
is undated and unsigned, and is thus uncertain as to its origin and
authenticity.
In the instant case, the right of Pedro Juanatas to be paid a commission
equivalent to 17%, later increased to 20%, of the gross income is not
disputed by Jimenez. Although Juanatas admit receipt of partial payment,
Jimenez still have to present proof of full payment.
Nestle vs. NLRC (1994)
ISSUE: WON the retirement plan should be discontinued
Nestle Phils. had separate CBAs with its establishments in –
Alabang/Cabuyao factories, Makati Administration Ofc, Cagayan de Oro
Factory, & Cebu/Davao Sales Offices. These all expired on 30 Jun ’87.
Union of Filipro Employees was certified as the sole & exclusive
bargaining agent for all regular rank-and-file employees at Nestle’s CDO
factory, as well as its Cebu/Davao Sales Ofc.
Aug ’87: While parties were negotiating, employees at Cabuyao resorted
to a slowdown & walk-outs, prompting Nestle to shut down the factory.
2 Sep: UFE declared a bargaining deadlock. SoL assumed jurisdiction &
issued a return to work order. In spite of that order, Makati Ofc & CDO
factory struck without notice. Nestle retaliated by dismissing the union
officers & members of negotiating panel who participated in the strike.
26 Jan ’88: UFE filed notice of strike on same gounds. But Nestle was
able to conclude a CBA with the union at Cebu/Davao Sales Ofc, & later
with CDO factory workers. Union assailed the validity of those agreements.
NLRC’s Resolution: Company should continue implementing its
retirement plan with some modifications.
Nestle’s contention: since its retirement plan is non-contributory, it
(Nestlé) has the sole and exclusive prerogative to define the terms of the
plan "because the workers have no vested and demandable rights thereunder,
the grant thereof being not a contractual obligation but merely gratuitous. At
most the company can only be directed to maintain the same but not to
change its terms. It should be left to the discretion of the company on how to
improve or mollify the same".
No. The inclusion of the retirement plan in CBA as part of the package
of economic benefits extended by Nestle to its employees to provide them
a measure of financial security after they shall have ceased to be
employed in the company, reward their loyalty, boost their morale and
efficiency and promote industrial peace, gives a consensual character to
the plan so that it may not be terminated/modified at will by either party.
The fact that the retirement plan is non-contributory, i.e., that the
employees contribute nothing to the operation of the plan, does not make
it a non-issue in the CBA negotiations. As a matter of fact, almost all of the
benefits that Nestle has granted to its employees under the CBA are non-
contributory benefits. The retirement plan has been an integral part of the
CBA since 1972.
 Labor Standards
Employees do have a vested & demandable right over
existing benefits voluntarily granted to them by their employer.
The latter may not unilaterally withdraw, eliminate or diminish such
benefits.
SOLIDARY LIABILITY
Phil. Bank vs. NLRC (1986)
ISSUE: WON an ER-EE relationship existed between Phil Bank & Orpiada
WON CESI & Phil. Bank are solidarily liable to Orpiada
Jan ’76: Philippine Bank of Communications & Corporate Executive
Search, Inc. entered into a letter agreement, whereby CESI undertook to
provide “temporary services” to Phil. Bank consisting of the “temporary
services” of 11 messengers. The contract period is described as from Jan
’76. Phil. Bank undertook to pay a daily service rate of P18/person.
Attached to the letter agreement was a List of Messengers assigned at
Phil. Bank. Ricardo Orpiada was one of them. He was assigned to work
with Phil Bank. Her rendered services to the Bank, within the premises of
the bank with other people.
Oct ’76: Phil Bank requested CESI to withdraw Orpiada’s assignment
because it alleged it no longer needed Orpiada’s services.
Orpiada instituted a complaint against Phil Bank for illegal dismissal &
failure to pay 13th month pay. During compulsory arbitration proceedings,
CESI was brought as an additional respondent.
Bank’s contentions: no ER-EE relationship between it & Orpiada but
Orpiada was an employee of CESI. As per their agreement – “individuals
CESI will assign to us will be subject to our acceptance & will observe work-
days, hours, & methods of work; such individuals will nevertheless remain your
own employees & CESI will retain all liabilities arising from LC.” Also that
CESI is possessed of substantial capital or investment in the form of office
equipment, tools & trained service personnel. Therefore, it is not a “labor
only” contractor.
1) Yes. Apply four-fold test. As to selection, Orpiada was not previously
selected by Bank. Rather, he was assigned to work in the bank by CESI.
Orpiada could not have found his way to the bank's offices had he not
been first hired by CESI & later assigned to work in the bank's offices. The
selection of Orpiada by CESI was, however, subject to the acceptance of
the bank & bank did accept him. CESI had hired Orpiada from the outside
world precisely for the purpose of assigning or seconding him to the bank.
As to payment of wages, Bank remitted to CESI amounts corresponding
to the “daily service rate”of Orpiada & CESI paid to Orpiada. Hence, safe to
assume that CESI had required some amount in excess of the wages paid
by CESI to Orpiada and the others to cover its own overhead expenses and
provide some contribution to profit. Bank alleged that Orpiada did not
appear in its payroll and this allegation was not denied by Orpiada. In fact,
Orpiada was listed in the payroll of CESI with CESI deducting amounts
representing his Medicare & SSS premiums.
As to power of dismissal, Bank requested CESI to withdraw Orpiada’s
assignment & CESI did. It appears clear that Orpiada was hired by CESI
specifically for assignment with the bank and that upon his withdrawal
from such assignment upon request of the bank, Orpiada's employment
with CESI was also severed.
As to power of control, Orpiada performed his sections within the
bank's premises, and not within the office premises of CESI. As such,
Orpiada must have been subject to at least the same control and
supervision that the bank exercises over any other person physically within
its premises and rendering services to or for the bank, in other words, any
employee or staff member of the bank. It seems unreasonable to suppose
that the bank would have allowed Orpiada and the other persons assigned
to the bank by CESI to remain within the bank's premises and there
render services to the bank, without subjecting them to a substantial
measure of control and supervision.
Hence, there is an ER-EE relationship between Phil. Bank & Orpiada.
2) Yes. The Court, then, considered the tri-lateral relationship Phil.
Bank, CESI, & Orpiada to determine their liabilities. Under Art. 106, an
employer who enters into a contract with a contractor for the performance
of work for the employer, does not thereby create an ER-EE relationship
between himself & the employees of the contractor. Thus, the employees
of the contractor remain the contractor's employees and his alone.
Nonetheless when a contractor fails to pay the wages of his employees
in accordance with LC, the employer who contracted out the job to the
contractor becomes jointly and severally liable with his contractor to the
employees of the latter "to the extent of the work performed under the
contract" as such employer were the employer of the contractor's
Case Digest
employees. Hence, there is an ER-EE relationship between the
employer & the job contractor’s employees for a limited purpose,
in order to ensure that the latter get paid the wages due them.
A similar situation obtains where there is "labor only" contracting. The
"labor-only" contractor, i.e "the person or intermediary" is considered
"merely as an agent of the employer." The employer is responsible to the
employees of the "labor only" contractor as if such employees had been
directly employed by the employer. Thus, where “labor only” contracting
exists, an ER-EE relationship exists between the employer (owner of the
project) and the employees of the “labor only” contractor. The law in effect
holds both the employer and the "labor-only" contractor responsible to the
latter's employees for the more effective safeguarding of the employees'
rights under the Labor Code.
The undertaking given by CESI in favor of the bank was not the
performance of a specific job for instance, the carriage and delivery of
documents and parcels to the addresses thereof. The undertaking of CESI
was to provide its client, the bank, with a certain number of persons able
to carry out the work of messengers. Such undertaking of CESI was
complied with when the requisite number of persons were assigned or
seconded to Phil. Bank. Orpiada utilized the premises and office
equipment of the bank and not those of CESI. Messengerial work, the
delivery of documents to designated persons whether within or without the
bank premises, is of course directly related to the day-to-day operations of
the bank.
CESI is not a parcel delivery company. It is a recruitment and placement
corporation placing bodies, as it were, in different client companies for
longer or shorter periods of time. Hence, CESI was engaged in "labor-only"
contracting vis-a-vis Phil. Bank and in respect to Ricardo Orpiada, and that
consequently, Phil Bank is liable to Orpiada as if Orpiada had been
directly, employed not only by CESI but also by the bank. It may well be
that the bank may in turn proceed against CESI to obtain reimbursement
of, or some contribution to, the amounts which the bank will have to pay
to Orpiada.
Rosewood vs. NLRC (1998)
ISSUE: WON Rosewood is solidarily liable with the security agency for the
payment of back wages, wage differential, & separation pay
All the complainants were employed by Veterans Philippines Scout
Security Agency as security guards.
Rosewood asked for the relief of Napoleon Mamon, the security guard
assigned to Rosewood, because they came to know that complainants filed
a complaint for underpayment.
The security agency assigned Mamon to their main office. After that, he
was floated until he was assigned to Mead Johnson Philippines. About a
week, the security agency received summons on complainant’s complaint
for underpayment & he was called to the office. He was told to sign a
“Quitclaim and Waiver.” But he refused to sign. The main office relieved
him because he did not sign.
13 May ’91: a complaint for illegal dismissal, underpayment of wages,
and for nonpayment of overtime pay, legal holiday pay, premium pay for
holiday and rest day, 13th month pay, cash bond deposit, unpaid wages
and damages was filed against VPSSA and/or Sergio Jamila IV. Thereafter,
Rosewood Processing Inc. was impleaded as a third-party respondent by
the security agency.
Yes. The joint and several liability of the employer or principal was
enacted to ensure compliance with the provisions of the Code, principally
those on statutory minimum wage. The contractor or subcontractor is
made liable by virtue of his or her status as a direct employer, and the
principal as the indirect employer of the contractor's employees. This
liability facilitates, if not guarantees, payment of the workers'
compensation, thus, giving the workers ample protection as mandated by
the 1987 Constitution. This is not unduly burdensome to the employer.
Should the indirect employer be constrained to pay the workers, it can
recover whatever amount it had paid in accordance with the terms of the
service contract between itself and the contractor.
However, Rosewood should not be held liable for wage differentials
incurred while the complainants were assigned to other companies. Under
the LC, should the contractor fail to pay the wages of its employees in
accordance with law, the indirect employer (Rosewood), is jointly and
severally liable with the contractor, but such responsibility should be
understood to be limited to the extent of the work performed under the
contract, in the same manner and extent that he is liable to the employees
directly employed by him. This liability of Rosewood covers the payment of
the workers' performance of any work, task, job or project. So long as the
 Labor Standards
work, task, job or project has been performed for Rosewood's
benefit or on its behalf, the liability accrues for such period
even if, later on, the employees are eventually transferred or reassigned
elsewhere.
The indirect employer's liability to the contractor's employees extends
only to the period during which they were working for the petitioner, and
the fact that they were reassigned to another principal necessarily ends
such responsibility. The principal is made liable to his indirect employees,
because it can protect itself from irresponsible contractors by withholding
such sums and paying them directly to the employees or by requiring a
bond from the contractor or subcontractor for this purpose.
The solidary liability for payment of back wages and separation pay is
limited, under Article 106, "to the extent of the work performed under the
contract"; under Article 107, to "the performance of any work, task, job or
project"; and under Article 109, to "the extent of their civil liability under
this Chapter [on payment of wages]."
These provisions cannot apply to Rosewood, considering that the
complainants were no longer working for or assigned to it when they were
illegally dismissed. Furthermore, an order to pay back wages and
separation pay is invested with a punitive character, such that an indirect
employer should not be made liable without a finding that it had
committed or conspired in the illegal dismissal.
The liability arising from an illegal dismissal is unlike an order to pay
the statutory minimum wage, because the workers' right to such wage is
derived from law. The proposition that payment of back wages and
separation pay should be covered by Article 109, which holds an indirect
employer solidarily responsible with his contractor or subcontractor for
"any violation of any provision of this Code," would have been tenable if
there were proof — there was none in this case — that the
principal/employer had conspired with the contractor in the acts giving
rise to the illegal dismissal.
Wherefore, Rosewood, with the Security agency, is solidarily liable to
PAY the complainants only wage differentials during the period that the
complainants were actually under its employ. However, Roseood is
exonerated from payment of back wages & separation pay.
Broadway vs. NLRC (1987)
ISSUE: WON an ER-EE relationship exists between Broadway & Apolinario
Mar ’67: Vicente Apolinario began work as an auto painter in the
premises of Broadway Motors, Inc. by virtue of a written Work Contract.
The contract was signed by Apolinario as “Contractor” and Johnny Chieng
(manager of Broadway Motors). Apolinario worked for period of 18 yrs.
23 Jan ’85: Apolinario was barred from entering the premises of
Broadway Motors because of his alleged involvement in a fist-fight with the
shop superintendent the day before.
21 Feb: Apolinario filed an action for illegal dismissal. He sought
recovery from Broadway of separation pay, moral damages & attorney’s
fees.
Broadway Motors’ contention: Apolinario was not its own employee but
rather, an independent contractor who conducted his own separate
business under the tradename of VM Automotive Repair Service & had his
own contract workers.
Yes, there is ER-EE relationship. As to selection, Apolinario was hired
directly by Broadway Motors to work as an auto painter, which fact is
evidenced by the undated Work Contract executed between Apolinario and
Broadway Motors through its authorized representative. That Broadway
Motors reserved unto itself the power of dismissal is evident from the fact
that it unilaterally undertook to terminate Apolinario's relationships with
itself. As to payment of wages, Apolinario was compensated for the jobs
performed in lump sum payments described as "payment for sub-contract
painting" or other repair job, from which amounts an unexplained "3% of
15% withholding tax" was deducted. It further appears that Apolinario
invoiced, under the designation of "VM Automotive Repair Service, " to
Broadway Motors the salaries of his "Contract Workers" on which amounts,
a 3% "sales tax" was added. The "Work Contract" also provided that
Broadway Motors would negotiate only with Apolinario on any work order,
and would refrain from dealing with any member of Apolinario's group of
"Contract Workers. As to power of control, according to the Work Contract,
Apolinario & his contract workers were required not only to keep regular
working hours, but to render overtime service as well, when such as
necessitated either by the volume or immediacy of the work. They were
not allowed to negotiate with customers regarding the performance of any
additional work beyond that which had been authorized by Broadway.
Any defect in the workmanship of their jobs was subject to correction by
Case Digest
Broadway’s designated supervisors and inspectors even as the
work was still in progress, and not just after the same had
already been completed. Furthermore, Apolinario and his men were
expressly required to abide by Broadway’s regulations and policies,
"particularly on the wearing of uniforms and Identification cards," which ID
cards had to be worn at all times while within the work premises.
Apolinario's "casual workers" were additionally required to deposit their ID
cards with Broadway’s security guard at the end of the working day.
Hence, they were under the direct control & supervision of the supervisors
& managers of Broadway from the very moment they entered the work
premises at the beginning of the working day, all throughout the
performance of their duties for the day, until shop closing time.
A finding that a contractor was a "labor-only" contractor is equivalent to
a finding that an ER-EE relationship existed between the owner and the
"labor-only" contractor including the latter’s "Contract Workers.”
Under the Work Contract, Apolinario supplied only "labor and supervision
(over his "Contract Workers") in the performance of automotive body painting
work which the company (i.e., Broadway Motors) may from time to time,
award to him under (the) contract." Apolinario also undertook to "hire and
bring in additional workers as may be required by the company, to handle
additional work load or to accelerate or facilitate completion of work in
process.” Broadway Motors supplied all the tools, equipment, machinery
and materials necessary for Apolinario to carry out his assigned painting
jobs, which painting jobs were executed by Apolinario and his men within
the premises owned and maintained by Broadway Motors.
Furthermore, there was no evidence adduced by Broadway Motors to
show that Apolinario had substantial capital investment in "VM Automotive
Repair Service" or that "VM Automotive Repair Service" carried on, in its
own premises, a car repair business operation separate and distinct from
that engaged in by Broadway, an operation the tools or equipment of
which were owned by Apolinario and the customers of which were not
customers of Broadway Motors. What was evident was that they were to
perform regular working hours 6 days a week, which makes it impossible
for them to carry on any additional & independent auto painting business
outside the premises of Broadway Motors. Finally, Apolinario and his men
were engaged in the performance of a line of work — automobile painting
— which was directly related to, if not an integral part altogether of the
regular business operations of Broadway Motors i.e., that of an automotive
repair shop.
While there are indications that an owner-independent contractor
relationship exists, there are many other factors present which
demonstrate an ER-EE relationship.
Neri vs. NLRC (1993)
ISSUE: WON BCC is engaged in “labor-only” contracting
Building Care Corp. is a corporation engaged in providing technical,
maintenance, engineering, housekeeping, security & other specific services
to its clientele. It established that it had substantial capitalization of P1M
or a stockholders equity of P1.5M.
Virginia Neri & Jose Cabelin applied for positions with, & were hired by
BCC. They were assigned to work in CDO Branch of Far East Bank. Neri
worked as radio/telex operator while Cabelin worked as janitor, being
promoted to messenger.
28 Jun ’89: Neri & Cabelin filed complaints against FEBTC & BCC to
compel the bank to accept them as regular employees and for it to pay
the differential between the wages being paid them by BCC and those
received by FEBTC employees with similar length of service.
Neri’s contentions: BCC in engaged in "labor-only" contracting because
it failed to adduce evidence purporting to show that it invested in the form
of tools, equipment, machineries, work premises and other materials
which are necessary in the conduct of its business. That they perform
duties which are directly related to the principal business or operation of
FEBTC. Hence, they must be deemed employees of FEBTC by operation of
law since BCC is merely an agent of FEBTC.
No. BCC need not prove that it made investments in the form of tools,
equipment, machineries, work premises, among others, because it has
established that it has sufficient capitalization. BCC had a capital stock of
P1M fully subscribed and paid for. BCC is therefore a highly capitalized
venture and cannot be deemed engaged in "labor-only" contracting.
There is "labor-only" contracting where: (a) the person supplying
workers to an employer does not have substantial capital or investment in
the form of tools, equipment, machineries, work premises, among others;
and, (b) the workers recruited and placed by such person are performing
 Labor Standards
activities which are directly related to the principal business of
the employer.
Based on the foregoing, BCC cannot be considered a "labor-only"
contractor because it has substantial capital. While there may be no
evidence that it has investment in the form of tools, equipment,
machineries, work premises, among others, it is enough that it has
substantial capital. The law does not require both substantial capital &
investment in the form of tools, equipment, machineries, etc. this is clear
from the use of the conjunction “or”. Having established that it has
substantial capital, it was no longer necessary for BCC to further adduce
evidence to prove that it does not fall within the purview of "labor-only"
contracting. There is even no need for it to refute Neri's contention that the
activities they perform are directly related to the principal business of FEB.
While the services performed by Neri & Cabelin may be considered
directly related to the principal business of the employer, nevertheless,
they are not necessarily in the conduct of the principal business of the
employer. Even assuming that Neri & Cabelin were performing activities
directly related to the principal business of the bank, under the "right of
control" test, they must still be considered employees of BCC.
Neri & Cabelin do not deny that they were selected & hired by BCC
before being assigned to FEBTC. BCC maintained supervision and control
over Neri & Cabelin through its Housekeeping and Special Services
Division: they reported for work wearing the prescribed uniform of BCC;
leaves of absence were filed directly with BCC; and, salaries were drawn
only from BCC. Also, under the terms and conditions of the contract, it was
BCC alone which had the power to reassign petitioners. Their deployment
to FEBTC was not subject to the bank's acceptance. Consequently,
petitioners cannot be held to be employees of FEBTC as BCC "carries an
independent business" and undertaken the performance of its contract
with various clients according to its "own manner and method, free from
the control and supervision" of its principals in all matters "except as to
the results thereof."
Tabas vs. California (1989)
ISSUE: WON Livi & California are solidarily liable
Petitioners filed for reinstatement and payment of various benefits,
including minimum wage, overtime pay, holiday pay, thirteen-month pay,
and emergency cost of living allowance pay, against California
Manufacturing Company.
California’s contentions: no ER-EE relationship between the petitioners
& the company hence, it has no liability for payment of the money claims.
Livi Manpower Services, Inc. was impleaded as party-respondent.
It appears that petitioners were, prior to their work with California,
employees of Livi, which subsequently assigned them to work as
“promotional merchandisers” for the former firm pursuant to a manpower
supply agreement.
The agreement provided that California "has no control or supervisions
whatsoever over Livi's workers with respect to how they accomplish their
work or perform California’s obligation"; Livi "is an independent contractor
and nothing herein contained shall be construed as creating between
California and Livi…the relationship of principal-agent or employer-
employee'; that "it is hereby agreed that it is the sole responsibility of Livi
to comply with all existing as well as future laws, rules and regulations
pertinent to employment of labor" and that "California is free and
harmless from any liability arising from such laws or from any accident
that may befall workers and employees of Livi while in the performance of
their duties for California. It was further stipulated that the assignment of
workers to California shall be on a "seasonal and contractual basis"; that
“cost of living allowance and the legal holidays will be charged directly to
California at cost "; and that "payroll for the preceeding week shall be
delivered by Livi at California's premises."
Petitioners were made to sign employment contracts with duration of 6
mos, upon the expiration of which they signed new agreements with the
same period. They received P38.56 plus P15 daily allowance.
Petitioners’ contentions: they had become regular California
employees hence, they are entitled to their money claims.
Yes. The fact that the manpower supply agreement between Livi and
California had specifically designated the former as the petitioners'
employer and had absolved the latter from any liability as an employer,
will not erase either party's obligations as an employer, if an employer-
employee relation otherwise exists between the workers and either firm. At
any rate, since the agreement was between Livi and California, they alone
are bound by it, and the petitioners cannot be made to suffer from its
adverse consequences.
Case Digest
Livi performs "manpower services". Therefore, it contracts out
labor in favor of clients. The bare fact that Livi maintains a
separate line of business does not extinguish the equal fact that it has
provided California with workers to pursue the latter's own business.
The petitioners had been charged with "merchandizing promotion or
sale of the products of California in the different sales outlets in Metro
Manila including task and occasional price tagging," an activity that is
doubtless, an integral part of the manufacturing business. It is not, then, as
if Livi had served as California's promotions or sales arm or agent, or
otherwise, rendered a piece of work California could not have itself done.
Livi, as a placement agency, had simply supplied it with the manpower
necessary to carry out California's merchandising activities, using
California’s premises and equipment.
Hence, neither California nor Livi can escape liability, assuming one
exists. The fact that the petitioners admitted being Livi’s direct employees
will not absolve California since liability has been imposed by legal
operation.
It would have been different had Livi been discretely a promotions firm,
and that California had hired it to perform the latter's merchandising
activities. For then, Livi would have been truly the employer of its
employees, and California, its client. The client, in that case, would have
been a mere patron, and not an employer.
In the case at bar, Livi is admittedly an "independent contractor
providing temporary services of manpower to its client.” When it provided
California with manpower, it supplied California with personnel, as if such
personnel had been directly hired by California. Hence, Art. 106 applies.
As to what is the liability of either Livi or California: The records show
that the petitioners had been given an initial six-month contract, renewed
for another six months. Accordingly, under Article 281, they had become
regular employees of California and had acquired a secure tenure. Hence,
they cannot be separated without due process of law.
Guarin vs. NLRC (1989)
ISSUE: WON Lipercon Services Inc. is an independent contractor and the
petitioners are its employees
Novelty Phils. Inc. is a domestic corporation that is engaged in the
garment manufacturing business.
Lipercon Services, Inc. is also a domestic corporation which is engaged
in business as a service contractor providing workers for other companies.
6 Jul ’83: Novelty & Lipercon entered into a “Contract of Services” in
which Lipercon, as the “Contractor” and Novelty as the “Company” agreed
as follows – Lipercon shall provide Novelty with contractual
laborers/helpers/janitors as requested by Novelty; Lipercon shall comply
with all the labor laws; Lipercon shall be answerable for any claim for
losses caused by its personnel assigned to Novelty & for damages; there is
no ER-EE relationship between Novelty & the employee assigned by
Lipercon; Lipercon shall have the exclusive discretion in the selection,
engagement & discharge of its personnel.
Petitioners were hired by Lipercon & assigned to Novelty as helpers,
janitors, janitresses, firemen & mechanics under said agreement. They
worked for 3 yrs. However, Novelty terminated its agreement with
Lipercon, resulting to their dismissal. Hence, they filed a complaint for
illegal dismissal against Lipercon & Novelty.
Lipercon’s contention: It merely acted as an agent of Novelty in the
hiring & placement of the complainants.
Novelty’s contentions: the services which are directly related to
manufacturing garments are sewing, textile cutting, designs, dying, quality
control, personnel, administration, accounting, finance, customs, delivery
and similar other activities; and that allegedly, "it is only by stretching the
imagination that one may conclude that the services of janitors, janitresses,
firemen, grasscutters, mechanics and helpers are directly related to the
business of manufacturing garments".
No. Under the "Contract of Services" between Lipercon and Novelty,
Lipercon was a "labor-only" contractor, hence, only an agent of Novelty to
procure workers for the latter, the real employer.
The law casts the burden on the contractor to prove that it has
substantial capital, investment, tools, etc. The petitioners, on the other
hand, need not prove the negative fact that the contractor does not have
substantial capital, investment, and tools to engage in job contracting.
The jobs assigned to the petitioners as mechanics, janitors, gardeners,
firemen and grasscutters were directly related to the business of Novelty
as a garment manufacturer. The work of gardeners in maintaining clean
and well-kept grounds around the factory, mechanics to keep the
machines functioning properly, and firemen to look out for fires, are
 Labor Standards
directly related to the daily operations of a garment factory.
That fact is confirmed by Novelty's rehiring the workers or
renewing the contract with Lipercon every year from 1983-1986, a period
of 3 years.
As Lipercon was a “labor-only” contractor, the workers it supplied
Novelty became regular employees of Novelty.
Wherefore, Novelty is ordered to reinstate the petitioners with
backwages for 1 yr.
SSS vs. CA (1971)
ISSUE: WON PGPU is the employer of the security guards
18 Feb ’60: SSS threatened Philippine Guards Protection Unit with
court action if it did not continue to remit its contributions to SSS. Hence,
PGPU filed with the Social Security Commission a petition for exclusion
from coverage under the System & for a refund of its remittances for Sep-
Oct ’58.
PGPU’s contention: it is not the employer, but merely the agent of the
39 security guards or watchmen whose names appear in its membership
list, for, actually, it has only one employee, namely, the clerk-secretary of
the office.
The facts concerning the mechanics of the tripartite relationship among
PGPU, its clients & the security guards: Whenever a person approaches the
owner of the agencies for employment, the owner tells him to secure a
license as a special watchman and in the meantime, the owner would look
for persons or establishments that need the service of a guard or guards.
If no such persons or establishments are found after the applicant has
secured a license, he remains with the agency as an "extra guard" and he
is utilized by the agency as a substitute for those guards going on vacation
or for those who are sick or otherwise absent. The owner may refuse to
accommodate an applicant if he so desires. The owner collects from the
client the fee for the service and from the amount received, the owner
pays the salary of the guard, retaining a part thereof for himself as his
"commission" as long as the watchman is assigned to guard the premises
of a client. The owner of the agency furnishes the firearms and
ammunitions, but the watchmen buy their own uniforms. If a client is
dissatisfied with the service of a guard, as when a guard is always late, the
agency may change the guard if the client so requests, or it may impose a
fine on the guard as a disciplinary measure.
Yes. PGPU carries on a business — watchmen's service — from which it
derives its income in the form of what it terms "commission". It uses the
services of other persons — the guards or watchmen — to carry on its
business. Without them, PGPU would not be in business, which consists
solely in the letting out of watchmen's services for a fee. The guards or
watchmen render their services to PGPU by allowing themselves to be
assigned by PGPU.
As to selection, who the clients will be, under what terms and
conditions the services will be rendered, are matters determined not by
the guards or the watchmen, but by PGPU. On the other hand, the client
companies have no hand in selecting who among the guards or watchmen
shall be assigned to them. It is PGPU that issues assignment orders and
instruction and exercise control and supervision over the guard or
watchmen, so much so that if for one reason or another, the client is
dissatisfied with a services of a particular guard the client cannot himself
terminate the services of a particular guard, but has to notify PGPU, which
either substitutes with another or metes out to him disciplinary measures
(as an element of dismissal). As to payment of wages, all the guards or
watchmen receive compensation from PGPU and not from private
companies or establishments whose premises they are guarding. The fee
contracted to be paid by the client is admittedly not equal to the salary of
a guard or a watchman; such fee is arrived at independently of the salary
to which the guard or watchman is entitled under his arrangements with
PGPU. All the fees received by PGPU from its clients constitute, its gross
income; and the salaries it pays to the guards or watchmen and to its
clerk-secretary, its ex for, say, office rent, light, water and telephone
services, licenses, firearms and ammunition, are expenses incurred in the
operation of the business.
Hence, PGPU is a bona fide independent contractor. The client
companies may not be deemed the employers of the guards/watchmen.
As to coverage of SSS: (1) A watchman is not permanently assigned to
a client; for one reason or another he may be pulled out of a particular
assignment and detailed to another client. Consequently, different clients
have to deduct premiums from different watchmen at different times and
remit them to the System together with the clients' own share of the
premiums. (2) Under the arrangements between PGPU and its the clients,
the latter do not determine how much salary is to be plaid to the
Case Digest
watchmen. The clients merely pay to PGPU the fee stipulated in
their contracts. (3) Service performed by one person for another
is not considered an employment if the same is "purely casual and not for
the purpose of occupation or business of the employer".
Insular Life vs. NLRC (1989)
ISSUE: WON Basiao is Insular’s employee or an independent contractor
2 Jul ’68: Insular Life Assurance Co. & Melecio Basiao entered into a
contract whereby Basiao was authorized to solicit within the Philippines
applications for insurance policies and annuities in accordance with the
existing rules and regulations" of Insular. He would receive compensation
in the form of commissions. As to his relation with the company, he is free
to exercise his own judgment as to the time, place & means of soliciting
insurance. However, he shall observe all rules & regulations.
May ’79: Insular terminated the Agency Manager’s Contract. Basiao
sued the company, prompting Insular to terminate also his engagement
under the first contract & to stop payment of his commissions. Basiao
filed a complaint against the Insular, seeking to recover unpaid
commissions and attorney’s fees.
Insular’s contention: Basiao is not Insular’s employee but an
independent contractor. The terms of the contract made Basiao the
master of his own time and selling methods, left to his judgment the time,
place and means of soliciting insurance, set no accomplishment quotas
and compensated him on the basis of results obtained. He was not bound
to observe any schedule of working hours or report to any regular station;
he could seek and work on his prospects anywhere and at anytime he
chose to, and was free to adopt the selling methods he deemed most
effective. Hence, Insular had no obligation to him for unpaid commissions
under the terms & conditions of his contract.
Not every form of control that the hiring party reserves to himself over
the conduct of the party hired in relation to the services rendered may be
accorded the effect of establishing an ER-EE relationship between them in
the legal or technical sense of the term. The line should be drawn between
rules that merely serve as guidelines towards the achievement of the
mutually desired result without dictating the means or methods to be
employed in attaining it, and those that control or fix the methodology and
bind or restrict the party hired to the use of such means. The first, which
aim only to promote the result, create no ER-EE relationship unlike the
second, which address both the result and the means used to achieve it.
The distinction acquires particular relevance in the case of an enterprise
affected with public interest, as is the business of insurance, and is on that
account subject to regulation by the State with respect, not only to the
relations between insurer and insured but also to the internal affairs of the
insurance company. It is, therefore, usual and expected for an insurance
company to promulgate a set of rules to guide its commission agents in
selling its policies that they may not run afoul of the law and what it
requires or prohibits.
Basiao is a commission agent, an independent contractor. There was
no showing that any such rules or regulations were in fact promulgated,
much less that any rules existed or were issued which effectively
controlled or restricted his choice of methods — or the methods
themselves — of selling insurance. Absent such showing, the Court will not
speculate that any exceptions or qualifications were imposed on the
express provision of the contract leaving Basiao "... free to exercise his own
judgment as to the time, place and means of soliciting insurance."
An independent contractor is (a) paid compensation in the form of
commissions based on percentages of their sales, any balance of
commissions earned being payable to their legal representatives in the
event of death or registration; (b) required to put up performance bonds;
(c) subject to a set of rules and regulations governing the performance of
their duties under the agreement with the company and termination of
their services for certain causes; (d) not required to report for work at any
time, nor to devote their time exclusively to working for the company nor
to submit a record of their activities, and who, finally, shouldered their own
selling and transportation expenses.
Although Basiao claimed that he has been connected with Insular for 25
yrs, what is germane is his status under the contract and not the length of
his relationship with Insular.
Petrophil vs. NLRC (1986)
 Labor Standards
ISSUE: WON Encarnacion is an employee of Petrophil or
Gersher
Anselmo Encarnacion had been working as casual employee of various
job contractors in Petrophil’s premises since 1963 when it was still under
the ownership & management of Esso Standard Phils.
21 Dec ’73: Esso was sold to Petrophil Corp. At that time, Encarnacion
was working at the bulk plant as an employee of Juanito Campos who has
a job contract with Esso. The said job contract was continued by Petrophil
so Encarnacion remained working at the bulk plant.
Mar ’76: Gersher Engineering Works entered into a service contract with
Petrophil & placed Encarnacion in its payroll.
28 Mar ’77: Gersher received a letter from Petrophil, complaining about
the unsatisfactory performance of Encarnacion. As a result, Gersher re-
assgined Encarnacion to Caltex Phil. Encarnacion refused to be reassigned
unless he was made to occupy the same position of warehouseman as in
Petrophil & since the position available at Caltex was equipment
maintainer, he refused to be transferred. Instead, he filed a complaint for
illegal dismissal against Gersher & Petrophil.
Encarnacion was an employee of Gersher, not Petrophil. This was
admitted by Gersher in its position paper – that Encarnacion started work
with Gersher sometime Mar ’76; that Gersher entered into a contract of
services with Petrophil as an independent contractor. Hence, there was the
presence of the element of selection and engagement. As to payment of
wages, Gersher’s payrolls showed that Encarnacion was its employee.
Encarnacion was receiving salary from Gersher & there was never an
instance that Encarnacion received his salary from Petrophil.
However, Encarnacion was not dismissed but was only demoted and
transferred to Caltex Phil. Inc. because of his failure to observe proper
diligence in his work, and also because of his indolence, habitual tardiness
and absences. But following his demotion and transfer, Encarnacion
refused to report for work anymore. There was no evidence that his
demotion and transfer was due to unfair labor practice.
Hence, reinstatement of Encarnacion and payment of his money claims
should be made by Gersher, his employer. Petrophil is absolved from any
and all liability.
Securities vs. MOLE ~ can’t find this
Rhone-Poulenc vs. NLRC (1993)
ISSUE: WON the janitors were employees of Union Carbide
WON CSI is a labor-only contractor
Rhone-Poulenc Agrochemicals Phils. is a domestic corporation engaged
in the manufacture of agro-chemicals. Its business operations involve the
formulation, production, distribution and sale in the local market of its
agro-chemical products.
1 Jan ’88: As a consequence of the sale by Union Carbide Inc. of all its
agricultural-chemical divisions worldwide in favor of Rhone-Poulenc
Agrochemie France (mother corporation), Rhone-Poulenc acquired from
Union Carbide it’s agro-chemical formulation plant in Mandaluyong.
Rhone-Poulenc & Union Carbide agreed on a 3-month transition period
for the turnover of the plant to Rhone-Poulenc. Hence, from 1 Jan to 31
May ’88, Union & Rhone shared & operated the same facilities.
Prior to the sale, Union Carbide entered into a contract with CSI for the
supply of janitorial services. During the transition period, Union Carbide
continued to avail itself of CSI’s janitorial services. Hence, the factory was
being serviced & maintained by janitors supplied by CSI.
Midway through the transition period, Union Carbied instructed CSI to
reduce the number of janitors working at the plant from 8 to 7. Paulino
Roman was recalled by CSI for reassignment. Roman refused to
acknowledge receipt of the recall memorandum.
9 Mar ’88: Union Carbide formally notified CSI of the termination of
their janitorial service agreement because of the global buy-out by Rhone-
Poulenc of Union Carbide’s business.
20 Mar: CSI issued a memorandum, recalling & advising the janitors to
report to the CSI office for reassignment. They refused to acknowledge.
In anticipation of the pull-out, Rhone-Poulenc started screening
proposals by prospective service contractors. It invited CSI to submit a
cost quotation of its janitorial services.
1 Apr: 8 janitors reported for work at the plant but were refused
admission & were told that another group of janitors had replaced them.
They filed for illegal dismissal, payment of 13th month salary, service leave
and overtime pay against Union Carbide, Rhone-Poulenc and CSI.
Case Digest
Rhone-Poulenc’s contentions: it is CSI which is the actual
employer of the janitors. CSI is a legitimate independent
contractor.
1) No. There is no ER-EE relationship between Union Carbide and the
janitors. The janitors themselves admitted that they were selected and
hired by CSI and were assigned to Union Carbide. CSI likewise
acknowledged that the two janitors were its employees. The janitors drew
their salaries from CSI and not from Union Carbide. CSI exercised control
over these janitors through Richard Barroga, also a CSI employee, who
gave orders and instructions to CSI janitors assigned to the Namayan
plant. Moreover, CSI had the power to assign its janitors to various clients
and to pull out, as it had done in a number of occasions, any of its janitors
working at Union Carbide.
2) Yes. CSI is engaged in job contracting. It is a legitimate service
contractor. It is registered as one and doing business as such with a
number of known companies in the country. It has a contract with UCFEI
to assign janitorial and ground services to the latter for a fee. The
complainants' work were basically janitorial and gardening chores. The
tools of their trade were supplied by CSI. It is true that the complainants'
claim that they were made to do chores which are production jobs. Yet,
there is no showing of regularity or permanence of such assignment.
The janitorial service agreement between Union Carbide and CSI binds
only the two, and not Rhone-Poulenc. As new owner, Rhone-Poulenc had
every right to choose its own service contractor.
As to difference with Guarin case: In Guarin, the contractor failed to
prove that it had substantial capital or investment in the form of tools,
equipment, machineries, work premises and other materials.
In the case at bar, it has been established that CSI, the contractor, owns
and maintains its own office; that it owns office equipment such as, but
not limited to, typewriters, calculators, xerox machines, mimeographing
machines, air-conditioning units and transportation vehicles; and that it
furnishes its janitors the cleaning equipment such as carpet vacuums and
polishing machines.
WORKER PREFERENCE IN CASE OF BANKRUPTCY
DBP vs. LA (1989)
ISSUE: WON the workers of Riverside Mills enjoy preference in the
satisfaction of credits against the company
In the case of PAFLU-RMC vs. Riverside Mills, LA Manuel Caday awarded
separation pay, wage and/or living allowance increases & 13th month pay
to the individual complainants.
In the case of Penalosa vs. Riverside Mills, LA Dogelio likewise awarded
separation pay, vacation & sick leave pay & unpaid increases in the basic
wage & allowances to other private respondents.
29 Mar ’85: After the judgment had become final, LA Dogelio issued a
writ of execution directing NLRC Deputy Sheriff Atienza to collect
P85,961,058.70. The Deputy Sheriff, however, failed to collect the amount
so he levied upon personal and real properties of RMC.
25 Apr: a notice of levy on execution of certain real properties was
annotated on the certificate of title filed with the ROD Pasig, where all the
said properties are situated.
Meanwhile, DBP obtained a writ of possession from RTC Pasig of all
properties of RMC after having extra-judicially foreclosed the same at
public auction earlier in 1983. DBP subsequently leased said properties to
Egret Trading and Manufacturing Corporation, Rosario Textile Mills and
General Textile Mills.
The writ of possession prevented the scheduled auction sale of the RMC
properties. As a result, the respondents filed an incidental petition with
NLRC to declare their preference over the levied properties.
31 Oct: LA Dogelio issued an order recognizing and declaring the
respondents' first preference as regards wages and other benefits due
them over and above all earlier encumbrances on the aforesaid
properties/assets of RMC, particularly those being asserted by DBP.
DBP’s contentions: LA Dogelio misinterpreted Art. 110 of LC when he
upheld the existence of the worker's preference over and above earlier
encumbrances on the properties of RMC despite the absence of any
bankruptcy or liquidation proceeding instituted against the latter.
Complainants’ contentions: under Art. 110, claims of the laborers for
unpaid wages and other monetary benefits due them for services rendered
prior to bankruptcy enjoy first preference in the satisfaction of credits
against a bankrupt company. That the word "bankruptcy" in LC is used in
its generic sense, meaning that condition of inability to pay one's debt.
 Labor Standards
No. A declaration of bankruptcy or a judicial liquidation
must be present before the worker's preference may be
enforced. Thus, Art. 110 and its implementing rule cannot be invoked by
the respondents in this case absent a formal declaration of bankruptcy or
a liquidation order. To hold that Art. 110 is also applicable in extra-judicial
proceedings would be putting the worker in a better position than the
State which could only assert its own prior preference in case of a judicial
proceeding. Therefore, Art. 110 must not be viewed in isolation and must
always be reckoned with the provisions of the Civil Code.
The reason behind the necessity for a judicial proceedings or a proceeding
in rem before the concurrence & preference of credits may be applied:
Insolvency proceedings and settlement of a decedent's estate are both
proceedings in rem which are binding against the whole world. All persons
having interest in the subject matter involved, whether they were notified
or not, are equally bound. Consequently, a liquidation of similar import or
'other equivalent general liquidation must also necessarily be a proceeding
in rem so that all interested persons whether known to the parties or not
may be bound by such proceeding.
The claims of all creditors whether preferred or non-preferred, the
identification of the preferred ones and the totality of the employer's asset
should be brought into the picture. There can then be an authoritative, fair,
and binding adjudication instead of the piece meal settlement which
would result from the questioned decision in this case.
However, there is nothing which prevents the respondents from
instituting involuntary insolvency or any other appropriate proceeding
against their employer RMC, where respondents' claims can be asserted
with respect to their employer's assets.
DBP vs. Secretary of Labor (1989)
ISSUE: WON the workers of RMC has a preference over RMC’s properties
that were already foreclosed by DBP
A complaint was filed by the private respondents against RMC for illegal
dismissal, unfair labor practice, illegal deductions from salaries and
violation of the minimum wage law. A decision was rendered by Director
Pucan, ordering RMC to pay them backwages & separation benefits. A writ
of execution was issued, directing the sheriff to collect P1,256,678.76 from
RMC and, in case of failure to collect, to execute the writ by selling the
goods and chattel of RMC not exempt from execution or, in case of
insufficiency thereof, the real or immovable properties of RMC.
However, the writ of execution was returned unsatisfied, with the
information that the company premises of RMC had been padlocked &
foreclosed by DBP. It appears that petitioner had instituted extra-judicial
foreclosure proceedings as early as 1983 on the properties and other
assets of RMC as a result of the latter's failure to meet its obligations on
the loans it secured from petitioner.
Consequently, private respondents filed a "Motion for Delivery of
Properties of RMC in the Possession of the DBP to the MOLE for Proper
Disposition," stating that pursuant to Art. 110 of the Labor Code, they
enjoy first preference over the mortgaged properties of RMC for the
satisfaction of the judgment rendered in their favor notwithstanding the
foreclosure of the same by DBP as mortgage creditor.
DBP’s contention: the requisite condition for the application of Art. 110
is not present since no bankruptcy or insolvency proceedings over RMC
properties and assets have been undertaken.
Respondents’ contention: the terms "bankruptcy" or "liquidation" are
broad enough to cover a situation where there is a cessation of the
operation of the employer's business.
No. There was no bankruptcy, liquidation or insolvency proceedings
against RMC. Hence, the private respondents’ right of first preference
under Art. 110 cannot apply. The preferential right accorded to employees
and workers under Article 110 may be invoked only during bankruptcy or
judicial liquidation proceedings against the employer.
The rationale for making the application of Article 110 of the Labor
Code contingent upon the institution of bankruptcy or judicial liquidation
proceedings against the employer is premised upon the very nature of a
preferential right of credit. A preference of credit bestows upon the
preferred creditor an advantage of having his credit satisfied first ahead of
other claims which may be established against the debtor. Logically, it
becomes material only when the properties and assets of the debtor are
insufficient to pay his debts in full; for if the debtor is amply able to pay
his various creditors in full, how can the necessity exist to determine which
of his creditors shall be paid first or whether they shall be paid out of the
proceeds of the sale of the debtor's specific property? Indubitably, the
preferential right of credit attains significance only after the properties of
Case Digest
the debtor have been inventoried and liquidated, and the claims
held by his various creditors have been established.
In this jurisdiction, bankruptcy, insolvency and general judicial
liquidation proceedings provide the only proper venue for the enforcement
of a creditor's preferential right such as that established in Article 110 of
the Labor Code, for these are in rem proceedings binding against the
whole world where all persons having any interest in the assets of the
debtor are given the opportunity to establish their respective credits.
Respondents’ contention: by virtue of Art. 110, an "automatic first lien"
was created in favor of them on RMC properties—a "lien" which predated
the foreclosure of the subject properties by DBP, and remained vested on
these properties even after its sale to DBP and other parties.
No merit. What Article 110 of the Labor Code establishes is not a lien,
but a preference of credit in favor of employees. This simply means that
during bankruptcy, insolvency or liquidation proceedings involving the
existing properties of the employer, the employees have the advantage of
having their unpaid wages satisfied ahead of certain claims which may be
proved therein.
A preference of credit points out solely the order in which creditors
would be paid from the properties of a debtor inventoried and appraised
during bankruptcy, insolvency or liquidation proceedings. Moreover, a
preference does not exist in any effective way prior to, and apart from, the
institution of these proceedings, for it is only then that the legal provisions
on concurrence and preference of credits begin to apply. Unlike a lien, a
preference of credit does not create in favor of the preferred creditor a
charge or proprietary interest upon any particular property of the debtor.
Neither does it vest as a matter of course upon the mere accrual of a
money claim against the debtor. Certainly, the debtor could very well sell,
mortgage or pledge his property, and convey good title thereon, to third
parties free from such preference.
PNB vs. Cruz (1989)
ISSUE: WON the workers’ lien takes precedence over any other claim
WON Art. 110 purports to create a lien in favor of the workers for
unpaid wages either upon all the properties or upon any particular
property owned by their employer
1980: Aggregate Mining Exponents laid-off about 70% of its employees
because it was experiencing business reverses. The retained employees
constituting 30% of the work force however, were not paid their wages.
This non-payment of salaries went on until July 1982 when AMEX
completely ceased operations and instead entered into an operating
agreement with T.M. San Andres Development Corp, whereby the latter
would be leasing the equipment and machineries of AMEX.
The employees filed a complaint. LA decided that award them the
unpaid wages & separation pay. AMEX did not appeal.
But PNB, in its capacity as mortgagee-creditor of AMEX, interposed an
appeal. PNB contended that the workers' lien covers unpaid wages only
and not the termination or severance pay which the workers likewise
claimed they were entitled to.
Yes. At the outset, PNB did not question the validity of the workers'
claim for unpaid wages with respect to the mortgaged properties of AMEX,
provided that the same be limited to the unpaid wages, and to the
exclusion of termination pay.
This Court cannot allow PNB to alter its stance at this stage inasmuch
as it is deemed to have acquiesced in the decision of the labor arbiter
concerning payment of unpaid wages. The records reveal that PNB failed
to question the same on appeal. Hence, it is now barred from claiming
that the workers' lien applies only to the products of their labor and not to
other properties of the employer which are encumbered by mortgage
contracts or otherwise.
Notwithstanding the foregoing, an attempt on the part of PNB to seek
relief from that portion of the decision would still be in vain.
This Court must uphold the preference accorded to the private
respondents in view of the provisions of Art. 110 LC which are clear and
which admit of no other interpretation. The phrase "any provision of law to
the contrary notwithstanding" indicates that such preference shall prevail
despite the order set forth in Articles 2241 to 2245 of the Civil Code.
Nevertheless, under Art. 110 LC as amended, the unpaid wages and
other monetary claims of workers should be paid in full before the claims
of the Government and other creditors. Thus not even tax claims could
have preference over the workers' claim.
 Labor Standards
PNB’s contentions: the claim for termination pay should
not be enforced against AMEX properties mortgaged to PNB
because Art. 110 of LC refers only to "wages due them for services rendered
during the period prior to bankcruptcy or liquidation." Citing serious financial
losses as the basis for the termination of the private respondents, PNB
alleges that the employees are not entitled to the termination pay which
they claim.
No merit. AMEX failed to adduce convincing evidence to prove that the
financial reverses were indeed serious. It is essentially required that the
alleged losses in business operations must be proved." This policy was
adopted to obviate the possibility of an employer fabricating business
reverses in order to ease out employees for no apparent reason.
The term "wages" includes not only remunerations or earnings payable
by an employer for services rendered or to be rendered, but also covers all
benefits of the employees under a CBA like severance pay, educational
allowance, accrued vacation leave earned but not enjoyed, as well as
workmen's compensation awards & unpaid salaries for services rendered.
For purposes of the application of Art. 110, "termination pay is
reasonably regarded as forming part of the remuneration or other money
benefits accruing to employees or workers by reason of their having
previously rendered services..." Hence, separation pay must be considered
as part of remuneration for services rendered or to be rendered.
Indeed Art. 110, as amended, now provides that the workers' preference
covers not only unpaid wages but also other monetary claims.
As much as the private respondents are concerned, the termination pay
which they so rightfully claim is an additional remuneration for having
rendered services to their employer for a certain period of time.
Noteworthy also is the relationship between termination pay and services
rendered by an employee, that in computing the amount to be given to an
employee as termination pay, the length of service of such employee is
taken into consideration such that the former must be considered as part
and parcel of wages.
Rubberworld vs. NLRC (1999)
ISSUE: WON Art. 110 applies
Rubberworld, Inc. is a domestic corporation which used to be in the
business of manufacturing footwear, bags and garments.
24 Nov ’94: Rubberworld filed with the Securities and Exchange
Commission a petition for suspension of payments, praying that it be
declared in a state of suspension of payments and that the SEC
accordingly issue an order restraining its creditors from enforcing their
claims against Rubberworld. It further prayed for the creation of a
management committee as well as for the approval of the proposed
rehabilitation plan and memorandum of agreement between Rubberworld
and its creditors.
SEC favorably ruled on the petition for suspension of payments.
Respondents, claiming to be employees of Rubberworld, filed their
complaints for illegal dismissal, unfair labor practice, damages and
payment of separation pay, retirement benefits, 13th month pay and
service incentive pay.
Despite the SEC’s order, the LA ruled against Rubberworld, declaring its
shutdown illegal and making the corporation liable for damages and
payment of separation pay. The NLRC affirmed the decision of the LA.
Respondents’ contention: automatic stay under PD 902-A is not
applicable to the instant case. Otherwise, the preference granted to
workers by Article 110 would be rendered ineffective.
The preferential right of workers and employees under Article 110 may
be invoked only upon the institution of insolvency or judicial liquidation
proceeding. Indeed, it is well-settled that "a declaration of bankruptcy or a
judicial liquidation must be present before preferences over various money
claims may be enforced." But debtors resort to preference of credit —
giving preferred creditors the rights to have their claims paid ahead of
those of other claimants — only when their assets are insufficient to pay
their debts fully. The purpose of rehabilitation proceedings is precisely to
enable the company to gain a new lease on life and thereby allow creditors
to be paid their claims from its earnings. In insolvency proceedings, on the
other hand, the company stops operating, and the claims of creditors are
satisfied from the assets of the insolvent corporation.
The present case involves the rehabilitation, not the liquidation, of
Rubberworld. Hence, the preference of credit granted to workers or
employees under Article 110 is not applicable.
The law is clear: upon the creation of a management committee or the
appointment of a rehabilitation receiver, all claims for actions "shall be
Case Digest
suspended accordingly." No exception in favor of labor claims is
mentioned in the law. Allowing labor cases to proceed clearly
defeats the purpose of the automatic stays and severally encumbers the
management committee's and resources. The said committee would need
to defend against these suits, to the detriment of its primary and urgent
duty to work towards rehabilitating the corporation and making it viable
again. PD 902-A itself does not provide for the duration of the automatic
stay.
WAGE DISTORTION
Prubankers vs. Prudential (1999)
ISSUE: WON the bank’s separate & regional implementation of the Wage
Orders created a wage distortion in the bank nationwide
18 Nov ’93: Regional Tripartite Wages & Productivity Board of Region V
issued Wage Order No. RB 05-03, which provided for a COLA to workers in
the private sector who had rendered service for at least 3 mos before its
effectivity, in the ff categories:
§ P17.50 in Naga & Legaspi
§ P15.50 in Tabaco, Daraga, Pili, & Iriga
§ P10 for all other areas in Bicol Region
23 Nov: RTWPB 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:
§ P10 in Cebu, Mandaue, Lapu-Lapu
§ P5 in Compostela Liloan, Consolacion, Cordova, Talisay,
Minglanilla, Naga and the cities of Davao, Toledo, Dumaguete, Bais,
Canlaon and Tagbilaran
Prudential Bank then granted a COLA of P17.50 to its employees in
Naga Branch (covered by WO 5-03) & integrated the P150/mo COLA into
the basic pay of its rank-and-file employees at its Cebu, Mabolo & P. del
Rosario branches (covered by WO VII-03).
7 Jun ’94: Prubankers Assoc. wrote to Prudential Bank, requesting that
the Labor Management Committee be immediately convened to discuss
and resolve the alleged wage distortion created in the salary structure
upon the implementation of the said wage orders. It demanded in the
meetings that Prudential 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 Prudential's employees nationwide.
The statutory definition of wage distortion is found in Art. 124 LC. 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.
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.
It has four elements: (1) An existing hierarchy of positions with
corresponding salary rates, (2) A significant change in the salary rate of a
lower pay class without a concomitant increase in the salary rate of a
higher one, (3) The elimination of the distinction between the two levels,
and (4) The existence of the distortion in the same region of the country.
No. In the present case, no wage distortion resulted when Prudential
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, length of service
 Labor Standards
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.
Prubankers’ contention: 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, as a result of the 2 WOs, the employees in the affected
regions have higher compensation that their counterparts of the same
level in other regions.
No merit. 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. 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 is mandated by RA 6727. The law recognizes
existing regional disparities in the cost of living. 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, Prubankers
has apparently misunderstood both the meaning of wage distortion and
the intent of the law to regionalize wage rates.
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. 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.
Prubankers’ contention: implementation of the WO in only one region
violates the equal-pay-for-equal-work principle.
No merit. 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.
As to meaning of “establishment”: 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 statutory provision does not support
Prubankers’ view that "establishment" includes all branches and offices in
different regions.
As to management practice: the 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."
TH
13 MONTH PAY LAW
NFL vs. Ovejera (1982)
ISSUE: WON under PD 851, CAC is obliged to give its workers a 13th
month salary in addition to Christmas, milling & amelioration bonuses
National Federation of Sugar Workers has been the bargaining agent of
Central Azucarera de la Carlota’s rank and file employees. The parties
concluded a CBA, whereby it stated: “The parties also agree to maintain the
present practice on the grant of Christmas bonus, milling bonus, and
Case Digest
amelioration bonus to the extent as the latter is required by law.”
The Christmas & milling bonuses amount to 1 and a half month’s
salary.
28 Nov ’81: NFSW allegedly struck to compel the payment of the 13th
month pay under PD 851, in addition to the Christmas, milling &
amelioration bonuses being enjoyed by CAC workers.
30 Nov: To settle the strike, the compromise agreement was conducted,
whereby they agreed that they would abide by the decision of the SC
involving the 13th Month Pay Law if it is held that the employer is liable to
pay a 13th month pay separate & distinct from the bonuses already given.
NSFW renewed its demand for the 13th month pay but CAC refused.
NSFW filed a notice to strike with MOLE. Six days later, it struck. CAC
filed a petition to declare the strike illegal.
No. Pres. Marcos issued PD 851, whereby it states: “all employers are
hereby required to pay salary of not more than all their employees receiving a
basic P1,000 a month, regardless of the nature of their employment, a 13th
month pay not later than December 24 of every year.” However, there is an
exception to this: employers already paying their employees a 13th month
pay or its equivalent.
The term "its equivalent” shall include Christmas bonus, mid-year
bonus, profit-sharing payments and other cash bonuses amounting to not
less than 1/12th of the basic salary.
The intention of the law was to grant an additional income in the form
of a 13th month pay to employees not already receiving the same.
Otherwise put, the intention was to grant some relief — not to all workers
— but only to the unfortunate ones not actually paid a 13th month salary
or what amounts to it, by whatever name called; but it was not envisioned
that a double burden would be imposed on the employer already paying
his employees a 13th month pay or its equivalent — whether out of pure
generosity or on the basis of a binding agreement and, in the latter ease,
regardless of the conditional character of the grant (such as making the
payment dependent on profit), so long as there is actual payment.
Otherwise, what was conceived to be a 13th month salary would in effect
become a 14th or possibly 15th month pay.
To require employers (already giving their employees a 13th month
salary or its equivalent) to give a second 13th month pay would be unfair
and productive of undesirable results. To the employer who had acceded
and is already bound to give bonuses to his employees, the additional
burden of a 13th month pay would amount to a penalty for his
munificence or liberality. The probable reaction of one so circumstance
would be to withdraw the bonuses or resist further voluntary grants for
fear that if and when a law is passed giving the same benefits, his prior
concessions might not be given due credit; and this negative attitude
would have an adverse impact on the employees.
In the case at bar, NFSW-CAC collective bargaining agreement provides
for the grant to CAC workers of Christmas bonus, milling bonus and
amelioration bonus, the aggregate of which is very much more than a
worker's monthly pay.
Dole vs. Leogardo (1982)
ISSUE: WON DOLE is obliged to give its workers 13th month pay in
addition to the year-end productivity bonus
6 Jun ’75: Standard Philippines Fruit Corp. merged with Dole entered
into a CBA with Assoc. Labor Union for a period of 3 yrs. The CBA
provided the grant of a year-end productivity bonus to all workers within
the CBA unit. The bonus is equivalent to 10 days of the basic daily wage of
the employee if 80% or more of the average total banana production for 2
preceding calendar years together with the current year’s estimate is
attained.
Thereafter, PD 851 took effect, requiring all employers to pay their
employees receiving a basic salary of not more than P1k a month,
regardless of the nature of their employment, a 13th month pay not later
than Dec 24 every year. However, it exempted form its coverage those
employers already paying their employees a 13th month pay or its
equivalent.
Sec. Ople, then, issued the IRR of PD 851, providing that the term "its
equivalent" ... shall include Christmas bonus, mid-year bonus, profit-sharing
payments and other cash bonuses amounting to not less than 1/12th of the
basic salary but shall not include rash and stock dividends, cost of living
allowance and other allowances regularly enjoyed by the employee as well as
non-monetary benefits…” Further, it provided that "where an employer pays
less than 1/12th of the employee's basic salary, the employer shall pay the
difference."
To comply with PD 851, STANFILCO paid its workers the difference
between 1/12th of their yearly basic salary & their year-end productivity
 Labor Standards
bonus. It relied on Sec. 2 of the decree. The same method of
computation was followed in the payment of the year-end
productivity bonus and the 13th month pay for the years 1976, 1977 and
1978.
ALU filed a complaint, charging STANFILCO with unfair labor practice &
non-implementation of the CBA provisions on the year-end productivity
bonus.
No. In mandating the payment of the 13th month compensation to
employees earning less than P1k, PD 851 obviously seeks to remedy the
sad plight of labor in a milieu of worldwide inflation vis-a-vis a static wage
level. However, the law has expressly exempted from its coverage those
employers "who are already paying their employees a 13th month pay or its
equivalent."
The year-end productivity bonus granted by DOLE to its employees
pursuant to their CBA is, in legal contemplation, an integral part of their
13th month pay, notwithstanding its conditional nature. When, therefore,
DOLE, in order to comply with the mandate of PD 851, credited the year-
end productivity bonus as part of the 13th month pay and adopted the
procedure of paying only the difference between said bonus and 1/12th of
the worker's yearly basic salary, it acted well within the letter and spirit of
the law and its implementing rules.
Kamaya vs. NLRC (1989)
ISSUE: WON Kamaya is obliged to pay its employees 14th month pay
Memia Quiambao with 30 others who are members of Federation of
Free Workers were employed by Kamaya Point Hotel as hotel crew. On the
basis of the profitability of the business operations, the management
granted a 14th month pay to its employees starting 1979.
Jan ’82: operations ceased to give way to the hotel’s conversion into a
training center for Libyan scholars. However, due to technical & financing
problems, the Libyans pre-terminated the program on 7 Jul ’82, leaving
Kamaya without any business, aside from the fact that it was not paid for
the use of the hotel premises & in addition had to undertake repairs of the
premises damages by the Libyan students. Kamaya suffered losses
amounting to P2M.
Although Kamaya reopened the hotel premises to the public, it was not
able to pick up its lost patronage. Hence, it effected a retrenchment
program until it totally closed its business.
Federation of Free Workers union filed a complaint against Kamaya for
illegal suspension, violation of CBA & non-payment of the 14th month pay.
Kamaya extended its 14th month pay beginning 1979 until 1981. What
is demanded is payment of the 14th month pay for 1982. Indubitably, Art.
100 cannot apply.
There is no law mandating the payment of 14th month pay. This is
emphasized in the grant of exemption under PD 851. "Employers already
paying their employees a 13th month pay or its equivalent are not covered by
this Decree." Necessarily then, only the 13th month pay is mandated.
Having enjoyed the additional income in the form of the 13th month pay,
FFW’s insistence on the 14th month pay for 1982 is already an
unwarranted expansion of the liberality of the law.
Moreover, the CBA between the management & the union provides no
stipulation as to such extra remuneration.
Verily, a 14th month pay is a misnomer because it is basically a bonus
and, therefore, gratuitous in nature. The granting of the 14th month pay is
a management prerogative which cannot be forced upon the employer. It
is something given in addition to what is ordinarily received by or strictly
due the recipient. It is a gratuity to which the recipient has no right to
make a demand.
Also, payment of such has not ripened into practice. Having lost its
catering business derived from Libyan students, Kamaya Hotel should not
be penalized for its previous liberality. An employer may not be obliged to
assume a "double burden" of paying the 13th month pay in addition to
bonuses or other benefits aside from the employee's basic salaries or
wages.
Framanlis vs. MOLE (1989)
ISSUE: WON the employers are still obliged to pay 13th month pay to its
workers despite giving them the non-monetary benefits
Apr ’80: 18 employees of Framanlis Farms, Inc. filed a complaint
against it, alleging that in 1977-1979, they were not paid ECOLA minimum
wage, 13th month pay, holiday pay, & SIL pay.
Case Digest
Framanlis’ contentions: they were not regular workers 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. As to 13th month pay, admitted that they failed to pay
their workers 13th month pay in ’78-’79. 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: a weekly subsidy of choice pork meat for
only P9/kilo and later increased to P11/kilo in March 1980, instead of the
market price of P10-15/kilo, free choice pork meat in May and December
of every year; and free light or electricity. All of these were “the equivalent”
of the 13th month pay.
Yes. Under Sec. 3 of PD 851, the benefits given to the workers 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 – “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.”
Neither may year-end rewards for loyalty and service be considered in
lieu of 13th month pay. Sec. 10 of the IRR of PD 851 provides, “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.”
San Miguel vs. Inciong (1981)
ISSUE: WON in the computation of the 13th month pay under PD 851,
payments for sick, vacation or maternity leaves, premium for work done
on rest days and special holidays, including pay for regular holidays and
night differentials should be considered
3 Jan ’77: Cagayan Coca-Cola Free Workers Union filed a complaint
against San Miguel Corp, alleging failure or refusal of the latter to include
in the computation of 13th-month pay such items as sick, vacation or
maternity leaves, premium for work done on rest days and special
holidays, including pay for regular holidays and night differentials.
An Order was issued, requiring San Miguel "to pay the difference of
whatever earnings and the amount actually received as 13th month pay
excluding overtime premium and emergency cost of living allowance. "
FWU’s contention: payments for sick leave, vacation leave, and
maternity benefits, as well as salaries paid to employees for work
performed on rest days, special and regular holidays are included in the
computation of the 13th-month pay. In computing the mandatory bonus,
the basis is the total gross basic salary paid by the employer during the
calendar year. Such gross basic salary includes: (1) regular salary or wage;
(2) payments for sick, vacation and maternity leaves; (3) premium for
work performed on rest days or holidays: (4) holiday pay for worked or
unworked regular holiday; and (5) emergency allowance if given in the
form of a wage adjustment.
San Miguel’s contention: PD 851 speaks only of basic salary as basis
for the determination of the 13th-month pay. Payments for sick, vacation,
or maternity leaves, night differential pay, as well as premium paid for
work performed on rest days, special and regular holidays do not form
part of the basic salary and that the inclusion of those payments in the
computation of the 13th-month pay is clearly not sanctioned by PD 851.
No. Under PD 851, the basic salary of an employee is used as the basis
in the determination of his 13th-month pay. Any compensations or
remunerations which are deemed not part of the basic pay is excluded as
basis in the computation of the mandatory bonus.
Under its IRR, the following compensations are deemed not part of the
basic salary: a) Cost-of-living allowances granted pursuant to Presidential
Decree 525 and Letter of Instructions No. 174; b) Profit sharing payments;
c) All allowances and monetary benefits which are not considered or
integrated as part of the regular basic salary of tile employee at the time
of the promulgation of the Decree on December 16, 1975.
Also, under a later set of Supplementary Rules, overtime pay, earnings
and other remunerations are excluded as part of the basic salary and in
the computation of the 13th-month pay.
The exclusion of cost-of-living allowances under PD 851 & profit sharing
payments indicate the intention to strip basic salary of other payments
which are properly considered as "fringe" benefits. Likewise, the catch-all
exclusionary phrase "all allowances and monetary benefits which are not
considered or integrated as part of the basic salary" shows also the intention
 Labor Standards
to strip basic salary of any and all additions which may be in
the form of allowances or "fringe" benefits.
The all-embracing phrase "earnings and other renumeration" which are
deemed not part of the basic salary includes payments for sick, vacation,
or maternity leaves. Maternity premium for works performed on rest days
and special holidays pays for regular holidays and night differentials. As
such they are deemed not part of the basic salary and shall not be
considered in the computation of the 13th-month they, were not so
excluded.
It is clear that overtime pay is an additional compensation other than
and added to the regular wage or basic salary, for reason of which such is
categorically excluded from the definition of basic salary under the PD
851. It is likewise clear that premium for special holiday which is at least
30% of the regular wage is an additional compensation other than and
added to the regular wage or basic salary.
Phil. Duplicators vs. NLRC (1995)
ISSUE: WON sales commissions should be included in the computation of
the 13th month pay
11 Nov ’93: A Decision was rendered by the SC, directing Phil.
Duplicators to pay 13th month pay to its employees computed on the
basis of their fixed wages plus sales commissions.
Phil. Duplicators filed a motion for reconsideration. It prayed for the
dismissal of the money claims in view of the rulings in Boie-Takeda vs.
Serna & Phil. Fuji vs. Trajano. It alleged that sales commissions should not
be included in the computation of the 13th month pay.
Yes. The sales commissions received for every duplicating machine sold
constituted part of the basic compensation or remuneration of the
salesmen of Phil. Duplicators for doing their job. The portion of the salary
structure representing commissions simply comprised an automatic
increment to the monetary value initially assigned to each unit of work
rendered by a salesman. Especially significant here also is the fact that the
fixed or guaranteed portion of the wages paid to the salesmen represented
only 15%-30% of an employee's total earnings in a year.
The sales commissions were an integral part of the basic salary
structure of employees-salesmen. These commissions are not overtime
payments, nor profit-sharing payments nor any other fringe benefit. 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.
Where the 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. However, sales commissions which are
effectively an integral portion of the basic salary structure of an employee,
shall be included in determining his 13th month pay.
Both productivity bonuses and sales commissions may have an
incentive effect. But there is reason to distinguish one from the other here.
Productivity bonuses are generally tied to the productivity or profit
generation of the employer corporation. Productivity bonuses are not
directly dependent on the extent an individual employee exerts himself. A
productivity bonus is something extra for which no specific additional
services are rendered by any particular employee and hence not legally
demandable, absent a contractual undertaking to pay it. Sales
commissions, on the other hand, such as those paid in Duplicators, are
intimately related to or directly proportional to the extent or energy of an
employee's endeavors. Commissions are paid upon the specific results
achieved by a salesman-employee. It is a percentage of the sales closed by
a salesman and operates as an integral part of such salesman's basic pay.
Phil. Agricultural vs. NLRC (1995)
ISSUE: WON the drivers & conductors, paid on a commission basis, are
entitled to 13th month pay
Phil. Agricultural Commercial & Agricultural Workers Union is the
exclusive bargaining agent of the rank and file employees of Vallacar
Transit, Inc. It filed a complaint against Vallacar for payment of 13th month
pay in behalf of the drivers & conductors of Vallacar’s Visayan operation.
Union’s contention: although drivers & conductors are compensated on
a "purely commission" basis as described in their CBA, they are
automatically entitled to the basic minimum pay mandated by law should
said commission be less than their basic minimum for 8 hrs work.
Vallacar’s contention: since said drivers and conductors are
compensated on a purely commission basis, they are not entitled to 13th
month pay pursuant to the exempting provisions enumerated in para. 2 of
Case Digest
the Revised Guidelines on the Implementation of the 13th Month
Pay Law. Also, under their CBA, it provided that "drivers and
conductors paid on a purely commission are not legally entitled to 13th
month pay."
Yes. Every employee receiving a commission in addition to a fixed or
guaranteed wage or salary, is entitled to a 13th month pay. It is immaterial
whether the employees concerned are paid a guaranteed wage plus
commission or a commission with guaranteed wage inasmuch as the
bottom line is that they receive a guaranteed wage.
While the bus drivers and conductors of Vallacar are considered by the
latter as being compensated on a commission basis, they are not paid
purely by what they receive as commission. In fact, said bus drivers &
conductors are automatically entitled to the basic minimum pay
mandated by law in case the commissions they earned be less than their
basic minimum for 8 hours work. Evidently therefore, the commissions
form part of the wage of the bus drivers and conductors. A contrary
interpretation would allow an employer to skirt the law and would result in
an absurd situation where an employee who receives a guaranteed
minimum basic pay cannot be entitled to a 13th month pay simply
because he is technically referred to by his employer per the CBA as an
employee compensated on a purely commission basis.
Commission is the recompense, compensation, reward of an employee,
agent, salesman, executor, trustee, receiver, factor, broker or bailee, when
the same is calculated as a percentage on the amount of his transactions
or on the profit of the principal. While said commissions may be in the
form of incentives or encouragement to inspire said bus drivers and
conductors to put a little more zeal and industry on their jobs, still, it is
safe to say that the same are direct remunerations for services rendered,
given the small remuneration they receive for the services they render,
which is precisely the reason why private respondent allowed the drivers
and conductors a guaranteed minimum wage.
In sum, the 13th month pay of the bus drivers and conductors who are
paid a fixed or guaranteed minimum wage in case their commissions be
less than the statutory minimum, and commissions only in case where the
same is over and above the statutory minimum, must be equivalent to
1/12th of their total earnings during the calendar year.
International School vs. NLRC (1995)
ISSUE: WON Mamuyac is entitled to P6,635 as 13th month pay
Sometime Jun ’89, Mamuyac was hired as English teacher paid on a
hourly basis.
Ma. Corazon Mamuyac filed a complaint against International School of
Speech for unfair labor practice; illegal deduction; non-payment of wages,
overtime pay, legal holiday pay, premium pay for holiday and rest day;
and violation of PDs 525, 851 and 928.
Mamuyac’s allegations: the School committed acts constitutive of
unfair labor practice, that is, by preventing employees of the school from
socializing with each other for fear that a labor organization might be
formed, not furnishing her a copy of her contract, imposing stiff penalties
for tardiness, imposing inhuman and unbearable working conditions such
as lunch-break of only 15 minutes, violating labor standard laws,
prohibiting stay-in employees from eating in adjoining restaurants, and
hitting a teacher for allegedly refusing to sign a contract. She also cited
unauthorized deductions made from her salary. She also claimed she was
not paid for services she rendered on weekends & holidays. She also
claimed payment of 13th month pay.
The School filed a counter-complaint charging Mamuyac with
abandonment & violation of contract with a prayer for damages. It
contended that Mamuyac abandoned her job when she fialed to report for
work in the summer, contrary to their agreement.
LA’s Decision: it granted a total of P6,635 as Mamuyac’s 13th month
pay. No payment was made to her for years 1990 & 1989. From Jul ’89 to
Dec ’89, Mamuyac received a total compensation of P7,319. From Jan ’90
to Apr ’90, she received P10,205.
For 1989: 6 mos. x P7,319.00/12= P3,659.50
For 1990: 3.5 x P10,205.00/12 = P2,976.46
Total 13th month pay = P6,635.96
Yes. According to PD 851, the 13th month pay of an individual is not
less than 1/12th of the total basic salary earned by an employee within a
calendar year. An employee who has resigned or whose services were
terminated at any time before the time for 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
 Labor Standards
during the calendar year up to the time of his resignation or
termination from the service. Thus, if he worked only from
January up to September, his proportionate 13th month pay should be
equivalent to the total basic salary he earned during that period.
Since no evidence was adduced by Mamuyac that the School observe a
different formula in the computation of the 13th month pay for their
employees, the aforementioned mode of computation should be applied.
Thus, considering that in 1989, she rendered service for only 6 months,
her 13th month pay should be 1/12th of the total compensation she
received for that year, that is, P7,31. Consequently, her 13th month pay
for the year 1989 should be P610.
Following the same formula, she should receive a 13th month pay of
P850 for the year 1990 for services rendered for three months wherein
she received a total compensation of P10,205, that is, P10,205 divided by
12 equals P850.
Dentech vs. NLRC (1989)
ISSUE: WON the private respondents are entitled to 13th month pay
Dentech Manufacturing Corp is a domestic corporation. Before it
became a corporate entity, it was known as J.L. Ledesma Enterprises, a
sole proprietorship owned by Jacinto Ledesma. At present, he is the
president and general manager of the corporation as well as the owner of
the controlling interest thereof. The firm is engaged in the manufacture
and sale of dental equipment and supplies.
The private respondents – Marbella, Torno, Tajan Jr. – are members of
the Confederation of Citizens Labor Union. They used to be the employees
of the firm, working therein as welders, upholsterers and painters. They
were already employed with the company when it was still a sole
proprietorship. They were dismissed from the firm beginning 14 Feb ‘85.
They filed a complaint for illegal dismissal, as well as for payment of
their 13th month pay under PD 851, separation pay & refund of the cash
bond they filed with the company at the start of their employment. Later
on, they also sought reinstatement.
Dentech’s contentions: the respondents were not dismissed from the
firm on account of their union activities. They abandoned their work
without informing the company about their reasons for doing so. They are
not entitled to 13th month pay because they received a total monthly
compensation of more than P1k & PD 851 states that such employees are
not entitled to receive 13th month pay. Also, it alleged that it is in bad
financial shape & as such, exempted from complying with PD 851.
Yes. Under PD 851, all employers are required to pay all their
employees receiving a basic salary of not more than P1,000 a month,
regardless of the nature of their employment, a 13th month pay not later
than December 24 of every year. Also, under Sec. 3, it provides that
financially distressed employers, i.e., those currently incurring substantial
losses, are not covered by the Decree. But Sec. 7 requires that such
distressed employers must obtain the prior authorization of the Secretary
of Labor and Employment before they may qualify for such exemption.
Dentech has no basis to claim that the company is exempted from
complying with PD 851. The P1k salary ceiling provided in PD 851
pertains to basic salary, not total monthly compensation. Dentech admit
that the private respondents work only five days a week and that they each
receive a basic daily wage of P40 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 P1k. Thus, there is no basis for the contention that
the company is exempted.
Assuming arguendo that the monthly salary of private respondents are
over P1k, the company is still not in a position to claim exemption. PD 851
provides 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. However, no such prior authorization
had been obtained by Dentech.
Alliance vs. MOLE (1983)
ISSUE: WON government employees are covered under PD 851
Petitioners’ contentions: PD 851 requires all employers to pay the
13th-month pay to their employees with one sole exception found in
Section 2 which states that "Employers already paying their employees a
13th month pay or its equivalent are not covered by this Decree." They
contend that Section 3 of the Rules and Regulations Implementing PD 851
included other types of employers not exempted by the decree. They state
that nowhere in the decree is the secretary of Labor and Employment,
Case Digest
authorized to exempt other types of employers from the
requirement. They assail the IRR as ultra vires & void.
Note: Basically, they are arguing this because the IRR provided that “all
employers except… government & any of its political subdivisions,
including GOCCs are required to give 13th month pay.
No. An analysis of the "whereases" of PD 851 shows that the President
had in mind only workers in private employment when he issued the
decree. There was no intention to cover persons working in the
government service. The decree states “Whereas, there has been no
increase in the legal minimum wage rates since ‘70.”
What the PD 851 intended to cover are only those in the private sector
whose real wages require protection from world-wide inflation. This is
emphasized by the "whereas" clause which states that 'there has been no
increase in the legal minimum wage rates since 1970'. This could only refer
to the private sector, and not to those in the government service because
at the time of the enactment of PD 851 in 1975, only the employees in the
private sector had not been given any increase in their minimum wage.
The employees in the government service had already been granted in
1974 a 10% across-the-board increase on their salaries.
To say that the words "all employers" in PD 851 includes the
Government and all its agencies, instrumentalities, and government-owned
or controlled corporations would also result in nightmarish budgetary
problems.
Government salaries and wages have always been lower than salaries,
wages, and bonuses in the private sector. However, civil servants have no
cause for despair. Service in the government may at times be a sacrifice
but it is also a welcome privilege. Apart from the emotional and psychic
satisfactions, there are various material advantages. The security of tenure
guaranteed to those in the civil service by the Constitution and statutes,
the knowledge that one is working for the most stable of employers and
not for private persons, the merit system in appointments and promotions,
the scheme of vacation, sick, and maternity leave privileges, and the
prestige and dignity associated with public office are only a few of the joys
of government employment.
Salafranca vs. Philamlife (1998)
ISSUE: WON Salafranca is entitled to 13th month pay
1 May ’81: Enrique Salafranca worked with Philamlife Village
Homeowners Assoc. as administrative for a period of 6 mos. He was
reappointed to his position three more times. As administrative officer, he
was generally responsible for the management of the village’s day to day
activities. After this term of employment expired, he still continued to work
in the same capacity, although without the benefit of a renewed contract.
Sometime ’87: Philamlife decided to amend its by-laws. Included
therein was a provision regarding officers, specifically, the position of
administrative officer under which said officer shall hold office at the
pleasure of the Board of Directors. In view of this, Philamlife informed
Salafranca that his term of office shall be coterminous with the BOD which
appointed him. Further, until he submits a medical certificate showing his
state of health, his employment shall be on a month-to-month basis.
Oddly, notwithstanding his failure to submit his medical certificate, he
continued working until his termination.
Salafranca filed a complaint for illegal dismissal with money claims.
Philamlife’s contention: Salafranca is a managerial employee. Hence,
not entitled to 13th month pay.
There is no dispute that Salafranca had already attained the status of a
regular employee, as evidenced by his 11 years of service with Philamlife.
Accordingly, he enjoys the right to security of tenure and his services may
be terminated only for causes provided by law.
No. Salafranca is a managerial employee. Sec. 1 of PD 851 extends the
coverage of 13th month pay to all rank and file employees. Clearly, it
exempts managerial employees from this benefit. But this does not
preclude an employer from granting other bonuses, in lieu of the 13th
month pay, to managerial employees in its discretion.
ATTORNEY’S FEES IN CASES OF UNLAWFUL WITHHOLDING OF WAGES
Taganas vs. NLRC (1995)
ISSUE: WON the reduction of Taganas’ contingent fee is warranted
Atty. Wilfredo Taganas represented Melchor Escultura, et. al. in a labor
suit for illegal dismissal, underpayment and non-payment of wages,
 Labor Standards
thirteenth-month pay, attorney's fees and damages. His
services was conditioned upon a contingent fee arrangement
granting the equivalent of 50% of the judgment award plus P300
appearance fee per hearing.
LA ruled in favor of Escultura & ordered Ultra Clean Services and Phil.
Tubercolosis Society, Inc. to reinstate them.
During the execution stage, Atty. Taganas moved to enforce his
attorney’s charging lien. However, Escultura et. al. felt aggrieved for
receiving a reduced award due to the attorney’s charging lien. They
contested the validity of the contingent fee arrangement, although 4 of
them expressed conformity.
Atty. Taganas’ contention: the invalidation of the contingent fee
agreement between him and his clients was without any legal justification
especially with respect to the 4 clients who manifested their conformity
thereto.
Yes. A contingent fee arrangement is an agreement laid down in an
express contract between a lawyer and a client in which the lawyer's
professional fee, usually a fixed percentage of what may be recovered in
the action is made to depend upon the success of the litigation. This
arrangement is valid in this jurisdiction. It is, however, under the
supervision and scrutiny of the court to protect clients from unjust
charges. Sec. 13 of the Canons of Professional Ethics provides that a
contingent fee contract should be reasonable under all circumstances of
the case. It is also subject to the supervision of the court.
The 50% of the judgment award as attorney’s fees is excessive &
unreasonable. The financial capacity and economic status of the client
have to be taken into account in fixing the reasonableness of the fee. His
clients were lowly janitors who receive miniscule salaries and that they
were precisely represented by Atty. Taganas in the labor dispute for
reinstatement and money claims to acquire what they have not been
receiving under the law and to alleviate their living condition. Hence, the
reduction of the contingent fee is proper.
Also, Atty. Taganas’ contingent fee falls within Art. 111 of LC. This article
fixes the limit on the amount of attorney's fees which a lawyer may recover
in any judicial or administrative proceedings since the labor suit where he
represented private respondents asked for the claim and recovery of
wages. In fact, the Court is not even precluded from fixing a lower amount
than the 10% ceiling prescribed by the article when circumstances
warrant it. However, considering that he was able in handling the case, his
fees need not be further reduced.
The manifestation of the 4 clients indicating their conformity with the
contingent fee contract did not make the agreement valid. The contingent
fee contract was unreasonable and unconscionable.
Five J Taxi vs. NLRC (1994)
ISSUE: WON Pulia may recover attorney’s fees as authorized
representative
Domingo Maldigan & Gilberto Sabsalon were hired by Five J Taxi as taxi
drivers. They worked for 4 days weekly on a 24-hr shifting schedule. Aside
from the daily "boundary" of P700 for air-conditioned taxi or P450 for
non-air-conditioned taxi, they were also required to pay P20 for car
washing, and to further make a P15 deposit to answer for any deficiency,
for every actual working day.
Both Maldigan & Sabsalon were terminated. They sued for illegal
dismissal & illegal deduction in their wages. Guillermo Pulia was their
authorized representative in the case filed.
No. Art. 222 LC (as amended by Sec. 3, PD 1691) states that non-
lawyers may appear before the NLRC or any labor arbiter only (1) if they
represent themselves, or (2) if they represent their organization or the
members thereof.
While it may be true that Guillermo Pulia was the authorized
representative of Maldigan & Sabsalon, he was a non-lawyer who did not
fall in either of the categories. Hence, by clear mandate of the law, he is
not entitled to attorney's fees.
Furthermore, the statutory rule that an attorney shall be entitled to have
and recover from his client a reasonable compensation for his services
necessarily imports the existence of an attorney-client relationship as a
condition for the recovery of attorney's fees, and such relationship cannot
exist unless the client's representative is a lawyer.
Amalgamated vs. CIR (1968)
ISSUE: WON the 30% attorney’s fees was reasonable
Case Digest
30 May ’56: Florentino Arceo & 47 others together with their
union, Amalgamated Laborers’ Assoc., filed a complaint for unfair labor
practices against Binalbagan Sugar Central Co.
CIR rendered a judgment, ordering the 2 regular employees to be
reinstated and the 8 seasonal workers be readmitted to their positions as
seasonal workers. It also granted them full backwages.
Upon their motion to determine the actual money due them, CIR
directed the Chief Examiner to compute the back wages due to them. The
CE reported that the total net back wages were P79,755.22.
In the interim, Atty. Leonardo Fernandez filed a Notice of Attorney’s
Lien.
Atty. Fernandez’s contention: that he had been the attorney of the
laborers since the start of the case; that he had rendered legal services to
them; that the laborer voluntarily agreed to give him, representing his
attorney's fees on contingent basis such amounts equivalent to 25%
thereof; and that the 25% attorney’s fee is reasonable considering the
length of services he rendered. He later on averred that the laborers
agreed to give him 30% of whatever money claims that may be
adjudicated to them but when the case was decided in their favor, Arsenio
Reyes begged that he reduce his attorney’s fees to 25% because they
have to satisfy Atty. Jose Carbonell’s fees in the amount of 5%. He agreed.
Atty. Carbonell’s contention: the award of the 25% to Atty. Fernandez
is excessive, unfair and illegal.
Amalgamated’s contention: the 30% attorney’s fees shall actually be
divided equally amongst Atty. Carbonell, Atty. Fernandez & Felisberto
Javier, the union president.
No. A contingent fee contract specifying the percentage of recovery an
attorney is to receive in a suit "should be reasonable under all the
circumstances of the case, including the risk and uncertainty of the
compensation, but should always be subject to the supervision of a court,
as to its reasonableness."
The stipulated 30% attorney’s fee is excessive and unconscionable. With
the exception of Arsenio Reyes who receives a monthly salary of P175, the
other successful complainants were mere wage earners paid a daily rate of
P4.20 to P5.00. Considering the long period of time that they were illegally
and arbitrarily deprived of their just pay, these laborers looked up to the
favorable money judgment as a serum to their pitiful economic malaise. A
30% slice therefrom immensely dilutes the palliative ingredient of this
judicial antidote.
The complainants are mere laborers. Contracts for legal services
between laborer and attorney should then be zealously scrutinized to the
end that a fair share of the benefits be not denied the former.
An award of 25% attorney’s fees reasonably compensates the whole of
the legal services rendered in the case. This fee must be shared by Atty.
Carbonell and Atty. Fernandez. For, after all, they are the counsel of record
of the complainants.
As to attorney’s fee in favor of Javier, the union president: void. No
division of fees for legal services is proper, except with another lawyer,
based upon a division of service or responsibility." The union president is
not the attorney for the laborers. He may seek compensation only as such
president. An agreement whereby a union president is allowed to share in
attorneys' fees is immoral.