LABOR - Wages
A. Concept and Definition
Labor Code: Articles 97-98
Omnibus Rules: Book III, Rule VII, Sections 2-9
Tan vs Lagrama
Facts: Petitioner Tan is the president of Supreme Theater Corporation and the
general manager of Crown and Empire Theaters in Butuan City. Private respondent
Leovigildo Lagrama is a painter, making ad billboards and murals for the motion
pictures shown at the Empress, Supreme, and Crown Theaters for more than 10 years,
from September 1, 1988 to October 17, 1998. On October 17, 1998, private
respondent Lagrama was summoned by Tan and upbraided: "Nangihi na naman ka
sulod sa imong drawinganan." ("You again urinated inside your work area.") When
Lagrama asked what Tan was saying, Tan told him, "Ayaw daghang estorya. Dili ko
gusto nga mo-drawing ka pa. Gikan karon, wala nay drawing. Gawas." ("Don't say
anything further. I don't want you to draw anymore. From now on, no more drawing.
Get out.")
Lagrama denied the charge against him. He claimed that he was not the only one who
entered the drawing area and that, even if the charge was true, it was a minor
infraction to warrant his dismissal. However, everytime he spoke, Tan shouted
"Gawas" ("Get out"), leaving him with no other choice but to leave the premises.
Lagrama filed a complaint with the National Labor Relations Commission (NLRC) in
Butuan City. He alleged that he had been illegally dismissed and sought
reinvestigation and payment of 13th month pay, service incentive leave pay, salary
differential, and damages.
As no amicable settlement had been reached, Labor Arbiter Rogelio P. Legaspi
directed the parties to file their position papers. It declared that the dismissal illegal
and order the payment of monetary benefits. Tan appealed to the NLRC and reversing
the decision of the Labor Arbiter.
Issue: Whether or not the respondent was illegally dismissed and thus entitled to
payment of benefits provided by law.
Ruling: The respondent was illegally dismissed and entitled to benefits. The
Implementing Rules of the Labor Code provide that no worker shall be dismissed
except for a just or authorized cause provided by law and after due process. This
provision has two aspects: (1) the legality of the act of dismissal, that is, dismissal
under the grounds provided for under Article 282 of the Labor Code and (2) the
legality in the manner of dismissal. The illegality of the act of dismissal constitutes
discharge without just cause, while illegality in the manner of dismissal is dismissal
without due process.
In this case, by his refusal to give Lagrama work to do and ordering Lagrama to get
out of his sight as the latter tried to explain his side, petitioner made it plain that
Lagrama was dismissed. Urinating in a work place other than the one designated for
the purpose by the employer constitutes violation of reasonable regulations intended
to promote a healthy environment under Art. 282(1) of the Labor Code for purposes
of terminating employment, but the same must be shown by evidence. Here there is
no evidence that Lagrama did urinate in a place other than a rest room in the
premises of his work. Instead of ordering his reinstatement as provided in Art. 279 of
the Labor Code, the Labor Arbiter found that the relationship between the employer
and employee has been so strained that the latter's reinstatement would no longer
serve any purpose. The parties do not dispute this finding. Hence, the grant of
separation pay in lieu of reinstatement is appropriate.
This is of course in addition to the payment of backwages which, in accordance with
the ruling in Bustamante v. NLRC should be computed from the time of Lagrama's
dismissal up to the time of the finality of this decision, without any deduction or
qualification.
The Bureau of Working Conditions classifies workers paid by results into two groups,
namely; (1) those whose time and performance is supervised by the employer, and
(2) those whose time and performance is unsupervised by the employer. The first
involves an element of control and supervision over the manner the work is to be
performed, while the second does not. If a piece worker is supervised, there is an
employer-employee relationship, as in this case. However, such an employee is not
entitled to service incentive leave pay since, as pointed out in Makati Haberdashery v.
NLRC 33 and Mark Roche International v. NLRC, 34 he is paid a fixed amount for work
done, regardless of the time he spent in accomplishing such work.
Philippine Spring Water vs Mahilum
Facts: Petitioner Philippine Spring Water Resources, Inc. (PSWRI), engaged in the
business of manufacturing, selling and distributing bottled mineral water, hired
Mahilum as Vice-President for Sales and Marketing for the Bulacan-South Luzon Area.
Sometime in November 2004, an inauguration of PSWRI’s Bulacan plant would be
celebrated at the same time with the company’s Christmas party. Mahilum was
designated as over-all chairman of the affair. A few days after his designation,
Mahilum called all committee chairpersons to a meeting for the program of action and
budget plan. The meeting, however, was reset to the following day. Mahilum
requested Ms. Vicky Evangelista (Evangelista), Vice-President for Administration and
LABOR - Wages
Finance, to take charge of the meeting for the inauguration should he fail to come back
on time.
Thereafter, meetings on the program of activities for the inauguration and Christmas
party were conducted without Mahilum’s presence. Evangelista took charge and
assumed the lead role until the day of the affair. But then on the inaugural day,
Mahilum was not seen around to supervise the program proper as he entertained
some visitors of the company. Mahilum’s attention was, however, called when Lua got
furious because he was not recognized during the program.
On the following day, Mahilum was required to explain why Lua was not recognized
and made to deliver his speech. At the same time, he was placed under preventive
suspension for thirty (30) days. Mahilum submitted his written explanation.
Subsequently, an investigation was conducted. When his 30-day suspension ended,
Mahilum reported for work but was prevented from entering the workplace.
Sometime in the first week of March 2005, he received a copy of the Memorandum,
dated January 31, 2005, terminating his services effective the next day or on February
1, 2005. On February 9, 2005, a clearance certificate was issued to Mahilum.
Mahilum filed a complaint for illegal dismissal with prayer for reinstatement,
payment of back wages and damages. He argued that he was illegally suspended and,
thereafter, dismissed constructively from the service. He also claimed that he was
forced to sign the waiver.
Labor Arbiter (LA) dismissed Mahilum’s complaint for lack of merit on the ground
that the quitclaim he had executed barred his right to question his dismissal under the
principle of estoppel. Being a person of sufficient aptitude and intellect Mahilum could
not have been forced to sign the document.
Issue: Whether or not CA erred to award the 0.25% commission on the cash sales of
the company from February 1, 2005 up to the finality of the decision.
Ruling: No, the Court resolves to delete the inclusion of 0.25% commission on cash
and delivery sales as part of Mahilum’s backwages. Backwages are granted on
grounds of equity to workers for earnings lost due to their illegal dismissal from
work. They represent reparation for the illegal dismissal of an employee based on
earnings which the employee would have obtained, either by virtue of a lawful decree
or order, as in the case of a wage increase under a wage order, or by rightful
expectation, as in the case of one’s salary or wage. The outstanding feature of
backwages is the degree of assuredness to an employee that he would have had them
as earnings had he not been illegally terminated from his employment. Mahilum’s
backwages must be pegged at his basic salary, excluding the commissions mentioned
by the NLRC, to be computed from the time of his dismissal up to the finality of this
decision. Nonetheless, the award of backwages shall earn legal interest at the rate of
six percent (6%) per annum in accordance with prevailing jurisprudence.
Entitlement to monetary claims
Article 279 of the Labor Code provides that an employee who is unjustly dismissed
from work shall be entitled to reinstatement without loss of seniority rights and other
privileges, to full backwages, inclusive of allowances, and to other benefits or their
monetary equivalent computed from the time his compensation was withheld from
him up to the time of his actual reinstatement. Due to the strained relations of the
parties, however, the payment of separation pay has been considered an acceptable
alternative, when reinstatement is no longer desirable or viable. On the one hand,
such payment liberates the employee from what could be a highly oppressive work
environment. On the other, the payment releases the employer from the grossly
unpalatable obligation of maintaining in its employ a worker it could no longer
trust.17 Thus, as an illegally or constructively dismissed employee, the respondent is
entitled to: (1) either reinstatement, if viable, or separation pay, if reinstatement is no
longer viable; and (2) backwages. These two reliefs are separate and distinct from
each other and are awarded conjunctively. Mahilum, as a regular employee at the time
of his illegal dismissal, is entitled to separation pay and backwages, computed from
the time of his dismissal up to the finality of the decision.
Mabeza vs NLRC
Facts: Petitioner Norma Mabeza contends that on the first week of May 1991, she and
her co-employees at the Hotel Supreme in Baguio City were asked by the hotel's
management to sign an instrument attesting to the latter's compliance with minimum
wage and other labor standard provisions of law. Petitioner signed the affidavit but
refused to go to the City Prosecutor's Office to swear to the veracity and contents of
the affidavit as instructed by management. The affidavit was nevertheless submitted
on the same day to the Regional Office of the Department of Labor and Employment in
Baguio City.
The affidavit was drawn by management for the sole purpose of refuting findings of
the Labor Inspector of DOLE apparently adverse to the private respondent. After she
refused to proceed to the City Prosecutor's Office, petitioner states that she was
ordered by the hotel management to turn over the keys to her living quarters and to
remove her belongings from the hotel premises. According to her, respondent
strongly chided her for refusing to proceed to the City Prosecutor's Office to attest to
the affidavit. She thereafter reluctantly filed a leave of absence from her job which
was denied by management. When she attempted to return to work on May 1991, the
LABOR - Wages
hotel's cashier informed her that she should not report to work and, instead, continue
with her unofficial leave of absence.
Consequently, three days after her attempt to return to work, petitioner filed a
complaint for illegal dismissal before the Arbitration Branch of the National Labor
Relations Commission — CAR Baguio City. In addition to her complaint for illegal
dismissal, she alleged underpayment of wages, non-payment of holiday pay, service
incentive leave pay, 13th month pay, night differential and other benefits.
Responding to the allegations for illegal dismissal, private respondent Peter Ng
alleged before Labor Arbiter that petitioner surreptitiously left her job without notice
to the management and that she actually abandoned her work. He maintained that
there was no basis for the money claims for underpayment and other benefits as
these were paid in the form of facilities to petitioner and the hotel's other employees.
LA decision
The Labor Arbiter ruled in favor of the hotel management on the ground of loss of
confidence. The labor arbiter’s contention that the reason for the monetary benefits
received by the petitioner between 1981 to 1987 were less than the minimum wage
was because petitioner did not factor in the meals, lodging, electric consumption and
water she received during the period of computations. She appealed to the NLRC
which affirmed the Labor Arbiter’s decision. Hence, this petition.
Issue: (1) Whether or not Mabeza’s certain facilities may be deducted from her wage.
(2) Whether or not there is unfair labor practice.
(3) Whether or not there is loss of confidence as a valid ground for dismissal.
(4) Whether or not there is abandonment.
Ruling: (1) NO, the labor arbiter’s contention that the reason for the monetary
benefits received by the petitioner between 1981 to 1987 were less than the
minimum wage was because petitioner did not factor in the meals, lodging, electric
consumption and water she received during the period of computations. Granting that
meals and lodging were provided and indeed constituted facilities, such facilities
could not be deducted without the employer complying first with certain legal
requirements. Without satisfying these requirements, the employer simply cannot
deduct the value from the employee’s wages.
First, proof must be shown that such facilities are customarily furnished by the trade.
Second, the provision of deductible facilities must be voluntary accepted in writing by
the employee. Finally, facilities must be charged at fair and reasonable value. These
requirements were not met in the instant case. Private respondent failed to present
any company policy to show that the meal and lodging are part of the salary. He also
failed to provide proof of the employee’s written authorization and he failed to show
how he arrived at the valuations. More significantly, the food and lodging, or
electricity and water consumed by the petitioner were not facilities but supplements.
A benefit or privilege granted to an employee for the convenience of the employer is
not a facility. The criterion in making a distinction between the two not so much lies
in the kind but the purpose. Considering, therefore, that hotel workers are required to
work on different shifts and are expected to be available at various odd hours, their
ready availability is a necessary matter in the operations of a small hotel, such as the
private respondent’s hotel.
(2) Yes. The pivotal question in any case where unfair labor practice on the part of the
employer is alleged is whether or not the employer has exerted pressure, in the form
of restraint, interference or coercion, against his employee’s right to institute
concerted action for better terms and conditions of employment. Without doubt, the
act of compelling employees to sign an instrument indicating that the employer
observed labor standard provisions of the law when he might not have, together with
the act of terminating or coercing those who refuse to cooperate with the employees’
scheme constitutes unfair labor practice.
(4) No. Abandonment is not present. Mabeza returned several times to inquire about
the status of her work or her employment status. She even asked for a leave but was
not granted. Her asking for leave is a clear indication that she has no intention to
abandon her work with the hotel. Even the employer knows that his purported reason
of dismissing her due to abandonment will not fly so he amended his reply to indicate
that it is actually “loss of confidence” that led to Mabeza’s dismissal.
(3) No. It is true that loss of confidence is a valid ground to dismiss an employee. But
this is ideally only applied to workers whose positions require a certain level or
degree of trust particularly those who are members of the managerial staff. Evidently,
an ordinary chambermaid who has to sign out for linen and other hotel property from
the property custodian each day and who has to account for each and every towel or
bedsheet utilized by the hotel’s guests at the end of her shift would not fall under any
of these two classes of employees for which loss of confidence, if ably supported by
evidence, would normally apply. Further, the suspicious filing by Peter Ng of a
criminal case against Mabeza long after she initiated her labor complaint against him
hardly warrants serious consideration of loss of confidence as a ground of Mabeza’s
dismissal.
LABOR - Wages
B. Wage-Fixing
Labor Code: Articles 99, 101, 120-127
R.A. 6727, R.A. 8188
R.A. 9178
NWPC Guidelines No. 2, Series of 2012, Guidelines on the Implementation of the Two-
Tiered
Wage System
Wage Order No. NCR-20
David vs. Macasio
Doctrine: Labor Law; Pakyaw Basis; Engagement on “pakyaw” or task basis does not
characterize the relationship that may exist between the parties, i.e., whether one of
employment or independent contractorship.—Engagement on “pakyaw” or task basis
does not characterize the relationship that may exist between the parties, i.e., whether
one of employment or independent contractorship. Article 97(6) of the Labor Code
defines wages as “x x x the remuneration or earnings, however designated, capable of
being expressed in terms of money, whether fixed or ascertained on a time, task,
piece, or commission basis, or other method of calculating the same, which is payable
by an employer to an employee under a written or unwritten contract of employment
for work done or to be done, or for services rendered or to be rendered[.]” In relation
to Article 97(6), Article 101 of the Labor Code speaks of workers paid by results or
those whose pay is calculated in terms of the quantity or quality of their work output
which includes “pakyaw” work and other non-time work.
Facts: In January 2009, Macasio filed before the LA a complaint against petitioner
Ariel L. David, doing business under the name and style “Yiels Hog Dealer,” for non-
payment of overtime pay, holiday pay and 13th month pay. He also claimed payment
for moral and exemplary damages and attorney’s fees. Macasio also claimed payment
for service incentive leave (SIL) David claimed that he started his hog dealer business
in 2005 and that he only has ten employees. The LA concluded that as Macasio was
engaged on “pakyaw” or task basis, he is not entitled to overtime, holiday, SIL and
13th month pay. The NLRC affirmed the LA decision, thus this case reach the CA which
says that Macasio is entitled to his monetary claims. The CA explained that as a task
basis employee, Macasio is excluded from the coverage of holiday, SIL and 13th month
pay only if he is likewise a “field personnel.” Thus this case reached the SC.
Issue: Whether or not Macasio is entitled of overtime pay, holiday pay, 13th month
pay and payment for service incentive leave.
Ruling: Yes, in so far as the Holiday and SIL pay is concern. To determine whether
workers engaged on “pakyaw” or “task basis” is entitled to holiday and SIL pay, the
presence (or absence) of employer supervision as regards the worker’s time and
performance is the key: if the worker is simply engaged on pakyaw or task basis, then
the general rule is that he is entitled to a holiday pay and SIL pay unless exempted
from the exceptions specifically provided under Article 94 (holiday pay) and Article
95 (SIL pay) of the Labor Code. However, if the worker engaged on pakyaw or task
basis also falls within the meaning of “field personnel” under the law, then he is not
entitled to these monetary benefits. CA that Macasio does not fall under the definition
of “field personnel.” The CA’s finding in this regard is supported by the established
facts of this case: first, Macasio regularly performed his duties at David’s principal
place of business; second, his actual hours of work could be determined with
reasonable certainty; and, third, David supervised his time and performance of duties.
Since Macasio cannot be considered a “field personnel,” then he is not exempted from
the grant of holiday, SIL pay even as he was engaged on “pakyaw” or task basis.
However, the governing law on 13th month pay is PD No. 851. As with holiday and SIL
pay, 13th month pay benefits generally cover all employees; an employee must be one
of those expressly enumerated to be exempted. Section 3 of the Rules and Regulations
Implementing P.D. No. 851 enumerates the exemptions from the coverage of 13th
month pay benefits. Under Section 3(e), “employers of those who are paid on task
basis, and those who are paid a fixed amount for performing a specific work,
irrespective of the time consumed in the performance thereof are exempted. Note that
unlike the IRR of the Labor Code on holiday and SIL pay, Section 3(e) of the Rules and
Regulations Implementing PD No. 851exempts employees "paid on task basis"
without any reference to "field personnel." This could only mean that insofar as
payment of the 13th month pay is concerned, the law did not intend to qualify the
exemption from its coverage with the requirement that the task worker be a "field
personnel" at the same time. Thus Macasio is not entitled to 13th month pay.
Wherefore, the petition was partially granted the petition insofar as the payment of
13th month pay to respondent is concerned. But all other aspect of the CA’s decision
was affirmed.
Nasipit Lumber Company, Inc. v. National Wages and Productivity Commission
Facts: The Region X [Tripartite Wages and Productivity] Board issued Wage Order
No. RX-01 which provides the increase in minimum wage rates applicable to workers
and employees in the private sector in Northern Mindanao (Region X)
Nasipit Lumber Company, Inc. (NALCO), Philippine Wallboard Corporation (PWC),
and Anakan Lumber Company (ALCO), claiming to be separate and distinct from each
other but for expediency and practical purposes, jointly filed an application for
exemption from the Wage Orders as distressed establishments and based the
exemption on Guidelines No. 3 issued by the herein Board, specifically Sec. 3(2)
thereof which, among others, provides:
LABOR - Wages
For purposes of this Guidelines the following criteria to determine whether the
applicant-firm is actually distressed shall be used.
xxx xxx xxx
2. Establishment belonging to distressed industry - an establishment that is
engaged in an industry that is distressed due to conditions beyond its control as
may be determined by the Board in consultation with DTI and NWPC.
Petitioners aver that they are engaged in logging and integrated wood processing
industry but are distressed due to conditions beyond their control, to wit:
1) Depressed economic conditions due to worldwide recession;
2) Peace and order and other emergency-related problems causing disruption and
suspension of normal logging operations;
3) Imposition of environmental fee for timber production in addition to regular forest
charges;
4) Logging moratorium in Bukidnon;
5) A reduction in the annual allowable volume of cut logs of NALCO& ALCO by 59%;
6) Highly insufficient raw material supply;
7) Extraordinary increases in the cost of fuel, oil, spare parts, and maintenance; 8)
Excessive labor cost/production ratio that is more or less 47%; and
9) Lumber export ban.
Private respondent unions jointly opposed the application for exemption on the
ground that said companies are not distressed establishments since their
capitalization has not been impaired by 25%.
RTWPB approved the applicants’ joint application for exemption citing liquidity
problems and business decline in the wood-processing industry. Board also took note
of the fact that petitioners are claiming for exemption, not on the strength of capital
impairment, but on the basis of belonging to a distressed industry — an
establishment that is engaged in an industry that is distressed due to conditions
beyond its control as may be determined by the Board in consultation with DTI and
NWPC.
Private respondents lodged an appeal with the NWPC, which affirmed ALCO's
application but reversed the applications of herein petitioners, NALCO and PWC.
NWPC reasoned that Guidelines No. 3 could not be used as valid basis for granting
their application for exemption since it did not pass the approval of the NWPC. Under
the Rules of Procedure on Minimum Wage Fixing dated June 4, 1990, issued by this
Commission pursuant to Republic Act 6727, particularly Section 1 of Rule VIII thereof
provides that:
Sec. 1. Application For Exemption. Whenever a wage order provides for exemption,
applications thereto shall be filed with the appropriate Board which shall process the
same, subject to guidelines issued by the Commission.
Clearly, it is the Commission that is empowered to set [the] criteria on exemption
from compliance with wage orders. While the Boards may issue supplementary
guidelines on exemption, the same should first pass the Commission for the purpose
of determining its conformity to the latter's general policies and guidelines relative
thereto. In fact, under the "Guidelines on Exemption from Compliance with the
Prescribed Wage/Cost of Living Allowance Increases Granted by the Regional
Tripartite Wages and Productivity Boards" dated February 25, 1991, issued by the
Commission, there is a provision that "(T)he Board may issue supplementary
guidelines for exemption . . . subject to review/approval by the Commission". (Section
11). In the case at bar, after the Commission Secretariat made some comments on said
Guidelines No. 3, the same was never submitted again for [the] Commission's
approval either justifying its original provisions or incorporating the comments made
thereon. Until and unless said Guidelines No. 3 is approved by the Commission, it has
no operative force and effect.
A perusal of the financial documents on record shows that for the year 1990, which is
the last full accounting period preceding the applications for exemption, appellees
NALCO, ALCO, and PWC incurred a capital impairment of 1.89%, 28.72%, and 5.03%,
respectively. Accordingly, based on the criteria set forth in the NWPC Guidelines on
Exemption, only the application for exemption of ALCO should be approved in view of
its capital impairment of 28.72%.
Hence, this petition.
Issue: W/N the guideline issued by an RTWPB without the approval of or, worse,
contrary to the guidelines promulgated by the NWPC valid
Ruling: NO. Labor Law; Wage Orders; It is the National Wages and Productivity
Commission (NWPC), not the Regional Tripartite Wages and Productivity
Boards (RTWPB), which has the power to “prescribe the rules and guidelines”
for the determination of minimum wage and productivity measures.—The
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foregoing clearly grants the NWPC, not the RTWPB, the power to “prescribe the rules
and guidelines” for the determination of minimum wage and productivity measures.
While the RTWPB has the power to issue wage orders under Article 122(b) of the
Labor Code, such orders are subject to the guidelines prescribed by the NWPC. One of
these guidelines is the “Rules on Nasipit Lumber Company, Inc. vs. National Wages
and Productivity Commission, 289 SCRA 667, G.R. No. 113097 April 27, 1998
Minimum Wage Fixing,” which was issued on June 4, 1990. Rule IV, Section 2 thereof,
allows the RTWPB to issue wage orders exempting enterprises from the coverage of
the prescribed minimum wages.
However, the NWPC has the power not only to prescribe guidelines to govern wage
orders, but also to issue exemptions therefrom, as the said rule provides that
“[w]henever a wage order provides for exemption, applications thereto shall be filed
with the appropriate Board which shall process the same, subject to guidelines issued
by the Commission.” In short, the NWPC lays down the guidelines which the RTWPB
implements.
Same; Same; Where the NWPC never assented to a Guideline issued by the
RTWPB, the said guideline is inoperative and cannot be used by the latter in
deciding or acting on an employer’s application for exemption.—Significantly,
the NWPC authorized the RTWPB to issue exemptions from wage orders, but subject
to its review and approval. Since the NWPC never assented to Guideline No. 3 of the
RTWPB, the said guideline is inoperative and cannot be used by the latter in deciding
or acting on petitioners’ application for exemption. Moreover, Rule VIII, Section 1 of
the NWPC’s Rules of Procedure on Minimum Wage Fixing issued on June 4, 1990-
which was prior to the effectivity of RTWPB Guideline No. 3-requires that an
application for exemption from wage orders should be processed by the RTWPB,
subject specifically to the guidelines issued by the NWPC.
ECOP vs NCPW
Facts: The Employers Confederation of the Philippines (ECOP) is questioning the
validity of Wage Order No. NCR-01-A stating: “Section 1. Upon the effectivity of this
Wage Order, all workers and employees in the private sector in the National Capital
Region already receiving wages above the statutory minimum wage rates up to one
hundred and twenty-five pesos (P125.00) per day shall also receive an increase of
seventeen pesos (P17.00) per day.”
ECOP assails the board's grant of an "across-the-board" wage increase to workers
already being paid more than existing minimum wage rates (up to P125. 00 a day) as
an alleged excess of authority, and alleges that under the Republic Act No. 6727, the
boards may only prescribe "minimum wages," not determine "salary ceilings."
Issue: Whether or not Wage Order No. NCR-01-A is valid.
Ruling: Yes. The determination of wages has generally involved two methods. Floor-
wage method involves the fixing of determinate amount that would be added to the
prevailing statutory minimum wage. The other involves "salary-ceiling method"
whereby the wage adjustment is applied to employees receiving a certain
denominated salary ceiling. ). The shift from the first method to the second method
was brought about by labor disputes arising from wage distortions, a consequence of
the implementation of the said wage order
It is true that wage-fixing, like rate constitutes an act Congress; it is also true,
however, that Congress may delegate the power to fix rates provided that, as in all
delegations cases, Congress leaves sufficient standards. As this Court has indicated, it
is impressed that the standards set forth by the Congress are sufficient.
It is the Court's thinking, reached after the Court's own study of the Act, that the Act is
meant to rationalize wages, that is, by having permanent boards to decide wages
rather than leaving wage determination to Congress year after year and law after law.
The Court is not of course saying that the Act is an effort of Congress to pass the buck,
or worse, to abdicate its duty, but simply, to leave the question of wages to the
expertise of experts.
Metropolitan Bank and Trust Company vs NWPC
Facts: the Regional Tripartite Wages and Productivity Board 2issued Wage Order, to
wit: Section 1. Upon effectivity of this Wage Order, all employees/workers in the private
sector throughout Region II, regardless of the status of employment are granted an
across-the-board increase of ₱15.00 daily.
In a letter-inquiry to the NWPC, the Bankers' Council for Personnel Management
(BCPM), on behalf of its member-banks, requested to seek exemption from the
coverage of the Wage Order since its member-banks are already paying more than the
prevailing minimum wage rate in the National Capital Region (NCR), which is their
principal place of business.8
In a letter-reply, NWPC stated that the member-banks are not exempted. The
petitioner sought for interpretation of the applicability of said Wage Order.10 The
NWPC referred petitioner's inquiry to the RTWPB. The RTWPB clarified that the Wage
LABOR - Wages
Order covers all private establishments situated in Region II, regardless of the
voluntary adoption by said establishments of the wage orders established in Metro
Manila and irrespective of the amounts already paid by the petitioner.
Issue: Whether or not across-the-board wage increase issued by RTWPB is valid.
Ruling: In ECOP,46 the Court declared that there are two ways of fixing the minimum
wage: the "floor-wage" method and the "salary-ceiling" method. The "floor-wage"
method involves the fixing of a determinate amount to be added to the prevailing
statutory minimum wage rates. On the other hand, in the "salary-ceiling" method, the
wage adjustment was to be applied to employees receiving a certain denominated
salary ceiling. In other words, workers already being paid more than the existing
minimum wage (up to a certain amount stated in the Wage Order) are also to be given
a wage increase.
In the present case, the RTWPB did not determine or fix the minimum wage rate by
the "floor-wage method" or the "salary-ceiling method" in issuing the Wage Order.
The RTWPB did not set a wage level nor a range to which a wage adjustment or
increase shall be added. Instead, it granted an across-the-board wage increase of
₱15.00 to all employees and workers of Region 2. In doing so, the RTWPB exceeded its
authority by extending the coverage of the Wage Order to wage earners receiving
more than the prevailing minimum wage rate, without a denominated salary ceiling.
As correctly pointed out by the OSG, the Wage Order granted additional benefits not
contemplated by R.A. No. 6727.
Thus, the Court finds that Section 1, Wage Order No. R02-03 is void insofar as it grants
a wage increase to employees earning more than the minimum wage rate; and
pursuant to the separability clause53 of the Wage Order, Section 1 is declared valid
with respect to employees earning the prevailing minimum wage rate.1awphi1.ne In
regard to the refund of the disallowed benefits, this Court holds that petitioners need
not refund the benefits received by them since they receive it in good faith.
NWPC vs. APL
Facts: On June 9, 1989, Republic Act No. 6727 was enacted into law. In order to
rationalize wages throughout the Philippines, Republic Act No. 6727 created the
NWPC and the RTWPBs of the different regions. Article 121 of the Labor Code, as
amended by Section 3 of Republic Act No. 6727, empowered the NWPC to formulate
policies and guidelines on wages, incomes and productivity improvement at the
enterprise, industry and national levels; to prescribe rules and guidelines for the
determination of appropriate minimum wage and productivity measures at the
regional, provincial or industry levels; and to review regional wage levels set by the
RTWPBs to determine whether the levels were in accordance with the prescribed
guidelines and national development plans, among others. On the other hand, Article
122(b) of the Labor Code, also amended by Section 3 of Republic Act No. 6727, tasked
the RTWPBs to determine and fix minimum wage rates applicable in their region,
provinces or industries therein; and to issue the corresponding wage orders, subject
to the guidelines issued by the NWPC.
Consequently, the RTWPB–NCR issued Wage Order No. NCR–07 on October 14, 1999
imposing an increase of P25.50/day on the wages of all private sector workers and
employees in the NCR and pegging the minimum wage rate in the NCR at
P223.50/day. However, Section 2 and Section 9 of Wage Order No. NCR–07 exempted
certain sectors and industries from its coverage. Section 9. Upon application with and
as determined by the Board, based on documentation and other requirements in
accordance with applicable rules and regulations issued by the Commission, the
following may be exempt from the applicability of this Order:
1. Distressed establishments as defined in the NPWC Guidelines No. 01, series of
1996;
2. Exporters including indirect exporters with at least 50% export sales and with
forward contracts with their foreign buyers/principals entered into on or twelve (12)
months before the date of publication of this Order may be exempt during the lifetime
of said contract but not to exceed twelve (12) months from the effectivity of this
Order.
Feeling aggrieved by their non–coverage by the wage adjustment, the Alliance of
Progressive Labor (APL) and the Tunay na Nagkakaisang Manggagawa sa Royal
(TNMR) filed an appeal with the NWPC assailing Section 2(A) and Section 9(2) of
Wage Order No. NCR–07. They contended that neither the NWPC nor the RTWPB–
NCR had the authority to expand the non–coverage and exemptible categories under
the wage order; hence, the assailed sections of the wage order should be voided.
The NWPC upheld the validity of Section 2(A) and Section 9(2) of Wage Order No.
NCR–07. It observed that the RTWPB’s power to determine exemptible categories was
adjunct to its wage fixing function conferred by Article 122(e) of the Labor Code, as
amended by Republic Act No. 6727; that such authority of the RTWPB was also
recognized in NWPC Guidelines No. 01, Series of 1996. The APL and TNMR assailed
the decisions of the NWPC on certiorari in the CA, contending that the power of the
RTWPB–NCR to determine exemptible categories was not an adjunct to its wage fixing
function. CA favored the respondents and granted the petition for certiorari.
LABOR - Wages
Issue: Whether or not the RTWPB-NCR had the authority to provide additional
exemptions from the minimum wage adjustments embodied in Wage Order No. NCR-
07.
Ruling: The RTWPB–NCR had the authority to provide additional exemptions from
the minimum wage adjustments embodied in Wage Order No. NCR–07. The NWPC
promulgated NWPC Guidelines No. 001–95 ( Revised Rules of Procedure on Minimum
Wage Fixing ) to govern the proceedings in the NWPC and the RTWPBs in the fixing of
minimum wage rates by region, province and industry. Section 1 of Rule VIII of NWPC
Guidelines No. 001–95 recognized the power of the RTWPBs to issue exemptions
from the application of the wage orders subject to the guidelines issued by the NWPC.
Under the guidelines, the RTWPBs could issue exemptions from the application of the
wage orders as long as the exemptions complied with the rules of the NWPC. In its
rules, the NWPC enumerated four exemptible establishments, but the list was not
exclusive. The RTWPBs had the authority to include in the wage orders
establishments that belonged to, or to exclude from the four enumerated exemptible
categories. If the exemption was outside of the four exemptible categories, like here,
the exemptible category should be: (1) in accord with the rationale for exemption; (2)
reviewed/approved by the NWPC; and (3) upon review, the RTWPB issuing the wage
order must submit a strong and justifiable reason or reasons for the inclusion of such
category. It is the compliance with the second requisite that is at issue here.
The NWPC, in arriving at its decision, weighed the arguments of the parties and ruled
that the RTWPB–NCR had substantial and justifiable reasons in exempting the
sectors and establishments enumerated in Section 2(A) and Section 9(2) based on
the public hearings and consultations, meetings, social–economic data and
information gathered prior to the issuance of Wage Order No. NCR–07. The very fact
that the validity of the assailed sections of Wage Order No. NCR–07 had been already
passed upon and upheld by the NWPC meant that the NWPC had already given the
wage order its necessary legal imprimatur. Accordingly, the requisite approval or
review was complied with. The RTWPBs are the thinking group of men and women
guided by statutory standards and bound by the rules and guidelines prescribed by
the NWPC. In the nature of their functions, the RTWPBs investigate and study all the
pertinent facts to ascertain the conditions in their respective regions. Hence, they are
logically vested with the competence to determine the applicable minimum wages to
be imposed as well as the industries and sectors to exempt from the coverage of their
wage orders.
Lastly, Wage Order No. NCR–07 is presumed to be regularly issued in the absence of
any strong showing of grave abuse of discretion on the part of RTWPB–NCR. The
presumption of validity is made stronger by the fact that its validity was upheld by the
NWPC upon review.
Wage Distortion
Metropolitan Bank and Trust Company vs NLRC
Facts: Respondents Patag and Flora were former employees of petitioner Metrobank.
Both respondents availed of the bank’s compulsory retirement plan in accordance
with the 1995 Officers’ Benefits Memorandum. Patag retired on February 1, 1998 as
an Assistant Manager with a monthly salary of P32,100.00. Flora retired on April 1,
1998 as a Senior Manager with a monthly salary of P48,500.00. Consequently, the
new 1998 CBA was issued increasing the retirement benefits from 185% to 200%.
The 1998 CBA covers employees for year 1998-2000 provided that they should not
resign before June 15, 1998. With this, the private respondents requested to extend
the benefits of the 1998 CBA to them but they were denied by the petitioner because
they had already resigned before June 15, 1998. The LA dismissed the complaint.
NLRC reversed the LA by granting the respondents the benefits endowed by the 1998
CBA. The CA affirmed the NLRC by stating that notwithstanding the stipulation of the
1998 CBA, it has been the petitioner’s long practice to extend the newly issued CBAs
towards its employees every 1st of January for 11 years from 1986 to 1997 without
any conditions that an employee must not resign prior to a settled date. Hence, this
petition.
Issue: Whether or not respondents can still recover higher benefits under the 1998
Officers’ Benefits Memorandum despite the fact that they have compulsorily retired
prior to the issuance of said memorandum.
Ruling: YES, it is a jurisprudential rule that where there is an established employer
practice of regularly, knowingly and voluntarily granting benefits to employees over a
significant period of time, despite the lack of a legal or contractual obligation on the
part of the employer to do so, the grant of such benefits ripens into a vested right of
the employees and can no longer be unilaterally reduced or withdrawn by the
employer
To be considered a company practice, the giving of the benefits 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.
In the case at bar, petitioner Metrobank favorably adjusted its officers’ benefits,
including retirement benefits, after the approval of each CBA with the rank and file
employees, to be effective every January 1st of the same year as the CBA’s approval,
and without any condition regarding the date of employment of the officer, from 1986
to 1997 or for about eleven (11) years. This constitutes voluntary employer practice
which cannot be unilaterally withdrawn or diminished by the employer without
LABOR - Wages
violating the spirit and intent of Art. 100 of the Labor Code which prohibits the
diminution of benefits of the employee. The condition that an officer must still be in
the service of petitioner bank as of June 15, 1998 effectively reduced benefits of
employees who retired prior to the issuance of the 1998 Officers’ Benefits
Memorandum despite the fact in the past no such condition was imposed by the bank
and previous retirees presumably enjoyed the higher benefits regardless of their date
of retirement as long as they were still employees of petitioner as of the January 1st
effectivity date.
Summary: The respondents, who were the former employees of the petitioner,
requested the benefits endowed by the 1998 CBA but they were denied by the
petitioner because the latter resigned prior to the settled date conditioned by the said
CBA. The Court ruled in favor of the respondents by stating that the long practice of
the petitioner of voluntarily covering the employees’ benefits in every CBA for 11
years from 1986 to 1997 every 1st of January without any conditions must apply also
to the 1998 CBA.
Prubankers Association vs. Prudential Bank & Trust Company Prubankers
Association vs. Prudential Bank & Trust Company
Facts: On November, the RTWPB Region V issued Wage Order No. RB 05-03 which
provided for a Cost of Living Allowance (COLA) to workers in the private sector who
had rendered service for at least three (3) months before its effectivity, and for the
same period thereafter, in the following categories: P17.50 in the cities of Naga and
Legaspi; P15.50 in the municipalities of Tabaco, Daraga, Pili and the city of Iriga; and
P10.00 for all other areas in the Bicol Region.
On November 1993, RTWPB Region VII issued Wage Order No. RB VII-03, which
directed the integration of the COLA mandated pursuant to Wage Order No. RO VII-
02-A into the basic pay of all workers. It also established an increase in the minimum
wage rates for all workers and employees in the private sector as follows: by Ten
Pesos (P10.00) in the cities of Cebu, Mandaue and Lapulapu; Five Pesos (P5.00) in the
municipalities of Compostela, Liloan, Consolacion, Cordova, Talisay, Minglanilla, Naga
and the cities of Davao, Toledo, Dumaguete, Bais, Canlaon, and Tagbilaran. The bank
granted a COLA of P17.50 to its employees at its Naga Branch, the only branch
covered by Wage Order No. RB 5-03, and integrated the P150.00 per month COLA into
the basic pay of its rank-and-file employees at its Cebu, Mabolo and P. del Rosario
branches, the branches covered by Wage Order No. RB VII-03.
On June 7, 1994, Prubankers Association wrote the petitioner requesting that the
Labor Management Committee be immediately convened to discuss and resolve the
alleged wage distortion created in the salary structure upon the implementation of
the said wage orders. It demanded in the Labor Management Committee meetings
that the petitioner extend the application of the wage orders to its employees outside
Regions V and VII, claiming that the regional implementation of the said orders
created a wage distortion in the wage rates of petitioner's employees nationwide. As
the grievance could not be settled in the said meetings, the parties agreed to submit
the matter to voluntary arbitration.
Arbitration Committee: ruled that the Bank's separate and regional implementation of
Wage Order No. VII-03 at its Cebu, Mabolo and P. del Rosario branches created a wage
distortion in the Bank nationwide which should be resolved in accordance with Art.
124 of the Labor Code
CA: petition is GRANTED. The assailed decision of the Voluntary Arbitration
Committee dated June 18, 1996 is hereby REVERSED and SET ASIDE. no wage
distortion resulted from the petitioner's separate and regional implementation of
Wage Order No. VII-03 at its Cebu, Mabolo and P. del Rosario.
Issue: Whether or not a wage distortion resulted from respondent's implementation
of the Wage Orders.
Ruling: No wage distortion. Same; Wage Distortion; 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.—Elaborating on this statutory definition, this Court ruled: “Wage
distortion presupposes a classification of positions and ranking of these positions at
various levels. One visualizes a hierarchy of positions with corresponding ranks
basically in terms of wages and other emoluments. Where a significant change occurs
at the lowest level of positions in terms of basic wage without a corresponding change
in the other level in the hierarchy of positions, negating as a result thereof the
distinction between one level of position from the next higher level, and resulting in a
parity between the lowest level and the next higher level or rank, between new
entrants and old hires, there exists a wage distortion.
Same; Same; The concept of wage distortion assumes an existing grouping or
classification of employees which establishes distinctions among such
employees on some relevant or legitimate basis.— The concept of wage distortion
assumes an existing grouping or classification of employees which establishes
distinctions among such employees on some relevant or legitimate basis. This
LABOR - Wages
classification is reflected in a differing wage rate for each of the existing classes of
employees.”
Same; Same; Elements.—Wage distortion involves four elements: 1. An existing
hierarchy of positions with corresponding salary rates; 2. A significant change in the
salary rate of a lower pay class without a concomitant increase in the salary rate of a
higher one; 3. The elimination of the distinction between the two levels; 4. The
existence of the distortion in the same region of the country.
Same; Same; Where the hierarchy of positions based on skills, length of service
and other logical bases of differentiation was preserved, it cannot be said that
there was a wage distortion.—In the present case, it is clear that no wage distortion
resulted when respondent implemented the subject Wage Orders in the covered
branches. In the said branches, there was an increase in the salary rates of all pay
classes. Furthermore, the hierarchy of positions based on skills, length of service and
other logical bases of differentiation was preserved. In other words, the quantitative
difference in compensation between different pay classes remained the same in all
branches in the affected region. Put differently, the distinction between Pay Class 1
and Pay Class 2, for example, was not eliminated as a result of the implementation of
the two Wage Orders in the said region. Hence, it cannot be said that there was a wage
distortion.
Same; Same; A disparity in wages between employees holding similar positions
but in different regions does not constitute wage distortion as contemplated by
law.—A wage parity between employees in different rungs is not at issue here, but a
wage disparity between employees in the same rung but located in different regions
of the country. Contrary to petitioner’s postulation, a disparity in wages between
employees holding similar positions but in different regions does not constitute wage
distortion as contemplated by law. As previously enunciated, it is the hierarchy of
positions and the disparity of their corresponding wages and other emoluments that
are sought to be preserved by the concept of wage distortion. Put differently, a wage
distortion arises when a wage order engenders wage parity between employees in
different rungs of the organizational ladder of the same establishment. It bears
emphasis that wage distortion involves a parity in the salary rates of different pay
classes which, as a result, eliminates the distinction between the different ranks in the
same region.
Bankard Employees Union-Workers Alliance Trade Unions vs NLRC
Facts: Bankard, Inc. (Bankard) classifies its employees by levels, to wit: Level I, Level
II, Level III, Level IV, and Level V. The Board of Directors approved the "New Salary
Scale" increased the hiring rates of new employees, to wit: Levels I and V by one
thousand pesos (P1,000.00), and Levels II, III and IV by nine hundred pesos
(P900.00). Accordingly, the salaries of employees who fell below the new minimum
rates were also adjusted to reach such rates under their levels. Consequently, Bankard
Employees Union-WATU press for the increase in the salary of its old, regular
employees. Bankard took the position, however, that there was no obligation on the
part of the management to grant to all its employees the same increase in an across-
the-board manner.
Issue: Whether or not the unilateral adoption by an employer of an upgraded salary
scale that increased the hiring rates of new employees without increasing the salary
rates of old employees resulted in wage distortion.
Ruling: The Court will not interfere in the management prerogative of the petitioner.
Prubankers Association v. Prudential Bank and Trust Company 5 laid down the four
elements of wage distortion, to wit: (1.) An existing hierarchy of positions with
corresponding salary rates; (2) A significant change in the salary rate of a lower pay
class without a concomitant increase in the salary rate of a higher one; (3) The
elimination of the distinction between the two levels; and (4) The existence of the
distortion in the same region of the country.
Thus the employees of private respondent have been "historically" classified into
levels, i.e. I to V, and not on the basis of their length of service. Put differently, the
entry of new employees to the company ipso facto place[s] them under any of the
levels mentioned in the new salary scale which private respondent adopted
retroactive [to] April 1, 1993. Petitioner cannot make a contrary classification of
private respondent’s employees without encroaching upon recognized management
prerogative of formulating a wage structure, in this case, one based on level. It is
thus clear that there is no hierarchy of positions between the newly hired and regular
employees of Bankard, hence, the first element of wage distortion provided
in Prubankers is wanting.
As National Federation of Labor v. NLRC, et al.10 teaches, the formulation of a wage
structure through the classification of employees is a matter of management
judgment and discretion and ultimately, perhaps, a subject matter for
bargaining negotiations between employer and employees.
The mere factual existence of wage distortion does not, however, ipso facto result to
an obligation to rectify it, absent a law or other source of information which requires
its rectification.
LABOR - Wages
C. Payment of Wages
Labor Code: Articles 102-105, 112-119 (check Art. 259 – Agency Fees, in relation to
Art. 112)
Omnibus Rules: Book III, Rule VIII
SHS Perforated Materials, Inc. vs. Manuel F. Diaz
Facts: SHS Perforated Materials, Inc. hired Manuel Diaz as the company’s Business
Development Manger on probationary status from July 18, 2005 to January 18, 2006
with a monthly salary of P100,000.00. Manuel’ s Probationary Employment Contract
contained his job description and his tasks. Aside from the Contract, Hartmannshenn
also instructed Manuel to report to the SHS office and plant at least two (2) days every
work week to observe technical processes involved in the manufacturing of
perforated materials, and to learn about the products of the company, which
respondent was hired to market and sell. Hartmannshenn was often abroad so
communication with Manuel was usually through e-mail or phone. There was no close
supervision over Manuel. In the Statement of Facts of the case, SHS and Manuel give
conflicting accounts of the days leading up to Manuel’s resignation. On the one hand,
SHS wanted Manuel to explain his absences and return company property before they
would give him his salary for the period November 16-30, 2005. And on the other
hand, when Manuel’s salary was withheld, he resigned on November 30, 2005 citing
the withholding of his salary as an “illegal and unfair labor practice.” In his letter he
demanded that SHS give him his salary and 13 th month pay. On December 9, 2005,
Manuel filed a Complaint against SHS for illegal dismissal, non-payment of
salaries/wages and 13 th month pay with prayer for reinstatement and full
backwages, exemplary damages and attorney’ s fees, costs of suit and legal interest.
Ruling of the Labor Arbiter
Found that respondent was constructively dismissed because the withholding of his
salary was contrary to Article 116 of the Labor Code as it was not one of the
exceptions for allowable wage deduction by the employer under Article 113 of the
Labor Code. He had no other alternative but to resign because he could not be
expected to continue working for an employer who withheld wages without valid
cause. He ruled that petitioners are jointly and severally liable to respondent for
backwages including 13th month pay as there was no showing in the salary vouchers
presented that such was integrated in the salary.
Ruling of the NLRC
NLRC reversed the LA’s decision. The withholding of respondent’s salary was said to
be a valid exercise of management prerogative. The NLRC further noted that
respondent’s 13 th month pay was already integrated in his salary in accordance with
his Probationary Contract of Employment and, therefore, no additional amount
should be due him.
Ruling of the Court of Appeals
The CA reversed the NLRC resolutions, the CA held that withholding respondent’s
salary was not a valid exercise of management prerogative as there is no such thing as
a management prerogative to withhold wages temporarily.
Issue: Whether or not the employer can exercise management prerogative in
withholding Manuel’ s wages?
Ruling: The Supreme Court said that management prerogative refers to “the right to
regulate all aspects of employment,” it cannot be understood to include the right to
temporarily withhold salary/wages without the consent of the employee. To allow
this would be contrary to Article 116 of the Labor Code which prohibits withholding
of wages and kickbacks. The only allowable deductions are in Art. 113 of the Labor
Code: (a) In cases where the worker is insured with his consent by the employer, and
the deduction is to recompense the employer for the amount paid by him as premium
on the insurance; (b) For union dues, in cases where the right of the worker or his
union to check-off has been recognized by the employer or authorized in writing by
the individual worker concerned; and (c) In cases where the employer is authorized
by law or regulations issued by the Secretary of Labor.
Further, Manuel’s duties as manager for business development entailed cultivating
business ties, connections, and clients in order to make sales. Thus because of the
nature of his job, he was frequently outside of the office and did not report to the
office on a regular schedule. The Supreme Court said just because he failed to answer
e-mails and take Hartmannshenn’s calls mean that he wasn’t working on November
16-30, 2005. However, the consistent rule is that if doubt exists between the evidence
presented by the employer and that by the employee, the scales of justice must be
tilted in favor of the latter in line with the policy mandated by Articles 2 and 3 of the
Labor Code to afford protection to labor and construe doubts in favor of labor. SHS
failed to satisfy their burden of proof, so Manuel is presumed to have worked during
the period in question and is, accordingly, entitled to his salary. Therefore, the
withholding of respondent’s salary by petitioners is contrary to Article 116 of the
Labor Code and, thus, unlawful. The Court agrees with the LA and the CA t the
unlawful withholding of respondent’s salary amounts to constructive dismissal, which
is an act of clear discrimination, insensibility, or disdain by an employer becomes so
unbearable on the part of the employee that it would foreclose any choice by him
except to forego his continued employment. It exists where there is cessation of work
LABOR - Wages
because continued employment is rendered impossible, unreasonable or unlikely, as
an offer involving a demotion in rank and a diminution in pay The Supreme Court
affirmed the CA’s decision with some modifications. Separation Pay of P50,000.00 and
no 13th month pay because it was already included in the monthly wages.
Commando Security vs NLRC
Facts: Private respondent Nemesio Decierdo was a security guard of the petitioner.
Petitioner entered into a contract to provide guarding services to the Alsons
Development and Investment Corporation (ALSONS) for a period of one year, unless
renewed under such terms and conditions as may be mutually acceptable. The
number of guards to be assigned by the petitioner would depend on ALSON's demand,
sometimes two (2) guards on a daily shift, and sometimes four (4) guards. Decierdo
was one of the guards assigned to the Aldevinco Building by the petitioner.
On February 9, 1988, Maria Mila D. Samonte, Properties Administration Head of
ALSONS, requested the petitioner for a "periodic reshuffling" of guards. Pursuant to
that reasonable request of its client, petitioner on February 10, 1988 served recall
order on Decierdo.
Detail Order 02-016 was issued to Decierdo assigning him to the Pacific Oil Company
in Bunawan, Davao City, with instruction to report to the manager, but Decierdo
refused to accept the assignment as he is going to rest for a while.
On February 11, 1988, which was the effective date of the detail order, Decierdo filed
a complaint for illegal dismissal, unfair labor practice, underpayment of wages,
overtime pay, night premium, 13th month pay, holiday pay, rest day pay and incentive
leave pay.
On June 28, 1988, the Executive Labor Arbiter rendered a decision ordering
respondent Commando Security Agency to pay complainant Nemesio Decierdo salary,
holiday and rest day pay differentials, 13th month pay differentials and service
incentive leave pay; and dismissing the complaint for illegal dismissal, unfair labor
practice, overtime pay and night premium for lack of merit.
Petitioner appealed to the NLRC which on May 26, 1989, affirmed with modification
the decision of the Labor Arbiter. Hence, this petition for certiorari alleging that the
NLRC gravely abused its discretion. The petition for certiorari is without merit.
Issue: Whether or not NLRC gravely abused its discretion in not holding that
petitioner is entitled to a 25% share of his monthly salary as agreed between them.
Ruling: Petitioner's contention that Decierdo is estopped from complaining about the
25% deduction from his salary representing petitioner's share in procuring job
placement for him, is not well taken. That provision of the employment contract was
illegal and inequitous, hence, null and void.
The constitutional provisions on social justice (Sections 9 and 10, Article II)
and protection to labor (Sec. 18, Article II) in the declaration of Principles and State
Policies, impose upon the courts the duty to be ever vigilant in protecting the rights of
workers who are placed in a contractually disadvantaged position and who sign
waivers or provisions contrary to law and public policy. We affirm the NLRC's ruling
that: It goes without saying that respondent may not deduct its so-called "share" from
the salaries of its guards without the latter's express consent and if such deductions
are not allowed by law. This is notwithstanding any previous agreement or
understanding between them. Any such agreement or contract is void ab initio being
contrary to law and public policy.
Mabeza vs NLRC
Facts: Petitioner Norma Mabeza contends that on the first week of May 1991, she and
her co-employees at the Hotel Supreme in Baguio City were asked by the hotel's
management to sign an instrument attesting to the latter's compliance with minimum
wage and other labor standard provisions of law. Petitioner signed the affidavit but
refused to go to the City Prosecutor's Office to swear to the veracity and contents of
the affidavit as instructed by management. The affidavit was nevertheless submitted
on the same day to the Regional Office of the Department of Labor and Employment in
Baguio City.
The affidavit was drawn by management for the sole purpose of refuting findings of
the Labor Inspector of DOLE apparently adverse to the private respondent. After she
refused to proceed to the City Prosecutor's Office, petitioner states that she was
ordered by the hotel management to turn over the keys to her living quarters and to
remove her belongings from the hotel premises. According to her, respondent
strongly chided her for refusing to proceed to the City Prosecutor's Office to attest to
the affidavit. She thereafter reluctantly filed a leave of absence from her job which
was denied by management. When she attempted to return to work on May 1991, the
LABOR - Wages
hotel's cashier informed her that she should not report to work and, instead, continue
with her unofficial leave of absence.
Consequently, three days after her attempt to return to work, petitioner filed a
complaint for illegal dismissal before the Arbitration Branch of the National Labor
Relations Commission — CAR Baguio City. In addition to her complaint for illegal
dismissal, she alleged underpayment of wages, non-payment of holiday pay, service
incentive leave pay, 13th month pay, night differential and other benefits.
Responding to the allegations for illegal dismissal, private respondent Peter Ng
alleged before Labor Arbiter that petitioner surreptitiously left her job without notice
to the management and that she actually abandoned her work. He maintained that
there was no basis for the money claims for underpayment and other benefits as
these were paid in the form of facilities to petitioner and the hotel's other employees.
LA Decision
The Labor Arbiter ruled in favor of the hotel management on the ground of loss of
confidence. The labor arbiter’s contention that the reason for the monetary benefits
received by the petitioner between 1981 to 1987 were less than the minimum wage
was because petitioner did not factor in the meals, lodging, electric consumption and
water she received during the period of computations. She appealed to the NLRC
which affirmed the Labor Arbiter’s decision. Hence, this petition.
Issue: (1) Whether or not Mabeza’s certain facilities may be deducted from her wage.
(2) Whether or not there is unfair labor practice.
(3) Whether or not there is abandonment.
(4) Whether or not there is loss of confidence as a valid ground for dismissal
Ruling: (1) NO, the labor arbiter’s contention that the reason for the monetary
benefits received by the petitioner between 1981 to 1987 were less than the
minimum wage was because petitioner did not factor in the meals, lodging, electric
consumption and water she received during the period of computations. Granting that
meals and lodging were provided and indeed constituted facilities, such facilities
could not be deducted without the employer complying first with certain legal
requirements. Without satisfying these requirements, the employer simply cannot
deduct the value from the employee’s wages.
First, proof must be shown that such facilities are customarily furnished by the trade.
Second, the provision of deductible facilities must be voluntary accepted in writing by
the employee. Finally, facilities must be charged at fair and reasonable value. These
requirements were not met in the instant case. Private respondent failed to present
any company policy to show that the meal and lodging are part of the salary. He also
failed to provide proof of the employee’s written authorization and he failed to show
how he arrived at the valuations. More significantly, the food and lodging, or
electricity and water consumed by the petitioner were not facilities but supplements.
A benefit or privilege granted to an employee for the convenience of the employer is
not a facility. The criterion in making a distinction between the two not so much lies
in the kind but the purpose. Considering, therefore, that hotel workers are required to
work on different shifts and are expected to be available at various odd hours, their
ready availability is a necessary matter in the operations of a small hotel, such as the
private respondent’s hotel.
(2) Yes. The pivotal question in any case where unfair labor practice on the part of the
employer is alleged is whether or not the employer has exerted pressure, in the form
of restraint, interference or coercion, against his employee’s right to institute
concerted action for better terms and conditions of employment. Without doubt, the
act of compelling employees to sign an instrument indicating that the employer
observed labor standard provisions of the law when he might not have, together with
the act of terminating or coercing those who refuse to cooperate with the employees’
scheme constitutes unfair labor practice.
(3) No. Abandonment is not present. Mabeza returned several times to inquire about
the status of her work or her employment status. She even asked for a leave but was
not granted. Her asking for leave is a clear indication that she has no intention to
abandon her work with the hotel. Even the employer knows that his purported reason
of dismissing her due to abandonment will not fly so he amended his reply to indicate
that it is actually “loss of confidence” that led to Mabeza’s dismissal.
(4) No. It is true that loss of confidence is a valid ground to dismiss an employee. But
this is ideally only applied to workers whose positions require a certain level or
degree of trust particularly those who are members of the managerial staff. Evidently,
an ordinary chambermaid who has to sign out for linen and other hotel property from
the property custodian each day and who has to account for each and every towel or
bedsheet utilized by the hotel’s guests at the end of her shift would not fall under any
of these two classes of employees for which loss of confidence, if ably supported by
evidence, would normally apply. Further, the suspicious filing by Peter Ng of a
criminal case against Mabeza long after she initiated her labor complaint against him
hardly warrants serious consideration of loss of confidence as a ground of Mabeza’s
dismissal.
LABOR - Wages
D. Thirteenth-Month Pay
Presidential Decree No. 851 (1975)
Memorandum Order No. 28 (1986)
Revised Guidelines on the Implementation of the 13th Month Pay Law
Dole Philippines, Inc. vs. Leogardo, Jr. Dole Philippines, Inc. vs. Leogardo, Jr.,
Facts: STANFILCO, a company merged with petitioner Dole Philippines, inc entered
into a collective bargaining agreement with the Associated Labor Union (ALU). The
CBA provided among others, the grant of a year-end productivity bonus to all workers
within the collective bargaining unit. The company agrees to grant each worker
within the bargaining unit a year-end productivity bonus equivalent to ten days of his
basic daily wage if eighty percent or more of the average total production for the two
preceding calendar years together with the current year’s estimate is attained. This
bonus is exclusive of any bonus which the Company may be presently giving or may
give in the future to its workers pursuant to the COMPANY's rights under Section 4,
Article I of this Agreement.
Thereafter, PD 851 took effect. Section 1 thereof required all employers to pay 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. Section 2, however exempted from its coverage those employers already paying
their employees a 13th month pay or its equivalent.
Sec. 3 of The Rules and regulations Implementing PD 851 provides that the term “its
equivalent” shall include Christmas bonus, mid-year bonus, profit sharing payments
and other cash bonuses amounting to not less than 1/12 th of the basic salary but shall
not include cash and stock dividends, cost of living allowances and other allowances
regularly enjoyed by the employees as well as non-monetary benefits. The rules
further added that where an employer pays less than 1/12 th of the employee’s basic
salary, the employer shall pay the difference.
Complying with the provision of PD 851 and relying on the interpretation of section 2
by the MOLE’s implementing rules, STANFILCO paid its workers the difference
between 1/12th of their yearly basic salary and their year-end productivity bonus.
Respondent ALU, joined by petitioner’s employees filed a complaint for the non-
implementation of the CBA provision on the year-end productivity bonus.
Regional Director of MOLE issued an order sustaining respondents' position that the
year-end productivity bonus, being a contractual commitment, is separate and
distinct from the 13th month pay and must, therefore, be paid separately in full.
On appeal, the respondent Deputy Minister of Labor affirmed the order.
Issue: WON productivity bonus agreed in the CBA is demandable aside from the
13th month pay provided for in the PD 851.
Ruling: NO.
Labor Law; Productivity bonus agreed upon in the Collective Bargaining
Agreement is not demandable over and above the 13th month pay provided for
in P.D. 851.—Tested against this norm, it becomes clear that the year-end
productivity bonus granted by petitioner to private respondents pursuant to their
CBA is, in legal contemplation, an integral part of their 13th month pay,
notwithstanding its conditional nature. When, therefore, petitioner, in order to
comply with the mandate of PD No. 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. For in the event that
"an employer pays less than one-twelfth of the employees' basic salary, all that said
employer is required to do under the law is to pay the difference."
To hold otherwise would be to impose an unreasonable and undue burden upon those
employers who had demonstrated their sensitivity and concern for the welfare of
their employees. A contrary stance would indeed create an absurd situation whereby
an employer who started giving his employees the 13th month pay only because of
the unmistakable force of the law would be in a far better position than another who,
by his own magnanimity or by mutual agreement, had long been extending to his
employees the benefits contemplated under PD No. 851, by whatever nomenclature
these benefits have come to be known. Indeed, PD No. 851, a legislation benevolent in
its purpose, never intended to bring about such oppressive situation.
Universal Corn Products vs NLRC
Facts: The petitioner and the Universal Corn Products Workers Union entered into a
collective bargaining agreement with a duration of three years. The collective
bargaining agreement in question expired without being renewed. On June 1, 1979,
the parties entered into an "addendum" stipulating certain wage increases covering
the years from 1974 to 1977. Simultaneously, they entered into a collective
bargaining agreement for the years from 1979 to 1981. Like the "addendum," the new
collective bargaining agreement did not refer to the "Christmas bonus" theretofore
paid but dealt only with salary adjustments. According to the petitioner, the new
agreements deliberately excluded the grant of Christmas bonus with the enactment of
Presidential Decree No. 851. For failure of the petitioner to pay the seven-day
LABOR - Wages
Christmas bonus for 1975 to 1978 inclusive, in accordance with the 1972 CBA, the
union went to the labor arbiter for relief.
Ruling: Bonus provided in the bargaining agreement was meant to be in
addition to the legal requirement; Difference between the bonus under the CBA
and the 13th month pay.— We apply instead, United CMC Textile Workers Union v.
Valenzuela, a recent decision. In that case this Court, speaking through Mr. Justice
Edgardo Paras, held: x x x If the Christmas bonus was included in the 13th month pay,
then there would be no need for having a specific provision on Christmas bonus in the
CBA. But it did not provide for a bonus in graduated amounts depending on the length
of service of the employee. The intention is clear therefore that the bonus provided in
the CBA was meant to be in addition to the legal requirement. Moreover, why exclude
the payment of the 1978 Christmas bonus and pay only the 1979-1980 bonus. The
classification of the company's workers in the CBA according to their years of service
supports the allegation that the reason for the payment of bonus was to give bigger
award to the senior employees—a purpose which is not found by P.D. 851. A bonus
under the CBA is an obligation created by the contract between the management and
workers while the 13th month pay is mandated by the law (P.D. 851).
Same; Same; Same; Same; Seven-day bonus is in addition to the legal
requirement.—ln the same vein, we consider the seven-day bonus here demanded
"to be in addition to the legal requirement." Although unlike the Valenzuela CBA,
which took effect after the promulgation of Presidential Decree No. 851 in 1975, the
subject agreement was entered into as early as 1972, that is no bar to our application
of Valenzuela. What is significant for us is the fact that, like the Valenzuela agreement,
the Christmas bonus provided in the collective bargaining agreement accords a
reward, in this case, for loyalty, to certain employees. This is evident from the
stipulation granting the bonus in question to workers "with at least one (1) year of
continuous service." As we said in Valenzuela, this is "a purpose not found in P.D.
851."
Same; Same; Same; Same; Same; Fact that the new collective bargaining
agreements are silent on the 7-day bonus should not preclude the private
respondent's claims thereon; The 1972 agreement is basis enough for such
claims.—It is claimed, however, that as a consequence of the impasse between the
parties beginning 1974 through 1979, no collective bargaining agreement was in
force during those intervening years. Hence, there is allegedly no basis for the money
award granted by the respondent labor body. But it is not disputed that under the
1972 collective bargaining agreement, "[i]f no agreement and negotiations are
continued, all the provisions of this Agreement shall remain in full force up to the time
a new agreement is executed." The fact, therefore, that the new agreements are silent
on the seven-day bonus demanded should not preclude the private respondents'
claims thereon. The 1972 agreement is basis enough for such claims for the whole
writing is " 'instinct with an obligation,' imperfectly expressed."
San Miguel Corp vs. Inciong
Facts: On January 3, 1977, Cagayan Coca-Cola Free Workers Union, private
respondent herein, filed a complaint against San Miguel Corporation (Cagayan Coca-
Cola Plant), petitioner herein, 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. The Regional Office No. 10 ruled in favor of the union
which ordered herein petitioner “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.” The order of the Regional Office was affirmed by
herein public respondent Deputy Minester Inciong in behalf of the Minister of Labor
Issue: Whether or not 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 are included in the computation of 13th-month pay under
Presidential Decree 851.
Contentions of herein petitioner: 1.) Presidential Decree 851 speaks only of basic
salary as basis for the determination of the 13th-month pay; 2.) Submits that
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; 3.) Concludes that the inclusion of those payments in the
computation of the 13thmonth pay is clearly not sanctioned by Presidential Decree
851.
Ruling: The Court finds petitioner's contention meritorious. The Court cited the
provisions of the law in dispute which are Section 1 of Presidential Decree 851 and
Section 2 of the Rules and Regulations. Under Presidential Decree 851 and its
implementing rules, 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 the Rules and Regulations Implementing Presidential Decree
851, 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.
LABOR - Wages
Under a later set of Supplementary Rules and Regulations Implementing Presidential
Decree 851 issued by the then Labor Secretary Blas Ople, 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 Presidential Decree 525 and Letter of Instructions No. 174, and
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 to strip basic salary
of any and all additions which may be in the form of allowances or "fringe" benefits.
Moreover, the Supplementary Rules and Regulations Implementing Presidential
Decree 851 is even more emphatic in declaring that earnings and other
remunerations which are not part of the basic salary shall not be included in the
computation of the 13thmonth pay. While doubt may have been created by the prior
Rules and Regulations Implementing Presidential Decree 851 which defines basic
salary to include all remunerations or earnings paid by an employer to an employee,
this cloud is dissipated in the later and more controlling Supplementary Rules and
Regulations which categorically, exclude from the definition of basic salary earnings
and other remunerations paid by employer to an employee. A cursory perusal of the
two sets of Rules indicates that what has hitherto been the subject of a broad
inclusion is now a subject of broad exclusion. The Supplementary rules and
Regulations cure the seeming tendency of the former rules to include all
remunerations and earnings within the definition of basic salary. The all-embracing
phrase "earnings and other renumeration" which are deemed not part of the basic
salary includes within its meaning 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 hard to find any "earnings and other remunerations" expressly
excluded in the computation of the 13thmonth pay. Then the exclusionary provision
would prove to be Idle and with no purpose. According to the Court, the conclusion
finds basis in Section 87 and Section 93 of the Labor Code. 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 Supplementary Rules and Regulations Implementing Presidential
Decree 851. It is likewise clear that prernium 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. For similar reason it shall not be considered in the computation
of the 13th- month pay.
Philippine Duplicators vs NLRC
Facts: Petitioner Corporation pays its salesmen a small fixed or guaranteed wage; the
greater part of the latter’s wages or salaries being composed of the sales or incentive
commissions earned on actual sales of duplicating machines closed by them. Thus the
sales commissions received for every duplicating machine sold constituted part of the
basic compensation or remuneration of the salesmen of the Philippine Duplicators for
doing their job.
The Labor Arbiter directed Petitioner Duplicators to pay 13th month pay to private
respondent employees computed on the basis of their fixed wages plus sales
commission. Sec. 4 of the Supplementary Rules and Regulations Implementing PD No.
851 (Revised Guidelines Implementing 13th Month Pay) provides that overtime pay,
earning and other remuneration which are not part of the basic salary shall not be
included in the computation of the 13th month pay.
Petitioner Corporation contends that their sales commission should not be included in
the computation of the 13th month pay invoking the consolidated cases of Boie-
Takeda Chemicals, Inc. vs Hon. Dionisio dela Serna and Philippine Fuji Xerox Corp. vs
Hon. Crecencio Trajano, were the so-called commissions of medical representatives of
Boie-Takeda Chemicals and rank-and-file employees of Fuji Xerox Co. were not
included in the term “basic salary” in computing the 13th month pay.
Issue: (1) Whether or not sales commissions comprising a pre-determined percent of
the selling price of the goods are included in the computation of the 13th month pay.
(2) Whether or not productivity bonus shall be considered as part of wages in 13th
month pay.
Ruling: (1) Yes, these commission which are an integral part of the basic salary
structure of the Philippine Duplicator’s employees-salesmen, are not overtime
payments, nor profit-sharing payments nor any other fringe benefit. Thus, salesmen’s
commissions comprising a pre-determined percent of the selling price of the goods
were properly included in the term “basic salary” for purposes of computing the 13th
month pay. Commissions of medical representatives of Boie-Takeda Chemicals and
rank-and-file employees of Fuji Xerox Co. were not included in the term “basic salary”
because these were paid as “productivity bonuses” which is not included in the
computation of 13th month pay.
(2) Productivity bonuses are generally tied to the productivity, or capacity for
revenue production, of a corporation; such bonuses closely resemble profit-sharing
payments and have no clear director necessary relation to the amount of work
actually done by each individual employee. More generally, a bonus is an amount
LABOR - Wages
granted and paid ex gratia to the employee; its payment constitutes an act of
enlightened generosity and self-interest on the part of the employer, rather than as a
demandable or enforceable obligation. Since productivity bonus is not demandable,
then it cannot be considered part of basic salary when time comes to compute 13th
month pay.
Additional payments made to employees, to the extent they partake of the nature of
profit-sharing payments, are properly excluded from the ambit of the term "basic
salary" for purposes of computing the 13th month pay due to employees. Such
additional payments are not "commissions" within the meaning of the second
paragraph of Section 5 (a) of the Revised Guidelines Implementing 13th Month Pay.
The Supplementary Rules and Regulations Implementing P.D. No. 851 subsequently
issued by former Labor Minister Ople sought to clarify the scope of items excluded in
the computation of the 13th month pay; Sec. 4. Overtime pay, earnings and other
remunerations which are not part of the basic salary shall not be included in the
computation of the 13th month pay.
Boie-Takeda Chemicals, Inc. vs. De la Serna
Facts: Sections 1 and 2 of Presidential Decree No. 851, the Thirteenth Month Pay Law,
read as follows:
Sec 1. All employees are hereby required to pay all their employees receiving
basic salary of not more than P1,000.00 a month, regardless of the nature of
the employment, a 13th month pay not later than December 24 of every year.
Sec. 2. Employers already paying their employees a 13th month pay or its
equivalent are not covered by this Decree.
The Rules and Regulations Implementing P.D. 851 promulgated by then Labor
Minister Blas Ople on December 22, 1975 contained the following relevant provisions
relative to the concept of "thirteenth month pay" and the employers exempted from
giving it, to wit:
Sec. 2. Definition of certain terms. — . . .
a) "Thirteenth month pay" shall mean one twelfth (1/12) of the basic salary
of an employee within a calendar year;
b) "Basic Salary" shall include all remunerations or earnings paid by an
employer to an employee for services rendered but may not include cost of
living allowances granted pursuant to Presidential Decree No. 525 or Letter
of Instructions No. 174, profit sharing payments, and all allowances and
monetary benefits which are not considered or integrated as part of the
regular or basic salary of the employee at the time of the promulgation of the
Decree on December 16, 1975.
Sec. 3. Employers covered. — . . . (The law applies) to all employers except to:
xxx xxx xxx
c) Employers already paying their employers a 13-month pay or more in
calendar year or is equivalent at the time of this issuance;
xxx xxx xxx
e) Employers of those who are paid on purely commission, boundary, or task
basis, and those who are paid a fixed amount for performing a specific work,
irrespective of the time consumed in the performance thereof, except where
the workers are paid on piece-rate basis in which case the employer shall be
covered by this issuance insofar as such workers are concerned.
xxx xxx xxx
The term "its equivalent" as used in paragraph (c) 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
cash and stock dividends, cost of living allowances and all other allowances
regularly enjoyed by the employee, as well as non-monetary benefits. Where
an employer pays less than 1/12th of the employee's basic salary, the
employer shall pay the difference.
Supplementary Rules and Regulations implementing P.D. 851 were subsequently
issued by Minister Ople which inter alia set out items of compensation not included in
the computation of the 13th month pay, viz.:
Sec. 4. Overtime pay, earnings and other remunerations which are not part of
the basic salary shall not be included in the computation of the 13th month
pay.
On August 13, 1986, President Corazon C. Aquino promulgated Memorandum Order
No. 28, which contained a single provision modifying Presidential Decree No. 851 by
removing the salary ceiling of P1,000.00 a month set by the latter, as follows:
LABOR - Wages
Section 1 of Presidential Decree No. 851 is hereby modified to the extent that
all employers are hereby required to pay all their rank-and-file employees a
13th month pay not later than December 24, of every year.
Slightly more than a year later, on November 16, 1987, Revised Guidelines on the
Implementation of the 13th Month Pay Law were promulgated by then Labor
Secretary Franklin Drilon which, among other things, defined with particularity what
remunerative items were and were not embraced in the concept of 13th month pay,
and specifically dealt with employees who are paid a fixed or guaranteed wage plus
commission. The relevant provisions read:
4. Amount and payment of 13th Month Pay.
xxx xxx xxx
The basic salary of an employee for the purpose of computing the 13th month
pay shall include all remunerations or earnings paid by the employer for
services rendered but does not include allowances and monetary benefits
which are not considered or integrated as part of the regular or basic salary,
such as the cash equivalent of unused vacation and sick leave credits,
overtime, premium, night differential and holiday pay, and cost-of-living
allowances. However, these salary-related benefits should be included as part
of the basic salary in the computation of the 13th month pay if by individual
or collective agreement, company practice or policy, the same are treated as
part of the basic salary of the employees.
xxx xxx xxx
5. 13th Month Pay for Certain Types of Employees.
(a) Employees Paid by Results. — Employees who are paid on piece work
basis are by law entitled to the 13th month pay.
Employees who are paid a fixed or guaranteed wage plus commission are
also entitled to the mandated 13th month pay based on their total earnings
during the calendar year, i.e., on both their fixed or guaranteed wage and
commission.
This was the state of the law when the controversies at bar arose out of the
following antecedents:
A routine inspection was conducted on May 2, 1989 in the premises of petitioner
Boie-Takeda Chemicals Inc. by Labor and Development officer Reynaldo B. Ramos
under Inspection Authority No. 4-209-89. It was found out that Boie-Takeda had not
been including the commissions earned by its medical representatives in the
computation of their 13th month pay.
Ramos served a Notice of Inspection Results on Boie-Takeda through its president
(Mr. Benito Araneta) requiring Boie-Takeda that within 10 calendar days from notice
to effect restitution or correction of “the underpayment of 13th month pay for the
years 1986, 1987 and 1988 of med reps in the amount of Php 558, 810.89. Boie-
Tekeda wrote the Labor Department contesting the Notice of Inspection Results and
expressing that the commission paid to the med reps are not included in the
computation of the 13th month pay. It also pointed out that if there were no sales
made under the effort of a particular rep, there’s no commission during the period
when no sale was transacted so commissions are not and cannot be legally defined as
regular in nature.
A motion for reconsideration was filed by Boie-Takeda. Acting Labor Secretary De La
Serna affirmed the order on July 24, 1989 with modification that the commissions
earned by the med reps before August 13, 1989, the effectivity date of Memorandum
Order No. 28 and its implementing guidelines, shall be excluded in the computation of
the 13th month pay.
Issue: W/N the commissions earned by the med reps should be included in the
computation of the 13th month pay.
Ruling: NO.
Labor Law; 13th Month Pay; Memorandum Order No. 28 did not repeal,
supersede or abrogate P.D. 851, thus the interpretation given to the term “basic
salary” remains the same.—Contrary to respondents’ contention, Memorandum
Order No. 28 did not repeal, supersede or abrogate P.D. 851. As may be gleaned from
the language of Memorandum Order No. 28, it merely “modified” Section 1 of the
decree by removing the P1,000.00 salary ceiling. The concept of 13th Month Pay as
envisioned, defined and implemented under P.D. 851 remained unaltered, and while
entitlement to said benefit was no longer limited to employees receiving a monthly
basic salary of not more than P1,000.00, said benefit was, and still is, to be computed
on the basic salary of the employee-recipient as provided under P.D. 851. Thus, the
interpretation given to the term “basic salary” as defined in P.D. 851 applies equally to
“basic salary” under Memorandum Order No. 28.
Same; “Basic salary”; Commissions do not form part of the “basic salary”.—In
remunerative schemes consisting of a fixed or guaranteed wage plus commission, the
fixed or guaranteed wage is patently the “basic salary” for this is what the employee
receives for a standard work period. Commissions are given for extra efforts exerted
LABOR - Wages
in consummating sales or other related transactions. They are, as such, additional pay,
which this Court has made clear do not form part of the “basic salary.”
Philippine Agricultural Commercial And Industrial Workers Union (PACIWU)-
TUCP vs NLRC
Facts: Petitioner union instituted a complaint with NLRC Regional Arbitration Branch
No. VI for payment of 13th month pay in behalf of the drivers and conductors of
respondent company's Visayan operation on the ground that although said drivers
and conductors are compensated on a "purely commission" basis as described in their
Collective Bargaining Agreement (CBA), they are automatically entitled to the basic
minimum pay mandated by law should said commission be less than their basic
minimum for eight (8) hours work.
In its position paper, respondent Vallacar Transit, Inc. contended that 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
paragraph 2 of the Revised Guidelines on the Implementation of the Thirteenth Month
Pay Law.2 It further contended that Section 2 of Article XIV of the Collective
Bargaining Agreement (CBA) concluded on October 17, 1988 expressly provided that
"drivers and conductors paid on a purely commission are not legally entitled to 13th
month pay." Said CBA, being the law between the parties, must be respected,
respondent opined. LA and NLRC dismissed the complaint.
Issue: Whether or not the bus drivers and conductors of respondent Vallacar Transit,
Inc. are entitled to 13th month pay.
Ruling: Yes. It is clear that every employee receiving a commission in addition to a
fixed or guaranteed wage or salary, is entitled to a 13th month pay. For purposes of
entitling rank and file employees 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.
In the case at bench, while the bus drivers and conductors of respondent company are
considered by the latter as being compensated on a commission basis, they are not
paid purely by what they receive as commission. As admitted by respondent company,
the said bus drivers and 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 eight (8) hours work.6 Evidently therefore, the commissions form part
of the wage or salary of the bus drivers and conductors.
Same; Same; Same; What is controlling is not the label attached to the
remuneration that the employee receives but the nature of the remuneration
and the purpose for which the 13th month pay was given.—What is controlling is
not the label attached to the remuneration that the employee receives but the nature
of the remuneration and the purpose for which the 13th month pay was given to
alleviate the plight of the working masses who are receiving low wages.
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 one-twelfth (1/12) of their total earnings
during the calendar year.
E. Service Charge
Labor Code: Article 96
Omnibus Rules: Book III, Rule VI
F. Non-Diminution
Labor Code: Article 100
Sevilla Trading Company vs. Semana
Facts: For two (2) to three (3) years, petitioner Sevilla Trading was paying its
employees 13th month pay based on a figure which included the amount of benefits
other than the basic pay. In computing, petitioner added to the basic pay the following
benefits: (a) overtime premium, (b) legal holiday pay, (c) night premium, (d)
bereavement leave pay, (e) union leave pay, (f) maternity leave pay, (g) paternity
leave pay, (h) company vacation and sick leave pay and (i) cash conversion of unused
company vacation and sick leave. Thereafter, petitioner changed its computation to
exclude the aforementioned benefits in the computation of 13th month pay. It cited
the implementing rules of PD 851 which provides, “Basic salary shall include all
remunerations or earnings paid by an employer to an employee for services rendered
but may not include cost-of-living allowances granted pursuant to P.D. No. 525 or
Letter of Instruction No. 174, profit-sharing payments, and all allowances and
monetary benefits which are not considered or integrated as part of the regular or
basic salary of the employee at the time of the promulgation of the Decree on
December 16, 1975.”. The petitioner blamed the alleged error in computation to its
previous personnel who was in charge of payroll. Private respondent Union contested
the new computation which reduced the employees’ thirteenth month pay. The issue
was submitted to respondent Accredited Voluntary Arbitrator Tomas Semana. The
Union alleged that petitioner violated the rule prohibiting the diminution of
employees’ benefits, as provided by Art. 100 of Labor Code. Petitioner maintained that
LABOR - Wages
the change is only a rectification of the mistake committed by its personnel in
previous years. AVA Semana decided in favor of the Union. Petitioner filed a petition
for certiorari before the Court of Appeals but it was dismissed. Hence, the present
case.
Issue: Whether or not the change in computation of 13th month pay constitutes
diminution of benefits.
Ruling: Yes, there is diminution of benefits. The claim of petitioner that the inclusion
of other benefits in the previous computation of 13th month pay was only a mistake
cannot stand. The law on 13th month pay and jurisprudence at that time was clear.
Also, the petitioner prepares its financial statement regularly thru a certified public
accountant. Hence, it cannot set up mistake as a defense. In many cases decided by the
Supreme Court, it was held that grant of benefits which ripened into
company/employer practice or policy cannot be withdrawn peremptorily. In the case
at bar, the petitioner used to include non-basic benefits in computing 13th month pay
for at least two (2) years. This constitutes a voluntary employer practice which cannot
be unilaterally withdrawn by the employer without violating Art 100 of Labor Code.
Arco Metal vs. Samahan ng Manggagawa sa Arco
Facts: Petitioner is a company engaged in the manufacture of metal products,
whereas respondent is the labor union of petitioner’s rank and file employees.
Sometime in December 2003, petitioner paid the 13th month pay, bonus, and leave
encashment of three union members in amounts proportional to the service they
actually rendered in a year, which is less than a full 12 months. Respondent protested
the prorated scheme, claiming that on several occasions petitioner did not prorate the
payment of the same benefits to 7 employees who had not served for the full 12
months. The payments were made in 1992, 1993, 1994, 1996, 1999, 2003, and 2004.
According to respondent, the prorated payment violates the rule against diminution
of benefits under Article 100 of the Labor Code. Thus, they filed a complaint before
the NCMB. The parties submitted the case for voluntary arbitration.
The voluntary arbitrator, Mangabat, ruled in favor of petitioner and found that the
giving of the contested benefits in full, irrespective of the actual service rendered
within one year has not ripened into a practice. He noted the affidavit of Baingan,
manufacturing group head of petitioner, which states that the giving in full of the
benefit was a mere error. He also interpreted the phrase “for each year of service”
found in the pertinent CBA provisions to mean that an employee must have rendered
one year of service in order to be entitled to the full benefits provided in the CBA.
The CA ruled that the CBA did not intend to foreclose the application of prorated
payments of leave benefits to covered employees. The appellate court found that
petitioner, however, had an existing voluntary practice of paying the aforesaid
benefits in full to its employees, thereby rejecting the claim that petitioner erred in
paying full benefits to its seven employees. The appellate court noted that aside
from the affidavit of petitioner’s officer, it has not presented any evidence in support
of its position that it has no voluntary practice of granting the contested benefits in
full and without regard to the service actually rendered within the year. It also
questioned why it took petitioner 11 years before it was able to discover the alleged
error.
Issue: Whether or not the grant of 13th month pay, bonus, and leave encashment in
full regardless of actual service rendered constitutes voluntary employer practice and,
consequently, whether or not the prorated payment of the said benefits constitute
diminution of benefits under Article 100 of the Labor Code.
Ruling: Any benefit and supplement being enjoyed by employees cannot be reduced,
diminished, discontinued or eliminated by the employer. The principle of non-
diminution of benefits is founded on the Constitutional mandate to "protect the rights
of workers and promote their welfare and to afford labor full protection. Said
mandate in turn is the basis of Article 4 of the Labor Code which states that all doubts
in the implementation and interpretation of this Code, including its implementing
rules and regulations shall be rendered in favor of labor.
Jurisprudence is replete with cases which recognize the right of employees to benefits
which were voluntarily given by the employer and which ripened into company
practice. Thus in DavaoFruits Corporation v. Associated Labor Unions, et al. where an
employer had freely and continuously included in the computation of the 13th month
pay those items that were expressly excluded by the law, we held that the act which
was favorable to the employees though not conforming to law had thus ripened into a
practice and could not be withdrawn, reduced, diminished, discontinued or
eliminated. In Sevilla Trading Company v. Semana, we ruled that the employer’s act of
including non-basic benefits in the computation of the 13th month pay was a
voluntary act and had ripened into a company practice which cannot be peremptorily
withdrawn.
In the years 1992, 1993, 1994, 1999, 2002 and 2003, petitioner had adopted a policy
of freely, voluntarily and consistently granting full benefits to its employees
regardless of the length of service rendered. True, there were only a total of seven
employees who benefited from such a practice, but it was an established practice
nonetheless. Jurisprudence has not laid down any rule specifying a minimum number
of years within which a company practice must be exercised in order to constitute
voluntary company practice. Thus, it can be six (6) years, three (3) years, or even as
LABOR - Wages
short as two (2) years. Petitioner cannot shirk away from its responsibility by merely
claiming that it was a mistake or an error, supported only by an affidavit of its
manufacturing group head. Hence, petition was denied.
Globe Mackay Cable and Radio Corp. vs. NLRC
Facts: Wage Order No. 6 increased the cost-of-living allowance (COLA) of non-
agricultural workers in the private sector. Petitioner Corporation complied with said
Order by paying its monthly-paid employees the mandated P3.00 per day COLA. In its
computation, Petitioner Corporation multiplied the P3.00 daily COLA by 22 days,
which is the number of working days in the company.
Respondent Union disagreed with the computation alleging that prior to the
effectivity of the Wage Order, Petitioner Corporation had been computing and paying
the COLA on the basis of 30 days per month and that this constituted an employer
practice, which should not be unilaterally withdrawn. After several grievance
proceedings proved futile, the Union filed a complaint against Petitioner Corporation.
The Labor Arbiter sustained the position of Petitioner Corporation by holding that the
monthly COLA should be computed on the basis of 22 days, since the evidence
showed that there are only 22 days in a month for monthly-paid employees in the
company.
The NLRC reversed the Labor Arbiter on appeal, holding that Petitioner
Corporation was guilty of illegal deductions considering that COLA should be paid
and computed on the basis of 30 days since workers paid on a monthly basis are
entitled to COLA on days “unworked”; and the full allowance enjoyed by Petitioner
Corporation’s monthly-paid employees before the CBA executed between the parties
constituted voluntary employer practice, which cannot be unilaterally withdrawn.
Issue: W/N the computation and payment of COLA on the basis of 30 days per month
constitute an employer practice which should not be unilaterally withdrawn.
Ruling: NO.
Labor Laws; COLA; For entitlement for COLA is that basic wage is being paid.—
Section 5 of the Rules Implementing Wage Orders Nos. 2, 3, 5 and 6 uniformly read as
follows: "Section 5. Allowance for Unworked Days. "All covered employees shall be
entitled to their daily living allowance during the days that they are paid their basic
wage, even ifunworked" The primordial consideration, therefore, 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. As held in University of Pangasinan Faculty
Union vs. University of Pangasinan, L-63122, February 20,1984,127 SCRA 691): "x x x
it iS evident that the intention of the law is to grant ECOLA upon the payment of basic
wages. Hence, we have the principle of 'No Pay, No ECOLA/ "
Same; Same; Same; Monthly paid employees whose monthly salary covers all the
days in a month are deemed paid their basic wages and should be entitled to
their COLA on those days "even if unworked"; CBA provides that basic pay is
computed on the basis of5 days a week; Case at bar.—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," as the NLRC had opined. Peculiar to this case,
however, is the circumstance that pursuant to the Collective Bargaining Agreement
(CBA) between Petitioner Corporation and Respondent Union, the monthly basic pay
is computed on the basis of five (5) days a week, or twenty two (22) days a month.
Thus, the pertinent provisions of that Agreement read: "Art. XV(a)—Eight net
working hours shall constitute the regular work day for five days." "Art. XV(b)—Forty
net hours of work, 5 working days, all constitute the regular work week." "Art. XVI,
Sec. l(b)—All overtime worked in excess of eight net hours daily or in excess of 5 days
weekly shall be computed on hourly basis at the rate of time and one haif."
Same; Same; Same; Computation of overtime pay of monthly paid employees.—
The Labor Arbiter also found that in determining the hourly ratc 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 eight (8) working hours. If a
monthly-paid employee renders overtime work, he is paid his basic salary rate plus
one-half thereof. For example, after examining the specimen payroll of employee
Jesus L. Santos, the Labor Arbiter found: "the employee Jesus L. Santos, who worked
on Saturday and Sunday was paid base pay plus 50% premium. This is over and above
his monthly basic pay as supported by the fact that base pay was paid. If the 6th and
7th days of the week are deemed paid even if unworkd and included in the monthly
salary. Santos should not have been paid his base pay for Saturday and Sunday but
should have received only the 50% overtime premium.
Same; Same; Same; CBA, law between the parties and can be subject of future re-
negotiation.—Under the peculiar circumstances obtaining, therefore, 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 twenty two (22) days, which is the period during which the
monthly-paid employees of Petitioner Corporation receive their basic wage. The CBA
is the law between the parties and, if not acceptable, can be the subject of future re-
negotiation.
LABOR - Wages
Same; Same; Same; Formula for conversion of daily allowance to its monthly
equivalent.—Moreover, before Wage Order No. 4, there was lack of administrative
guidelines for the implementation of the Wage Orders. It was only when the Rules
Implementing Wage Order No. 4 were issued on 21 May 1984 that a formula for the
conversion of the daily allowance to its monthly equivalent was laid down, thus:
"Section 3. Application of Section 2—"xxx xxx (a) Monthly rates for non-agricultural
workers covered under PDs 1614, 1634, 1678 and 1713: xxx xxx (3) For workers who
do not work and are not considered paid on Saturdays and Sundays: P60 + P90 + P60
+ (P2.00 x 262) dividedby!2 = P253.7(X"
Insular Hotel Employees Union-NFL vs. Waterfront Insular Hotel Davao
Facts: Respondent Waterfront Insular Hotel Davao (respondent) sent the Department
of Labor and Employment (DOLE), City, a Notice of Suspension of
Operations5 notifying the same that it will suspend its operations for a period of six
months due to severe and serious business losses. In said notice, respondent assured
the DOLE that if the company could not resume its operations within the six-month
period, the company would pay the affected employees all the benefits legally due to
them.
During the period of the suspension, Domy R. Rojas (Rojas), the President of Davao
Insular Hotel Free Employees Union (DIHFEU-NFL), the recognized labor organization
in Waterfront Davao, sent respondent a number of letters asking management to
reconsider its decision.
After series of negotiations, respondent and DIHFEU-NFL, represented by its
President, Rojas, and Vice-Presidents, Exequiel J. Varela Jr. and Avelino C. Bation, Jr.,
signed a Memorandum of Agreement14 (MOA) wherein respondent agreed to re-open
the hotel subject to certain concessions offered by DIHFEU-NFL in its Manifesto.
Accordingly, respondent downsized its manpower structure to 100 rank-and-file
employees as set forth in the terms of the MOA. Moreover, as agreed upon in the MOA,
a new pay scale was also prepared by respondent. Respondent resumed its business
operations.
Darius Joves (Joves) and Debbie Planas, claiming to be local officers of the National
Federation of Labor (NFL), filed a Notice of Mediation 16 before the National
Conciliation and Mediation Board (NCMB). In the said conference, respondent and
petitioner Insular Hotel Employees Union-NFL (IHEU-NFL), represented by Joves,
signed a Submission Agreement17 wherein they chose AVA Alfredo C. Olvida (AVA
Olvida) to act as voluntary arbitrator. Submitted for the resolution of AVA Olvida was
the determination of whether or not there was a diminution of wages and other
benefits through an unlawful MOA.
Issue: (1) Whether or not the accredited voluntary arbitrator has jurisdiction over the
case simply because the notice of mediation does not mention the name of the local
union but only the affiliate federation thereby disregarding the submission agreement
duly signed by the parties and their legal counsels that mentions the name of the local
union.
(2) Whether or not Article 100 of the Labor Code applies only to benefits enjoyed
prior to the adoption of the labor code which, in effect, allows the diminution of the
benefits enjoyed by employees from its adoption.
Ruling: (1) The voluntary arbitrator had no jurisdiction over the case.
Waterfront contents that the Notice of Mediation does not mention the name of the
Union but merely referred to the National Federation of Labor (NFL) with which the
Union is affiliated. In the subsequent pleadings, NFL's legal counsel even confirmed
that the case was not filed by the union but by NFL and the individual employees
named in the SPAs which were not even dated nor notarized.
Even granting that petitioner Union was affiliated with NFL, still the relationship
between that of the local union and the labor federation or national union with which
the former was affiliated is generally understood to be that of agency, where the local
is the principal and the federation the agency. Being merely an agent of the local
union, NFL should have presented its authority to file the Notice of Mediation. While
We commend NFL's zealousness in protecting the rights of lowly workers, We cannot,
however, allow it to go beyond what it is empowered to do.
(2) No merit. Article 100 of the Labor Code provides: PROHIBITION AGAINST
ELIMINATION OR DIMINUTION OF BENEFITS - Nothing in this Book shall be construed
to eliminate or in any way diminish supplements, or other employee benefits being
enjoyed at the time of the promulgation of this Code.
On this note, Apex Mining Company, Inc. v. NLRC65 is instructive, to wit:
Clearly, the prohibition against elimination or diminution of benefits set out in
Article 100 of the Labor Code is specifically concerned with benefits already
enjoyed at the time of the promulgation of the Labor Code. Article 100 does not,
in other words, purport to apply to situations arising after the promulgation
date of the Labor Code x x x.66
LABOR - Wages
Even assuming arguendo that Article 100 applies to the case at bar, this Court agrees
with respondent that the same does not prohibit a union from offering and agreeing
to reduce wages and benefits of the employees. In Rivera v. Espiritu,67 this Court ruled
that the right to free collective bargaining, after all, includes the right to suspend it
Lastly, this Court is not unmindful of the fact that DIHFEU-NFL's Constitution and By-
Laws specifically provides that "the results of the collective bargaining negotiations
shall be subject to ratification and approval by majority vote of the Union members at
a meeting convened, or by plebiscite held for such special purpose." It must be
remembered that after the MOA was signed, the members of the Union individually
signed contracts denominated as "Reconfirmation of Employment." 70 Cullo did not
dispute the fact that of the 87 members of the Union, who signed and accepted the
"Reconfirmation of Employment," 71 are the respondent employees in the case at bar.
Moreover, it bears to stress that all the employees were assisted by Rojas, DIHFEU-
NFL's president, who even co-signed each contract. Each contract was freely entered
into and there is no indication that the same was attended by fraud,
misrepresentation or duress.
Asis vs. Minister of Labor
Facts: Petioner was appointed as LEGAL COUNSEL of the Central Azucera de Pilar,
and later was also appointed as Manpower and Services Dept. He was given basic
salaries PLUS 200L gas allowance and a small LPG tank every month but later, such
was revoked for 5 years already as a cost reduction measure. This was raised by them,
but was denied. This lead Asis to commence an action with the Regional Office of the
Ministry of Labor and Employment to restore the benefit. Later, also filed complaint
for he said that he was “relieved” through a “temporary
leave absence” by the company. He averred that this was tantamount to ILLEGAL
DISMISSAL. The two cases were jointly heard and decided by the Regional Director.
The latter's judgments was for the petitioner's reinstatement to his former positions
without loss of seniority, benefits and other privileges, the payment to him of back
wages from date of his relief up to time of reinstatement, and the delivery to him of
the monthly benefits from the time of their temporary revocation up to actual
restoration or, at his option, the money equivalent thereof. But this decision was
REVERSED by the Deputy Minister of Labor. The suspension of the benefit was
because of an unavoidable financial constraint. Further, the institution of actions
created “an atmosphere of enmity between them”, hence his discharge was said to be
justifiable. The Deputy Minister's order of dismissal was however subsequently
modified, at the petitioner's instance, by decreeing the payment to the latter of
separation pay equivalent to one month's salary for every year of service rendered.
Issues: (1) WON the removal of monthly ration of fuel benefit was okay? (YES)
(2) WON there was ILLEGAL DISMISSAL? (NO, there was no need to alter deputy
minister’s findings)
Ruling: As regards the temporary revocation of the petitioner's monthly ration of fuel,
suffice it to point out that, as the Solicitor General stresses, this bad been 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 the petitioner. 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 the petitioner for his actual consumption of fuel
during the period of suspension. These facts are entirely distinct from those obtaining
in the case of States Marine Corporation and Royal Line, Inc. v. Cebu Seamen's
Association, Inc., 12 invoked by petitioner and thus preclude application of the ruling
therein laid down to the case at bar. A review of the record demonstrates that there is
substantial evidence supporting the factual findings of the respondent Deputy
Minister. Said findings, as well as the legal conclusions
derived therefrom, cannot be said to have been rendered with grave abuse of
discretion, and will thus be affirmed. In fine, and as petitioner could not but have
realized from the outset, neither he nor any other employee similarly situated had any
legitimate grievance against the Central. WHEREFORE, the petition is DISMISSED for
lack of merit, with costs against petitioner.
//same
Facts: In addition to petitioner’s basic salaries and other fringe benefits as legal
counselor and later as Head of its Manpower and Services Department, his employer,
private respondent CENTRAL AZUCARERA DE PILAR, granted him, and a few other
officials of the company, a monthly ration of 200 liters of gasoline and a small tank of
liquefied petroleum gas (LPG). This monthly ration was temporarily revoked some
five (5) years later as a cost reduction measure of the Central .
The petitioner commenced an action against the Central with the Regional Office of
the Ministry of Labor and Employment, seeking restoration of his monthly ration of
gasoline and LPG, and complaining against a signed memorandum ordaining his relief.
He theorized that he had in effect been dismissed, illegally.
LABOR - Wages
The Regional Director’s judgement was for petitioner’s reinstatement including the
restoration of additional benefits (ration of gasoline and LPG)but upon appeal by
Central, The Deputy Minister of Labor reversed the Regional Director’s decision.
Hence, this petition.
Issue: WON an employee may demand that revoked additional benefits be restored
even if such are not part of the basic salary.
Ruling: No. The revocation of the ration had been 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 the petitioner. 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 the petitioner for his actual consumption of fuel during the
period of suspension.
American Wire & Cable Daily Rated Employees Union vs. Amercan Wire & Cable
Co., Inc., & the Court of Appeals
Facts: American Wire and Cable Co., Inc., is a corporation engaged in the manufacture
of wires and cables. There are two unions in this company, the American Wire and
Cable Monthly-Rated Employees Union and the American Wire and Cable Daily-Rated
Employees. An original action was filed before the NCMB of the Department of Labor
and Employment (DOLE) by the two unions for voluntary arbitration. The petitioner
submits that the withdrawal of the private respondent of the 35%premium pay for
selected days during the Holy Week and Christmas season, the holding of the
Christmas Party and its incidental benefits, and the giving of service awards, which
they have long enjoyed, violated Article 100 of the Labor Code.
A decision was rendered by the Voluntary Arbitrator in favor of the private
respondent. On appeal, CA affirmed and upheld the Arbitrator’s decision.
Issue: Whether or not private respondent is guilty of violating Article 100 of the
Labor Code, as amended, when the benefits/entitlements given to the members of
petitioner union were withdrawn.
Ruling: The Court ruled that respondent is not guilty of violating Art. 100 of the Labor
Code. ART. 100. PROHIBITION AGAINST ELIMINATION OR DIMINUTION OF
BENEFITS. –Nothing in this Book shall be construed to eliminate or in any way
diminish supplements, or other employee benefits being enjoyed at the time of
promulgation of this Code.
The benefits and entitlements mentioned in the instant case are all considered
bonuses which were given by the private respondent out of its generosity and
munificence. A bonus is an amount granted and paid to an employee for his industry
and loyalty which contributed to the success of the employer’s business and made
possible the realization of profits. The granting of a bonus is a management
prerogative, something given in addition to what is ordinarily received by or strictly
due the recipient. Thus, a bonus is not a demandable and enforceable obligation,
except when it is made part of the wage, salary or compensation of the employee.
For a bonus to be enforceable, it must have been promised by the employer and
expressly agreed upon by the parties or it must have had a fixed amount and had been
a long and regular practice on the part of the employer. The assailed benefits were
never subjects of any agreement between the union and the company. It was never
incorporated in the CBA. To be considered a “regular practice,” the giving of the bonus
should have be end one over a long period of time, and must be shown to have been
consistent and deliberate. The downtrend in the grant of these two bonuses over the
years demonstrates that there is nothing consistent about it. To hold that an employer
should be forced to distribute bonuses which it granted out of kindness is to penalize
him for his past generosity.
Royal Plant Workers Union vs. Coca-cola Bottlers Philippines, Inc.-Cebu Plant
Facts: Petitioner Coca-Cola Bottlers Philippines, Inc. (CCBPI) is a domestic
corporation engaged in the manufacture, sale, and distribution of softdrink products.
The bottling operators were provided with chairs upon their requests. But these were
removed pursuant to a national directive of petitioner "I operate, I maintain, I clean"
program. The program reinforces the task of bottling operators to constantly move
about in the performance of their duties and responsibilities. With this task of moving
constantly to check on the machinery and equipment assigned to him, a bottling
operator does not need a chair anymore, hence, petitioner’s directive to remove them.
Furthermore, respondents justified this by saying that a bottling operator does not
need a chair anymore and the bottling operators will avoid sleeping, thus, prevent
injuries to their persons.
The bottling operators took issue with the removal of the chairs. Through the
representation of herein respondent, they initiated the grievance machinery of the
Collective Bargaining Agreement (CBA) in November 2008. Even after exhausting the
remedies contained in the grievance machinery, the parties were still at a deadlock
with petitioner still insisting on the removal of the chairs and respondent still against
such measure.
Private respondents, argued that the removal of the chairs is valid as it is a legitimate
exercise of management prerogative, it does not violate the CBA it contracted with
LABOR - Wages
respondent. Respondent, on the other hand, averred that the removal of the chairs
constitutes a violation of the occupational health and safety standards, the policy of
the state to assure the right of workers to just and humane conditions of work.
Arbitration Committee rendered a decision in favor of the Royal Plant Workers Union
(the Union) and against CCBPI:
The use of chairs by the operators had been a company practice for 34 years
in Bottling Line 2, from 1974 to 2008, and 20 years in Bottling Line 1, from
1988 to 2008; that the use of the chairs by the operators constituted a
company practice favorable to the Union; that it ripened into a benefit after it
had been enjoyed by it; that any benefit being enjoyed by the employees
could not be reduced, diminished, discontinued, or eliminated by the
employer in accordance with Article 100 of the Labor Code, which prohibited
the diminution or elimination by the employer of the employees’ benefit; and
that jurisprudence had not laid down any rule requiring a specific minimum
number of years before a benefit would constitute a voluntary company
practice which could not be unilaterally withdrawn by the employer.
Arbitration Committee further stated that, although the removal of the chairs was
done in good faith, CCBPI failed to present evidence regarding instances of sleeping
while on duty. There were no specific details as to the number of incidents of sleeping
on duty, who were involved, when these incidents happened, and what actions were
taken. There was no evidence either of any accident or injury in the many years that
the bottling operators used chairs. To the Arbitration Committee, it was puzzling why
it took 34 and 20 years for CCBPI to be so solicitous of the bottling operators’ safety
that it removed their chairs so that they would not fall asleep and injure themselves.
Finally, the Arbitration Committee was of the view that, contrary to CCBPI’s position,
line efficiency was the result of many factors and it could not be attributed solely to
one such as the removal of the chairs.
CA: petition is hereby GRANTED and the Decision of the Arbitration Committee
in AC389-VII-09-10-2009D is NULLIFIED and SET ASIDE.
Issue: W/N the the operators’ chairs are part of employee benefits covered in Article
100.
Ruling: NO.
Same; Same; Non-Diminution of Benefits; The operators’ chairs cannot be
considered as one of the employee benefits covered in Article 100 of the Labor
Code. In the Court’s view, the term “benefits” mentioned in the non-diminution
rule refers to monetary benefits or privileges given to the employee with
monetary equivalents. Such benefits or privileges form part of the employees’
wage, salary or compensation making them enforceable obligations.—The
operators’ chairs cannot be considered as one of the employee benefits covered in
Article 100 of the Labor Code. In the Court’s view, the term “benefits” mentioned in
the non-diminution rule refers to monetary benefits or privileges given to the
employee with monetary equivalents. Such benefits or privileges form part of the
employees’ wage, salary or compensation making them enforceable obligations. This
Court has already decided several cases regarding the non-diminution rule where the
benefits or privileges involved in those cases mainly concern monetary
considerations or privileges with monetary equivalents. Some of these cases are:
Eastern Telecommunication Phils. Inc. v. Eastern Telecoms Employees Union, 665
SCRA 516 (2012), where the case involves the payment of 14th, 15th and 16th month
bonuses; Central Azucarera De Tarlac v. Central Azucarera De Tarlac Labor Union-
NLU, 625 SCRA 622 (2010), regarding the 13th month pay, legal/special holiday pay,
night premium pay and vacation and sick leaves; TSPIC Corp. v. TSPIC Employees
Union, 545 SCRA 215 (2008), regarding salary wage increases; and American Wire
and Cable Daily Employees Union vs. American Wire and Cable Company, Inc., 457
SCRA 684 (2005), involving service awards with cash incentives, premium pay,
Christmas party with incidental benefits and promotional increase.
Same; Management Prerogatives; The Supreme Court often declines to interfere in
legitimate business decisions of employers. The law must protect not only the
welfare of the employees, but also the right of the employers.—Jurisprudence
recognizes the exercise of management prerogatives. Labor laws also discourage
interference with an employer’s judgment in the conduct of its business. For this
reason, the Court often declines to interfere in legitimate business decisions of
employers. The law must protect not only the welfare of the employees, but also the
right of the employers.
G. Worker Preference
Labor Code: Article 110
Development Bank of the Philippines vs Labor Arbiter
Facts: This petition calls for the interpretation of Article 110 of the Labor Code which
gives the workers preferences as regards wages in case of liquidation or bankruptcy of
an employer's business. Petitioner Development Bank of the Philippines (DBP) maintains
the Article 110 does not apply where there has been an extra-judicial foreclosure
proceeding while the respondents claim otherwise.
LABOR - Wages
Petitioner DBP maintains that the public respondent misinterpreted Article 110 of the
Labor Code and Section 10, Rule VIII, Book III of the Revised Rules and Regulations
Implementing the Labor Code in that the said respondent 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. The petitioner argues that there must be a judicial declaration, or at the very
least, a cognizance by an appropriate court or administrative agency of bankruptcy or
inability of the employer to meet its obligations.
On the other hand, the respondents contend that under both Article 110 and its
implementing rule, the 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
the Labor Code is used in its generic sense, meaning that condition of inability to pay
one's debt; and that Article 110 of the Labor Code is not confined to the situation
contemplated in Articles 2236-2245 of the Civil Code where all the preferred
creditors must necessarily be convened and the import of their claims ascertained.
Issue: Whether or not Article 110 does not apply in extra-judicial foreclosure
proceeding.
Ruling: Yes. Article 110 of the Labor Code and Section 10, Rule VIII, Book III of the
Revised Rules and Regulations Implementing the Labor Code provide:
Article 110. Worker preference in case of bankruptcy in the event of bankruptcy
or liquidation of an employer's business, his workers shall enjoy first preference
as regards wages due them for services rendered during the period prior to the
bankruptcy or liquidation, any provision of law to the contrary notwithstanding.
Unpaid wages shall be paid in full before other creditors may establish any claim
to a share in the assets of the employer.
Article 10. Payment of wages in case of bankruptcy. Unpaid wages earned by the
employee before the declaration of bankruptcy or judicial liquidation of the
employer's business shall be given first preference and shall be paid in full before
other creditors may establish any claim to the assets of the employer.
Article 110 of the Labor Code cannot be invoked by the respondents in this case
absent a formal declaration of bankruptcy or a liquidation order. It is quite clear
from the provisions that a declaration of bankruptcy or a judicial liquidation must be
present before the worker's preference may be enforced. Thus, Article 110 of the
Labor Code and its implementing rule cannot be invoked by the respondents in this
case absent a formal declaration of bankruptcy or a liquidation order. Following the
rule in Republic v. Peralta, supra, to hold that Article 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, as stated earlier, Article 110 must not be viewed in isolation and must
always be reckoned with the provisions of the Civil Code.
Article 110 of the Labor Code did not sweep away the overriding preference
accorded under the scheme of the Civil constitute a lien upon properties of the
insolvent. We come to the question of what impact Article 110 of the Labor Code
has had upon the complete scheme of classification, concurrence and
preference of credits in insolvency set out in the Civil Code. — We believe and so
hold that Article 110 of the Labor Code did not sweep away the overriding preference
accorded under the scheme of the Civil Code to tax claims of the government or any
subdivision thereof which constitute a lien upon properties of the Insolvent. x x x. It
cannot be assumed simpliciter that the legislative authority, by using Article 110 of
the words ‘first preference’ and any provisions of law to the contrary
notwithstanding’ intended to disrupt the elaborate and symmetrical structure set up
in the Civil Code. Neither can it be assumed casually that Article 110 intended to
subsume the sovereign itself within the term ‘other creditors’, in stating that ‘unpaid
wages shall be paid in full before other creditors may establish any claim to a share in
the assets of employer.’ Insistent considerations of public policy prevent us from
giving to ‘other creditors a linguistically unlimited scope that would embrace the
universe of creditors save only unpaid employees.
We, therefore, hold that Labor Arbiter Ariel C. Santos committed grave abuse of
discretion in ruling that the private respondents may enforce their first preference in
the satisfaction of their claims over those of the petitioner in the absence of a
declaration of bankruptcy or judicial liquidation of RMC.
Development Bank of the Philippines vs. The National Labor Relations
Commission, Ong Peng, et al.
Facts: November 14, 1986, private respondents filed with DOLE- Daet, Camarines
Norte, 17 individual complaints against Republic Hardwood Inc. (RHI) for unpaid
wages and separation pay. These complaints were thereafter endorsed to Regional
Arbitration Branch of the NLRC since the petitioners had already been terminated
from employment.
LABOR - Wages
RHI alleged that it had ceased to operate in 1983 due to the government ban against
tree-cutting and that in May 24, 1981, its sawmill was totally burned resulting in
enormous losses and that due to its financial setbacks, RHI failed to pay its loan with
the DBP. RHI contended that since DBP foreclosed its mortgaged assets on September
24,1985, then any adjudication of monetary claims in favor of its former employees
must be satisfied against DBP. Private respondent impleaded DBP.
Labor Arbiter favored private respondents and held RHI and DBP jointly and
severally liable to private respondents. DBP appealed to the NLRC. NLRC affirmed
LA’s judgment. DBP filed M.R. but it was dismissed. Thus, this petition for certiorari.
Issues: (1) Whether the private respondents are entitled to separation pay.
(2) Whether the private respondents’ separation pay should be preferred than the
DBP’s lien over the RHI’s mortgaged assets.
Ruling: (1) Yes. Despite the enormous losses incurred by RHI due to the fire that
gutted the sawmill in 1981 and despite the logging ban in 1953, the uncontroverted
claims for separation pay show that most of the private respondents still worked up
to the end of 1985. RHI would still have continued its business had not the petitioner
foreclosed all of its assets and properties on September 24, 1985. Thus, the closure of
RHI’s business was not primarily brought about by serious business losses. Such
closure was a consequence of DBP’s foreclosure of RHI’s assets. The Supreme Court
applied Article 283 which provides:
“. . . in cases of closures or cessation of operations of establishment or undertaking not
due to serious business losses or financial reverses, the separation pay shall be
equivalent to 1 month pay or at least 1/2 month pay for every year of service,
whichever is higher. . . .”
(2) No. Because of the petitioner’s assertion that LA and NLRC incorrectly applied the
provisions of Article 110 of the Labor Code, the Supreme Court was constrained to
grant the petition for certiorari.
Article 110 must be read in relation to the Civil Code concerning the classification,
concurrence and preference of credits, which is application in insolvency proceedings
where the claims of all creditors, preferred or non-preferred, may be adjudicated in a
binding manner. Before the workers’ preference provided by Article 110 may be
invoked, there must first be a declaration of bankruptcy or a judicial liquidation of the
employer’s business.
NLRC committed grave abuse of discretion when it affirmed the LA’s ruling. DBP’s lien
on RHI’s mortgaged assets, being a mortgage credit, is a special preferred credit under
Article 2242 of the Civil Code while the workers’ preference is an ordinary preferred
credit under Article 2244.
A distinction should be made between a preference of credit and a lien. A preference
applies only to claims which do not attach to specific properties. A lien creates a
charge on a particular property. The right of first preference as regards unpaid wages
recognized by Article 110 does not constitute a lien on the property of the insolvent
debtor in favor of workers. It is but a preference of credit in their favor, a preference
in application. It is a method adopted to determine and specify the order in which
credits should be paid in the final distribution of the proceeds of the insolvent’s
assets. It is a right to a first preference in the discharge of the funds of the judgment
debtor.
Article 110 of the Labor Code does not create a lien in favor of workers or employees
for unpaid wages either upon all of the properties or upon any particular property
owned by their employer. Claims for unpaid wages do not therefore fall at all within
the category of specially preferred claims established under Articles 2241 and 2242 of
the Civil Code, except to the extent that such claims for unpaid wages are already
covered by Article 2241, (6)- (claims for laborers’ wages, on the goods manufactured
or the work done); or by Article 2242,(3)- (claims of laborers and other workers
engaged in the construction, reconstruction or repair of buildings, canals and other
works, upon said buildings, canals and other works.
Since claims for unpaid wages fall outside the scope of Article 2241 (6) and 2242 (3),
and not attached to any specific property, they would come within the category of
ordinary preferred credits under Article 2244. (Note: SC favored DBP kasi yung
mortgage nila against RHI was executed prior to the amendment of Article 110. The
amendment can’t be given retroactive effect daw. Pero sa present, 1st priority na
talaga ang laborer’s unpaid wages regardless kung may mortgage or wala ang ibang
creditors ng employer)
Article 110 of the Labor Code has been amended by R.A. No. 6715 and now reads:
“Article 110. Worker preference in case of bankruptcy. – In the event of bankruptcy or
liquidation of an employers business, his workers shall enjoy first preference as
regards their unpaid wages and other monetary claims, any provision of law to the
contrary notwithstanding. Such unpaid wages, and monetary claims shall be paid in
full before the claims of the Government and other creditors may be paid.”
The amendment “expands worker preference to cover not only unpaid wages but also
other monetary claims to which even claims of the Government must be deemed
subordinate.” Hence, under the new law, even mortgage credits are subordinate to
workers’ claims.
LABOR - Wages
R.A. No. 6715, however, took effect only on March 21, 1989. The amendment cannot
therefore be retroactively applied to, nor can it affect, the mortgage credit which was
secured by the petitioner several years prior to its effectivity.
Even if Article 110 and its Implementing Rule, as amended, should be interpreted to
mean `absolute preference,’ the same should be given only prospective effect in line
with the cardinal rule that laws shall have no retroactive effect, unless the contrary is
provided. To give Article 110 retroactive effect would be to wipe out the mortgage in
DBP’s favor and expose it to a risk which it sought to protect itself against by
requiring a collateral in the form of real property.
The public respondent, therefore, committed grave abuse of discretion when it
retroactively applied the amendment introduced by R.A. No. 6715 to the case at bar.
Petition GRANTED. Decision of NLRC SET ASIDE.
Development Bank of the Philippines vs. NLRC
Facts: Lirag Textile Mills, Inc. (LIRAG) was a mortgage debtor of DBP. Private
respondent Labor Alliance for National Development (LAND) was the bargaining
representative of the more or less 800 former rank and file employees of LIRAG.
LIRAG started terminating the services of its employees on the ground of
retrenchment. LIRAG has since ceased operations presumably due to financial
reverses.
Joselito Albay, one of the employees dismissed filed a complaint before the National
Labor Relations Commission (NLRC) against LIRAG for illegal dismissal, LAND, on
behalf of 180 dismissed members, also filed a Complaint against LIRAG.
In a Decision, Labor Arbiter Apolinar L. Sevilla ordered LIRAG to pay the individual
complainants. The NLRC affirmed. Judgment
Writ of Execution was issued. DBP extrajudicially foreclosed the mortgaged
properties for failure of LIRAG to pay its mortgage obligation. As the only bidder at
the foreclosure sale, DBP acquired said mortgaged properties. Since DBP was the sole
mortgagee, no actual payment was made, the amount of the bid having been merely
credited in partial satisfaction of LIRAG's indebtedness.
By reason of said foreclosure, the Writ of Execution issued in favor of the
complainants remained unsatisfied. A Notice of Levy on Execution on the properties
of LIRAG was then entered. library
LAND filed a "Motion for Writ of Execution and Garnishment" of the proceeds of the
foreclosure sale. Labor Arbiter Sevilla granted the Writ of Garnishment and directed
DBP to remit to the NLRC the sum of P6,292,380.00 out of the proceeds of the
foreclosed properties of LIRAG sold at public auction in order to satisfy the judgment
previously rendered.
DBP sought reconsideration. Public respondent, Labor Arbiter Isabel P. Ortiguerra
denied reconsideration. DBP appealed that denial to the NLRC. In the meantime, by
virtue of Proclamation Nos. 50 and 50-A, the Asset Privatization Trust (APT) became
the transferee of the DBP foreclosed assets of LIRAG.
A partial Compromise Agreement was entered into between APT and LAND (Litex
Chapter) whereby APT paid the complainants-employees, ex gratia, the sum of
P750,000.00 "in full settlement of their claims, past and present, with respect to all
assets of LITEX transferred by DBP to APT." That amount was received by LAND's
local President. LAND, through its national President, NLRC affirmed the appealed
Order and dismissed the DBP appeal.
Issue: WON the proceeds of LIRAG's properties foreclosed by DBP should first satisfy
the unpaid wages of the workers.
Ruling: NO. Civil Law; Labor Law; Bankruptcy; Wages; Article 110 of the Labor
Code and Section 10 Rule VIII, Book III of the Revised Rules and Regulations
Implementing the Labor Code, interpreted; Declaration of bankruptcy or a
judicial liquidation must be present before the worker’s preference may be
enforced.—In interpreting the foregoing provisions, the Court, in Development Bank
of the Philippines vs. Santos (G.R. Nos. 78261-62, 8 March 1989), categorically stated:
“It is quite clear from the provisions that a declaration of bankcruptcy or a judicial
liquidation must be present before the worker’s preference may be enforced. Thus,
Article 110 of the Labor Code and its implementing rule cannot be invoked by the
respondents in this case absent a formal declaration of bankruptcy or a liquidation
order.”
Same; Same; Same; Same; Amendment of Article 110 by Republic Act No. 6715
expand worker preference to cover not only unpaid wages but also other
monetary claims.—The amendment expands worker preference to cover not only
unpaid wages but also other monetary claims to which even claims of the Government
must be deemed subordinate.
Same; Same; Same; Preference of credit; To effect an equitable distribution of the
insolvent’s property among his creditors, a principal objective in the event of
insolvency.—In the event of insolvency, a principal objective should be to effect an
equitable distribution of the insolvent’s property among his creditors. To accomplish
LABOR - Wages
this there must first be some proceeding where notice to all of the insolvents’s
creditors may be given and where the claims of preferred creditors may be bindingly
adjudicated.
Same; Same; Same; Same; Rationale of preference of credit expressed in the
recent case of DBP vs. Secretary of Labor.—The rationale therefore has been
expressed in the recent case of DBP vs. Secretary of Labor (G.R. No. 79351, 28
November 1989), which we quote: “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 debtors 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 the debtor
have been inventoried and liquidated, and the claims held by his various creditors
have been established.
Same; Same; Same; Same; Lien; Preference of credit and a lien distinguished.—A
distinction should be made between a preference of credit and a lien. A preference
applies only to claims which do not attach to specific properties. A lien creates a
charge on a particular property. The right of first preference as regards unpaid wages
recognized by Article 110 does not constitute a lien on the property of the insolvent
debtor in favor of workers. It is but a preference of credit in their favor, a preference
in application. It is a method adopted to determine and specify the order in which
credits should be paid in the final distribution of the proceeds of the insolvent’s
assets. It is a right to a first preference in the discharge of the funds of the judgment
debtor
CRUZ, J., Dissenting: It was the intention of the legislature to give absolute
preference to the workers’ claims pursuant to the social justice policy.—The
amendment of Article 110 of the Labor code only strengthens that conviction and, I
like to think, vindicates my original position. I reiterate it now and repeat that: Social
justice is not a mere catchphrase to be mouthed with sham fervor in Labor Day
celebrations for the delectation and seduction of the working class. It is a mandate we
should pursue with energy an sincerity if we are to truly insure the dignity and well
being of the laborer.
PADILLA, J., Dissenting opinion: Preference is established with the amendment of
Article 110 of the Labor Code by Republic Act 6715 wherein unpaid wage and other
monetary claims of workers enjoy absolute preference over all other claims.—With
the amendment of Article 110 of the Labor Code by Republic Act 6715, a three-tier
order of preference is established wherein unpaid wages and other monetary claims
of workers enjoy absolute preference over all other claims, including those of the
Government, in cases where a debtor-employer is unable to pay in full all his
obligations. The absolute preference given to monetary claims of workers, to which
claims of the Government, i.e., taxes, are now subordinated, manifests the clear and
deliberate intent of our law-maker to put flesh and blood into the expressed
Constitutional policy of protecting the rights of workers and promoting their welfare.
Prior formal declaration of insolvency or bankruptcy or a judicial liquidation of the
employer’s business is not a condition sine qua non to the operation of the preference
accorded to workers under article 110 of the Labor Code.—I thus take exception to
the proposition that a prior formal declaration of insolvency or bankruptcy or a
judicial liquidation of the employer’s business is a condition sine qua non to the
operation of the preference accorded to workers under Article 110 of the Labor Code.
The fact remains that Congress intends that the assets of the insolvent debtor be held
first and above all else to satisfy in full the unpaid wages and monetary claims of its
workers.—In sum, it is to me clear that, whether or not there be a judicial proceeding
in rem, i.e., insolvency, bankruptcy or liquidation proceedings, the fact remains that
Congress intends that the assets of the insolvent debtor be held, first and above all
else, to satisfy in full the unpaid wages and monetary claims of its workers. Translated
into the case at bar, a formal declaration of insolvency or bankruptcy or judicial
liquidation of the employer’s business should not be a price imposed upon the
workers to enable them to get their much needed and already adjudi-cated unpaid
wages. This position, I believe, is only in keeping with a fundamental state policy
enshrined in the Constitutional mandate to accord protection to labor. The legislative
intent being clear and manifest, it is the duty of this Court, I submit, not to decimate
but to give it breath and life.
Dissenting opinion of Justice Sarmiento—Under Republic Act No. 6715, the
payment of unpaid wages and other benefits to labor enjoys preference over all other
indebtedness including taxes, of management, with or without a declaration of
insolvency.—I join Mr. Justice Teodoro Padilla in his dissent. It is also my considered
opinion that under Republic Act No. 6715, the payment of unpaid wages and other
benefits to labor enjoys preference over all other indebtedness, including taxes, of
management, with or without a declaration of insolvency.
H. Attorney’s Fees
Labor Code: Article 111