Republic of the Philippines

SUPREME COURT

Manila

SECOND DIVISION

G.R. No. 114698 July 3, 1995

WELLINGTON INVESTMENT AND MANUFACTURING CORPORATION, petitioner,

vs.

CRESENCIANO B. TRAJANO, Under-Secretary of Labor and Employment, ELMER ABADILLA, and 34

others, respondents.

NARVASA, C.J.:

The basic issue raised by petitioner in this case is, as its counsel puts it, "whether or not a monthly-paid
employee, receiving a fixed monthly compensation, is entitled to an additional pay aside from his usual
holiday pay, whenever a regular holiday falls on a Sunday."

The case arose from a routine inspection conducted by a Labor Enforcement Officer on August 6, 1991
of the Wellington Flour Mills, an establishment owned and operated by petitioner Wellington
Investment and Manufacturing Corporation (hereafter, simply Wellington). The officer thereafter drew
up a report, a copy of which was "explained to and received by" Wellington's personnel manager, in
which he set forth his finding of "(n)on-payment of regular holidays falling on a Sunday for monthly-paid
employees."1

Wellington sought reconsideration of the Labor Inspector's report, by letter dated August 10, 1991. It
argued that "the monthly salary of the company's monthly-salaried employees already includes holiday
pay for all regular holidays . . . (and hence) there is no legal basis for the finding of alleged non-payment
of regular holidays falling on a Sunday."2 It expounded on this thesis in a position paper subsequently
submitted to the Regional Director, asserting that it pays its monthly-paid employees a fixed monthly
compensation "using the 314 factor which undeniably covers and already includes payment for all the
working days in a month as well as all the 10 unworked regular holidays within a year."3

Wellington's arguments failed to persuade the Regional Director who, in an Order issued on July 28,
1992, ruled that "when a regular holiday falls on a Sunday, an extra or additional working day is created
and the employer has the obligation to pay the employees for the extra day except the last Sunday of
August since the payment for the said holiday is already included in the 314 factor," and accordingly
directed Wellington to pay its employees compensation corresponding to four (4) extra working days.4

Wellington timely filed a motion for reconsideration of this Order of August 10, 1992, pointing out that it
was in effect being compelled to "shell out an additional pay for an alleged extra working day" despite
its complete payment of all compensation lawfully due its workers, using the 314 factor.5 Its motion was
treated as an appeal and was acted on by respondent Undersecretary. By Order dated September 22,
the latter affirmed the challenged order of the Regional Director, holding that "the divisor being used by
the respondent (Wellington) does not reliably reflect the actual working days in a year, " and
consequently commanded Wellington to pay its employees the "six additional working days resulting
from regular holidays falling on Sundays in 1988, 1989 and 1990."6 Again, Wellington moved for
reconsideration,7 and again was rebuffed.8

Wellington then instituted the special civil action of certiorari at bar in an attempt to nullify the orders
above mentioned. By Resolution dated July 4, 1994, this Court authorized the issuance of a temporary
restraining order enjoining the respondents from enforcing the questioned orders.9

Every worker should, according to the Labor Code, 10 "be paid his regular daily wage during regular
holidays, except in retail and service establishments regularly employing less than ten (10) workers;"
this, of course, even if the worker does no work on these holidays. The regular holidays include: "New
Year's Day, Maundy Thursday, Good Friday, the ninth of April, the first of May, the twelfth of June, the
fourth of July, the thirtieth of November, the twenty-fifth of December, and the day designated by law
for holding a general election (or national referendum or plebiscite).11

Particularly as regards employees "who are uniformly paid by the month, "the monthly minimum wage
shall not be less than the statutory minimum wage multiplied by 365 days divided by twelve."12 This
monthly salary shall serve as compensation "for all days in the month whether worked or not," and
"irrespective of the number of working days therein."13 In other words, whether the month is of thirty
(30) or thirty-one (31) days' duration, or twenty-eight (28) or twenty-nine (29) (as in February), the
employee is entitled to receive the entire monthly salary. So, too, in the event of the declaration of any
special holiday, or any fortuitous cause precluding work on any particular day or days (such as
transportation strikes, riots, or typhoons or other natural calamities), the employee is entitled to the
salary for the entire month and the employer has no right to deduct the proportionate amount
corresponding to the days when no work was done. The monthly compensation is evidently intended
precisely to avoid computations and adjustments resulting from the contingencies just mentioned which
are routinely made in the case of workers paid on daily basis.

In Wellington's case, there seems to be no question that at the time of the inspection conducted by the
Labor Enforcement Officer on August 6, 1991, it was and had been paying its employees "a salary of not
less than the statutory or established minimum wage," and that the monthly salary thus paid was "not . .
. less than the statutory minimum wage multiplied by 365 days divided by twelve," supra. There is, in
other words, no issue that to this extent, Wellington complied with the minimum norm laid down by
law.

Apparently the monthly salary was fixed by Wellington to provide for compensation for every working
day of the year including the holidays specified by law — and excluding only Sundays. In fixing the salary,
Wellington used what it calls the "314 factor;" that is to say, it simply deducted 51 Sundays from the 365
days normally comprising a year and used the difference, 314, as basis for determining the monthly
salary. The monthly salary thus fixed actually covers payment for 314 days of the year, including regular
and special holidays, as well as days when no work is done by reason of fortuitous cause, as above
specified, or causes not attributable to the employees.

The Labor Officer who conducted the routine inspection of Wellington discovered that in certain years,
two or three regular holidays had fallen on Sundays. He reasoned that this had precluded the enjoyment
by the employees of a non-working day, and the employees had consequently had to work an additional
day for that month. This ratiocination received the approval of his Regional Director who opined 14 that
"when a regular holiday falls on a Sunday, an extra or additional working day is created and the
employer has the obligation to pay its employees for the extra day except the last Sunday of August
since the payment for the said holiday is already included in the 314 factor." 15

This ingenuous theory was adopted and further explained by respondent Labor Undersecretary, to
whom the matter was appealed, as follows: 16
. . . By using said (314) factor, the respondent (Wellington) assumes that all the regular holidays fell on
ordinary days and never on a Sunday. Thus, the respondent failed to consider the circumstance that
whenever a regular holiday coincides with a Sunday, an additional working day is created and left
unpaid. In other words, while the said divisor may be utilized as proof evidencing payment of 302
working days, 2 special days and the ten regular holidays in a calendar year, the same does not cover or
include payment of additional working days created as a result of some regular holidays falling on
Sundays.

He pointed out that in 1988 there was "an increase of three (3) working days resulting from regular
holidays falling on Sundays;" hence Wellington "should pay for 317 days, instead of 314 days." By the
same process of ratiocination, respondent Undersecretary theorized that there should be additional
payment by Wellington to its monthly-paid employees for "an increment of three (3) working days" for
1989 and again, for 1990. What he is saying is that in those years, Wellington should have used the "317
factor," not the "314 factor."

The theory loses sight of the fact that the monthly salary in Wellington — which is based on the so-
called "314 factor" — accounts for all 365 days of a year; i.e., Wellington's "314 factor" leaves no day
unaccounted for; it is paying for all the days of a year with the exception only of 51 Sundays.

The respondents' theory would make each of the years in question (1988, 1989, 1990), a year of 368
days. Pursuant to this theory, no employer opting to pay his employees by the month would have any
definite basis to determine the number of days in a year for which compensation should be given to his
work force. He would have to ascertain the number of times legal holidays would fall on Sundays in all
the years of the expected or extrapolated lifetime of his business. Alternatively, he would be compelled
to make adjustments in his employees' monthly salaries every year, depending on the number of times
that a legal holiday fell on a Sunday.

There is no provision of law requiring any employer to make such adjustments in the monthly salary rate
set by him to take account of legal holidays falling on Sundays in a given year, or, contrary to the legal
provisions bearing on the point, otherwise to reckon a year at more than 365 days. As earlier
mentioned, what the law requires of employers opting to pay by the month is to assure that "the
monthly minimum wage shall not be less than the statutory minimum wage multiplied by 365 days
divided by twelve," 17 and to pay that salary "for all days in the month whether worked or not," and
"irrespective of the number of working days therein."18 That salary is due and payable regardless of the
declaration of any special holiday in the entire country or a particular place therein, or any fortuitous
cause precluding work on any particular day or days (such as transportation strikes, riots, or typhoons or
other natural calamities), or cause not imputable to the worker. And as also earlier pointed out, the legal
provisions governing monthly compensation are evidently intended precisely to avoid re-computations
and alterations in salary on account of the contingencies just mentioned, which, by the way, are
routinely made between employer and employees when the wages are paid on daily basis.

The public respondents argue that their challenged conclusions and dispositions may be justified by
Section 2, Rule X, Book III of the Implementing Rules, giving the Regional Director power — 19

. . . to order and administer (in cases where employer-employee relations still exist), after due notice
and hearing, compliance with the labor standards provisions of the Code and the other labor legislations
based on the findings of their Regulations Officers or Industrial Safety Engineers (Labor Standard and
Welfare Officers) and made in the course of inspection, and to issue writs of execution to the
appropriate authority for the enforcement of his order, in line with the provisions of Article 128 in
relation to Articles 289 and 290 of the Labor Code, as amended. . . .

The respondents beg the question. Their argument assumes that there are some "labor standards
provisions of the Code and the other labor legislations" imposing on employers the obligation to give
additional compensation to their monthly-paid employees in the event that a legal holiday should fall on
a Sunday in a particular month — with which compliance may be commanded by the Regional Director
— when the existence of said provisions is precisely the matter to be established.

In promulgating the orders complained of the public respondents have attempted to legislate, or
interpret legal provisions in such a manner as to create obligations where none are intended. They have
acted without authority, or at the very least, with grave abuse of their discretion. Their acts must be
nullified and set aside.

WHEREFORE, the orders complained of, namely: that of the respondent Undersecretary dated
September 22, 1993, and that of the Regional Director dated July 30, 1992, are NULLIFIED AND SET
ASIDE, and the proceeding against petitioner DISMISSED.

SO ORDERED.

Regalado, Puno and Mendoza, JJ., concur.

Republic of the Philippines

SUPREME COURT

Baguio City

FIRST DIVISION

G.R. No. 118506 April 18, 1997

NORMA MABEZA, petitioner,

vs.

NATIONAL LABOR RELATIONS COMMISSION, PETER NG/HOTEL SUPREME, respondents.

KAPUNAN, J.:

This petition seeking the nullification of a resolution of public respondent National Labor Relations
Commission dated April 28, 1994 vividly illustrates why courts should be ever vigilant in the preservation
of the constitutionally enshrined rights of the working class. Without the protection accorded by our
laws and the tempering of courts, the natural and historical inclination of capital to ride roughshod over
the rights of labor would run unabated.

The facts of the case at bar, culled from the conflicting versions of petitioner and private respondent,
are illustrative.

Petitioner Norma Mabeza contends that around 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. 1
The instrument provides: 2
JOINT AFFIDAVIT

We, SYLVIA IGANA, HERMINIGILDO AQUINO, EVELYN OGOY, MACARIA JUGUETA, ADELAIDA NONOG,
NORMA MABEZA, JONATHAN PICART and JOSE DIZON, all of legal ages (sic), Filipinos and residents of
Baguio City, under oath, depose and say:

1. That we are employees of Mr. Peter L. Ng of his Hotel Supreme situated at No. 416 Magsaysay
Ave., Baguio City.

2. That the said Hotel is separately operated from the Ivy's Grill and Restaurant;

3. That we are all (8) employees in the hotel and assigned in each respective shifts;

4. That we have no complaints against the management of the Hotel Supreme as we are paid
accordingly and that we are treated well.

5. That we are executing this affidavit voluntarily without any force or intimidation and for the
purpose of informing the authorities concerned and to dispute the alleged report of the Labor Inspector
of the Department of Labor and Employment conducted on the said establishment on February 2, 1991.

IN WITNESS WHEREOF, we have hereunto set our hands this 7th day of May, 1991 at Baguio City,
Philippines.

(Sgd.) (Sgd.) (Sgd.)

SYLVIA IGAMA HERMINIGILDO AQUINO EVELYN OGOY

(Sgd.) (Sgd.) (Sgd.)

MACARIA JUGUETA ADELAIDA NONOG NORMA MABEZA.

(Sgd.) (Sgd.)

JONATHAN PICART JOSE DIZON

SUBSCRIBED AND SWORN to before me this 7th day of May, 1991, at Baguio City, Philippines.

Asst. City Prosecutor

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.

As gleaned from the affidavit, the same was drawn by management for the sole purpose of refuting
findings of the Labor Inspector of DOLE (in an inspection of respondent's establishment on February 2,
1991) apparently adverse to the private respondent. 3

After she refused to proceed to the City Prosecutor's Office — on the same day the affidavit was
submitted to the Cordillera Regional Office of DOLE — petitioner avers 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. 4 According to her, respondent strongly chided her for refusing to proceed to the City
Prosecutor's Office to attest to the affidavit. 5 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 10, 1991, the
hotel's cashier, Margarita Choy, informed her that she should not report to work and, instead, continue
with her unofficial leave of absence. Consequently, on May 13, 1991, 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. The complaint was docketed as NLRC Case No.
RAB-CAR-05-0198-91 and assigned to Labor Arbiter Felipe P. Pati.
Responding to the allegations made in support of petitioner's complaint for illegal dismissal, private
respondent Peter Ng alleged before Labor Arbiter Pati that petitioner "surreptitiously left (her job)
without notice to the management" 6 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 employee. 7 Pointing to the Affidavit of May 7, 1991,
the private respondent asserted that his employees actually have no problems with management. In a
supplemental answer submitted eleven (11) months after the original complaint for illegal dismissal was
filed, private respondent raised a new ground, loss of confidence, which was supported by a criminal
complaint for Qualified Theft he filed before the prosecutor's office of the City of Baguio against
petitioner on July 4, 1991. 8

On May 14, 1993, Labor Arbiter Pati rendered a decision dismissing petitioner's complaint on the ground
of loss of confidence. His disquisitions in support of his conclusion read as follows:

It appears from the evidence of respondent that complainant carted away or stole one (1) blanket, 1
piece bedsheet, 1 piece thermos, 2 pieces towel (Exhibits "9", "9-A," "9-B," "9-C" and "10" pages 12-14
TSN, December 1, 1992).

In fact, this was the reason why respondent Peter Ng lodged a criminal complaint against complainant
for qualified theft and perjury. The fiscal's office finding a prima facie evidence that complainant
committed the crime of qualified theft issued a resolution for its filing in court but dismissing the charge
of perjury (Exhibit "4" for respondent and Exhibit "B-7" for complainant). As a consequence,
complainant was charged in court for the said crime (Exhibit "5" for respondent and Exhibit "B-6" for the
complainant).

With these pieces of evidence, complainant committed serious misconduct against her employer which
is one of the just and valid grounds for an employer to terminate an employee (Article 282 of the Labor
Code as amended). 9

On April 28, 1994, respondent NLRC promulgated its assailed

Resolution 10 — affirming the Labor Arbiter's decision. The resolution substantially incorporated the
findings of the Labor Arbiter. 11 Unsatisfied, petitioner instituted the instant special civil action for
certiorari under Rule 65 of the Rules of Court on the following grounds: 12
1. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION
COMMITTED A PATENT AND PALPABLE ERROR AMOUNTING TO GRAVE ABUSE OF DISCRETION IN ITS
FAILURE TO CONSIDER THAT THE ALLEGED LOSS OF CONFIDENCE IS A FALSE CAUSE AND AN
AFTERTHOUGHT ON THE PART OF THE RESPONDENT-EMPLOYER TO JUSTIFY, ALBEIT ILLEGALLY, THE
DISMISSAL OF THE COMPLAINANT FROM HER EMPLOYMENT;

2. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION
COMMITTED A PATENT AND PALPABLE ERROR AMOUNTING TO GRAVE ABUSE OF DISCRETION IN
ADOPTING THE RULING OF THE LABOR ARBITER THAT THERE WAS NO UNDERPAYMENT OF WAGES AND
BENEFITS ON THE BASIS OF EXHIBIT "8" (AN UNDATED SUMMARY OF COMPUTATION PREPARED BY
ALLEGEDLY BY RESPONDENT'S EXTERNAL ACCOUNTANT) WHICH IS TOTALLY INADMISSIBLE AS AN
EVIDENCE TO PROVE PAYMENT OF WAGES AND BENEFITS;

3. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION
COMMITTED A PATENT AND PALPABLE ERROR AMOUNTING TO GRAVE ABUSE OF DISCRETION IN
FAILING TO CONSIDER THE EVIDENCE ADDUCED BEFORE THE LABOR ARBITER AS CONSTITUTING UNFAIR
LABOR PRACTICE COMMITTED BY THE RESPONDENT.

The Solicitor General, in a Manifestation in lieu of Comment dated August 8, 1995 rejects private
respondent's principal claims and defenses and urges this Court to set aside the public respondent's
assailed resolution. 13

We agree.

It is settled that in termination cases the employer bears the burden of proof to show that the dismissal
is for just cause, the failure of which would mean that the dismissal is not justified and the employee is
entitled to reinstatement. 14

In the case at bar, the private respondent initially claimed that petitioner abandoned her job when she
failed to return to work on May 8, 1991. Additionally, in order to strengthen his contention that there
existed sufficient cause for the termination of petitioner, he belatedly included a complaint for loss of
confidence, supporting this with charges that petitioner had stolen a blanket, a bedsheet and two towels
from the hotel. 15 Appended to his last complaint was a suit for qualified theft filed with the Baguio City
prosecutor's office.
From the evidence on record, it is crystal clear that the circumstances upon which private respondent
anchored his claim that petitioner "abandoned" her job were not enough to constitute just cause to
sanction the termination of her services under Article 283 of the Labor Code. For abandonment to arise,
there must be concurrence of two things: 1) lack of intention to work; 16 and 2) the presence of overt
acts signifying the employee's intention not to work. 17

In the instant case, respondent does not dispute the fact that petitioner tried to file a leave of absence
when she learned that the hotel management was displeased with her refusal to attest to the affidavit.
The fact that she made this attempt clearly indicates not an intention to abandon but an intention to
return to work after the period of her leave of absence, had it been granted, shall have expired.

Furthermore, while absence from work for a prolonged period may suggest abandonment in certain
instances, mere absence of one or two days would not be enough to sustain such a claim. The overt act
(absence) ought

to unerringly point to the fact that the employee has no intention to return to work, 18 which is patently
not the case here. In fact, several days after she had been advised to take an informal leave, petitioner
tried to resume working with the hotel, to no avail. It was only after she had been repeatedly rebuffed
that she filed a case for illegal dismissal. These acts militate against the private respondent's claim that
petitioner abandoned her job. As the Solicitor General in his manifestation observed:

Petitioner's absence on that day should not be construed as abandonment of her job. She did not report
because the cashier told her not to report anymore, and that private respondent Ng did not want to see
her in the hotel premises. But two days later or on the 10th of May, after realizing that she had to clarify
her employment status, she again reported for work. However, she was prevented from working by
private respondents. 19

We now come to the second cause raised by private respondent to support his contention that
petitioner was validly dismissed from her job.

Loss of confidence as a just cause for dismissal was never intended to provide employers with a blank
check for terminating their employees. Such a vague, all-encompassing pretext as loss of confidence, if
unqualifiedly given the seal of approval by this Court, could readily reduce to barren form the words of
the constitutional guarantee of security of tenure. Having this in mind, loss of confidence should ideally
apply only to cases involving employees occupying positions of trust and confidence or to those
situations where the employee is routinely charged with the care and custody of the employer's money
or property. To the first class belong managerial employees, i.e., those vested with the powers or
prerogatives to lay down management policies and/or to hire, transfer, suspend, lay-off, recall,
discharge, assign or discipline employees or effectively recommend such managerial actions; and to the
second class belong cashiers, auditors, property custodians, etc., or those who, in the normal and
routine exercise of their functions, regularly handle significant amounts of money or property. 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. Illustrating this distinction, this
Court in Marina Port Services, Inc. vs. NLRC, 20 has stated that:

To be sure, every employee must enjoy some degree of trust and confidence from the employer as that
is one reason why he was employed in the first place. One certainly does not employ a person he
distrusts. Indeed, even the lowly janitor must enjoy that trust and confidence in some measure if only
because he is the one who opens the office in the morning and closes it at night and in this sense is
entrusted with the care or protection of the employer's property. The keys he holds are the symbol of
that trust and confidence.

By the same token, the security guard must also be considered as enjoying the trust and confidence of
his employer, whose property he is safeguarding. Like the janitor, he has access to this property. He too,
is charged with its care and protection.

Notably, however, and like the janitor again, he is entrusted only with the physical task of protecting
that property. The employer's trust and confidence in him is limited to that ministerial function. He is
not entrusted, in the Labor Arbiter's words, with the duties of safekeeping and safeguarding company
policies, management instructions, and company secrets such as operation devices. He is not privy to
these confidential matters, which are shared only in the higher echelons of management. It is the
persons on such levels who, because they discharge these sensitive duties, may be considered holding
positions of trust and confidence. The security guard does not belong in such category. 21

More importantly, we have repeatedly held that loss of confidence should not be simulated in order to
justify what would otherwise be, under the provisions of law, an illegal dismissal. "It should not be used
as a subterfuge for causes which are illegal, improper and unjustified. It must be genuine, not a mere
afterthought to justify an earlier action taken in bad faith." 22
In the case at bar, the suspicious delay in private respondent's filing of qualified theft charges against
petitioner long after the latter exposed the hotel's scheme (to avoid its obligations as employer under
the Labor Code) by her act of filing illegal dismissal charges against the private respondent would hardly
warrant serious consideration of loss of confidence as a valid ground for dismissal. Notably, the Solicitor
General has himself taken a position opposite the public respondent and has observed that:

If petitioner had really committed the acts charged against her by private respondents (stealing supplies
of respondent hotel), private respondents should have confronted her before dismissing her on that
ground. Private respondents did not do so. In fact, private respondent Ng did not raise the matter when
petitioner went to see him on May 9, 1991, and handed him her application for leave. It took private
respondents 52 days or up to July 4, 1991 before finally deciding to file a criminal complaint against
petitioner, in an obvious attempt to build a case against her.

The manipulations of private respondents should not be countenanced. 23

Clearly, the efforts to justify petitioner's dismissal — on top of the private respondent's scheme of
inducing his employees to sign an affidavit absolving him from possible violations of the Labor Code —
taints with evident bad faith and deliberate malice petitioner's summary termination from employment.

Having said this, we turn to the important question of whether or not the dismissal by the private
respondent of petitioner constitutes an unfair labor practice.

The answer in this case must inevitably be in the affirmative.

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 standards provisions of law when he might have not, together with the act of
terminating or coercing those who refuse to cooperate with the employer's scheme constitutes unfair
labor practice. The first act clearly preempts the right of the hotel's workers to seek better terms and
conditions of employment through concerted action.
We agree with the Solicitor General's observation in his manifestation that "[t]his actuation . . . is
analogous to the situation envisaged in paragraph (f) of Article 248 of the Labor Code" 24 which
distinctly makes it an unfair labor practice "to dismiss, discharge or otherwise prejudice or discriminate
against an employee for having given or being about to give testimony" 25 under the Labor Code. For in
not giving positive testimony in favor of her employer, petitioner had reserved not only her right to
dispute the claim and proffer evidence in support thereof but also to work for better terms and
conditions of employment.

For refusing to cooperate with the private respondent's scheme, petitioner was obviously held up as an
example to all of the hotel's employees, that they could only cause trouble to management at great
personal inconvenience. Implicit in the act of petitioner's termination and the subsequent filing of
charges against her was the warning that they would not only be deprived of their means of livelihood,
but also possibly, their personal liberty.

This Court does not normally overturn findings and conclusions of quasi-judicial agencies when the same
are ably supported by the evidence on record. However, where such conclusions are based on a
misperception of facts or where they patently fly in the face of reason and logic, we will not hesitate to
set aside those conclusions. Going into the issue of petitioner's money claims, we find one more salient
reason in this case to set things right: the labor arbiter's evaluation of the money claims in this case
incredibly ignores existing law and jurisprudence on the matter. Its blatant one-sidedness simply raises
the suspicion that something more than the facts, the law and jurisprudence may have influenced the
decision at the level of the Arbiter.

Labor Arbiter Pati accepted hook, line and sinker the private respondent's bare claim that the reason the
monetary benefits received by petitioner between 1981 to 1987 were less than minimum wage was
because petitioner did not factor in the meals, lodging, electric consumption and water she received
during the period in her computations. 26 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 ages. First, proof must be shown that such facilities are customarily
furnished by the trade. Second, the provision of deductible facilities must be voluntarily accepted in
writing by the employee. Finally, facilities must be charged at fair and reasonable value. 27

These requirements were not met in the instant case. Private respondent "failed to present any
company policy or guideline to show that the meal and lodging . . . (are) part of the salary;" 28 he failed
to provide proof of the employee's written authorization; and, he failed to show how he arrived at the
valuations. 29

Curiously, in the case at bench, the only valuations relied upon by the labor arbiter in his decision were
figures furnished by the private respondent's own accountant, without corroborative evidence. On the
pretext that records prior to the July 16, 1990 earthquake were lost or destroyed, respondent failed to
produce payroll records, receipts and other relevant documents, where he could have, as has been
pointed out in the Solicitor General's manifestation, "secured certified copies thereof from the nearest
regional office of the Department of Labor, the SSS or the BIR." 30

More significantly, the food and lodging, or the 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 (food, lodging) but the purpose. 31 Considering, therefore, that hotel workers are required to work
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.

It is therefore evident that petitioner is entitled to the payment of the deficiency in her wages
equivalent to the full wage applicable from May 13, 1988 up to the date of her illegal dismissal.

Additionally, petitioner is entitled to payment of service incentive leave pay, emergency cost of living
allowance, night differential pay, and 13th month pay for the periods alleged by the petitioner as the
private respondent has never been able to adduce proof that petitioner was paid the aforestated
benefits.

However, the claims covering the period of October 1987 up to the time of filing the case on May 13,
1988 are barred by prescription as P.D. 442 (as amended) and its implementing rules limit all money
claims arising out of employer-employee relationship to three (3) years from the time the cause of
action accrues. 32

We depart from the settled rule that an employee who is unjustly dismissed from work normally should
be reinstated without loss of seniority rights and other privileges. Owing to the strained relations
between petitioner and private respondent, allowing the former to return to her job would only subject
her to possible harassment and future embarrassment. In the instant case, separation pay equivalent to
one month's salary for every year of continuous service with the private respondent would be proper,
starting with her job at the Belfront Hotel.

In addition to separation pay, backwages are in order. Pursuant to R.A. 6715 and our decision in Osmalik
Bustamante, et al. vs. National Labor Relations Commission, 33 petitioner is entitled to full backwages
from the time of her illegal dismissal up to the date of promulgation of this decision without
qualification or deduction.

Finally, in dismissal cases, the law requires that the employer must furnish the employee sought to be
terminated from employment with two written notices before the same may be legally effected. The
first is a written notice containing a statement of the cause(s) for dismissal; the second is a notice
informing the employee of the employer's decision to terminate him stating the basis of the dismissal.
During the process leading to the second notice, the employer must give the employee ample
opportunity to be heard and defend himself, with the assistance of counsel if he so desires.

Given the seriousness of the second cause (qualified theft) of the petitioner's dismissal, it is noteworthy
that the private respondent never even bothered to inform petitioner of the charges against her.
Neither was petitioner given the opportunity to explain the loss of the articles. It was only almost two
months after petitioner had filed a complaint for illegal dismissal, as an afterthought, that the loss was
reported to the police and added as a supplemental answer to petitioner's complaint. Clearly, the
dismissal of petitioner without the benefit of notice and hearing prior to her termination violated her
constitutional right to due process. Under the circumstance an award of One Thousand Pesos
(P1,000.00) on top of payment of the deficiency in wages and benefits for the period aforestated would
be proper.

WHEREFORE, premises considered, the RESOLUTION of the National Labor Relations Commission dated
April 24, 1994 is REVERSED and SET ASIDE, with costs. For clarity, the economic benefits due the
petitioner are hereby summarized as follows:

1) Deficiency wages and the applicable ECOLA from May 13, 1988 up to the date of petitioner's
illegal dismissal;

2) Service incentive leave pay; night differential pay and 13th month pay for the same period;
3) Separation pay equal to one month's salary for every year of petitioner's continuous service with
the private respondent starting with her job at the Belfront Hotel;

4) Full backwages, without qualification or deduction, from the date of petitioner's illegal dismissal
up to the date of promulgation of this decision pursuant to our ruling in Bustamante vs. NLRC. 34

5) P1,000.00.

ORDERED.

Padilla, Bellosillo and Vitug, JJ., concur.

Hermosisima, Jr., J., is on leave.

SECOND DIVISION

G.R. No. 152843 July 20, 2006

INTERCONTINENTAL BROADCASTING CORPORATION, petitioner,

vs.

REYNALDO BENEDICTO, deceased, substituted by his surviving spouse LOURDES V. BENEDICTO, and
children, namely: REYNALDO V. BENEDICTO, SHIRLEY V. BENEDICTO-TAN, EDGAR V. BENEDICTO and
LILIBETH V. BENEDICTO-DE LA VICTORIA,*, respondents.

DECISION
CORONA, J.:

This is a petition for review on certiorari1 of the October 18, 2001 decision2 and March 18, 2002
resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 53413 which in turn affirmed the March 5,
1999 decision4 and June 10, 1999 resolution5 of the National Labor Relations Commission (NLRC) in
NLRC NCR CA Case No. 017886-99.

Petitioner alleged that Intercontinental Broadcasting Corporation is a government-owned and controlled

corporation.6 It is engaged in the business of mass media communications including, among others, the
operation of television Channel 13 (IBC 13).7

In 1993, Reynaldo Benedicto was appointed by Ceferino Basilio, the general manager8 then of
petitioner, as marketing manager with a monthly compensation of P20,000 plus 1% commission from
collections of all advertising contracts consummated.9

In a letter dated October 11, 1994 signed by Tomas Gomez III, at that time the president of petitioner,
Benedicto was terminated from his position.10

On December 3, 1996, Benedicto filed a complaint with the NLRC for illegal dismissal and damages. He
alleged that after his appointment, he was able to increase the televiewing, listening and audience
ratings of petitioner which resulted in its improved competitive financial strength.11 Specifically, in
1994, he claimed that he successfully initiated, pursued and consummated an advertising contract with
VTV Corporation for a period of five years involving the amount of P600 million.12 However, on October
11, 1994, he was terminated from his position without just or authorized cause.

Labor arbiter Jovencio LL. Mayor, Jr.,13 in a decision dated August 17, 1998, ruled in favor of Benedicto
finding that he was indeed illegally dismissed. Consequently, Mayor: (1) ordered his reinstatement with
full backwages from the time of his dismissal up to his actual reinstatement (amounting to P920,000 at
the time of the promulgation of the decision); (2) directed petitioner to pay his 1% commission on the
contract with VTV Corporation (P645,000), attorney’s fees in the amount of 10% of the total award
(P156,500) and (3) dismissed the claim for moral and exemplary damages.14
Finding the award excessive, petitioner, on October 15, 1998, filed with the NLRC its memorandum on
appeal with motion to re-compute the award on which the appeal bond was to be based.15 This motion
was not acted upon,16 hence, on December 10, 1998, petitioner proceeded to file the appeal bond
based on the amounts17 awarded in the judgment appealed from.18

In a decision promulgated on March 5, 1999, the NLRC dismissed the appeal and ruled that petitioner
failed to perfect its appeal since it did not file the appeal bond within the reglementary period. The CA
affirmed the NLRC’s decision.

Thus this petition with application for preliminary injunction and/or temporary restraining order alleging
the following assignment of errors:

I. WITH DUE RESPECT, THE [CA] ERRED IN AFFIRMING THE ASSAILED DECISION/RESOLUTION OF THE
[NLRC] ON MERE TECHNICALITY, FAILING TO RECOGNIZE THAT PETITIONER HAS IN FACT PERFECTED ITS
APPEAL UNDER EXISTING LAW AND JURISPRUDENCE[;]

II. WITH DUE RESPECT, THE [CA] ERRED IN AFFIRMING IN TOTO THE ASSAILED RESOLUTION/DECISION
DEPRIVING PETITIONER OF ITS RIGHT TO APPEAL, BY IGNORING THE MERITS OF THE MOTION TO
RECOMPUTE AWARD TO REDUCE BOND AND ITS SIGNIFICANCE IN RELATION TO THE PERFECTION OF
THE APPEAL[;]

III. WITH DUE RESPECT, THE [CA] ERRED IN NOT PASSING UPON THE SUBSTANTIVE MERITS OF THE CASE,
SPECIALLY ON THE VALIDITY OF THE REINSTATEMENT OF [BENEDICTO] AT AGE SEVENTY TWO (72),
CONTRARY TO LAW AND JURISPRUDENCE, AND THE GRANT OF BACKWAGES BEYOND [THE] AGE FOR
COMPULSORY RETIREMENT AT 65[;]

IV. WITH DUE RESPECT, THE [CA] ERRED IN AFFIRMING IN TOTO THE ASSAILED RESOLUTION/DECISION
THAT GRANTS 5-YEAR AUTOMATIC INCREASE OF AWARD [SUCH] AS FROM P1.565M TO 2.711M
WITHOUT SETTING [BENEDICTO]’S MOTION TO RECOMPUTE AWARD FOR HEARING AND WITHOUT DUE
NOTICE THEREOF DEPRIVING THE PETITIONER OF ITS PROPERTY WITHOUT DUE PROCESS[;]

V. THE [CA] ERRED IN IGNORING THE ISSUE OF JURISDICTION RAISED BY PETITIONER.19

On June 26, 2002, this Court issued a temporary restraining order enjoining Benedicto and the NLRC
from implementing the decision of labor arbiter Mayor.20

During the pendency of the case, on November 6, 2002, Benedicto passed away.21 He was substituted
by his surviving spouse Lourdes V. Benedicto and their four children.22

After this petition was given due course, Atty. Rodolfo B. Barriga, who claimed to have been hired by
Benedicto as collaborating counsel, filed a motion dated December 17, 2002 praying to be reinstated as
counsel of record of respondents.23 The Court, in a resolution dated March 26, 2003, denied the motion
since any attorney-client relationship between him and Benedicto, if it indeed existed, was terminated
by the latter’s death. Thereafter, Atty. Barriga filed a motion to determine attorney’s fees and notice and
statement of charging lien for attorney’s fees dated May 5, 2003 praying, among others, that we
determine and approve his attorney’s fees and approve the notice of his charging lien.24

Now the resolution of the issues.

Petitioner raises the issue of jurisdiction without, however, explaining properly the basis of its
objections.25 Such half-hearted and belated attempt to argue the NLRC’s alleged lack of jurisdiction
cannot possibly be taken seriously at this late stage of the proceedings.

The NLRC and the CA dismissed petitioner’s appeal. Both held that petitioner failed to perfect its appeal.
Petitioner had ten calendar days from its receipt of the labor arbiter’s decision on October 5, 1998 to
appeal. While it filed its memorandum on appeal with motion to re-compute award on October 15,
1998, the appeal bond was posted after the appeal period.

Under the second paragraph of Article 223 of the Labor Code, when a judgment involving monetary
award is appealed by the employer, the appeal is perfected only upon the posting of a cash or surety
bond issued by a reputable bonding company duly accredited by the NLRC in an amount equivalent to
the monetary award in the judgment. This assures the workers that if they finally prevail in the case, the
monetary award will be given to them on dismissal of the employer’s appeal.26 It is also meant to
discourage employers from using the appeal to delay or evade payment of their obligations to the
employees.27
Nevertheless, such amount of the bond may be reduced by the NLRC in meritorious cases, on motion of
the appellant.28 Indeed, an unreasonable and excessive amount of bond is oppressive and unjust, and
has the effect of depriving a party of his right to appeal.29

The provision of Article 223 of the Labor Code requiring the posting of a bond for the perfection of an
appeal of a monetary award must be given liberal interpretation in line with the desired objective of
resolving controversies on the merits.30 If only to achieve substantial justice, strict observance of the
reglementary periods may be relaxed if warranted.31 However, this liberal interpretation must be
justified by substantial compliance with the rule. As we declared in Buenaobra v. Lim King Guan:32

It is true that the perfection of an appeal in the manner and within the period prescribed by law is not
only mandatory but jurisdictional, and failure to perfect an appeal has the effect of making the judgment
final and executory. However, technicality should not be allowed to stand in the way of equitably and
completely resolving the rights and obligations of the parties. We have allowed appeals from the
decisions of the labor arbiter to the NLRC, even if filed beyond the reglementary period, in the interest
of justice.33

In this case, petitioner posted the bond when the NLRC did not act on its motion for re-computation of
the award. There was thus substantial compliance that justified a liberal application of the requirement
on the timely filing of the appeal bond. Moreover, petitioner presented a meritorious ground in
questioning the computation of the backwages, as we shall discuss below.

We now proceed to the merits of the case.

The labor arbiter found that Benedicto was an employee (the marketing manager) of petitioner.34 He
also determined that there was no just or authorized cause for Benedicto’s termination. Neither did
petitioner comply with the two-notice requirement for valid termination under the law. He therefore
concluded that Benedicto was illegally dismissed.35

These factual findings of the NLRC, confirmed by the CA, are binding on us since they are supported by
substantial evidence. Petitioner, aside from merely stating that Benedicto’s appointment was
unauthorized,36 did not extensively deal with the issue of whether Benedicto was in fact its employee.
Besides, it is estopped from denying such fact considering its admission that its former President, Tomas
Gomez III, wrote him a letter of termination on October 11, 1994.37 Petitioner, furthermore, never
contested the finding of illegal dismissal. Accordingly, there are no strong reasons for us to again delve
into the facts.

Instead, the bulk of petitioner’s arguments focused on the labor arbiter’s order of reinstatement and
award of backwages. The issue of reinstatement was mooted by Benedicto’s death in 2002.

As for the award of backwages, petitioner insists that the award should be limited to what Benedicto
was entitled to as of the compulsory retirement age of 65 years. When the labor arbiter promulgated his
decision (wherein he awarded the amount of P920,000 as backwages), Benedicto was already 68 years
old. In an order dated August 10, 1999, he further increased the backwages by P180,000.38

We agree with petitioner that Benedicto was entitled to backwages only up to the time he reached 65
years old, the compulsory retirement age under the law.39 When Benedicto was illegally dismissed on
October 11, 1994, he was already 64 years old. He turned 65 years old on December 1, 199440 at which
age he was deemed to have retired. Since backwages are granted on grounds of equity for earnings lost
by an employee due to his illegal dismissal,41 Benedicto was entitled to backwages only for the period
he could have worked had he not been illegally dismissed, i.e. from October 11, 1994 to December 1,
1994.42

Petitioner also questions the award by the labor arbiter of Benedicto’s 1% commission on the blocktime
sale agreement with VTV Corporation in the amount of P645,000.43 The arbiter found that the
agreement was initiated by and consummated through Benedicto’s efforts and that he was entitled to
the commission.44 This is another factual matter that is binding on us. However, it is unclear how the
labor arbiter arrived at the amount adjudged. We therefore rule that in computing the amount of the
commission Benedicto was entitled to, the following should be considered:

First, because Benedicto was entitled to backwages only from October 11 to December 1, 1994 when he
turned 65 years old, petitioner should pay his commission only for this period.

Second, by nature, commissions are given to employees only if the employer receives income.45
Employees, as a reward, receive a percentage of the earnings of the employer, which they, through their
efforts, helped produce.46 Commissions are also given in the form of incentives or encouragement so
that employees will be inspired to put a little more industry into their tasks. Commissions can also be
considered as direct remunerations for services rendered.47 All these different concepts of commissions
are incongruent with the claim that an employee can continue to receive them indefinitely after
reaching his mandatory retirement age.

Benedicto’s right to the commissions was coterminous with his employment with petitioner48 and this
ended when he reached the compulsory retirement age.

Lastly, the stipulation49 providing for commissions (which did not specify the period of entitlement)
would be too burdensome if interpreted to mean that Benedicto had a right to it even after his
employment with petitioner. Doubts in contracts should be settled in favor of the greatest reciprocity of
interests.50 A lopsided and open-minded construction could not have been the parties’ contemplation.
Had that been their intent, then they should have spelled it out in no uncertain terms.

The labor arbiter should therefore re-compute the commission Benedicto was entitled to in accordance
with these guidelines.

Petitioner is also liable for 10% of the total amount for attorney’s fees since Benedicto and the present
respondents were compelled to litigate and incur expenses to enforce and protect his rights.51

With respect to Atty. Barriga’s motion, we note that this entails a factual determination and examination
of the evidence. Since Atty. Barriga still has to prove his entitlement to the attorney’s fees he is claiming
and the amount thereof (if he is so entitled), this may be taken up in the NLRC which will execute the
judgment.52

In summary, this case shall be remanded to the labor arbiter for re-computation of backwages and
commissions to be paid by petitioner to respondent(s) for the period October 11, 1994 to December 1,
1994 and 10% of the total amount as attorney’s fees. The labor arbiter shall also set for further hearing
Atty. Barriga’s motion to determine his attorney’s fees and thereafter to fix the amount thereof if he is
so entitled.

WHEREFORE, the assailed decision dated October 18, 2001 and resolution dated March 18, 2002 of the
Court of Appeals in CA-G.R. SP No. 53413 are hereby REVERSED and SET ASIDE.
Petitioner is ORDERED to pay the deceased respondent’s backwages and commissions to his heirs from
the time he was illegally dismissed on October 11, 1994 up to the time he reached compulsory
retirement age on December 1, 1994. Likewise, petitioner is ORDERED to pay attorney’s fees equivalent
to 10% of the total monetary award (backwages plus commissions). For this purpose, the case is hereby
ordered REMANDED to the labor arbiter for the re-computation of the amounts due.

The labor arbiter is also DIRECTED to set for further hearing Atty. Rodolfo B. Barriga’s motion to
determine his attorney’s fees and thereafter to fix the amount thereof if due to him.

Our temporary restraining order issued on June 26, 2002 is hereby LIFTED.

Costs against petitioner.

SO ORDERED.

Puno, Chairperson, Sandoval-Gutierrez, Azcuna, Garcia, Jr., J.J., concur.

Republic of the Philippines

SUPREME COURT

Manila

SECOND DIVISION

G.R. No. 172295 December 23, 2008

LILIA P. LABADAN, petitioner,

vs.

FOREST HILLS ACADEMY/NAOMI CABALUNA and PRESIDING COMISSIONER SALIC B. DUMARPA,

COMMISSIONER PROCULO T. SARMEN, COMMISSIONER NOVITO C. CAGAYAN, respondents.

DECISION

CARPIO MORALES, J.:

Lilian L. Labadan (petitioner) was hired by private respondent Forest Hills Mission Academy (Forest Hills)
in July 1989 as an elementary school teacher. From 1990 up to 2002, petitioner was registrar and
secondary school teacher.

On August 18, 2003, petitioner filed a complaint1 against respondent Forest Hills and its administrator
respondent Naomi Cabaluna for illegal dismissal, non-payment of overtime pay, holiday pay, allowances,
13th month pay, service incentive leave, illegal deductions, and damages.

In her Position Paper,2 petitioner alleged that she was allowed to go on leave from Forest Hills, and
albeit she had exceeded her approved leave period, its extension was impliedly approved by the school
principal because she received no warning or reprimand and was in fact retained in the payroll up to
2002.3

Petitioner further alleged that since 1990, tithes to the Seventh Day Adventist church have been illegally
deducted from her salary; and she was not paid overtime pay for overtime service, 13th month pay, five
days service incentive leave pay, and holiday pay; and that her SSS contributions have not been
remitted.

Claiming that strained relations between her and Forest Hill have rendered reinstatement not feasible,
petitioner prayed for separation pay in lieu of reinstatement.

In its Position Paper,4 Forest Hills claimed as follows: In July 2001, petitioner was permitted to go on
leave for two weeks but did not return for work after the expiration of the period. Despite petitioner’s
undertaking to report "soon," she never did even until the end of School Year 2001-2002. It thus hired a
temporary employee to accomplish the needed reports. When she finally returned for work, classes for
the School Year 2002-2003 were already on-going.

To belie petitioner’s claim that she was dismissed, Forest Hills submitted a list of faculty members and
staff from School Year 1998-1999 up to School Year 2001 to 2002 which included her name.5

With regard to the charge for illegal deduction, Forest Hills claimed that the Seventh Day Adventist
Church requires its members to pay tithes equivalent to 10% of their salaries, and petitioner was hired
on account of her being a member thereof, and petitioner never questioned the deduction of the tithe
from her salary.

With regard to the charge for non-payment of overtime pay, holiday pay, and allowances, Forest Hills
noted that petitioner proffered no evidence to support the same.

The Labor Arbiter decided in favor of petitioner, disposing as follows:

WHEREFORE, judgment is hereby rendered:

1. Finding respondents Forest Hills Academy and/or Naomi Cabaluna guilty of illegally dismissing the
complainant;

2. Directing respondent to pay complainant Lilia P. Labadan the total amount of P152,501.02
representing her monetary award x x x.

Complainant’s other claim[s] are hereby dismissed for lack of merit and/or failure to substantiate.

SO ORDERED.6
The National Labor Relations Commission (NLRC), finding the Labor Arbiter to have misappreciated the
facts of the case, reversed and set aside his decision and dismissed petitioner’s complaint by Resolution
of June 30, 2005.7

On petitioner’s Petition for Certiorari,8 the Court of Appeals, by Resolution9 of December 15, 2005,
dismissed the petition for deficient amount of appellate docket fee, non-attachment of Affidavit of
Service, absence of written explanation why the petition was filed through registered mail instead of
through personal service, and non-attachment of copies of the Complaint and the Answer filed before
the Labor Arbiter. Petitioner’s Motion for Reconsideration having been denied,10 she filed the present
Petition for Review on Certiorari,11 faulting the Court of Appeals

x x x IN DISMISSING THE PETITION ON THE GROUND OF TECHNICALITIES[;]

x x x IN NOT DECIDING ON THE MERITS WHETHER OR NOT HONORABLE COMMISSIONERS OF THE 5TH
DIVISION HAVE COMMITTED AN ACT OF GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION:

A. IN REVERSING THE FINDINGS OF THE EXECUTIVE LABOR ARBITER THAT HEREIN PETITIONER-
COMPLAINANT WAS NOT DISMISSED FROM HER WORK AS A TEACHER and AT THE SAME TIME THE
REGISTRAR;

B. IN FINDING THAT BY A PROLONGED ABSENCE OF ONE YEAR MORE OR LESS, PETITIONER WAIVED HER
13TH MONTH PAY AND SERVICE INCENTIVE LEAVES AS SHE FAILED TO STATE SUCH CLAIMS IN HER
AFFIDAVIT THAT WAS ATTACHED [TO] HER POSITION PAPER, and;

C. THAT THE DECISION/RESOLUTION RENDERED BY THE HONORABLE COMMISSIONERS OF THE 5TH

DIVISION WAS TAINTED WITH GRAVE ABUSE OF DISCRETION AS IT WAS INCOMPLETE AND
UNLAWFUL[.]12 (Italics and emphasis in the original)

Non-payment of docket fee at the time of the filing of a petition does not automatically call for its
dismissal as long as the fee is paid within the applicable prescriptive or reglementary period.13 While
petitioner paid the P30 deficient amount of the docket fee on February 7, 2006,14 it was beyond the 60-
day period for filing the petition for certiorari. Nevertheless, the Court, in the interest of substantial
justice, brushes aside this and the other technicalities cited by the Court of Appeals in its Resolution of
December 15, 200515 and, instead of remanding the case to the appellate court, now hereby decides
the case on the merits.

While in cases of illegal dismissal, the employer bears the burden of proving that the dismissal is for a
valid or authorized cause, the employee must first establish by substantial evidence the fact of
dismissal.16

The records do not show that petitioner was dismissed from the service. They in fact show that despite
petitioner’s absence from July 2001 to March 2002 which, by her own admission, exceeded her
approved leave,17 she was still considered a member of the Forest Hills faculty18 which retained her in
its payroll.19

Petitioner argues, however, that she was constructively dismissed when Forest Hills merged her class
with another "so much that when she reported back to work, she has no more claims to hold and no
more work to do."20

Petitioner, however, failed to refute Forest Hills’ claim that when she expressed her intention to resume
teaching, classes were already ongoing for School Year 2002-2003. It bears noting that petitioner
simultaneously held the positions of secondary school teacher and registrar and, as the NLRC noted, she
could have resumed her work as registrar had she really wanted to continue working with Forest Hills.21

Petitioner’s affidavit and those of her former colleagues,22 which she attached to her Position Paper,
merely attested that she was dismissed from her job without valid cause, but gave no particulars on
when and how she was dismissed.

There being no substantial proof that petitioner was dismissed, she is not entitled to separation pay or
backwages.

Respecting petitioner’s claim for holiday pay, Forest Hills contends that petitioner failed to prove that
she actually worked during specific holidays. Article 94 of the Labor Code provides, however, that
(a) Every worker shall be paid his regular daily wage during regular holidays, except in retail and service
establishments regularly employing less than ten (10) workers;

(b) The employer may require an employee to work on any holiday but such employee shall be paid a
compensation equivalent to twice his regular rate[.]

The provision that a worker is entitled to twice his regular rate if he is required to work on a holiday
implies that the provision entitling a worker to his regular rate on holidays applies even if he does not
work.

The petitioner is likewise entitled to service incentive leave under Article 95 of the Labor Code which
provides that

(a) Every employee who has rendered at least one year of service shall be entitled to a yearly service
incentive leave of five days with pay.

(b) This provision shall not apply to those who are already enjoying the benefit herein provided, those
enjoying vacation leave with pay of at least five days and those employed in establishments regularly
employing less than ten employees or in establishment exempted from granting this benefit by the
Secretary of Labor after considering the viability or financial condition of such establishment.

x x x x,

and to 13th month pay under Presidential Decree No. 851.23

As for petitioner’s claims for overtime pay, it must be denied, for other than the uncorroborated
affidavits of her colleagues, there is no concrete proof that she is entitled thereto.24 And so must her
claim for allowances, no proof to her entitlement thereto having been presented

On the deduction of 10% tithe, Article 113 of the Labor Code instructs:
ART. 113. No employer, in his own behalf or in behalf of any person, shall make any deduction from the
wages of his employees, except:

(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,

as does Rule VIII, Section 10 of the Rules Implementing Book III of the Labor Code reading:

SEC. 10. Deductions from the wages of the employees may be made by the employer in any of the
following cases:

(a) When the deductions are authorized by law, including deductions for the insurance premiums
advanced by the employer in behalf of the employee as well as union dues where the right to check-off
has been recognized by the employer or authorized in writing by the individual employee himself;

(b) When the deductions are with the written authorization of the employees for payment to a third
person and the employer agrees to do so, provided that the latter does not receive any pecuniary
benefit, directly or indirectly, from the transaction. (Emphasis and underscoring supplied)

In the absence then of petitioner’s written conformity to the deduction of the 10% tithe from her salary,
the deduction made by Forest Hills was illegal.
Finally, on petitioner’s claim that Forest Hills did not remit her SSS contributions, Villar v. National Labor
Relations Commission25 enlightens:

x x x [T]he burden of proving payment of monetary claims rests on the employer. x x x

xxxx

The reason for the rule is that the pertinent personnel files, payrolls, records, remittances and other
similar documents – which will show that overtime, differentials, service incentive leave and other
claims of workers have been paid – are not in the possession of the worker but in the custody and
absolute control of the employer.26 (Underscoring supplied)

Forest Hills having glossed over this claim, the same must be granted.

Finally, insofar as petitioner was compelled to litigate her money claims, an award of attorney’s fees
equivalent to 10% of the final judgment award is in order.27

WHEREFORE, the Court of Appeals Resolution of December 15, 2005 is SET ASIDE. The petition is
GRANTED insofar as petitioner’s claims for illegal deductions, holiday pay, service incentive leave pay,
13th month pay, and non-remittance of SSS contributions are concerned. Respondents are accordingly
ORDERED to refund to petitioner the amount of the illegal deductions from her salary; to pay her holiday
pay, service incentive leave pay, and 13th month pay; to remit her contributions to the SSS; and to pay
her attorney’s fees equivalent to 10% of the final judgment award. The case is accordingly REMANDED
to the Labor Arbiter for computation of the amount of such money claims.

SO ORDERED.

CONCHITA CARPIO MORALES

Associate Justice
Republic of the Philippines

SUPREME COURT

Manila

SECOND DIVISION

G.R. No. 188949 July 26, 2010

CENTRAL AZUCARERA DE TARLAC, Petitioner,

vs.

CENTRAL AZUCARERA DE TARLAC LABOR UNION-NLU, Respondent.

DECISION

NACHURA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court, assailing the
Decision1 dated May 28, 2009, and the Resolution2 dated July 28, 2009 of the Court of Appeals (CA) in
CA-G.R. SP No. 106657.

The factual antecedents of the case are as follows:

Petitioner is a domestic corporation engaged in the business of sugar manufacturing, while respondent
is a legitimate labor organization which serves as the exclusive bargaining representative of petitioner’s
rank-and-file employees. The controversy stems from the interpretation of the term "basic pay,"
essential in the computation of the 13th-month pay.
The facts of this case are not in dispute. In compliance with Presidential Decree (P.D.) No. 851, petitioner
granted its employees the mandatory thirteenth (13th) - month pay since 1975. The formula used by
petitioner in computing the 13th-month pay was: Total Basic Annual Salary divided by twelve (12).
Included in petitioner’s computation of the Total Basic Annual Salary were the following: basic monthly
salary; first eight (8) hours overtime pay on Sunday and legal/special holiday; night premium pay; and
vacation and sick leaves for each year. Throughout the years, petitioner used this computation until
2006.3

On November 6, 2004, respondent staged a strike. During the pendency of the strike, petitioner
declared a temporary cessation of operations. In December 2005, all the striking union members were
allowed to return to work. Subsequently, petitioner declared another temporary cessation of operations
for the months of April and May 2006. The suspension of operation was lifted on June 2006, but the
rank-and-file employees were allowed to report for work on a fifteen (15) day-per-month rotation basis
that lasted until September 2006. In December 2006, petitioner gave the employees their 13th-month
pay based on the employee’s total earnings during the year divided by 12.4

Respondent objected to this computation. It averred that petitioner did not adhere to the usual
computation of the 13th-month pay. It claimed that the divisor should have been eight (8) instead of 12,
because the employees worked for only 8 months in 2006. It likewise asserted that petitioner did not
observe the company practice of giving its employees the guaranteed amount equivalent to their one
month pay, in instances where the computed 13th-month pay was less than their basic monthly pay.5

Petitioner and respondent tried to thresh out their differences in accordance with the grievance
procedure as provided in their collective bargaining agreement. During the grievance meeting, the
representative of petitioner explained that the change in the computation of the 13th-month pay was
intended to rectify an error in the computation, particularly the concept of basic pay which should have
included only the basic monthly pay of the employees.6

For failure of the parties to arrive at a settlement, respondent applied for preventive mediation before
the National Conciliation and Mediation Board. However, despite four (4) conciliatory meetings, the
parties still failed to settle the dispute. On March 29, 2007, respondent filed a complaint against
petitioner for money claims based on the alleged diminution of benefits/erroneous computation of
13th-month pay before the Regional Arbitration Branch of the National Labor Relations Commission
(NLRC).7
On October 31, 2007, the Labor Arbiter rendered a Decision8 dismissing the complaint and declaring
that the petitioner had the right to rectify the error in the computation of the 13th-month pay of its
employees.9 The fallo of the Decision reads:

WHEREFORE, premises considered, the complaint filed by the complainants against the respondents
should be DISMISSED with prejudice for utter lack of merit.

SO ORDERED.10

Respondents filed an appeal. On August 14, 2008, the NLRC rendered a Decision11 reversing the Labor
Arbiter. The dispositive portion of the Decision reads:

WHEREFORE, the decision appealed is reversed and set aside and respondent-appellee Central
Azucarera de Tarlac is hereby ordered to adhere to its established practice of granting 13th[-] month pay
on the basis of gross annual basic which includes basic pay, premium pay for work in rest days and
special holidays, night shift differential and paid vacation and sick leaves for each year.

Additionally, respondent-appellee is ordered to observe the guaranteed one[-]month pay by way of 13th
month pay.

SO ORDERED. 12

Petitioner filed a motion for reconsideration. However, the same was denied in a Resolution dated
November 27, 2008. Petitioner then filed a petition for certiorari under Rule 65 of the Rules of Court
before the CA.13

On May 28, 2009, the CA rendered a Decision14 dismissing the petition, and affirming the decision and
resolution of the NLRC, viz.:
WHEREFORE, the foregoing considered, the petition is hereby DISMISSED and the assailed August 14,
2008 Decision and November 27, 2008 Resolution of the NLRC, are hereby AFFIRMED. No costs.

SO ORDERED.15

Aggrieved, petitioner filed the instant petition, alleging that the CA committed a reversible error in
affirming the Decision of the NLRC, and praying that the Decision of the Labor Arbiter be reinstated.

The petition is denied for lack of merit.

The 13th-month pay mandated by Presidential Decree (P.D.) No. 851 represents an additional income
based on wage but not part of the wage. It is equivalent to one-twelfth (1/12) of the total basic salary
earned by an employee within a calendar year. All rank-and-file employees, regardless of their
designation or employment status and irrespective of the method by which their wages are paid, are
entitled to this benefit, provided that they have worked for at least one month during the calendar year.
If the employee worked for only a portion of the year, the 13th-month pay is computed pro rata.16

Petitioner argues that there was an error in the computation of the 13th-month pay of its employees as
a result of its mistake in implementing P.D. No. 851, an error that was discovered by the management
only when respondent raised a question concerning the computation of the employees’

13th-month pay for 2006. Admittedly, it was an error that was repeatedly committed for almost thirty
(30) years. Petitioner insists that the length of time during which an employer has performed a certain
act beneficial to the employees, does not prove that such an act was not done in error. It maintains that
for the claim of mistake to be negated, there must be a clear showing that the employer had freely,
voluntarily, and continuously performed the act, knowing that he is under no obligation to do so.
Petitioner asserts that such voluntariness was absent in this case.17

The Rules and Regulations Implementing P.D. No. 851, promulgated on December 22, 1975, defines
13th-month pay and basic salary as follows:
Sec. 2. Definition of certain terms. - As used in this issuance:

(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.

On January 16, 1976, the Supplementary Rules and Regulations Implementing P.D. No. 851 was issued.
The Supplementary Rules clarifies that overtime pay, earnings, and other remuneration that are not part
of the basic salary shall not be included in the computation of the 13th-month pay.

On November 16, 1987, the Revised Guidelines on the Implementation of the 13th-Month Pay Law was
issued. Significantly, under this Revised Guidelines, it was specifically stated that the minimum 13th-
month pay required by law shall not be less than one-twelfth (1/12) of the total basic salary earned by
an employee within a calendar year.1avvphi1

Furthermore, the term "basic salary" of an employee for the purpose of computing the 13th-month pay
was interpreted to include all remuneration or earnings paid by the employer for services rendered, but
does not include allowances and monetary benefits which are not 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.

Based on the foregoing, it is clear that there could have no erroneous interpretation or application of
what is included in the term "basic salary" for purposes of computing the 13th-month pay of employees.
From the inception of P.D. No. 851 on December 16, 1975, clear-cut administrative guidelines have been
issued to insure uniformity in the interpretation, application, and enforcement of the provisions of P.D.
No. 851 and its implementing regulations.
As correctly ruled by the CA, the practice of petitioner in giving 13th-month pay based on the
employees’ gross annual earnings which included the basic monthly salary, premium pay for work on
rest days and special holidays, night shift differential pay and holiday pay continued for almost thirty
(30) years and has ripened into a company policy or practice which cannot be unilaterally withdrawn.

Article 100 of the Labor Code, otherwise known as the Non-Diminution Rule, mandates that benefits
given to employees cannot be taken back or reduced unilaterally by the employer because the benefit
has become part of the employment contract, written or unwritten. 18 The rule against diminution of
benefits applies if it is shown that the grant of the benefit is based on an express policy or has ripened
into a practice over a long period of time and that the practice is consistent and deliberate.
Nevertheless, the rule will not apply if the practice is due to error in the construction or application of a
doubtful or difficult question of law. But even in cases of error, it should be shown that the correction is
done soon after discovery of the error.19

The argument of petitioner that the grant of the benefit was not voluntary and was due to error in the
interpretation of what is included in the basic salary deserves scant consideration. No doubtful or
difficult question of law is involved in this case. The guidelines set by the law are not difficult to
decipher. The voluntariness of the grant of the benefit was manifested by the number of years the
employer had paid the benefit to its employees. Petitioner only changed the formula in the computation
of the 13th-month pay after almost 30 years and only after the dispute between the management and
employees erupted. This act of petitioner in changing the formula at this time cannot be sanctioned, as
it indicates a badge of bad faith.

Furthermore, petitioner cannot use the argument that it is suffering from financial losses to claim
exemption from the coverage of the law on 13th-month pay, or to spare it from its erroneous unilateral
computation of the 13th-month pay of its employees. Under Section 7 of the Rules and Regulations
Implementing P.D. No. 851, distressed employers shall qualify for exemption from the requirement of
the Decree only upon prior authorization by the Secretary of Labor.20 In this case, no such prior
authorization has been obtained by petitioner; thus, it is not entitled to claim such exemption.

WHEREFORE, the Decision dated May 28, 2009 and the Resolution dated July 28, 2009 of the Court of
Appeals in CA-G.R. SP No. 106657 are hereby AFFIRMED. Costs against petitioner.

SO ORDERED.
ANTONIO EDUARDO B. NACHURA

Associate Justice

Republic of the Philippines

SUPREME COURT

Manila

THIRD DIVISION

G.R. No. 108556 November 19, 1996

MANILA MANDARIN EMPLOYEES UNION, petitioner,

vs.

NATIONAL LABOR RELATIONS COMMISSION, Second Division, and the MANILA MANDARIN HOTEL,
respondents.

NARVASA, C.J.:

The petitioner in this special civil action of certiorari seeks nullification of the September 11, 1992
Decision of the Second Division of the National Labor Relations Commission reversing the judgment of
the Labor Arbiter in NLRC NCR Case No. 10-4335-86 and dismissing the case for lack of merit, as well as
of the Commission's November 24, 1992 Resolution denying reconsideration of said decision.

On October 30, 1986, the Manila Mandarin Employees Union (hereafter UNION), as exclusive bargaining
agent of the rank-and-file employees of the Manila Mandarin Hotel, Inc. (hereafter MANDARIN), filed
with the NLRC Arbitration Branch a complaint in its members' behalf to compel MANDARIN to pay the
salary differentials of the individual employees concerned because of wage distortions in their salary
structure allegedly created by the upward revisions of the minimum wage pursuant to various
Presidential Decrees and Wage Orders, and the failure of MANDARIN to implement the corresponding
increases in the basic salary rate of newly-hired employees.

The relevant Presidential Decrees and Wage Orders were specified by the UNION as follows :

a. PD 1389, amending PD 928, mandating an increase in the statutory minimum wage by P3.00
spread out over a period of three years, as follows: P1.00 starting July 1, 1978; P1.00 starting May 1,
1979; and P1.00 starting May 1, 1980.

b. PD 1614, providing that workers covered by PD 1389, whether agricultural or non-agricultural,

should receive an increase of P2.00 in their statutory minimum wage effective April 1, 1979, the same
representing an acceleration of the remaining increases under PD 1389; and that all non-agricultural
workers in Metro Manila shall receive a minimum wage of P12.00;

c. PD 1713, issued on August 18, 1980, providing an increase in the minimum daily wage rates and
for additional allowance; increasing the minimum daily wage rates by P1.00, and providing that all
private employers shall pay their employees with wages or salaries not exceeding P1,500.00 a month, an
additional mandatory living allowance of P60.00 a month for non-agricultural workers, P45.00 for
plantation workers and P30.00 a month for agricultural non-plantation workers;

d. PD 1751, issued on December 14, 1980, increasing the statutory daily minimum wages by
integrating the P4.00 mandatory allowance under PD 525 and PD 1123 into the basic pay of all covered
workers;

e. Wage Order No. 1, issued on March 26, 1981, increasing the mandatory emergency living
allowance of all workers with salaries or wages of P1,500.00 a month by P2.00 a day for non-agricultural
workers, P1.50 a day for agricultural plantation workers, P1.00 a day for agricultural non-plantation
workers, effective March 22, 1981;

f. Wage Order No. 2 issued on July 6, 1983 increasing the mandatory basic minimum wage and.
living allowance for non-agricultural and agricultural workers in the following manner:
1) For non-agricultural employees, receiving not more than P1,800.00 monthly, P1.00 a day as
minimum wage and P1.50 a day as cost of living allowance;

2) For plantation agricultural employees, P1.00 a day as minimum wage and P0.50 a day as cost of
living allowance subject to the same salary ceiling provided in the immediately preceding section; and

3) For non-plantation agricultural employees, P1.00 a day as minimum wage; and

also, providing that effective October 1, 1983, the living allowance rates as adjusted in the preceding
section shall be further increased subject to the same salary ceiling, for non-agricultural employees, by
P1.00.

g. Wage Order No. 3 issued November 7, 1983 increasing the statutory minimum wage rates for
workers in the private sector by P1.00 per day effective November 1, 1983, and also increasing the
statutory wage rates by P1.00 per day, effective December 1, 1983;

h. Wage Order No. 4 issued on May 1, 1984 increasing the statutory daily minimum wages, after
integrating the mandatory living allowance under PDs 1614, 1634, 1678 and 1713 into the basic pay of
all covered employees, effective May 1, 1984; — after the integration, the minimum daily wage rate was
increased by P11.00 for non-agricultural workers.

i. Wage Order No. 5 issued on June 11, 1984 increasing the statutory daily minimum wage rates
and living allowances of workers in the private sector by P3.00 effective June 16, 1984 — the minimum
daily wage rates became P35.00 for Metro Manila and P34.00 for outside Metro Manila; and

j. Wage order No. 6, effective November 1, 1984, increasing the statutory minimum wage rate by
P2.00 per day.

On January 15, 1987, the UNION filed its Position Paper amplifying the allegations of its complaint and
setting forth the legal bases of its demands against MANDARIN; and on March 25, 1987, it filed an
Amended Complaint presenting an additional claim for payment of salary differentials to the union
members affected, allegedly resulting from underpayment of wages.

The Labor Arbiter eventually ruled in favor of the UNION, holding that there were in fact wage
distortions entitling its members to salary adjustments totalling P26,173,601.25 — for 541 employees —
as well as underpayments amounting to P1,978,296.18 — for 182 employees. The dispositive portion of
his decision reads: 1

WHEREFORE, judgment is hereby rendered ordering the respondent Hotel to pay the individual
complainants who are members of the respondent Union whose names appear on the respective
computations embodied in this Decision, the aggregate amount of P26,173,601.25 representing their
salary adjustments by way of correcting the wage distortions in their respective salary structure, for the
period from October 30, 1983 up to October 31, 1990, and continuously thereafter to pay the
corresponding amounts due them as such salary adjustments until the same are properly and finally
restored in their basic monthly rates; to pay the aggregate amount of P1,978,296.18 representing their
salary differentials resulting from underpayment of wages in violation of the minimum wage laws,
Presidential Decrees and Wage Orders for the period from March 25, 1984 up to October 31, 1990, and
continuously thereafter to pay the corresponding amounts due them as such salary differentials until the
same are properly and finally restored into their basic monthly rates.

Likewise, the respondent Hotel is ordered to pay an amount equivalent to ten percent (10%) of the total
awards granted to individual complainants, by way of and as attorney's fees.

On appeal, the Second Division of respondent Commission (composed of Commissioner Domingo H.

Zapanta, ponente, and Presiding Commissioner Edna Bonto-Perez) rendered the dispositions already
referred to and now assailed — setting aside the Labor Arbiter's judgment and dismissing the UNION's
complaint, and later denying the UNION'S motion for reconsideration. 2

The principal issues raised in this Court are: (1) Whether or not the NLRC had jurisdiction to take
cognizance of MANDARIN'S appeal from the Labor Arbiter's decision; and (2) if so, whether or not it
gravely abused its discretion in setting aside the Labor Arbiter's judgment and dismissing the UNION'S
complaint.
The issue of jurisdiction is grounded on the posited tardiness of private respondents' appeal from the
Labor Arbiter's judgment to the NLRC, and fatal defect in their supersedeas bond.

The UNION contends 3 that the records indubitably show that MANDARIN received on January 22, 1991
its copy of the Labor Arbiter's Decision (of January 15, 1991), but filed its appeal and paid the appeal fee
only on February 4, 1991, three (3) days beyond the reglementary ten-day period for doing so. It also
condemns as "anomalous" the certification of Deputy Executive Clerk Gaudencio P. Demaisip, Jr., NLRC,
to the effect that MANDARIN's lawyer had approached Hon. Domingo H. Zapanta, a member of the
Second Division, NLRC, "for assistance to have the appeal including the appeal fee in said case duly
received and acknowledged on February 1, 1991, at 4:40 P.M.;" and claims that the anomaly was
aggravated when it was Commissioner Zapanta who wrote the Decision for the Second Division4 —
reversing the Labor Arbiter's judgment, as aforesaid — despite the UNION'S motion for his
disqualification and/or inhibition. The UNION finally argues that MANDARIN'S appeal was not only tardy
but also fatally flawed in that its supersedeas bond had been issued by a surety company — Plaridel
Surety & Insurance Company — which had pending obligations and liabilities at the time, the Insurance
Commissioner having in fact issued a Cease-and-Desist Order against said company for issuing bonds of
no little magnitude without authority; and that moreover, the replacement bond of the Commonwealth
Insurance Company — subsequently filed by order of the NLRC — was just as defective because the
latter company had an authorized maximum net retention level in the amount of only P686,582.80, way
below the monetary award subject of MANDARIN'S appeal to the Commission.

The Court rules that respondent Commission acted correctly in accepting and acting on MANDARIN's
appeal. The circumstances attendant upon the filing of the appeal and supersedeas bond are clearly set
forth in the Certification of Deputy Executive Clerk Demaisip, Jr. 5 above mentioned, viz.:

This is to certify that when Atty. Godofredo Labay filed the appeal in NLRC NCR Case No. 10-4335-86
entitled Manila Mandarin Employees Union vs. Manila Mandarin on Friday, February 1, 1991, the
Cashier and the Docket Section, NCR, were not around, that no one would receive the pleadings and the
appeal fee. He therefore approached Commissioner Domingo H. Zapanta for assistance and to have the
appeal including the appeal bond in said case duly received on February 1, 1991 at 4:50 p.m.

With respect to the appeal fee, since no one was authorized to act as substitute for the Cashier of the
NCR for purposes of receiving the appeal fee and issuing a temporary receipt and/or official receipt
therefor, Commissioner Zapanta requested Atty. Gaudencio P. Demaisip, Jr. to receive said pleadings
and allowed Atty. Labay to pay the appeal fee on Monday, February 4, 1991.
This certification is issued upon request of Atty. Labay for whatever purpose it may serve him.

(SGD.) GAUDENCIO P. DEMAISIP, JR.

Deputy Executive Clerk

Second Division

MANDARIN cannot be faulted for paying the appeal fee only on February 4, 1991. The fact is that on
February 1, 1991, its lawyer was in the NLRC premises, ready to pay said fee, but was unable to do so
because the NLRC Cashier or any other employee authorized to receive payment in his stead, was no
longer around. This is why Commissioner Zapanta allowed payment of the appeal fee to be made on the
next business day, as in fact the appeal fee was paid on, February 4, 1991. This Court has ruled that the
failure to pay the appeal docketing fee within the reglementary period confers a directory, not a
mandatory, power to dismiss an appeal, to be exercised with circumspection in light of all the relevant
facts. 6 In view of these considerations, and the meritoriousness of MANDARIN's appeal — as later
pronounced by respondent NLRC — the interest of justice was quite evidently served when
MANDARIN's appeal was given due course despite delayed payment of the docketing fee.

The contention concerning MANDARIN's ostensibly defective appeal bond, issued by Plaridel Surety and
Insurance Company, deserves short shrift, too. The issuance of the bond antedated this court's
resolution of January 15, 1992 — to which the attention of respondent NLRC had been invited by the
UNION — declaring said surety company to be of doubtful solvency. More important, the issue was
mooted when MANDARIN posted a new surety bond, through Commonwealth Insurance Company, in
compliance with the Order of the respondent Commission dated December 10, 1991. The UNION's
contention that this new bond was equally defective because the bonding company had an authorized
maximum net retention level lower than the sum of P30,967,087.17 involved in this dispute, is
inconsequential, the new bonding company being duly accredited by this Court and licensed by the
Insurance Commission.

At any rate, this Court has invariably ruled that Article 223 of the Labor Code, requiring a bond in
appeals involving monetary awards, must be liberally construed, in line with the desired objective of
resolving controversies on their merits. 7 The circumstances under which the bond was filed in this case
adequately justify such liberal application of the provision.
As to the alleged partiality of Commissioner Domingo Zapanta, the Court finds that his intervention on
February 1, 1991 in the matter of payment of the appeal docketing fee did not, in the circumstances
already related, constitute impropriety or pre-judgment of the case and a ground for his disqualification
as a member of the Second Division to which the case was thereafter raffled. Significantly, in its motion
to inhibit, the UNION mentioned that the case was "assigned particularly to the late Commissioner
Rustico Diokno . . (but) that upon the latter's demise, the case was reassigned to Commissioner Domingo
Zapanta as the new ponente." 8 As Commissioner Zapanta had always been a member of the Second
Division, the UNION's motion for his inhibition, filed more than a year after the occurrence of the
incident on which it was based, becomes suspect as a mere afterthought. In any case, Commissioner
Zapanta did inhibit himself from taking part in the resolution of the UNION'S motion for reconsideration
of the assailed decision of September 11, 1992, thus dispelling what doubts might linger about his
impartiality.

Coming now to the issue of wage distortion, prior to the effectivity on June 9, 1989 of Republic Act No.
6727 which, among others, amended Article 124 (Standards/Criteria for Minimum Wage Fixing) of the
Labor Code, the concept of 'wage distortion' was relatively obscure. So it was observed by this Court in
National Federation of Labor vs. NLRC, 9 a case involving the same subject Wage Orders:

We note that neither the Wage Orders noted above, nor the Implementing Rules promulgated by the
Department of Labor and Employment, set forth a clear and specific notion of "wage distortion." What
the Wage Orders and the Implementing Rules did was simply to recognize that implementation of the
Wage Orders could result in a 'distortion of the wage structure' of an employer, and to direct the
employer and the union to negotiate with each other to correct the distortion. Thus, Section 6 of Wage
Order No. 3, dated 7 November 1983, provided as follows:

Sec. 6. Where the application of the minimum wage rate prescribed herein results in distortions of the
wage structure of an establishment, the employer and the union shall negotiate to correct the
distortions. Any dispute arising from wage distortions shall be resolved through the grievance procedure
under their collective bargaining agreement or through conciliation.

"In case where there is no collective bargaining agreement or recognized labor organization, the
employer shall endeavor to correct such distortions in consultation with their workers. Any dispute
arising from wage distortions shall be resolved through conciliation by the appropriate Regional Office of
the Ministry of Labor and Employment or through arbitration by the NLRC Arbitration Branch having
jurisdiction over the work-place." (Emphasis supplied)
It is therefore opportune to re-state the general principles enunciated in that case, summarized in Metro
Transit Organization, Inc. vs. NLRC, et al., 10 as follows:

(a) 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
classification is reflected in a differing wage rate for each of the existing classes of employees.

(b) Wage distortions have often been the result of government- decreed increases in minimum
wages. There are, however, other causes of wage distortions, like the merger of two (2) companies (with
differing classification of employees and different wage rates) where the surviving company absorbs all
the employees of the dissolved corporation. (In the present Metro case, as already noted, the wage
distortion arose because the effectivity dates of wage increases given to each of the two (2) classes of
employees (rank-and-file and supervisory) had not been synchronized in their respective CBAs.).

(c) Should a wage distortion exist, there is no legal requirement that, in the rectification of that
distortion by re-adjustment of the wage rates of the differing classes of employees, the gap which had
previously or historically existed be restored in precisely the same amount. In other words, correction of
a wage distortion may be done by re-establishing a substantial or significant gap (as distinguished from
the historical gap) between the wage rates of the differing classes of employees.

(d) The re-establishment of a significant difference in wage rates may be the result of resort to
grievance procedures or collective bargaining negotiations.

It was only on June 9, 1989, upon the enactment of R.A. No. 6727 (Wage Rationalization Act, amending,
among others, Article 124 of the Labor Code), 11 that the term "wage distortion" came to be explicitly
defined as:

. . . a situation where an increase in prescribed wage rates results in the elimination or severe
contraction of Intentional quantitative differences in wage or salary rates between and among employee
groups in an establishment as to effectively obliterate the distinctions embodied in such wage structure
based on skills, length of service, or other logical bases of differentiation.
The same provision lays down the procedure to be followed where wage distortion arises from the
implementation of a wage increase prescribed by law or ordered by a Regional Wage Board, viz.:

Where the application of any prescribed wage increase by virtue of a law or wage order issued by any
Regional Board results in distortions of the wage structure within an establishment, the employer and
the union shall negotiate to correct the distortions. Any dispute arising from the wage distortions shall
be resolved through the grievance procedure under their collective bargaining agreement and, if it
remains unresolved, through voluntary arbitration. Unless otherwise agreed by the parties in writing,
such dispute shall be decided by the voluntary arbitrator or panel of voluntary arbitrators within ten (10)
calendar days from the time said dispute was referred to voluntary arbitration.

In cases where there are no collective agreements or recognized labor unions, the employers and
workers shall endeavor to correct such distortions. Any dispute arising therefrom shall be settled
through the National Conciliation and Mediation Board and, if it remains unresolved after ten (10)
calendar days of conciliation, shall be referred to the appropriate branch of the National Labor Relations
Commission (NLRC). It shall be mandatory for the NLRC to conduct continuous hearings and decide the
dispute within twenty (20) calendar days from the time said dispute is submitted for compulsory
arbitration.

The pendency of a dispute arising from a wage distortion shall not in any way delay the applicability of
any increase in prescribed wage rates pursuant to the provisions of law or Wage Order.

The issue of whether or not a wage distortion exists as a consequence of the grant of a wage increase to
certain employees, is a question of fact; 12 and as a rule, factual findings in labor cases, where grounded
on substantial evidence, are not reviewed. 13 However, a disharmony such as exists here, between the
factual findings of the Labor Arbiter and those of the NLRC, opens the door to a review thereof by this
Court. 14

The Labor Arbiter ruled that a wage distortion existed, and that "the only and logical way to correct . . .
(it) in the salary structure of the employees of respondent Hotel is to apply the corresponding increase
made by way of revising upward the minimum wage or integration of the ECOLA into the basic wage as
embodied in the various Presidential Decrees and Wage Orders, across-the-board, so that employees
whose salaries are above the minimum set by

law but who have already been long in the service will not be discriminated against." 15
On the other hand, respondent Commission declared in its decision 16 that there was no wage
distortion arising from the implementation of said Presidential Decrees and Wage Orders such as
warranted across-the-board increases to all employees:

On the issue of wage distortion, we have examined the various presidential decrees and wage orders
referred to by the complainant and in the Labor Arbiter's decision and we found nothing therein that
would justify the award of across-the-board increases to all employees. The apparent intention of the
law is only to upgrade the salaries or wages of the employees receiving lower than the minimum daily
wage set therein. For example, Section 1 of Wage Order No. 6 provides that "effective November 1,
1984, the statutory minimum daily wage rates of workers in the private sector shall be increased by
P2.00." Also, Section 1 of Presidential Decree 1389 provides that "Presidential Decree 928 is hereby
amended by increasing all existing statutory minimum wages in the country by Three Pesos (P3.00)
spread equally over a period of three years, as follows: l) One Peso (P1.00) starting July 1, 1978; 2) One
Peso (P1.00) starting May 1, 1979; and One Peso (P1.00) starting May 1, 1980." Thus, it is clear that the
presidential decrees and wage orders merely provide for a floor wage to be observed by the employers
in the private sector.

It indeed appears that the clear mandate of those issuances was merely to increase the prevailing
minimum wages of particular employee groups. There were no across-the-board increases to all
employees; increases were required only as regards those specified therein. 17 It was therefore
incorrect for the UNION to claim that all its members became automatically entitled to across-the-board
increases upon the effectivity of the Decrees and Wage Orders in question. And even if there were wage
distortions, which is not the case here, the appropriate remedy thereunder prescribed is for the
employer and the union to "negotiate" to correct them; or, if the dispute be not thereby resolved, to
thresh out the controversy through the grievance procedure in the collective bargaining agreement, or
through conciliation or arbitration.

A review of the records convinces this Court that respondent NLRC committed no grave abuse of
discretion in holding that no wage distortion was demonstrated by the UNION. It was, to be sure,
incumbent on the UNION to prove by substantial evidence its assertion of the existence of a wage
distortion. This it failed to do. It presented no such evidence to establish, as required by the law, what, if
any, were the designed quantitative differences in wage or salary rates between employee groups, and
if there were any severe contractions or elimination of these quantitative differences.
The UNION's effort to prove wage distortion consisted only of the presentation of an unverified list of
thirteen (13) employees denominated a "Sample Comparison of Salary Rates Affected by Wage
Distortion," 18 viz.:

SAMPLE COMPARISON OF SALARY RATES OF COMPLAINANTS AFFECTED BY WAGE DISTORTION

F&B DEFT.

Name Position Date Hired Basic Rate

(12/30/85)

1. Pablo Trinidad — Waiter — 9/1/78 P1,300

2. Eduardo Vito — Waiter — 10/16/80 P1,375

3. Camilo Sanchez — Busboy — 8/1/83 P954

4. Renato Solomon — Busboy — 7/19/84 P1,096

5. Buenconsejo Monico — Busboy — 4/15/85 P968

HOUSEKEEPING DEPT.

1. Ruben A. Rillo — Linen Uniform Att. — 6/19/76 P984

2. Hubert Malolot — Linen Uniform Att. — 1/16/80 P1,238

3. Aurelia Kilat — Linen Uniform Att. — 5/2/79 P1,272

4. Rogelio Molaco — Cloakroom Attn. — 9/1/80 P946

5. David Pineda — Cloakroom Attn. — 9/14/81 P1,194

6. Nemesio Matro — Houseman Attn. — 6/10/76 P1,142

7. Dom'go Sabano — Houseman Attn. — 3/8/82 P1,194

8. Renato Guina — Houseman Attn. — 8/24/81 P1,194

SUBMITTED:

(SGD.) ATTY. R.E. ESPINOSA

9/17/87.

The UNION'S Internal Vice-President, Arnulfo Castro, deposed that the employees named in this list
were the "more or less (13) persons found to have suffered wage distortion," 19 and the UNION pointed
out that while these thirteen employees occupied similar positions, they were receiving different rates
of salary.

Respondent Commission however found that as explained by private respondents, such disparity was
due simply to the fact that the employees mentioned had been hired on different dates and were thus
receiving different salaries; or that an employee was hired initially at a position level carrying a hiring
rate higher than the others; or that an employee failed to meet the cut-off date in the grant of yearly
CBA increase; or that the union did not get the correct data on salaries. The Commission accepted as
more accurate the data presented by MANDARIN respecting the same employees, to wit: 20

A N N E X "2"

F&B Dept.

NAME Position Date Hired Basic Rate

per Hotel Records as of 12/30/85

1. Pablo Trinidad Waiter 09/01/78 P1,302.00 *

2. Eduardo Vito Waiter 10/16/80 1,375.00 *

3. Camilo Sanchez Busboy 08/01/83 1,194.00

4. Renato Solomon Busboy 07/19/84 1,096.00

5. Buenconsejo Monico Busboy 04/15/85 968.00

Housekeeping Dept.

1. Ruben A. Rillo Linen Uniform Att. 06/19/76 1,417.00

2. Hubert Malolot Linen Uniform Att. 01/16/80 1,238.00

3. Aurelia Kilat Linen Uniform Att. 05/02/79 1,272.00

4. Rogelio Molaco Cloakroom Attn. 09/19/80 1,272.00

5. David Pineda Cloakroom Attn. 09/14/81 1,213.00

6. Nemesio Matro Houseman Attn. 06/10/77 1,342.00

7. Domingo Sabando Houseman Attn. 03/08/82 1,194.00

8. Renato Guina Houseman Attn. 08/24/81 1,194.00

* Vito was hired at a higher position with a higher hiring rate than that given to Trinidad, i.e. Vito
was hired at P366/mo. while Trinidad at P301/mo. Prior to hiring, Vito already worked as a waiter at the
Metropolitan Club.

The Court agrees that the claimed wage distortion was actually a result of the UNION'S failure to
appreciate various circumstances relating to the employment of the thirteen employees. For instance,
while some of these employees mentioned by UNION Vice-President Arnulfo Castro occupied the same
or similar positions, they were hired by the Hotel on different dates and at different salaries. As
explained in part by MANDARIN:

With respect to the case of Pablo Trinidad and Eduardo Vito, while they were both occupying the
position of waiter in 1987, with monthly salaries of P2,044.00 and P2,217.00, respectively, a
comparative study of the records of these employees shows one of them was initially hired at a higher
position level which naturally carried a higher hiring rate. Trinidad was originally hired in 1978 as a mere
Houseman at the Banquet Department with a basic starting rate of P301.00 a month. On the other hand,
Vito was originally hired in 1980 already a Busboy at the Food and Beverage Department with a starting
salary of P366.00 a month. Before he was hired at the Mandarin Hotel, Vito had already been working as
Waiter at the Metropolitan Club. Records also show that it was only after some time that Trinidad was
promoted to Busboy but still with the smaller Banquet Department. The headway in rate was carried by
Vito although at some point in their careers, these two employees achieved the same position as
Waiter. Not long after, Vito was promoted to Captain Waiter while Trinidad remained Waiter. There is
therefore no reason to compare the renumeration of these two employees as the circumstances
attendant to their employment are different. 21

Respondent Commission correctly concluded that these did not represent cases of wage distortion
contemplated by the law (Article 124, Labor Code, as amended), i.e., a "situation where an increase in
prescribed wage rates results in the elimination or severe contraction of intentional quantitative
differences in wage or salary rates between and among employees groups in an establishment as to
effectively obliterate the distinctions embodied in such wage structure based on skills, length of service,
or other logical basis of differentiation."

Moreover, even assuming arguendo that there was really a wage distortion, it was wrong for the Labor
Arbiter, after first acknowledging that some of the money claims had prescribed under Article 291 of the
Labor

Code, 22 to nevertheless order the computation of salary differentials retroactive to the effective dates
of PDs 1389, 1614, 1713, 1751 and Wage Orders Nos. 2, 3, 4, 5, and 6: in 1978, 1979, 1980, 1980, July
1983, November 1983, May 1984, June 1981 and November 1984, respectively. Clearly, five of these
Decrees and Wage Orders took effect after the lapse of the three-year prescriptive period for litigating
claims for wage distortion differentials, the original complaint for wage distortion having been filed on
October 30, 1986 and the amended complaint for underpayment of wages, on March 25, 1987.
Consequently, the applicable cut-off dates, for purposes of prescription, were October 30, 1983 and
March 25, 1984, respectively.

Finally, the records show that the matter of wage distortion, actual or imputed under the various
issuances up to Wage Order No. 6, had been settled by the parties as early as July 30, 1985. On that day
they executed a Compromise Agreement with the assistance of the then Regional Director of the
National Capital Region, Severo M. Pucan in which they affirmed that with the implementation by
MANDARIN of Wage Order Nos. 4 and 6 as well as P.D. 1634, the latter was "deemed for all legal and
purposes to have fully satisfied all its legal and contractual obligations to its employees under all
presidential issuances on wages." 23
The Compromise Agreement pertinently states:

1. That the respondent shall implement Wage Order No. 6 effective July 1, 1985, without prejudice
to the outcome of the application for exemption as distressed employer filed by said respondent with
the National Wage Council as regards benefits that might be due between November 1, 1985 and June
30, inclusive;

2. The the respondent shall also implement effective August 1, 1985 the integration of the P90.00
a month cost of living allowance under P.D. 1634 into the basic wages of its employees as called for
under Wage Order No. 4 in accordance with the Guidelines contained in the Explanatory Bulletin issued
by the Bureau of Working Conditions on August 8, 1985;

3. That as soon as the respondent shall have complied with the above terms of this Compromise
Agreement, said respondent shall be deemed for all legal intents and purposes to have fully satisfied all
the legal and contractual obligations to its employees under all presidential issuances on wages,
including Wage Orders No. 4 and 6, and Article XI of the collective bargaining agreement.

The Labor Code recognizes the conclusiveness of compromises as a means to settle and end labor
disputes. Article 227 provides that "(a)ny compromise settlement, including those involving labor
standard laws, voluntarily agreed upon by the parties with the assistance of the Bureau or the regional
office of the Department of Labor, shall be final and binding upon the parties. The National Labor
Relations Commission or any court shall not assume jurisdiction over issues involved therein except in
case of non-compliance thereof or if there is prima facie evidence that the settlement was obtained
through fraud, misrepresentation or coercion." In Olaybar vs.

NLRC, 24 this Court had occasion, in a labor dispute, to apply the rule that compromises and settlements
have the effect and conclusiveness of res judicata upon the parties.

Thus, and again assuming arguendo the existence of a wage distortion, this was corrected under the
"fully implemented" Compromise Agreement; 25 and such correction having been explicitly
acknowledged by the UNION, it is now estopped from claiming that a distortion still subsists. In the same
manner, when the UNION entered into a new collective bargaining agreement with MANDARIN,
providing for wage increases in 1987, it is deemed to have thereby settled any remaining question of
wage distortion, since the subject of wages and wage distortions were plainly and unavoidably an
economic issue and the proper subject of collective bargaining. 26

Neither did respondent Commission gravely abuse its discretion in ruling against the UNION on the issue
of underpayment of wages,

The UNION's theory was that since the employees of MANDARIN are paid on a monthly basis under the
Group III category, the applicable increase in daily wage must be multiplied by 365 and then divided by
12 to determine the equivalent monthly rate. MANDARIN's position, on the other hand, was that it had
consistently been using the multiplier 313, and not 365, for the purpose of deriving salary related
benefits of its employees who are paid by the month, excluding from 365, the 52 unpaid rest days in a
year. This appears to have been the consistent practice of MANDARIN, following the formula for daily
paid employees under Group II category as prepared by the Bureau of Labor Standards: 27

AR x 313 days = EMR

——————

12

Where: 313 days = 303 actual working days a year

plus the paid 10 unworked regular

holidays.

Actual working days 303

10 legal holidays 10

Total No. of Days 313.

MANDARIN presented evidence of its practice regarding the use of the factor 313 in computing the
monthly equivalent of the minimum daily wages and other related benefits of its employees; i.e.,
Annexes 3 and 4 of its Supplemental Appeal dated November 12, 1991. This was corroborated by the
UNION's Internal Vice President, Arnulfo Castro, who admitted during cross-examination that in his
research and study, he found that the divisor used in arriving at the daily rate of the hotel employees
was 313 days, which meant that the days-off or rest days are not paid. 28 The admission confirms that
the hotel employees pertain Group II category under the Bureau of Labor Standards Guidelines for
computing the equivalent monthly minimum wage rates. 29 Thus, instead of multiplying the applicable
minimum daily wage by 365 and dividing the result by 12 to derive the applicable minimum monthly
salary, the factor used is 313, composed of 303 actual working days and the 10 unworked but paid
regular holidays in a year.

In his explanatory Bulletin on the payment of Holiday Pay — Ref. No. 85-08 dated 6 November 1985 —
then Secretary Augusto Sanchez of the Department of Labor and Employment, expatiating on the
implications of the Chartered Bank case, 30 stated:

6. Monthly Paid Employees

Oftentime confusion arises from the different interpretations as to who is a monthly-paid employee. A
"monthly-paid employee" is one whose monthly salary includes payments for everyday of the month
although he does not regularly work on his rest days or Sundays and on regular and special holidays.
Group III in the above illustration covers monthly paid employees. Employees falling under Group I, II
and IV are in reality daily paid employees but whose daily rate is translated into its monthly equivalent.
The fact, therefore, that an employee is regularly paid a fixed monthly rate does not necessarily mean
that he is a monthly-paid employee as defined above. (Emphasis supplied)

As applied to the UNION, the-monthly equivalent of the minimum wage under the various Presidential
Decrees and Wage Orders based on the above formula should be as follows:

PD/WO NO. Effectivity Minimum Daily Equivalent

Wage Rate Monthly Rate

PD 1389 01 July 1978 P11.00 P286.96

PD 1614 1 March 1979 13.00 339.00

PD 1813 18 Aug. 1980 14.00 365.17

WO # 2 06 July 1983 19.00 495.58

WO # 3 01 Nov. 1983 20.00 521.67

WO # 4 01 May 1984 32.00 834.67

WO # 5 01 Nov. 1984 35.00 912.92

WO # 6 01 Nov. 1984 37.00 965.08

On the other hand, the monthly pay of the Hotel employees and hiring rate may be illustrated as
follows:

PD/WO NO. Effectivity Equivalent Lowest Salary

Monthly Rate in the Hotel

PD 1389 01 July 1978 P286.92 P350.00

PD 1614 1 March 1979 339.08 411.00

PD 1813 18 Aug. 1980 365.17 562.00

WO # 2 06 July 1983 495.58 960.00

WO # 3 01 Nov. 1983 521.67 960.00

WO # 4 01 May 1984 834.67 960.00

WO # 5 01 Nov. 1984 912.92 960.00

WO # 6 01 Nov. 1984 965.080 1,015.00

A comparative analysis of the wages of the Hotel's employees from 1978 to 1984 vis a vis the minimum
wages fixed by law for the period reveals that at no time during the said period was there any
underpayment of wages by the respondent Hotel. On the contrary, the prevailing monthly salaries of the
subject hotel employees appear to be over and above the minimum amounts required under the
applicable Presidential Decrees and Wage Orders.
WHEREFORE, the assailed Decision of respondent Commission promulgated on September 11, 1992 —
reversing the judgment of the Labor Arbiter and dismissing the UNION'S complaint — being based on
substantial evidence and in accord with applicable laws and jurisprudence, as well as said Commission's
Resolution dated 24, 1992 — denying reconsideration — are hereby AFFIRMED in toto.

SO ORDERED.

Davide, Jr., Melo, Francisco and Panganiban, JJ., concur.

Republic of the Philippines

SUPREME COURT

Manila

THIRD DIVISION

G.R. No. 102636 September 10, 1993

METROPOLITAN BANK & TRUST COMPANY EMPLOYEES UNION-ALU-TUCP and ANTONIO V. BALINANG,
petitioners,

vs.

NATIONAL LABOR RELATIONS COMMISSION (2nd Division) and METROPOLITAN BANK and TRUST
COMPANY, respondents.

Gilbert P. Lorenzo for petitioners.

Marcial G. dela Fuente for private respondents.

VITUG, J.:

In this petition for certiorari, the Metropolitan Bank & Trust Company Employees Union-ALU-TUCP
(MBTCEU) and its president, Antonio V. Balinang, raise the issue of whether or not the implementation
by the Metropolitan Bank and Trust Company of Republic Act No. 6727, mandating an increase in pay of
P25 per day for certain employees in the private sector, created a distortion that would require an
adjustment under said law in the wages of the latter's other various groups of employees.

On 25 May 1989, the bank entered into a collective bargaining agreement with the MBTCEU, granting a
monthly P900 wage increase effective 01 January 1989, P600 wage increase 01 January 1990, and P200
wage increase effective 01 January 1991. The MBTCEU had also bargained for the inclusion of
probationary employees in the list of employees who would benefit from the first P900 increase but the
bank had adamantly refused to accede thereto. Consequently, only regular employees as of 01 January
1989 were given the increase to the exclusion of probationary employees.

Barely a month later, or on 01 January 1989, Republic Act 6727, "an act to rationalize wage policy
determination be establishing the mechanism and proper standards thereof, . . . fixing new wage rates,
providing wage incentives for industrial dispersal to the countryside, and for other purposes," took
effect. Its provisions, pertinent to this case, state:

Sec. 4. (a) Upon the effectivity of this Act, the statutory minimum wage rates of all workers and
employees in the private sector, whether agricultural or non-agricultural, shall be increased by twenty-
five pesos (P25) per day, . . .: Provided, That those already receiving above the minimum wage rates up
to one hundred pesos(P100.00) shall also receive an increase of twenty-five pesos (P25.00) per day, . . .

xxx xxx xxx

(d) If expressly provided for and agreed upon in the collective bargaining agreements, all increase in
the daily basic wage rates granted by the employers three (3) months before the effectivity of this Act
shall be credited as compliance with the increases in the wage rates prescribed herein, provided that,
where such increases are less than the prescribed increases in the wage rates under this Act, the
employer shall pay the difference. Such increase shall not include anniversary wage increases, merit
wage increase and those resulting from the regularization or promotion of employees.
Where the application of the increases in the wage rates under this Section results in distortions as
defined under existing laws in the wage structure within an establishment and gives rise to a dispute
therein, such dispute shall first be settled voluntarily between the parties and in the event of a deadlock,
the same shall be finally resolved through compulsory arbitration by the regional branches of the
National Labor Relations Commission (NLRC) having jurisdiction over the workplace.

It shall be mandatory for the NLRC to conduct continous hearings and decide any dispute arising under
this Section within twenty (20) calendar days from the time said dispute is formally submitted to it for
arbitration. The pendency of a dispute arising from a wage distortion shall not in any way delay the
applicability of the increase in the wage rates prescribed under this Section.

Pursuant to the above provisions, the bank gave the P25 increase per day, or P750 a month, to its
probationary employees and to those who had been promoted to regular or permanent status before 01
July 1989 but whose daily rate was P100 and below. The bank refused to give the same increase to its
regular employees who were receiving more than P100 per day and recipients of the P900 CBA increase.

Contending that the bank's implementation of Republic Act 6727 resulted in the categorization of the
employees into (a) the probationary employees as of 30 June 1989 and regular employees receiving
P100 or less a day who had been promoted to permanent or regular status before 01 July 1989, and (b)
the regular employees as of 01 July 1989, whose pay was over P100 a day, and that, between the two
groups, there emerged a substantially reduced salary gap, the MBTCEU sought from the bank the
correction of the alleged distortion in pay. In order to avert an impeding strike, the bank petitioned the
Secretary of Labor to assume jurisdiction over the case or to certify the same to the National Labor
Relations Commission (NLRC) under Article 263 (g) of the Labor Code.1 The parties ultimately agreed to
refer the issue for compulsory arbitration to the NLRC.

The case was assigned to Labor Arbiter Eduardo J. Carpio. In his decision of 05 February 1991, the labor
arbiter disregard with the bank's contention that the increase in its implementation of Republic Act 6727
did not constitute a distortion because "only 143 employees or 6.8% of the bank's population of a total
of 2,108 regular employees" benefited. He stressed that "it is not necessary that a big number of wage
earners within a company be benefited by the mandatory increase before a wage distortion may be
considered to have taken place," it being enough, he said, that such increase "result(s) in the severe
contraction of an intentional quantitative difference in wage between employee groups."
The labor arbiter concluded that since the "intentional quantitative difference" in wage or salary rates
between and among groups of employees is not based purely on skills or length of service but also on
"other logical bases of differentiation, a P900.00 wage gap intentionally provided in a collective
bargaining agreement as a quantitative difference in wage between those who WERE regular employees
as of January 1, 1989 and those who WERE NOT as of that date, is definitely a logical basis of
differentiation (that) deserves protection from any distorting statutory wage increase." Otherwise, he
added, "a minimum wage statute that seek to uplift the economic condition of labor would itself destroy
the mechanism of collective bargaining which, with perceived stability, has been labor's constitutional
and regular source of wage increase for so long a time now." Thus, since the "subjective quantitative
difference" between wage rates had been reduced from P900.00 to barely P150.00, correction of the
wage distortion pursuant to Section 4(c) of the Rules Implementing Republic Act 6727 should be made.

The labor arbiter disposed of the case, thus:

WHEREFORE, premises considered, the respondent is hereby directed to restore to complainants and
their members the Nine Hundred (P900.00) Pesos CBA wage gap they used to enjoy over non-regular
employees as of January 1, 1989 by granting them a Seven Hundred Fifty (P750.00) Pesos monthly
increase effective July 1, 1989.

SO ORDERED.2

The bank appealed to the NLRC. On 31 May 1991, the NLRC Second Division, by a vote of 2 to 1,
reversed the decision of the Labor Arbiter. Speaking, through Commissioners Rustico L. Diokno and
Domingo H. Zapanta, the NLRC said:

. . . a wage distortion can arise only in a situation where the salary structure is characterized by
intentional quantitative differences among employee groups determined or fixed on the basis of skills,
length of service, or other logical basis of differentiation and such differences or distinction are
obliterated (In Re: Labor Dispute at the Bank of the Philippine Islands, NCMB-RB-7-11-096-89, Secretary
of Labor and Employment, February 18, 1991).

As applied in this case, We noted that in the new wage salary structure, the wage gaps between Level 6
and 7 levels 5 and 6, and levels 6 and 7 (sic) were maintained. While there is a noticeable decrease in the
wage gap between levels 2 and 3, Levels 3 and 4, and Levels 4 and 5, the reduction in the wage gaps
between said levels is not significant as to obliterate or result in severe contraction of the intentional
quantitative differences in salary rates between the employees groups. For this reason, the basis
requirement for a wage in this case. Moreover, there is nothing in the law which would justify an across-
the-board adjustment of P750.00 as ordered by the labor Arbiter.

WHEREFORE, premises considered, the appealed decision is hereby set aside and a new judgment is
hereby entered, dismissing the complaint for lack of merit.

SO ORDERED.3

In her dissent, Presiding Commissioner Edna Bonto-Perez opined:

There may not be an obliteration nor elimination of said quantitative distinction/difference aforecited
but clearly there is a contraction. Would such contraction be severe as to warrant the necessary
correction sanctioned by the law in point, RA 6727? It is may considered view that the quantitative
intended distinction in pay between the two groups of workers in respondent company was contracted
by more than fifty (50%) per cent or in particular by more or less eighty-three (83%) per cent hence,
there is no doubt that there is an evident severe contraction resulting in the complained of wage
distortion.

Nonetheless, the award of P750.00 per month to all of herein individual complainants as ordered by the
Labor Arbiter below, to my mind is not the most equitable remedy at bar, for the same would be an
across the board increase which is not the intention of RA 6727. For that matter, herein complainants
cannot by right claim for the whole amount of P750.00 a month or P25.00 per day granted to the
workers covered by the said law in the sense that they are not covered by the said increase mandated
by RA 6727. They are only entitled to the relief granted by said law by way of correction of the pay scale
in case of distortion in wages by reason thereof.

Hence, the formula offered and incorporated in Wage Order No. IV-02 issued on 21 May 1991 by the
Regional Tripartite Wages and Productivity Commission for correction of pay scale structures in case of
wage distortion as in the case at bar which is:

Minimum Wage= % x Prescribed = Distortion

—————— Increased Adjustment

Actual Salary

would be the most equitable and fair under the circumstances obtaining in this case.

For this very reason, I register my dissent from the majority opinion and opt for the modification of the
Labor Arbiter's decision as afore-discussed.4

The MBTCEU filed a motion for reconsideration of the decision of the NLRC; having been denied, the
MBTCEU and its president filed the instant petition for certiorari, charging the NLRC with gave abuse of
discretion by its refusal (a) "to acknowledge the existence of a wage distortion in the wage or salary
rates between and among the employee groups of the respondent bank as a result of the bank's partial
implementation" of Republic Act 6727 and (b) to give due course to its claim for an across-the-board P25
increase under Republic Act No. 6727.5

We agree with the Solicitor General that the petition is impressed with merit.6

The term "wage distortion", under the Rules Implementing Republic Act 6727, is defined, thus:

(p) Wage Distortion means a situation where an increase in prescribed wage rates results in the
elimination or severe contradiction of intentional quantitative differences in wage or salary rates
between and among employee groups in an establishment as to effectively obliterate the distinctions
embodied in such wage structure based on skills, length of service, or other logical bases of
differentiation.

The issue of whether or not a wage distortion exists as a consequence of the grant of a wage increase to
certain employees, we agree, is, by and large, a question of fact the determination of which is the
statutory function of the NLRC.7 Judicial review of labor cases, we may add, does not go beyond the
evaluation of the sufficiency of the evidence upon which the labor official's findings rest.8 As such,
factual findings of the NLRC are generally accorded not only respect but also finality provided that its
decision are supported by substantial evidence and devoid of any taint of unfairness of arbitrariness.9
When, however, the members of the same labor tribunal are not in accord on those aspects of a case, as
in this case, this Court is well cautioned not to be as so conscious in passing upon the sufficiency of the
evidence, let alone the conclusions derived therefrom.

In this case, the majority of the members of the NLRC, as well as its dissenting member, agree that there
is a wage distortion arising from the bank's implementation of the P25 wage increase; they do differ,
however, on the extent of the distortion that can warrant the adoption of corrective measures required
by law.

The definition of "wage distortion," 10 aforequoted, shows that such distortion can so exist when, as a
result of an increase in the prescribed wage rate, an "elimination or severe contraction of intentional
quantitative differences in wage or salary rates" would occur "between and among employee groups in
an establishment as to effectively obliterate the distinctions embodied in such wage structure based on
skills, length of service, or other logical bases of differentiation." In mandating an adjustment, the law
did not require that there be an elimination or total abrogation of quantitative wage or salary
differences; a severe contraction thereof is enough. As has been aptly observed by Presiding
Commissioner Edna Bonto-Perez in her dissenting opinion, the contraction between personnel
groupings comes close to eighty-three (83%), which cannot, by any stretch of imagination, be considered
less than severe.

The "intentional quantitative differences" in wage among employees of the bank has been set by the
CBA to about P900 per month as of 01 January 1989. It is intentional as it has been arrived at through
the collective bargaining process to which the parties are thereby concluded. 11 The Solicitor General, in
recommending the grant of due course to the petition, has correctly emphasized that the intention of
the parties, whether the benefits under a collective bargaining agreement should be equated with those
granted by law or not, unless there are compelling reasons otherwise, must prevail and be given effect.
12

In keeping then with the intendment of the law and the agreement of the parties themselves, along with
the often repeated rule that all doubts in the interpretation and implementation of labor laws should be
resolved in favor of labor, 13 we must approximate an acceptable quantitative difference between and
among the CBA agreed work levels. We, however, do not subscribe to the labor arbiter's exacting
prescription in correcting the wage distortion. Like the majority of the members of the NLRC, we are also
of the view that giving the employees an across-the-board increase of P750 may not be conducive to the
policy of encouraging "employers to grant wage and allowance increases to their employees higher than
the minimum rates of increases prescribed by statute or administrative regulation," particularly in this
case where both Republic Act 6727 and the CBA allow a credit for voluntary compliance. As the Court,
through Associate Justice Florentino Feliciano, also pointed out in Apex Mining Company, Inc. v. NLRC:
14

. . . . (T)o compel employers simply to add on legislated increases in salaries or allowances without
regard to what is already being paid, would be to penalize employers who grant their workers more
than the statutorily prescribed minimum rates of increases. Clearly, this would be counter-productive so
far as securing the interests of labor is concerned. . . .

We find the formula suggested then by Commissioner Bonto-Perez, which has also been the standard
considered by the regional Tripartite Wages and Productivity Commission for the correction of pay scale
structures in cases of wage distortion, 15 to well be the appropriate measure to balance the respective
contentions of the parties in this instance. We also view it as being just and equitable.

WHEREFORE, finding merit in the instant petition for certiorari, the same is GRANTED DUE PROCESS, the
questioned NLRC decision is hereby SET ASIDE and the decision of the labor arbiter is REINSTATED
subject to the MODIFICATION that the wage distortion in question be corrected in accordance with the
formula expressed in the dissenting opinion of Presiding Commissioner Edna Bonto-Perez. This decision
is immediately executory.

SO ORDERED.

Bidin, Romero and Melo, JJ., concur.

Feliciano, J., is on leave.