Cases On Labor Standard Midterm 2014 Part 1

CASES ON LABOR STANDARDS MID-TERM 2014 PART 1
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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:
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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.


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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


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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;

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;

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


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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:


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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,

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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,

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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;

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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.

SUPREME COURT
Manila


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THIRD DIVISION

G.R. No. 102132. March 19, 1993.

DAVAO INTEGRATED PORT STEVEDORING SERVICES, petitioner, vs. RUBEN V. ABARQUEZ, in his capacity
as an accredited Voluntary Arbitrator and THE ASSOCIATION OF TRADE UNIONS (ATU-TUCP), respondents.

Libron, Gaspar & Associates for petitioner.

Bansalan B. Metilla for Association of Trade Unions (ATUTUCP).

SYLLABUS

1. LABOR LAWS AND SOCIAL LEGISLATION; LABOR RELATIONS; COLLECTIVE BARGAINING
AGREEMENT; DEFINED; NATURE THEREOF; CONSTRUCTION TO BE PLACED THEREON. A collective
bargaining agreement (CBA), as used in Article 252 of the Labor Code, refers to a contract executed upon
request of either the employer or the exclusive bargaining representative incorporating the agreement reached
after negotiations with respect to wages, hours of work and all other terms and conditions of employment,
including proposals for adjusting any grievances or questions arising under such agreement. While the terms
and conditions of a CBA constitute the law between the parties, it is not, however, an ordinary contract to
which is applied the principles of law governing ordinary contracts. A CBA, as a labor contract within the
contemplation of Article 1700 of the Civil Code of the Philippines which governs the relations between labor
and capital, is not merely contractual in nature but impressed with public interest, thus, it must yield to the
common good. As such, it must be construed liberally rather than narrowly and technically, and the courts
must place a practical and realistic construction upon it, giving due consideration to the context in which it is
negotiated and purpose which it is intended to serve.

2. ID.; ID.; ID.; ID.; ID.; ID.; CASE AT BAR. It is thus erroneous for petitioner to isolate Section 1,
Article VIII of the 1989 CBA from the other related section on sick leave with pay benefits, specifically Section
3 thereof, in its attempt to justify the discontinuance or withdrawal of the privilege of commutation or
conversion to cash of the unenjoyed portion of the sick leave benefit to regular intermittent workers. The
manner they were deprived of the privilege previously recognized and extended to them by petitioner-company
during the lifetime of the CBA of October 16, 1985 until three (3) months from its renewal on April 15, 1989,
or a period of three (3) years and nine (9) months, is not only tainted with arbitrariness but likewise
discriminatory in nature. It must be noted that the 1989 CBA has two (2) sections on sick leave with pay
benefits which apply to two (2) distinct classes of workers in petitioner's company, namely: (1) the regular non-
intermittent workers or those workers who render a daily eight-hour service to the company and are governed
by Section 1, Article VIII of the 1989 CBA; and (2) intermittent field workers who are members of the regular
labor pool and the present regular extra labor pool as of the signing of the agreement on April 15, 1989 or
those workers who have irregular working days and are governed by Section 3, Article VIII of the 1989 CBA. It
is not disputed that both classes of workers are entitled to sick leave with pay benefits provided they comply
with the conditions set forth under Section 1 in relation to the last paragraph of Section 3, to wit: (1) the
employee-applicant must be regular or must have rendered at least one year of service with the company; and
(2) the application must be accompanied by a certification from a company-designated physician. the phrase
"herein sick leave privilege," as used in the last sentence of Section 1, refers to the privilege of having a fixed 15-
day sick leave with pay which, as mandated by Section 1, only the non-intermittent workers are entitled to. This
fixed 15-day sick leave with pay benefit should be distinguished from the variable number of days of sick leave,
not to exceed 15 days, extended to intermittent workers under Section 3 depending on the number of hours of

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service rendered to the company, including overtime pursuant to the schedule provided therein. It is only fair
and reasonable for petitioner-company not to stipulate a fixed 15-day sick leave with pay for its regular
intermittent workers since, as the term "intermittent" implies, there is irregularity in their work-days.
Reasonable and practical interpretation must be placed on contractual provisions. Interpetatio fienda est ut res
magis valeat quam pereat. Such interpretation is to be adopted, that the thing may continue to have efficacy
rather than fail.

3. ID.; ID.; ID.; SICK LEAVE BENEFITS; NATURE AND PURPOSE. Sick leave benefits, like other
economic benefits stipulated in the CBA such as maternity leave and vacation leave benefits, among others, are
by their nature, intended to be replacements for regular income which otherwise would not be earned because
an employee is not working during the period of said leaves. They are non-contributory in nature, in the sense
that the employees contribute nothing to the operation of the benefits. By their nature, upon agreement of the
parties, they are intended to alleviate the economic condition of the workers.

4. ID.; ID.; JURISDICTION OF VOLUNTARY ARBITRATOR; CASE AT BAR. Petitioner-company's
objection to the authority of the Voluntary Arbitrator to direct the commutation of the unenjoyed portion of
the sick leave with pay benefits of intermittent workers in his decision is misplaced. Article 261 of the Labor
Code is clear. The questioned directive of the herein public respondent is the necessary consequence of the
exercise of his arbitral power as Voluntary Arbitrator under Article 261 of the Labor Code "to hear and decide
all unresolved grievances arising from the interpretation or implementation of the Collective Bargaining
Agreement." We, therefore, find that no grave abuse of discretion was committed by public respondent in
issuing the award (decision). Moreover, his interpretation of Sections 1 and 3, Article VIII of the 1989 CBA
cannot be faulted with and is absolutely correct.

5. ID.; CONDITIONS OF EMPLOYMENT; PROHIBITION AGAINST ELIMINATION OR DIMINUTION OF
BENEFITS; BENEFITS GRANTED PURSUANT TO COMPANY PRACTICE OR POLICY CANNOT BE
PEREMPTORILY WITHDRAWN. Whatever doubt there may have been early on was clearly obliterated when
petitioner-company recognized the said privilege and paid its intermittent workers the cash equivalent of the
unenjoyed portion of their sick leave with pay benefits during the lifetime of the CBA of October 16, 1985 until
three (3) months from its renewal on April 15, 1989. Well-settled is it that the said privilege of commutation or
conversion to cash, being an existing benefit, the petitioner-company may not unilaterally withdraw, or
diminish such benefits. It is a fact that petitioner-company had, on several instances in the past, granted and
paid the cash equivalent of the unenjoyed portion of the sick leave benefits of some intermittent workers.
Under the circumstances, these may be deemed to have ripened into company practice or policy which cannot
be peremptorily withdrawn.

D E C I S I O N

ROMERO, J p:

In this petition for certiorari, petitioner Davao Integrated Port Services Corporation seeks to reverse the Award
1 issued on September 10, 1991 by respondent Ruben V. Abarquez, in his capacity as Voluntary Arbitrator of the
National Conciliation and Mediation Board, Regional Arbitration Branch XI in Davao City in Case No. AC-211-
BX1-10-003-91 which directed petitioner to grant and extend the privilege of commutation of the unenjoyed
portion of the sick leave with pay benefits to its intermittent field workers who are members of the regular
labor pool and the present regular extra pool in accordance with the Collective Bargaining Agreement (CBA)
executed between petitioner and private respondent Association of Trade Unions (ATU-TUCP), from the time
it was discontinued and henceforth.

The facts are as follows:

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Petitioner Davao Integrated Port Stevedoring Services (petitioner-company) and private respondent ATU-TUCP
(Union), the exclusive collective bargaining agent of the rank and file workers of petitioner-company, entered
into a collective bargaining agreement (CBA) on October 16, 1985 which, under Sections 1 and 3, Article VIII
thereof, provide for sick leave with pay benefits each year to its employees who have rendered at least one (1)
year of service with the company, thus:

"ARTICLE VIII

Section 1. Sick Leaves The Company agrees to grant 15 days sick leave with pay each year to every
regular non-intermittent worker who already rendered at least one year of service with the company. However,
such sick leave can only be enjoyed upon certification by a company designated physician, and if the same is
not enjoyed within one year period of the current year, any unenjoyed portion thereof, shall be converted to
cash and shall be paid at the end of the said one year period. And provided however, that only those regular
workers of the company whose work are not intermittent, are entitled to the herein sick leave privilege.

xxx xxx xxx

Section 3. All intermittent field workers of the company who are members of the Regular Labor Pool shall
be entitled to vacation and sick leaves per year of service with pay under the following schedule based on the
number of hours rendered including overtime, to wit:

Hours of Service Per Vacation Sick Leave

Calendar Year Leave

Less than 750 NII NII

751 825 6 days 6 days

826 900 7 7

901 925 8 8

926 1,050 9 9

1,051 1,125 10 10

1,126 1,200 11 11

1,201 1,275 12 12

1,276 1,350 13 13

1,351 1,425 14 14

1,426 1,500 15 15

The conditions for the availment of the herein vacation and sick leaves shall be in accordance with the above
provided Sections 1 and 2 hereof, respectively."

12

Upon its renewal on April 15, 1989, the provisions for sick leave with pay benefits were reproduced under
Sections 1 and 3, Article VIII of the new CBA, but the coverage of the said benefits was expanded to include the
"present Regular Extra Labor Pool as of the signing of this Agreement." Section 3, Article VIII, as revised,
provides, thus:

"Section 3. All intermittent field workers of the company who are members of the Regular Labor Pool and
present Regular Extra Labor Pool as of the signing of this agreement shall be entitled to vacation and sick
leaves per year of service with pay under the following schedule based on the number of hours rendered
including overtime, to wit:

Hours of Service Per Vacation Sick Leave

Calendar Year Leave

Less than 750 NII NII

751 825 6 days 6 days

826 900 7 7

901 925 8 8

926 1,050 9 9

1,051 1,125 10 10

1,126 1,200 11 11

1,201 1,275 12 12

1,276 1,350 13 13

1,351 1,425 14 14

1,426 1,500 15 15

The conditions for the availment of the herein vacation and sick leaves shall be in accordance with the above
provided Sections 1 and 2 hereof, respectively."

During the effectivity of the CBA of October 16, 1985 until three (3) months after its renewal on April 15, 1989,
or until July 1989 (a total of three (3) years and nine (9) months), all the field workers of petitioner who are
members of the regular labor pool and the present regular extra labor pool who had rendered at least 750
hours up to 1,500 hours were extended sick leave with pay benefits. Any unenjoyed portion thereof at the end
of the current year was converted to cash and paid at the end of the said one-year period pursuant to Sections
1 and 3, Article VIII of the CBA. The number of days of their sick leave per year depends on the number of
hours of service per calendar year in accordance with the schedule provided in Section 3, Article VIII of the
CBA.


13

The commutation of the unenjoyed portion of the sick leave with pay benefits of the intermittent workers or
its conversion to cash was, however, discontinued or withdrawn when petitioner-company under a new
assistant manager, Mr. Benjamin Marzo (who replaced Mr. Cecilio Beltran, Jr. upon the latter's resignation in
June 1989), stopped the payment of its cash equivalent on the ground that they are not entitled to the said
benefits under Sections 1 and 3 of the 1989 CBA.

The Union objected to the said discontinuance of commutation or conversion to cash of the unenjoyed sick
leave with pay benefits of petitioner's intermittent workers contending that it is a deviation from the true
intent of the parties that negotiated the CBA; that it would violate the principle in labor laws that benefits
already extended shall not be taken away and that it would result in discrimination between the non-
intermittent and the intermittent workers of the petitioner-company.

Upon failure of the parties to amicably settle the issue on the interpretation of Sections 1 and 3, Article VIII of
the 1989 CBA, the Union brought the matter for voluntary arbitration before the National Conciliation and
Mediation Board, Regional Arbitration Branch XI at Davao City by way of complaint for enforcement of the
CBA. The parties mutually designated public respondent Ruben Abarquez, Jr. to act as voluntary arbitrator.

After the parties had filed their respective position papers, 2 public respondent Ruben Abarquez, Jr. issued on
September 10, 1991 an Award in favor of the Union ruling that the regular intermittent workers are entitled to
commutation of their unenjoyed sick leave with pay benefits under Sections 1 and 3 of the 1989 CBA, the
dispositive portion of which reads:

"WHEREFORE, premises considered, the management of the respondent Davao Integrated Port Stevedoring
Services Corporation is hereby directed to grant and extend the sick leave privilege of the commutation of the
unenjoyed portion of the sick leave of all the intermittent field workers who are members of the regular labor
pool and the present extra pool in accordance with the CBA from the time it was discontinued and henceforth.

SO ORDERED."

Petitioner-company disagreed with the aforementioned ruling of public respondent, hence, the instant petition.

Petitioner-company argued that it is clear from the language and intent of the last sentence of Section 1, Article
VIII of the 1989 CBA that only the regular workers whose work are not intermittent are entitled to the benefit
of conversion to cash of the unenjoyed portion of sick leave, thus: ". . . And provided, however, that only those
regular workers of the Company whose work are not intermittent are entitled to the herein sick leave
privilege."

Petitioner-company further argued that while the intermittent workers were paid the cash equivalent of their
unenjoyed sick leave with pay benefits during the previous management of Mr. Beltran who misinterpreted
Sections 1 and 3 of Article VIII of the 1985 CBA, it was well within petitioner-company's rights to rectify the
error it had committed and stop the payment of the said sick leave with pay benefits. An error in payment,
according to petitioner-company, can never ripen into a practice.

We find the arguments unmeritorious.

A collective bargaining agreement (CBA), as used in Article 252 of the Labor Code, refers to a contract
executed upon request of either the employer or the exclusive bargaining representative incorporating the
agreement reached after negotiations with respect to wages, hours of work and all other terms and conditions
of employment, including proposals for adjusting any grievances or questions arising under such agreement.


14

While the terms and conditions of a CBA constitute the law between the parties, 3 it is not, however, an
ordinary contract to which is applied the principles of law governing ordinary contracts. 4 A CBA, as a labor
contract within the contemplation of Article 1700 of the Civil Code of the Philippines which governs the
relations between labor and capital, is not merely contractual in nature but impressed with public interest,
thus, it must yield to the common good. As such, it must be construed liberally rather than narrowly and
technically, and the courts must place a practical and realistic construction upon it, giving due consideration to
the context in which it is negotiated and purpose which it is intended to serve. 5

It is thus erroneous for petitioner to isolate Section 1, Article VIII of the 1989 CBA from the other related
section on sick leave with pay benefits, specifically Section 3 thereof, in its attempt to justify the discontinuance
or withdrawal of the privilege of commutation or conversion to cash of the unenjoyed portion of the sick leave
benefit to regular intermittent workers. The manner they were deprived of the privilege previously recognized
and extended to them by petitioner-company during the lifetime of the CBA of October 16, 1985 until three (3)
months from its renewal on April 15, 1989, or a period of three (3) years and nine (9) months, is not only
tainted with arbitrariness but likewise discriminatory in nature. Petitioner-company is of the mistaken notion
that since the privilege of commutation or conversion to cash of the unenjoyed portion of the sick leave with
pay benefits is found in Section 1, Article VIII, only the regular non-intermittent workers and no other can avail
of the said privilege because of the proviso found in the last sentence thereof.

It must be noted that the 1989 CBA has two (2) sections on sick leave with pay benefits which apply to two
(2) distinct classes of workers in petitioner's company, namely: (1) the regular non-intermittent workers or
those workers who render a daily eight-hour service to the company and are governed by Section 1, Article VIII
of the 1989 CBA; and (2) intermittent field workers who are members of the regular labor pool and the
present regular extra labor pool as of the signing of the agreement on April 15, 1989 or those workers who
have irregular working days and are governed by Section 3, Article VIII of the 1989 CBA.

It is not disputed that both classes of workers are entitled to sick leave with pay benefits provided they comply
with the conditions set forth under Section 1 in relation to the last paragraph of Section 3, to wit: (1) the
employee-applicant must be regular or must have rendered at least one year of service with the company; and
(2) the application must be accompanied by a certification from a company-designated physician.

Sick leave benefits, like other economic benefits stipulated in the CBA such as maternity leave and vacation
leave benefits, among others, are by their nature, intended to be replacements for regular income which
otherwise would not be earned because an employee is not working during the period of said leaves. 6 They
are non-contributory in nature, in the sense that the employees contribute nothing to the operation of the
benefits. 7 By their nature, upon agreement of the parties, they are intended to alleviate the economic
condition of the workers.

After a careful examination of Section 1 in relation to Section 3, Article VIII of the 1989 CBA in light of the
facts and circumstances attendant in the instant case, we find and so hold that the last sentence of Section 1,
Article VIII of the 1989 CBA, invoked by petitioner-company does not bar the regular intermittent workers
from the privilege of commutation or conversion to cash of the unenjoyed portion of their sick leave with pay
benefits, if qualified. For the phrase "herein sick leave privilege," as used in the last sentence of Section 1, refers
to the privilege of having a fixed 15-day sick leave with pay which, as mandated by Section 1, only the non-
intermittent workers are entitled to. This fixed 15-day sick leave with pay benefit should be distinguished from
the variable number of days of sick leave, not to exceed 15 days, extended to intermittent workers under
Section 3 depending on the number of hours of service rendered to the company, including overtime pursuant
to the schedule provided therein. It is only fair and reasonable for petitioner-company not to stipulate a fixed
15-day sick leave with pay for its regular intermittent workers since, as the term "intermittent" implies, there is
irregularity in their work-days. Reasonable and practical interpretation must be placed on contractual

15

provisions. Interpetatio fienda est ut res magis valeat quam pereat. Such interpretation is to be adopted, that
the thing may continue to have efficacy rather than fail. 8

We find the same to be a reasonable and practical distinction readily discernible in Section 1, in relation to
Section 3, Article VIII of the 1989 CBA between the two classes of workers in the company insofar as sick leave
with pay benefits are concerned. Any other distinction would cause discrimination on the part of intermittent
workers contrary to the intention of the parties that mutually agreed in incorporating the questioned
provisions in the 1989 CBA.

Public respondent correctly observed that the parties to the CBA clearly intended the same sick leave privilege
to be accorded the intermittent workers in the same way that they are both given the same treatment with
respect to vacation leaves - non-commutable and non-cumulative. If they are treated equally with respect to
vacation leave privilege, with more reason should they be on par with each other with respect to sick leave
privileges. 9 Besides, if the intention were otherwise, during its renegotiation, why did not the parties expressly
stipulate in the 1989 CBA that regular intermittent workers are not entitled to commutation of the unenjoyed
portion of their sick leave with pay benefits?

Whatever doubt there may have been early on was clearly obliterated when petitioner-company recognized the
said privilege and paid its intermittent workers the cash equivalent of the unenjoyed portion of their sick leave
with pay benefits during the lifetime of the CBA of October 16, 1985 until three (3) months from its renewal
on April 15, 1989. Well-settled is it that the said privilege of commutation or conversion to cash, being an
existing benefit, the petitioner-company may not unilaterally withdraw, or diminish such benefits. 10 It is a fact
that petitioner-company had, on several instances in the past, granted and paid the cash equivalent of the
unenjoyed portion of the sick leave benefits of some intermittent workers. 11 Under the circumstances, these
may be deemed to have ripened into company practice or policy which cannot be peremptorily withdrawn. 12

Moreover, petitioner-company's objection to the authority of the Voluntary Arbitrator to direct the
commutation of the unenjoyed portion of the sick leave with pay benefits of intermittent workers in his
decision is misplaced. Article 261 of the Labor Code is clear. The questioned directive of the herein public
respondent is the necessary consequence of the exercise of his arbitral power as Voluntary Arbitrator under
Article 261 of the Labor Code "to hear and decide all unresolved grievances arising from the interpretation or
implementation of the Collective Bargaining Agreement." We, therefore, find that no grave abuse of discretion
was committed by public respondent in issuing the award (decision). Moreover, his interpretation of Sections 1
and 3, Article VIII of the 1989 CBA cannot be faulted with and is absolutely correct.

WHEREFORE, in view of the foregoing, the petition is DISMISSED. The award (decision) of public respondent
dated September 10, 1991 is hereby AFFIRMED. No costs.

SO ORDERED.

Feliciano, Bidin, Davide, Jr. and Melo, JJ., concur.

Gutierrez, Jr., on terminal leave.

SUPREME COURT
Manila


16

FIRST DIVISION

G.R. No. 85073 August 24, 1993

DAVAO FRUITS CORPORATION, petitioner,
vs.
ASSOCIATED LABOR UNIONS (ALU) for in behalf of all the rank-and-file workers/employees of DAVAO
FRUITS CORPORATION and NATIONAL LABOR RELATIONS COMMISSION, respondents.

Dominguez & Paderna Law Offices for petitioners.

The Solicitor General for public respondents.

QUIASON, J.:

This is a petition for certiorari to set aside the resolution of the National Labor Relations Commission (NLRC),
dismissing for lack of merit petitioner's appeal from the decision of the Labor Arbiter in NLRC Case No. 1791-
MC-X1-82.

On December 28, 1982 respondent Associated Labor Unions (ALU), for and in behalf of all the rank-and-file
workers and employees of petitioner, filed a complaint (NLRC Case No. 1791-MC-XI-82) before the Ministry of
Labor and Employment, Regional Arbitration Branch XI, Davao City, against petitioner, for "Payment of the
Thirteenth-Month Pay Differentials." Respondent ALU sought to recover from petitioner the thirteenth month
pay differential for 1982 of its rank-and-file employees, equivalent to their sick, vacation and maternity leaves,
premium for work done on rest days and special holidays, and pay for regular holidays which petitioner,
allegedly in disregard of company practice since 1975, excluded from the computation of the thirteenth month
pay for 1982.

In its answer, petitioner claimed that it erroneously included items subject of the complaint in the computation
of the thirteenth month pay for the years prior to 1982, upon a doubtful and difficult question of law.
According to petitioner, this mistake was discovered only in 1981 after the promulgation of the Supreme Court
decision in the case of San Miguel Corporation v. Inciong (103 SCRA 139).

A decision was rendered on March 7, 1984 by Labor Arbiter Pedro C. Ramos, in favor of respondent ALU. The
dispositive portion of the decision reads as follows:

WHEREFORE, in view of all the foregoing considerations, judgment is hereby rendered ordering respondent to
pay the 1982 13th month pay differential to all its rank-and-file workers/employees herein represented by
complainant Union (Rollo, p. 32).

Petitioner appealed the decision of the Labor Arbiter to the NLRC, which affirmed the said decision accordingly
dismissed the appeal for lack of merit.

Petitioner elevated the matter to this Court in a petition for review under Rule 45 of the Revised Rules of
Court. This error notwithstanding and in the interest of justice, this Court resolved to treat the instant petition
as a special civil action for certiorari under Rule 65 of the Revised Rules of Court (P.D. No. 1391, Sec. 5; Rules

17

Implementing P.D. No. 1391, Rule II, Sec. 7; Cando v. National Labor Relations Commission, 189 SCRA 666
[1990]: Pearl S. Buck Foundation, Inc. v. National Labor Relations Commission, 182 SCRA 446 [1990]).

The crux of the present controversy is whether in the computation of the thirteenth month pay given by
employers to their employees under P.D.
No. 851, payments for sick, vacation and maternity leaves, premiums for work done on rest days and special
holidays, and pay for regular holidays may be excluded in the computation and payment thereof, regardless of
long-standing company practice.

Presidential Decree No. 851, promulgated on December 16, 1975, mandates all employers to pay their employees
a thirteenth month pay. How this pay shall be computed is set forth in Section 2 of the "Rules and Regulations
Implementing Presidential Decree No. 851," thus:

SECTION 2. . . .

(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 renumerations 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.

The Department of Labor and Employment issued on January 16, 1976 the "Supplementary Rules and
Regulations Implementing P.D. No. 851" which in paragraph 4 thereof further defines the term "basic salary,"
thus:

4. Overtime pay, earnings and other renumerations which are not part of the basic salary shall not be
included in the computation of the 13th month pay.

Clearly, the term "basic salary" includes renumerations or earnings paid by the employer to employee, but
excludes cost-of-living allowances, profit-sharing payments, and all allowances and monetary benefits which
have not been considered as part of the basic salary of the employee as of December 16, 1975. The exclusion of
cost-of-living allowances and profit sharing payments shows the intention to strip "basic salary" of payments
which are otherwise considered as "fringe" benefits. This intention is emphasized in the catch all phrase "all
allowances and monetary benefits which are not considered or integrated as part of the basic salary." Basic
salary, therefore does not merely exclude the benefits expressly mentioned but all payments which may be in
the form of "fringe" benefits or allowances (San Miguel Corporation v. Inciong, supra, at 143-144). In fact, the
Supplementary Rules and Regulations Implementing P.D. No. 851 are very emphatic in declaring that overtime
pay, earnings and other renumerations shall be excluded in computing the thirteenth month pay.

In other words, whatever compensation an employee receives for an eight-hour work daily or the daily wage
rate in the basic salary. Any compensation or remuneration other than the daily wage rate is excluded. It
follows therefore, that payments for sick, vacation and maternity leaves, premium for work done on rest days
special holidays, as well as pay for regular holidays, are likewise excluded in computing the basic salary for the
purpose of determining the thirteen month pay.

Petitioner claims that the mistake in the interpretation of "basic salary" was caused by the opinions, orders and
rulings rendered by then Acting Labor Secretary Amado C. Inciong, expressly including the subject items in

18

computing the thirteenth month pay. The inclusion of these items is clearly not sanctioned under P.D. No. 851,
the governing law and its implementing rules, which speak only of "basis salary" as the basis for determining
the thirteenth month pay.

Moreover, whatever doubt arose in the interpretation of P.D. No. 851 was erased by the Supplementary Rules
and Regulations which clarified the definition of "basic salary."

As pointed out in San Miguel Corporation v. Inciong, (supra):

While doubt may have been created by the prior Rules and Regulations and Implementing Presidential Decree
851 which defines basic salary to include all remunerations or earnings paid by an employer to an employee,
this cloud is dissipated in the later and more controlling Supplementary Rules and Regulations which
categorically, exclude from the definition of basic salary earnings and other remunerations paid by employer to
an employee. A cursory perusal of the two sets of Rules indicates that what has hitherto been the subject of
broad inclusion is now a subject of broad exclusion. The Supplementary Rules and Regulations cure the
seeming tendency of the former rules to include all remunerations and earnings within the definition of basic
salary.

The all-embracing phrase "earnings and other remunerations which are deemed not part of the basic salary
includes within its meaning payments for sick, vacation, or maternity leaves, premium for work performed on
rest days and special holidays, pay for regular holidays and night differentials. As such they are deemed not
part of the basic salary and shall not be considered in the computation of the 13th-month pay. If they were not
so excluded, it is hard to find any "earnings and other remunerations" expressly excluded in computation of the
13th month-pay. Then the exclusionary provision would prove to be idle and with purpose.

The "Supplementary Rules and Regulations Implementing P.D. No. 851," which put to rest all doubts in the
computation of the thirteenth month pay, was issued by the Secretary of Labor as early as January 16, 1976,
barely one month after the effectivity of P.D. No. 851 and its Implementing Rules. And yet, petitioner computed
and paid the thirteenth month pay, without excluding the subject items therein until 1981. Petitioner continued
its practice in December 1981, after promulgation of the afore-quoted San Miguel decision on February 24, 1981,
when petitioner purportedly "discovered" its mistake.

From 1975 to 1981, petitioner had freely, voluntarily and continuously included in the computation of its
employees' thirteenth month pay, the payments for sick, vacation and maternity leaves, premiums for work
done on rest days and special holidays, and pay for regular holidays. The considerable length of time the
questioned items had been included by petitioner indicates a unilateral and voluntary act on its part, sufficient
in itself to negate any claim of mistake.

A company practice favorable to the employees had indeed been established and the payments made pursuant
thereto, ripened into benefits enjoyed by them. And any benefit and supplement being enjoyed by the
employees cannot be reduced, diminished, discontinued or eliminated by the employer, by virtue of Section 10
of the Rules and Regulations Implementing P.D. No. 851, and Article 100 of the labor of the Philippines, which
prohibit the diminution or elimination by the employer of the employees' existing benefits (Tiangco v.
Leogardo, Jr., 122 SCRA 267, [1983]).

Petitioner cannot invoke the principle of solutio indebiti which as a civil law concept that is not applicable in
Labor Law. Besides, in solutio indebiti, the obligee is required to return to the obligor whatever he received
from the latter (Civil Code of the Philippines, Arts. 2154 and 2155). Petitioner in the instant case, does not
demand the return of what it paid respondent ALU from 1975 until 1981; it merely wants to "rectify" the error

19

it made over these years by excluding unilaterally from the thirteenth month pay in 1982 the items subject of
litigation. Solutio indebiti, therefore, is not applicable to the instant case.

WHEREFORE, finding no grave abuse of discretion on the part of the NLRC, the petition is hereby DISMISSED,
and the questioned decision of respondent NLRC is AFFIRMED accordingly.

Cruz, Grio-Aquino, Davide, Jr. and Bellosillo, JJ., concur.

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 152456 April 28, 2004

SEVILLA TRADING COMPANY, petitioner,
vs.
A.V.A. TOMAS E. SEMANA, SEVILLA TRADING WORKERS UNIONSUPER, respondents.

DECISION

PUNO, J.:

On appeal is the Decision1 of the Court of Appeals in CA-G.R. SP No. 63086 dated 27 November 2001
sustaining the Decision2 of Accredited Voluntary Arbitrator Tomas E. Semana dated 13 November 2000, as well
as its subsequent Resolution3 dated 06 March 2002 denying petitioners Motion for Reconsideration.

The facts of the case are as follows:

For two to three years prior to 1999, petitioner Sevilla Trading Company (Sevilla Trading, for short), a
domestic corporation engaged in trading business, organized and existing under Philippine laws, added to the
base figure, in its computation of the 13th-month pay of its employees, the amount of other benefits received
by the employees which are beyond the basic pay. These benefits included:

(a) Overtime premium for regular overtime, legal and special holidays;

(b) Legal holiday pay, premium pay for special holidays;

(c) Night premium;

(d) Bereavement leave pay;

(e) Union leave pay;


20

(f) Maternity leave pay;

(g) Paternity leave pay;

(h) Company vacation and sick leave pay; and

(i) Cash conversion of unused company vacation and sick leave.

Petitioner claimed that it entrusted the preparation of the payroll to its office staff, including the computation
and payment of the 13th-month pay and other benefits. When it changed its person in charge of the payroll in
the process of computerizing its payroll, and after audit was conducted, it allegedly discovered the error of
including non-basic pay or other benefits in the base figure used in the computation of the 13th-month pay of
its employees. It cited the Rules and Regulations Implementing P.D. No. 851 (13th-Month Pay Law), effective
December 22, 1975, Sec. 2(b) which stated that:

"Basic salary" shall include all remunerations or earnings paid by an employer to an employee for services
rendered but may not include cost-of-living allowances granted pursuant to P.D. No. 525 or Letter of
Instruction No. 174, profit-sharing payments, and all allowances and monetary benefits which are not
considered or integrated as part of the regular or basic salary of the employee at the time of the promulgation
of the Decree on December 16, 1975.

Petitioner then effected a change in the computation of the thirteenth month pay, as follows:

13th-month pay = net basic pay
12 months
where:
net basic pay = gross pay (non-basic pay or other benefits)
Now excluded from the base figure used in the computation of the thirteenth month pay are the following:

a) Overtime premium for regular overtime, legal and special holidays;

b) Legal holiday pay, premium pay for special holidays;

c) Night premium;

d) Bereavement leave pay;

e) Union leave pay;

f) Maternity leave pay;

g) Paternity leave pay;

h) Company vacation and sick leave pay; and

i) Cash conversion of unused vacation/sick leave.

Hence, the new computation reduced the employees thirteenth month pay. The daily piece-rate workers
represented by private respondent Sevilla Trading Workers Union SUPER (Union, for short), a duly organized

21

and registered union, through the Grievance Machinery in their Collective Bargaining Agreement, contested the
new computation and reduction of their thirteenth month pay. The parties failed to resolve the issue.

On March 24, 2000, the parties submitted the issue of "whether or not the exclusion of leaves and other
related benefits in the computation of 13th-month pay is valid" to respondent Accredited Voluntary Arbitrator
Tomas E. Semana (A.V.A. Semana, for short) of the National Conciliation and Mediation Board, for
consideration and resolution.

The Union alleged that petitioner violated the rule prohibiting the elimination or diminution of employees
benefits as provided for in Art. 100 of the Labor Code, as amended. They claimed that paid leaves, like sick
leave, vacation leave, paternity leave, union leave, bereavement leave, holiday pay and other leaves with pay in
the CBA should be included in the base figure in the computation of their 13th-month pay.

On the other hand, petitioner insisted that the computation of the 13th-month pay is based on basic salary,
excluding benefits such as leaves with pay, as per P.D. No. 851, as amended. It maintained that, in adjusting its
computation of the 13th-month pay, it merely rectified the mistake its personnel committed in the previous
years.

A.V.A. Semana decided in favor of the Union. The dispositive portion of his Decision reads as follows:

WHEREFORE, premises considered, this Voluntary Arbitrator hereby declared that:

1. The company is hereby ordered to include sick leave and vacation leave, paternity leave, union leave,
bereavement leave and other leave with pay in the CBA, premium for work done on rest days and special
holidays, and pay for regular holidays in the computation of the 13th-month pay to all covered and entitled
employees;

2. The company is hereby ordered to pay corresponding backwages to all covered and entitled employees
arising from the exclusion of said benefits in the computation of 13th-month pay for the year 1999.

Petitioner received a copy of the Decision of the Arbitrator on December 20, 2000. It filed before the Court of
Appeals, a "Manifestation and Motion for Time to File Petition for Certiorari" on January 19, 2001. A month
later, on February 19, 2001, it filed its Petition for Certiorari under Rule 65 of the 1997 Rules of Civil Procedure
for the nullification of the Decision of the Arbitrator. In addition to its earlier allegations, petitioner claimed
that assuming the old computation will be upheld, the reversal to the old computation can only be made to the
extent of including non-basic benefits actually included by petitioner in the base figure in the computation of
their 13th-month pay in the prior years. It must exclude those non-basic benefits which, in the first place, were
not included in the original computation. The appellate court denied due course to, and dismissed the petition.

Hence, this appeal. Petitioner Sevilla Trading enumerates the grounds of its appeal, as follows:

1. THE DECISION OF THE RESPONDENT COURT TO REVERT TO THE OLD COMPUTATION OF THE 13th-
MONTH PAY ON THE BASIS THAT THE OLD COMPUTATION HAD RIPENED INTO PRACTICE IS
WITHOUT LEGAL BASIS.

2. IF SUCH BE THE CASE, COMPANIES HAVE NO MEANS TO CORRECT ERRORS IN COMPUTATION
WHICH WILL CAUSE GRAVE AND IRREPARABLE DAMAGE TO EMPLOYERS.4


22

First, we uphold the Court of Appeals in ruling that the proper remedy from the adverse decision of the
arbitrator is a petition for review under Rule 43 of the 1997 Rules of Civil Procedure, not a petition for
certiorari under Rule 65. Section 1 of Rule 43 states:

RULE 43

Appeals from the Court of Tax Appeals and
Quasi-Judicial Agencies to the Court of Appeals

SECTION 1. Scope. This Rule shall apply to appeals from judgments or final orders of the Court of Tax
Appeals and from awards, judgments, final orders or resolutions of or authorized by any quasi-judicial agency
in the exercise of its quasi-judicial functions. Among these agencies are the Civil Service Commission, Central
Board of Assessment Appeals, Securities and Exchange Commission, Office of the President, Land Registration
Authority, Social Security Commission, Civil Aeronautics Board, Bureau of Patents, Trademarks and Technology
Transfer, National Electrification Administration, Energy Regulatory Board, National Telecommunications
Commission, Department of Agrarian Reform under Republic Act No. 6657, Government Service Insurance
System, Employees Compensation Commission, Agricultural Inventions Board, Insurance Commission,
Philippine Atomic Energy Commission, Board of Investments, Construction Industry Arbitration Commission,
and voluntary arbitrators authorized by law. [Emphasis supplied.]

It is elementary that the special civil action of certiorari under Rule 65 is not, and cannot be a substitute for an
appeal, where the latter remedy is available, as it was in this case. Petitioner Sevilla Trading failed to file an
appeal within the fifteen-day reglementary period from its notice of the adverse decision of A.V.A. Semana. It
received a copy of the decision of A.V.A. Semana on December 20, 2000, and should have filed its appeal under
Rule 43 of the 1997 Rules of Civil Procedure on or before January 4, 2001. Instead, petitioner filed on January
19, 2001 a "Manifestation and Motion for Time to File Petition for Certiorari," and on February 19, 2001, it filed
a petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure. Clearly, petitioner Sevilla Trading
had a remedy of appeal but failed to use it.

A special civil action under Rule 65 of the Rules of Court will not be a cure for failure to timely file a petition
for review on certiorari under Rule 45 (Rule 43, in the case at bar) of the Rules of Court. Rule 65 is an
independent action that cannot be availed of as a substitute for the lost remedy of an ordinary appeal,
including that under Rule 45 (Rule 43, in the case at bar), especially if such loss or lapse was occasioned by
ones own neglect or error in the choice of remedies.5

Thus, the decision of A.V.A. Semana had become final and executory when petitioner Sevilla Trading filed its
petition for certiorari on February 19, 2001. More particularly, the decision of A.V.A. Semana became final and
executory upon the lapse of the fifteen-day reglementary period to appeal, or on January 5, 2001. Hence, the
Court of Appeals is correct in holding that it no longer had appellate jurisdiction to alter, or much less, nullify
the decision of A.V.A. Semana.

Even assuming that the present petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure is a
proper action, we still find no grave abuse of discretion amounting to lack or excess of jurisdiction committed
by A.V.A. Semana. "Grave abuse of discretion" has been interpreted to mean "such capricious and whimsical
exercise of judgment as is equivalent to lack of jurisdiction, or, in other words where the power is exercised in
an arbitrary or despotic manner by reason of passion or personal hostility, and it must be so patent and gross
as to amount to an evasion of positive duty or to a virtual refusal to perform the duty enjoined or to act at all
in contemplation of law."6 We find nothing of that sort in the case at bar.


23

On the contrary, we find the decision of A.V.A. Semana to be sound, valid, and in accord with law and
jurisprudence. A.V.A. Semana is correct in holding that petitioners stance of mistake or error in the
computation of the thirteenth month pay is unmeritorious. Petitioners submission of financial statements every
year requires the services of a certified public accountant to audit its finances. It is quite impossible to suggest
that they have discovered the alleged error in the payroll only in 1999. This implies that in previous years it
does not know its cost of labor and operations. This is merely basic cost accounting. Also, petitioner failed to
adduce any other relevant evidence to support its contention. Aside from its bare claim of mistake or error in
the computation of the thirteenth month pay, petitioner merely appended to its petition a copy of the 1997-
2002 Collective Bargaining Agreement and an alleged "corrected" computation of the thirteenth month pay.
There was no explanation whatsoever why its inclusion of non-basic benefits in the base figure in the
computation of their 13th-month pay in the prior years was made by mistake, despite the clarity of statute and
jurisprudence at that time.

The instant case needs to be distinguished from Globe Mackay Cable and Radio Corp. vs. NLRC,7 which
petitioner Sevilla Trading invokes. In that case, this Court decided on the proper computation of the cost-of-
living allowance (COLA) for monthly-paid employees. Petitioner Corporation, pursuant to Wage Order No. 6
(effective 30 October 1984), increased the COLA of its monthly-paid employees by multiplying the P3.00 daily
COLA by 22 days, which is the number of working days in the company. The Union disagreed with the
computation, claiming that the daily COLA rate of P3.00 should be multiplied by 30 days, which has been the
practice of the company for several years. We upheld the contention of the petitioner corporation. To answer
the Unions contention of company practice, we ruled that:

Payment in full by Petitioner Corporation of the COLA before the execution of the CBA in 1982 and in
compliance with Wage Orders Nos. 1 (26 March 1981) to 5 (11 June 1984), should not be construed as
constitutive of voluntary employer practice, which cannot now be unilaterally withdrawn by petitioner. To be
considered as such, it should have been practiced over a long period of time, and must be shown to have been
consistent and deliberate . . . The test of long practice has been enunciated thus:

. . . Respondent Company agreed to continue giving holiday pay knowing fully well that said employees are not
covered by the law requiring payment of holiday pay." (Oceanic Pharmacal Employees Union [FFW] vs. Inciong,
94 SCRA 270 [1979])

Moreover, before Wage Order No. 4, there was lack of administrative guidelines for the implementation of the
Wage Orders. It was only when the Rules Implementing Wage Order No. 4 were issued on 21 May 1984 that a
formula for the conversion of the daily allowance to its monthly equivalent was laid down.

Absent clear administrative guidelines, Petitioner Corporation cannot be faulted for erroneous application of
the law . . .

In the above quoted case, the grant by the employer of benefits through an erroneous application of the law
due to absence of clear administrative guidelines is not considered a voluntary act which cannot be unilaterally
discontinued. Such is not the case now. In the case at bar, the Court of Appeals is correct when it pointed out
that as early as 1981, this Court has held in San Miguel Corporation vs. Inciong8 that:

Under Presidential Decree 851 and its implementing rules, the basic salary of an employee is used as the basis
in the determination of his 13th-month pay. Any compensations or remunerations which are deemed not part
of the basic pay is excluded as basis in the computation of the mandatory bonus.

Under the Rules and Regulations Implementing Presidential Decree 851, the following compensations are
deemed not part of the basic salary:

24

a) Cost-of-living allowances granted pursuant to Presidential Decree 525 and Letter of Instruction No. 174;

b) Profit sharing payments;

c) All allowances and monetary benefits which are not considered or integrated as part of the regular basic
salary of the employee at the time of the promulgation of the Decree on December 16, 1975.

Under a later set of Supplementary Rules and Regulations Implementing Presidential Decree 851 issued by the
then Labor Secretary Blas Ople, overtime pay, earnings and other remunerations are excluded as part of the
basic salary and in the computation of the 13th-month pay.

The exclusion of cost-of-living allowances under Presidential Decree 525 and Letter of Instruction No. 174 and
profit sharing payments indicate the intention to strip basic salary of other payments which are properly
considered as "fringe" benefits. Likewise, the catch-all exclusionary phrase "all allowances and monetary benefits
which are not considered or integrated as part of the basic salary" shows also the intention to strip basic salary
of any and all additions which may be in the form of allowances or "fringe" benefits.

Moreover, the Supplementary Rules and Regulations Implementing Presidential Decree 851 is even more
empathic in declaring that earnings and other remunerations which are not part of the basic salary shall not be
included in the computation of the 13th-month pay.

While doubt may have been created by the prior Rules and Regulations Implementing Presidential Decree 851
which defines basic salary to include all remunerations or earnings paid by an employer to an employee, this
cloud is dissipated in the later and more controlling Supplementary Rules and Regulations which categorically,
exclude from the definition of basic salary earnings and other remunerations paid by employer to an employee.
A cursory perusal of the two sets of Rules indicates that what has hitherto been the subject of a broad
inclusion is now a subject of broad exclusion. The Supplementary Rules and Regulations cure the seeming
tendency of the former rules to include all remunerations and earnings within the definition of basic salary.

The all-embracing phrase "earnings and other remunerations" which are deemed not part of the basic salary
includes within its meaning payments for sick, vacation, or maternity leaves, premium for works performed on
rest days and special holidays, pay for regular holidays and night differentials. As such they are deemed not
part of the basic salary and shall not be considered in the computation of the 13th-month pay. If they were not
so excluded, it is hard to find any "earnings and other remunerations" expressly excluded in the computation of
the 13th-month pay. Then the exclusionary provision would prove to be idle and with no purpose.

In the light of the clear ruling of this Court, there is, thus no reason for any mistake in the construction or
application of the law. When petitioner Sevilla Trading still included over the years non-basic benefits of its
employees, such as maternity leave pay, cash equivalent of unused vacation and sick leave, among others in the
computation of the 13th-month pay, this may only be construed as a voluntary act on its part. Putting the
blame on the petitioners payroll personnel is inexcusable.

In Davao Fruits Corporation vs. Associated Labor Unions, we likewise held that:9

The "Supplementary Rules and Regulations Implementing P.D. No. 851" which put to rest all doubts in the
computation of the thirteenth month pay, was issued by the Secretary of Labor as early as January 16, 1976,
barely one month after the effectivity of P.D. No. 851 and its Implementing Rules. And yet, petitioner computed
and paid the thirteenth month pay, without excluding the subject items therein until 1981. Petitioner continued

25

its practice in December 1981, after promulgation of the aforequoted San Miguel decision on February 24, 1981,
when petitioner purportedly "discovered" its mistake.

From 1975 to 1981, petitioner had freely, voluntarily and continuously included in the computation of its
employees thirteenth month pay, without the payments for sick, vacation and maternity leave, premium for
work done on rest days and special holidays, and pay for regular holidays. The considerable length of time the
questioned items had been included by petitioner indicates a unilateral and voluntary act on its part, sufficient
in itself to negate any claim of mistake.

A company practice favorable to the employees had indeed been established and the payments made pursuant
thereto, ripened into benefits enjoyed by them. And any benefit and supplement being enjoyed by the
employees cannot be reduced, diminished, discontinued or eliminated by the employer, by virtue of Sec. 10 of
the Rules and Regulations Implementing P.D. No. 851, and Art. 100 of the Labor Code of the Philippines which
prohibit the diminution or elimination by the employer of the employees existing benefits. [Tiangco vs.
Leogardo, Jr., 122 SCRA 267 (1983)]

With regard to the length of time the company practice should have been exercised to constitute voluntary
employer practice which cannot be unilaterally withdrawn by the employer, we hold that jurisprudence has not
laid down any rule requiring a specific minimum number of years. In the above quoted case of Davao Fruits
Corporation vs. Associated Labor Unions,10 the company practice lasted for six (6) years. In another case,
Davao Integrated Port Stevedoring Services vs. Abarquez,11 the employer, for three (3) years and nine (9)
months, approved the commutation to cash of the unenjoyed portion of the sick leave with pay benefits of its
intermittent workers. While in Tiangco vs. Leogardo, Jr.,12 the employer carried on the practice of giving a fixed
monthly emergency allowance from November 1976 to February 1980, or three (3) years and four (4) months.
In all these cases, this Court held that the grant of these benefits has ripened into company practice or policy
which cannot be peremptorily withdrawn. In the case at bar, petitioner Sevilla Trading kept the practice of
including non-basic benefits such as paid leaves for unused sick leave and vacation leave in the computation of
their 13th-month pay for at least two (2) years. This, we rule likewise constitutes voluntary employer practice
which cannot be unilaterally withdrawn by the employer without violating Art. 100 of the Labor Code:

Art. 100. Prohibition against elimination or diminution of benefits. Nothing in this Book shall be construed to
eliminate or in any way diminish supplements, or other employee benefits being enjoyed at the time of
promulgation of this Code.

IN VIEW WHEREOF, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 63086
dated 27 November 2001 and its Resolution dated 06 March 2002 are hereby AFFIRMED.

SO ORDERED.

Quisumbing, Austria-Martinez, Callejo, Sr.*, and Tinga, JJ., concur.


26

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-69741 August 19, 1986

BROKENSHIRE MEMORIAL HOSPITAL, INC., petitioner,
vs.
THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION AND THE BROKENSHIRE MEMORIAL
HOSPITAL EMPLOYEES AND WORKERS UNION-FFW, respondents.

Maximo Magno-Libre for petitioner.

Ireneo B. Bernardo for private respondent.

NARVASA, J.:

Are employees in a private enterprise entitled to the so called "13th month pay" prescribed by PD 851 "on top
of bonuses" already being given by the employer prior to the decree's effectivity on December 16, 1975?

To this question, a negative answer has twice been given by this Court.

In National Federation of Sugar Workers (NFSW) vs. Ovejera, promulgated on May 31, 1982 1-where a collective
bargaining agreement required the employer among others "to maintain the present practice on the grant of
Christmas bonus, milling bonus and amelioration bonus" ("amounting to more than a month's pay")-this Court
made the following pronouncements on the issue: 2

Keenly sensitive to the needs of the workingmen, yet mindful of the mounting production cost that are the woe
of capital which provides employment to labor, President Ferdinand E. Marcos issued Presidential Decree No.
851 on 16 December 1975. Thereunder, 'all employers are hereby required to pay all their employees receiving a
basic salary of not more than Pl,000 a month, regardless of the nature of their employment, a 13th month pay
not later than December 24 of every year.' Exempted from the obligation however are:

Employers already paying their employees a 13th month pay or its equivalent. . . . (Section 2)

The evident intention of the law, as revealed by the law itself, was to grant an additional income in the form of
a 13th month pay to employees not already receiving the same. Otherwise put, the intention was to grant some
relief-not to all workers-but only to the unfortunate ones not actually paid a 13th month salary or what
amounts to it, by whatever name called; but it was not envisioned that a double burden would be imposed on
the employer already paying his employees a 13th month pay or its equivalent-whether out of pure generosity

27

or on the basis of a binding agreement and, in the latter case, regardless of the conditional character of the
grant (such as making the payment dependent on profit), so long as there is actual payment. Otherwise, what
was conceived to be a 13th month salary would in effect become a 14th or possibly 15th month pay.

This view is justified by the law itself which makes no distinction in the grant of exemption: 'Employers already
paying their employees a 13th month pay or its equivalent are not covered by this Decree.' (P.D. 851)

The Rules Implementing P.D. 851 issued by MOLE immediately after the adoption of said law reinforce this
stand. Under Section 3(e) thereof-

The term "its equivalent" . . . shall include Christmas bonus, mid-year bonus, profit-sharing payments and other
cash bonuses amounting to not less than 1/12th of the basic salary but shall not include cash and stock
dividends, cost of living allowances and all other allowances regularly enjoyed by the employee, as well as non-
monetary benefits. Where an employer pays less than 1/12th of the employee's basic salary, the employer shall
pay the difference.' (Empahsis supplied)

Having been issued by the agency charged with the implementation of PD 851 as its contemporaneous
interpretation of the law, the quoted rule should be accorded great weight.

Pragmatic considerations also weigh heavily in favor of crediting both voluntary and contractual bonuses for
the purpose of determining liability for the 13th month pay. To require employers (already giving their
employees a 13th month salary or its equivalent to give a second 13th month pay would be unfair and
productive of undesirable results. To the employer who had acceded and is already bound to give bonuses to
his employees, the additional burden of a 13th month pay would amount to a penalty for his munificence or
liberality. The probable reaction of one so circumstanced would be to withdraw the bonuses or resist further
voluntary grants for fear that if and when a law is passed giving the same benefits, his prior concessions might
not be given due credit; and this negative attitude would have an adverse impact on the employees.

In Dole Philippines, Inc. vs. Leogardo, Jr., decided on October 23, 1982 3 -where a collective bargaining
agreement imposed on the employer the obligation to pay "a year-end productivity bonus equivalent to ten (10)
days of ... (the employee's) basic daily wage" if a stipulated level of production were attained, and the first
bonus was in fact given on December 11, 1975-this Court 4 adverted to the NFSW decision as binding norm
and went on to say.

Tested against this norm, it becomes clear that the year-end productivity bonus granted by petitioner to
private respondents pursuant to their CBA is, in legal contemplation, an integral part of their 13th month pay,
notwithstanding its conditional nature. When, therefore, petitioner, in order to comply with the mandate of PD
851, credited the year-end productivity bonus as part of the 13th month pay and adopted the procedure of
paying only the difference between said bonus and 1/12 of the worker's yearly basic salary, it acted well within
the letter and spirit of the law and its implementing rules. For in the event that "an employer pays less than
one twelfth of the employees' basic salary, all that said employer is required to do under the law is to pay the
difference.

To hold otherwise would be to impose an unreasonable and undue burden upon those employers who had
demonstrated their sensitivity and concern for the welfare of their employees. A contrary stance would indeed
create an absurd situation whereby an employer who started giving his employees the 13th month pay only
because of the unmistakable force of the law would be in a far better position than another who, by his own
magnanimity or by mutual agreement, had long been extending to his employees the benefits contemplated
under PD 851, by whatever nomenclature these benefits have come to be known. Indeed, PD No. 851, a
legislation benevolent in its purpose, never intended to bring about such oppressive situation.

28

This Court is now called upon to answer the same question again, this time at the instance of petitioner
Brokenshire Memorial Hospital, which initiated the special civil action of certiorari at bar to annul the
resolution of the National Labor Relations Commission (Second Division) affirming the decision of a Labor
Arbiter of Regional Arbitration Branch XI of the Ministry of Labor and Employment in NLRC Case No. 64-LS-
XI-82 entitled "Brokenshire Memorial Hospital Employees and Workers Union FFW v. Brokenshire Memorial
Hospital." The affirmed decision required the hospital to pay its employees a yearly Christmas bonus in
addition to the 13th month pay under PD 85l. 5 The answer to the question will be the same. The hospital can
not be obliged to bear the "double burden" of giving its employees not only the 13th month pay required by
PD 851 but also the Christmas bonus it had theretofore been granting. The decisions in question will have to
be reversed.

At the time that PD 851 became effective on December 16, 1975, the hospital had for many years been giving
its employees an annual Christmas bonus. It continued to do so afterwards. But after 1979 the hospital stopped
giving the bonus because avowedly its poor financial condition no longer made this possible.

Protesting the discontinuance, respondent union filed a complaint 6 against the hospital for unlawful
diminution of benefits, alleging a violation of Article 100 of the Labor Code and Section 10 of PD 851. 7 In
response, 8 the hospital asserted that the giving of the bonus was not an established and continuing obligation
on its part but was contingent and entirely dependent on its financial condition in any given year. This is why
the matter of the bonus was not dealt with at all in the Collective Bargaining Agreement between it and the
union. At any rate, it further claimed, it should not be made to bear the double burden of giving both 13th
month pay and bonus, in the light of the decision in National Federation of Sugar Workers (NFSW) vs.
Ethelwoldo R. Ovejera, et al., G.R. No. 59743, rendered in the context of Section 2, PD 851, and Section 3(c) of
the Rules and Regulations Implementing PD 851, declaring said decree inapplicable to "employers already
paying their employees a 13th month pay or its equivalent.

On March 23, 1983, the Labor Arbiter promulgated judgment requiring the hospital "to pay all its employees,
as it had done in 1979, an extra Christmas bonus of P100.00 per year, for 1980, 1981, and 1982." 9 The hospital
appealed. On December 14, 1984, the National Labor Relations Commission affirmed the labor Arbiter's
decision. 10

It is difficult to understand why the Labor Arbiter took no account whatever of this Court's decision in NFSW
vs. Ovejera despite its having been explicitly brought to his attention. He never mentioned the case in his
decision at all. Instead, he occupied Himself with a discussion of the financial condition of the hospital,
declaring that his reading of the hospital's financial statement for 1980 revealed a "surplus available for
expenditure" from which the employees' bonuses could be drawn.

Equally difficult to understand is the refusal of the National Labor Relations Commission to apply the NFSW vs.
Ovejera ruling. According to the Commission-

Respondent's (the hospital's) reliance on the La Carlota case, GR No. 59743, is unavailing. We are not
persuaded to view the matter that way. For in the La Carlota case, the NFSW union is claiming entitlement to
a 13th month pay, on top of Christmas bonuses already given, whereas, in the instant case, respondent
discontinued and eliminated a favorable practice being enjoyed by the employee at the time of promulgation of
the rules implementing PD No. 851 on December 22, 1975 which, as fixed below, amounts to P100 christmas
bonus, on top of the 13th month pay.

The distinction sought to be drawn by the Commission between the case at bar and NFSW vs. Ovejera is
insubstantial and unjustifiable. The message of NFSW vs. Ovejera is clear and unequivocal: An employer may

29

not be obliged to assume a "double burden" of paying the 13th month pay in addition to bonuses or other
pecuniary benefits given by way of fringe benefits aside from the employees' basic salaries or wages; PD 851
accorded to him the option either to exempt himself from the obligation to give 13th month pay or discontinue
the payment of the bonuses or fringe benefits deemed to be the equivalent of said 13th month pay. In any
event, whatever doubt might have existed regarding this option on the employer's part should have been
dispelled by this Court's decision in Dole Phils., Inc. vs. Leogardo, Jr. promulgated on October 23, 1982, 11 more
than two (2) years before the rendition of the resolution of the National Labor Relations Commission on
December 14, 1984. In Dole, this Court declared that when an employer, in order to comply with the mandate
of PD 851, credits the bonus being paid by him as part of his employees' 13th month pay and adopts the
procedure of paying only the difference between said bonus and 1/12 of the employees' yearly basic salary, said
employer acts well within the letter and spirit of the law and its implementing rules; for in the event that "an
employer pays less than one twelfth of the employees' basic salary, all that said employer is required to do
under the law is to pay the difference."

Prescinding from these legal considerations, it would appear that the ratiocinations of the Labor Arbiter based
on his own interpretation of the financial statements of petitioner hospital for 1980 were quite erroneous.
Where those financial statements, to an accountant, or one familiar with accountancy, should have shown a
deficit, to the Labor Arbiter they showed a surplus.

Be this as it may, the fact is that as early as November 5, 1984, the hospital sent to the Minister of Labor and
Employment a notice of closure 12 because of its "critically grave" financial condition. 13 And on March 2, 1985
the hospital finally ceased to operate for lack of operating capital 14 resulting from the garnishment of its bank
deposits amounting to P163,047.50. 15

Whether or not this unhappy eventuality would have come to pass had the decision of the Labor Arbiter or
that of the National Labor Relations Commission correctly applied the doctrine enunciated by this Court in
NFSW vs. Ovejera and Dole Phils., Inc. vs. Leogardo, Jr., is a question that perhaps is incapable of a fair and
realistic answer. But the mere possibility that closure, with the consequent loss of work for so many, was
caused or hastened by the questioned decisions should be enough to give pause and provide an object lesson to
address such matters more studiously and with greater circumspection in the future.

WHEREFORE, the Decision of the Labor Arbiter dated March 23, 1983 and the Resolution of the National
Labor Relation Commission in affirmance thereof, dated December 14, 1984, are hereby reversed and set aside,
and the complaint filed by respondent union is hereby dismissed, with costs against said private respondent.

SO ORDERED.

Yap (Chairman), Melencio-Herrera, Cruz and Paras, JJ., concur.

SUPREME COURT
Manila

FIRST DIVISION

30

G.R. No. 123938 May 21, 1998

LABOR CONGRESS OF THE PHILIPPINES (LCP) for and in behalf of its members, ANA MARIE OCAMPO,
MARY INTAL, ANNABEL CARESO, MARLENE MELQIADES, IRENE JACINTO, NANCY GARCIA, IMELDA
SARMIENTO, LENITA VIRAY, GINA JACINTO, ROSEMARIE DEL ROSARIO, CATHERINE ASPURNA, WINNIE
PENA, VIVIAN BAA, EMILY LAGMAN, LILIAN MARFIL, NANCY DERACO, JANET DERACO, MELODY
JACINTO, CAROLYN DIZON, IMELDA MANALOTO, NORY VIRAY, ELIZA SALAZAR, GIGI MANALOTO,
JOSEFINA BASILIO, MARY ANN MAYATI, ZENAIDA GARCIA, MERLY CANLAS, ERLINDA MANALANG,
ANGELINA QUIAMBAO, LANIE GARCIA, ELVIRA PIEDRA, LOURDES PANLILIO, LUISA PANLILIO, LERIZA
PANLILIO, ALMA CASTRO, ALDA DAVID, MYRA T. OLALIA, MARIFE PINLAC, NENITA DE GUZMAN, JULIE
GACAD, EVELYN MANALO, NORA PATIO, JANETH CARREON, ROWENA MENDOZA, ROWENA MANALO,
LENY GARCIA, FELISISIMA PATIO, SUSANA SALOMON, JOYDEE LANSANGAN, REMEDIOS AGUAS, JEANIE
LANSANGAN, ELIZABETH MERCADO, JOSELYN MANALESE, BERNADETH RALAR, LOLITA ESPIRITU, AGNES
SALAS, VIRGINIA MENDIOLA, GLENDA SALITA, JANETH RALAR, ERLINDA BASILIO, CORA PATIO,
ANTONIA CALMA, AGNES CARESO, GEMMA BONUS, MARITESS OCAMPO, LIBERTY GELISANGA, JANETH
MANARANG, AMALIA DELA CRUZ, EVA CUEVAS, TERESA MANIAGO, ARCELY PEREZ, LOIDA BIE, ROSITA
CANLAS, ANALIZA ESGUERRA, LAILA MANIAGO, JOSIE MANABAT, ROSARIO DIMATULAC, NYMPA
TUAZON, DAIZY TUASON, ERLINDA NAVARRO, EMILY MANARANG, EMELITA CAYANAN, MERCY
CAYANAN, LUZVIMINDA CAYANAN, ANABEL MANALO, SONIA DIZON, ERNA CANLAS, MARIAN
BENEDICTA, DOLORES DOLETIN, JULIE DAVID, GRACE VILLANUEVA, VIRGINIA MAGBAG, CORAZON
RILLION, PRECY MANALILI, ELENA RONOZ, IMELDA MENDOZA, EDNA CANLAS and ANGELA CANLAS,
petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, EMPIRE FOOD PRODUCTS, its Proprietor/President &
Manager, MR. GONZALO KEHYENG and MRS. EVELYN KEHYENG, respondents.

DAVIDE, JR., J.:

In this special civil action for certiorari under Rule 65, petitioners seek to reverse the 29 March 1995 resolution
1 of the National Labor Relations Commission (NLRC) in NLRC RAB III Case No. 01-1964-91 which affirmed the
Decision 2 of Labor Arbiter Ariel C. Santos dismissing their complaint for utter lack of merit.

The antecedents of this case, as summarized by the Office of the Solicitor General in its Manifestation and
Motion in Lieu of Comment, 3 are as follows:

The 99 persons named as petitioners in this proceeding were rank-and-file employees of respondent Empire
Food Products, which hired them on various dates (Paragraph 1, Annex "A" of Petition, Annex "B;" Page 2,
Annex "F" of Petition).


31

Petitioners filed against private respondents a complaint for payment of money claim[s] and for violation of
labor standard[s] laws (NLRC Case No. RAB-111-10-1817-90). They also filed a petition for direct certification of
petitioner Labor Congress of the Philippines as their bargaining representative (Case No. R0300-9010-RU-005).

On October 23, 1990, petitioners represented by LCP President Benigno B. Navarro, Sr. and private
respondents Gonzalo Kehyeng and Evelyn Kehyeng in behalf of Empire Food Products, Inc. entered into a
Memorandum of Agreement which provided, among others, the following:

1. That in connection with the pending Petition for Direct Certification filed by the Labor Congress with
the DOLE, Management of the Empire Food Products has no objection [to] the direct certification of the LCP
Labor Congress and is now recognizing the Labor Congress of the Philippines (LCP) and its Local Chapter as
the SOLE and EXCLUSIVE Bargaining Agent and Representative for all rank and file employees of the Empire
Food Products regarding "WAGES, HOURS Of WORK, AND OTHER TERMS AND CONDITIONS OF
EMPLOYMENT;"

2. That with regards [sic] to NLRC CASE NO. RAB-III-10-1817-90 pending with the NLRC parties jointly
and mutually agreed that the issues thereof, shall be discussed by the parties and resolve[d] during the
negotiation of the Collective Bargaining Agreement;

3. That Management of the Empire Food Products shall make the proper adjustment of the Employees
Wages within fifteen (15) days from the signing of this Agreement and further agreed to register all the
employees with the SSS;

4. That Employer, Empire Food Products thru its Management agreed to deduct thru payroll deduction
UNION DUES and other Assessment[s] upon submission by the LCP Labor Congress individual Check-Off
Authorization[s] signed by the Union Members indicating the amount to be deducted and further agreed all
deduction[s] made representing Union Dues and Assessment[s] shall be remitted immediately to the LCP Labor
Congress Treasurer or authorized representative within three (3) or five (5) days upon deductions [sic], Union
dues not deducted during the period due, shall be refunded or reimbursed by the Employer/Management.
Employer/Management further agreed to deduct Union dues from non-union members the same amount
deducted from union members without need of individual Check-Off Authorizations [for] Agency Fee;

5. That in consideration [of] the foregoing covenant, parties jointly and mutually agreed that NLRC CASE
NO. RAB-III-10-1817-90 shall be considered provisionally withdrawn from the Calendar of the National Labor
Relations Commission (NLRC), while the Petition for direct certification of the LCP Labor Congress parties
jointly move for the direct certification of the LCP Labor Congress;

6. That parties jointly and mutually agreed that upon signing of this Agreement, no Harassments [sic],
Threats, Interferences [sic] of their respective rights under the law, no Vengeance or Revenge by each partner
nor any act of ULP which might disrupt the operations of the business;

7. Parties jointly and mutually agreed that pending negotiations or formalization of the propose[d] CBA,
this Memorandum of Agreement shall govern the parties in the exercise of their respective rights involving the
Management of the business and the terms and condition[s] of employment, and whatever problems and
grievances may arise by and between the parties shall be resolved by them, thru the most cordial and good
harmonious relationship by communicating the other party in writing indicating said grievances before taking
any action to another forum or government agencies;


32

8. That parties [to] this Memorandum of Agreement jointly and mutually agreed to respect, abide and
comply with all the terms and conditions hereof. Further agreed that violation by the parties of any provision
herein shall constitute an act of ULP. (Annex "A" of Petition).

In an Order dated October 24, 1990, Mediator Arbiter Antonio Cortez approved the memorandum of
agreement and certified LCP "as the sole and exclusive bargaining agent among the rank-and-file employee of
Empire Food Products for purposes of collective bargaining with respect to wages, hours of work and other
terms and conditions of employment" (Annex "B" of Petition).

On November 9, 1990, petitioners through LCP President Navarro submitted to private respondents a proposal
for collective bargaining (Annex "C" of Petition).

On January 23, 1991, petitioners filed a complaint docketed as NLRC Case No. RAB-III-01-1964-91 against private
respondents for:

a. Unfair Labor Practice by way of Illegal Lockout and/or Dismissal;

b. Union busting thru Harassments [sic], threats, and interfering with the rights of employees to self-
organization;

c. Violation of the Memorandum of Agreement dated October 23, 1990;

d. Underpayment of Wages in violation of R.A. No. 6640 and R.A. No. 6727, such as Wages promulgated
by the Regional Wage Board;

e. Actual, Moral and Exemplary Damages. (Annex "D" of Petition)

After the submission by the parties of their respective position papers and presentation of testimonial evidence,
Labor Arbiter Ariel C. Santos absolved private respondents of the charges of unfair labor practice, union
busting, violation of the memorandum of agreement, underpayment of wages and denied petitioners' prayer for
actual, moral and exemplary damages. Labor Arbiter Santos, however, directed the reinstatement of the
individual complainants:

The undersigned Labor Arbiter is not oblivious to the fact that respondents have violated a cardinal rule in
every establishment that a payroll and other papers evidencing hours of work, payments, etc. shall always be
maintained and subjected to inspection and visitation by personnel of the Department of Labor and
Employment. As such penalty, respondents should not escape liability for this technicality, hence, it is proper
that all individual complainants except those who resigned and executed quitclaim[s] and releases prior to the
filing of this complaint should be reinstated to their former position[s] with the admonition to respondents
that any harassment, intimidation, coercion or any form of threat as a result of this immediately executory
reinstatement shall be dealt with accordingly.

SO ORDERED. (Annex "G" of petition)

On appeal, the National Labor Relations Commission vacated the Decision dated April 14, 1972 [sic] and
remanded the case to the Labor Arbiter for further proceedings for the following reasons:

The Labor Arbiter, through his decision, noted that ". . . complainant did not present any single witness while
respondent presented four (4) witnesses in the persons of Gonzalo Kehyeng, Orlando Cairo, Evelyn Kehyeng
and Elvira Bulagan . . ." (p. 183, Records), that ". . . complainant before the National Labor Relations

33

Commission must prove with definiteness and clarity the offense charged. . . ." (Record, p. 183); that ". . .
complainant failed to specify under what provision of the Labor Code particularly Art. 248 did respondents
violate so as to constitute unfair labor practice . . ." (Record, p. 183); that "complainants failed to present any
witness who may describe in what manner respondents have committed unfair labor practice . . ." (Record, p.
185); that ". . . complainant LCP failed to present anyone of the so-called 99 complainants in order to testify
who committed the threats and intimidation . . ." (Record, p. 185).

Upon review of the minutes of the proceedings on record, however, it appears that complainant presented
witnesses, namely, BENIGNO NAVARRO, JR. (28 February 1991, RECORD, p. 91; 8 March 1991, RECORD, p. 92,
who adopted its POSITION PAPER AND CONSOLIDATED AFFIDAVIT, as Exhibit "A" and the annexes thereto
as Exhibit "B", "B-1" to "B-9", inclusive. Minutes of the proceedings on record show that complainant further
presented other witnesses, namely: ERLINDA BASILIO (13 March 1991, RECORD, p. 93; LOURDES PANTILLO,
MARIFE PINLAC, LENIE GARCIA (16 April 1991, Record, p. 96, see back portion thereof ; 2 May 1991, Record, p.
102; 16 May 1991, Record, p. 103, 11 June 1991, Record, p. 105). Formal offer of Documentary and Testimonial
Evidence was made by complainant on June 24, 1991 (Record, p. 106-109)

The Labor Arbiter must have overlooked the testimonies of some of the individual complainants which are now
on record. Other individual complainants should have been summoned with the end in view of receiving their
testimonies. The complainants should be afforded the time and opportunity to fully substantiate their claims
against the respondents. Judgment should be rendered only based on the conflicting positions of the parties.
The Labor Arbiter is called upon to consider and pass upon the issues of fact and law raised by the parties.

Toward this end, therefore, it is Our considered view [that] the case should be remanded to the Labor Arbiter
of origin for further proceedings. (Annex "H" of Petition)

In a Decision dated July 27, 1994, Labor Arbiter Santos made the following determination:

Complainants failed to present with definiteness and clarity the particular act or acts constitutive of unfair
labor practice.

It is to be borne in mind that a declaration of unfair labor practice connotes a finding of prima facie evidence
of probability that a criminal offense may have been committed so as to warrant the filing of a criminal
information before the regular court. Hence, evidence which is more than a scintilla is required in order to
declare respondents/employers guilty of unfair labor practice. Failing in this regard is fatal to the cause of
complainants. Besides, even the charge of illegal lockout has no leg to stand on because of the testimony of
respondents through their guard Orlando Cairo (TSN, July 31, 1991 hearing; p. 5-35) that on January 21, 1991,
complainants refused and failed to report for work, hence guilty of abandoning their post without permission
from respondents. As a result of complainants['] failure to report for work, the cheese curls ready for repacking
were all spoiled to the prejudice of respondents. Under cross-examination, complainants failed to rebut the
authenticity of respondents' witness testimony.

As regards the issue of harassments [sic], threats and interference with the rights of employees to self-
organization which is actually an ingredient of unfair labor practice, complainants failed to specify what type of
threats or intimidation was committed and who committed the same. What are the acts or utterances
constitutive of harassments [sic] being complained of? These are the specifics which should have been proven
with definiteness and clarity by complainants who chose to rely heavily on its position paper through
generalizations to prove their case.

Insofar as violation of [the] Memorandum of Agreement dated October 23, 1990 is concerned, both parties
agreed that:

34

2 That with regards [sic] to the NLRC Case No. RAB III-10-1817-90 pending with the NLRC, parties jointly
and mutually agreed that the issues thereof shall be discussed by the parties and resolve[d] during the
negotiation of the CBA.

The aforequoted provision does not speak of [an] obligation on the part of respondents but on a resolutory
condition that may occur or may not happen. This cannot be made the basis of an imposition of an obligation
over which the National Labor Relations Commission has exclusive jurisdiction thereof.

Anent the charge that there was underpayment of wages, the evidence points to the contrary. The enumeration
of complainants' wages in their consolidated Affidavits of merit and position paper which implies
underpayment has no leg to stand on in the light of the fact that complainants' admission that they are piece
workers or paid on a pakiao [basis] i.e. a certain amount for every thousand pieces of cheese curls or other
products repacked. The only limitation for piece workers or pakiao workers is that they should receive
compensation no less than the minimum wage for an eight (8) hour work [sic]. And compliance therewith was
satisfactorily explained by respondent Gonzalo Kehyeng in his testimony (TSN, p. 12-30) during the July 31, 1991
hearing. On cross-examination, complainants failed to rebut or deny Gonzalo Kehyeng's testimony that
complainants have been even receiving more than the minimum wage for an average workers [sic]. Certainly, a
lazy worker earns less than the minimum wage but the same cannot be attributable to respondents but to the
lazy workers.

Finally, the claim for moral and exemplary damages has no leg to stand on when no malice, bad faith or fraud
was ever proven to have been perpetuated by respondents.

WHEREFORE, premises considered, the complaint is hereby DISMISSED for utter lack of merit. (Annex "I" of
Petition). 4

On appeal, the NLRC, in its Resolution dated 29 March 1995, 5 affirmed in toto the decision of Labor Arbiter
Santos. In so doing, the NLRC sustained the Labor Arbiter's findings that: (a) there was a dearth of evidence to
prove the existence of unfair labor practice and union busting on the part of private respondents; (b) the
agreement of 23 October 1990 could not be made the basis of an obligation within the ambit of the NLRC's
jurisdiction, as the provisions thereof, particularly Section 2, spoke of a resolutory condition which could or
could not happen; (c) the claims for underpayment of wages were without basis as complainants were
admittedly "pakiao" workers and paid on the basis of their output subject to the lone limitation that the
payment conformed to the minimum wage rate for an eight-hour workday; and (d) petitioners were not
underpaid.

Their motion for reconsideration having been denied by the NLRC in its Resolution of 31 October 1995, 6
petitioners filed the instant special civil action for certiorari raising the following issues:

I

WHETHER OR NOT THE PUBLIC RESPONDENT NATIONAL LABOR RELATIONS COMMISSION GRAVELY
ABUSED ITS DISCRETION WHEN IT DISREGARDED OR IGNORED NOT ONLY THE EVIDENCE FAVORABLE
TO HEREIN PETITIONERS, APPLICABLE JURISPRUDENCE BUT ALSO ITS OWN DECISIONS AND THAT OF
THIS HONORABLE HIGHEST TRIBUNAL WHICH [WAS] TANTAMOUNT NOT ONLY TO THE DEPRIVATION
OF PETITIONERS' RIGHT TO DUE PROCESS BUT WOULD RESULT [IN] MANIFEST INJUSTICE.

II


35

WHETHER OR NOT THE PUBLIC RESPONDENT GRAVELY ABUSED ITS DISCRETION WHEN IT DEPRIVED
THE PETITIONERS OF THEIR CONSTITUTIONAL RIGHT TO SELF-ORGANIZATION, SECURITY OF TENURE,
PROTECTION TO LABOR, JUST AND HUMANE CONDITIONS OF WORK AND DUE PROCESS.

III

WHETHER OR NOT THE PETITIONERS WERE ILLEGALLY EASED OUT [OF] OR CONSTRUCTIVELY
DISMISSED FROM THEIR ONLY MEANS OF LIVELIHOOD.

IV

WHETHER OR NOT PETITIONERS SHOULD BE REINSTATED FROM THE DATE OF THEIR DISMISSAL UP
TO THE TIME OF THEIR REINSTATEMENT, WITH BACKWAGES, STATUTORY BENEFITS, DAMAGES AND
ATTORNEY'S FEES. 7

We required respondents to file their respective Comments.

In their Manifestation and Comment, private respondents asserted that the petition was filed out of time. As
petitioners admitted in their Notice to File Petition for Review on Certiorari that they received a copy of the
resolution (denying their motion for reconsideration) on 13 December 1995, they had only until 29 December
1995 to file the petition. Having failed to do so, the NLRC thus already entered judgment in private
respondents' favor.

In their Reply, petitioners averred that Mr. Navarro, a non-lawyer who filed the notice to file a petition for
review on their behalf, mistook which reglementary period to apply. Instead of using the "reasonable time"
criterion for certiorari under Rule 65, he used the 15-day period for petitions for review on certiorari under
Rule 45. They hastened to add that such was a mere technicality which should not bar their petition from
being decided on the merits in furtherance of substantial justice, especially considering that respondents
neither denied nor contradicted the facts and issues raised in the petition.

In its Manifestation and Motion in Lieu of Comment, the Office of the Solicitor General (OSG) sided with
petitioners. It pointed out that the Labor Arbiter, in finding that petitioners abandoned their jobs, relied solely
on the testimony of Security Guard Rolando Cairo that petitioners refused to work on 21 January 1991, resulting
in the spoilage of cheese curls ready for repacking. However, the OSG argued, this refusal to report for work
for a single day did not constitute abandonment, which pertains to a clear, deliberate and unjustified refusal to
resume employment, and not mere absence. In fact, the OSG stressed, two days after allegedly abandoning
their work, petitioners filed a complaint for, inter alia, illegal lockout or illegal dismissal. Finally, the OSG
questioned the lack of explanation on the part of Labor Arbiter Santos as to why he abandoned his original
decision to reinstate petitioners.

In view of the stand of the OSG, we resolved to require the NLRC to file its own Comment.

In its Comment, the NLRC invokes the general rule that factual findings of an administrative agency bind a
reviewing court and asserts that this case does not fall under the exceptions. The NLRC further argues that
grave abuse of discretion may not be imputed to it, as it affirmed the factual findings and legal conclusions of
the Labor Arbiter only after carefully reviewing, weighing and evaluating the evidence in support thereof, as
well as the pertinent provisions of law and jurisprudence.


36

In their Reply, petitioners claim that the decisions of the NLRC and the Labor Arbiter were not supported by
substantial evidence; that abandonment was not proved; and that much credit was given to self-serving
statements of Gonzalo Kehyeng, owner of Empire Foods, as to payment of just wages.

On 7 July 1997, we gave due course to the petition and required the parties to file their respective memoranda.
However, only petitioners and private respondents filed their memoranda, with the NLRC merely adopting its
Comment as its Memorandum.

We find for petitioners.

Invocation of the general rule that factual findings of the NLRC bind this Court is unavailing under the
circumstances. Initially, we are unable to discern any compelling reason justifying the Labor Arbiter's volte face
from his 14 April 1992 decision reinstating petitioners to his diametrically opposed 27 July 1994 decision, when
in both instances, he had before him substantially the same evidence. Neither do we find the 29 March 1995
NLRC resolution to have sufficiently discussed the facts so as to comply with the standard of substantial
evidence. For one thing, the NLRC confessed its reluctance to inquire into the veracity of the Labor Arbiter's
factual findings, staunchly declaring that it was "not about to substitute [its] judgment on matters that are
within the province of the trier of facts." Yet, in the 21 July 1992 NLRC resolution, 8 it chastised the Labor
Arbiter for his errors both in judgment and procedure; for which reason it remanded the records of the case to
the Labor Arbiter for compliance with the pronouncements therein.

What cannot escape from our attention is that the Labor Arbiter did not heed the observations and
pronouncements of the NLRC in its resolution of 21 July 1992, neither did he understand the purpose of the
remand of the records to him. In said resolution, the NLRC summarized the grounds for the appeal to be:

1. that there is a prima facie evidence of abuse of discretion and acts of gross incompetence committed by
the Labor Arbiter in rendering the decision.

2. that the Labor Arbiter in rendering the decision committed serious errors in the findings of facts.

After which, the NLRC observed and found:

Complainant alleged that the Labor Arbiter disregarded the testimonies of the 99 complainants who submitted
their Consolidated Affidavit of Merit and Position Paper which was adopted as direct testimonies during the
hearing and cross-examined by respondents' counsel.

The Labor Arbiter, through his decision, noted that ". . . complainant did not present any single witness while
respondent presented four (4) witnesses in the persons of Gonzalo Kehyeng, Orlando Cairo, Evelyn Kehyeng
and Elvira Bulagan . . ." (Records, p. 183), that ". . . complainant before the National Labor Relations
Commission must prove with definiteness and clarity the offense charged. . . ." (Record, p. 183; that ". . .
complainant failed to specify under what provision of the Labor Code particularly Art. 248 did respondents
violate so as to constitute unfair labor practice . . ." (Record, p. 183); that "complainants failed to present any
witness who may describe in what manner respondents have committed unfair labor practice . . ." (Record, p.
185); that ". . . complainant a [sic] LCP failed to present anyone of the so called 99 complainants in order to
testify who committed the threats and intimidation . . ." (Record, p.185).

Upon review of the minutes of the proceedings on record, however, it appears that complainant presented
witnesses, namely BENIGNO NAVARRO, JR. (28 February 1991, RECORD, p. 91; 8 March 1991, RECORD, p. 92),
who adopted its POSITION PAPER AND CONSOLIDATED AFFIDAVIT as Exhibit A and the annexes thereto as
Exhibit B, B-1 to B-9, inclusive. Minutes of the proceedings on record show that complainant further presented

37

other witnesses, namely: ERLINDA BASILIO (13 March 1991, RECORD, p. 93; LOURDES PANTILLO, MARIFE
PINLAC, LENI GARCIA (16 April 1991, Record, p. 96, see back portion thereof; 2 May 1991, Record, p. 102; 16
May 1991, Record, p. 103; 11 June 1991, Record, p. 105). Formal offer of Documentary and Testimonial Evidence
was made by the complainant on June 24, 1991 (Record, p.106-109).

The Labor Arbiter must have overlooked the testimonies of some of the individual complainants which are now
on record. Other individual complainants should have been summoned with the end in view of receiving their
testimonies. The complainants should [have been] afforded the time and opportunity to fully substantiate their
claims against the respondents. Judgment should [have been] rendered only based on the conflicting positions
of the parties. The Labor Arbiter is called upon to consider and pass upon the issues of fact and law raised by
the parties.

Toward this end, therefore, it is Our considered view the case should be remanded to the Labor Arbiter of
origin for further proceedings.

Further, We take note that the decision does not contain a dispositive portion or fallo. Such being the case, it
may be well said that the decision does not resolve the issues at hand. On another plane, there is no portion of
the decision which could be carried out by way of execution.

It may be argued that the last paragraph of the decision may be categorized as the dispositive portion thereof:

xxx xxx xxx

The undersigned Labor Arbiter is not oblivious [to] the fact that respondents have violated a cardinal rule in
every establishment that a payroll and other papers evidencing hour[s] of work, payment, etc. shall always be
maintained and subjected to inspection and visitation by personnel of the Department of Labor and
Employment. As such penalty, respondents should not escape liability for this technicality, hence, it is proper
that all the individual complainants except those who resigned and executed quitclaim[s] and release[s] prior to
the filing of this complaint should be reinstated to their former position with the admonition to respondents
that any harassment, intimidation, coercion or any form of threat as a result of this immediately executory
reinstatement shall be dealt with accordingly.

SO ORDERED.

It is Our considered view that even assuming arguendo that the respondents failed to maintain their payroll
and other papers evidencing hours of work, payment etc., such circumstance, standing alone, does not warrant
the directive to reinstate complainants to their former positions. It is [a] well settled rule that there must be a
finding of illegal dismissal before reinstatement be mandated.

In this regard, the LABOR ARBITER is hereby directed to include in his clarificatory decision, after receiving
evidence, considering and resolving the same, the requisite dispositive portion. 9

Apparently, the Labor Arbiter perceived that if not for petitioners, he would not have fallen victim to this
stinging rebuke at the hands of the NLRC. Thus does it appear to us that the Labor Arbiter, in concluding in
his 27 July 1994 Decision that petitioners abandoned their work, was moved by, at worst, spite, or at best,
lackadaisically glossed over petitioner's evidence. On this score, we find the following observations of the OSG
most persuasive:


38

In finding that petitioner employees abandoned their work, the Labor Arbiter and the NLRC relied on the
testimony of Security Guard Rolando Cairo that on January 21, 1991, petitioners refused to work. As a result of
their failure to work, the cheese curls ready for repacking on said date were spoiled.

The failure to work for one day, which resulted in the spoilage of cheese curls does not amount to
abandonment of work. In fact two (2) days after the reported abandonment of work or on January 23, 1991,
petitioners filed a complaint for, among others, unfair labor practice, illegal lockout and/or illegal dismissal. In
several cases, this Honorable Court held that "one could not possibly abandon his work and shortly thereafter
vigorously pursue his complaint for illegal dismissal (De Ysasi III v. NLRC, 231 SCRA 173; Ranara v. NLRC, 212
SCRA 631; Dagupan Bus Co. v. NLRC, 191 SCRA 328; Atlas Consolidated Mining and Development Corp. v.
NLRC, 190 SCRA 505; Hua Bee Shirt Factory v. NLRC, 186 SCRA 586; Mabaylan v. NLRC, 203 SCRA 570 and
Flexo Manufacturing v. NLRC, 135 SCRA 145). In Atlas Consolidated, supra, this Honorable Court explicitly
stated:

It would be illogical for Caballo, to abandon his work and then immediately file an action seeking for his
reinstatement. We can not believe that Caballo, who had worked for Atlas for two years and ten months, would
simply walk away from his job unmindful of the consequence of his act. i.e. the forfeiture of his accrued
employment benefits. In opting to finally to [sic] contest the legality of his dismissal instead of just claiming his
separation pay and other benefits, which he actually did but which proved to be futile after all, ably supports
his sincere intention to return to work, thus negating Atlas' stand that he had abandoned his job.

In De Ysasi III v. NLRC (supra), this Honorable Court stressed that it is the clear, deliberate and unjustified
refusal to resume employment and not mere absence that constitutes abandonment. The absence of petitioner
employees for one day on January 21, 1991 as testified [to] by Security Guard Orlando Cairo did not constitute
abandonment.

In his first decision, Labor Arbiter Santos expressly directed the reinstatement of the petitioner employees and
admonished the private respondents that "any harassment, intimidation, coercion or any form of threat as a
result of this immediately executory reinstatement shall be dealt with accordingly.

In his second decision, Labor Arbiter Santos did not state why he was abandoning his previous decision
directing the reinstatement of petitioner employees.

By directing in his first decision the reinstatement of petitioner employees, the Labor Arbiter impliedly held
that they did not abandon their work but were not allowed to work without just cause.

That petitioner employees are "pakyao" or piece workers does not imply that they are not regular employees
entitled to reinstatement. Private respondent Empire Food Products, Inc. is a food and fruit processing
company. In Tabas v. California Manufacturing Co., Inc. (169 SCRA 497), this Honorable Court held that the
work of merchandisers of processed food, who coordinate with grocery stores and other outlets for the sale of
the processed food is necessary in the day-to-day operation[s] of the company. With more reason, the work of
processed food repackers is necessary in the day-to-day operation[s] of respondent Empire Food Products. 10

It may likewise be stressed that the burden of proving the existence of just cause for dismissing an employee,
such as abandonment, rests on the employer, 11 a burden private respondents failed to discharge.

Private respondents, moreover, in considering petitioners' employment to have been terminated by
abandonment, violated their rights to security of tenure and constitutional right to due process in not even
serving them with a written notice of such termination. 12 Section 2, Rule XIV, Book V of the Omnibus Rules
Implementing the Labor Code provides:

39

Sec. 2. Notice of Dismissal Any employer who seeks to dismiss a worker shall furnish him a written notice
stating the particular acts or omission constituting the grounds for his dismissal. In cases of abandonment of
work, the notice shall be served at the worker's last known address.

Petitioners are therefore entitled to reinstatement with full back wages pursuant to Article 279 of the Labor
Code, as amended by R.A. No. 6715. Nevertheless, the records disclose that taking into account the number of
employees involved, the length of time that has lapsed since their dismissal, and the perceptible resentment and
enmity between petitioners and private respondents which necessarily strained their relationship, reinstatement
would be impractical and hardly promotive of the best interests of the parties. In lieu of reinstatement then,
separation pay at the rate of one month for every year of service, with
a fraction of at least six (6) months of service considered as one (1) year, is in order. 13

That being said, the amount of back wages to which each petitioner is entitled, however, cannot be fully settled
at this time. Petitioners, as piece-rate workers having been paid by the piece, 14 there is need to determine the
varying degrees of production and days worked by each worker. Clearly, this issue is best left to the National
Labor Relations Commission.

As to the other benefits, namely, holiday pay, premium pay, 13th month pay and service incentive leave which
the labor arbiter failed to rule on but which petitioners prayed for in their complaint, 15 we hold that
petitioners are so entitled to these benefits. Three (3) factors lead us to conclude that petitioners, although
piece-rate workers, were regular employees of private respondents. First, as to the nature of petitioners' tasks,
their job of repacking snack food was necessary or desirable in the usual business of private respondents, who
were engaged in the manufacture and selling of such food products; second, petitioners worked for private
respondents throughout the year, their employment not having been dependent on a specific project or season;
and third, the length of time 16 that petitioners worked for private respondents. Thus, while petitioners' mode
of compensation was on a "per piece basis," the status and nature of their employment was that of regular
employees.

The Rules Implementing the Labor Code exclude certain employees from receiving benefits such as nighttime
pay, holiday pay, service incentive leave 17 and 13th month pay, 18 inter alia, "field personnel and other
employees whose time and performance is unsupervised by the employer, including those who are engaged on
task or contract basis, purely commission basis, or those who are paid a fixed amount for performing work
irrespective of the time consumed in the performance thereof." Plainly, petitioners as piece-rate workers do not
fall within this group. As mentioned earlier, not only did petitioners labor under the control of private
respondents as their employer, likewise did petitioners toil throughout the year with the fulfillment of their
quota as supposed basis for compensation. Further, in Section 8 (b), Rule IV, Book III which we quote
hereunder, piece workers are specifically mentioned as being entitled to holiday pay.

Sec. 8. Holiday pay of certain employees.

(b) Where a covered employee is paid by results or output, such as payment on piece work, his holiday pay
shall not be less than his average daily earnings for the last seven (7) actual working days preceding the
regular holiday: Provided, however, that in no case shall the holiday pay be less than the applicable statutory
minimum wage rate.

In addition, the Revised Guidelines on the Implementation of the 13th Month Pay Law, in view of the
modifications to P.D. No. 851 19 by Memorandum Order No. 28, clearly exclude the employer of piece rate
workers from those exempted from paying 13th month pay, to wit:


40

2. EXEMPTED EMPLOYERS

The following employers are still not covered by P.D. No. 851:

d. Employers of those who are paid on purely commission, boundary or task basis, and those who are paid
a fixed amount for performing specific work, irrespective of the time consumed in the performance thereof,
except where the workers are paid on piece-rate basis in which case the employer shall grant the required 13th
month pay to such workers. (emphasis supplied)

The Revised Guidelines as well as the Rules and Regulations identify those workers who fall under the piece-
rate category as those who are paid a standard amount for every piece or unit of work produced that is more
or less regularly replicated, without regard to the time spent in producing the same. 20

As to overtime pay, the rules, however, are different. According to Sec. 2(e), Rule I, Book III of the
Implementing Rules, workers who are paid by results including those who are paid on piece-work, takay,
pakiao, or task basis, if their output rates are in accordance with the standards prescribed under Sec. 8, Rule
VII, Book III, of these regulations, or where such rates have been fixed by the Secretary of Labor in accordance
with the aforesaid section, are not entitled to receive overtime pay. Here, private respondents did not allege
adherence to the standards set forth in Sec. 8 nor with the rates prescribed by the Secretary of Labor. As such,
petitioners are beyond the ambit of exempted persons and are therefore entitled to overtime pay. Once more,
the National Labor Relations Commission would be in a better position to determine the exact amounts owed
petitioners, if any.

As to the claim that private respondents violated petitioners' right to self-organization, the evidence on record
does not support this claim. Petitioners relied almost entirely on documentary evidence which, per se, did not
prove any wrongdoing on private respondents' part. For example, petitioners presented their complaint 21 to
prove the violation of labor laws committed by private respondents. The complaint, however, is merely "the
pleading alleging the plaintiff's cause or causes of action." 22 Its contents are merely allegations, the verity of
which shall have to be proved during the trial. They likewise offered their Consolidated Affidavit of Merit and
Position Paper 23 which, like the offer of their Complaint, was a tautological exercise, and did not help nor
prove their cause. In like manner, the petition for certification election 24 and the subsequent order of
certification 25 merely proved that petitioners sought and acquired the status of bargaining agent for all rank-
and-file employees. Finally, the existence of the memorandum of agreement 26 offered to substantiate private
respondents' non-compliance therewith, did not prove either compliance or non-compliance, absent evidence of
concrete, overt acts in contravention of the provisions of the memorandum.

IN VIEW WHEREOF, the instant petition is hereby GRANTED. The Resolution of the National Labor Relations
Commission of 29 March 1995 and the Decision of the Labor Arbiter of 27 July 1994 in NLRC Case No. RAB-
III-01-1964-91 are hereby SET ASIDE, and another is hereby rendered:

1. DECLARING petitioners to have been illegally dismissed by private respondents, thus entitled to full
back wages and other privileges, and separation pay in lieu of reinstatement at the rate of one month's salary
for every year of service with a fraction of six months of service considered as one year;

2. REMANDING the records of this case to the National Labor Relations Commission for its determination
of the back wages and other benefits and separation pay, taking into account the foregoing observations; and

3. DIRECTING the National Labor Relations Commission to resolve the referred issues within sixty (60)
days from its receipt of a copy of this decision and of the records of the case and to submit to this Court a
report of its compliance hereof within ten (10) days from the rendition of its resolution.

41

Costs against private respondents.

SO ORDERED.

Davide, Jr., Bellosillo, Vitug, Panganiban and Quisumbing, JJ., concur.

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