FIRST DIVISION

[G.R. No. L-44169. December 3, 1985.]

ROSARIO A. GAA, petitioner, vs. THE HONORABLE COURT OF APPEALS,
EUROPHIL INDUSTRIES CORPORATION, and CESAR R. ROXAS, Deputy
Sheriff of Manila, respondents.
Federico C. Alikpala and Federico Y. Alikpala Jr. for petitioner.
Borbe and Palma for private respondent.
DECISION
PATAJO, J p:
This is a petition for review on certiorari of the decision of the Court of
Appeals promulgated on March 30, 1976, affirming the decision of the
Court of First Instance of Manila.
It appears that respondent Europhil Industries Corporation was formerly
one of the tenants in Trinity Building at T.M. Kalaw Street, Manila, while
petitioner Rosario A. Gaa was then the building administrator. On
December 12, 1973, Europhil Industries commenced an action (Civil Case
No. 92744) in the Court of First Instance of Manila for damages against
petitioner "for having perpetrated certain acts that Europhil Industries
considered a trespass upon its rights, namely, cutting of its electricity,
and removing its name from the building directory and gate passes of its
officials and employees" (p. 87, Rollo). On June 28, 1974, said court
rendered judgment in favor of respondent Europhil Industries, ordering
petitioner to pay the former the sum of P10,000.00 as actual damages,
P5,000.00 as moral damages, P5,000.00 as exemplary damages and to
pay the costs.
The said decision having become final and executory, a writ of
garnishment was issued pursuant to which Deputy Sheriff Cesar A. Roxas
on August 1, 1975 served a Notice of Garnishment upon El Grande Hotel,
where petitioner was then employed, garnishing her "salary, commission
and/or remuneration." Petitioner then filed with the Court of First Instance
of Manila a motion to lift said garnishment on the ground that her
"salaries, commission and or remuneration" are exempted from execution
under Article 1708 of the New Civil Code. Said motion was denied by the
lower Court in an order dated November 7, 1975. A motion for
reconsideration of said order was likewise denied, and on January 26,

1976 petitioner filed with the Court of Appeals a petition for certiorari
against said order of November 7, 1975.
On March 30, 1976, the Court of Appeals dismissed the petition for
certiorari. In dismissing the petition, the Court of Appeals held that
petitioner is not a mere laborer as contemplated under Article 1708 as
the term laborer does not apply to one who holds a managerial or
supervisory position like that of petitioner, but only to those "laborers
occupying the lower strata." It also held that the term "wages" means the
pay given "as hire or reward to artisans, mechanics, domestics or menial
servants, and laborers employed in manufactories, agriculture, mines,
and other manual occupation and usually employed to distinguish the
sums paid to persons hired to perform manual labor, skilled or unskilled,
paid at stated times, and measured by the day, week, month, or season,"
citing 67 C.J. 285, which is the ordinary acceptation of the said term, and
that "wage" in Spanish is "jornal" and one who receives a wage is a
"jornalero."
In the present petition for review on certiorari of the aforesaid decision of
the Court of Appeals, petitioner questions the correctness of the
interpretation of the then Court of Appeals of Article 1708 of the New Civil
Code which reads as follows:
"ART. 1708.
The laborer's wage shall not be subject to execution or
attachment, except for debts incurred for food, shelter, clothing and
medical attendance."
It is beyond dispute that petitioner is not an ordinary or rank and file
laborer but "a responsibly place employee," of El Grande Hotel,
"responsible for planning, directing, controlling, and coordinating the
activities of all housekeeping personnel" (p. 95, Rollo) so as to ensure the
cleanliness, maintenance and orderliness of all guest rooms, function
rooms, public areas, and the surroundings of the hotel. Considering the
importance of petitioner's function in El Grande Hotel, it is undeniable
that petitioner is occupying a position equivalent to that of a managerial
or supervisory position.
In its broadest sense, the word "laborer" includes everyone who performs
any kind of mental or physical labor, but as commonly and customarily
used and understood, it only applies to one engaged in some form of
manual or physical labor. That is the sense in which the courts generally
apply the term as applied in exemption acts, since persons of that class
usually look to the reward of a day's labor for immediate or present

support and so are more in need of the exemption than are other. (22 Am.
Jur. 22 citing Briscoe vs. Montgomery, 93 Ga 602, 20 SE 40; Miller vs.
Dugas, 77 Ga 4 Am St Rep 192; State ex rel I.X.L. Grocery vs. Land, 108
La 512, 32 So 433; Wildner vs. Ferguson, 42 Minn 112, 43 NW 793; 6 LRA
338; Anno 102 Am St Rep. 84.
In Oliver vs. Macon Hardware Co., 98 Ga 249, 25 SE 403, it was held that
in determining whether a particular laborer or employee is really a
"laborer," the character of the word he does must be taken into
consideration. He must be classified not according to the arbitrary
designation given to his calling, but with reference to the character of the
service required of him by his employer. LLjur
In Wildner vs. Ferguson, 42 Minn 112, 43 NW 793, the Court also held that
all men who earn compensation by labor or work of any kind, whether of
the head or hands, including judges, lawyers, bankers, merchants, officers
of corporations, and the like, are in some sense "laboring men." But they
are not "laboring men" in the popular sense of the term, when used to
refer to a man's employment, and that is the sense in which the court
must presume, the legislature used the term. The Court further held in
said case:
"There are many cases holding that contractors, consulting or assistant
engineers, agents, superintendents, secretaries of corporations and livery
stable keepers, do not come within the meaning of the term. (Powell v.
Eldred, 39 Mich. 554; Atkin v. Wasson, 25 N.Y. 482; Short v. Medberry, 29
Hun. 39; Dean v. De Wolf, 16 Hun. 186; Krausen v. Buckel, 17 Hun. 463;
Ericson v. Brown, 39 Barb. 390; Coffin v. Reynolds, 37 N.Y. 640; Brusie v.
Griffith, 34 Cal. 306; Dave v. Nunan, 62 Cal. 400)."
Thus, in Jones vs. Avery, 50 Mich, 326, 15 N.W. Rep. 494, it was held that
a traveling salesman, selling by sample, did not come within the meaning
of a constitutional provision making stockholders of a corporation liable
for "labor debts" of the corporation.
In Kline vs. Russel, 113 Ga. 1085, 39 SE 477, citing Oliver vs. Macon
Hardware Co., supra, it was held that a laborer, within the statute
exempting from garnishment the wages of a "laborer," is one whose work
depends on mere physical power to perform ordinary manual labor, and
not one engaged in services consisting mainly of work requiring mental
skill or business capacity, and involving the exercise of intellectual
faculties.

So, also in Wakefield vs. Fargo, 90 N.Y. 213, the Court, in construing an act
making stockholders in a corporation liable for debts due "laborers,
servants and apprentices" for services performed for the corporation, held
that a "laborer" is one who performs menial or manual services and
usually looks to the reward of a day's labor or services for immediate or
present support. And in Weymouth vs. Sanborn, 43 N.H. 173, 80 Am. Dec.
144, it was held that "laborer" is a term ordinarily employed to denote
one who subsists by physical toil in contradistinction to those who
subsists by professional skill. And in Consolidated Tank Line Co. vs. Hunt,
83 Iowa, 6, 32 Am. St. Rep. 285, 43 N.W. 1057, 12 L.R.A. 476, it was
stated that "laborers" are those persons who earn a livelihood by their
own manual labor.
Article 1708 used the word "wages" and not "salary" in relation to
"laborer" when it declared what are to be exempted from attachment and
execution. The term "wages" as distinguished from "salary", applies to the
compensation for manual labor, skilled or unskilled, paid at stated times,
and measured by the day, week, month, or season, while "salary" denotes
a higher degree of employment, or a superior grade of services, and
implies a position of office: by contrast, the term "wages" indicates
considerable pay for a lower and less responsible character of
employment, while "salary" is suggestive of a larger and more important
service (35 Am. Jur. 496).
The distinction between wages and salary was adverted to in Bell vs.
Indian Livestock Co. (Tex. Sup.), 11 S.W. 344, wherein it was said:
"'Wages' are the compensation given to a hired person for service, and
the same is true of 'salary'. The words seem to be synonymous,
convertible terms, though we believe that use and general acceptation
have given to the word 'salary' a significance somewhat different from the
word 'wages' in this: that the former is understood to relate to position of
office, to be the compensation given for official or other service, as
distinguished from 'wages', the compensation for labor." Annotation 102
Am. St. Rep. 81, 95. LLjur
We do not think that the legislature intended the exemption in Article
1708 of the New Civil Code to operate in favor of any but those who are
laboring men or women in the sense that their work is manual. Persons
belonging to this class usually look to the reward of a day's labor for
immediate or present support, and such persons are more in need of the
exemption than any others. Petitioner Rosario A. Gaa is definitely not
within that class.

We find, therefore, and so hold that the Trial Court did not err in denying
in its order of November 7, 1975 the motion of petitioner to lift the notice
of garnishment against her salaries, commission and other remuneration
from El Grande Hotel since said salaries, commission and other
remuneration due her from the El Grande Hotel do not constitute wages
due a laborer which, under Article 1708 of the Civil Code, are not subject
to execution or attachment.
IN VIEW OF THE FOREGOING, We find the present petition to be without
merit and hereby AFFIRM the decision of the Court of Appeals, with costs
against petitioner.
SO ORDERED.
Teehankee (Chairman), Plana, Gutierrez, Jr. and De la Fuente, JJ., concur.
Melencio-Herrera and Relova, JJ., are on leave.

FIRST DIVISION
[G.R. No. 128845. June 1, 2000.]
INTERNATIONAL SCHOOL ALLIANCE OF EDUCATORS (ISAE), petitioner, vs.
HON. LEONARDO A. QUISUMBING in his capacity as the Secretary of Labor
and Employment; HON. CRESENCIANO B. TRAJANO in his capacity as the
Acting Secretary of Labor and Employment; DR. BRIAN MACCAULEY in his
capacity as the Superintendent of International School-Manila; and
INTERNATIONAL SCHOOL, INC., respondents.
Azcuna Yorac Sarmiento Arroyo & Chua Law Offices for petitioner.
The Solicitor General for public respondent.
Bernas Law Office for private respondent.
SYNOPSIS
Private respondent International School, Inc. is a domestic educational
institution established primarily for dependents of foreign diplomatic
personnel and other temporary residents. It hires both foreign and local
teachers as members of its faculty classifying them as foreign-hires and
local-hires. It grants foreign-hires certain benefits as housing,
transportation, shipping costs, taxes and home leave travel allowance
which are not accorded to local-hires. Foreign-hires are also paid a salary
rate of twenty-five percent (25%) more than the local-hires. The school
justified the difference on two "significant economic disadvantages"
foreign-hires have to endure, namely: (a) the "dislocation factor" and (b)
limited tenure. When negotiations for a new collective bargaining
agreement were held in June 1995, petitioner International School
Alliance of Educators (ISAE) as a legitimate labor union and the collective
bargaining representative of all the faculty members of the school
contested the difference in salary rates between foreign and local hires.
This issue, as well as the question of whether foreign-hires should be
included in the appropriate bargaining unit, eventually caused a deadlock
between the parties. The Department of Labor and Employment (DOLE)
assumed jurisdiction over the dispute. It subsequently issued an Order
resolving the issues in favor of the school. The motion for reconsideration
of ISAE was also denied. Hence, this petition.
The Court ruled that the point-of-hire classification employed by
respondent School to justify the distinction in the salary rates of foreignhires and local-hires was an invalid classification. There is no reasonable
distinction between the services rendered by foreign-hires and local-hires.

The practice of the School of according higher salaries to foreign-hires

contravenes public policy and, certainly, does not deserve the sympathy
of the Court.
The Court agreed, however, that foreign-hires do not belong to the same
bargaining unit as the local-hires. The basic test of an asserted bargaining
unit's acceptability is whether or not it is fundamentally the combination
which will best assure to all employees the exercise of their collective
bargaining rights. It does not appear that foreign-hires have indicated
their intention to be grouped together with local-hires for purposes of
collective bargaining. The collective bargaining history in the School also
showed that these groups were always treated separately. Foreign-hires
have limited tenure; local-hires enjoy security of tenure. Although foreignhires perform similar functions under the same working conditions as the
local-hires, foreign-hires are accorded certain benefits not granted to
local-hires. These benefits, such as housing, transportation, shipping
costs, taxes, and home leave travel allowance, are reasonably related to
their status as foreign-hires, and justified the exclusion of the former from
the latter. To include foreign-hires in a bargaining unit with local-hires
would not assure either group the exercise of their respective collective
bargaining rights. The orders of the Secretary of Labor were reversed and
set aside insofar as they upheld the practice of respondent School of
according foreign-hires higher salaries than local-hires. IDcHCS
SYLLABUS
1.
POLITICAL LAW; CONSTITUTIONAL LAW; PUBLIC POLICY ABHORS
INEQUALITY AND DISCRIMINATION. That public policy abhors inequality
and discrimination is beyond contention. Our Constitution and laws reflect
the policy against these evils. The Constitution in the Article on Social
Justice and Human Rights exhorts Congress to "give highest priority to the
enactment of measures that protect and enhance the right of all people
to human dignity, reduce social, economic, and political inequalities." The
very broad Article 19 of the Civil Code requires every person, "in the
exercise of his rights and in the performance of this duties, [to] act with
justice, give everyone his due, and observe honesty and good faith."
2.
INTERNATIONAL LAW; SPRINGS FROM GENERAL PRINCIPLES OF LAW
WHICH PROSCRIBE DISCRIMINATION. International law, which springs
from general principles of law, likewise proscribes discrimination. General
principles of law include principles of equity, i.e., the general principles of
fairness and justice, based on the test of what is reasonable. The
Universal Declaration of Human Rights, the International Covenant on

Economic, Social, and Cultural Rights, the International Convention on the

Elimination of All Forms of Racial Discrimination, the Convention against
Discrimination in Education, the Convention (No. 111) Concerning
Discrimination in Respect of Employment and Occupation all embody
the general principle against discrimination, the very antithesis of fairness
and justice. The Philippines, through its Constitution, has incorporated
this principle as part of its national laws.
3.
POLITICAL LAW; CONSTITUTIONAL LAW; SOCIAL JUSTICE AND HUMAN
RIGHTS; LABOR; HUMANE CONDITIONS OF WORK INCLUDES THE MANNER
BY WHICH EMPLOYERS TREAT THEIR EMPLOYEES. The Constitution
specifically provides that labor is entitled to "humane conditions of work."
These conditions are not restricted to the physical workplace the
factory, the office or the field but include as well the manner by which
employers treat their employees.
4.
LABOR AND SOCIAL LEGISLATION; LABOR CODE; THE STATE SHALL
ENSURE EQUAL WORK OPPORTUNITIES REGARDLESS OF SEX, RACE OR
CREED. The Constitution also directs the State to promote "equality of
employment opportunities for all." Similarly, the Labor Code provides that
the State shall "ensure equal work opportunities regardless of sex, race or
creed." It would be an affront to both the spirit and letter of these
provisions if the State, in spite of its primordial obligation to promote and
ensure equal employment opportunities, closes its eyes to unequal and
discriminatory terms and conditions of employment.
5.
ID.; ID.; PROHIBITS DISCRIMINATION IN TERMS OF WAGES.
Discrimination, particularly in terms of wages, is frowned upon by the
Labor Code. Article 135, for example, prohibits and penalizes the
payment of lesser compensation to a female employee as against a male
employee for work of equal value. Article 248 declares it an unfair labor
practice for an employer to discriminate in regard to wages in order to
encourage or discourage membership in any labor organization.
6.
INTERNATIONAL LAW; INTERNATIONAL COVENANT ON ECONOMIC,
SOCIAL AND CULTURAL RIGHTS; INSTITUTIONALIZED THE LONG HONORED
LEGAL TRUISM OF "EQUAL PAY FOR EQUAL WORK." [T]he International
Covenant on Economic, Social, and Cultural Rights, in Article 7 thereof,
provides: The States Parties to the present Covenant recognize the right
of everyone to the enjoyment of just and favourable conditions of work,
which ensure, in particular: a. Remuneration which provides all workers,
as a minimum, with: i. Fair wages and equal remuneration for work of
equal value without distinction of any kind, in particular women being

guaranteed conditions of work not inferior to those enjoyed by men, with

equal pay for equal work; . . . . The foregoing provisions impregnably
institutionalize in this jurisdiction the long honored legal truism of "equal
pay for equal work." Persons who work with substantially equal
qualifications, skill, effort and responsibility, under similar conditions,
should be paid similar salaries.
7.
LABOR AND SOCIAL LEGISLATION; LABOR CODE; CONDITIONS OF
EMPLOYMENT; EQUAL WORK FOR EQUAL PAY; APPLIED IN CASE AT BAR.
This rule applies to the School, its "international character"
notwithstanding. The School contends that petitioner has not adduced
evidence that local-hires perform work equal to that of foreign-hires. The
Court finds this argument a little cavalier. If an employer accords
employees the same position and rank, the presumption is that these
employees perform equal work. This presumption is borne by logic and
human experience. If the employer pays one employee less than the rest,
it is not for that employee to explain why he receives less or why the
others receive more. That would be adding insult to injury. The employer
has discriminated against that employee; it is for the employer to explain
why the employee is treated unfairly. The employer in this case has failed
to discharge this burden. There is no evidence here that foreign-hires
perform 25% more efficiently or effectively than the local-hires. Both
groups have similar functions and responsibilities, which they perform
under similar working conditions. The School cannot invoke the need to
entice foreign-hires to leave their domicile to rationalize the distinction in
salary rates without violating the principle of equal work for equal pay.
HIaTCc
8.
ID.; ID.; ID.; SALARY; DEFINED. "Salary" is defined in Black's Law
Dictionary (5th ed.) as "a reward or recompense for services performed."
Similarly, the Philippine Legal Encyclopedia states that "salary" is the
"[c]onsideration paid at regular intervals for the rendering of services." In
Songco v. National Labor Relations Commission, we said that: "salary"
means a recompense or consideration made to a person for his pains or
industry in another man's business. Whether it be derived from
"salarium," or more fancifully from "sal," the pay of the Roman soldier, it
carries with it the fundamental idea of compensation for services
rendered.
9.
ID.; ID.; ID.; ID.; "DISLOCATION FACTOR" AND FOREIGN HIRES'
LIMITED TENURE CANNOT SERVE AS VALID BASES FOR DISTINCTION IN
SALARY RATES. While we recognize the need of the School to attract

foreign-hires, salaries should not be used as an enticement to the

prejudice of local-hires. The local-hires perform the same services as
foreign-hires and they ought to be paid the same salaries as the latter. For
the same reason, the "dislocation factor" and the foreign-hires' limited
tenure also cannot serve as valid bases for the distinction in salary rates.
The dislocation factor and limited tenure affecting foreign-hires are
adequately compensated by certain benefits accorded them which are
not enjoyed by local-hires, such as housing, transportation, shipping
costs, taxes and home leave travel allowances.
10. ID.; ID.; THE STATE HAS THE RIGHT AND DUTY TO REGULATE THE
RELATIONS BETWEEN LABOR AND CAPITAL. The Constitution enjoins
the State to "protect the rights of workers and promote their welfare," "to
afford labor full protection." The State, therefore, has the right and duty
to regulate the relations between labor and capital. These relations are
not merely contractual but are so impressed with public interest that
labor contracts, collective bargaining agreements included, must yield to
the common good. Should such contracts contain stipulations that are
contrary to public policy, courts will not hesitate to strike down these
stipulations.
11. ID.;
ID.;
CONDITIONS
OF
EMPLOYMENT;
POINT-OF-HIRE
CLASSIFICATION TO JUSTIFY THE DISTINCTION IN THE SALARY RATES OF
FOREIGN-HIRES AND LOCAL-HIRES IS AN INVALID CLASSIFICATION.
[W]e find the point-of-hire classification employed by respondent School
to justify the distinction in the salary rates of foreign-hires and local-hires
to be an invalid classification. There is no reasonable distinction between
the services rendered by foreign-hires and local-hires. The practice of the
School of according higher salaries to foreign-hires contravenes public
policy and, certainly, does not deserve the sympathy of this Court.
12. ID.; ID.; LABOR RELATIONS; COLLECTIVE BARGAINING UNIT;
ELUCIDATED. A bargaining unit is "a group of employees of a given
employer, comprised of all or less than all of the entire body of
employees, consistent with equity to the employer, indicate to be the
best suited to serve the reciprocal rights and duties of the parties under
the collective bargaining provisions of the law." The factors in determining
the appropriate collective bargaining unit are (1) the will of the
employees (Globe Doctrine); (2) affinity and unity of the employees'
interest, such as substantial similarity of work and duties, or similarity of
compensation and working conditions (Substantial Mutual Interests Rule);
(3) prior collective bargaining history; and (4) similarity of employment

status. The basic test of an asserted bargaining unit's acceptability is

whether or not it is fundamentally the combination which will best assure
to all employees the exercise of their collective bargaining rights.
cADEHI
13. ID.; ID.; ID.; ID.; FOREIGN-HIRES SHOULD NOT BELONG TO THE SAME
BARGAINING UNIT AS LOCAL-HIRES. We agree, however, that foreignhires do not belong to the same bargaining unit as the local-hires. . . . It
does not appear that foreign-hires have indicated their intention to be
grouped together with local-hires for purposes of collective bargaining.
The collective bargaining history in the School also shows that these
groups were always treated separately. Foreign-hires have limited tenure;
local-hires enjoy security of tenure. Although foreign-hires perform similar
functions under the same working conditions as the local-hires, foreignhires are accorded certain benefits not granted to local-hires. These
benefits, such as housing, transportation, shipping costs, taxes, and home
leave travel allowance, are reasonably related to their status as foreignhires, and justify the exclusion of the former from the latter. To include
foreign-hires in a bargaining unit with local-hires would not assure either
group the exercise of their respective collective bargaining rights.
DECISION
KAPUNAN, J p:
Receiving salaries less than their counterparts hired abroad, the localhires of private respondent School, mostly Filipinos, cry discrimination. We
agree. That the local-hires are paid more than their colleagues in other
schools is, of course, beside the point. The point is that employees should
be given equal pay for work of equal value. That is a principle long
honored in this jurisdiction. That is a principle that rests on fundamental
notions of justice. That is the principle we uphold today.
Private respondent International School, Inc. (the School, for short),
pursuant to Presidential Decree 732, is a domestic educational institution
established primarily for dependents of foreign diplomatic personnel and
other temporary residents. 1 To enable the School to continue carrying
out its educational program and improve its standard of instruction,
Section 2(c) of the same decree authorizes the School to
employ its own teaching and management personnel selected by it either
locally or abroad, from Philippine or other nationalities, such personnel
being exempt from otherwise applicable laws and regulations attending

their employment, except laws that have been or will be enacted for the
protection of employees.
Accordingly, the School hires both foreign and local teachers as members
of its faculty, classifying the same into two: (1) foreign-hires and (2) localhires. The School employs four tests to determine whether a faculty
member should be classified as a foreign-hire or a local hire:
a.

What is one's domicile?

b.

Where is one's home economy?

c.

To which country does one owe economic allegiance?

d.
Was the individual hired abroad specifically to work in the School
and was the School responsible for bringing that individual to the
Philippines? 2
Should the answer to any of these queries point to the Philippines, the
faculty member is classified as a local hire; otherwise, he or she is
deemed a foreign-hire. llcd
The School grants foreign-hires certain benefits not accorded local-hires.
These include housing, transportation, shipping costs, taxes, and home
leave travel allowance. Foreign-hires are also paid a salary rate twentyfive percent (25%) more than local-hires. The School justifies the
difference on two "significant economic disadvantages" foreign-hires have
to endure, namely: (a) the "dislocation factor" and (b) limited tenure. The
School explains:
A foreign-hire would necessarily have to uproot himself from his home
country, leave his family and friends, and take the risk of deviating from a
promising career path all for the purpose of pursuing his profession as
an educator, but this time in a foreign land. The new foreign hire is faced
with economic realities: decent abode for oneself and/or for one's family,
effective means of transportation, allowance for the education of one's
children, adequate insurance against illness and death, and of course the
primary benefit of a basic salary/retirement compensation.
Because of a limited tenure, the foreign hire is confronted again with the
same economic reality after his term: that he will eventually and
inevitably return to his home country where he will have to confront the
uncertainty of obtaining suitable employment after a long period in a
foreign land.

The compensation scheme is simply the School's adaptive measure to

remain competitive on an international level in terms of attracting
competent professionals in the field of international education. 3
When negotiations for a new collective bargaining agreement were held
on June 1995, petitioner International School Alliance of Educators, "a
legitimate labor union and the collective bargaining representative of all
faculty members" 4 of the School, contested the difference in salary rates
between foreign and local-hires. This issue, as well as the question of
whether foreign-hires should be included in the appropriate bargaining
unit, eventually caused a deadlock between the parties.
On September 7, 1995, petitioner filed a notice of strike. The failure of the
National Conciliation and Mediation Board to bring the parties to a
compromise prompted the Department of Labor and Employment (DOLE)
to assume jurisdiction over the dispute. On June 10, 1996, the DOLE
Acting Secretary, Cresenciano B. Trajano, issued an Order resolving the
parity and representation issues in favor of the School. Then DOLE
Secretary Leonardo A. Quisumbing subsequently denied petitioner's
motion for reconsideration in an Order dated March 19, 1997. Petitioner
now seeks relief in this Court.
Petitioner claims that the point-of-hire classification employed by the
School is discriminatory to Filipinos and that the grant of higher salaries
to foreign-hires constitutes racial discrimination.
The School disputes these claims and gives a breakdown of its faculty
members, numbering 38 in all, with nationalities other than Filipino, who
have been hired locally and classified as local hires. 5 The Acting
Secretary of Labor found that these non-Filipino local-hires received the
same benefits as the Filipino local-hires:
The compensation package given to local-hires has been shown to apply
to all, regardless of race. Truth to tell, there are foreigners who have been
hired locally and who are paid equally as Filipino local hires. 6
The Acting Secretary upheld the point-of-hire classification for the
distinction in salary rates:
The principle "equal pay for equal work" does not find application in the
present case. The international character of the School requires the hiring
of foreign personnel to deal with different nationalities and different
cultures, among the student population.

We also take cognizance of the existence of a system of salaries and

benefits accorded to foreign hired personnel which system is universally
recognized. We agree that certain amenities have to be provided to these
people in order to entice them to render their services in the Philippines
and in the process remain competitive in the international market.
Furthermore, we took note of the fact that foreign hires have limited
contract of employment unlike the local hires who enjoy security of
tenure. To apply parity therefore, in wages and other benefits would also
require parity in other terms and conditions of employment which include
the employment contract. cda
A perusal of the parties' 1992-1995 CBA points us to the conditions and
provisions for salary and professional compensation wherein the parties
agree as follows:
All members of the bargaining unit shall be compensated only in
accordance with Appendix C hereof provided that the Superintendent of
the School has the discretion to recruit and hire expatriate teachers from
abroad, under terms and conditions that are consistent with accepted
international practice.
Appendix C of said CBA further provides:
The new salary schedule is deemed at equity with the Overseas Recruited
Staff (OSRS) salary schedule. The 25% differential is reflective of the
agreed value of system displacement and contracted status of the OSRS
as differentiated from the tenured status of Locally Recruited Staff (LRS).
To our mind, these provisions demonstrate the parties' recognition of the
difference in the status of two types of employees, hence, the difference
in their salaries.
The Union cannot also invoke the equal protection clause to justify its
claim of parity. It is an established principle of constitutional law that the
guarantee of equal protection of the laws is not violated by legislation or
private covenants based on reasonable classification. A classification is
reasonable if it is based on substantial distinctions and apply to all
members of the same class. Verily, there is a substantial distinction
between foreign hires and local hires, the former enjoying only a limited
tenure, having no amenities of their own in the Philippines and have to be
given a good compensation package in order to attract them to join the
teaching faculty of the School. 7
We cannot agree.

That public policy abhors inequality and discrimination is beyond

contention. Our Constitution and laws reflect the policy against these
evils. The Constitution 8 in the Article on Social Justice and Human Rights
exhorts Congress to "give highest priority to the enactment of measures
that protect and enhance the right of all people to human dignity, reduce
social, economic, and political inequalities." The very broad Article 19 of
the Civil Code requires every person, "in the exercise of his rights and in
the performance of his duties, [to] act with justice, give everyone his due,
and observe honesty and good faith."
International law, which springs from general principles of law, 9 likewise
proscribes discrimination. General principles of law include principles of
equity, 10 i.e., the general principles of fairness and justice, based on the
test of what is reasonable. 11 The Universal Declaration of Human Rights,
12 the International Covenant on Economic, Social and Cultural Rights, 13
the International Convention on the Elimination of All Forms of Racial
Discrimination, 14 the Convention against Discrimination in Education, 15
the Convention (No. 111) Concerning Discrimination in Respect of
Employment and Occupation 16 all embody the general principle
against discrimination, the very antithesis of fairness and justice. The
Philippines, through its Constitution, has incorporated this principle as
part of its national laws.
In the workplace, where the relations between capital and labor are often
skewed in favor of capital, inequality and discrimination by the employer
are all the more reprehensible.
The Constitution 17 specifically provides that labor is entitled to "humane
conditions of work." These conditions are not restricted to the physical
workplace the factory, the office or the field but include as well the
manner by which employers treat their employees.
The Constitution 18 also directs the State to promote "equality of
employment opportunities for all." Similarly, the Labor Code 19 provides
that the State shall "ensure equal work opportunities regardless of sex,
race or creed." It would be an affront to both the spirit and letter of these
provisions if the State, in spite of its primordial obligation to promote and
ensure equal employment opportunities, closes its eyes to unequal and
discriminatory terms and conditions of employment. 20
Discrimination, particularly in terms of wages, is frowned upon by the
Labor Code. Article 135, for example, prohibits and penalizes 21 the
payment of lesser compensation to a female employee as against a male

employee for work of equal value. Article 248 declares it an unfair labor
practice for an employer to discriminate in regard to wages in order to
encourage or discourage membership in any labor organization.
Notably, the International Covenant on Economic, Social, and Cultural
Rights, supra, in Article 7 thereof, provides:
The States Parties to the present Covenant recognize the right of
everyone to the enjoyment of just and favorable conditions of work, which
ensure, in particular:
a.

Remuneration which provides all workers, as a minimum, with:

i.
Fair wages and equal remuneration for work of equal value without
distinction of any kind, in particular women being guaranteed conditions
of work not inferior to those enjoyed by men, with equal pay for equal
work;
xxx

xxx

xxx

The foregoing provisions impregnably institutionalize in this jurisdiction

the long honored legal truism of "equal pay for equal work." Persons who
work with substantially equal qualifications, skill, effort and responsibility,
under similar conditions, should be paid similar salaries. 22 This rule
applies to the School, its "international character" notwithstanding.
The School contends that petitioner has not adduced evidence that localhires perform work equal to that of foreign-hires. 23 The Court finds this
argument a little cavalier. If an employer accords employees the same
position and rank, the presumption is that these employees perform equal
work. This presumption is borne by logic and human experience. If the
employer pays one employee less than the rest, it is not for that
employee to explain why he receives less or why the others receive more.
That would be adding insult to injury. The employer has discriminated
against that employee; it is for the employer to explain why the employee
is treated unfairly.
The employer in this case has failed to discharge this burden. There is no
evidence here that foreign-hires perform 25% more efficiently or
effectively than the local-hires. Both groups have similar functions and
responsibilities, which they perform under similar working conditions.
The School cannot invoke the need to entice foreign-hires to leave their
domicile to rationalize the distinction in salary rates without violating the
principle of equal work for equal pay.

"Salary" is defined in Black's Law Dictionary (5th ed.) as "a reward or

recompense for services performed." Similarly, the Philippine Legal
Encyclopedia states that "salary" is the "[c]onsideration paid at regular
intervals for the rendering of services." In Songco v. National Labor
Relations Commission, 24 we said that:
"salary" means a recompense or consideration made to a person for his
pains or industry in another man's business. Whether it be derived from
"salarium," or more fancifully from "sal," the pay of the Roman soldier, it
carries with it the fundamental idea of compensation for services
rendered. (Emphasis supplied.)
While we recognize the need of the School to attract foreign-hires,
salaries should not be used as an enticement to the prejudice of localhires. The local-hires perform the same services as foreign-hires and they
ought to be paid the same salaries as the latter. For the same reason, the
"dislocation factor" and the foreign-hires' limited tenure also cannot serve
as valid bases for the distinction in salary rates. The dislocation factor and
limited tenure affecting foreign-hires are adequately compensated by
certain benefits accorded them which are not enjoyed by local-hires, such
as housing, transportation, shipping costs, taxes and home leave travel
allowances.
The Constitution enjoins the State to "protect the rights of workers and
promote their welfare," 25 "to afford labor full protection." 26 The State,
therefore, has the right and duty to regulate the relations between labor
and capital. 27 These relations are not merely contractual but are so
impressed with public interest that labor contracts, collective bargaining
agreements included, must yield to the common good. 28 Should such
contracts contain stipulations that are contrary to public policy, courts will
not hesitate to strike down these stipulations.
In this case, we find the point-of-hire classification employed by
respondent School to justify the distinction in the salary rates of foreignhires and local hires to be an invalid classification. There is no reasonable
distinction between the services rendered by foreign-hires and local-hires.
The practice of the School of according higher salaries to foreign-hires
contravenes public policy and, certainly, does not deserve the sympathy
of this Court.
We agree, however, that foreign-hires do not belong to the same
bargaining unit as the local-hires. LLjur

A bargaining unit is "a group of employees of a given employer,

comprised of all or less than all of the entire body of employees,
consistent with equity to the employer indicate to be the best suited to
serve the reciprocal rights and duties of the parties under the collective
bargaining provisions of the law." 29 The factors in determining the
appropriate collective bargaining unit are (1) the will of the employees
(Globe Doctrine); (2) affinity and unity of the employees' interest, such as
substantial similarity of work and duties, or similarity of compensation
and working conditions (Substantial Mutual Interests Rule); (3) prior
collective bargaining history; and (4) similarity of employment status. 30
The basic test of an asserted bargaining unit's acceptability is whether or
not it is fundamentally the combination which will best assure to all
employees the exercise of their collective bargaining rights. 31
It does not appear that foreign-hires have indicated their intention to be
grouped together with local-hires for purposes of collective bargaining.
The collective bargaining history in the School also shows that these
groups were always treated separately. Foreign-hires have limited tenure;
local-hires enjoy security of tenure. Although foreign-hires perform similar
functions under the same working conditions as the local-hires, foreignhires are accorded certain benefits not granted to local-hires. These
benefits, such as housing, transportation, shipping costs, taxes, and home
leave travel allowance, are reasonably related to their status as foreignhires, and justify the exclusion of the former from the latter. To include
foreign-hires in a bargaining unit with local-hires would not assure either
group the exercise of their respective collective bargaining rights.
WHEREFORE, the petition is GIVEN DUE COURSE. The petition is hereby
GRANTED IN PART. The Orders of the Secretary of Labor and Employment
dated June 10, 1996 and March 19, 1997, are hereby REVERSED and SET
ASIDE insofar as they uphold the practice of respondent School of
according foreign-hires higher salaries than local hires.
SO ORDERED.
Puno and Pardo, JJ., concur.
Davide, Jr., C.J., is on official leave.
Ynares-Santiago, J., is on leave.

FIRST DIVISION
[G.R. No. 149758. August 25, 2005.]
PHILEX GOLD PHILIPPINES, INC., GERARDO H. BRIMO, LEONARD P. JOSEF,
and JOSE B. ANIEVAS, petitioners, vs. PHILEX BULAWAN SUPERVISORS
UNION, represented by its President, JOSE D. PAMPLIEGA, respondents.
Roco Kapunan Migallos Perez & Luna for petitioners.
Arnel L. Lapore for respondents.
SYLLABUS
1.
MERCANTILE LAW; CORPORATION CODE; CORPORATION; LIABILITIES;
OBLIGATIONS INCURRED BY CORPORATION ACTING THROUGH ITS
DIRECTORS, OFFICERS AND EMPLOYEES ARE ITS SOLE LIABILITIES;
EXCEPTIONS. A corporation is a juridical entity with legal personality
separate and distinct from those acting for and in its behalf and, in
general, from the people comprising it. The rule is that obligations
incurred by the corporation, acting through its directors, officers and
employees, are its sole liabilities. However, it is possible for a corporate
director, trustee or officer to be held solidarily liable with the corporation
in the following instances: 1. When directors and trustees or, in
appropriate cases, the officers of a corporation (a) vote for or assent to
patently unlawful acts of the corporation; (b) act in bad faith or with gross
negligence in directing the corporate affairs; (c) are guilty of conflict of
interest to the prejudice of the corporation, its stockholders or members,
and other persons. 2. When a director or officer has consented to the
issuance of watered stocks or who, having knowledge thereof, did not
forthwith file with the corporate secretary his written objection thereto. 3.
When a director, trustee or officer has contractually agreed or stipulated
to hold himself personally and solidarily liable with the Corporation. 4.
When a director, trustee or officer is made, by specific provision of law,
personally liable for his corporate action. ETCcSa
2.
LABOR AND SOCIAL LEGISLATION; LABOR RELATIONS; MANAGEMENT
PREROGATIVES ARE SUBJECT TO LEGAL LIMITS, COLLECTIVE BARGAINING
AGREEMENTS AND THE GENERAL PRINCIPLES OF FAIR PLAY AND JUSTICE;
VIOLATION IN CASE AT BAR. The records only show that an ex-Padcal
supervisor is paid a higher salary than a locally hired supervisor of the
same rank. Therefore, petitioner failed to prove with satisfactory evidence
that it has not discriminated against the locally hired supervisor in view of
the unequal salary. To reiterate the ruling of
Philippine-Singapore

Transport Services, Inc. v. NLRC, which was cited by the Court of Appeals
in its Decision: . . . It is noteworthy to state that an employer is free to
manage and regulate, according to his own discretion and judgment, all
phases of employment, which includes hiring, work assignments, working
methods, time, place and manner of work, supervision of workers,
working regulations, transfer of employees, lay-off of workers, and the
discipline, dismissal and recall of work. While the law recognizes and
safeguards this right of an employer to exercise what are clearly
management prerogatives, such right should not be abused and used as a
tool of oppression against labor. The company's prerogative must be
exercised in good faith and with due regard to the rights of labor. A priori,
they are not absolute prerogatives but are subject to legal limits,
collective bargaining agreements and the general principles of fair play
and justice.
DECISION
AZCUNA, J p:
This is a petition for review on certiorari, with prayer for the issuance of a
temporary restraining and/or status quo order, assailing the Decision of
the Court of Appeals in CA-G.R. SP No. 57701 promulgated on April 23,
2001 and its Resolution, promulgated on August 29, 2001, denying
petitioner's Motion for Reconsideration. The said Decision of the Court of
Appeals reversed and set aside the Resolution dated February 29, 2000 of
the Voluntary Arbitrator and reinstated the Voluntary Arbitrator's
Resolution dated January 14, 2000 with modification. caDTSE
The antecedents 1 of the case are as follows:
Respondent Philex Bulawan Supervisors Union ("Philex Supervisors
Union") is the sole and exclusive bargaining representative of all
supervisors of petitioner Philex Gold Philippines, Incorporated ("Philex
Gold"), a gold mining company with mine site at Vista Alegre, Nabulao,
Sipalay, Negros Occidental. On July 2, 1997, respondent union entered
into a Collective Bargaining Agreement (CBA) with petitioner company
effective August 1, 1996 up to July 31, 2001.
It appears, however, that after the signing of the CBA, Philex Gold made
the employees of Philex Mining Corporation from Padcal, Tuba, Benguet,
its regular supervisory employees effective July 1, 1997. Some of the socalled "ex-Padcal" supervisors began to work in the Bulawan mines of
Philex Mining Corporation in 1992 as ordinary rank-and-file workers. When
Philex Gold was incorporated in 1996 to exclusively handle gold mining, it

took over the operations of the Bulawan mines and absorbed some of the
ex-Padcal employees.
Philex Gold conveyed to Philex Supervisors Union the status of the exPadcal supervisors in November 1997 upon the insistence of the union to
be informed of their standing.
It turned out that the ex-Padcal supervisors were maintained under a
confidential payroll, receiving a different set of benefits and higher
salaries compared to the locally hired supervisors of similar rank and
classification doing parallel duties and functions.
Philex Supervisors Union filed a Complaint 2 against Philex Gold with the
National Conciliation and Mediation Board (NCMB), Bacolod City, for the
payment of wage differential and damages and the rectification of the
discriminatory salary structure and benefits between the ex-Padcal
supervisors and the local-hires.
After the submission of the parties' respective position papers and
rejoinders/supplemental position papers, the Voluntary Arbitrator
rendered a decision on January 14, 2000 in favor of respondent Union.
As regards the supervisors' wage rates 3 which was submitted by Philex
Gold, the Voluntary Arbitrator held:
xxx

xxx

xxx

The Wage rates of the employers as classified and classed by them are
not also reasonable and undiscriminatory.
This is shown by the fact that the maximum rate for S-4 at P18,065 per
month is higher than the minimum rate for S-5, the highest category at
P13,295 a month only. The rate difference between the maximum rate of
S-4 and the minimum rate for S-5 is P4,770, the maximum rate of S-4
being higher than the minimum rate of S-5.
Simply stated, an S-4 employee getting the maximum salary of P18,065 a
month will merely get a reduced or diminished salary of P13,295 upon his
promotion to S-5, the highest class or category of supervisors upon his
promotion. This condition is not an ideal labor relation but a situation
which will surely ignite labor conflicts and disputes in the work place.
In whatever shade or color that we shall look upon the issue of whether or
not the herein employer can be held liable to pay the wage differential
pay to the LOCALLY HIRED SUPERVISORS due to its obvious discriminatory

wage policy, one thing stands out supervisors of the same ranks are
not paid the same rates of pay. EHTIDA
This inequitable rates of pay being implemented by respondents result
naturally into the herein employers' discriminatory wage policy which
Article 248 (e) of the LABOR CODE prohibits and defines as UNFAIR LABOR
PRACTICE OF EMPLOYERS. 4
The dispositive portion of the Decision reads:
WHEREFORE, in view of all the FOREGOING, judgment is hereby decreed
ORDERING the respondent PHILEX GOLD PHILIPPINES, INC./GERARD H.
BRIMO/LEONARD P. JOSEF/JOSE B. ANIEVAS, JOINTLY and SEVERALLY to:
1.
Readjust the MONTHLY RATES OF PAY of locally hired SUPERVISORS in
the categories of S-1 to S-5 RANKS in the same level/or amount with that
of PADCAL SUPERVISORS of the same RANKS namely:
S-1 P13,081.60
S-2 P13,893.60
S-3 P15,209.60
S-4 P17,472.00
S-5 P20,300.00
effective November 1, 1998 and to pay Wage differential pay from
November 1, 1998 up to the date of the Decision to all affected locally
hired supervisors.
2.
To revise or modify its existing wage rates per supervisory ranking,
making the maximum rate of a lower category lower than the minimum
rate of the next higher category; and,
3.
Pay to the UNION ATTORNEY'S FEES at 5% of the total sum of the
Wage differential pay awarded within ten (10) days from receipt of this
Decision.
The respondent is further ordered to deposit with the cashier of the NCMB
the sum which is equivalent to the wage differential pay computed at a
differential of P5,501.24 per person/supervisor per month from November
1, 1998 up to the date of this decision, for S-1; P5,663.24 per month per
supervisor, for S-2; P5,979.24 per supervisor per month, for S-3;
P7,065.75 per supervisor per month for S-4 and P8,428.46 per supervisor

per month for S-5, and the ATTORNEY'S FEE which is 5% of the total wage
differential pay also within ten (10) days from receipt of this decision.
SO ORDERED. 5
Philex Supervisors Union filed a Motion for Partial Reconsideration dated
January 20, 2000, seeking, among others, the modification of the
effectivity of the readjustment of the monthly rates of pay of the locally
hired supervisors and of the computation of their wage differential from
November 1, 1998 to August 1, 1997 although the discrimination in
wages started upon the regularization of the ex-Padcal supervisors on July
1, 1997.
On January 25, 2000, Philex Gold also filed a motion for reconsideration,
which was allegedly filed a day late, contending that it was denied due
process as the Voluntary Arbitrator decided the case without its
supplemental position paper, that the decision undermined the collective
bargaining process between the parties relative to wage differentials, and
that there was neither unlawful discrimination nor wage distortion
between the ex-Padcal supervisors and the locally hired supervisors.
EICDSA
On February 29, 2000, the Voluntary Arbitrator issued the assailed
Resolution modifying his earlier Decision dated January 14, 2000, this
time finding that there was no discrimination in the determination of the
rates of pay of the supervisors. The Voluntary Arbitrator, however,
readjusted the amount of wages of local supervisors by adding or
increasing their wages in the uniform sum of P800.00 a month effective
October 1, 1999 "to erase the shadows of inequities among the various
grades of supervisors." The dispositive portion of the Decision reads:
WHEREFORE, IN VIEW of the foregoing, the Decision dated January 14,
2000 is hereby modified in the following manner, to wit:
1.
The respondent employer is hereby ordered to readjust the wage
rates of S-1 to S-5 supervisors by adding or increasing their wages in the
uniform sum of P800.00 a month each effective October 1, 1999; and to
compute and pay their differential pay from October 1, 1999 up to the
time it is paid and implemented;
2.
The respondent is further ordered to pay Attorney's Fee to the
Union's lawyer at 5% of the total amount of WAGE DIFFERENTIAL PAY;

3.
Finally, the respondent employer is ordered to deposit to the cashier
of the NCMB the WAGE DIFFERENTIAL PAY and the Attorney's Fee
adjudged within 10 days from receipt of this Resolution.
SO ORDERED. 6
On March 13, 2000, respondent Union filed a petition for review before
the Court of Appeals raising the following issues: (1) whether or not the
Voluntary Arbitrator erred in admitting petitioner's motion for
reconsideration which was filed beyond the reglementary period; (2)
whether or not the Voluntary Arbitrator erred in modifying his decision by
finding petitioner to be liable to its locally hired members in the sum of
P800 per month as wage adjustment effective October 1999; and (3)
whether or not the Voluntary Arbitrator erred in failing to grant 10 percent
attorney's fees on the total awards.
On March 2, 2000, petitioners filed a Manifestation of Compliance with the
Voluntary Arbitrator alleging that on account of its payment to respondent
union members of monetary benefits (in the amount of P1,000) provided
by the Amendments and Supplement to the CBA, it has complied with the
Resolution dated February 29, 2000.
In a Resolution dated April 4, 2000, the Voluntary Arbitrator denied 7 said
Manifestation of Compliance for lack of merit.
While CA-G.R. SP No. 57701 was pending, respondent Union filed on April
8, 2000 a Motion for Issuance of Writ of Execution of the Resolution dated
February 29, 2000.
In an Order dated June 27, 2000, the Voluntary Arbitrator issued a Writ of
Execution enforcing the Resolution dated February 29, 2000.
On June 29, 2000, Philex Gold filed a Motion to Lift Writ of Execution,
which was not acted upon by the Voluntary Arbitrator.
On July 10, 2000, Philex Gold filed a petition for review before the Court of
Appeals, docketed as CA-G.R. SP No. 60065, questioning the propriety
and validity of the Voluntary Arbitrator's Order granting execution
pending appeal. Said petition was denied for lack of merit.
On April 23, 2001, the Court of Appeals rendered the assailed Decision, in
CA-G.R. SP No. 57701, finding that petitioners failed to prove that they did
not discriminate against the locally hired supervisors in paying them
lower salaries than the ex-Padcal supervisors. It held, thus:

Philex Gold's attempt to explain the disparity in the salary rates between
"ex-Padcal" supervisors and the local-hires failed to convince Us. It
presented a salary structure for supervisors classified into five categories,
namely: "S-1, S-2, S-3, S-4, and S-5" with different rates of pay. Each
classification is further divided in terms of wage rates into minimum,
medium, and maximum. While the "ex-Padcal" supervisors received the
maximum for each category, presumably because of seniority in
employment, longer work experience in gold mining, specialized skills,
and the "dislocation factor", the local-hires received the minimum.
This explanation is fraught with inconsistencies. First, the CBA between
the parties did not disclose this multi-tiered classification of supervisors
(Rollo, pp. 36-37, 46-74). Second, as found by the voluntary arbitrator in
his original decision, the local-hires actually received salaries less than
those they were supposed to be entitled (Rollo, p. 41). Third, the
minimum wage rate for a higher category happened to be lesser than the
maximum rate of a lower category such that a supervisor with a rank of
"S-1" maximum would get less upon his promotion to "S-2" minimum
(Rollo, pp. 38-39, 90). And finally, this pay structure was kept from the
knowledge of the union and was only revealed in the course of the
proceedings before the voluntary arbitrator. These factors only
accentuate the fact which Philex Gold tried to hide, that is, it unduly
favored the "ex-Padcal" supervisors over the local-hires through a system
of confidential salary structure.
The long honored legal truism of "equal pay for equal work," meaning,
"persons who work with substantially equal qualification, skill, effort and
responsibility, under similar conditions, should be paid similar salaries,"
has been institutionalized in our jurisdiction. Such that "if an employer
accords employees the same position and rank, the presumption is that
these employees perform equal work" as "borne by logic and human
experience." The ramification is that "(i)f the employer pays one
employee less than the rest, it is not for that employee to explain why he
receives less or why the others receive more. That would be adding insult
to injury. The employer has discriminated against that employee; it is for
the employer to explain why the employee is treated unfairly."
(International School Alliance of Educators v. Quisumbing, et al., G.R. No.
128845, June 1, 2000).
Philex Gold having failed to discharge this burden, We opt therefore to
reinstate, albeit with modification, the original decision dated 14 January

2000 of the voluntary arbitrator as the same is duly supported by the

pleadings filed before Us. 8
The dispositive portion of the Decision reads:
WHEREFORE, premises considered, the assailed resolution of 29 February
2000 is REVERSED and SET ASIDE and a new one entered REINSTATING
the 14 January 2000 decision subject to the MODIFICATION that the
readjustment of the monthly rates of pay of locally hired supervisors as
well as their wage differential pay be made effective 1 August 1997 up to
the finality of this decision. This case is REMANDED to the voluntary
arbitrator for the proper computation of wage differential and attorney's
fees. No costs.
SO ORDERED. 9
Petitioners' motion for reconsideration was denied by the appellate court
in its Resolution dated August 29, 2001.
Petitioners thus filed this petition with a prayer for the issuance of a
temporary restraining order. The Court issued a temporary restraining
order enjoining the execution of the Decision of the Court of Appeals
dated April 23, 2001 and its Resolution dated August 29, 2001 after
petitioners posted a cash bond.
Petitioners raise the following issues:
1.
Section 4, Rule 43 and Luzon Development Bank [v. Association of
Luzon Development Bank Employees, 249 SCRA 162 (1995)] provide that
the decision of a voluntary arbitrator becomes final after 15 days from
notice of the award. Assuming the validity of service on Philex Gold's
liaison office, instead of its counsel's address on record, did the Court of
Appeals commit an error in law by stating that the Decision dated 14
January 2000 of VA Sitjar became "final and executory" after eleven days
from notice?
2.
Granting arguendo that Philex Gold had only a period of 10 days
within which to seek reconsideration of the Sitjar Decision, did the period
begin to run upon service of said Decision at an address which is not the
address on record or upon the actual receipt thereof by Philex Gold's
counsel?
3.
VA Sitjar found petitioners Brimo, Josef and Jose B. Anievas, in their
capacity as corporate officers, jointly and severally liable for the alleged
obligation of Philex Gold to pay wage differentials to PBSU. Did the Court

of Appeals commit an error in law in affirming VA Sitjar when the latter

disposed of an issue not submitted to him for arbitration and in directing
solidary liability between Philex Gold and its top officers despite the
absence of any finding of malice, bad faith, or gross negligence?

4.
In leveling the wages of the Padcal Supervisors and the Locally-Hired
Supervisors, the Court of Appeals applied the egalitarian doctrine of
"equal pay for equal work" in International School Alliance of Educators v.
Quisumbing. Does "equal pay for equal work" unqualifiedly remove
management prerogative to institute qualitative difference in pay and
benefits on the basis of seniority, skill, experience and other valid factors
in the same class of workers doing the same kind of work? 10
The relevant issues in this case are as follows:
(1) Whether the notice sent through petitioner company's Liaison Office
can be considered as notice to counsel;
(2) Whether the petitioners-corporate officers are solidarily liable with
Philex Gold in any liability to respondent Union;
(3) Whether the doctrine of "equal pay for equal work" should not
remove management prerogative to institute difference in salary on the
basis of seniority, skill, experience and the dislocation factor in the same
class of supervisory workers doing the same kind of work.
First Issue:
Whether the notice sent through petitioner company's
Liaison Office can be considered as notice to counsel
Petitioners contend that the Court of Appeals erred in holding that their
motion for reconsideration of the Decision of the Voluntary Arbitrator
dated January 14, 2000 was filed out of time.
Indeed, the Court of Appeals found that "[b]ased on the certification
issued by the voluntary arbitrator himself, the decision was received by
the respondents (petitioners herein) on 14 January 2000 (Rollo, p. 123),
and they filed their motion for reconsideration on 25 January 2000, or on
the eleventh day from receipt of the decision." The appellate court ruled
that the late filing rendered the decision final and executory as regards
the petitioners, and that the Voluntary Arbitrator erred in admitting
petitioners' motion for reconsideration.

Petitioners argue that the service of the Voluntary Arbitrator's Decision on

Philex Gold's Liaison Office at Libertad St., Bacolod City on January 14,
2000 was improper since their counsel's address of record was at Vista
Alegre, Nabulao, Sipalay, Negros Occidental 6113. Petitioners state that
Philex Gold's Liaison Office forwarded said Decision to their counsel only
the next day or on January 15, 2000, which should be the date of notice
to counsel and the basis for computation of the period to file a motion for
reconsideration of said Decision.
The contention is meritorious.
Section 4, Rule III of the NCMB Procedural Guidelines in the Conduct of
Voluntary Arbitration Proceedings states:
Section 4. Service of Pleadings, Notices and Awards. Copies of
pleadings, notices or copies of [an] award may be served through
personal service or by registered mails on the parties to the dispute:
Provided, that where a party is represented by counsel or authorized
representative, service shall be made on the latter. Service by registered
mail is complete upon receipt by the addressee or his agents. 11
In this case, petitioners were represented before the Voluntary Arbitrator
by Attys. Deogracias G. Contreras Jr. and Weldy U. Manlong. Hence, under
the NCMB Guidelines, service of pleadings, notices and awards should be
made on petitioners' counsel.
The Court noted that in petitioners' Position Paper and Supplemental
Position Paper filed with the Voluntary Arbitrator, the address of
petitioners' counsel was indicated as Vista Alegre, Nabulao, Sipalay,
Negros Occidental, 6113. However, the Decision of the Voluntary
Arbitrator dated January 14, 2000 was sent through the Liaison Office of
Philex Gold, thus:
ATTY. WENDY U. MANLONG
Counsel for the Respondents
PHILEX GOLD PHILIPPINES, INC.
GERARDO BRIMO, LEONARD P. JOSEF,
JOSE B. ANIEVAS
C/O Liaison Office, Libertad St.
Bacolod City

Even the Court of Appeals stated that "based on the certification issued
by the voluntary arbitrator himself, the decision was received by the
respondents on 14 January 2000. . . ." Said service on Philex Gold's
Liaison Office or on the petitioners themselves cannot be considered as
notice in law to petitioners' counsel.
Under the circumstances, reliance may be placed on the assertion of
petitioners that a copy of the Decision of the Voluntary Arbitrator dated
January 14, 2000 was delivered to their counsel the next day or on
January 15, 2000, which must be deemed as the date of notice to counsel
of said Decision. 12
Hence, when petitioners' motion for reconsideration was filed on January
25, 2000, it was filed within the 10-day reglementary period under Article
262-A of the Labor Code. The Court of Appeals, therefore, erred in holding
that said motion for reconsideration was filed out of time.
Second Issue: Whether the petitioners-corporate officers are solidarily
liable with Philex Gold in any liability to respondent Union
Petitioners officers contend that they should not be adjudged solidarily
liable with Philex Gold.
The contention is meritorious.
A corporation is a juridical entity with legal personality separate and
distinct from those acting for and in its behalf and, in general, from the
people comprising it. 13 The rule is that obligations incurred by the
corporation, acting through its directors, officers and employees, are its
sole liabilities. 14 However, it is possible for a corporate director, trustee
or officer to be held solidarily liable with the corporation in the following
instances:
1.
When directors and trustees or, in appropriate cases, the officers of
a corporation
(a)

vote for or assent to patently unlawful acts of the corporation;

(b) act in bad faith or with gross negligence in directing the corporate
affairs;
(c) are guilty of conflict of interest to the prejudice of the corporation, its
stockholders or members, and other persons.

2.
When a director or officer has consented to the issuance of watered
stocks or who, having knowledge thereof, did not forthwith file with the
corporate secretary his written objection thereto.
3.
When a director, trustee or officer has contractually agreed or
stipulated to hold himself personally and solidarily liable with the
Corporation.
4.
When a director, trustee or officer is made, by specific provision of
law, personally liable for his corporate action. 15
The corporate officers in this case have not been proven to fall under any
of the aforecited instances; hence, they cannot be held solidarily liable
with the company in the payment of any liability.
Third Issue:
Whether the doctrine of "equal pay for equal work" should
not remove management prerogative to institute difference in salary
within the same supervisory level
Petitioners submit that the "equal pay for equal work" doctrine in
International School Alliance of Educators v. Quisumbing, 16 which the
Court of Appeals cited to support its Decision should be narrowly
construed to apply to a situation where invidious discrimination exists by
reason of race or ethnicity, but not where valid factors exist to justify
distinctive treatment of employees even if they do the same work.
Petitioners explained that the ex-Padcal supervisors were paid higher
because of their longer years of service, experience, their training and
skill in the underground mining method wanting in the local supervisors,
and their relocation to Bulawan, Negros Occidental. They assert that the
differential treatment of the ex-Padcal supervisors is not arbitrary,
malicious or discriminatory but justified by the circumstances of their
relocation and integration in the new mining operation in Bulawan.
HEIcDT
The Court is not persuaded by petitioners' contention.
Petitioners admit that the "same class of workers [are] doing the same
kind of work." This means that an ex-Padcal supervisor and a locally hired
supervisor of equal rank do the same kind of work. If an employer accords
employees the same position and rank, the presumption is that these
employees perform equal work. 17 Hence, the doctrine of "equal pay for
equal work" in International School Alliance of Educators was correctly
applied by the Court of Appeals.

Petitioners now contend that the doctrine of "equal pay for equal work"
should not remove management prerogative to institute difference in
salary on the basis of seniority, skill, experience and the dislocation factor
in the same class of supervisory workers doing the same kind of work. 18
In this case, the Court cannot agree because petitioners failed to adduce
evidence to show that an ex-Padcal supervisor and a locally hired
supervisor of the same rank are initially paid the same basic salary for
doing the same kind of work. They failed to differentiate this basic salary
from any kind of salary increase or additional benefit which may have
been given to the ex-Padcal supervisors due to their seniority, experience
and other factors.
The records only show that an ex-Padcal supervisor is paid a higher salary
than a locally hired supervisor of the same rank. Therefore, petitioner
failed to prove with satisfactory evidence that it has not discriminated
against the locally hired supervisor in view of the unequal salary.
To reiterate the ruling of Philippine-Singapore Transport Services, Inc. v.
NLRC, 19 which was cited by the Court of Appeals in its Decision:
xxx

xxx

xxx

It is noteworthy to state that an employer is free to manage and regulate,

according to his own discretion and judgment, all phases of employment,
which includes hiring, work assignments, working methods, time, place
and manner of work, supervision of workers, working regulations, transfer
of employees, lay-off of workers, and the discipline, dismissal and recall of
work. While the law recognizes and safeguards this right of an employer
to exercise what are clearly management prerogatives, such right should
not be abused and used as a tool of oppression against labor. The
company's prerogative must be exercised in good faith and with due
regard to the rights of labor. A priori, they are not absolute prerogatives
but are subject to legal limits, collective bargaining agreements and the
general principles of fair play and justice. 20 (Emphasis supplied.)
WHEREFORE, the petition is hereby DENIED. No reversible error was
committed by the Court of Appeals in its Decision in CA-G.R. SP No. 57701
and in its Resolution promulgated on August 29, 2001. The Temporary
Restraining Order issued by the Court is LIFTED.
No costs.
SO ORDERED.

Davide, Jr., C.J., Quisumbing, Ynares-Santiago and Carpio, JJ., concur.

SECOND DIVISION
[G.R. No. 157634. May 16, 2005.]
MAYON HOTEL & RESTAURANT, PACITA O. PO and/or JOSEFA PO LAM,
petitioners, vs. ROLANDO ADANA, CHONA BUMALAY, ROGER BURCE,
EDUARDO ALAMARES, AMADO ALAMARES, EDGARDO TORREFRANCA,
LOURDES CAMIGLA, TEODORO LAURENARIA, WENEFREDO LOVERES, LUIS
GUADES, AMADO MACANDOG, PATERNO LLARENA, GREGORIO NICERIO,
JOSE ATRACTIVO, MIGUEL TORREFRANCA, and SANTOS BROOLA,
respondents.
J.P. Villanueva & Associates for petitioners.
Public Attorney's Office for respondents.
SYLLABUS
1.
LABOR AND SOCIAL LEGISLATION; LABOR RELATIONS; A
DISHARMONY BETWEEN THE FACTUAL FINDINGS OF THE LABOR ARBITER
AND THOSE OF THE NATIONAL LABOR RELATIONS COMMISSION OPENS
THE DOOR TO A REVIEW BY THE COURT. There is no denying that it is
within the NLRC's competence, as an appellate agency reviewing
decisions of Labor Arbiters, to disagree with and set aside the latter's
findings. But it stands to reason that the NLRC should state an acceptable
cause therefore, otherwise it would be a whimsical, capricious,
oppressive, illogical, unreasonable exercise of quasi-judicial prerogative,
subject to invalidation by the extraordinary writ of certiorari. And when
the factual findings of the Labor Arbiter and the NLRC are diametrically
opposed and this disparity of findings is called into question, there is,
necessarily, a re-examination of the factual findings to ascertain which
opinion should be sustained. As ruled in Asuncion v. NLRC, although, it is
a legal tenet that factual findings of administrative bodies are entitled to
great weight and respect, we are constrained to take a second look at the
facts before us because of the diversity in the opinions of the Labor
Arbiter and the NLRC. A disharmony between the factual findings of the
Labor Arbiter and those of the NLRC opens the door to a review thereof by
this Court. The CA, therefore, did not err in reviewing the records to
determine which opinion was supported by substantial evidence.
ACSaHc
2.
ID.; ID.; TERMINATION OF EMPLOYMENT; RECORDS BELIE
PETITIONER'S CLAIM THAT SHE IS MERELY AN OVERSEER; FINDINGS OF
LABOR ARBITER ON THE QUESTION WERE BASED ON CREDIBLE,

COMPETENT AND SUBSTANTIAL EVIDENCE. The records of the case

belie petitioner Josefa Po Lam's claim that she is merely an overseer. The
findings of the Labor Arbiter on this question were based on credible,
competent and substantial evidence. We again quote the Joint Decision
on this matter: Mayon Hotel and Restaurant is a [business name] of an
enterprise. While [petitioner] Josefa Po Lam claims that it is her daughter,
Pacita Po, who owns the hotel and restaurant when the latter purchased
the same from one Palanos in 1981, Josefa failed to submit the document
of sale from said Palanos to Pacita as allegedly the sale was only verbal
although the license to operate said hotel and restaurant is in the name
of Pacita which, despite our Order to Josefa to present the same, she
failed to comply (p. 38, tsn. August 13, 1998). While several documentary
evidences were submitted by Josefa wherein Pacita was named therein as
owner of the hotel and restaurant (pp. 64, 65, 67 to 69; vol. I, rollo)[,]
there were documentary evidences also that were submitted by Josefa
showing her ownership of said enterprise (pp. 468 to 469; vol. II, rollo).
While Josefa explained her participation and interest in the business as
merely to help and assist her daughter as the hotel and restaurant was
near the former's store, the testimonies of [respondents] and Josefa as
well as her demeanor during the trial in these cases proves (sic) that
Josefa Po Lam owns Mayon Hotel and Restaurant. [Respondents] testified
that it was Josefa who exercises all the acts and manifestation of
ownership of the hotel and restaurant like transferring employees from
the Greatwall Palace Restaurant which she and her husband Roy Po Lam
previously owned; it is Josefa to whom the employees submits (sic)
reports, draws money for payment of payables and for marketing,
attending (sic) to Labor Inspectors during ocular inspections. Except for
documents whereby Pacita Po appears as the owner of Mayon Hotel and
Restaurant, nothing in the record shows any circumstance or
manifestation that Pacita Po is the owner of Mayon Hotel and Restaurant.
The least that can be said is that it is absurd for a person to purchase a
hotel and restaurant in the very heart of the City of Legazpi verbally.
Assuming this to be true, when [petitioners], particularly Josefa, was
directed to submit evidence as to the ownership of Pacita of the hotel and
restaurant, considering the testimonies of [respondents], the former
should [have] submitted the lease contract between the owner of the
building where Mayon Hotel and Restaurant was located at Rizal St.,
Legazpi City and Pacita Po to clearly establish ownership by the latter of
said enterprise. Josefa failed. We are not surprised why some employers
employ schemes to mislead Us in order to evade liabilities. We therefore

consider and hold Josefa Po Lam as the owner/proprietor of Mayon Hotel

and Restaurant and the proper respondent in these cases.
3.
ID.; ID.; ID.; PETITIONER'S RELIANCE ON THE RULES OF EVIDENCE IS
MISPLACED; TECHNICAL RULES OF EVIDENCE ARE NOT BINDING AND THE
APPLICATION THEREOF MAY BE RELAXED IN LABOR CASES TO SERVE THE
DEMAND OF SUBSTANTIAL JUSTICE. Petitioners' reliance on the rules of
evidence, i.e., the certificate of registration being the best proof of
ownership, is misplaced. Notwithstanding the certificate of registration,
doubts were cast as to the true nature of petitioner Josefa Po Lam's
involvement in the enterprise, and the Labor Arbiter had the authority to
resolve this issue. It was therefore within his jurisdiction to require the
additional documents to ascertain who was the real owner of petitioner
Mayon Hotel & Restaurant. Article 221 of the Labor Code is clear:
technical rules are not binding, and the application of technical rules of
procedure may be relaxed in labor cases to serve the demand of
substantial justice. The rule of evidence prevailing in court of law or
equity shall not be controlling in labor cases and it is the spirit and
intention of the Labor Code that the Labor Arbiter shall use every and all
reasonable means to ascertain the facts in each case speedily and
objectively and without regard to technicalities of law or procedure, all in
the interest of due process. Labor laws mandate the speedy
administration of justice, with least attention to technicalities but without
sacrificing the fundamental requisites of due process. STECAc
4.
ID.; ID.; ID.; TO APPLY THE CONCEPT OF JUDICIAL ADMISSIONS TO
RESPONDENTS WHO ARE BUT LOWLY EMPLOYEES WOULD BE TO EXACT
TECHNICALITIES OF LAW THAT IS CONTRARY TO THE DEMANDS OF
SUBSTANTIAL JUSTICE. The fact that the respondents' complaints
contained no allegation that petitioner Josefa Po Lam is the owner is of no
moment. To apply the concept of judicial admissions to respondents
who are but lowly employees would be to exact compliance with
technicalities of law that is contrary to the demands of substantial justice.
Moreover, the issue of ownership was an issue that arose only during the
course of the proceedings with the Labor Arbiter, as an incident of
determining respondents' claims, and was well within his jurisdiction.
5.
ID.; ID.; ID.; NO DENIAL OF DUE PROCESS; THE CHOICE NOT TO
PRESENT EVIDENCE WAS MADE BY PETITIONERS THEMSELVES.
Petitioners were also not denied due process, as they were given
sufficient opportunity to be heard on the issue of ownership. The essence
of due process in administrative proceedings is simply an opportunity to

explain one's side or an opportunity to seek reconsideration of the action

or ruling complained of. And there is nothing in the records which would
suggest that petitioners had absolute lack of opportunity to be heard.
Obviously, the choice not to present evidence was made by petitioners
themselves.
6.
ID.; ID.; ID.; FAILURE TO SUBMIT EVIDENCE OF OWNERSHIP COULD
ONLY MEAN THAT IF PRODUCED, IT WOULD HAVE BEEN ADVERSE TO
PETITIONERS' CASE. We sustain the Labor Arbiter and the CA because
even when the case was on appeal with the NLRC, nothing was submitted
to negate the Labor Arbiter's finding that Pacita Po is not the real owner of
the subject hotel and restaurant. Indeed, no such evidence was submitted
in the proceedings with the CA nor with this Court. Considering that
petitioners vehemently deny ownership by petitioner Josefa Po Lam, it is
most telling that they continue to withhold evidence which would shed
more light on this issue. We therefore agree with the CA that the failure to
submit could only mean that if produced, it would have been adverse to
petitioners' case. Thus, we find that there is substantial evidence to rule
that petitioner Josefa Po Lam is the owner of petitioner Mayon Hotel &
Restaurant. ATcaEH
7.
ID.; ID.; ID.; IT WAS SERIOUS ERROR FOR THE NATIONAL LABOR
RELATIONS COMMISSION IN NOT INQUIRING INTO THE LEGALITY OF THE
CESSATION OF EMPLOYMENT CONSIDERING THAT UNDER THE LABOR
CODE THERE IS TERMINATION OF EMPLOYMENT WHEN AN OTHERWISE
BONA FIDE SUSPENSION EXCEEDS SIX (6) MONTHS. The factual finding
of the Labor Arbiter was never refuted by petitioners in their appeal with
the NLRC. It confounds us, therefore, how the NLRC could have so
cavalierly treated this uncontroverted factual finding by ruling that
respondents have not introduced any evidence to show that they were
illegally dismissed, and that the Labor Arbiter's finding was based on
conjecture. It was a serious error that the NLRC did not inquire as to the
legality of the cessation of employment. Article 286 of the Labor Code is
clear there is termination of employment when an otherwise bona fide
suspension of work exceeds six (6) months. The cessation of employment
for more than six months was patent and the employer has the burden of
proving that the termination was for a just or authorized cause.
8.
ID.; ID.; ID.; PETITIONERS' ARGUMENTS REFLECT THEIR LACK OF
CANDOR AND BLATANT ATTEMPT TO USE TECHNICALITIES TO MUDDLE
THE ISSUES AND DEFEAT THE LAWFUL CLAIMS OF THEIR EMPLOYEES.
Petitioners' arguments reflect their lack of candor and the blatant attempt

to use technicalities to muddle the issues and defeat the lawful claims of
their employees. First, petitioners admit that since April 1997, when hotel
operations were suspended due to the termination of the lease of the old
premises, respondents Loveres, Macandog, Llarena, Nicerio and Guades
have not been permitted to work. Second, even after six months of what
should have been just a temporary lay-off, the same respondents were
still not recalled to work. As a matter of fact, the Labor Arbiter even found
that as of the time when he rendered his Joint Decision on July 2000 or
more than three (3) years after the supposed "temporary lay-off," the
employment of all of the respondents with petitioners had ceased,
notwithstanding that the new premises had been completed and the
same operated as a hotel with bar and restaurant. This is clearly dismissal
or the permanent severance or complete separation of the worker from
the service on the initiative of the employer regardless of the reasons
therefor. cDCaHA
9.
ID.; ID.; ID.; EVIDENCE ON RECORD BELIE CLAIM THAT THE LAY OFF
WAS MERELY TEMPORARY. While the closure of the hotel operations in
April of 1997 may have been temporary, we hold that the evidence on
record belie any claim of petitioners that the lay-off of respondents on
that same date was merely temporary. On the contrary, we find
substantial evidence that petitioners intended the termination to be
permanent. Respondents Loveres, Macandog, Llarena, Guades, Nicerio
and Alamares filed the complaint for illegal dismissal immediately after
the closure of the hotel operations in Rizal Street, notwithstanding the
alleged temporary nature of the closure of the hotel operations, and
petitioners' allegations that the employees assigned to the hotel
operations knew about this beforehand. In their position paper submitted
to the Labor Arbiter, petitioners invoked Article 286 of the Labor Code to
assert that the employer-employee relationship was merely suspended,
and therefore the claim for separation pay was premature and without
legal or factual basis. But they made no mention of any intent to recall
these respondents to work upon completion of the new premises. The
various pleadings on record show that petitioners held respondents,
particularly Loveres, as responsible for mismanagement of the
establishment and for abuse of trust and confidence. Petitioner Josefa Po
Lam's affidavit on July 21, 1998, for example, squarely blamed
respondents, specifically Loveres, Bumalay and Camigla, for abusing her
leniency and causing petitioner Mayon Hotel & Restaurant to sustain
"continuous losses until it is closed." She then asserts that respondents
"are not entitled to separation pay for they were not terminated and if

ever the business ceased to operate it was because of losses." Again,

petitioners make the same allegation in their memorandum on appeal
with the NLRC, where they alleged that three (3) years prior to the
expiration of the lease in 1997, the operation of the Hotel had been
sustaining consistent losses, and these were solely attributed to
respondents, but most especially due to Loveres's mismanagement and
abuse of petitioners' trust and confidence. Even the petition filed in this
court made reference to the separation of the respondents due to "severe
financial losses and reverses," again imputing it to respondents'
mismanagement. The vehemence of petitioners' accusation of
mismanagement against respondents, especially against Loveres, is
inconsistent with the desire to recall them to work. TIAEac
10. ID.; ID.; ID.; SERIOUS BUSINESS LOSSES DO NOT EXCUSE THE
EMPLOYER FROM COMPLYING WITH THE LABOR CODE AND ITS
IMPLEMENTING RULES; FAILURE TO OBSERVE PROCEDURAL RULES TAINTS
PETITIONER'S ACTUATIONS WITH BAD FAITH. We are not impressed by
petitioners' claim that severe business losses justified their failure to
reinstate respondents. The evidence to prove this fact is inconclusive. But
more important, serious business losses do not excuse the employer from
complying with the clearance or report required under Article 283 of the
Labor Code and its implementing rules before terminating the
employment of its workers. In the absence of justifying circumstances,
the failure of petitioners to observe the procedural requirements set out
under Article 284, taints their actuations with bad faith, especially since
they claimed that they have been experiencing losses in the three years
before 1997. To say the least, if it were true that the lay-off was
temporary but then serious business losses prevented the reinstatement
of respondents, then petitioners should have complied with the
requirements of written notice. The requirement of law mandating the
giving of notices was intended not only to enable the employees to look
for another employment and therefore ease the impact of the loss of their
jobs and the corresponding income, but more importantly, to give the
Department of Labor and Employment (DOLE) the opportunity to
ascertain the verity of the alleged authorized cause of termination. And
even assuming that the closure was due to a reason beyond the control of
the employer, it still has to accord its employees some relief in the form
of severance pay. AEIHaS
11. ID.; ID.; ID.; AWARD OF MORAL DAMAGES IS PROPER; DISMISSAL OF
RESPONDENTS WAS ATTENDED BY BAD FAITH AND MEANT TO EVADE THE
LAWFUL OBLIGATIONS IMPOSED UPON AN EMPLOYER. While we

recognize the right of the employer to terminate the services of an

employee for a just or authorized cause, the dismissal of employees must
be made within the parameters of law and pursuant to the tenets of fair
play. And in termination disputes, the burden of proof is always on the
employer to prove that the dismissal was for a just or authorized cause.
Where there is no showing of a clear, valid and legal cause for
termination of employment, the law considers the case a matter of illegal
dismissal. Under these circumstances, the award of damages was proper.
As a rule, moral damages are recoverable where the dismissal of the
employee was attended by bad faith or fraud or constituted an act
oppressive to labor, or was done in a manner contrary to morals, good
customs or public policy. We believe that the dismissal of the respondents
was attended with bad faith and meant to evade the lawful obligations
imposed upon an employer. To rule otherwise would lead to the anomaly
of respondents being terminated from employment in 1997 as a matter of
fact, but without legal redress. This runs counter to notions of fair play,
substantial justice and the constitutional mandate that labor rights should
be respected. If doubts exist between the evidence presented by the
employer and the employee, the scales of justice must be tilted in favor
of the latter the employer must affirmatively show rationally adequate
evidence that the dismissal was for a justifiable cause. It is a timehonored rule that in controversies between a laborer and his master,
doubts reasonably arising from the evidence, or in the interpretation of
agreements and writing should be resolved in the former's favor. The
policy is to extend the doctrine to a greater number of employees who
can avail of the benefits under the law, which is in consonance with the
avowed policy of the State to give maximum aid and protection of labor.
12. ID.; ID.; ID.; ENTITLEMENT TO LABOR STANDARD BENEFITS IS A
SEPARATE AND DISTINCT CONCEPT FROM PAYMENT OF SEPARATION PAY
ARISING FROM ILLEGAL DISMISSAL, AND ARE GOVERNED BY DIFFERENT
PROVISIONS OF THE LABOR CODE. Petitioners assail this ruling by
repeating their long and convoluted argument that as there was no illegal
dismissal, then respondents are not entitled to their monetary claims or
separation pay and damages. Petitioners' arguments are not only tiring,
repetitive and unconvincing, but confusing and confused entitlement to
labor standard benefits is a separate and distinct concept from payment
of separation pay arising from illegal dismissal, and are governed by
different provisions of the Labor Code. We agree with the CA and the
Labor Arbiter. Respondents have set out with particularity in their
complaint, position paper, affidavits and other documents the labor

standard benefits they are entitled to, and which they alleged that
petitioners have failed to pay them. It was therefore petitioners' burden to
prove that they have paid these money claims. One who pleads payment
has the burden of proving it, and even where the employees must allege
nonpayment, the general rule is that the burden rests on the defendant to
prove nonpayment, rather than on the plaintiff to prove non payment.
This petitioners failed to do. aTEScI
13. ID.; ID.; ID.; COST OF MEALS AND SNACKS PURPORTEDLY PROVIDED
TO RESPONDENTS CANNOT BE DEDUCTED AS PART OF THEIR MINIMUM
WAGE DUE TO PETITIONER'S FAILURE TO COMPLY WITH CERTAIN LEGAL
REQUIREMENTS; MERE AVAILMENT IS NOT SUFFICIENT TO ALLOW
DEDUCTIONS FROM EMPLOYEE'S WAGES. The cost of meals and snacks
purportedly provided to respondents cannot be deducted as part of
respondents' minimum wage. Even granting that meals and snacks were
provided and indeed constituted facilities, such facilities could not be
deducted without compliance with certain legal requirements. As stated
in Mabeza v. NLRC, the employer simply cannot deduct the value from the
employee's wages without satisfying the following: (a) proof that such
facilities are customarily furnished by the trade; (b) the provision of
deductible facilities is voluntarily accepted in writing by the employee;
and (c) the facilities are charged at fair and reasonable value. The records
are clear that petitioners failed to comply with these requirements. There
was no proof of respondents' written authorization. Indeed, the Labor
Arbiter found that while the respondents admitted that they were given
meals and merienda, the quality of food served to them was not what was
provided for in the Facility Evaluation Orders and it was only when they
filed the cases that they came to know of this supposed Facility
Evaluation Orders. Petitioner Josefa Po Lam herself admitted that she did
not inform the respondents of the facilities she had applied for.
Considering the failure to comply with the above-mentioned legal
requirements, the Labor Arbiter therefore erred when he ruled that the
cost of the meals actually provided to respondents should be deducted as
part of their salaries, on the ground that respondents have availed
themselves of the food given by petitioners. The law is clear that mere
availment is not sufficient to allow deductions from employees' wages.
HCTaAS
14. ID.; ID.; ID.; FOOD OR SNACKS OR OTHER CONVENIENCE PROVIDED
BY EMPLOYERS ARE DEEMED AS SUPPLEMENTS IF THEY ARE GRANTED
FOR THE CONVENIENCE OF THE EMPLOYER. We note the
uncontroverted testimony of respondents on record that they were

required to eat in the hotel and restaurant so that they will not go home
and there is no interruption in the services of Mayon Hotel & Restaurant.
As ruled in Mabeza, food or snacks or other convenience provided by the
employers are deemed as supplements if they are granted for the
convenience of the employer. The criterion in making a distinction
between a supplement and a facility does not so much lie in the kind
(food, lodging) but the purpose. 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 petitioners' business. The deduction
of the cost of meals from respondents' wages, therefore, should be
removed.
15. ID.; ID.; ID.; AN EMPLOYER CANNOT EXEMPT HIMSELF FROM
LIABILITY TO PAY MINIMUM WAGES BECAUSE OF POOR FINANCIAL
CONDITION OF THE COMPANY; PAYMENT OF MINIMUM WAGES IS NOT
DEPENDENT ON THE EMPLOYER'S ABILITY TO PAY. On the issue of the
proper minimum wage applicable to respondents, we sustain the Labor
Arbiter. We note that petitioners themselves have admitted that the
establishment employs "more or less sixteen (16) employees," therefore
they are estopped from claiming that the applicable minimum wage
should be for service establishments employing 15 employees or less. As
for petitioners repeated invocation of serious business losses, suffice to
say that this is not a defense to payment of labor standard benefits. The
employer cannot exempt himself from liability to pay minimum wages
because of poor financial condition of the company. The payment of
minimum wages is not dependent on the employer's ability to pay. Thus,
we reinstate the award of monetary claims granted by the Labor Arbiter.
AHacIS
DECISION
PUNO, J p:
This is a petition for certiorari to reverse and set aside the Decision issued
by the Court of Appeals (CA) 1 in CA-G.R. SP No. 68642, entitled "Rolando
Adana, Wenefredo Loveres, et. al. vs. National Labor Relations
Commission (NLRC), Mayon Hotel & Restaurant/Pacita O. Po, et al.," and
the Resolution 2 denying petitioners' motion for reconsideration. The
assailed CA decision reversed the NLRC Decision which had dismissed all
of respondents' complaints, 3 and reinstated the Joint Decision of the
Labor Arbiter 4 which ruled that respondents were illegally dismissed and
entitled to their money claims. AIHaCc

The facts, culled from the records, are as follows: 5

Petitioner Mayon Hotel & Restaurant is a single proprietor business
registered in the name of petitioner Pacita O. Po, 6 whose mother,
petitioner Josefa Po Lam, manages the establishment. 7 The hotel and
restaurant employed about sixteen (16) employees.
Records show that on various dates starting in 1981, petitioner hotel and
restaurant hired the following people, all respondents in this case, with
the following jobs: 8
1.

Wenefredo Loveres Accountant and Officer-in-charge

2.

Paterno Llarena

Front Desk Clerk

3.

Gregorio Nicerio

Supervisory Waiter

4.

Amado Macandog

Roomboy

5.

Luis Guades

6.

Santos Broola Roomboy

7.

Teodoro Laurenaria Waiter

8.

Eduardo Alamares

Roomboy/Waiter

9.

Lourdes Camigla

Cashier

Utility/Maintenance Worker

10. Chona Bumalay

Cashier

11. Jose Atractivo Technician

12. Amado Alamares
13. Roger Burce

Dishwasher and Kitchen Helper

Cook

14. Rolando Adana Waiter

15. Miguel Torrefranca

Cook

16. Edgardo Torrefranca Cook

Due to the expiration and non-renewal of the lease contract for the rented
space occupied by the said hotel and restaurant at Rizal Street, the hotel
operations of the business were suspended on March 31, 1997. 9 The
operation of the restaurant was continued in its new location at Elizondo
Street, Legazpi City, while waiting for the construction of a new Mayon
Hotel & Restaurant at Pearanda Street, Legazpi City. 10 Only nine (9) of

the sixteen (16) employees continued working in the Mayon Restaurant at

its new site. 11
On various dates of April and May 1997, the 16 employees filed
complaints for underpayment of wages and other money claims against
petitioners, as follows: 12
Wenefredo Loveres, Luis Guades, Amado Macandog and Jose Atractivo for
illegal dismissal, underpayment of wages, nonpayment of holiday and
rest day pay; service incentive leave pay (SILP) and claims for separation
pay plus damages;
Paterno Llarena and Gregorio Nicerio for illegal dismissal with claims for
underpayment of wages; nonpayment of cost of living allowance (COLA)
and overtime pay; premium pay for holiday and rest day; SILP; nightshift
differential pay and separation pay plus damages;
Miguel Torrefranca, Chona Bumalay and Lourdes Camigla for
underpayment of wages; nonpayment of holiday and rest day pay and
SILP; ITScAE
Rolando Adana, Roger Burce and Amado Alamares for underpayment of
wages; nonpayment of COLA, overtime, holiday, rest day, SILP and
nightshift differential pay;
Eduardo Alamares for underpayment of wages, nonpayment of holiday,
rest day and SILP and night shift differential pay;
Santos Broola for illegal dismissal, underpayment of wages, overtime
pay, rest day pay, holiday pay, SILP, and damages; 13 and
Teodoro Laurenaria for underpayment of wages; nonpayment of COLA and
overtime pay; premium pay for holiday and rest day, and SILP.
On July 14, 2000, Executive Labor Arbiter Gelacio L. Rivera, Jr. rendered a
Joint Decision in favor of the employees. The Labor Arbiter awarded
substantially all of respondents' money claims, and held that respondents
Loveres, Macandog and Llarena were entitled to separation pay, while
respondents Guades, Nicerio and Alamares were entitled to their
retirement pay. The Labor Arbiter also held that based on the evidence
presented, Josefa Po Lam is the owner/proprietor of Mayon Hotel &
Restaurant and the proper respondent in these cases.
On appeal to the NLRC, the decision of the Labor Arbiter was reversed,
and all the complaints were dismissed.

Respondents filed a motion for reconsideration with the NLRC and when
this was denied, they filed a petition for certiorari with the CA which
rendered the now assailed decision.
After their motion for reconsideration was denied, petitioners now come
to this Court, seeking the reversal of the CA decision on the following
grounds:
I.
THE HONORABLE COURT OF APPEALS ERRED IN REVERSING THE
DECISION OF THE NATIONAL LABOR RELATIONS COMMISSION (SECOND
DIVISION) BY HOLDING THAT THE FINDINGS OF FACT OF THE NLRC WERE
NOT SUPPORTED BY SUBSTANTIAL EVIDENCE DESPITE AMPLE AND
SUFFICIENT EVIDENCE SHOWING THAT THE NLRC DECISION IS INDEED
SUPPORTED BY SUBSTANTIAL EVIDENCE;
II.
THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THE
JOINT DECISION OF THE LABOR ARBITER WHICH RULED THAT PRIVATE
RESPONDENTS WERE ILLEGALLY DISMISSED FROM THEIR EMPLOYMENT,
DESPITE THE FACT THAT THE REASON WHY PRIVATE RESPONDENTS WERE
OUT OF WORK WAS NOT DUE TO THE FAULT OF PETITIONERS BUT TO
CAUSES BEYOND THE CONTROL OF PETITIONERS.
III. THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THE
AWARD OF MONETARY BENEFITS BY THE LABOR ARBITER IN HIS JOINT
DECISION IN FAVOR OF THE PRIVATE RESPONDENTS, INCLUDING THE
AWARD OF DAMAGES TO SIX (6) OF THE PRIVATE RESPONDENTS, DESPITE
THE FACT THAT THE PRIVATE RESPONDENTS HAVE NOT PROVEN BY
SUBSTANTIAL EVIDENCE THEIR ENTITLEMENT THERETO AND ESPECIALLY
THE FACT THAT THEY WERE NOT ILLEGALLY DISMISSED BY THE
PETITIONERS. DHAcET
IV. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT
PACITA ONG PO IS THE OWNER OF THE BUSINESS ESTABLISHMENT,
PETITIONER MAYON HOTEL AND RESTAURANT, THUS DISREGARDING THE
CERTIFICATE OF REGISTRATION OF THE BUSINESS ESTABLISHMENT
ISSUED BY THE LOCAL GOVERNMENT, WHICH IS A PUBLIC DOCUMENT,
AND THE UNQUALIFIED ADMISSIONS OF COMPLAINANTS-PRIVATE
RESPONDENTS. 14
In essence, the petition calls for a review of the following issues:
1.
Was it correct for petitioner Josefa Po Lam to be held liable as the
owner of petitioner Mayon Hotel & Restaurant, and the proper respondent
in this case?

2.
Were respondents Loveres, Guades, Macandog, Atractivo, Llarena
and Nicerio illegally dismissed?
3.
Are respondents entitled to their money claims due to
underpayment of wages, and nonpayment of holiday pay, rest day
premium, SILP, COLA, overtime pay, and night shift differential pay?
It is petitioners' contention that the above issues have already been
threshed out sufficiently and definitively by the NLRC. They therefore
assail the CA's reversal of the NLRC decision, claiming that based on the
ruling in Castillo v. NLRC, 15 it is non sequitur that the CA should reexamine the factual findings of both the NLRC and the Labor Arbiter,
especially as in this case the NLRC's findings are allegedly supported by
substantial evidence.
We do not agree.
There is no denying that it is within the NLRC's competence, as an
appellate agency reviewing decisions of Labor Arbiters, to disagree with
and set aside the latter's findings. 16 But it stands to reason that the
NLRC should state an acceptable cause therefore, otherwise it would be a
whimsical, capricious, oppressive, illogical, unreasonable exercise of
quasi-judicial prerogative, subject to invalidation by the extraordinary writ
of certiorari. 17 And when the factual findings of the Labor Arbiter and the
NLRC are diametrically opposed and this disparity of findings is called into
question, there is, necessarily, a re-examination of the factual findings to
ascertain which opinion should be sustained. 18 As ruled in Asuncion v.
NLRC, 19
Although, it is a legal tenet that factual findings of administrative bodies
are entitled to great weight and respect, we are constrained to take a
second look at the facts before us because of the diversity in the opinions
of the Labor Arbiter and the NLRC. A disharmony between the factual
findings of the Labor Arbiter and those of the NLRC opens the door to a
review thereof by this Court. 20
The CA, therefore, did not err in reviewing the records to determine which
opinion was supported by substantial evidence. DHCSTa
Moreover, it is explicit in Castillo v. NLRC 21 that factual findings of
administrative bodies like the NLRC are affirmed only if they are
supported by substantial evidence that is manifest in the decision and on
the records. As stated in Castillo:

[A]buse of discretion does not necessarily follow from a reversal by the

NLRC of a decision of a Labor Arbiter. Mere variance in evidentiary
assessment between the NLRC and the Labor Arbiter does not
automatically call for a full review of the facts by this Court. The NLRC's
decision, so long as it is not bereft of substantial support from the
records, deserves respect from this Court. As a rule, the original and
exclusive jurisdiction to review a decision or resolution of respondent
NLRC in a petition for certiorari under Rule 65 of the Rules of Court does
not include a correction of its evaluation of the evidence but is confined to
issues of jurisdiction or grave abuse of discretion. Thus, the NLRC's factual
findings, if supported by substantial evidence, are entitled to great
respect and even finality, unless petitioner is able to show that it simply
and arbitrarily disregarded the evidence before it or had misappreciated
the evidence to such an extent as to compel a contrary conclusion if such
evidence had been properly appreciated. (citations omitted) 22
After careful review, we find that the reversal of the NLRC's decision was
in order precisely because it was not supported by substantial evidence.
1.

Ownership by Josefa Po Lam

The Labor Arbiter ruled that as regards the claims of the employees,
petitioner Josefa Po Lam is, in fact, the owner of Mayon Hotel &
Restaurant. Although the NLRC reversed this decision, the CA, on review,
agreed with the Labor Arbiter that notwithstanding the certificate of
registration in the name of Pacita Po, it is Josefa Po Lam who is the
owner/proprietor of Mayon Hotel & Restaurant, and the proper respondent
in the complaints filed by the employees. The CA decision states in part:
[Despite] the existence of the Certificate of Registration in the name of
Pacita Po, we cannot fault the labor arbiter in ruling that Josefa Po Lam is
the owner of the subject hotel and restaurant. There were conflicting
documents submitted by Josefa herself. She was ordered to submit
additional documents to clearly establish ownership of the hotel and
restaurant, considering the testimonies given by the [respondents] and
the non-appearance and failure to submit her own position paper by
Pacita Po. But Josefa did not comply with the directive of the Labor Arbiter.
The ruling of the Supreme Court in Metropolitan Bank and Trust Company
v. Court of Appeals applies to Josefa Po Lam which is stated in this wise:
When the evidence tends to prove a material fact which imposes a
liability on a party, and he has it in his power to produce evidence which
from its very nature must overthrow the case made against him if it is not

founded on fact, and he refuses to produce such evidence, the

presumption arises that the evidence[,] if produced, would operate to his
prejudice, and support the case of his adversary. EAIcCS
Furthermore, in ruling that Josefa Po Lam is the real owner of the hotel
and restaurant, the labor arbiter relied also on the testimonies of the
witnesses, during the hearing of the instant case. When the conclusions
of the labor arbiter are sufficiently corroborated by evidence on record,
the same should be respected by appellate tribunals, since he is in a
better position to assess and evaluate the credibility of the contending
parties. 23 (citations omitted)
Petitioners insist that it was error for the Labor Arbiter and the CA to have
ruled that petitioner Josefa Po Lam is the owner of Mayon Hotel &
Restaurant. They allege that the documents they submitted to the Labor
Arbiter sufficiently and clearly establish the fact of ownership by
petitioner Pacita Po, and not her mother, petitioner Josefa Po Lam. They
contend that petitioner Josefa Po Lam's participation was limited to
merely (a) being the overseer; (b) receiving the month-to-month and/or
year-to-year financial reports prepared and submitted by respondent
Loveres; and (c) visitation of the premises. 24 They also put emphasis on
the admission of the respondents in their position paper submitted to the
Labor Arbiter, identifying petitioner Josefa Po Lam as the manager, and
Pacita Po as the owner. 25 This, they claim, is a judicial admission and is
binding on respondents. They protest the reliance the Labor Arbiter and
the CA placed on their failure to submit additional documents to clearly
establish ownership of the hotel and restaurant, claiming that there was
no need for petitioner Josefa Po Lam to submit additional documents
considering that the Certificate of Registration is the best and primary
evidence of ownership.
We disagree with petitioners. We have scrutinized the records and find
the claim that petitioner Josefa Po Lam is merely the overseer is not borne
out by the evidence.
First. It is significant that only Josefa Po Lam appeared in the proceedings
with the Labor Arbiter. Despite receipt of the Labor Arbiter's notice and
summons, other notices and Orders, petitioner Pacita Po failed to appear
in any of the proceedings with the Labor Arbiter in these cases, nor file
her position paper. 26 It was only on appeal with the NLRC that Pacita Po
signed the pleadings. 27 The apathy shown by petitioner Pacita Po is
contrary to human experience as one would think that the owner of an

establishment would naturally be concerned when ALL her employees file

complaints against her.
Second. The records of the case belie petitioner Josefa Po Lam's claim
that she is merely an overseer. The findings of the Labor Arbiter on this
question were based on credible, competent and substantial evidence.
We again quote the Joint Decision on this matter:
Mayon Hotel and Restaurant is a [business name] of an enterprise. While
[petitioner] Josefa Po Lam claims that it is her daughter, Pacita Po, who
owns the hotel and restaurant when the latter purchased the same from
one Palanos in 1981, Josefa failed to submit the document of sale from
said Palanos to Pacita as allegedly the sale was only verbal although the
license to operate said hotel and restaurant is in the name of Pacita
which, despite our Order to Josefa to present the same, she failed to
comply (p. 38, tsn. August 13, 1998). While several documentary
evidences were submitted by Josefa wherein Pacita was named therein as
owner of the hotel and restaurant (pp. 64, 65, 67 to 69; vol. I, rollo)[,]
there were documentary evidences also that were submitted by Josefa
showing her ownership of said enterprise (pp. 468 to 469; vol. II, rollo).
While Josefa explained her participation and interest in the business as
merely to help and assist her daughter as the hotel and restaurant was
near the former's store, the testimonies of [respondents] and Josefa as
well as her demeanor during the trial in these cases proves (sic) that
Josefa Po Lam owns Mayon Hotel and Restaurant. [Respondents] testified
that it was Josefa who exercises all the acts and manifestation of
ownership of the hotel and restaurant like transferring employees from
the Greatwall Palace Restaurant which she and her husband Roy Po Lam
previously owned; it is Josefa to whom the employees submits (sic)
reports, draws money for payment of payables and for marketing,
attending (sic) to Labor Inspectors during ocular inspections. Except for
documents whereby Pacita Po appears as the owner of Mayon Hotel and
Restaurant, nothing in the record shows any circumstance or
manifestation that Pacita Po is the owner of Mayon Hotel and Restaurant.
The least that can be said is that it is absurd for a person to purchase a
hotel and restaurant in the very heart of the City of Legazpi verbally.
Assuming this to be true, when [petitioners], particularly Josefa, was
directed to submit evidence as to the ownership of Pacita of the hotel and
restaurant, considering the testimonies of [respondents], the former
should [have] submitted the lease contract between the owner of the
building where Mayon Hotel and Restaurant was located at Rizal St.,
Legazpi City and Pacita Po to clearly establish ownership by the latter of

said enterprise. Josefa failed. We are not surprised why some employers
employ schemes to mislead Us in order to evade liabilities. We therefore
consider and hold Josefa Po Lam as the owner/proprietor of Mayon Hotel
and Restaurant and the proper respondent in these cases. 28
Petitioners' reliance on the rules of evidence, i.e., the certificate of
registration being the best proof of ownership, is misplaced.
Notwithstanding the certificate of registration, doubts were cast as to the
true nature of petitioner Josefa Po Lam's involvement in the enterprise,
and the Labor Arbiter had the authority to resolve this issue. It was
therefore within his jurisdiction to require the additional documents to
ascertain who was the real owner of petitioner Mayon Hotel & Restaurant.
AIDcTE
Article 221 of the Labor Code is clear: technical rules are not binding, and
the application of technical rules of procedure may be relaxed in labor
cases to serve the demand of substantial justice. 29 The rule of evidence
prevailing in court of law or equity shall not be controlling in labor cases
and it is the spirit and intention of the Labor Code that the Labor Arbiter
shall use every and all reasonable means to ascertain the facts in each
case speedily and objectively and without regard to technicalities of law
or procedure, all in the interest of due process. 30 Labor laws mandate
the speedy administration of justice, with least attention to technicalities
but without sacrificing the fundamental requisites of due process. 31
Similarly, the fact that the respondents' complaints contained no
allegation that petitioner Josefa Po Lam is the owner is of no moment. To
apply the concept of judicial admissions to respondents who are but
lowly employees would be to exact compliance with technicalities of
law that is contrary to the demands of substantial justice. Moreover, the
issue of ownership was an issue that arose only during the course of the
proceedings with the Labor Arbiter, as an incident of determining
respondents' claims, and was well within his jurisdiction. 32
Petitioners were also not denied due process, as they were given
sufficient opportunity to be heard on the issue of ownership. 33 The
essence of due process in administrative proceedings is simply an
opportunity to explain one's side or an opportunity to seek
reconsideration of the action or ruling complained of. 34 And there is
nothing in the records which would suggest that petitioners had absolute
lack of opportunity to be heard. 35 Obviously, the choice not to present
evidence was made by petitioners themselves. 36

But more significantly, we sustain the Labor Arbiter and the CA because
even when the case was on appeal with the NLRC, nothing was submitted
to negate the Labor Arbiter's finding that Pacita Po is not the real owner of
the subject hotel and restaurant. Indeed, no such evidence was submitted
in the proceedings with the CA nor with this Court. Considering that
petitioners vehemently deny ownership by petitioner Josefa Po Lam, it is
most telling that they continue to withhold evidence which would shed
more light on this issue. We therefore agree with the CA that the failure to
submit could only mean that if produced, it would have been adverse to
petitioners' case. 37
Thus, we find that there is substantial evidence to rule that petitioner
Josefa Po Lam is the owner of petitioner Mayon Hotel & Restaurant.
2.

Illegal Dismissal: claim for separation pay

Of the sixteen employees, only the following filed a case for illegal
dismissal: respondents Loveres, Llarena, Nicerio, Macandog, Guades,
Atractivo and Broola. 38
The Labor Arbiter found that there was illegal dismissal, and granted
separation pay to respondents Loveres, Macandog and Llarena. As
respondents Guades, Nicerio and Alamares were already 79, 66 and 65
years old respectively at the time of the dismissal, the Labor Arbiter
granted retirement benefits pursuant to Article 287 of the Labor Code as
amended. 39 The Labor Arbiter ruled that respondent Atractivo was not
entitled to separation pay because he had been transferred to work in the
restaurant operations in Elizondo Street, but awarded him damages.
Respondents Loveres, Llarena, Nicerio, Macandog and Guades were also
awarded damages. 40
The NLRC reversed the Labor Arbiter, finding that "no clear act of
termination is attendant in the case at bar" and that respondents "did not
submit any evidence to that effect, but the finding and conclusion of the
Labor Arbiter [are] merely based on his own surmises and conjectures."
41 In turn, the NLRC was reversed by the CA. SHADcT
It is petitioners contention that the CA should have sustained the NLRC
finding that none of the above-named respondents were illegally
dismissed, or entitled to separation or retirement pay. According to
petitioners, even the Labor Arbiter and the CA admit that when the illegal
dismissal case was filed by respondents on April 1997, they had as yet no
cause of action. Petitioners therefore conclude that the filing by
respondents of the illegal dismissal case was premature and should have

been dismissed outright by the Labor Arbiter. 42 Petitioners also claim

that since the validity of respondents' dismissal is a factual question, it is
not for the reviewing court to weigh the conflicting evidence. 43
We do not agree. Whether respondents are still working for petitioners IS
a factual question. And the records are unequivocal that since April 1997,
when petitioner Mayon Hotel & Restaurant suspended its hotel operations
and transferred its restaurant operations in Elizondo Street, respondents
Loveres, Macandog, Llarena, Guades and Nicerio have not been permitted
to work for petitioners. Respondent Alamares, on the other hand, was also
laid-off when the Elizondo Street operations closed, as were all the other
respondents. Since then, respondents have not been permitted to work
nor recalled, even after the construction of the new premises at
Pearanda Street and the reopening of the hotel operations with the
restaurant in this new site. As stated by the Joint Decision of the Labor
Arbiter on July 2000, or more than three (3) years after the complaint was
filed: 44
[F]rom the records, more than six months had lapsed without [petitioner]
having resumed operation of the hotel. After more than one year from the
temporary closure of Mayon Hotel and the temporary transfer to another
site of Mayon Restaurant, the building which [petitioner] Josefa allege[d]
w[h]ere the hotel and restaurant will be transferred has been finally
constructed and the same is operated as a hotel with bar and restaurant
nevertheless, none of [respondents] herein who were employed at Mayon
Hotel and Restaurant which was also closed on April 30, 1998 was/were
recalled by [petitioner] to continue their services. . . .
Parenthetically, the Labor Arbiter did not grant separation pay to the
other respondents as they had not filed an amended complaint to
question the cessation of their employment after the closure of Mayon
Hotel & Restaurant on March 31, 1997. 45
The above factual finding of the Labor Arbiter was never refuted by
petitioners in their appeal with the NLRC. It confounds us, therefore, how
the NLRC could have so cavalierly treated this uncontroverted factual
finding by ruling that respondents have not introduced any evidence to
show that they were illegally dismissed, and that the Labor Arbiter's
finding was based on conjecture. 46 It was a serious error that the NLRC
did not inquire as to the legality of the cessation of employment. Article
286 of the Labor Code is clear there is termination of employment
when an otherwise bona fide suspension of work exceeds six (6) months.
47 The cessation of employment for more than six months was patent

and the employer has the burden of proving that the termination was for
a just or authorized cause. 48
Moreover, we are not impressed by any of petitioners' attempts to
exculpate themselves from the charges. First, in the proceedings with the
Labor Arbiter, they claimed that it could not be illegal dismissal because
the lay-off was merely temporary (and due to the expiration of the lease
contract over the old premises of the hotel). They specifically invoked
Article 286 of the Labor Code to argue that the claim for separation pay
was premature and without legal and factual basis. 49 Then, because the
Labor Arbiter had ruled that there was already illegal dismissal when the
lay-off had exceeded the six-month period provided for in Article 286,
petitioners raise this novel argument, to wit:
It is the firm but respectful submission of petitioners that reliance on
Article 286 of the Labor Code is misplaced, considering that the reason
why private respondents were out of work was not due to the fault of
petitioners. The failure of petitioners to reinstate the private respondents
to their former positions should not likewise be attributable to said
petitioners as the private respondents did not submit any evidence to
prove their alleged illegal dismissal. The petitioners cannot discern why
they should be made liable to the private respondents for their failure to
be reinstated considering that the fact that they were out of work was not
due to the fault of petitioners but due to circumstances beyond the
control of petitioners, which are the termination and non-renewal of the
lease contract over the subject premises. Private respondents, however,
argue in their Comment that petitioners themselves sought the
application of Article 286 of the Labor Code in their case in their Position
Paper filed before the Labor Arbiter. In refutation, petitioners humbly
submit that even if they invoke Article 286 of the Labor Code, still the fact
remains, and this bears stress and emphasis, that the temporary
suspension of the operations of the establishment arising from the nonrenewal of the lease contract did not result in the termination of
employment of private respondents and, therefore, the petitioners cannot
be faulted if said private respondents were out of work, and consequently,
they are not entitled to their money claims against the petitioners. 50
It is confounding how petitioners have fashioned their arguments. After
having admitted, in effect, that respondents have been laid-off since April
1997, they would have this Court excuse their refusal to reinstate
respondents or grant them separation pay because these same

respondents purportedly have not proven the illegality of their dismissal.

cEITCA
Petitioners' arguments reflect their lack of candor and the blatant attempt
to use technicalities to muddle the issues and defeat the lawful claims of
their employees. First, petitioners admit that since April 1997, when hotel
operations were suspended due to the termination of the lease of the old
premises, respondents Loveres, Macandog, Llarena, Nicerio and Guades
have not been permitted to work. Second, even after six months of what
should have been just a temporary lay-off, the same respondents were
still not recalled to work. As a matter of fact, the Labor Arbiter even found
that as of the time when he rendered his Joint Decision on July 2000 or
more than three (3) years after the supposed "temporary lay-off," the
employment of all of the respondents with petitioners had ceased,
notwithstanding that the new premises had been completed and the
same operated as a hotel with bar and restaurant. This is clearly dismissal
or the permanent severance or complete separation of the worker from
the service on the initiative of the employer regardless of the reasons
therefor. 51
On this point, we note that the Labor Arbiter and the CA are in accord that
at the time of the filing of the complaint, respondents had no cause of
action to file the case for illegal dismissal. According to the CA and the
Labor Arbiter, the lay-off of the respondents was merely temporary,
pending construction of the new building at Pearanda Street. 52
While the closure of the hotel operations in April of 1997 may have been
temporary, we hold that the evidence on record belie any claim of
petitioners that the lay-off of respondents on that same date was merely
temporary. On the contrary, we find substantial evidence that petitioners
intended the termination to be permanent. First, respondents Loveres,
Macandog, Llarena, Guades, Nicerio and Alamares filed the complaint for
illegal dismissal immediately after the closure of the hotel operations in
Rizal Street, notwithstanding the alleged temporary nature of the closure
of the hotel operations, and petitioners' allegations that the employees
assigned to the hotel operations knew about this beforehand. Second, in
their position paper submitted to the Labor Arbiter, petitioners invoked
Article 286 of the Labor Code to assert that the employer-employee
relationship was merely suspended, and therefore the claim for
separation pay was premature and without legal or factual basis. 53 But
they made no mention of any intent to recall these respondents to work
upon completion of the new premises. Third, the various pleadings on

record show that petitioners held respondents, particularly Loveres, as

responsible for mismanagement of the establishment and for abuse of
trust and confidence. Petitioner Josefa Po Lam's affidavit on July 21, 1998,
for example, squarely blamed respondents, specifically Loveres, Bumalay
and Camigla, for abusing her leniency and causing petitioner Mayon Hotel
& Restaurant to sustain "continuous losses until it is closed." She then
asserts that respondents "are not entitled to separation pay for they were
not terminated and if ever the business ceased to operate it was because
of losses." 54 Again, petitioners make the same allegation in their
memorandum on appeal with the NLRC, where they alleged that three (3)
years prior to the expiration of the lease in 1997, the operation of the
Hotel had been sustaining consistent losses, and these were solely
attributed to respondents, but most especially due to Loveres's
mismanagement and abuse of petitioners' trust and confidence. 55 Even
the petition filed in this court made reference to the separation of the
respondents due to "severe financial losses and reverses," again imputing
it to respondents' mismanagement. 56 The vehemence of petitioners'
accusation of mismanagement against respondents, especially against
Loveres, is inconsistent with the desire to recall them to work. Fourth,
petitioners' memorandum on appeal also averred that the case was filed
"not because of the business being operated by them or that they were
supposedly not receiving benefits from the Labor Code which is true, but
because of the fact that the source of their livelihood, whether legal or
immoral, was stopped on March 31, 1997, when the owner of the building
terminated the Lease Contract." 57 Fifth, petitioners had inconsistencies
in their pleadings (with the NLRC, CA and with this Court) in referring to
the closure, 58 i.e., in the petition filed with this court, they assert that
there is no illegal dismissal because there was "only a temporary
cessation or suspension of operations of the hotel and restaurant due to
circumstances beyond the control of petitioners, and that is, the nonrenewal of the lease contract. . . . " 59 And yet, in the same petition, they
also assert that: (a) the separation of respondents was due to severe
financial losses and reverses leading to the closure of the business; and
(b) petitioner Pacita Po had to close shop and was bankrupt and has no
liquidity to put up her own building to house Mayon Hotel & Restaurant.
60 Sixth, and finally, the uncontroverted finding of the Labor Arbiter that
petitioners terminated all the other respondents, by not employing them
when the Hotel and Restaurant transferred to its new site on Pearanda
Street. 61 Indeed, in this same memorandum, petitioners referred to all
respondents as "former employees of Mayon Hotel & Restaurant." 62

These factors may be inconclusive individually, but when taken together,

they lead us to conclude that petitioners really intended to dismiss all
respondents and merely used the termination of the lease (on Rizal Street
premises) as a means by which they could terminate their employees.
DcTAIH
Moreover, even assuming arguendo that the cessation of employment on
April 1997 was merely temporary, it became dismissal by operation of law
when petitioners failed to reinstate respondents after the lapse of six (6)
months, pursuant to Article 286 of the Labor Code.
We are not impressed by petitioners' claim that severe business losses
justified their failure to reinstate respondents. The evidence to prove this
fact is inconclusive. But more important, serious business losses do not
excuse the employer from complying with the clearance or report
required under Article 283 of the Labor Code and its implementing rules
before terminating the employment of its workers. 63 In the absence of
justifying circumstances, the failure of petitioners to observe the
procedural requirements set out under Article 284, taints their actuations
with bad faith, especially since they claimed that they have been
experiencing losses in the three years before 1997. To say the least, if it
were true that the lay-off was temporary but then serious business losses
prevented the reinstatement of respondents, then petitioners should have
complied with the requirements of written notice. The requirement of law
mandating the giving of notices was intended not only to enable the
employees to look for another employment and therefore ease the impact
of the loss of their jobs and the corresponding income, but more
importantly, to give the Department of Labor and Employment (DOLE) the
opportunity to ascertain the verity of the alleged authorized cause of
termination. 64
And even assuming that the closure was due to a reason beyond the
control of the employer, it still has to accord its employees some relief in
the form of severance pay. 65
While we recognize the right of the employer to terminate the services of
an employee for a just or authorized cause, the dismissal of employees
must be made within the parameters of law and pursuant to the tenets of
fair play. 66 And in termination disputes, the burden of proof is always on
the employer to prove that the dismissal was for a just or authorized
cause. 67 Where there is no showing of a clear, valid and legal cause for
termination of employment, the law considers the case a matter of illegal
dismissal. 68

Under these circumstances, the award of damages was proper. As a rule,

moral damages are recoverable where the dismissal of the employee was
attended by bad faith or fraud or constituted an act oppressive to labor,
or was done in a manner contrary to morals, good customs or public
policy. 69 We believe that the dismissal of the respondents was attended
with bad faith and meant to evade the lawful obligations imposed upon
an employer. cSITDa
To rule otherwise would lead to the anomaly of respondents being
terminated from employment in 1997 as a matter of fact, but without
legal redress. This runs counter to notions of fair play, substantial justice
and the constitutional mandate that labor rights should be respected. If
doubts exist between the evidence presented by the employer and the
employee, the scales of justice must be tilted in favor of the latter the
employer must affirmatively show rationally adequate evidence that the
dismissal was for a justifiable cause. 70 It is a time-honored rule that in
controversies between a laborer and his master, doubts reasonably
arising from the evidence, or in the interpretation of agreements and
writing should be resolved in the former's favor. 71 The policy is to extend
the doctrine to a greater number of employees who can avail of the
benefits under the law, which is in consonance with the avowed policy of
the State to give maximum aid and protection of labor. 72
We therefore reinstate the Labor Arbiter's decision with the following
modifications:
(a) Separation pay for the illegal dismissal of respondents Loveres,
Macandog and Llarena; (Santos Broola cannot be granted separation pay
as he made no such claim);
(b) Retirement pay for respondents Guades, Nicerio, and Alamares, who
at the time of dismissal were entitled to their retirement benefits
pursuant to Article 287 of the Labor Code as amended; 73 and
(c) Damages for respondents Loveres, Macandog, Llarena, Guades,
Nicerio, Atractivo, and Broola.
3.

Money claims

The CA held that contrary to the NLRC's ruling, petitioners had not
discharged the burden of proving that the monetary claims of the
respondents have been paid. 74 The CA thus reinstated the Labor
Arbiter's grant of respondents' monetary claims, including damages.

Petitioners assail this ruling by repeating their long and convoluted

argument that as there was no illegal dismissal, then respondents are not
entitled to their monetary claims or separation pay and damages.
Petitioners' arguments are not only tiring, repetitive and unconvincing,
but confusing and confused entitlement to labor standard benefits is a
separate and distinct concept from payment of separation pay arising
from illegal dismissal, and are governed by different provisions of the
Labor Code.
We agree with the CA and the Labor Arbiter. Respondents have set out
with particularity in their complaint, position paper, affidavits and other
documents the labor standard benefits they are entitled to, and which
they alleged that petitioners have failed to pay them. It was therefore
petitioners' burden to prove that they have paid these money claims. One
who pleads payment has the burden of proving it, and even where the
employees must allege nonpayment, the general rule is that the burden
rests on the defendant to prove nonpayment, rather than on the plaintiff
to prove non payment. 75 This petitioners failed to do. IaHSCc
We also agree with the Labor Arbiter and the CA that the documents
petitioners submitted, i.e., affidavits executed by some of respondents
during an ocular inspection conducted by an inspector of the DOLE;
notices of inspection result and Facility Evaluation Orders issued by DOLE,
are not sufficient to prove payment. 76 Despite repeated orders from the
Labor Arbiter, 77 petitioners failed to submit the pertinent employee files,
payrolls, records, remittances and other similar documents which would
show that respondents rendered work entitling them to payment for
overtime work, night shift differential, premium pay for work on holidays
and rest day, and payment of these as well as the COLA and the SILP
documents which are not in respondents' possession but in the custody
and absolute control of petitioners. 78 By choosing not to fully and
completely disclose information and present the necessary documents to
prove payment of labor standard benefits due to respondents, petitioners
failed to discharge the burden of proof. 79 Indeed, petitioners' failure to
submit the necessary documents which as employers are in their
possession, inspite of orders to do so, gives rise to the presumption that
their presentation is prejudicial to its cause. 80 As aptly quoted by the CA:
[W]hen the evidence tends to prove a material fact which imposes a
liability on a party, and he has it in his power to produce evidence which
from its very nature must overthrow the case made against him if it is not
founded on fact, and he refuses to produce such evidence, the

presumption arises that the evidence, if produced, would operate to his

prejudice, and support the case of his adversary. 81
Petitioners next claim that the cost of the food and snacks provided to
respondents as facilities should have been included in reckoning the
payment of respondents' wages. They state that although on the surface
respondents appeared to receive minimal wages, petitioners had granted
respondents other benefits which are considered part and parcel of their
wages and are allowed under existing laws. 82 They claim that these
benefits make up for whatever inadequacies there may be in
compensation. 83 Specifically, they invoked Sections 5 and 6, Rule VII-A,
which allow the deduction of facilities provided by the employer through
an appropriate Facility Evaluation Order issued by the Regional Director of
the DOLE. 84 Petitioners also aver that they give five (5) percent of the
gross income each month as incentives. As proof of compliance of
payment of minimum wages, petitioners submitted the Notice of
Inspection Results issued in 1995 and 1997 by the DOLE Regional Office.
85
The cost of meals and snacks purportedly provided to respondents cannot
be deducted as part of respondents' minimum wage. As stated in the
Labor Arbiter's decision: 86
While [petitioners] submitted Facility Evaluation Orders (pp. 468, 469; vol.
II, rollo) issued by the DOLE Regional Office whereby the cost of meals
given by [petitioners] to [respondents] were specified for purposes of
considering the same as part of their wages, We cannot consider the cost
of meals in the Orders as applicable to [respondents]. [Respondents] were
not interviewed by the DOLE as to the quality and quantity of food
appearing in the applications of [petitioners] for facility evaluation prior to
its approval to determine whether or not [respondents] were indeed given
such kind and quantity of food. Also, there was no evidence that the
quality and quantity of food in the Orders were voluntarily accepted by
[respondents]. On the contrary; while some [of the respondents] admitted
that they were given meals and merienda, the quality of food serve[d] to
them were not what were provided for in the Orders and that it was only
when they filed these cases that they came to know about said Facility
Evaluation Orders (pp. 100; 379[,] vol. II, rollo; p. 40, tsn[,] June 19,
1998). [Petitioner] Josefa herself, who applied for evaluation of the facility
(food) given to [respondents], testified that she did not inform
[respondents] concerning said Facility Evaluation Orders (p. 34, tsn[,]
August 13, 1998). HTCaAD

Even granting that meals and snacks were provided and indeed
constituted facilities, such facilities could not be deducted without
compliance with certain legal requirements. As stated in Mabeza v. NLRC,
87 the employer simply cannot deduct the value from the employee's
wages without satisfying the following: (a) proof that such facilities are
customarily furnished by the trade; (b) the provision of deductible
facilities is voluntarily accepted in writing by the employee; and (c) the
facilities are charged at fair and reasonable value. The records are clear
that petitioners failed to comply with these requirements. There was no
proof of respondents' written authorization. Indeed, the Labor Arbiter
found that while the respondents admitted that they were given meals
and merienda, the quality of food served to them was not what was
provided for in the Facility Evaluation Orders and it was only when they
filed the cases that they came to know of this supposed Facility
Evaluation Orders. 88 Petitioner Josefa Po Lam herself admitted that she
did not inform the respondents of the facilities she had applied for. 89
Considering the failure to comply with the above-mentioned legal
requirements, the Labor Arbiter therefore erred when he ruled that the
cost of the meals actually provided to respondents should be deducted as
part of their salaries, on the ground that respondents have availed
themselves of the food given by petitioners. 90 The law is clear that mere
availment is not sufficient to allow deductions from employees' wages.
More important, we note the uncontroverted testimony of respondents on
record that they were required to eat in the hotel and restaurant so that
they will not go home and there is no interruption in the services of
Mayon Hotel & Restaurant. As ruled in Mabeza, food or snacks or other
convenience provided by the employers are deemed as supplements if
they are granted for the convenience of the employer. The criterion in
making a distinction between a supplement and a facility does not so
much lie in the kind (food, lodging) but the purpose. 91 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 petitioners'
business. 92 The deduction of the cost of meals from respondents' wages,
therefore, should be removed. SaHcAC
We also do not agree with petitioners that the five (5) percent of the gross
income of the establishment can be considered as part of the
respondents' wages. We quote with approval the Labor Arbiter on this
matter, to wit:

While complainants, who were employed in the hotel, receive[d] various

amounts as profit share, the same cannot be considered as part of their
wages in determining their claims for violation of labor standard benefits.
Although called profit share[,] such is in the nature of share from service
charges charged by the hotel. This is more explained by [respondents]
when they testified that what they received are not fixed amounts and
the same are paid not on a monthly basis (pp. 55, 93, 94, 103, 104; vol. II,
rollo). Also, [petitioners] failed to submit evidence that the amounts
received by [respondents] as profit share are to be considered part of
their wages and had been agreed by them prior to their employment.
Further, how can the amounts receive[d] by [respondents] be considered
as profit share when the same [are] based on the gross receipt of the
hotel[?] No profit can as yet be determined out of the gross receipt of an
enterprise. Profits are realized after expenses are deducted from the
gross income.
On the issue of the proper minimum wage applicable to respondents, we
sustain the Labor Arbiter. We note that petitioners themselves have
admitted that the establishment employs "more or less sixteen (16)
employees," 93 therefore they are estopped from claiming that the
applicable minimum wage should be for service establishments
employing 15 employees or less.
As for petitioners repeated invocation of serious business losses, suffice
to say that this is not a defense to payment of labor standard benefits.
The employer cannot exempt himself from liability to pay minimum wages
because of poor financial condition of the company. The payment of
minimum wages is not dependent on the employer's ability to pay. 94
Thus, we reinstate the award of monetary claims granted by the Labor
Arbiter.
4.

Conclusion

There is no denying that the actuations of petitioners in this case have

been reprehensible. They have terminated the respondents' employment
in an underhanded manner, and have used and abused the quasi-judicial
and judicial processes to resist payment of their employees' rightful
claims, thereby protracting this case and causing the unnecessary
clogging of dockets of the Court. They have also forced respondents to
unnecessary hardship and financial expense. Indeed, the circumstances
of this case would have called for exemplary damages, as the dismissal
was effected in a wanton, oppressive or malevolent manner, 95 and

public policy requires

discouraged. 96

that

these

acts

must

be

suppressed

and

Nevertheless, we cannot agree with the Labor Arbiter in granting

exemplary damages of P10,000.00 each to all respondents. While it is
true that other forms of damages under the Civil Code may be awarded to
illegally dismissed employees, 97 any award of moral damages by the
Labor Arbiter cannot be based on the Labor Code but should be grounded
on the Civil Code. 98 And the law is clear that exemplary damages can
only be awarded if plaintiff shows proof that he is entitled to moral,
temperate or compensatory damages. 99
As only respondents Loveres, Guades, Macandog, Llarena, Nicerio,
Atractivo and Broola specifically claimed damages from petitioners, then
only they are entitled to exemplary damages. sjgs1
Finally, we rule that attorney's fees in the amount to P10,000.00 should
be granted to each respondent. It is settled that in actions for recovery of
wages or where an employee was forced to litigate and incur expenses to
protect his rights and interest, he is entitled to an award of attorney's
fees. 100 This case undoubtedly falls within this rule. EHaDIC
IN VIEW WHEREOF, the petition is hereby DENIED. The Decision of January
17, 2003 of the Court of Appeals in CA-G.R. SP No. 68642 upholding the
Joint Decision of July 14, 2000 of the Labor Arbiter in RAB V Case Nos. 0400079-97 and 04-00080-97 is AFFIRMED, with the following
MODIFICATIONS:
(1) Granting separation pay of one-half (1/2) month for every year of
service to respondents Loveres, Macandog and Llarena;
(2) Granting retirement pay for respondents Guades, Nicerio, and
Alamares;
(3) Removing the deductions for food facility from the amounts due to
all respondents;
(4) Awarding moral damages of P20,000.00 each for respondents
Loveres, Macandog, Llarena, Guades, Nicerio, Atractivo, and Broola;
(5) Deleting the award of exemplary damages of P10,000.00 from all
respondents except Loveres, Macandog, Llarena, Guades, Nicerio,
Atractivo, and Broola; and TAEcCS
(6)

Granting attorney's fees of P10,000.00 each to all respondents.

The case is REMANDED to the Labor Arbiter for the RECOMPUTATION of

the total monetary benefits awarded and due to the employees
concerned in accordance with the decision. The Labor Arbiter is ORDERED
to submit his compliance thereon within thirty (30) days from notice of
this decision, with copies furnished to the parties.
SO ORDERED.
Austria-Martinez, Callejo, Sr., Tinga and Chico-Nazario, JJ., concur.

SECOND DIVISION
[G.R. No. 122827. March 29, 1999.]
LIDUVINO M. MILLARES, J. CAPISTRANO CORDITA, SHIRLEY P. UY, DIONISIO
J. REQUINA, GABRIEL A. DEJERO, NELSON T. GOMONIT, IMELDA
IMPEYNADO, SULPICIO B. SUMILE, MA. CONSUELO AVIEL, SILVINO S.
GUEVARRA, FIDEL DUMANHOG, NELFA T. POLOTAN, LEMUEL C. RISMA,
JUANITO M. GONZALES, ROGELIO B. CABATUAN, EPIFANCIO E. GANANCIAL,
DOMINADOR D. ATOK, CONRADO U. SERRANO, ISIDRO J. BARNAJA, ROMEO
VIRTUDAZO, AVELINO NABLE, EDGAR TAMPOS, ERNESTO ORIAS,
DALMACIO LEGARAY, ROMEO R. BULA, ROBERTO G. GARCIA, RUDOLFO
SUZON, JERRY S. DANO, AUGUST G. ESCUDERO, OSCAR B. CATBAGAN,
TEOFILO C. SISON, NARCISO BULASA, ALBERTO CORTEZ, LILIA C.
CABRERA, NESTOR A. ACASO, BIENVENIDO MOZO, ISIDORO A.
ALMENDAREZ, VICENTE M. PILONGO, ROBERTO N. LUMPOT, PATRICIO
BANDOLA, MANUEL S. ESPINA, ISIDRO K. BALCITA, JR., EMMANUEL O.
ABRAHAM, OLEGARIO A. EPIS, NESTOR D. PEREGRINO, RAMON A.
USANAGA, PRESTO BARTOLOME, BRADY EMPEYNADO, PORFERIO N.
CONDADO, AQUILLO V. CORDOVA, LEONARDO ESTOSI, PACIFICO B.
DACORINA, PABLITO B. LLUBIT, ANTONIO DOZA, LEONITO LABADIA,
EDGARDO BELLIZA, FEDENCIO P. GEBERTAS, VIRGILIO D. GULBE, MANUEL
A. LERIO, JR., ROGELIO B. OCAMIA, RODOLFO A. CASTILLO, EDMUNDO L.
PLAZA, ROBERTO D. YAGONIA, JR., PETRONIO ESTELA, JR., CRISOLOGO A.
LOGRONIO, ERNESTO T. MORIO, ROGELIO M. DAVID, BENJAMIN U.
ARLIGUE, APOLONIO MUNDO, JR., NENE M. ESPINOSA, NILO B. BALAORO,
GERONIMO S. CONVI, VICENTE R. TARAGOZA, YOLANDO A. SALAZAR,
MANUEL A. NERI, ROGELIO C. TICAR, ROBERTO A. MACALAM, MIGUEL
MACARIOLA, WALTERIO DAPADAP, SILVERIO CUAMAG, EUPARQUIO
PLANOS, GILBERTO M. MIRA, REYNALDO BACSARSA, DIOSDADO B. ABING,
ARISTARCO V. SALON, TOMAS N. CATACTE, RODOLFO MEMORIA,
PAPENIANO CURIAS, JOSE S. CANDIA, DESIDERIO C. NAVARRO, EMMANUEL
O. ABRAHAM, JOSELITO D. ARLAN, FRANCISCO S. SANCHEZ, MANSUETO B.
LINGGO, ISIDRO BARNAJA, ROMEO S. CABRERA, LEODEGARIO CAINTIC,
NESTOR G. BLANDO, FLORENCIO B. DELIZO, MILAN M. ETES, GONZALO C.
PADILLO, LEONARDO CAGAKIT, JOSEFINO E. DULGUIME, PEPITO G.
ARREZA, AMADOR G. CAGALAWAN, GAUDENCIO C. SARMIENTO,
FLORENTINO J. BRACAMONTE, DOMINADOR H. TY, LEOPOLDO T. SUPIL,
JOSE A. DOHINOG, ANIANO T. REYES, CARLITO G. UY, PLACIDO D. PADILLO,
TERESITA C. ADRIANO, CANDIDO S. ADRIANO, and AVELINO G.
VENERACION, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION,

(FIFTH DIVISION), and PAPER INDUSTRIES

PHILIPPINES (PICOP), respondents.

CORPORATION

OF

THE

Gonzales Batiller Bilog and Associates for petitioners.

The Solicitor General for public respondent.
Ricardo B. Fabiosa and De la Rosa Tejero & Nograles for private
respondent.
SYNOPSIS
Petitioners numbering one hundred sixteen (116) occupied technical,
managerial and even a Vice Presidential positions in the mill site of
respondent Paper Industries Corporation of the Philippines (PICOP) in
Bislig, Surigao del Sur. They were retrenched by respondent when it
suffered a major financial setback brought about by the joint impact of
restrictive government regulations on logging and the economic crisis.
Accordingly, petitioners were given separation pay. Believing that the
allowances they regularly received on a monthly basis during their
employment should have been included in the computation thereof, they
lodged a complaint for separation pay differentials. The Executive LaborArbiter concluded that the allowances should be included in the
petitioners' basic pay. The NLRC set aside the Labor Arbiter's decision. It
decreed that the allowances did not form part of the salary base in
computing separation pay. cdasia
The Supreme Court held that when an employer customarily furnishes his
employee board, lodging or other facilities, the fair and reasonable value
thereof, as determined by the Secretary of Labor and Employment is
included in "wage." "Customary" as founded on long-established and
constant practice connoting regularity. The receipt of an allowance on a
monthly basis does not ipso facto characterize it as regular and forming
part of a salary because the nature of the grant is a factor worth
considering. The subject allowance were temporarily, not regularly
received by petitioners.
SYLLABUS
1.
LABOR AND SOCIAL LEGISLATION; LABOR CODE; EMPLOYMENT;
SEPARATION PAY; OBLIGATION OF EMPLOYER TO GRANT SEPARATION PAY
TO AFFECTED EMPLOYEES. In case of retrenchment to prevent losses,
Art. 283 of the Labor Code imposes on the employer an obligation to
grant to the affected employees separation pay equivalent to one (1)

month pay or at least one-half (1/2) month pay for every year of service,
whichever is higher.
2.
ID.; ID.; ID.; WAGE; INCLUDES BOARD, LODGING OR OTHER
FACILITIES CUSTOMARILY FURNISHED BY EMPLOYER INCLUDED THEREIN.
When an employer customarily furnishes his employee board, lodging
or other facilities, the fair and reasonable value thereof, as determined by
the Secretary of Labor and Employment, is included in "wage."
3.
ID.; ID.; ID.; ID.; ID.; RECEIPT OF ALLOWANCE ON MONTHLY BASIS
DOES NOT IPSO FACTO CHARACTERIZE IT AS REGULAR AND FORMING
PART OF SALARY; CASE AT BAR. The receipt of an allowance on a
monthly basis does not ipso facto characterize it as regular and forming
part of salary because the nature of the grant is a factor worth
considering. In the case at bar, the subject allowances were temporarily,
not regularly, received by petitioners. In the case of the housing
allowance, once a vacancy occurs in the company-provided housing
accommodations, the employee concerned transfers to the company
premises and his housing allowance is discontinued . . . . On the other
hand, the transportation allowance is in the form of advances for actual
transportation expenses subject to liquidation . . . given to employees
who have personal cars. The Bislig allowance is given to Division
Managers and corporate officers assigned in Bislig, Surigao del Norte.
Once the officer is transferred outside Bislig, the allowance stops.
IaCHTS
4.
ID.; ID.; ID.; ID.; IN DETERMINING WHETHER PRIVILEGE IS FACILITY,
THE CRITERION IS NOT SO MUCH ITS KIND BUT ITS PURPOSE; CASE AT
BAR. Although it is quite easy to comprehend "board" and "lodging," it
is not so with "facilities." Thus, Sec. 5, Rule VII, Book III, of the Rules
Implementing the Labor Code gives meaning to the term as including
articles or services for the benefit of the employee or his family but
excluding tools of the trade or articles or service primarily for the benefit
of the employer or necessary to the conduct of the employer's business.
The Staff/Manager's allowance may fall under "lodging" but the
transportation and Bislig allowances are not embraced in "facilities" on
the main consideration that they are granted as well as the
Staff/Manager's allowance for respondent PICOP's benefit and
convenience, i.e., to insure that petitioners render quality performance. In
determining whether a privilege is a facility, the criterion is not so much
its kind but its purpose. That the assailed allowances were for the benefit

and convenience of respondent company was supported by

circumstance that they were not subjected to withholding tax.

the

5.
ID.; ID.; SECRETARY OF LABOR AND EMPLOYMENT; POWER THEREOF
TO FIX FAIR AND REASONABLE VALUE OF BOARD, LODGING AND OTHER
FACILITIES CUSTOMARILY FURNISHED BY AN EMPLOYER TO EMPLOYEES;
CASE AT BAR. The Secretary of Labor and Employment under Sec. 6,
Rule VII, Book III, of the Rules Implementing the Labor Code may from
time to time fix in appropriate issuances the "fair and reasonable value of
board, lodging and other facilities customarily furnished by an employer
to his employees." Petitioners' allowances do not represent such fair and
reasonable value as determined by the proper authority simply because
the Staff/Manager's allowance and transportation allowance were
amounts given by respondent company in lieu of actual provisions for
housing and transportation needs whereas the Bislig allowance was given
in consideration of being assigned to the hostile environment then
prevailing in Bislig.
6.
ID.; ID.; EMPLOYMENT; SEPARATION PAY; SANTOS, SORIANO AND
INSULAR CASES NOT APPLICABLE IN CASE AT BAR. In Santos the Court
decreed that in the computation of separation pay awarded in lieu of
reinstatement, account must be taken not only of the basic salary but
also of transportation and emergency living allowances. Later, the Court
in Soriano, citing Santos, was general in its holding that the salary base
properly used in computing separation pay where reinstatement was no
longer feasible should include not just the basic salary but also the
regular allowances that the employee had been receiving. Insular merely
reiterated the aforementioned rulings. The rationale is not difficult to
discern. It is the obligation of the employer to pay an illegally dismissed
employee the whole amount of his salaries plus all other benefits,
bonuses and general increases to which he would have been normally
entitled had he not been dismissed and had not stopped working. The
same holds true in case of retrenched employees. And thus we applied
Insular and Soriano in Planters in the computation of separation pay of
retrenched employees. Songco likewise involved retrenchment and was
relied upon in Planters, Soriano and Santos in the proper amount of
separation pay. As culled from the foregoing jurisprudence, separation
pay when awarded to an illegally dismissed employee in lieu of
reinstatement or to a retrenched employee should be computed based
not only on the basic salary but also on the regular allowances that the
employee had been receiving. But in view of the previous discussion that

the disputed allowances were not regularly received by petitioners herein,

there was no reason at all for petitioners to resort to the above cases.
7.
ID.; ID.; ID.; ID.; NEITHER IS KNEEBONE CASE APPLICABLE. Neither
is Kneebone applicable, contrary to the finding of the NLRC, because of
the difference in factual circumstances. In Kneebone, the Court was
tasked to resolve the issue whether the representation and transportation
allowances formed part of salary as to be considered in the computation
of retirement benefits. The ruling was in the negative on the main ground
that the retirement plan of the company expressly excluded such
allowances from salary. IECcaA
DECISION
BELLOSILLO, J p:
Petitioners numbering one hundred sixteen (116) 1 occupied the positions
of Technical Staff, Unit Manager, Section Manager, Department Manager,
Division Manager and Vice President in the mill site of respondent Paper
Industries Corporation of the Philippines (PICOP) in Bislig, Surigao del Sur.
In 1992 PICOP suffered a major financial setback allegedly brought about
by the joint impact of restrictive government regulations on logging and
the economic crisis. To avert further losses, it undertook a retrenchment
program and terminated the services of petitioners. Accordingly,
petitioners received separation pay computed at the rate of one (1)
month basic pay for every year of service. Believing however that the
allowances they allegedly regularly received on a monthly basis during
their employment should have been included in the computation thereof
they lodged a complaint for separation pay differentials.
The allowances in question pertained to the following
1.

Staff/Manager's Allowance

Respondent PICOP provides free housing facilities to supervisory and

managerial employees assigned in Bislig. The privilege includes free
water and electric consumption. Owing however to shortage of such
facilities, it was constrained to grant Staff allowance instead to those who
live in rented houses outside but near the vicinity of the mill site. But the
allowance ceases whenever a vacancy occurs in the company's housing
facilities. The former grantee is then directed to fill the vacancy. For Unit,
Section and Department Managers, respondent PICOP gives an additional
amount to meet the same kind of expenses called Manager's allowance.
2.

Transportation Allowance

To relieve respondent PICOP's motor pool in Bislig from a barrage of

requests for company vehicles and to stabilize company vehicle
requirements it grants transportation allowance to key officers and
Managers assigned in the mill site who use their own vehicles in the
performance of their duties. It is a conditional grant such that when the
conditions no longer obtain, the privilege is discontinued. The recipients
of this kind of allowance are required to liquidate it by submitting a report
with a detailed enumeration of expenses incurred.
3.

Bislig Allowance

The Bislig Allowance is given to Division Managers and corporate officers

assigned in Bislig on account of the hostile environment prevailing
therein. But once the recipient is transferred elsewhere outside Bislig, the
allowance ceases.
Applying Art. 97, par. (f), of the Labor Code which defines "wage," the
Executive Labor Arbiter opined that the subject allowances, being
customarily furnished by respondent PICOP and regularly received by
petitioners, formed part of the latter's wages. Resolving the controversy
from another angle, on the strength of the ruling in Santos v. NLRC 2 and
Soriano v. NLRC 3 that in the computation of separation pay account
should be taken not just of the basic salary but also of the regular
allowances that the employee had been receiving, he concluded that the
allowances should be included in petitioners' base pay. Thus respondent
PICOP was ordered on 28 April 1994 to pay petitioners Four Million Four
Hundred Eighty-One Thousand Pesos (P4,481,000.00) representing
separation pay differentials plus ten per cent (10%) thereof as attorney's
fees. 4
The National Labor Relations Commission (NLRC) did not share the view of
the Executive Labor Arbiter. On 7 October 1994 it set aside the assailed
decision by decreeing that the allowances did not form part of the salary
base used in computing separation pay. 5 Its ruling was based on the
finding that the cases relied upon by the Executive Labor Arbiter were
inapplicable since they involved illegal dismissal where separation pay
was granted in lieu of reinstatement which was no longer feasible.
Instead, what it considered in point was Estate of the late Eugene J.
Kneebone v. NLRC 6 where the Court held that representation and
transportation allowances were deemed not part of salary and should
therefore be excluded in the computation of separation benefits. Relating
the present case with Art. 97, par. (f), of the Labor Code, the NLRC
likewise found that petitioners' allowances were contingency-based and

thus not included in their salaries. On 26 September 1995 reconsideration

was denied. 7
In this petition for certiorari, petitioners submit that their allowances are
included in the definition of "facilities" in Art. 97, par. (f), of the Labor
Code, being necessary and indispensable for their existence and
subsistence. Furthermore they claim that their availment of the monetary
equivalent of those "facilities" on a monthly basis was characterized by
permanency, regularity and customariness. And to fortify their arguments
they insist on the applicability of Santos, 8 Soriano, 9 The Insular Life
Assurance Company, 10 Planters Products, Inc. 11 and Songco 12 which
are all against the NLRC holding that the salary base in computing
separation pay includes not just the basic salary but also the regular
allowances. cdasia
There is no showing of grave abuse of discretion on the part of the NLRC.
In case of retrenchment to prevent losses, Art. 283 of the Labor Code
imposes on the employer an obligation to grant to the affected
employees separation pay equivalent to one (1) month pay or at least
one-half (1/2) month pay for every year of service, whichever is higher.
Since the law speaks of "pay," the question arises, "What exactly does the
term connote?" We correlate Art. 283 with Art. 97 of the same Code on
definition of terms. "Pay" is not defined therein but "wage." In Songco the
Court explained that both words (as well as salary) generally refer to one
and the same meaning, i.e., a reward or recompense for services
performed. Specifically, "wage" is defined in letter (f) as the remuneration
or earnings, however designated, capable of being expressed in terms of
money, whether fixed or ascertained on a time, task, piece, or
commission basis, or other method of calculating the same, which is
payable by an employer to an employee under a written or unwritten
contract of employment for work done or to be done, or for services
rendered or to be rendered and includes the fair and reasonable value, as
determined by the Secretary of Labor, of board, lodging, or other facilities
customarily furnished by the employer to the employee.
We invite attention to the above-underlined clause. Stated differently,
when an employer customarily furnishes his employee board, lodging or
other facilities, the fair and reasonable value thereof, as determined by
the Secretary of Labor and Employment, is included in "wage." In order to
ascertain whether the subject allowances form part of petitioner's
"wages," we divide the discussion on the following "customarily

furnished;" "board, lodging or other facilities;" and, "fair and reasonable

value as determined by the Secretary of Labor."
"Customary" is founded on long-established and constant practice 13
connoting regularity. 14 The receipt of an allowance on a monthly basis
does not ipso facto characterize it as regular and forming part of salary
15 because the nature of the grant is a factor worth considering. We
agree with the observation of the Office of the Solicitor General that the
subject allowances were temporarily, not regularly, received by
petitioners because
In the case of the housing allowance, once a vacancy occurs in the
company-provided housing accommodations, the employee concerned
transfers to the company premises and his housing allowance is
discontinued . . . .
On the other hand, the transportation allowance is in the form of
advances for actual transportation expenses subject to liquidation . . .
given only to employees who have personal cars.
The Bislig allowance is given to Division Managers and corporate officers
assigned in Bislig, Surigao del Norte. Once the officer is transferred
outside Bislig, the allowance stops. 16
We add that in the availment of the transportation allowance, respondent
PICOP set another requirement that the personal cars be used by the
employees in the performance of their duties. When the conditions for
availment ceased to exist, the allowance reached the cutoff point. The
finding of the NLRC along the same line likewise merits concurrence, i.e.,
petitioners' continuous enjoyment of the disputed allowances was based
on contingencies the occurrence of which wrote finis to such enjoyment.
Although it is quite easy to comprehend "board" and "lodging," it is not so
with "facilities." Thus Sec. 5, Rule VII, Book III, of the Rules Implementing
the Labor Code gives meaning to the term as including articles or services
for the benefit of the employee or his family but excluding tools of the
trade or articles or service primarily for the benefit of the employer or
necessary to the conduct of the employer's business. The Staff/Manager's
allowance may fall under "lodging" but the transportation and Bislig
allowances are not embraced in "facilities" on the main consideration that
they are granted as well as the Staff/Manager's allowance for respondent
PICOP's benefit and convenience, i.e., to insure that petitioners render
quality performance. In determining whether a privilege is a facility, the
criterion is not so much its kind but its purpose. 17 That the assailed

allowances were for the benefit and convenience of respondent company

was supported by the circumstance that they were not subjected to
withholding tax. Revenue Audit Memo Order No. 1-87 pertinently provides

3.2 . . . transportation, representation or entertainment expenses shall

not constitute taxable compensation if:
(a) It is for necessary travelling and representation or entertainment
expenses paid or incurred by the employee in the pursuit of the trade or
business of the employer, and
(b) The
employee
is
required
to,
and
does,
make
an
accounting/liquidation for such expense in accordance with the specific
requirements of substantiation for such category or expense.
Board and lodging allowances furnished to an employee not in excess of
the latter's needs and given free of charge, constitute income to the latter
except if such allowances or benefits are furnished to the employee for
the convenience of the employer and as necessary incident to proper
performance of his duties in which case such benefits or allowances do
not constitute taxable income. 18
The Secretary of Labor and Employment under Sec. 6, Rule VII, Book III, of
the Rules Implementing the Labor Code may from time to time fix in
appropriate issuances the "fair and reasonable value of board, lodging
and other facilities customarily furnished by an employer to his
employees." Petitioners' allowances do not represent such fair and
reasonable value as determined by the proper authority simply because
the Staff/Manager's allowance and transportation allowance were
amounts given by respondent company in lieu of actual provisions for
housing and transportation needs whereas the Bislig allowance was given
in consideration of being assigned to the hostile environment then
prevailing in Bislig. cdll
The inevitable conclusion is that, as reached by the NLRC, subject
allowances did not form part of petitioners' wages.
In Santos 19 the Court decreed that in the computation of separation pay
awarded in lieu of reinstatement, account must be taken not only of the
basic salary but also of transportation and emergency living allowances.
Later, the Court in Soriano, citing Santos, was general in its holding that
the salary base properly used in computing separation pay where
reinstatement was no longer feasible should include not just the basic

salary but also the regular allowances that the employee had been
receiving. Insular merely reiterated the aforementioned rulings. The
rationale is not difficult to discern. It is the obligation of the employer to
pay an illegally dismissed employee the whole amount of his salaries plus
all other benefits, bonuses and general increases to which he would have
been normally entitled had he not been dismissed and had not stopped
working. 20 The same holds true in case of retrenched employees. And
thus we applied Insular and Soriano in Planters in the computation of
separation pay of retrenched employees. Songco likewise involved
retrenchment and was relied upon in Planters, Soriano and Santos in
determining the proper amount of separation pay. As culled from the
foregoing jurisprudence, separation pay when awarded to an illegally
dismissed employee in lieu of reinstatement or to a retrenched employee
should be computed based not only on the basic salary but also on the
regular allowances that the employee had been receiving. But in view of
the previous discussion that the disputed allowances were not regularly
received by petitioners herein, there was no reason at all for petitioners to
resort to the above cases.
Neither is Kneebone applicable, contrary to the finding of the NLRC,
because of the difference in factual circumstances. In Kneebone, the
Court was tasked to resolve the issue whether the representation and
transportation allowances formed part of salary as to be considered in the
computation of retirement benefits. The ruling was in the negative on the
main ground that the retirement plan of the company expressly excluded
such allowances from salary.
WHEREFORE, the petition is DISMISSED. The resolution of public
respondent National Labor Relations Commission dated 7 October 1994
holding that the Staff/Manager's, transportation and Bislig allowances did
not form part of the salary base used in computing the separation pay of
petitioners, as well as its resolution dated 26 September 1995 denying
reconsideration, is AFFIRMED. No costs.
SO ORDERED.
Puno, Mendoza, Quisumbing and Buena, JJ., concur.

FIRST DIVISION
[G.R. Nos. 50999-51000. March 23, 1990.]
JOSE SONGCO, ROMEO CIPRES, and AMANCIO MANUEL, petitioners, vs.
NATIONAL LABOR RELATIONS COMMISSION (FIRST DIVISION), LABOR
ARBITER FLAVIO AGUAS, and F.E. ZUELLIG (M), INC., respondents.
Raul E. Espinosa for petitioners.
Lucas Emmanuel B. Canilao for petitioner A. Manuel.
Atienza, Tabara, Del Rosario & Castillo for private respondent.
SYLLABUS
1.
LABOR
LAW;
NATIONAL
LABOR
RELATIONS
COMMISSION;
SEPARATION PAY; ALLOWANCES AND EARNED COMMISSIONS INCLUDED IN
THE MONTHLY SALARY IN THE COMPUTATION THEREOF. Insofar as the
issues of whether or not allowances should be included in the monthly
salary of petitioners for the purpose of computation of their separation
pay is concerned, this has been settled in the case of Santos v. NLRC, et
al., G.R. No. 76721, September 21, 1987, 154 SCRA 166, where We ruled
that "in the computation of backwages and separation pay, account must
be taken not only of the basic salary of petitioner but also of her
transportation and emergency living allowances." This ruling was
reiterated in Soriano v. NLRC, et al., G.R. No. 75510, October 27, 1987,
155 SCRA 124 and recently, in Planters Products, Inc. v. NLRC, et al., G.R.
No. 78524, January 20, 1989. Inasmuch as the words "wages", "pay" and
"salary" have the same meaning, and commission is included in the
definition of "wage", the logical conclusion, therefore, is, in the
computation of the separation pay of petitioners, their salary base should
include also their earned sales commissions.
2.
ID.; ID.; TERM "WAGES" INCLUDE COMMISSIONS. Article 97(f) by
itself is explicit that commission is included in the definition of the term
"wage". It has been repeatedly declared by the courts that where the law
speaks in clear and categorical language, there is no room for
interpretation or construction; there is only room for application (Cebu
Portland Cement Co. v. Municipality of Naga, G.R. Nos. 24116-17, August
22, 1968, 24 SCRA 708; Gonzaga v. Court of Appeals, G.R. No. L-27455,
June 28, 1973, 51 SCRA 381). A plain and unambiguous statute speaks for
itself, and any attempt to make it clearer is vain labor and tends only to
obscurity.

3.
ID.; ID.; SYNONYMOUS TO "SALARY" AND "PAY". The ambiguity
between Article 97(f), which defines the term 'wage' and Article XIV of the
Collective Bargaining Agreement, Article 284 of the Labor Code and
Sections 9(b) and 10 of the Implementing Rules, which mention the terms
"pay" and "salary", is more apparent than real. Broadly, the word "salary"
means a recompense or consideration made to a person for his pains or
industry in another man's business. Whether it be derived from
"salarium," or more fancifully from "sal," the pay of the Roman soldier, it
carries with it the fundamental idea of compensation for services
rendered. Indeed, there is eminent authority for holding that the words
"wages" and "salary" are in essence synonymous (Words and Phrases,
Vol. 38 Permanent Edition, p. 44 citing Hopkins vs. Cromwell, 85 N.Y.S.
839, 841, 89 App. Div. 481; 38 Am. Jur. 496). "Salary," the etymology of
which is the Latin word "salarium," is often used interchangeably with
"wage", the etymology of which is the Middle English word "wagen". Both
words generally refer to one and the same meaning, that is, a reward or
recompense for services performed. Likewise, "pay" is the synonym of
"wages" and "salary" (Black's Law Dictionary, 5th Ed.).
4.
ID.; ID.; ID.; COMMISSION; DEFINED. We agree with the Solicitor
General that granting, in gratia argumenti, that the commissions were in
the form of incentives or encouragement, so that the petitioners would be
inspired to put a little more industry on the jobs particularly assigned to
them, still these commissions are direct remunerations for services
rendered which contributed to the increase of income of Zuellig.
Commission is the recompense, compensation or reward of an agent,
salesman, executor, trustees, receiver, factor, broker or bailee, when the
same is calculated as a percentage on the amount of his transactions or
on the profit to the principal (Black's Law Dictionary, 5th Ed., citing
Weiner v. Swales, 217 Md. 123, 141 A. 2d 749, 750). The nature of the
work of a salesman and the reason for such type of remuneration for
services rendered demonstrate clearly that commissions are part of
petitioners' wage or salary.
5.
ID.; ID.; ID.; ID.; BASIS IN THE COMPUTATION THEREOF. In Soriano
v. NLRC, et al., supra, in resolving the issue of the salary base that should
be used in computing the separation pay, We held that: "The
commissions also claimed by petitioner ('override commission' plus 'net
deposit incentive') are not properly includible in such base figure since
such commissions must be earned by actual market transactions
attributable to petitioner." Applying this by analogy, since the
commissions in the present case were earned by actual market

transactions attributable to petitioners, these should be included in their

separation pay. In the computation thereof, what should be taken into
account is the average commissions earned during their last year of
employment.

6.
ID.; INTERPRETATION OF THE LABOR CODE AND ITS IMPLEMENTING
RULES AND REGULATIONS; SHALL BE RESOLVED IN FAVOR OF THE
WORKINGMEN. In carrying out and interpreting the Labor Code's
provisions and its implementing regulations, the workingman's welfare
should be the primordial and paramount consideration. This kind of
interpretation gives meaning and substance to the liberal and
compassionate spirit of the law as provided for in Article 4 of the Labor
Code which states that "all doubts in the implementation and
interpretation of the provisions of the Labor Code including its
implementing rules and regulations shall be resolved in favor of labor"
(Abella v. NLRC, G.R. No. 71812, July 30, 1987, 152 SCRA 140; Manila
Electric Company v. NLRC, et al., G.R. No. 78763, July 12, 1989), and
Article 1702 of the Civil Code which provides that "in case of doubt, all
labor legislation and all labor contracts shall be construed in favor of the
safety and decent living for the laborer.
DECISION
MEDIALDEA, J p:
This is a petition for certiorari seeking to modify the decision of the
National Labor Relations Commission in NLRC Case No. RB-IV-20840-78-T
entitled, "Jose Songco and Romeo Cipres, Complainants-Appellants, v. F.E.
Zuellig (M), Inc., Respondent-Appellee" and NLRC Case No. RN-IV-2085578-T entitled, "Amancio Manuel, Complainant-Appellant, v. F.E. Zuellig (M),
Inc., Respondent-Appellee," which dismissed the appeal of petitioners
herein and in effect affirmed the decision of the Labor Arbiter ordering
private respondent to pay petitioners separation pay equivalent to their
one month salary (exclusive of commissions, allowances, etc.) for every
year of service.
The antecedent facts are as follows:
Private respondent F.E. Zuellig (M), Inc., (hereinafter referred to as Zuellig)
filed with the Department of Labor (Regional Office No. 4) an application
seeking clearance to terminate the services of petitioners Jose Songco,
Romeo Cipres, and Amancio Manuel (hereinafter referred to as

petitioners) allegedly on the ground of retrenchment due to financial

losses. This application was seasonably opposed by petitioners alleging
that the company is not suffering from any losses. They alleged further
that they are being dismissed because of their membership in the union.
At the last hearing of the case, however, petitioners manifested that they
are no longer contesting their dismissal. The parties then agreed that the
sole issue to be resolved is the basis of the separation pay due to
petitioners. Petitioners, who were in the sales force of Zuellig received
monthly salaries of at least P400.00. In addition, they received
commissions for every sale they made. LibLex
The Collective Bargaining Agreement entered into between Zuellig and
F.E. Zuellig Employees Association, of which petitioners are members,
contains the following provision (p. 71, Rollo):
"ARTICLE XIV Retirement Gratuity.
"Section 1(a) Any employee, who is separated from employment due to
old age, sickness, death or permanent lay-off not due to the fault of said
employee shall receive from the company a retirement gratuity in an
amount equivalent to one (1) month's salary per year of service. One
month of salary as used in this paragraph shall be deemed equivalent to
the salary at date of retirement; years of service shall be deemed
equivalent to total service credits, a fraction of at least six months being
considered one year, including probationary employment. (Emphasis
supplied).
On the other hand, Article 284 of the Labor Code then prevailing provides:
"Art. 284. Reduction of personnel. The termination of employment of
any employee due to the installation of labor saving-devices, redundancy,
retrenchment to prevent losses, and other similar causes, shall entitle the
employee affected thereby to separation pay. In case of termination due
to the installation of labor-saving devices or redundancy, the separation
pay shall be equivalent to one (1) month pay or to at least one (1) month
pay for every year of service, whichever is higher. In case of retrenchment
to prevent losses and other similar causes, the separation pay shall be
equivalent to one (1) month pay or at least one-half (1/2) month pay for
every year of service, whichever is higher. A fraction of at least six (6)
months shall be considered one (1) whole year." (Emphasis supplied) llcd
In addition, Sections 9 (b) and 10, Rule 1, Book VI of the Rules
Implementing the Labor Code provide:

xxx

xxx

xxx

"Sec. 9(b).
Where the termination of employment is due to
retrenchment initiated by the employer to prevent losses or other similar
causes, or where the employee suffers from a disease and his continued
employment is prohibited by law or is prejudicial to his health or to the
health of his co-employees, the employee shall be entitled to termination
pay equivalent at least to his one month salary, or to one-half month pay
for every year of service, whichever is higher, a fraction of at least six (6)
months being considered as one whole year.
xxx

xxx

xxx

"Sec. 10. Basis of termination pay. The computation of the termination

pay of an employee as provided herein shall be based on his latest salary
rate, unless the same was reduced by the employer to defeat the
intention of the Code, in which case the basis of computation shall be the
rate before its deduction." (Emphasis supplied)
On June 26, 1978, the Labor Arbiter rendered a decision, the dispositive
portion of which reads (p. 78, Rollo):
"RESPONSIVE TO THE FOREGOING, respondent should be as it is hereby,
ordered to pay the complainants separation pay equivalent to their one
month salary (exclusive of commissions, allowances, etc.) for every year
of service that they have worked with the company.
"SO ORDERED."
The appeal by petitioners to the National Labor Relations Commission was
dismissed for lack of merit.
Hence, the present petition.
On June 2, 1980, the Court, acting on the verified "Notice of Voluntary
Abandonment and Withdrawal of Petition" dated April 7, 1980 filed by
petitioner Romeo Cipres, based on the ground that he wants "to abide by
the decision appealed from" since he had "received, to his full and
complete satisfaction, his separation pay," resolved to dismiss the
petition as to him.
The issue is whether or not earned sales commissions and allowances
should be included in the monthly salary of petitioners for the purpose of
computation of their separation pay.
The petition is impressed with merit.

Petitioners' position was that in arriving at the correct and legal amount of
separation pay due them, whether under the Labor Code or the CBA, their
basic salary, earned sales commissions and allowances should be added
together. They cited Article 97(f) of the Labor Code which includes
commission as part of one's salary, to wit: LibLex
"(f) 'Wage' paid to any employee shall mean the remuneration or
earnings, however designated, capable of being expressed in terms of
money, whether fixed or ascertained on a time, task, piece, or
commission basis, or other method of calculating the same, which is
payable by an employer to an employee under a written or unwritten
contract of employment for work done or to be done, or for services
rendered or to be rendered, and includes the fair and reasonable value, as
determined by the Secretary of Labor, of board, lodging, or other facilities
customarily furnished by the employer to the employee. 'Fair and
reasonable value' shall not include any profit to the employer or to any
person affiliated with the employer."
Zuellig argues that if it were really the intention of the Labor Code as well
as its implementing rules to include commission in the computation of
separation pay, it could have explicitly said so in clear and unequivocal
terms. Furthermore, in the definition of the term "wage", "commission" is
used only as one of the features or designations attached to the word
remuneration or earnings.
Insofar as the issue of whether or not allowances should be included in
the monthly salary of petitioners for the purpose of computation of their
separation pay is concerned, this has been settled in the case of Santos v.
NLRC, et al., G.R. No. 76721, September 21, 1987, 154 SCRA 166, where
We ruled that "in the computation of backwages and separation pay,
account must be taken not only of the basic salary of petitioner but also
of her transportation and emergency living allowances." This ruling was
reiterated in Soriano v. NLRC, et al., G.R. No. 75510, October 27, 1987,
155 SCRA 124 and recently, in Planters Products, Inc. v. NLRC, et al., G.R.
No. 78524, January 20, 1989. cdphil
We shall concern ourselves now with the issue of whether or not earned
sales commissions should be included in the monthly salary of petitioners
for the purpose of computation of their separation pay.
Article 97(f) by itself is explicit that commission is included in the
definition of the term "wage". It has been repeatedly declared by the
courts that where the law speaks in clear and categorical language, there

is no room for interpretation or construction; there is only room for

application (Cebu Portland Cement Co. v. Municipality of Naga, G.R. Nos.
24116-17, August 22, 1968, 24 SCRA 708; Gonzaga v. Court of Appeals,
G.R. No. L-27455, June 28, 1973, 51 SCRA 381). A plain and unambiguous
statute speaks for itself, and any attempt to make it clearer is vain labor
and tends only to obscurity. However, it may be argued that if We
correlate Article 97(f) with Article XIV of the Collective Bargaining
Agreement, Article 284 of the Labor Code and Sections 9(b) and 10 of the
Implementing Rules, there appears to be an ambiguity. In this regard, the
Labor Arbiter rationalized his decision in this manner (pp. 74-76, Rollo):
'The definition of 'wage' provided in Article 96 (sic) of the Code can be
correctly be (sic) stated as a general definition. It is 'wage' in its generic
sense. A careful perusal of the same does not show any indication that
commission is part of salary. We can say that commission by itself may be
considered a wage. This is not something novel for it cannot be gain said
that certain types of employees like agents, field personnel and salesmen
do not earn any regular daily, weekly or monthly salaries, but rely mainly
on commission earned. LibLex
"Upon the other hand, the provisions of Section 10, Rule I, Book VI of the
implementing rules in conjunction with Articles 273 and 274 (sic) of the
Code specifically states that the basis of the termination pay due to one
who is sought to be legally separated from the service is 'his latest salary
rates.'
xxx

xxx

xxx

"Even Articles 273 and 274 (sic) invariably use 'monthly pay or monthly
salary.'
"The above terms found in those Articles and the particular Rules were
intentionally used to express the intent of the framers of the law that for
purposes of separation pay they mean to be specifically referring to
salary only.
". . . . Each particular benefit provided in the Code and other Decrees on
Labor has its own peculiarities and nuances and should be interpreted in
that light. Thus, for a specific provision, a specific meaning is attached to
simplify matters that may arise therefrom. The general guidelines in (sic)
the formation of specific rules for particular purpose. Thus, that what
should be controlling in matters concerning termination pay should be the
specific provisions of both Book VI of the Code and the Rules. At any rate,
settled is the rule that in matters of conflict between the general

provision of law and that of a particular or specific provision, the latter

should prevail."
On its part, the NLRC ruled (p. 110, Rollo):
"From the aforequoted provisions of the law and the implementing rules,
it could be deduced that wage is used in its generic sense and obviously
refers to the basic wage rate to be ascertained on a time, task, piece or
commission basis or other method of calculating the same. It does not,
however, mean that commission, allowances or analogous income
necessarily forms part of the employee's salary because to do so would
lead to anomaleas (sic), if not absurd, construction of the word "salary."
For what will prevent the employee from insisting that emergency living
allowance, 13th month pay, overtime and premium pay, and other fringe
benefits should be added to the computation of their separation pay. This
situation, to our mind, is not the real intent of the Code and its rules."
We rule otherwise. The ambiguity between Article 97(f), which defines the
term 'wage' and Article XIV of the Collective Bargaining Agreement,
Article 284 of the Labor Code and Sections 9(b) and 10 of the
Implementing Rules, which mention the terms "pay" and "salary", is more
apparent than real. Broadly, the word "salary" means a recompense or
consideration made to a person for his pains or industry in another man's
business. Whether it be derived from "salarium," or more fancifully from
"sal," the pay of the Roman soldier, it carries with it the fundamental idea
of compensation for services rendered. Indeed, there is eminent authority
for holding that the words "wages" and "salary" are in essence
synonymous (Words and Phrases, Vol. 38 Permanent Edition, p. 44 citing
Hopkins vs. Cromwell, 85 N.Y.S. 839, 841, 89 App. Div. 481; 38 Am. Jur.
496). "Salary," the etymology of which is the Latin word "salarium," is
often used interchangeably with "wage", the etymology of which is the
Middle English word "wagen". Both words generally refer to one and the
same meaning, that is, a reward or recompense for services performed.
Likewise, "pay" is the synonym of "wages" and "salary" (Black's Law
Dictionary, 5th Ed.). Inasmuch as the words "wages", "pay" and "salary"
have the same meaning, and commission is included in the definition of
"wage", the logical conclusion, therefore, is, in the computation of the
separation pay of petitioners, their salary base should include also their
earned sales commissions. LibLex
The aforequoted provisions are not the only consideration for deciding the
petition in favor of the petitioners.

We agree with the Solicitor General that granting, in gratia argumenti,

that the commissions were in the form of incentives or encouragement,
so that the petitioners would be inspired to put a little more industry on
the jobs particularly assigned to them, still these commissions are direct
remunerations for services rendered which contributed to the increase of
income of Zuellig. Commission is the recompense, compensation or
reward of an agent, salesman, executor, trustees, receiver, factor, broker
or bailee, when the same is calculated as a percentage on the amount of
his transactions or on the profit to the principal (Black's Law Dictionary,
5th Ed., citing Weiner v. Swales, 217 Md. 123, 141 A.2d 749, 750). The
nature of the work of a salesman and the reason for such type of
remuneration for services rendered demonstrate clearly that commissions
are part of petitioners' wage or salary. We take judicial notice of the fact
that some salesmen do not receive any basic salary but depend on
commissions and allowances or commissions alone, although an
employer-employee relationship exists. Bearing in mind the preceding
discussions, if We adopt the opposite view that commissions do not form
part of wage or salary, then, in effect, We will be saying that this kind of
salesmen do not receive any salary and therefore, not entitled to
separation pay in the event of discharge from employment. Will this not
be absurd? This narrow interpretation is not in accord with the liberal
spirit of our labor laws and considering the purpose of separation pay
which is, to alleviate the difficulties which confront a dismissed employee
thrown to the streets to face the harsh necessities of life. LexLib
Additionally, in Soriano v. NLRC, et al., supra, in resolving the issue of the
salary base that should be used in computing the separation pay, We held
that:.
"The commissions also claimed by petitioner ('override commission' plus
'net deposit incentive') are not properly includible in such base figure
since such commissions must be earned by actual market transactions
attributable to petitioner."
Applying this by analogy, since the commissions in the present case were
earned by actual market transactions attributable to petitioners, these
should be included in their separation pay. In the computation thereof,
what should be taken into account is the average commissions earned
during their last year of employment.
The final consideration is, in carrying out and interpreting the Labor
Code's provisions and its implementing regulations, the workingman's
welfare should be the primordial and paramount consideration. This kind

of interpretation gives meaning and substance to the liberal and

compassionate spirit of the law as provided for in Article 4 of the Labor
Code which states that "all doubts in the implementation and
interpretation of the provisions of the Labor Code including its
implementing rules and regulations shall be resolved in favor of labor"
(Abella v. NLRC, G.R. No. 71812, July 30, 1987, 152 SCRA 140; Manila
Electric Company v. NLRC, et al., G.R. No. 78763, July 12, 1989), and
Article 1702 of the Civil Code which provides that "in case of doubt, all
labor legislation and all labor contracts shall be construed in favor of the
safety and decent living for the laborer. LLphil
ACCORDINGLY, the petition is hereby GRANTED. The decision of the
respondent National Labor Relations Commission is MODIFIED by
including allowances and commissions in the separation pay of petitioners
Jose Songco and Amancio Manuel. The case is remanded to the Labor
Arbiter for the proper computation of said separation pay.
SO ORDERED.
Narvasa, Cruz, Gancayco and Grio-Aquino, JJ., concur.

EN BANC
[G.R. No. L-30279. July 30, 1982.]
PHILIPPINE NATIONAL BANK, petitioner, vs. PHILIPPINE NATIONAL BANK
EMPLOYEES ASSOCIATION (PEMA) and COURT OF INDUSTRIAL RELATIONS,
respondents.
Conrado E. Medina, Edgardo M. Magtalas and Nestor Kalaw for petitioner.
Leon O. Ty, Gesmundo Fernandez & Zulueta Oliver B. Gesmundo and
Israel Bocobo for respondents.
SYNOPSIS
In connection with an industrial dispute certified by the President of the
Philippines, respondent Court of Industrial Relations (CIR) ruled, that
petitioner Philippine National Bank (PNB) should include cost-of-living
allowances (equity pay) and longevity pay to the sum total of every
employee's basic salary or wage as basis for computation of the overtime
pay of its employees. Respondent CIR's decision was based on its
interpretation of the applicable law, the Eight-Hour Labor Law
(Commonwealth Act No. 444), in the light of its own impression of the
Supreme Court's opinion in NAWASA vs. NAWASA Consolidated Unions (G.
R. No. L-18938, promulgated August 31, 1964, 11 SCRA 766) wherein it
was held that in computing the daily wage of employees and workers who
worked seven days a week their 25% Sunday differential pay should be
included; and the computation should not be based exclusively on the
basic wage.
On review, the Supreme Court held that: (a) longevity pay cannot be
included in the computation of overtime pay since the contrary is
expressly stipulated in the collective bargaining agreement which
constitutes the law between the parties; (b) notwithstanding the portions
of the NAWASA opinion relied upon by respondent PEMA, there is nothing
in the Eight- Hour Labor Law that could justify its posture that the cost of
living allowance should be added to the regular wage in computing
overtime pay; (c) the NAWASA ruling relied upon by respondent PEMA was
obiter dictum, the only issue therein being whether or not "in computing
the daily wage, the additional compensation for Sunday should be
included"; and (d) in the absence of any specific provision in a collective
bargaining agreement, what are decisive in determining the basis for
computation of overtime pay are two germane considerations, namely:
(1) whether or not the additional pay is for extra work done or service

rendered; and (2) whether or not the same is intended to be permanent

and regular, not contingent nor temporary and given only to remedy a
situation which can change any time.
SYLLABUS
1.
LABOR AND SOCIAL LEGISLATIONS; EIGHT-HOUR LABOR LAW
(COMMONWEALTH ACT NO. 444); OVERTIME PAY; RATIONALE OF. Why is
a laborer or employee who works beyond the regular hours of work
entitled to extra compensation called in this enlightened time, overtime
pay? Verily, there can be no other reason than that he is made to work
longer than what is commensurate with his agreed compensation for the
statutorily fixed or voluntarily agreed hours of labor he is supposed to do.
When he thus spends additional time to his work, the effect upon him is
multi-faceted: he puts in more effort, physical and/or mental; he is
delayed in going home to his family to enjoy the comforts thereof; he
might have no time for relaxation, amusement or sports; he might miss
important pre-arranged engagements; etc., etc. It is thus the additional
work, labor or service employed and the adverse effects just mentioned
of his longer stay in his place of work that justify and is the real reason for
the extra compensation that he called overtime pay.
2.
ID.; ID.; OVERTIME WORK, MEANING OF. Overtime work is actually
the lengthening of hours devoted to the interests of the employer and the
requirements of his enterprise.
3.
ID.; ID.; WAGE; MEANING OF. Wage under the Minimum Wage Law
(Republic Act No. 602), in whatever means or form it is given to the
worker, is "for work done or to be done or for services rendered or to be
rendered" and logically "includes (only) the fair and reasonable value as
determined by the Secretary of Labor, of board, lodging or other facilities
customarily furnished by the employer to the employee."
4.
ID.; ID.; LONGEVITY PAY; CANNOT BE INCLUDED IN COMPUTATION OF
OVERTIME PAY WHERE THE CONTRARY IS EXPRESSLY STIPULATED IN THE
COLLECTIVE BARGAINING AGREEMENT; CASE AT BAR. In the instant
case, longevity pay cannot be included in the computation of overtime
pay for the very simple reason that the contrary is expressly stipulated in
the collective bargaining agreement and, as should be the case, it is
settled that the terms and conditions of a collective bargaining
agreement constitute the law between the parties. (Mactan Workers
Union vs. Aboitiz, 45 SCRA 577; See also Shell Oil Workers Union, et al. vs.
Shell Company of the Philippines, 70 SCRA 242-243.)

5.
ID.; ID.; COST-OF-LIVING ALLOWANCES; GRANT THEREOF NOT
JUSTIFIED IN CASE AT BAR. Notwithstanding the portions of NAWASA's
opinion relied upon by PEMA, there is nothing in CA 444 that could justify
its posture that cost-of-living allowance should be added to the regular
wage in computing overtime pay.
6.
ID.; ID.; ID.; OPINION IN NAWASA vs. NAWASA CONSOLIDATED
UNIONS, ET AL. NOT CONTROLLING IN CASE AT BAR. True it is that in
the opinion in the case of NAWASA vs. NAWASA Consolidated Unions, et
al., it is there stated that "for purposes of computing overtime
compensation, regular wage includes all payments which the parties have
agreed shall be received during the work week, including differential
payments for working at undesirable times, such as at night and the
board and lodging customarily furnished the employee . . . The 'regular
rate' of pay also ordinarily includes incentive bonus or profit-sharing
payments made in addition to the normal basic pay (56 C.J.S., pp. 704705), and it was also held that the higher rate for night, Sunday and
holiday work is just as much a regular rate as the lower rate for daytime
work. The higher rate is merely an inducement to accept employment at
times which are not as desirable from a workman's standpoint
(International L. Ass'n. vs. National Terminals Corp. C.C. Wise, 50 F. Supp.
26, affirmed C.C.A. Carbunao vs. National Terminals Corp. 139 F. 2d 853)."
(11 SCRA 783) But nowhere did NAWASA refer to extra, temporary and
contingent compensation unrelated to work done or service rendered,
which is the very nature of cost-of-living allowance. Withal, in strict sense,
the cited NAWASA ruling was obiter dictum, since the only issue before
the Court there was whether or not "in computing the daily wage,
(whether) the additional compensation for Sunday should be included."
7.
ID.; ID.; OVERTIME PAY; BASIS OF COMPUTATION BEYOND THAT
PROVIDED BY LAW SHOULD BE THE COLLECTIVE BARGAINING
AGREEMENT. The basis of computation of overtime pay beyond that
required by Commonwealth Act No. 444 must be the collective bargaining
agreement (Shell Oil Workers Union vs. Shell Company of the Philippines,
L-30658-59, March 31, 1976, 70 SCRA 238), for, it is not for the court to
impose upon the parties anything beyond what they have agreed upon
which is not tainted with illegality (Bisig ng Manggagawa case). On the
other hand, where the parties fail to come to an agreement, on a matter
not legally required, the court abuses its discretion when it obliges any of
them to do more than what is legally obliged.

8.
ID.; ID.; ID.; BASIS THEREFOR ABSENT ANY SPECIFIC PROVISION IN
THE COLLECTIVE BARGAINING AGREEMENT. Doctrinally, We hold that,
in the absence of any specific provision on the matter in a collective
bargaining agreement, what are decisive in determining the basis for the
computation of overtime pay are two very germane considerations,
namely, (1) whether or not the additional pay is for extra work done or
service rendered and (2) whether or not the same is intended to be
permanent and regular. not contingent nor temporary and given only to
remedy a situation which can change any time. We reiterate, overtime
pay is for extra effort beyond that contemplated in the employment
contract, hence when additional pay is given for any other purpose, it is
illogical to include the same in the basis for the computation of overtime
pay. This holding supersedes the ruling in NAWASA vs. NAWASA
Consolidated Unions. et al., G.R. No. L-18938, August 31, 1964.
AQUINO, J., concurring:
LABOR AND SOCIAL LEGISLATIONS; COMMONWEALTH ACT NO. 444
(EIGHT-HOUR LABOR LAW); OVERTIME PAY; SHOULD BE BASED ON THE
REGULAR WAGES OR SALARY; DOES NOT INCLUDE COST-OF-LIVING
ALLOWANCE, LONGEVITY PAY OR OTHER FRINGE BENEFITS. Sections 3
and 4 of the Eight-Hour Labor Law,. Commonwealth Act No. 444, provide
that the overtime pay of workers should be based on the "regular wages
or salary" or "regular remuneration" of the laborers and employees. These
terms should be given their ordinary meaning. Hence, they do not include
the cost-of-living allowance, longevity pay or other fringe benefits, which
items constitute extra pay or additions to the regular or basic pay. In Shell
Oil Workers Union vs. Shell Company of the Philippines, L-30658-59,
March 31, 1976, 70 SCRA 238, this Court held that, notwithstanding the
ruling in NAWASA Consolidated Unions, et al. (130 Phil. 736, 754), the
fringe benefits should not be added to the basic pay in computing the
overtime pay. Consequently, the Industrial Court erred in including the
cost-of-living allowance and the longevity pay as part of the employee's
basic salary or wage on which the overtime pay should be based.
DECISION
BARREDO, J p:
Appeal by the Philippine National Bank from the decision of the trial court
of the Court of Industrial Relations in Case No. IPA-53 dated August 5,
1967 and affirmed en banc by said court on January 15, 1968.

This case started on January 28,1965 in consequence of the certification

of the President of the Philippines of an industrial dispute between the
Philippine National Bank Employees Association (PEMA, for short), on the
one hand, and the Philippine National Bank (PNB, for short), on the other,
which arose from no more than the alleged failure of the PNB to comply
with its commitment of organizing a Committee on Personnel Affairs to
take charge of screening and deliberating on the promotion of employees
covered by the collective bargaining agreement then in force between the
said parties. On January 28, 1965, the Industrial Court issued an order
aimed at settling the dispute temporarily between the parties, which way
certified by the President. Pertinent portions of the order read thus:
"xxx

xxx

xxx

"1. That in order to settle the strike and for the employees to return to
work immediately starting January 29, 1965, the Committee on Personnel
Affairs is hereby created to start functioning on February 1, 1965;
"xxx

xxx

xxx

"f.
That in return for this concession, an injunction against future strikes
or lockouts shall be issued by the Court to last for a period of six months
but which shall terminate even before that period should all disputes of
the parties be already resolve;" (Page 84, Record.)
According to the very decision now on appeal, "on May 22, 1965,
petitioner (private respondent herein) filed another pleading submitting to
this Court for determination certain matters which it claims cannot be
resolved by the parties, which are as follows:
'First Cause of Action
'a. In a Resolution No. 1162 dated September 16, 1957, the
Respondent's Board of Directors approved a revision of the computation
of overtime pay retroactive as of July 1, 1954, and authorized a
recomputation of the regular one-hour and extra overtime already
rendered by all officers and employees of the Respondent Bank.
'The details of the benefits involved in said Resolution are contained in a
Memorandum of the Respondent Bank dated September 18, 1957.
'b. Since the grant of the benefits in question, the employees of the
Respondent, represented by the petitioner, have always considered them
to be a part of their salaries and/or fringe benefits; nevertheless, the
Respondent, in 1963, without just cause, withdrew said benefits and in

spite of repeated demands refused, and still refuses to reinstate the same
up to the present.
'Second Cause of Action
'c. After the promulgation of the Decision in National Waterworks and
Sewerage Authority vs. NAWASA Consolidated Unions, et al., G.R. No. L18938, Aug. 31,1964, the Petitioner has repeatedly requested Respondent
that the cost of living allowance and longevity pay be taken into account
in the computation of overtime pay, effective as of the grant of said
benefits on January 1, 1958, in accordance with the ruling in said Decision
of the Supreme Court.
'd. Until now Respondent has not taken any concrete steps toward the
payment of the differential overtime and nighttime pays arising from the
cost of living allowance and longevity pay.
'xxx

xxx

xxx

Respondent in its answer of June 7, 1965 took exception to this

mentioned petition on several grounds, namely, (1) the said alleged
causes of action were not disputes existing between the parties, (2) the
same are mere money claims and therefore not within this Court's
jurisdiction, and (3) that the parties have not so stipulated under the
collective bargaining agreement between them, or the same is premature
as the pertinent collective bargaining agreement has not yet expired."
(Pp. 84-86, Record.) 1
Resolving the issues of jurisdiction and prematurity thus raised by PNB,
the court held:
"As to the first ground, it is well to note that this Court in its Order of
January 28, 1965 has enjoined the parties not to strike or lockout for a
period of six (6) months starting from said date. In a very definite sense
the labor disputes between the parties have been given a specific period
for the settlement of their differences. The fact that thereafter the
question of the manner of payment of overtime pay is being put in issue,
appears to indicate that this was a part of the labor dispute. If we are to
consider that this question, particularly the second cause of action, has in
fact existed as early as 1958, shows the necessity of resolving the same
now. And the same would indeed be an existing issue considering that the
present certification came only in 1965.
"It is further to be noted that the presidential certification has not limited
specific areas of the labor dispute embraced within the said certification.

It speaks of the existence of a labor dispute between the parties and of a

strike declared by the PEMA, for which the Court has been requested to
take immediate steps in the exercise of its powers under the law. prcd
"Even on the assumption that the present issue is not one embraced by
the presidential certification or it is an issue presented by one party on a
cause arising subsequent to the certification, the same would still be
subject to the jurisdiction of this Court. In 'Apo Cement Workers Union
versus Cebu Portland Cement', Case No. 11-IPA (G.R. No. L-12451, July 10,
1957), the Court en banc (where this Sala has taken an opposite view)
upheld its jurisdiction under the circumstances just enumerated. It would
seem that this question has been further settled by our Supreme Court in
'National Waterworks & Sewerage Authority vs. NAWASA Consolidated
Unions, et al.' (supra), which we quote in part:
"xxx

xxx

xxx

'4. Petitioner's claim that the issue of overtime compensation not

having been raised in the original case but merely dragged into it by
intervenors, respondent Court cannot take cognizance thereof under
Section 1, Rule 13 of the Rules of Court.
'xxx

xxx

xxx

'. . . The fact that the question of overtime payment is not included in the
principal case in the sense that it is not one of the items of dispute
certified to by the President is of no moment, for it comes within the
sound discretion of the Court of Industrial Relations. Moreover, in Labor
disputes technicalities of procedure should as much as possible be
avoided not only in the interest of labor but to avoid multiplicity of action.
This claim has no merit.
'xxx

xxx

xxx

"As to the objection posed that the issues are mere money claims, there
appears to be no ground for the same. In the first place, although the
same involves a claim for additional compensation it is also a part of the
Labor dispute existing between the parties and subject to the compulsory
arbitration powers of the Court, pursuant to Section 10 of Rep. Act No.
875. In the second place, on the basis of the so-called PRISCO doctrine
(G.R. No. L-13806, May 23, 1960), there is an existing and current
employer-employee relationship between the respondent and the
members of petitioner union, for whom the additional overtime
compensation is claimed. prcd

"With respect to ground three of the answer on which objection is based,

on C.A. 444, as amended, Section 6 thereof, provides as follows:
'Any agreement or contract between the employer and the laborer or
employee contrary to the provisions of this Act shall be null and void ab
initio'.
"The instant action is partially subject to the provisions of Commonwealth
Act 444, as amended. Even if, the parties have stipulated to the extent
that overtime will not be paid, the same will not be binding. More so
under the present circumstances, where the only question is the
correctness of the computation of the overtime payments.
"While the Court notes that the first cause of action has become moot
and academic in view of the compliance by respondent, hence there is no
further need to resolve the same (t.s.n., pp. 5-7, August 16, 1965), the
settlement of said first cause of action further strengthens the view that
the second cause of action is indeed an existing dispute between the
parties. Both causes of action involve overtime questions. Both stem from
dates well beyond and before the presidential certification of the present
proceedings. If respondent has been fit to take steps to expedite and
resolve, without court intervention, the first cause of action, it cannot
deny the existence of the second cause of action as the first and second
appear to be interrelated matters." (Pp. 86-89, Record)
And We agree that the foregoing holding is well taken. It would be more
worthwhile to proceed to the basic issues immediately than to add
anything more of Our own discourse to the sufficiently based disposition
of the court a quo of the above-mentioned preliminary questions.
After discussing the pros and cons on the issue involved in the second
cause of action as to whether or not the cost-of-living allowance otherwise
denominated as equity pay and longevity pay granted by the bank, the
first beginning January 1, 1958 and the latter effective July 1, 1961,
should be included in the computation of overtime pay, the court granted
the demands of PEMA, except the additional rate of work for night pay,
and rendered the following judgment:
"WHEREFORE, in view of the foregoing, this Court hereby promulgates the
following:
"1. The respondent Philippine National Bank is hereby required to pay
overtime and nighttime rates to its employees from January 28, 1962;
and such overtime compensation shall be based on the sum total of the

employee's basic salary or wage plus cost of living allowance and

longevity pay under the following schedule:
'a. Overtime services rendered shall be paid at the rate of time and
one-third, but overtime work performed between 6:00 P.M. and 6:00 A.M.
shall be paid at the rate of 150% or 50% beyond the regular rate;
'b. The rate for work performed in the night shift, or during the period
from 6:00 P.M. to 6:00 A.M. shall be compensated at the rate of 150% or
60% beyond the regular rate, provided the work performed involved a
definite night shift and not merely a continuation by way of overtime of
the regular and established hours of the respondent Bank.
"2. The Chief of the Examining Division of the Court or any of his duly
designated representatives is hereby ordered to compute the overtime
rates due each employee of the respondent Bank from January 28, 1962,
in accordance with the above determination; and to complete the same
within a period of sixty (60) days from receipt of this Order. However,
considering that the Philippine National Bank is a government depository,
and renders and performs functions distinct and unique; and, while it may
be a banking institution, its relationship with other government agencies
and the public is such that it has no basis for comparison with other
banking institutions organized under the corporation law or special
charter. To require it to pay immediately the liability after the exact
amount shall have been determined by the Court Examiner and duly
approved by the Court, as in other cases, would work undue hardship to
the whole government machinery, not to mention the outstanding foreign
liabilities and outside commitments, if any. Moreover, the records show
that this case was initiated long before the taking over of the incumbent
bank officials.
"Accordingly, the Court feels that the payment shall be subject to the
negotiations by the parties as to time, amount, and duration.
"The Court may intervene in said negotiations for the purpose of settling
once and for all this case to maintain industrial peace pursuant to Section
13 of Commonwealth Act 103, as amended, if desired, however by the
parties.
"After all, this is not an unfair labor practice case.
"SO ORDERED." (Pp. 98-100, Record.)
In connection with the above decision, two interesting points appear at
once to be of determinative relevance:

The first is that in upholding its jurisdiction to take cognizance of the

demand in question about cost-of-living allowance and longevity pay, the
Industrial Court carefully noted that it was not resolving a petition for
declaratory relief in the light of the decision of this Court in NAWASA vs.
NAWASA Consolidated Unions, G.R. No. L-18938, August 31, 1964, 11
SCRA 766. Thus the decision under review states: cdll
"Incidentally, the present action is not one for declaratory relief as to the
applicability of a judicial decision to the herein parties. A careful perusal
of the pleadings indicates that what is being sought is the payment of
differential overtime and nighttime pay based on existing law and
jurisprudence. The cause of action is not anchored on any decision of any
court but on provisions of the law which have been in effect at the time of
the occurrence of the cause of the action in relation to a labor dispute.
Hence, this is not a petition for declaratory relief." (Pp. 94-95, Record.)
The second refers to a subsequent decision of the same Industrial Court
in Shell Oil Workers Union vs. Shell Co., et al., Case No. 2410-V and Shell
& Affiliates Supervisors Union vs. Shell Company of the Philippines, et al.,
Case No. 2411-V, in which the court made an explanatory discourse of its
understanding of the NAWASA ruling, supra, and on that basis rejected
the claim of the workers. In brief, it held that (1) NAWASA does not apply
where the collective bargaining agreement does not provide for the
method of computation of overtime pay herein insisted upon by private
respondent PEMA and (2) the fact-situation in the Shell cases differed
from that of NAWASA, since the sole and definite ratio decidendi in
NAWASA was merely that inasmuch as Republic Act 1880 merely fixed a
40-hour 5-day work for all workers, laborers and employees including
government-owned corporations like NAWASA, the weekly pay of NAWASA
workers working more than five days a week should remain intact; with
overtime pay in excess of eight hours work and 25% additional
compensation on Sundays. There was no pronouncement at all therein
regarding the basis of the computation of overtime pay in regard to
bonuses and other fringe benefits.
For being commendably lucid and comprehensive, We deem it justified to
quote from that Shell decision:
"The main issue:
"The Unions appear to have read the NAWASA case very broadly. They
would want it held that in view of the said ruling of the Supreme Court,
employers and employees must, even in the face of existing bargaining

contracts providing otherwise, determine the daily and hourly rates of

employees in this manner: Add to basic pay all the money value of all
fringe benefits agreed upon or already received by the workers
individually and overtime pay shall be computed thus
"Basic yearly Rate plus Value of all Fringe Benefits divided by number of
days worked during the year equals daily wage; Daily wage divided by 8
equals hourly rate. Hourly rate plus premium rate equals hourly overtime
rate.
"The NAWASA case must be viewed to determine whether it is that broad.
NAWASA case must be understood in its setting. The words used by the
Supreme Court in its reasoning should not be disengaged from the factsituation with which it was confronted and the specific question which it
was there required to decide. Above all, care should be taken not to lose
sight of the truth that the facts obtaining, the issue settled, and the law
applied in the said case, and these, though extractable from the records
thereof as material in the resolution herein, were, as they are, primarily
declarative of the rights and liabilities of the parties involved therein.
"Recourse to the Records of the NAWASA case shows that the factsituation, as far as can be materially connected with the instant case, is
as follows:
'In view of the enactment of Rep. Act 1880, providing that the legal hours
of work for government employees, (including those in governmentowned or controlled corporations) shall be eight (8) hours a day for five
(5) days a week or forty (40) hours a week, its implementation by
NAWASA was disputed by the Union. The workers affected were those
who, for a period of three (3) months prior to or immediately preceding
the implementation of Rep. Act 1880, were working seven (7) days a
week and were continuously receiving 25% Sunday differential pay. The
manner of computing or determining the daily rate of monthly salaried
employees.
"And the Supreme Court, specifically laid out the issue to be decided, as it
did decide, in the NAWASA, as follows:
'7. and 8. How is a daily wage of a weekly employee computed in the
light of Republic Act 1880?' (G.R. L-18938)
"Resolving the above issue, it was held:
'According to petitioner, the daily wage should be computed exclusively
on the basic wage without including the automatic increase of 25%

corresponding to the Sunday differential. To include said Sunday

differential would be to increase the basic pay which is not contemplated
by said Act. Respondent court disagrees with this manner of computation.
It holds that Republic Act 1880 requires that the basic weekly wage and
the basic monthly salary should not be diminished notwithstanding the
reduction in the number of working days a week. If the automatic
increase corresponding to the salary differential should not be included
there would be a diminution of the weekly wage of the laborer concerned.
Of course, this should only benefit those who have been working seven
days a week and had been regularly receiving 25% additional
compensation for Sunday work before the effectivity of the Act.'
"It is thus necessary to analyze the Court's rationale in the said NAWASA
case, 'in the light of Rep. Act 1880', and the 'specific corollaries' discussed
preparatory to arriving at a final conclusion on the main issue. What was
required to be done, by way of implementing R.A. 1880? The statute
directs that working hours and days of government employees (including
those of government owned and controlled proprietary corporations) shall
be reduced to five days - forty hours a week. But, the same law carried
the specific proviso, designed to guard against diminution of salaries or
earnings of affected employees. The Supreme Court itself clearly spelled
this out in the following language: 'It is evident that Republic Act 1880
does not in tend to raise the wages of the employees over what they are
actually receiving. Rather, its purpose is to limit the working days in a
week to five days, or to 40 hours without however permitting any
reduction in the weekly or daily wage of the compensation which was
previously received . . .'
"If the object of the law was to keep intact, (not either to increase it or
decrease it) it is but natural that the Court should concern itself, as it did,
with the corollary, what is the weekly wage of worker who, prior to R.A.
1880, had been working seven (7) days a week and regularly receiving
differential payments for work on Sundays or at night? It seems clear that
the Court was only concerned in implementing correctly R.A. 1880 by
ensuring that in diminishing the working days and hours of workers in one
week, no diminution should result in the worker's weekly or daily wage.
And, the conclusion reached by the Supreme Court was to affirm or
recognize the correctness of the action taken by the industrial court
including such differential pay in computing the weekly wages of these
employees and laborers who worked seven days a week and were
continuously receiving 25% Sunday differential for a period of three
months immediately preceding the implementation of R.A. 1880.' Nothing

was said about adding the money value of some other bonuses or
allowances or money value of other fringe benefits, received outside the
week or at some other periods. That was not within the scope of the issue
before the Court. In fact, the limited application of the decision is
expressed in the decision itself. The resolution of this particular issue was
for the benefit of only a segment of the NAWASA employees. Said the
Court 'Of course, this should only benefit those who have been working
seven days a week and had been regularly receiving 25% additional
compensation for Sunday work before the effectivity of the Act.'
"Unions make capital of the following pronouncement of the Supreme
Court in the NAWASA case:
'It has been held that for purposes of computing overtime compensation a
regular wage includes all payments which the parties have agreed shall
be received during the work week, including piece-work wages,
differential payments for working at undesirable times, such as at night or
on Sundays and holidays, and the cost of board and lodging customarily
furnished the employee (Walling v. Yangermah-Reynolds Hardwook Co.,
325 U.S. 419; Walling v. Harischfeger Corp. 325 U.S. 427). The 'Regular
rate' of pay also ordinarily includes incentive bonus or profit-sharing
payments made in addition to the normal basic pay (56 C.J.S., pp. 704705), and it was also held that the higher rate for night, Sunday and
holiday work is just as much as regular rate as the lower rate for daytime
work. The higher rate is merely an inducement to accept employment at
times which are not at desirable form a workman's standpoint
(International L. Ass'n. Wise 50 F. Supp. 26, affirmed C.C.A. Carbunao v.
National Terminals Corp. 139 F. 853).'

But this paragraph in the decision appears to have been used and cited
by the Court to sustain the action of the court a quo: that it was correct to
include the 25% Sunday premium for the purpose of setting the weekly
wage of specified workers whose weekly earnings before the passage of
R.A. 1880 would be diminished, if said premium pay regularly received for
three months were not included. It is significant that the citations therein
used by the Supreme Court are excerpts from American decisions whose
legislation on overtime is at variance with the law in this jurisdiction in
this respect: the U.S. legislation considers work in excess of forty hours a
week as overtime; whereas, what is generally considered overtime in the
Philippines is work in excess of the regular 8-hours a day. It is
understandably material to refer to precedents in the U.S. for purposes of

computing weekly wages under a 40-hour a week rule, since the

particular issue involved in NAWASA is the conversion of prior weekly
regular earnings into daily rates without allowing diminution or addition.
llcd
"No rule of universal application to other cases may, therefore, be
justifiably extracted from the NAWASA case. Let it be enough that in
arriving at just solution and correct application of R.A. 1880, an inference
was drawn from other decisions that a regular wage includes payments
'agreed by the parties as to be received during the week.' But to use this
analogy in another fact-situation would unmitigatingly stretch its value as
basis for legal reasoning, for analogies are not perfect and can bring a
collapse if stretched far beyond their logical and reasoned efficacy.
Neither would it be far to ascribe to the Supreme Court's citation of
foreign jurisprudence, which was used for purposes of analogy, the force
of statute law, for this would be the consequence if it were allowed to be
used as authority for all fact-situations, even if different from the NAWASA
case. This, because courts do not legislate. All they do is apply the law.
"The above discussions impel the objective analyst to reject the
proposition that the NAWASA decision is all embracing and can be used
with the authority of a statute's effects on existing contracts.
"It appears that the answer to dispute lies, not in the text of the NAWASA
case but in the terms and conditions and practice in the implementation
of, the agreement, an area which makes resolution of the issue
dependent on the relation of the terms and conditions of the contract to
the phraseology and purpose of the Eight-Hour Labor Law (Act 444).
"The more we read the NAWASA case, the more we are convinced that the
overtime computation set therein cannot apply to the cases at bar. For to
do so would lead to unjust results, inequities between and among the
employees themselves and absurd situations. To apply the NAWASA
computation would require a different formula for each and every
employee, would require reference to and continued use of individual
earnings in the past, thus multiplying the administrative difficulties of the
Company. It would be cumbersome and tedious a process to compute
overtime pay and this may again cause delays in payments, which in turn
could lead to serious disputes. To apply this mode of computation would
retard and stifle the growth of unions themselves as Companies would be
irresistibly drawn into denying, new and additional fringe benefits, if not
those already existing, for fear of bloating their overhead expenses

through overtime which, by reason of being unfixed, becomes instead a

veritable source of irritant in labor relations.
"One other reason why application of the NAWASA case should be
rejected is that this Court is not prepared to accept that it can lay down a
less cumbersome formula for a company-wide overtime pay other than
that which is already provided in the collective bargaining agreement.
Courts cannot make contracts for the parties themselves.
"Commonwealth Act 444 prescribes that overtime work shall be paid 'at
the same rate as their regular wages or salary, plus at least twenty-five
per centum additional' (Secs. 4 & 5). The law did not define what is a
'regular wage or salary'. What the law emphasized by way of repeated
expression is that in addition to 'regular wage', there must be paid an
additional 25% of that 'regular wage' to constitute overtime rate of pay.
The parties were thus allowed to agree on what shall be mutually
considered regular pay from or upon which a 25% premium shall be
based and added to make up overtime compensation. This the parties did
by agreeing and accepting for a very long period to a basic hourly rate to
which a premium shall be added for purposes of overtime.
"Also significant is the fact that Commonwealth Act 444 merely sets a
minimum, a least premium rate for purposes of overtime. In this case, the
parties agreed to premium rates four (4) or even six (6) times than that
fixed by the Act. Far from being against the law, therefore, the agreement
provided for rates 'commensurate with the Company's reputation of being
among the leading employers in the Philippines' (Art. 1, Sec. 2, Coll. Barg.
Agreement) at the same time that the Company is maintained in a
competitive position in the market (Coll. Barg. Agreement, Ibid).
"Since the agreed rates are way above prevailing statutory wages and
premiums, fixed by themselves bona fide through negotiations favored by
law, there appears no compelling reason nor basis for declaring the same
illegal. A basic principle forming an important foundation of R.A. 875 is
the encouragement given to parties to resort to peaceful settlement of
industrial problems through collective bargaining. It behooves this Court,
therefore, to help develop respect for those agreements which do not
exhibit features of illegality. This is the only way to build confidence in the
democratic process of collective bargaining. Parties cannot be permitted
to avoid the implications and ramifications of the agreement.
"Although this Court has gone very far in resolving all doubts and in
giving great weight to evidence and presumptions in favor of labor, it may

not go as far as reconstruct the law to fit particular cases." (Pp. 174-181,
Record)
Proof of the correctness of the aforequoted considerations, the appeal of
the workers from the Industrial Court's decision did not prosper. Affirming
the appealed decision, We held:
"The theory, therefore, of the petitioners is to the effect that,
notwithstanding the terms and conditions of their existing collective
bargaining agreement with respondent Shell Company, particularly
Exhibit 'A-1' for the Petitioners and Exhibit '1-A' for the Respondent (which
is Appendix 'B' of the Collective Bargaining Agreement of the parties),
considering the ruling in the NAWASA case, a recomputation should be
made of their basic wage by adding the money value of the fringe
benefits enjoyed by them from whence the premium rates agreed upon
shall be computed in order to arrive at the correct computation of their
overtime compensation from the Company. On the other hand,
respondent Shell Company maintains that the NAWASA case should not
be utilized as the basis for the alteration of their mode of computing
overtime rate of pay as set forth in their collective Bargaining Agreement.
It insists that their collective bargaining agreement should be the law
between them.
"After a careful and thorough re-examination of the NAWASA case, supra,
and a minute examination of the facts and the evidence of the case now
before Us, We rule that the NAWASA case is not in point and, therefore, is
inapplicable to the case at bar.
"The ruling of this Court in the NAWASA case contemplates the regularity
and continuity of the benefits enjoyed by the employees or workers (for at
least three (3) months) as the condition precedent before such additional
payments or benefits are taken into account. This is evident in the
aforequoted ruling of this Court in the NAWASA case as well as in the
hereinbelow cited authorities, to wit:
'The 'regular rate' of pay on the basis of which overtime must be
computed must reflect all payments which parties have agreed shall be
received regularly during the work week, exclusive of overtime
payments.' Walling v. Garlock Packing Co. C.C.A.N.Y., 159 F. 2d 44, 45.
(Page 289, WORDS And PHRASES, Permanent Edition, Vol. 36A; Italics
supplied); and
'As a general rule the words 'regular rate' mean the hourly rate actually
paid for the normal, non-overtime work week, and an employee's regular

compensation is the compensation which regularly and actually reaches

him, . . .' (56 C.J.S. 704; Italics supplied).
"Even in the definition of wage under the Minimum Wage Law, the words
'customarily furnished' are used in referring to the additional payments or
benefits, thus,
" 'Wage' paid to any employee shall mean the remuneration or earnings,
however designated, capable of being expressed in terms of money,
whether fixed or ascertained on a time, task, piece, commission basis, or
other method of calculating the same, which is payable by an employer to
an employee under a written or unwritten contract of employment for
work done or to be done or for services rendered or to be rendered, and
includes the fair and reasonable value, as determined by the Secretary of
Labor, of board, lodging or other facilities customarily furnished by the
employer to the employee.' (Sec. 2 (g), R.A. No. 602).
"Having been stipulated by the parties that '. . . the Tin Factory Incentive
Pay has ceased in view of the closure of the factory in May 1966 the
fringe benefits as described show that they are occasionally not regularly
enjoyed and that not all employees are entitled to them', herein
petitioners failed to meet the test laid down by this Court in the NAWASA
case. Further, the collective bargaining agreement resorted to by the
parties being in accordance with R.A. 875, with its provision on overtime
pay far way beyond the premium rate provided for in Sections 4 and 5 of
Commonwealth Act 444, the same should govern their relationship. Since
this is their contract entered into by them pursuant to bargaining
negotiations under existing laws, they are bound to respect it. It is the
duty of this Court to see to it that contracts between parties, not tainted
with infirmity or irregularity or illegality, be strictly complied with by the
parties themselves. This is the only way by which unity and order can be
properly attained in our society.
"It should be noted in passing that Commonwealth Act 444 prescribes
only a minimum of at least 25% in addition to the regular wage or salary
of an employee to constitute his overtime rate of pay, whereas, under
Appendix 'B', (Exhs. 'A-1', Petitioners and '1-A', Respondent) of the
Collective Bargaining Agreement of the parties, the premium rate of
overtime pay is as high as 150% on regular working days up to 250% on
Sundays and recognized national holidays." (Shell Oil Workers Union vs.
Shell Company of the Philippines, G.R. No. L-30658-59, March 31, 1976,
70 SCRA 242-243.)

In the instant case, on May 22, 1965 PEMA alleged in the court below the
following cause of action as amended on June 7, 1965: prcd
"Since the start of the giving of cost of living allowance and longevity pay
and reiterated, after the promulgation of the Decision in National
Waterworks and Sewerage Authority vs. NAWASA Consolidated Unions et
al., G.R. No. L-18938, August 31, 1964, the petitioner has repeatedly
requested respondent that the cost of living allowance and longevity pay
be taken into account in the computation of overtime pay, effective as of
the grant of said benefits on January 1, 1958, in accordance with the
ruling in said Decision of the Supreme Court." (Page 14, PNB's Brief.)
To be sure, there could be some plausibility in PNB's pose regarding the
jurisdiction of the Industrial Court over the above cause of action. But, as
We have already stated, We agree with the broader view adopted by the
court a quo on said point, and We find that it is in the best interests of all
concerned that this almost 25-year dispute be settled once and for all
without the need of going through other forums only for the matter to
ultimately come back to this Court probably years later, taking particular
note as We do, in this regard, of the cases cited on pages 9-10 of PEMA's
original memo, as follows:
"Realizing its error before in not considering the present case a certified
labor dispute, the Bank now concedes that the case at bar 'belongs to
compulsory arbitration'. Hence, the lawful powers of the CIR over the
same. However, the Bank says 'overtime differential is but a money claim,
(and) respondent court does not have jurisdiction to take cognizance of
the same'.
"But this is not a pure money claim (pp. 10-11, Opposition) because other
factors are involved certification by the President, the matter may
likely cause a strike, the dispute concerns national interest and comes
within the CIR's injunction against striking, and the employer-employee
relationship between the Bank and the employees has not been severed.
Besides, 'money claim' is embraced within the term 'compensation' and
therefore falls squarely under the jurisdiction of the CIR in the exercise of
its arbitration power (Sec. 4, CA 103; Please see also Republic vs. CIR, L21303, Sept. 23/68; Makalintal, J., NWSA Case, L-26894-96, Feb. 28/69;
Fernando, J.).
"What confers jurisdiction on the Industrial Court, says Justice J.B.L.
Reyes, is not the form or manner of certification by the President, but the
referral to said court of the industrial dispute between the employer and

the employees. (Liberation Steamship vs. CIR, etc., L-25389 & 25390,
June 27/68).
"In Phil. Postal Savings Bank, et al. vs. CIR, et al., L-24572, Dec. 20/67,
this Honorable Court, speaking through Chief Justice Concepcion, held
that the certification of the issue 'as a dispute affecting an industry
indispensable to the national interest' leaves 'no room for doubt on the
jurisdiction of the CIR to settle such dispute.'
Relatedly, however, it is to be noted that it is clear from the holding of the
Industrial Court's decision We have earlier quoted, "the cause of action
(here) is not on any decision of any court but on the provisions of the Law
which have been in effect at the time of the occurrence of the cause of
action in relation to a labor dispute". Viewed from such perspective laid
by the lower court itself, it can hardly be said that it indeed exercised
purely its power of arbitration, which means laying down the terms and
conditions that should govern the relationship between the employer and
employees of an enterprise following its own appreciation of the relevant
circumstances rather empirically. More accurately understood, the court
in fact indulged in an interpretation of the applicable law, namely, CA
444, in the light of its own impression of the opinion of this Court in
NAWASA and based its decision thereon. Cdpr
Accordingly, upon the fact-situation of this case hereunder to be set forth,
the fundamental question for Us to decide is whether or not the decision
under appeal is in accordance with that law and the cited jurisprudence.
In brief, as PEMA posits, is NAWASA four-square with this case? And even
assuming, for a while, that in a sense what is before Us is an arbitration
decision, private respondent itself admits in its above-mentioned
memorandum that this Court is not without power and authority to
determine whether or not such arbitration decision is against the law or
jurisprudence or constitutes a grave abuse of discretion. Thus, in PEMA's
memorandum, it makes the observation that "(F)urthermore, in the Shell
cases, the unions are using the NAWASA decision as a source of right for
recomputation, while in the PNB, the Union merely cites the NAWASA
doctrine, not as a source of right, but as a legal authority or reference by
both parties so the Union demand may be granted." (Motion to Dismiss,
p. 3.)
Obviously, therefore, the polestar to which Our mental vision must be
focused in order that We may arrive at a correct legal and equitable
determination of this controversy and, in the process make NAWASA
better understood as We believe it should be, is none other than Sections

3 and 4 of Com. Act No. 444, the Eight Hour Labor Law, which pertinently
provide thus:
"SEC. 3. Work may be performed beyond eight hours a day in case of
actual or impending emergencies caused by serious accidents, fire, flood,
typhoon, earthquake, epidemic, or other disaster or calamity in order to
prevent loss to life and property or imminent danger to public safety; or in
case of urgent work to be performed on the machines, equipment, or
installations in order to avoid a serious loss which the employer would
otherwise suffer, or some other just cause of a similar nature; but in all
such cases the laborers and employees shall be entitled to receive
compensation for the overtime work performed at the same rate as their
regular wages or salary, plus at least twenty-five per centum additional.
"In case of national emergency the Government is empowered to
establish rules and regulations for the operation of the plants and
factories and to determine the wages to be paid the laborers.
xxx

xxx

xxx

"SEC. 4. No person, firm, or corporation, business establishment or

place or center of labor shall compel an employee or laborer to work
during Sundays and legal holidays, unless he is paid an additional sum of
at least twenty-five per centum of his regular remuneration: Provided,
however, that this prohibition shall not apply to public utilities performing
some public service such as supplying gas, electricity, power, water, or
providing means of transportation or communication."
The vital question is, what does "regular wage or salary" mean or connote
in the light of the demand of PEMA?
In Our considered opinion, the answer to such question lies in the basic
rationale of overtime pay. Why is a laborer or employee who works
beyond the regular hours of work entitled to extra compensation called in
this enlightened time, overtime pay? Verily, there can be no other reason
than that he is made to work longer than what is commensurate with his
agreed compensation for the statutorily fixed or voluntarily agreed hours
of labor he is supposed to do. When he thus spends additional time to his
work, the effect upon him is multi-faceted: he puts in more effort, physical
and/or mental; he is delayed in going home to his family to enjoy the
comforts thereof; he might have no time for relaxation, amusement or
sports; he might miss important pre-arranged engagements; etc., etc. It is
thus the additional work, labor or service employed and the adverse
effects just mentioned of his longer stay in his place of work that justify

and is the real reason for the extra compensation that he called overtime
pay. prcd
Overtime work is actually the lengthening of hours developed to the
interests of the employer and the requirements of his enterprise. It
follows that the wage or salary to be received must likewise be increased,
and more than that, a special additional amount must be added to serve
either as encouragement or inducement or to make up for the things he
loses which We have a ready referred to. And on this score, it must always
be borne in mind that wage is indisputably intended as payment for work
done or services rendered. Thus, in the definition of wage for purposes of
the Minimum Wage Law, Republic Act No. 602, it is stated:
" 'Wage' paid to any employee shall mean the remuneration or earnings,
however designated, capable of being expressed in terms of money,
whether fixed or ascertained on a time task, piece, commission basis or
other method of calculating the same, which is payable by an employer to
an employee under a written or unwritten contract of employment for
work done or to be done or for services rendered or to be rendered and
includes the fair and reasonable value as determined by the Secretary of
Labor, of board, lodging or other facilities customarily furnished by the
employer to the employee. 'Fair and reasonable value' shall not include a
profit to the employer which reduces the wage received by the employee
below the minimum wage applicable to the employee under this Act, nor
shall any transaction between an employer or any person affiliated with
the employer and the employee of the employer include any profit to the
employer or affiliated person which reduces the employee's wage below
the minimum wage applicable to the employee under this Act.' 2 (Italics
supplied)."
As can be seen, wage under said law, in whatever means or form it is
given to the worker, is "for work done or to be done or for services
rendered or to be rendered" and logically "includes (only) the fair and
reasonable value as determined by the Secretary of Labor, of board,
lodging or other facilities customarily furnished by the employer to the
employee"
Indeed, for the purpose of avoiding any misunderstanding or
misinterpretation of the word "wage" used in the law and to differentiate
it from "supplement", the Wage Administration Service to implement the
Minimum Wage Law, defined the latter as:

"extra remuneration or benefits received by wage earners from their

employers and include but are not restricted to pay for vacation and
holidays not worked; paid sick leave or maternity leave; overtime rate in
excess of what is required by law; pension, retirement, and death
benefits; profit-sharing; family allowances; Christmas, war risk and costof-living bonuses; or other bonuses other than those paid as a reward for
extra output or time spent on the job. (Italics ours)."
In these times when humane and dignified treatment of labor is steadily
becoming universally an obsession of society, we, in our country, have
reached a point in employer-employee relationship wherein employers
themselves realize the indispensability of at least making the
compensation of workers equal to the worth of their efforts as much as
this case can be statistically determined. Thus, in order to meet the
effects of uncertain economic conditions affecting adversely the living
conditions of wage earners, employers, whenever the financial conditions
of the enterprise permit, grant them what has been called as cost-ofliving allowance. In other words, instead of leaving the workers to assume
the risks of or drift by themselves amidst the cross-currents of countrywide economic dislocation, employers try their best to help them tide
over the hardships and difficulties of the situation. Sometimes, such
allowances are voluntarily agreed upon in collective bargaining
agreements. At other times, it is imposed by the government as in the
instances of Presidential Decrees Nos. 525, 928, 1123, 1389, 1614, 1678,
1751 and 1790; Letters of Instructions No. 1056 and Wage Order No. 1.
Notably, Presidential Decree No. 1751 increased the statutory minimum
wage at all levels by P400 in addition to integrating the mandatory
emergency living allowances under Presidential Decree No. 525 and
Presidential Decree No. 1123 into the basic pay of all covered workers.
LexLib
Going over these laws, one readily notices two distinctive features: First,
it is evidently gratifying that the government, in keeping with the
humanitarian trend of the times, always makes every effort to keep
wages abreast with increased cost of living conditions, doing it as soon as
the necessity for it arises. However, obviously, in order not to overdo
things, except when otherwise provided, it spares from such obligation
employers who by mutual agreement with their workers are already
paying what the corresponding law provides (See Sec. 4 of P.D. No. 525;
Section 2 of P.D. No. 851 until P.D. 1684 abolished all exemptions under
P.D. No. 525, P.D. No. 1123, P.D. No. 851 and P.D. No. 928 among

distressed employers who even though given sufficient lapse of time to

make the necessary adjustment have not done so.) 3
In the case at bar, as already related earlier, the cost-of-living allowance
began to be granted in 1958 and the longevity pay in 1981. In other
words, they were granted by PNB upon realizing the difficult plight of its
labor force in the face of the unusual inflationary situation in the economy
of the country, which, however acute, was nevertheless expected to
improve. There was thus evident an inherently contingent character in
said allowances. They were not intended to be regular, much less
permanent additional part of the compensation of the employees and
workers. To such effect were the testimonies of the witnesses at the trial.
For instance, Mr. Ladislao Yuzon declared:
"ATTORNEY GESMUNDO
Questioning . . .
Q. Calling your attention to paragraph No. 1, entitled monthly living
allowance, which has been marked as Exhibit 'A-1', will you kindly tell us
the history of this benefit monthly living allowance, why the same has
been granted?
A.
Well, in view of the increasing standard of living, we decided to
demand from management in our set of demands . . . included in our set
of demands in 1957-1958 a monthly living allowance in addition to our
basic salary. This benefit was agreed upon and granted to take effect as
of January 1, 1958. That was the first time it was enjoyed by the
employees of the Philippine National Bank. It started on a lesser amount
but year after year we have been demanding for increases on this living
allowance until we have attained the present amount of P150.00 a month,
starting with P40.00 when it was first granted. The same is still being
enjoyed by the employees on a much higher amount. There were a few
variations to that. (t.s.n., pp. 18-19, Hearing of August 16, 1965)
which testimony was affirmed by Mr. Panfilo Domingo, on crossexamination by counsel for the respondent, reading as follows:
"ATTORNEY GESMUNDO:
"Q. Do you recall Mr. Domingo, that in denying the cost of living
allowance and longevity pay for incorporation with the basic salary, the
reason given by the management was that as according to you, it will
mean an added cost and furthermore it will increase the contribution of
the Philippine National Bank to the GSIS, is that correct?

"A. This is one of the reasons, of the objections for the inclusion of the
living allowance and longevity pay to form part of the basic pay, I mean
among others, because the basic reason why management would object
is the cost of living allowance is temporary in nature, the philosophy
behind the grant of this benefit. Nonetheless, it was the understanding if I
recall right that in the event that cost of living should go down, then there
should be a corresponding decrease in the cost of living allowance being
granted. I have to mention this because this is the fundamental
philosophy in the grant of cost of living allowance." (Pp. 19-20, Record.)
Much less were they dependent on extra or special work done or service
rendered by the corresponding recipient. Rather, they were based on the
needs of their families as the conditions of the economy warranted. Such
is the inexorable import of the pertinent provisions of the collective
bargaining agreement:
"MONTHLY LIVING ALLOWANCE
"All employees of the Bank shall be granted a monthly living allowance of
P140, plus P10 for each minor dependent child below 21 years of age, but
in no case shall the total allowance exceed P200 or 25% of the monthly
salary, whichever is higher, subject to the following conditions:
"a) That this new basic allowance shall be applicable to all employees,
irrespective of their civil status;
"b) That a widow or widower shall also enjoy the basic allowance of
P140 a month, plus the additional benefit of P10 for each minor
dependent child but not to exceed P200 or 25% of basic salary whichever
is higher.
"c) That in case the husband and wife are both employees in the Bank
both shall enjoy this new basic monthly living allowance of P140 but only
one of spouses shall be entitled to claim the additional benefit of P10 for
each minor legitimate or acknowledged child." (Pp. 30-31, PNB's memo.)
So also with the longevity pay; manifestly, this was not based on the daily
or monthly amount of work done or service rendered it was more of a
gratuity for their loyalty, or their having been in the bank's employment
for consideration periods of time. Indeed, with particular reference to the
longevity pay, the then existing collective bargaining contract expressly
provided: ". . . That this benefit shall not form part of the basic salaries of
the officers so affected."

PEMA may contend that the express exclusion of the longevity pay,
means that the cost-of-living allowance was not intended to be excluded.
Considering, however, the contingent nature of the allowances and their
lack of relation to work done or service rendered, which in a sense may
be otherwise in respect to longevity pay PEMA's contention is untenable.
The rule of exclusio unius, exclusio alterius would not apply here, if only
because in the very nature of the two benefits in question, considerations
and conclusions as to one of them could be non-sequitur as to the other.
prcd
Withal, there is the indisputable significant fact that after 1958, everytime
a collective bargaining agreement was being entered into, the union
always demanded the integration of the cost-of-living allowances and
longevity pay, and as many times, upon opposition of the bank, no
stipulation to such effect has ever been included in any of said
agreements. And the express exclusion of longevity pay was continued to
be maintained.
On this point, the respondent court held that under its broad jurisdiction,
it was within the ambit of its authority to provide for what the parties
could not agree upon. We are not persuaded to view the matter that way.
We are not convinced that the government, thru the Industrial Court,
then, could impose upon the parties in an employer-employee conflict,
terms and conditions which are inconsistent with the existing law and
jurisprudence, particularly where the remedy is sought by the actors more
on such legal basis and not purely on the court's arbitration powers.
As pointed out earlier in this opinion, Our task here is twofold: First,
reviewing the decision under scrutiny as based on law and jurisprudence,
the question is whether or not the rulings therein are correct. And second,
reading such judgment as an arbitration decision, did the court a quo
gravely abuse its discretion in holding, as it did, that cost-of-living
allowance and longevity pay should be included in the computation of
overtime pay?
In regard to the first question, We have already pointed out to start with,
that as far as longevity pay is concerned, it is beyond question that the
same cannot be included in the computation of overtime pay for the very
simple reason that the contrary is expressly stipulated in the collective
bargaining agreement and, as should be the case, it is settled that the
terms and conditions of a collective bargaining agreement constitute the
law between the parties. (Mactan Workers Union vs. Aboitiz, 45 SCRA 577,
See also Shell Oil Workers Union et al. vs. Shell Company of the

Philippines, supra.) The contention of PEMA that the express provision in

the collective bargaining agreement that "this benefit (longevity pay)
shall not form part of the basic salaries of the officers so affected" cannot
imply the same idea insofar as the computation of the overtime pay is
concerned defies the rules of logic and mathematics. If the basic pay
cannot be deemed increased, how could the overtime pay be based on
any increased amount at all? LLphil
However, the matter of the cost-of-living allowance has to be examined
from another perspective, namely, that while PEMA had been always
demanding for its integration into the basic pay, it never succeeded in
getting the conformity of PNB thereto, and so, all collective bargaining
agreements entered into periodically by the said parties did not provide
therefor. And it would appear that PEMA took the non-agreement of the
bank in good grace, for the record does not show that any remedial
measure was ever taken by it in connection therewith. In other words, the
parties seemed to be mutually satisfied that the matter could be better
left for settlement on the bargaining table sooner or later, pursuant to the
spirit of free bargaining underlying Republic Act 875, the Industrial Peace
Act then in force. Or, as observed by PEMA in its memorandum, (page
23), the parties "agreed to let the question remain open pending
decision of authorities that would justify the demand of the Union."
Indeed, on pages 23-24 of said memorandum, the following position of
PEMA is stated thus:
"Thus the following proceeding took place at the Court a quo:
"ATTY. GESMUNDO:
That is our position, Your Honor, because apparently there was an
understanding reached between the parties as to their having to wait for
authorities and considering that the issue or one of the issues then
involved in the NAWASA case pending in the CIR supports the stand of the
union, that the principle enunciated in connection with that issue is
applicable to this case.
xxx

xxx

xxx

"Q Do we understand from you, Mister Yuson, that it was because of the
management asking you for authorities in allowing the integration of the
cost of living allowance with your basic salary and your failure to produce
at the time such authorities that the union then did not bring any case to
the Court?

"A. Well, in the first place, it is not really my idea to be bringing matters
to the Court during my time but I would much prefer that we agree on the
issue. Well, insofar as you said that the management was asking me, well,
I would say that they were invoking (on) authorities that we can show in
order to become as a basis for granting or for agreeing with us although
we were aware of the existence of a pending case which is very closely
similar to our demand, yet we decided to wait until this case should be
decided by the Court so that we can avail of the decision to present to
management as what they are asking for. (t.s.n., pp. 31-32, 35-36, Aug.
28, 1965.)"
Now, to complete proper understanding of the character of the
controversy before Us, and lest it be felt by those concerned that We have
overlooked a point precisely related to the matter touched in the above
immediately preceding paragraph, it should be relevant to quote a portion
of the "Stipulation of Facts" of the parties hereto: LLphil
"1. This particular demand was among those submitted by PetitionerUnion in the current collective bargaining negotiations to the Respondent
Bank. However, since this case was already filed in court on May 22,
1965, the parties agreed not to include this particular demand in the
discussion, leaving the matter to the discretion and final judicial
determination of the courts of justice." (Page 81, Rec.)
In fine, what the parties commonly desire is for thus Court to construe CA
444 in the light of NAWASA, considering the fact-situation of the instant
case.
In this respect, it is Our considered opinion, after mature deliberation,
that notwithstanding the portions of the NAWASA's opinion relied upon by
PEMA, there is nothing in CA 444 that could justify its possible that costof-living allowance should be added to the regular wage in computing
overtime pay.
After all, what was said in NAWASA that could be controlling here? True, it
is there stated that "for purposes of computing overtime compensation,
regular wage includes all payments which the parties have agreed shall
be received during the work week, including differential payments for
working at undesirable times, such as at night and the board and lodging
customarily furnished the employee . . . The 'regular rate' of pay also
ordinarily includes incentive bonus or profit-sharing payments made in
addition to the normal basic pay (56 C.J.S., pp. 704-705), and it was also
held that the higher rate for night, Sunday and holiday work is just as

much a regular rate as the lower rate for daytime work. The higher rate is
merely an inducement to accept employment at times which are not as
desirable from a workmen's standpoint (International L. Ass'n vs. National
Terminals Corp. C.C. Wise, 50 F. Supp. 26, affirmed C.C.A. Carbunoa v.
National Terminals Corp. 139 F. 2d 853)." (11 SCRA, p. 783)
But nowhere did NAWASA refer to extra, temporary and contingent
compensation unrelated to work done or service rendered, which as
explained earlier is the very nature of cost-of-living allowance. Withal, in
strict sense, what We have just quoted from NAWASA was obiter dictum,
since the only issue before the Court there was whether or not "in
computing the daily wage, (whether) the additional compensation for
Sunday should be included." (See No. 7 of Record)
In any event, as stressed by Us in the Shell cases, the basis of
computation of overtime pay beyond that required by CA 444 must be the
collective bargaining agreement, 4 for, to reiterate Our postulation
therein and in Bisig ng Manggagawa, supra, it is not for the court to
impose upon the parties anything beyond what they have agreed upon
which is not tainted with illegality. On the other hand, where the parties
fail to come to an agreement, on a matter not legally required, the court
abuses its discretion when it obliges any of them to do more than what is
legally obliged.
Doctrinally, We hold that, in the absence of any specific provision on the
matter in a collective bargaining agreement, what are decisive in
determining the basis for the computation of overtime pay are two very
germane considerations, namely, (1) whether or not the additional pay is
for extra work done or service rendered and (2) whether or not the same
is intended to be permanent and regular, not contingent nor temporary
and given only to remedy a situation which can change any time. We
reiterate, overtime pay is for extra effort beyond that contemplated in the
employment contract, hence when additional pay is given for any other
purpose, it is illogical to include the same in the basis for the computation
of overtime pay. This holding supersedes NAWASA. LLphil
Having arrived at the foregoing conclusions, We deem it unnecessary to
discuss any of the other issues raised by the parties.
WHEREFORE, judgment is hereby rendered reversing the decision
appealed from, without costs.
Guerrero, De Castro, Plana, Escolin, Vasquez, Relova, and Gutierrez, Jr., JJ.,
concur.

Melencio-Herrera J., in the result.

Fernando, C.J., Concepcion, Jr., and Abad Santos, JJ., took no part.
Teehankee and Makasiar, JJ., reserve their votes.

FIRST DIVISION
[G.R. No. 107994. August 14, 1995.]
PHILIPPINE AGRICULTURAL COMMERCIAL AND INDUSTRIAL WORKERS
UNION (PACIWU)-TUCP, petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION AND VALLACAR TRANSIT, INC., respondents.
Raul E. Espinosa for petitioner.
Geocadin & Sabig Law Office for private respondent.
The Solicitor General for public respondent.
SYLLABUS
1.
LABOR AND SOCIAL LEGISLATION; 13TH MONTH PAY LAW;
EMPLOYEES RECEIVING COMMISSIONS IN ADDITION TO FIXED OR
GUARANTEED WAGES OR SALARIES ENTITLED THERETO; CASE AT BAR.
From the foregoing legal milieu, it is clear that every employee receiving
a commission in addition to a fixed or guaranteed wage or salary, is
entitled to a 13th month pay. For purposes of entitling rank and file
employees a 13th month pay, it is immaterial whether the employees
concerned are paid a guaranteed wage plus commission or a commission
with guaranteed wage inasmuch as the bottom line is that they receive a
guaranteed wage. This is correctly construed in the MOLE Explanatory
Bulletin No. 86-12. In the case at bench, while the bus drivers and
conductors of respondent company are considered by the latter as being
compensated on a commission basis, they are not paid purely by what
they receive as commission. As admitted by respondent company, the
said bus drivers and conductors are automatically entitled to the basic
minimum pay mandated by law in case the commissions they earned be
less than their basic minimum for eight (8) hours work. Evidently
therefore, the commissions form part of the wage or salary of the bus
drivers and conductors. A contrary interpretation would allow an
employer to skirt the law and would result in an absurd situation where an
employee who receives a guaranteed minimum basic pay cannot be
entitled to a 13th month pay simply, because he is technically referred to
by his employer per the CBA as an employee compensated on a purely
commission basis. Such would be a narrow interpretation of the law,
certainly not in accord with the liberal spirit of our labor laws. Moreover,
what is controlling is not the label attached to the remuneration that the
employee receives but the nature of the remuneration and the purpose
for which the 13th month pay was given to alleviate the plight of the

working masses who are receiving low wages. This is extant from the
"WHEREASES" of PD 851, to wit: WHEREAS, it is necessary to further
protect the level of real wages from the ravage of world-wide inflation.
WHEREAS, there has been no increase in the legal minimum wage since
1970. WHEREAS, the Christmas season is an opportune time for society to
show its concern for the plight of the working masses so they may
properly celebrate Christmas and New Year. Misplaced legal hermeneutics
cannot be countenanced to evade paying the rank and file what is due to
them under the law.
2.
ID.; COMMISSION; DEFINED; CASE AT BAR. Commission is the
recompense, compensation, reward of an employee, agent, salesman,
executor, trustee, receiver, factor, broker or bailee, when the same is
calculated as a percentage on the amount of his transactions or on the
profit of the principal.
3.
ID.; ID.; PART OF EMPLOYEES' SALARY OR WAGE. While said
commissions may be in the form of incentives or encouragement to
inspire said bus drivers and conductors to put a little more zeal and
industry on their jobs, still, it is safe to say that the same are direct
remunerations for services rendered, given the small remuneration they
receive for the services they render, which is precisely the reason why
private respondent allowed the drivers and conductors a guaranteed
minimum wage. The conclusion is ineluctable that said commissions are
part of their salary.
DECISION
KAPUNAN, J p:
This is a petition for certiorari seeking to reverse the decision of the
National Labor Relations Commission (NLRC) in NLRC Case No. V-0159-92
which dismissed the appeal of petitioner union and in effect, affirmed the
decision of the Labor Arbiter ordering the dismissal of the complaint of
petitioner for payment of 13th month pay to the drivers and conductors of
respondent company.
Petitioner Philippine Agricultural Commercial and Industrial Workers
Union-TUCP is the exclusive bargaining agent of the rank and file
employees of respondent Vallacar Transit, Inc. Petitioner union instituted a
complaint with NLRC Regional Arbitration Branch No. VI, Bacolod City, for
payment of 13th month pay in behalf of the drivers and conductors of
respondent company's Visayan operation on the ground that although
said drivers and conductors are compensated on a "purely commission"

basis as described in their Collective Bargaining Agreement (CBA), they

are automatically entitled to the basic minimum pay mandated by law
should said commission be less than their basic minimum for eight (8)
hours work. 1
In its position paper, respondent Vallacar Transit, Inc. contended that
since said drivers and conductors are compensated on a purely
commission basis, they are not entitled to 13th month pay pursuant to
the exempting provisions enumerated in paragraph 2 of the Revised
Guidelines on the Implementation of the Thirteenth Month Pay Law. 2 It
further contended that Section 2 of Article XIV of the Collective
Bargaining Agreement (CBA) concluded on October 17, 1988 expressly
provided that "drivers and conductors paid on a purely commission are
not legally entitled to 13th month pay." Said CBA, being the law between
the parties, must be respected, respondent opined.
On May 22, 1992, Labor Arbiter Reynaldo Gulmatico rendered a decision
dismissing the complaint. 3
The appeal of the petitioner to the National Labor Relations Commission
was likewise dismissed; 4 so was the motion for reconsideration of the
said decision. 5
Hence, the present petition.
The principal issue posed for consideration is whether or not the bus
drivers and conductors of respondent Vallacar Transit, Inc. are entitled to
13th month pay.
We rule in the affirmative.
It may be recalled that on December 16, 1975, P.D. 851, otherwise known
as the "13th Month Pay" Law, was promulgated. The same prescribed
payment of 13th month pay in the following terms:
Sec. 1.
All employers are hereby required to pay all their employees
receiving a basic salary of not more than P1,000.00 a month, regardless
of the nature of the employment, a 13th month pay not later than
December 24 of every year.
Sec. 2.
Employers already paying their employees a 13th month pay or
its equivalent are not covered by this Decree.

The Rules and Regulations Implementing P.D. No. 851, issued by the then
Secretary of Labor and Employment on December 22, 1975, defined the
following basic terms:
xxx

xxx

xxx

(a) 13th month pay shall mean one-twelfth (1/12) of the basic salary of
an employee within a calendar year;
(b) basic salary shall include all remunerations or earnings paid by an
employer to an employee for services rendered, but may not include cost
of living allowances granted pursuant to Presidential Decree No. 525 or
Letter of Instructions No. 174, profit-sharing payments, and all allowances
and monetary benefits which are not considered or integrated as part of
the regular or basic salary of the employee at the time of the
promulgation of the Decree on December 16, 1975.
xxx

xxx

xxx

On August 13, 1986, then President Corazon C. Aquino, exercising both

executive and legislative authority, issued Memorandum Order No. 28
which provided as follows:
xxx

xxx

xxx

Sec. 1 of Presidential Decree No. 851 is hereby modified to the extent that
all employers are hereby required to pay all their rank-and-file employees
a 13th month pay not later than December 24 of every year.
xxx

xxx

xxx

In connection with and in implementation of Memorandum Order No. 28,

the then Minister of Labor and Employment issued MOLE Explanatory
Bulletin No. 86-12 on November 24, 1986. Item No. 5(a) of the said
issuance reads:
xxx

xxx

xxx

Employees who are paid a fixed or guaranteed wage plus commission are
also entitled to the mandated 13th month pay, based on their total
earning(s) during the calendar year, i.e., on both their fixed and
guaranteed wage and commission.
xxx

xxx

xxx. (Emphasis supplied)

From the foregoing legal milieu, it is clear that every employee receiving
a commission in addition to a fixed or guaranteed wage or salary, is

entitled to a 13th month pay. For purposes of entitling rank and file
employees a 13th month pay, it is immaterial whether the employees
concerned are paid a guaranteed wage plus commission or a commission
with guaranteed wage inasmuch as the bottom line is that they receive a
guaranteed wage. This is correctly construed in the MOLE Explanatory
Bulletin No. 86-12.
In the case at bench, while the bus drivers and conductors of respondent
company are considered by the latter as being compensated on a
commission basis, they are not paid purely by what they receive as
commission. As admitted by respondent company, the said bus drivers
and conductors are automatically entitled to the basic minimum pay
mandated by law in case the commissions they earned be less than their
basic minimum for eight (8) hours work. 6 Evidently therefore, the
commissions form part of the wage or salary of the bus drivers and
conductors. A contrary interpretation would allow an employer to skirt the
law and would result in an absurd situation where an employee who
receives a guaranteed minimum basic pay cannot be entitled to a 13th
month pay simply because he is technically referred to by his employer
per the CBA as an employee compensated on a purely commission basis.
Such would be a narrow interpretation of the law, certainly not in accord
with the liberal spirit of our labor laws. Moreover, what is controlling is not
the label attached to the remuneration that the employee receives but
the nature of the remuneration 7 and the purpose for which the 13th
month pay was given to alleviate the plight of the working masses who
are receiving low wages. This is extant from the "WHEREASES" of PD 851,
to wit:
WHEREAS, it is necessary to further protect the level of real wages from
the ravage of world-wide inflation.
WHEREAS, there has been no increase in the legal minimum wage since
1970.
WHEREAS, the Christmas season is an opportune time for society to show
its concern for the plight of the working masses so they may properly
celebrate Christmas and New Year.
Misplaced legal hermeneutics cannot be countenanced to evade paying
the rank and file what is due to them under the law.
Commission is the recompense, compensation, reward of an employee,
agent, salesman, executor, trustee, receiver, factor, broker or bailee,
when the same is calculated as a percentage on the amount of his

transactions or on the profit of the principal. 8 While said commissions

may be in the form of incentives or encouragement to inspire said bus
drivers and conductors to put a little more zeal and industry on their jobs,
still, it is safe to say that the same are direct remunerations for services
rendered, given the small remuneration they receive for the services they
render, 9 which is precisely the reason why private respondent allowed
the drivers and conductors a guaranteed minimum wage. The conclusion
is ineluctable that said commissions are part of their salary. In Philippine
Duplicators, Inc. v. National Labor Relations Commission, 10 we had the
occasion to state that:
. . . Article 97 (f) of the Labor Code defines the term 'wage' (which is
equivalent to 'salary,' as used in P.D. No. 851 and Memorandum Order No.
28) in the following terms:
(f) 'Wage' paid to any employee shall mean the remuneration or
earnings, however designated, capable of being expressed in terms of
money, whether fixed or ascertained on a time, task, piece, or
commission basis, or other method of calculating the same, which is
payable by an employer to an employee under a written or unwritten
contract of employment for work done or to be done, or for services
rendered or to be rendered, and includes the fair and reasonable value, as
determined by the Secretary of Labor, of board, lodging, or other facilities
customarily furnished by the employer to the employee. 'Fair and
reasonable value' shall not include any profit to the employer or to any
person affiliated with the employer.
In the instant case, there is no question that the sales commissions
earned by salesmen who make or close a sale of duplicating machines
distributed by petitioner corporation, constitute part of the compensation
or remuneration paid to salesmen for serving as salesmen, and hence as
part of the 'wage' or 'salary' of petitioner's salesmen. Indeed, it appears
that petitioner pays its salesmen a small fixed or guaranteed wage; the
greater part of the salesmen's wages or salaries being composed of the
sales or incentive commissions earned on actual sales closed by them. No
doubt this particular salary structure was intended for the benefit of
petitioner corporation, on the apparent assumption that thereby its
salesmen would be moved to greater enterprise and diligence and close
more sales in the expectation of increasing their sales commission. This,
however, does not detract from the character of such commissions as
part of the salary or wage paid to each of its salesmen for rendering
services to petitioner corporation. 11

In sum, the 13th month pay of the bus drivers and conductors who are
paid a fixed or guaranteed minimum wage in case their commissions be
less than the statutory minimum, and commissions only in case where the
same is over and above the statutory minimum, must be equivalent to
one-twelfth (1/12) of their total earnings during the calendar year.
WHEREFORE, the petition is hereby GRANTED. The decision of respondent
National Labor Relations Commission is hereby REVERSED and SET ASIDE.
The case is remanded to the Labor Arbiter for the proper computation of
13th month pay.
SO ORDERED.
Padilla, Davide, Jr., Bellosillo and Hermosisima, Jr., JJ., concur.

THIRD DIVISION
[G.R. No. 127422. April 17, 2001.]
LMG CHEMICALS CORPORATION, petitioner, vs. THE SECRETARY OF THE
DEPARTMENT OF LABOR AND EMPLOYMENT, THE HON. LEONARDO A.
QUISUMBING, and CHEMICAL WORKER'S UNION, respondents.
Benitez Parlade Africa Herrera Parlade & Panga Law Offices for petitioner.
The Solicitor General for public respondent.
Villy P. Cadiz for private respondent NAFLU.
SYNOPSIS
Petitioner company sought nullification of the orders of the Labor
Secretary, whimsically granting a wage increase of P140.00 to respondent
union members despite the losses suffered by the company and awarding
without basis retroactively provisions of the new CBA, in violation of Art.
253-A of the Labor Code. HCaDET
On certiorari, the Supreme Court held that the respondent Secretary did
not gravely abuse his discretion in ordering the wage increase, because:
it was only in one division of the corporation that was sustaining losses
and the loss in one is usually offset by the gains in the others; pending
negotiations between the parties, petitioner granted its supervisory
employee wage increase, hence, there is no valid reason why it should
deny the same to union members. Finally, the authority of the Secretary
to assume jurisdiction over a labor dispute likely to cause a strike in an
industry indispensable to national interest in plenary and carries with it
the power to determine the retroactivity of the parties' CBA.
SYLLABUS
1.
REMEDIAL LAW; SPECIAL CIVIL ACTIONS; CERTIORARI; GRAVE ABUSE
OF DISCRETION; ORDERING WAGE INCREASE DESPITE COMPANY LOSSES,
NOT WHIMSICAL IN CASE AT BAR. Verily, petitioner's assertion that
respondent Secretary failed to consider the evidence on record lacks
merit. It was only the Inorganic Division of the petitioner corporation that
was sustaining losses. Such incident does not justify the withholding of
any salary increase as petitioner's income from all sources are collated for
the determination of its true financial condition. As correctly stated by the
Secretary, "the loss in one is usually offset by the gains in the others".
Moreover, petitioner company granted its supervisory employees, during

the pendency of the negotiations between the parties, a wage increase of

P4,500 per month or P166 per day, more or less. Petitioner justified this
by saying that the said increase was pursuant to its earlier agreement
with the supervisors. Hence, the company had no choice but to abide by
such agreement even if it was already sustaining losses as a result of the
strike of the rank-and-file employees. Petitioner's actuation is actually a
discrimination against respondent union members. If it could grant a
wage increase to its supervisors, there is no valid reason why it should
deny the same to respondent union members. Significantly, while
petitioner asserts that it sustained losses in the first part of 1996, yet
during the May 9, 1996 conciliation meeting, it made the offer of P135
daily wage to the said union members. This court, therefore, holds that
respondent Secretary did not gravely abuse his discretion in ordering the
wage increase. Grave abuse of discretion implies whimsical and
capricious exercise of power which, in the instant case, is not obtaining.
DTCAES
2.
LABOR AND SOCIAL LEGISLATION; SECRETARY OF LABOR AND
EMPLOYMENT; JURISDICTION OVER LABOR DISPUTES IMPRESSED WITH
NATIONAL INTEREST; PLENARY NATURE THEREOF; CASE AT BAR. It must
be emphasized that respondent Secretary assumed jurisdiction over the
dispute because it is impressed with national interest. As noted by the
Secretary, "the petitioner corporation was then supplying the sulfate
requirements of MWSS as well as the sulfuric acid of NAPOCOR, and
consequently, the continuation of the strike would seriously affect the
water supply of Metro Manila and the power supply of the Luzon Grid".
Such authority of the Secretary to assume jurisdiction carries with it the
power to determine the retroactivity of the parties' CBA. It is well settled
in our jurisprudence that the authority of the Secretary of Labor to
assume jurisdiction over a labor dispute causing or likely to cause a strike
or lockout in an industry indispensable to national interest includes and
extends to all questions and controversies arising therefrom. The power is
plenary and discretionary in nature to enable him to effectively and
efficiently dispose of the primary dispute.
3.
STATUTORY CONSTRUCTION; LABOR LAWS; ALL DOUBTS IN THE
INTERPRETATION THEREOF SHOULD BE RESOLVED IN FAVOR OF LABOR;
CASE AT BAR. Finally, to deprive respondent Secretary of such power
and discretion would run counter to the well-established rule that all
doubts in the interpretation of labor laws should be resolved in favor of
labor. In upholding the assailed orders of respondent Secretary, this Court
is only giving meaning to this rule. Indeed, the Court should help labor

authorities in providing workers immediate benefits, without being

hampered by arbitration or litigation processes that prove to be not only
nerve-wracking but financially burdensome in the long run. ScAaHE
DECISION
SANDOVAL-GUTIERREZ, J p:
Before us is a petition for certiorari with prayer for a temporary
restraining order and a writ of preliminary injunction under Rule 65 of the
1997 Rules of Civil Procedure, as amended, seeking to nullify the orders
dated October 7, 1996 and December 17, 1996, issued by the then
Secretary of Labor and Employment, Hon. Leonardo A. Quisumbing, 1 in
OS-AJ-05-10(1)-96, "IN RE: LABOR DISPUTE AT LMG CHEMICALS
CORPORATION"
The facts as culled from the records are:

DASCIc

LMG Chemicals Corporation, (petitioner) is a domestic corporation

engaged in the manufacture and sale of various kinds of chemical
substances, including aluminum sulfate which is essential in purifying
water, and technical grade sulfuric acid used in thermal power plants.
Petitioner has three divisions, namely: the Organic Division, Inorganic
Division and the Pinamucan Bulk Carriers. There are two unions within
petitioner's Inorganic Division. One union represents the daily paid
employees and the other union represents the monthly paid employees.
Chemical Workers Union, respondent, is a duly registered labor
organization acting as the collective bargaining agent of all the daily paid
employees of petitioner's Inorganic Division.
Sometime in December 1995, the petitioner and the respondent started
negotiation for a new Collective Bargaining Agreement (CBA) as their old
CBA was about to expire. They were able to agree on the political
provisions of the new CBA, but no agreement was reached on the issue of
wage increase. The economic issues were not also settled.
The positions of the parties with respect to wage issue were:
"Petitioner Company
P40 per day on the first year
P40 per day on the second year
P40 per day on the third year

Respondent Union"
P350 per day on the first 18 months, and
P150 per day for the next 18 months"
In the course of the negotiations, respondent union pruned down the
originally proposed wage increase quoted above to P215 per day, broken
down as follows:
"P142 for the first 18 months
P73 for the second 18 months"
With the CBA negotiations at a deadlock, on March 6, 1996, respondent
union filed a Notice of Strike with the National Conciliation and Mediation
Board, National Capital Region. Despite several conferences and efforts of
the designated conciliator-mediator, the parties failed to reach an
amicable settlement.
On April 16, 1996, respondent union staged a strike. In an attempt to end
the strike early, petitioner, on April 24, 1996, made an improved offer of
P135 per day, spread over the period of three years, as follows:
"P55 per day on the first year;
P45 per day on the second year;
P35 per day on the third year."
On May 9, 1996, another conciliation meeting was held between the
parties. In that meeting, petitioner reiterated its improved offer of P135
per day which was again rejected by the respondent union.
On May 20, 1996, the Secretary of Labor and Employment, finding the
instant labor dispute impressed with national interest, assumed
jurisdiction over the same.
In compliance with the directive of the Labor Secretary, the parties
submitted their respective position papers both dated June 21, 1996.
In its position paper, petitioner made a turn-around, stating that it could
no longer afford to grant its previous offer due to serious financial losses
during the early months of 1996. It then made the following offer:
Zero increase in the first year;
P30 per day increase in the second year; and

P20 per day increase in the third year.

In its reply to petitioner's position paper, respondent union claimed it had
a positive performance in terms of income during the covered period.
On October 7, 1996, the Secretary of Labor and Employment issued the
first assailed order, pertinent portions of which read:
". . . In the light of the Company's last offer and the Union's last position,
We decree that the Company's offer of P135 per day wage increase be
further increased to P140 per (day), which shall be incorporated in the
new CBA, as follows:
P90 per day for the first 18 months, and
P50 per day for the next 18 months.
After all, the Company had granted its supervisory employees an increase
of P4,500 per month or P166 per day, more or less, if the period reckoned
is 27 working days.
In regard to the division of the three-year period into two sub-periods of
18 months each, this office take cognizance of the same practice under
the old CBA.
2.

Other economic demands

Considering the financial condition of the Company, all other economic

demands except those provided in No. 3 below are rejected. The
provisions in the old CBA as well as those contained in the Company's
Employee's Primer of Benefits as of Aug. 1, 1994 shall be retained and
incorporated in the new CBA.
3.

Effectivity of the new CBA

Article 253-A of the Labor Code, as amended, provides that when no new
CBA is signed during a period of six months from the expiry date of the
old CBA, the retroactivity period shall be according to the parties'
agreement. Inasmuch as the parties could not agree on this issue and
since this Office has assumed jurisdiction, then this matter now lies at the
discretion of the Secretary of Labor and Employment. Thus the new
Collective Bargaining Agreement which the parties will sign pursuant to
this Order shall retroact to January 1, 1996.
xxx

xxx

xxx

ACCORDINGLY, this Office now directs the parties to incorporate these

dispositions in their new Collective bargaining Agreement effective
January 1, 1996 to December 31, 1998."
Forthwith, petitioner filed a motion for reconsideration but was denied by
the Secretary in his order dated December 16, 1996.
Petitioner now contends that in issuing the said orders, respondent
Secretary gravely abused his discretion, thus:
I
"THE HONORABLE SECRETARY OF LABOR COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OF JURISDICTION IN DISREGARDING
THE EVIDENCE OF PETITIONER'S FINANCIAL LOSSES AND IN GRANTING A
P140.00 WAGE INCREASE TO THE RESPONDENT UNION.
II
THE HONORABLE SECRETARY OF LABOR COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OF JURISDICTION IN DECREEING THAT
THE NEW COLLECTIVE BARGAINING AGREEMENT TO BE SIGNED BY THE
PARTIES SHALL RETROACT TO JANUARY 1, 1996."
Anent the first ground, petitioner asserts that the decreed amount of
P140 wage increase has no basis in fact and in law. Petitioner insists that
public respondent Secretary whimsically presumed that the company can
survive despite the losses being suffered by its Inorganic Division and its
additional losses caused by the strike held by respondent union.
Petitioner further contends that respondent Secretary disregarded its
evidence showing that for the first part of 1996, its Inorganic Division
suffered serious losses amounting to P15.651 million. Hence, by awarding
wage increase without any basis, respondent Secretary gravely abused
his discretion and violated petitioner's right to due process. CAaSHI
We are not persuaded.
As aptly stated by the Solicitor General in his comment on the petition
dated July 1, 1997, respondent Secretary considered all the evidence and
arguments adduced by both parties. In ordering the wage increase, the
Secretary ratiocinated as follows:
"xxx

xxx

xxx

In the Company's Supplemental Comment, it says that it has three

divisions, namely: the Organic Division, Inorganic Division and the

Pinamucan Bulk Carriers. The Union in this instant dispute represent the
daily wage earners in the Inorganic Division. The respective income of the
three divisions is shown in Annex B to the Company's Supplemental
Comment. The Organic Division posted an income of P369,754,000 in
1995. The Inorganic Division realized an income of P261,288,000 in the
same period. The tail-ender is the Pinamucan Bulk Carriers Division with
annual income of P11,803,000 for the same period. Total Company
income for the period was P642,845,000.
It is a sound business practice that a Company's income from all sources
are collated to determine its true financial condition. Regardless of
whether one division or another losses or gains in its yearly operation is
not material in reckoning a Company's financial status. In fact, the loss in
one is usually offset by the gains in the others. It is not a good business
practice to isolate the employees or workers of one division, which
incurred an operating loss for a particular period. That will create
demoralization among its ranks, which will ultimately affect productivity.
The eventual loser will be the company.
So, even if We believe the position of the company that its Inorganic
Division lost last year and during the early months of this year, it would
not be a good argument to deny them of any salary increase. When the
Company made the offer of P135 per day for the three year period, it was
presumed to have studied its financial condition properly, taking into
consideration its past performance and projected income. In fact, the
Company realized a net income of P10,806,678 for 1995 in all its
operations, which could be one factor why it offered the wage increase
package of P135 per day for the Union members.
Besides, as a major player in the country's corporate field, reneging from
a wage increase package it previously offered and later on withdrawing
the same simply because this Office had already assumed jurisdiction
over its labor dispute with the Union cannot be countenanced. It will be
worse if the employer is allowed to withdraw its offer on the ground that
the union staged a strike and consequently subsequently suffered
business setbacks in its income projections. To sustain the Company's
position is like hanging the proverbial sword of Damocles over the Union's
right to concerted activities, ready to fall when the latter clamors for
better terms and conditions of employment.
But we cannot also sustain the Union's demand for an increase of P215
per day. If we add the overload factors such as the increase in SSS
premiums, medicare and medicaid, and other multiplier costs, the

Company will be saddled with additional labor cost, and its projected
income for the CBS period may not be able to absorb the added cost
without impairing its viability. . . ."
Verily, petitioner's assertion that respondent Secretary failed to consider
the evidence on record lacks merit. It was only the Inorganic Division of
the petitioner corporation that was sustaining losses. Such incident does
not justify the withholding of any salary increase as petitioner's income
from all sources are collated for the determination of its true financial
condition. As correctly stated by the Secretary, "the loss in one is usually
offset by the gains in the others."
Moreover, petitioner company granted its supervisory employees, during
the pendency of the negotiations between the parties, a wage increase of
P4,500 per month or P166 per day, more or less. Petitioner justified this
by saying that the said increase was pursuant to its earlier agreement
with the supervisors. Hence, the company had no choice but to abide by
such agreement even if it was already sustaining losses as a result of the
strike of the rank-and-file employees.
Petitioner's actuation is actually a discrimination against respondent
union members. If it could grant a wage increase to its supervisors, there
is no valid reason why it should deny the same to respondent union
members. Significantly, while petitioner asserts that it sustained losses in
the first part of 1996, yet during the May 9, 1996 conciliation meeting, it
made the offer of P135 daily wage to the said union members.
This Court, therefore, holds that respondent Secretary did not gravely
abuse his discretion in ordering the wage increase. Grave abuse of
discretion implies whimsical and capricious exercise of power which, in
the instant case, is not obtaining.
On the second ground, petitioner contends that public respondent
committed grave abuse of discretion when he ordered that the new CBA
which the parties will sign shall retroact to January 1, 1996, citing the
cases of Union of Filipro Employees vs. NLRC, 2 and Pier 8 Arrastre and
Stevedoring Services, Inc. vs. Roldan Confesor. 3
Invoking the provisions of Article 253-A of the Labor Code, petitioner
insists that public respondent's discretion on the issue of the date of the
effectivity of the new CBA is limited to either: (1) leaving the matter of
the date of effectivity of the new CBA to the agreement of the parties or
(2) ordering that the terms of the new CBA be prospectively applied.

It must be emphasized that respondent Secretary assumed jurisdiction

over the dispute because it is impressed with national interest. As noted
by the Secretary, "the petitioner corporation was then supplying the
sulfate requirements of MWSS as well as the sulfuric acid of NAPOCOR,
and consequently, the continuation of the strike would seriously affect the
water supply of Metro Manila and the power supply of the Luzon Grid."
Such authority of the Secretary to assume jurisdiction carries with it the
power to determine the retroactivity of the parties' CBA.
It is well settled in our jurisprudence that the authority of the Secretary of
Labor to assume jurisdiction over a labor dispute causing or likely to
cause a strike or lockout in an industry indispensable to national interest
includes and extends to all questions and controversies arising therefrom.
The power is plenary and discretionary in nature to enable him to
effectively and efficiently dispose of the primary dispute. 4
In St. Luke's Medical Center, Inc. vs. Torres 5 , a deadlock developed
during the CBA negotiations between the management and the union.
The Secretary of Labor assumed jurisdiction and ordered that their CBA
shall retroact to the date of the expiration of the previous CBA. The
management claimed that the Secretary of Labor gravely abused his
discretion. This Court held:
"xxx

xxx

xxx

Finally, the effectivity of the Order of January 28, 1991, must retroact to
the date of the expiration of the previous CBA, contrary to the position of
the petitioner. Under the circumstances of the case, Art. 253-A cannot be
properly applied to herein case. As correctly stated by public respondent
in his assailed Order of April 12, 1991
'Anent the alleged lack of basis for retroactivity provisions awarded, We
would stress that the provision of law invoked by the Hospital, Article 253A of the Labor Code, speaks of agreement by and between the parties,
and not arbitral awards.'
Therefore in the absence of the specific provision of law prohibiting
retroactivity of the effectivity of the arbitral awards issued by the
Secretary of Labor pursuant to Article 263(9) of the Labor Code, such as
herein involved, public respondent is deemed vested with plenary powers
to determine the effectivity thereof."
Finally, to deprive respondent Secretary of such power and discretion
would run counter to the well-established rule that all doubts in the

interpretation of labor laws should be resolved in favor of labor. In

upholding the assailed orders of respondent Secretary, this Court is only
giving meaning to this rule. Indeed, the Court should help labor
authorities in providing workers immediate benefits, without being
hampered by arbitration or litigation processes that prove to be not only
nerve-wracking but financially burdensome in the long run. caIDSH
As we said in Maternity Children's Hospital vs. Secretary of Labor 6 :
"Social Justice Legislation, to be truly meaningful and rewarding to our
workers, must not be hampered in its application by long windedarbitration and litigation. Rights must be asserted and benefits received
with the least inconvenience. Labor laws are meant to promote, not to
defeat, social justice."
WHEREFORE, the instant petition is DENIED. The assailed orders of the
Secretary of Labor dated October 7, 1996 and December 16, 1996 are
AFFIRMED. Costs against petitioner.
SO ORDERED.
Melo, Vitug and Gonzaga-Reyes, JJ., concur.
Panganiban, J ., took no part. Former partner in law firm representing a
party.

THIRD DIVISION
[G.R. No. 143304. July 8, 2004.]
SPECIAL STEEL PRODUCTS, INC., petitioner, vs. LUTGARDO VILLAREAL
AND FREDERICK SO, respondents.
Mario Eugenio V. Lim for petitioner.
Neva Blancaver for respondents.
SYNOPSIS
Respondents Lutgardo C. Villareal and Frederick G. So worked for
petitioner as assistant sales manager and salesman, respectively. On April
16, 1997, respondents filed with the Labor Arbiter a complaint for
payment of separation benefits, commissions, vacation and sick leave
benefits, and proportionate 13th month pay against the petitioner. On its
part, the petitioner justified its withholding of respondent Villareal's
monetary benefits as a lien for the protection of its right as surety in the
latter' car loan from the bank. On the other hand, petitioner claimed that
it withheld the monetary benefits of respondent So as payment for the
expenses incurred by him in his training abroad. It maintained that it
could withhold his monetary benefits being authorized by the
memorandum he signed. The Labor Arbiter ruled for the respondents. The
National Labor Relations Commission (NLRC) and the Court of Appeals
affirmed with modification the Labor Arbiter's Decision. The appellate
court ruled that the petitioner may not offset its claims against
respondents' monetary benefits. ADaSET
Hence, this petition for review on certiorari.
In affirming the decision of the appellate court, the Supreme Court held
that the petitioner had no legal authority to withhold respondents' 13th
month pay and other benefits. According to the Court, what an employee
has worked for, his employer must pay. Thus, an employer cannot simply
refuse to pay the wages or benefits of its employee because he has either
defaulted in paying a loan guaranteed by his employer; or violated their
memorandum of agreement; or failed to render an accounting of his
employer's property. DHIcET
SYLLABUS
1.
LABOR AND SOCIAL LEGISLATION; LABOR STANDARDS; WAGES;
WITHHOLDING OF WAGES AND BENEFITS PROHIBITED WITHOUT THE

WORKER'S CONSENT; WHAT AN EMPLOYEE HAS WORKED FOR, HIS

EMPLOYER MUST PAY. Article 116 of the Labor Code, as amended is
clear and needs no further elucidation. Indeed, petitioner has no legal
authority to withhold respondents' 13th month pay and other benefits.
What an employee has worked for, his employer must pay. Thus, an
employer cannot simply refuse to pay the wages or benefits of its
employee because he has either defaulted in paying a loan guaranteed
by his employer; or violated their memorandum of agreement; or failed to
render an accounting of his employer's property.
2.
CIVIL LAW; OBLIGATIONS AND CONTRACTS; SURETY DISTINGUISHED
FROM GUARANTY; AN EMPLOYER CANNOT UNILATERALLY WITHHOLD
WAGES OR BENEFITS OF ITS EMPLOYEE WHO HAS DEFAULTED IN PAYING A
LOAN GUARANTEED BY HIS EMPLOYER. There is no guaranty involved
herein and, therefore, the provision of Article 2071 does not apply. A
guaranty is distinguished from a surety in that a guarantor is the insurer
of the solvency of the debtor and thus binds himself to pay if the principal
is unable to pay, while a surety is the insurer of the debt, and he obligates
himself to pay if the principal does not pay. Based on the above
distinction, it appears that the contract executed by petitioner and
respondent Villareal (in favor of the Bank of Commerce) is a contract of
surety. In fact, it is denominated as a "continuing suretyship agreement."
Hence, petitioner could not just unilaterally withhold respondent's wages
or benefits as a preliminary remedy under Article 2071. It must file an
action against respondent Villareal. Thus, the Appellate Court aptly ruled
that petitioner "may only protect its right as surety by instituting an
'action to demand a security'." CAHaST
3.
ID.; ID.; EXTINGUISHMENT OF OBLIGATIONS; LEGAL COMPENSATION;
CANNOT TAKE PLACE BETWEEN PARTIES WHO ARE NOT MUTUALLY
CREDITOR AND DEBTOR OF EACH OTHER. As to respondent So,
petitioner maintains that there can be a set-off or legal compensation
between them. Consequently, it can withhold his 13th month pay and
other benefits. For legal compensation to take place, the requirements set
forth in Articles 1278 and 1279 of the Civil Code, quoted below, must be
present. . . . In the present case, set-off or legal compensation cannot
take place between petitioner and respondent So because they are not
mutually creditor and debtor of each other. A careful reading of the
Memorandum dated August 22, 1994 reveals that the "lump sum
compensation of not less than US$6,000.00 will have to be refunded" by
each trainee to BOHLER, not to petitioner. ADCETI

DECISION
SANDOVAL-GUTIERREZ, J p:
May an employer withhold its employees' wages and benefits as lien to
protect its interest as a surety in the latter's car loan and for expenses
incurred in a training abroad? This is the basic issue for our resolution in
the instant case. ISCcAT
At bar is a petition for review on certiorari under Rule 45 of the 1997
Rules of Civil Procedure, as amended, assailing the Decision 1 dated
October 29, 1999 and Resolution 2 dated May 8, 2000 of the Court of
Appeals in CA-G.R. SP No. 50957, entitled "Special Steel Products, Inc. vs.
National Labor Relations Commission, Lutgardo Villareal and Frederick
So."
The factual antecedents as borne by the records are:
Special Steel Products, Inc., petitioner, is a domestic corporation engaged
in the principal business of importation, sale, and marketing of BOHLER
steel products. Lutgardo C. Villareal and Frederick G. So, respondents,
worked for petitioner as assistant sales manager and salesman,
respectively.
Sometime in May 1993, respondent Villareal obtained a car loan from the
Bank of Commerce, with petitioner as surety, as shown by a "continuing
suretyship agreement" and "promissory note" wherein they jointly and
severally agreed to pay the bank P786,611.60 in 72 monthly installments.
On January 15, 1997, respondent Villareal resigned and thereafter joined
Hi-Grade Industrial and Technical Products, Inc. as executive vicepresident.
Sometime in August 1994, petitioner "sponsored" respondent Frederick So
to attend a training course in Kapfenberg, Austria conducted by BOHLER,
petitioner's principal company. This training was a reward for respondent
So's outstanding sales performance. When respondent returned nine
months thereafter, petitioner directed him to sign a memorandum
providing that BOHLER requires trainees from Kapfenberg to continue
working with petitioner for a period of three (3) years after the training.
Otherwise, each trainee shall refund to BOHLER $6,000.00 (US dollars) by
way of set-off or compensation. On January 16, 1997 or 2 years and 4
months after attending the training, respondent resigned from petitioner.

Immediately, petitioner ordered respondents to render an accounting of

its various Christmas giveaways 3 they received. These were intended for
distribution to petitioner's customers.
In protest, respondents demanded from petitioner payment of their
separation benefits, commissions, vacation and sick leave benefits, and
proportionate 13th month pay. But petitioner refused and instead,
withheld their 13th month pay and other benefits.
On April 16, 1997, respondents filed with the Labor Arbiter a complaint for
payment of their monetary benefits against petitioner and its president,
Augusto Pardo, docketed as NLRC NCR Case No. 04-02820-97.
In due course, the Labor Arbiter rendered a Decision dated February 18,
1998, the dispositive portion of which reads:
"WHEREFORE, decision is hereby rendered ordering the respondents,
Special Steel Products, Inc. and Mr. Augusto Pardo to pay, jointly and
severally, complainants Frederick G. So and Lutgardo C. Villareal the
amounts of Seventy One Thousand Two Hundred Seventy Nine Pesos and
Fifty Eight Centavos (P71,279.58) and One Hundred Sixty Four Thousand
Eight Hundred Seventy Three Pesos (P164,873.00), respectively,
representing their commissions, retirement benefit (for Villareal),
proportionate 13th month, earned vacation and sick leave benefits, and
attorney's fees.
xxx

xxx

xxx

SO ORDERED."
On appeal, the National Labor Relations Commission (NLRC), in a Decision
dated June 29, 1998, affirmed with modification the Arbiter's Decision in
the sense that Pardo, petitioner's president, was exempted from any
liability.
On September 11, 1998, petitioner filed a motion for reconsideration but
was denied.
Hence, petitioner filed with the Court of Appeals a petition for certiorari.
On October 29, 1999, the Court of Appeals rendered a Decision
dismissing the petition and affirming the assailed NLRC Decision, thus:
"At the outset, the Court notes that despite its Seventh Assignment of
Error, petitioner does not question the NLRC's decision affirming the labor
arbiter's award to private respondents of commissions, proportionate

13th month pay, earned vacation and sick leave benefits and retirement
benefit (for Villareal). It merely asserts that it was withholding private
respondents' claims by reason of their pending obligations.
Petitioner justifies its withholding of Villareal's monetary benefits as a lien
for the protection of its right as surety in the car loan. It asserts that it
would release Villareal's monetary benefits if he would cause its
substitution as surety by Hi-Grade. It further asserts that since Villareal's
debt to the Bank is now due and demandable, it may, pursuant to Art.
2071 of the New Civil Code, 'demand a security that shall protect him
from any proceeding by the creditor and from the danger of insolvency of
the debtor.'
Petitioner's posture is not sanctioned by law. It may only protect its right
as surety by instituting an 'action . . . to demand a security (Kuenzle and
Streiff vs. Tan Sunco, 16 Phil 670). It may not take the law into its own
hands. Indeed, it is 'unlawful for any person, directly or indirectly, to
withhold any amount from the wages of a worker or induce him to give up
any part of his wages by force, stealth, intimidation, threat or by any
other means whatsoever without the worker's consent' (Art. 116, Labor
Code).
Moreover, petitioner has made no payment on the car loan.
Consequently, Villareal is not indebted to petitioner. On the other hand,
petitioner owes Villareal for the decreed monetary benefits. The
withholding of Villareal's monetary benefits had effectively prevented him
from settling his arrearages with the Bank.
With regard to So's money claims. We find no cogent reason to disturb the
findings of the NLRC. . . .
So's all-expense paid trip to Austria was a bonus for his outstanding sales
performance. Before his sojourn to Austria, petitioner issued him a
memorandum (or 'memo') stating that 'Bohler is now imposing that
trainees coming to Kapfenberg to stay with the local representative for at
least three (3) years after training, otherwise, a lump sum compensation
of not less than US $6,000.00 will have to be refunded to them by the
trainee'. So did not affix his signature on the memo. However, nine (9)
months after coming back from his training, he was made to sign the
memo. In his letter to Augusto Pardo dated July 18, 1997, So stated that
his signature was needed only as a formality and that he was left with no
choice but to accommodate Augusto Pardo's request. The labor arbiter
gave credence to such explanation.

Assuming arguendo that the memo is binding on So, his more than two
years post-training stay with petitioner is a substantial compliance with
the condition. Besides, So tendered his resignation effective February 16,
1997. Instead of asking So to defer his resignation until the expiration of
the three-year period, petitioner advanced its effectivity by one month
as of January 16, 1997. This means that petitioner no longer needed So's
services, particularly the skill and expertise acquired by him from the
training. More importantly, the party entitled to claim the US $6,000.00
liquidated damages is BOHLER and not petitioner. Consequently,
petitioner has no right to insist on payment of the liquidated damages,
much less to withhold So's monetary benefits in order to exact payment
thereof. DAHSaT
With regard to the Christmas giveaways. We agree with the findings of
the labor arbiter (affirmed by the NLRC) 'that there is no existing
memorandum requiring the accounting of such giveaways and that no
actual accounting has ever been required before, as in the case of then
Sales Manager Benito Sayo whose resignation took effect on December
31, 1996 but was not required to account for the Christmas giveaways. To
make So account now for said items would amount to discrimination.' In
any event, the matter of accounting of the giveaways may be ventilated
in the proper forum.
Finally, petitioner may not offset its claims against private respondents'
monetary benefits. With respect to its being the surety of Villareal, two
requisites of compensation are lacking, to wit: 'that each one of the
obligors be bound principally, and that he be at the same time a principal
creditor of the other' and 'that (the two debts) be liquidated and
demandable' (Art. 1279 (1) and (4), New Civil Code). And in respect to its
claim for liquidated damages against So, there can be no compensation
because his 'creditor' is not petitioner but BOHLER (Art. 1278, New Civil
Code).
Consequently, the NLRC committed no grave abuse of discretion.
WHEREFORE, the petition is DISMISSED while the assailed decision of the
NLRC is AFFIRMED.
SO ORDERED."
On December 15, 1999, petitioner filed a motion for reconsideration but
was denied by the Appellate Court in a Resolution dated May 8, 2000.

Hence, this petition for review on certiorari. Petitioner contends that as a

guarantor, it could legally withhold respondent Villareal's monetary
benefits as a preliminary remedy pursuant to Article 2071 of the Civil
Code, as amended. 4 As to respondent So, petitioner, citing Article 113 of
the Labor Code, as amended, 5 in relation to Article 1706 of the Civil
Code, as amended, 6 maintains that it could withhold his monetary
benefits being authorized by the memorandum he signed.
Article 116 of the Labor Code, as amended, provides:
"ART. 116.Withholding of wages and kickbacks prohibited. It shall be
unlawful for any person, directly or indirectly, to withhold any amount
from the wages (and benefits) of a worker or induce him to give up any
part of his wages by force, stealth, intimidation, threat or by any other
means whatsoever without the worker's consent."
The above provision is clear and needs no further elucidation. Indeed,
petitioner has no legal authority to withhold respondents' 13th month pay
and other benefits. What an employee has worked for, his employer must
pay. 7 Thus, an employer cannot simply refuse to pay the wages or
benefits of its employee because he has either defaulted in paying a loan
guaranteed by his employer; or violated their memorandum of
agreement; or failed to render an accounting of his employer's property. 8
Nonetheless, petitioner, relying on Article 2071 (earlier cited), contends
that the right to demand security and obtain release from the guaranty it
executed in favor of respondent Villareal may be exercised even without
initiating a separate and distinct action.
There is no guaranty involved herein and, therefore, the provision of
Article 2071 does not apply.
A guaranty is distinguished from a surety in that a guarantor is the insurer
of the solvency of the debtor and thus binds himself to pay if the principal
is unable to pay, while a surety is the insurer of the debt, and he obligates
himself to pay if the principal does not pay. 9
Based on the above distinction, it appears that the contract executed by
petitioner and respondent Villareal (in favor of the Bank of Commerce) is
a contract of surety. In fact, it is denominated as a "continuing suretyship
agreement." Hence, petitioner could not just unilaterally withhold
respondent's wages or benefits as a preliminary remedy under Article
2071. It must file an action against respondent Villareal. Thus, the

Appellate Court aptly ruled that petitioner "may only protect its right as
surety by instituting an 'action to demand a security'."
As to respondent So, petitioner maintains that there can be a set-off or
legal compensation between them. Consequently, it can withhold his 13th
month pay and other benefits.
For legal compensation to take place, the requirements set forth in
Articles 1278 and 1279 of the Civil Code, quoted below, must be present.
"ARTICLE 1278.
Compensation shall take place when two persons, in
their own right, are creditors and debtors of each other.
"ARTICLE 1279.
necessary:

In order that compensation may be proper, it is

(1) That each one of the obligors be bound principally, and that he be at
the same time a principal creditor of the other;
(2) That both debts consist in a sum of money, or if the things due are
consumable, they be of the same kind, and also of the same quality if the
latter has been stated;
(3)

That the two debts be due;

(4)

That they be liquidated and demandable;

(5) That over neither of them there be any retention or controversy,

commenced by third persons and communicated in due time to the
debtor."
In the present case, set-off or legal compensation cannot take place
between petitioner and respondent So because they are not mutually
creditor and debtor of each other.
A careful reading of the Memorandum 10 dated August 22, 1994 reveals
that the "lump sum compensation of not less than US $6,000.00 will have
to be refunded" by each trainee to BOHLER, not to petitioner.
In fine, we rule that petitioner has no legal right to withhold respondents'
13th month pay and other benefits to recompense for whatever amount it
paid as security for respondent Villareal's car loan; and for the expenses
incurred by respondent So in his training abroad.
WHEREFORE, the petition is DENIED. The Decision dated October 29,
1999 and Resolution dated May 8, 2000 of the Court of Appeals in CA-G.R.
SP No. 50957 are hereby AFFIRMED.

SO ORDERED. caADIC
Vitug, Corona and Carpio-Morales, JJ ., concur.

THIRD DIVISION
[G.R. No. 86227. January 19, 1994.]
DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs. THE NATIONAL
LABOR RELATIONS COMMISSION and MALAYANG SAMAHAN NG MGA
MANGGAGAWA SA ATLAS TEXTILE DEVELOPMENT CORPORATION,
respondents.
SYLLABUS
1.
LABOR AND SOCIAL LEGISLATION; WORKER PREFERENCE IN CASE OF
BANKRUPTCY, MUST BE VIEWED AND READ IN CONSONANCE WITH THE
PROVISIONS OF THE CIVIL CODE ON CONCURRENCE AND PREFERENCE OF
CREDIT. Article 110 of the Labor Code was later amended by Republic
Act No. 6715 which became effective on 21 March 1989. The effects of
the amendatory law were put to issue and passed upon in subsequent
cases. In Development Bank of the Philippines vs. National Labor
Relations Commission, 183 SCRA 328, the Court, through Mme. Justice
Melencio-Herrera, elucidated: "The amendment expands worker
preference to cover not only unpaid wages but also other monetary
claims to which even claims of the Government must be deemed
subordinate. . . . Notably, the terms `declaration' of bankruptcy or
'judicial' liquidation have been eliminated. Does this mean then that
liquidation proceedings have been done away with? We opine in the
negative upon the following considerations: 1. Because of its impact on
the entire system of credit, Article 110 of the Labor Code cannot be
viewed in isolation but must be read in relation to the Civil Code scheme
on classification and preference of credits. . . . 2. In the same way that the
Civil Code provisions on classification of credits and the Insolvency Law
have been brought into harmony, so also must the kindred provisions of
the Labor Law be made to harmonize with those laws. 3. In the event of
insolvency, a principal objective should be to effect an equitable
distribution of the insolvent's property among his creditors. To accomplish
this there must first be some proceeding where notice to all of the
insolvent's creditors may be given and where the claims of preferred
creditors may be bindingly adjudicated (De Barreto vs. Villanueva, No. L14938, December 29, 1962, 6 SCRA 928). The rationale therefore has
been expressed in the recent case of DBP vs. Secretary of Labor (G.R. No.
79351, 28 November 1989), . . . 4. A distinction should be made between
a preference of credit and a lien. A preference applies only to claims
which do not attach to specific properties. A lien creates a charge on a
particular property. The right of first preference as regards unpaid wages

recognized by Article 110 does not constitute a lien on the property of the
insolvent debtor in favor of workers. It is but a preference of credit in their
favor, a preference in application. It is a method adopted to determine
and specify the order in which credits should be paid in the final
distribution of the proceeds of the insolvent's assets. It is a right to a first
preference in the discharge of the funds of the judgment debtor."
2.
ID.; ID.; REQUIRES JUDICIAL PROCEEDINGS IN REM IN THE
ADJUDICATION OF CREDITORS CLAIMS AGAINST DEBTOR'S ASSETS.
Even if Article 110 and its Implementing Rule, as amended, should be
interpreted to mean "absolute preference," the same should be given only
prospective effect in line with the cardinal rule that laws shall have no
retroactive effect, unless the contrary is provided (Article 4, Civil Code).
Any infringement on the constitutional guarantee on non-impairment of
the obligation of contracts (Section 10, Article III, 1987 Constitution) is
thereby also avoided. In point of fact, DBP's mortgage credit antedated by
several years the amendatory law, RA No. 6715. To give Article 110
retroactive effect would be to wipe out the mortgage in DBP's favor and
expose it to a risk which it sought to protect itself against by requiring a
collateral in the form of real property. In fine, the right of preference given
to workers under Article 110 of the labor Code cannot exist in any
effective way prior to the time of its presentation in distribution
proceedings. It will find application when, in such proceedings as
insolvency, unpaid wages shall be paid in full before the `claims of the
Government and other creditors' may be paid. But, for an orderly
settlement of a debtor's assets, all creditors must be convened, their
claims ascertained and inventoried, and thereafter the preferences
determined in the course of judicial proceedings which have for their
object the subjection of the property of the debtor to the payment of his
debts and other lawful obligations. Hence, an orderly determination of
preference of creditors' claims is assured (Philippine Savings Bank vs.
Lantin, No. L-33929, September 2, 1983, 124 SCRA 476); the adjudication
made will be binding on all parties-in-interest, since those proceedings
are proceedings in rem; and the legal scheme of classification,
concurrence and preference of credits in the Civil Code, the Insolvency
Law, and the Labor Code is preserved in harmony."
DECISION
VITUG, J p:
This "petition for review on certiorari" (in reality a petition for certiorari),
filed by the Development Bank of the Philippines ("DBP"), seeks the

reversal of the decision of the National Labor Relations Commission

("NLRC"), affirming that of the Labor Arbiter, which holds the petitioner,
along with Atlas Textile Development Corporation ("ATLAS"), liable to the
private respondents for wage differentials, "illegal" salary deductions,
separation pay, and similar money claims. Cdpr
The private respondents were employees of ATLAS, a textile firm, which
hypothecated its certain assets to DBP. After ATLAS defaulted in its
obligations, DBP foreclosed on the mortgage in March 1985. The latter
acquired the mortgaged assets by virtue of the foreclosure sale. LLjur
The private respondents filed their aforementioned claim, on 30 October
1985, against both ATLAS and DBP. The Labor Arbiter ruled for the private
respondents. On appeal by DBP, the decision was sustained by the NLRC.
Hence, the instant petition.
The petitioner contends that it is error on the part of the public
respondent to consider the workers' preference under Article 110 of the
Labor Code over that of DBP's mortgage lien.
The issue has been put to fore in a number of cases brought to and
decided by this Court.
In Republic vs. Peralta, 150 SCRA 37, the Court, through Mr. Justice
Feliciano, ruled:
"Article 110 of the Labor Code does not purport to create a lien in favor of
workers or employees for unpaid wages either upon all of the properties
or upon any particular property owned by their employer. Claims for
unpaid wages do not therefore fall at all within the category of specially
preferred claims established under Articles 2241 and 2242 of the Civil
Code, except to the extent that such claims for unpaid wages are already
covered by Article 2241, number 6: 'claims for laborers' wages, on the
goods manufactured or the work done;' or by Article 2242, number 3:
'claims of laborers and other workers engaged in the construction,
reconstruction or repair of buildings, canals and other works upon said
buildings, canals or other works.' To the extent that claims for unpaid
wages fall outside the scope of Article 2241, number 6 and 2242, number
3, they would come within the ambit of the category of ordinary preferred
credits under Article 2244. Applying Article 2241, number 6 to the instant
case, the claims of the Unions for separation pay of their members
constitute liens attaching to the processed leaf tobacco, cigars and
cigarettes and other products produced or manufactured by the Insolvent,

but not to other assets owned by the Insolvent. And even in respect of
such tobacco and tobacco products produced by the Insolvent, the claims
of the Unions may be given effect only after the Bureau of Internal
Revenue's claim for unpaid tobacco inspection fees shall have been
satisfied out of the products so manufactured by the Insolvent."
Article 110 of the Labor Code was later amended by Republic Act No.
6715 which became effective on 21 March 1989. And so modified, the
provision thenceforth provided:
"Article 110.
Worker preference in case of bankruptcy. In the event of
bankruptcy or liquidation of an employer's business, his workers shall
enjoy first preference as regards their unpaid wages and other monetary
claims, any provision of law to the contrary notwithstanding. Such unpaid
wages, and monetary claims shall be paid in full before the claims of the
Government and other creditors may be paid." LLpr
The effects of the amendatory law were put to issue and passed upon in
subsequent cases. In Development Bank of the Philippines vs. National
Labor Relations Commission, 183 SCRA 328, the Court, through Mme.
Justice Melencio-Herrera, elucidated:
"The amendment expands worker preference to cover not only unpaid
wages but also other monetary claims to which even claims of the
Government must be deemed subordinate.
xxx

xxx

xxx

"Notably, the terms 'declaration' of bankruptcy or 'judicial' liquidation

have been eliminated. Does this mean then that liquidation proceedings
have been done away with?
"We opine in the negative upon the following considerations:
"1. Because of its impact on the entire system of credit, Article 110 of
the Labor Code cannot be viewed in isolation but must be read in relation
to the Civil Code scheme on classification and preference of credits.
xxx

xxx

xxx

"2. In the same way that the Civil Code provisions on classification of
credits and the Insolvency Law have been brought into harmony, so also
must the kindred provisions of the Labor Law be made to harmonize with
those laws.

"3. In the event of insolvency, a principal objective should be to effect

an equitable distribution of the insolvent's property among his creditors.
To accomplish this there must first be some proceeding where notice to all
of the insolvents's creditors may be given and where the claims of
preferred creditors may be bindingly adjudicated (De Barretto vs.
Villanueva, No. L-14938, December 29, 1962, 6 SCRA 928). The rationale
therefore has been expressed in the recent case of DBP vs. Secretary of
Labor (G.R. No. 79351, 28 November 1989), . . .
"4. A distinction should be made between a preference of credit and a
lien. A preference applies only to claims which do not attach to specific
properties. A lien creates a charge on a particular property. The right of
first preference as regards unpaid wages recognized by Article 110 does
not constitute a lien on the property of the insolvent debtor in favor of
workers. It is but a preference of credit in their favor, a preference in
application. It is a method adopted to determine and specify the order in
which credits should be paid in the final distribution of the proceeds of the
insolvent's assets. It is a right to a first preference in the discharge of the
funds of the judgment debtor. LLphil
xxx

xxx

xxx

"6. Even if Article 110 and its Implementing Rule, as amended, should
be interpreted to mean "absolute preference," the same should be given
only prospective effect in line with the cardinal rule that laws shall have
no retroactive effect, unless the contrary is provided (Article 4, Civil
Code). Thereby, any infringement on the constitutional guarantee on nonimpairment of the obligation of contracts (Section 10, Article III, 1987
Constitution) is also avoided. In point of fact, DBP's mortgage credit
antedated by several years the amendatory law, RA No. 6715. To give
Article 110 retroactive effect would be to wipe out the mortgage in DBP's
favor and expose it to a risk which it sought to protect itself against by
requiring a collateral in the form of real property.
"In fine, the right of preference given to workers under Article 110 of the
Labor Code cannot exist in any effective way prior to the time of its
presentation in distribution proceedings. It will find application when, in
proceedings such as insolvency, such unpaid wages shall be paid in full
before the 'claims of the Government and other creditors' may be paid.
But, for an orderly settlement of a debtor's assets, all creditors must be
convened, their claims ascertained and inventoried, and thereafter the
preferences determined in the course of judicial proceedings which have
for their object the subjection of the property of the debtor to the

payment of his debts and other lawful obligations. Thereby, an orderly

determination of preference of creditors' claims is assured (Philippine
Savings Bank vs. Lantin, No. L-33929, September 2, 1983, 124 SCRA
476); the adjudication made will be binding on all parties-in-interest, since
those proceedings are proceedings in rem; and the legal scheme of
classification, concurrence and preference of credits in the Civil Code, the
Insolvency Law, and the Labor Code is preserved in harmony."
The ruling was reiterated in Development Bank of the Philippines vs.
National Labor Relations Commission, 186 SCRA 841, as well as cases
thereafter, and just recently in Development Bank of the Philippines vs.
NLRC, 218 SCRA 183. cdrep
The case at bench concerns monetary claims of workers that are not
involved in judicial proceedings in rem in adjudication of claims of
creditors vis-a-vis the assets of the debtor, nor have such claims accrued
after the effectivity of Republic Act 6715. The petition thus raises issues
heretofore squarely resolved in our aforequoted decisions. To recapitulate:
(1) Article 110 of the Labor Code, as amended, must be viewed and
read in conjunction with the provisions of the Civil Code on concurrence
and preferences of credits;
(2) The aforesaid provisions of the Civil Code, including Article 110 of
the Labor Code, require judicial proceedings in rem in adjudication of
creditors' claims against the debtor's assets to become operative;
(3) Republic Act No. 6715 has the effect of expanding the "worker
preference" to cover not only unpaid wages but also other monetary
claims of laborers, to which even claims of the Government must be
deemed subordinate; and
(4) The amendatory provisions of Republic Act 6715, which took effect
on 21 March 1989, should only be given prospective application. cdphil
WHEREFORE, the petition is GRANTED. The assailed decision of public
respondent, National Labor Relations Commission and that of the Labor
Arbiter, insofar as the latter holds the petitioner liable for monetary
claims of the private respondents, are hereby REVERSED and SET ASIDE.
SO ORDERED.
Feliciano, Bidin, Romero and Melo, JJ., concur.

FIRST DIVISION
[G.R. No. 108031. March 1, 1995.]
DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs. NATIONAL
LABOR RELATIONS COMMISSION and LEONOR A. ANG, respondents.
Bonifacio M. Abad and Rene A. Gaerlan for petitioner.
The Solicitor General for respondents.
SYLLABUS
1.
REMEDIAL LAW; SPECIAL CIVIL ACTION; CERTIORARI; GRAVE ABUSE
OF DISCRETION; MANIFEST WHERE WORKER PREFERENCE WAS APPLIED
IN THE ABSENCE OF FORMAL DECLARATION OF BANKRUPTCY OR JUDICIAL
LIQUIDATION OF THE BUSINESS ENTERPRISE. The issue now before us
is whether public respondent committed grave abuse of discretion in
holding that Art. 110 of the Labor Code, as amended, which refers to
worker preference in case of bankruptcy or liquidation of an employer's
business, is applicable to the present case notwithstanding the absence
of any formal declaration of bankruptcy or judicial liquidation of TPWII.
Petitioner argues that the decision of public respondent runs counter to
the consistent rulings of this Court in a long line of cases emphasizing
that the application of Art. 110 of the Labor Code is contingent upon the
institution of bankruptcy or judicial liquidation proceedings against the
employer. We hold that public respondent gravely abused its discretion in
affirming the decision of the Labor Arbiter. In the present case, there is as
yet no declaration of bankruptcy nor judicial liquidation of TPWII. Hence, it
would be premature to enforce the worker's preference.
2.
LABOR AND SOCIAL LEGISLATION; LABOR CODE; EMPLOYMENT;
EMPLOYEE'S PREFERENCE IN CASE OF BANKRUPTCY OR LIQUIDATION OF
EMPLOYEE'S BUSINESS; DECLARATION OF BANKRUPTCY OR JUDICIAL
LIQUIDATION, A PRE-REQUISITE. Art. 110 should not be treated apart
from other laws but applied in conjunction with the pertinent provisions of
the Civil Code and the Insolvency Law to the extent that piece-meal
distribution of the assets of the debtor is avoided. Complementing Art.
110 is Sec. 10, Rule VIII, Book III, of the Revised Rules and Regulations
Implementing the Labor Code. We interpreted this provision in
Development Bank of the Philippines v. Santos to mean that . . . a
declaration of bankruptcy or a judicial liquidation must be present before
the worker's preference may be enforced. Thus Article 110 of the Labor
Code and its implementing rule cannot be invoked by the respondents in

this case absent a formal declaration of bankruptcy or a liquidation order .

...
3.
ID.; ID.; ID.; ID.; ID.; RATIONALE. The rationale is that to hold Art.
110 to be applicable also to extrajudicial proceedings would be putting
the worker in a better position than the State which could only assert its
own prior preference in case of a judicial proceeding.
4.
ID.; ID.; ID.; ID.; CONCEPT EXPANDED TO INCLUDE NOT ONLY UNPAID
WAGES BUT ALSO OTHER MONETARY CLAIMS. Art. 110, which was
amended by R.A. 6715 effective 21 March 1989, now reads: Art. 110.
Worker preference in case of bankruptcy. In the event of bankruptcy or
liquidation of an employer's business, his workers shall enjoy first
preference as regards their unpaid wages and monetary claims, any
provision of law to the contrary notwithstanding. Such unpaid wages and
monetary claims shall be paid in full before the claims of the Government
and other creditors may be paid. Obviously, the amendment expanded
the concept of "worker preference" to cover not only unpaid wages but
also other monetary claims to which even claims of the Government must
be deemed subordinate. The Rules and Regulations Implementing R.A.
6715, approved 24 May 1989, also amended the corresponding
implementing rule, and now reads: Sec. 10. Payment of wages and other
monetary claims in case of bankruptcy. In case of bankruptcy or
liquidation of the employer's business, the unpaid wages and other
monetary claims of the employees shall be given first preference and
shall be paid in full before the claims of government and other creditors
may be paid.
5.
ID.; ID.; ID.; ID.; ID.; DELETION OF THE TERM "DECLARATION" OF
BANKRUPTCY OR "JUDICIAL" LIQUIDATION, IMMATERIAL. Although the
terms "declaration" (of bankruptcy) or "judicial" (liquidation) have been
notably eliminated, still in Development Bank of the Philippines v. NLRC ,
this Court did not alter its original position that the right to preference
given to workers under Art. 110 cannot exist in any effective way prior to
the time of its presentation in distribution proceedings. In effect, we
reiterated our previous interpretation in Development Bank of the
Philippines v. Santos.
6.
CIVIL LAW; OBLIGATIONS AND CONTRACTS; PREFERENCE OF CREDIT
DISTINGUISHED FROM A LIEN. A preference applies only to claims
which do not attach to specific properties. A lien creates a charge on a
particular property. The right of first preference as regards unpaid wages
recognized by Article 110 does not constitute a lien on the property of the

insolvent debtor in favor of workers. It is but a preference of credit in their

favor, a preference in application. It is a method adopted to determine
and specify the order in which creditors should be paid in the final
distribution of the proceeds of the insolvent's assets. It is a right to a first
preference in the discharge of the funds of the judgment debtor.
(Development Bank of the Philippines v. NLRC )
7.
LABOR AND SOCIAL LEGISLATION; LABOR CODE; EMPLOYMENT;
EMPLOYEE'S PREFERENCE IN CASE OF BANKRUPTCY OR LIQUIDATION OF
EMPLOYER'S BUSINESS; NOT A LIEN IN FAVOR OF WORKERS FOR UNPAID
LABOR. In the words of Republic v. Peralta, supra: 'Article 110 of the
labor Code does not purport to create a lien in favor of workers or
employees for unpaid wages either upon all of the properties or upon any
particular property owned by their employer. Claims for unpaid wages do
not therefore fall at all within the category of specially preferred claims
established under Articles 2241 and 2242 of the Civil Code, except to the
extent that such claims for unpaid wages are already covered by Article
2241, number 6: 'claims for laborers' wages, on the goods manufactured
or the work done'; or by Article 2242, number 3: 'claims of laborers and
other workers engaged in the construction, reconstruction or repair of
buildings, canals and other works, upon said buildings, canals and other
works. . . . To the extent that claims for unpaid wages fall outside the
scope of Article 2241, number 6, and 2242, number 3, they would come
within the ambit of the category of ordinary preferred credits under
Article 2244. (Development Bank of the Philippines v. NLRC )
8.
REMEDIAL LAW; ACTIONS; PRINCIPLE OF STARE DECISIS APPLIED IN
CASE AT BAR; FURTHER DISREGARD THEREOF MAY BE CONSIDERED
GROUND FOR CONTEMPT. The present controversy could have been
easily settled by public respondent had it referred to ample jurisprudence
which already provides the solution. Stare decisis et non quieta movere.
Once a case is decided by this Court as the final arbiter of any justiciable
controversy one way, then another case involving exactly the same point
at issue should be decided in the same manner. Public respondent had no
choice on the matter. It could not have ruled any other way. This Court
having spoken in a string of cases against public respondent, its duty is
simply to obey judicial precedents. Any further disregard, if not defiance,
of our rulings will be considered a ground to hold public respondent in
contempt.
PADILLA, J ., dissenting:

1.
LABOR AND SOCIAL LEGISLATION; LABOR CODE; PREFERENCE OF
CREDIT OF UNPAID WAGES AND OTHER MONETARY CLAIMS OF WORKERS;
DECLARATION OF BANKRUPTCY OR JUDICIAL LIQUIDATION OF BUSINESS,
NOT A CONDITION SINE QUA NON. Justice Padilla takes exception to the
proposition that a prior formal declaration of insolvency or bankruptcy or
a judicial liquidation of the employer's business is a condition sine qua
non to the operation of the preference accorded to workers under Article
110 of the Labor Code, for the following specific reasons: First, the
majority reads into the aforesaid law and implementing rule a
qualification that is not there. Nowhere is it stated in the present law and
its new implementing rule that a prior declaration of bankruptcy or
judicial liquidation is a condition sine qua non to the operation of Article
110. In fact, it will be noted that the phrase declaration of bankruptcy or
judicial liquidation of the employer's business, which formerly appeared in
Section 10, Rule VIII, Book III of the Revised Rules and Regulations
Implementing the Labor Code has been deleted in the new implementing
rule. What is to me even more obvious and, therefore, significant in the
present law and implementing new rule is the unconditional and
unqualified grant of priority to workers' monetary claims over and above
all other claims as against all the assets of an employer incapable of fully
paying his obligations. Second, a proceeding in rem, by its nature, seeks
to bar any other person who claims any interest in the property or right
subject of the suit. To my mind, such a proceeding is not essential or
necessary to enforce the workers' preferential right over the assets of the
insolvent debtor as against other creditors of the lower tier, as Article 110
of the Labor Code itself bars the satisfaction of claims of other creditors,
including the Government, until unpaid wages and monetary claims of the
workers are first satisfied in full. Further, it appears that such a
proceeding is essential only where the credits are concurring and enjoy no
preference over one another, but not when the law accords to one of the
credits absolute priority and undisputed supremacy. This submission finds
support, by analogy, in the case of De Barreto vs. Villanueva. (DBP vs.
NLRC , et al., G.R. Nos. 82763-64, 183 SCRA 328)
2.
ID.; ID.; ID.; ID.; PREFERENCE GIVEN IS ABSOLUTE. In Conchita S.
Hautea, etc. v. NLRC , et al., G.R. No. 96149, 230 SCRA 119. He said in his
dissenting opinion: "1. The distinction made between a preference of
credit and a lien does not, in his view, negate the clear intent of the law
(Rep. Act No. 6715) in giving absolute preference to unpaid wages and
other monetary claims of workers over and all other claims including
those of the Government. It should be recalled that Article 110 of the

Labor Code as amended by Republic Act No. 6715 states: 'Worker

preference in case of bankruptcy. In the event of bankruptcy or
liquidation of an employer's business, his workers shall enjoy first
preference as regards their wages and other monetary claims, any
provisions of law to the contrary notwithstanding. Such unpaid wages and
monetary claims shall be paid in full before claims of the government and
other creditors may be paid.' It is to be noted that the law gives absolute
preference to workers' claims for unpaid wages and monetary benefits,
subordinating even claims of the government. The clear legislative intent
is to give life to Article II, Section 18 of the Constitution which protects the
rights of workers and promotes their welfare. 2. Neither can the argument
in the DBP case that a mortgage credit is a 'special preferred credit' under
Article 2242(5) of the Civil Code be used to support the conclusion of the
majority, for the law expressly and unqualifiedly states that workers'
claims are given first preference over all other claims, any provision of
law to the contrary notwithstanding. This, to him, is the only logical
interpretation that can be made from the letter, intent and spirit of the
law and the Constitution. To give any claim other than those of workers
first preference would plainly violate that letter, intent and spirit of the
law and the Constitution."
DECISION
BELLOSILLO, J p:
Is declaration of bankruptcy or judicial liquidation required before the
worker's preference may be invoked under Art. 110 of the Labor Code?
On 21 March 1977 private respondent Leonor A. Ang started employment
as Executive Secretary with Tropical Philippines Wood Industries, Inc.
(TPWII), a corporation engaged in the manufacture and sale of veneer,
plywood and sawdust panel boards. In 1982 she was promoted to the
position of Personal Officer. cdll
In September 1983 petitioner Development Bank of the Philippines, as
mortgagee of TPWII, foreclosed its plant facilities and equipment.
Nevertheless, TPWII continued its business operations interrupted only by
brief shutdowns for the purpose of servicing its plant facilities and
equipment. In January 1986 petitioner took possession of the foreclosed
properties. From then on the company ceased its operations. As a
consequence private respondent was on 15 April 1986 verbally
terminated from the service.

On 14 December 1987 aggrieved by the termination of her employment,

private respondent filed with the Labor Arbiter a complaint for separation
pay, 13th month pay, vacation and sick leave pay, salaries and
allowances against TPWII, its General Manager, and petitioner.
After hearing the Labor Arbiter found TPWII primarily liable to private
respondent but only for her separation pay and vacation and sick leave
pay because her claims for unpaid wages and 13th month pay were later
paid after the complaint was filed. 1 The General Manager was absolved
of any liability. But with respect to petitioner, it was held subsidiarily liable
in the event the company failed to satisfy the judgment. The Labor Arbiter
rationalized that the right of an employee to be paid benefits due him
from the properties of his employer is superior to the right of the latter's
mortgagee, citing this Court's resolution in PNB v. Delta Motor Workers
Union. 2
On 16 November 1992 public respondent National Labor Relations
Commission affirmed the ruling of the Labor Arbiter. 3
The issue now before us is whether public respondent committed grave
abuse of discretion in holding that Art. 110 of the Labor Code, as
amended, which refers to worker preference in case of bankruptcy or
liquidation of an employer's business, is applicable to the present case
notwithstanding the absence of any formal declaration of bankruptcy or
judicial liquidation of TPWII.
Petitioner argues that the decision of public respondent runs counter to
the consistent rulings of this Court in a long line of cases emphasizing
that the applicant of Art. 110 of the Labor Code is contingent upon the
institution of bankruptcy or judicial liquidation proceedings against the
employer. LibLex
We hold that public respondent gravely abused its discretion in affirming
the decision of the Labor Arbiter. Art. 110 should not be treated apart
from other laws but applied in conjunction with the pertinent provisions of
the Civil Code and the Insolvency Law to the extent that piece-meal
distribution of the assets of the debtor is avoided. Art. 110, then
prevailing, provides:
ARTICLE 110. Worker preference in case of bankruptcy. In the event of
bankruptcy or liquidation of an employer's business, his workers shall
enjoy first preference as regards wages due them for services rendered
during the period prior to the bankruptcy or liquidation, any provision to
the contrary notwithstanding. Unpaid wages shall be paid in full before

other creditors may establish any claim to a share in the assets of the
employer.
Complementing Art. 110, Sec. 10, Rule VIII, Book III, of the Revised Rules
and Regulations Implementing the Labor Code provides:
SECTION 10. Payment of wages in case of bankruptcy. Unpaid wages
earned by the employees before the declaration of bankruptcy or judicial
liquidation of the employer's business shall be given first preference and
shall be paid in full before other creditors may establish any claim to a
share in the assets of the employer.
We interpreted this provision in Development Bank of the Philippines v.
Santos 4 to mean that
. . . a declaration of bankruptcy or a judicial liquidation must be present
before the worker's preference may be enforced. Thus, Article 110 of the
Labor Code and its implementing rule cannot be invoked by the
respondents in this case absent a formal declaration of bankruptcy or a
liquidation order . . . (emphasis supplied).
The rationale is that to hold Art. 110 to be applicable also to extrajudicial
proceedings would be putting the worker in a better position than the
State which could only assert its own prior preference in case of a judicial
proceeding. 5 Art. 110, which was amended by R.A. 6715 effective 21
March 1989, now reads:
ARTICLE 110. Worker preference in case of bankruptcy. In the event of
bankruptcy or liquidation of an employer's business, his workers shall
enjoy first preference as regards their unpaid wages and other monetary
claims, any provision of law to the contrary notwithstanding. Such unpaid
wages and monetary claims shall be paid in full before the claims of the
Government and other creditors may be paid.
Obviously, the amendment expanded the concept of "worker preference"
to cover not only unpaid wages but also other monetary claims to which
even claims of the Government must be deemed subordinate. The Rules
and Regulations Implementing R.A. 6715, approved 24 May 1989, also
amended the corresponding implementing rule, and now reads:
SECTION 10. Payment of wages and other monetary claims in case of
bankruptcy. In case of bankruptcy or liquidation of the employer's
business, the unpaid wages and other monetary claims of the employees
shall be given first preference and shall be paid in full before the claims of
government and other creditors may be paid.

Although the terms "declaration" (of bankruptcy) or "judicial" (liquidation)

have been notably eliminated, still in Development Bank of the
Philippines v. NLRC , 6 this Court did not alter its original position that the
right to preference given to workers under Art. 110 cannot exist in any
effective way prior to the time of its presentation in distribution
proceedings. In effect, we reiterated our previous interpretation in
Development Bank of the Philippines v. Santos where we said:
It (worker preference) will find application when, in proceedings such as
insolvency, such unpaid wages shall be paid in full before the 'claims of
the Government and other creditors' may be paid. But, for an orderly
settlement of a debtor's assets, all creditors must be convened, their
claims ascertained and inventoried, and thereafter the preferences
determined in the course of judicial proceedings which have for their
object the subjection of the property of the debtor to the payment of his
debts or other lawful obligations. Thereby, an orderly determination of
preference of creditors' claims is assured (Philippine Savings Bank vs.
Lantin, No. L-33929, September 2, 1983, 124 SCRA 476); the adjudication
made will be binding on all parties-in-interest since those proceedings are
proceedings in rem; and the legal scheme of classification, concurrence
and preference of credits in the Civil Code, the Insolvency Law, and the
Labor Code is preserved in harmony. 7
In ruling, as we did, in Development Bank of the Philippines v. Santos, we
took into account the following pronouncements:
In the event of insolvency, a principal objective should be to effect an
equitable distribution of the insolvent's property among his creditors. To
accomplish this there must first be some proceeding where notice to all of
the insolvent's creditors may be given and where the claims of preferred
creditors may be bindingly adjudicated. (De Barretto v. Villanueva, No. L14938, December 29, 1962, 6 SCRA 928). The rationale therefore has
been expressed in the recent case of DBP v. Secretary of Labor (G.R. No.
79351, 28 November 1989), which we quote:
A preference of credit bestows upon the preferred creditor an advantage
of having his credit satisfied first ahead of other claims which may be
established against the debtor. Logically, it becomes material only when
the properties and assets of the debtors are insufficient to pay his debts
in full; for if the debtor is amply able to pay his various creditors in full,
how can the necessity exist to determine which of his creditors shall be
paid first or whether they shall be paid out of the proceeds of the sale (of)
the debtor's specific property. Indubitably, the preferential right of credit

attains significance only after the properties of the debtor have been
inventoried and liquidated, and the claims held by his various creditors
have been established (Kuenzle & Streiff (Ltd.) v. Villanueva, 41 Phil 611
[1916]; Barreto v. Villanueva, G.R. No. 14938, 29 December 1962, 6 SCRA
928; Philippine Savings Bank v. Lantin, G.R. No. 33929, 2 September
1983, 124 SCRA 476). prcd
In the present case, there is as yet no declaration of bankruptcy nor
judicial liquidation of TPWII. Hence, it would be premature to enforce the
worker's preference.
The additional ratiocination of public respondent that "under Article 110
of the Labor Code complainant enjoys a preference of credit over the
properties of TPWII being held in possession by DBP," is a dismal
misconception of the nature of preference of credit, a subject matter
which we have already discussed in clear and simple terms and even
distinguished from a lien in Development Bank of the Philippines v. NLRC
8
. . . A preference applies only to claims which do not attach to specific
properties. A lien creates a charge on a particular property. The right of
first preference as regards unpaid wages recognized by Article 110 does
not constitute a lien on the property of the insolvent debtor in favor of
workers. It is but a preference of credit in their favor, a preference in
application. It is a method adopted to determine and specify the order in
which credits should be paid in the final distribution of the proceeds of the
insolvent's assets. It is a right to a first preference in the discharge of the
funds of the judgment debtor. . . . In the words of Republic v. Peralta,
supra: 'Article 110 of the Labor Code does not purport to create a lien in
favor of workers or employees for unpaid wages either upon all of the
properties or upon any particular property owned by their employer.
Claims for unpaid wages do not therefore fall at all within the category of
specially preferred claims established under Articles 2241 and 2242 of the
Civil Code, except to the extent that such claims for unpaid wages are
already covered by Article 2241, number 6: 'claims for laborers' wages,
on the goods manufactured or the work done'; or by Article 2242, number
3: 'claims of laborers and other workers engaged in the construction,
reconstruction or repair of buildings, canals and other works, upon said
buildings, canals and other works. . . . To the extent that claims for unpaid
wages fall outside the scope of Article 2241, number 6, and 2242, number
3, they would come within the ambit of the category of ordinary preferred
credits under Article 2244.

The DBP anchors its claims on a mortgage credit. A mortgage directly and
immediately subjects the property upon which it is imposed, whoever the
possessor may be, to the fulfillment of the obligation for whose security it
was constituted (Article 2176, Civil Code). It creates a real right which is
enforceable against the whole world. It is a lien on an identified
immovable property, which a preference is not. A recorded mortgage
credit is a special preferred credit under Article 2242 (5) of the Civil Code
on classification of credits. The preference given by Article 110, when not
falling within Article 2241 (6) and Article 2242 (3) of the Civil Code and
not attached to any specific property, is an ordinary preferred credit
although its impact is to move it from second priority to first priority in
order of preference established by Article 2244 of the Civil Code.
The present controversy could have been easily settled by public
respondent had it referred to ample jurisprudence which already provides
the solution. Stare decisis et non quieta movere. Once a case is decided
by this Court as the final arbiter of any justiciable controversy one way,
then another case involving exactly the same point at issue should be
decided in the same manner. Public respondent had no choice on the
matter. It could not have ruled any other way. This Court having spoken in
a string of cases against public respondent, its duty is simply to obey
judicial precedents. 9 Any further disregard, if not defiance, of our rulings
will be considered a ground to hold public respondent in contempt. prLL
WHEREFORE, the petition is GRANTED. The decision of public respondent
National Labor Relations Commission affirming the decision of the Labor
Arbiter insofar as it held petitioner Development Bank of the Philippines
liable for the monetary claims of private respondent Leonor A. Ang is SET
ASIDE. The temporary restraining order we issued on 8 February 1993 10
enjoining the execution of the decision of public respondent against
petitioner is made PERMANENT.
SO ORDERED.
Davide, Jr., Quiason and Kapunan, JJ ., concur.
Padilla, J., dissents.

SECOND DIVISION
[G.R. No. 96169. September 24, 1991.]
EMPLOYEES CONFEDERATION OF THE PHILIPPINES, petitioners, vs.
NATIONAL WAGES AND PRODUCTIVITY COMMISSION AND REGIONAL
TRIPARTITE WAGES AND PRODUCTIVITY BOARD-NCR, TRADE UNION
CONGRESS OF THE PHILIPPINES, respondents.
Sycip, Salazar, Fernandez & Gatmaitan for petitioner.
Gilbert P. Lorenzo for private respondent.
SYLLABUS
1.
LABOR AND SOCIAL LEGISLATION; WAGE RATIONALIZATION ACT (RA
6727); NOT INTENDED TO DEREGULATE THE RELATION BETWEEN LABOR
AND CAPITAL. Republic Act No. 6727 is not meant to "get the
Government out of the industry" and leave labor and management alone
in deciding wages. The Court does not think that the law intended to
deregulate the relation between labor and capital for several reasons: (1)
The Constitution calls upon the State to protect the rights of workers and
promote their welfare; (2) the Constitution also makes it a duty of the
State "to intervene when the common goal so demands" in regulating
property and property relations; (3) the Charter urges Congress to give
priority to the enactment of measures, among other things, to diffuse the
wealth of the nation and to regulate the use of property; (4) the Charter
recognizes the "just share of labor in the fruits of production;" (5) under
the Labor Code, the State shall regulate the relations between labor and
management; (6) under Republic Act No. 6727 itself, the State is
interested in seeing that workers receive fair and equitable wages; and
(7) the Constitution is primarily a document of social justice, and although
it has recognized the importance of the private sector, it has not
embraced fully the concept of laissez faire or otherwise, relied on pure
market forces to govern the economy; We can not give to the Act a
meaning or intent that will conflict with these basic principles.
2.
ID.; ID.; PROVIDES TO HAVE PERMANENT BOARDS TO DECIDE
WAGES. It is the Court's thinking, reached after the Court's own study
of the Act, that the Act is meant to rationalize wages, that is, by having
permanent boards to decide wages rather than leaving wage
determination to Congress year after year and law after law. The Court is
not of course saying that the Act is an effort of Congress to pass the buck,
or worse, to abdicate its duty, but simply, to leave the question of wages

to the expertise of experts. As Justice Cruz observed, "[w]ith the

proliferation of specialized activities and their attendant peculiar
problems, the national legislature has found it more necessary to entrust
to administrative agencies the power of subordinate legislation' as it is
called." Cruz, Philippine Political Law 96 (1987).
3.
ID.; ID.; CONCEPT OF "MINIMUM WAGE"; PURPOSE. The concept of
"minimum wage" is, however, a different thing, and certainly, it means
more than setting a floor wage to upgrade existing wages, as ECOP takes
it to mean. "Minimum wages" underlies the effort of the State, as Republic
Act No. 6727 expresses it, "to promote productivity-improvement and
gain-sharing measures to ensure a decent standard of living for the
workers and their families; to guarantee the rights of labor to its just
share in the fruits of production; to enhance employment generation in
the countryside through industry dispersal; and to allow business and
industry reasonable returns on investment, expansion and growth," and
as the Constitution expresses it, to affirm "labor as a primary social
economic force." As the Court indicated, the statute would have no need
for a board if the question were simply "how much". The State is
concerned, in addition, that wages are not distributed unevenly, and more
important, that social justice is subserved.
DECISION
SARMIENTO, J p:
The petition is given due course and the various pleadings submitted
being sufficient to aid the Court in the proper resolution of the basic
issues raised in this case, we decide it without further ado.
The Employers Confederation of the Philippines (ECOP) is questioning the
validity of Wage Order No. NCR-01-A dated October 23, 1990 of the
Regional Tripartite Wages and Productivity Board, National Capital Region,
promulgated pursuant to the authority of Republic Act No. 6727, "AN ACT
TO RATIONALIZE WAGE POLICY DETERMINATION BY ESTABLISHING THE
MECHANISM AND PROPER STANDARDS THEREFORE, AMENDING FOR THE
PURPOSE ARTICLE 99 OF, AND INCORPORATING ARTICLES 120, 121, 122,
123, 124, 126, AND 127 INTO, PRESIDENTIAL DECREE NO. 442 AS
AMENDED, OTHERWISE KNOWN AS THE LABOR CODE OF THE
PHILIPPINES, FIXING NEW WAGE RATES, PROVIDING WAGE INCENTIVES
FOR INDUSTRIAL DISPERSAL TO THE COUNTRYSIDE, AND FOR OTHER
PURPOSES," was approved by the President on June 9, 1989. Aside from
providing new wage rates,
1 the "Wage Rationalization Act" also

provides, among other things, for various Regional Tripartite Wages and
Productivity Boards in charge of prescribing minimum wage rates for all
workers in the various regions,
2 and for a National Wages and
Productivity Commission to review, among other functions, wage levels
determined by the boards. 3
On October 15, 1990, the Regional Board of the National Capital Region
issued Wage Order No. NCR-01, increasing the minimum wage by P17.00
daily in the National Capital Region. 4 The Trade Union Congress of the
Philippines (TUCP) moved for reconsideration; so did the Personnel
Management Association of the Philippines (PMAP). 5 ECOP opposed.
On October 23, 1990, the Board issued Wage Order No. NCR01-A,
amending Wage Order No. NCR-01, as follows: cdll
Section 1. Upon the effectivity of this Wage Order, all workers and
employees in the private sector in the National Capital Region already
receiving wages above the statutory minimum wage rates up to one
hundred and twenty-five pesos (P125.00) per day shall also receive an
increase of seventeen pesos (P17.00) per day.
ECOP appealed to the National Wages and Productivity Commission. On
November 6, 1990, the Commission promulgated an Order, dismissing the
appeal for lack of merit. On November 14, 1990, the Commission denied
reconsideration. cdll
The Orders of the Commission (as well as Wage Order No. NCR-01-A) are
the subject of this petition, in which ECOP assails the board's grant of an
"across-the-board" wage increase to workers already being paid more
than existing minimum wage rates (up to P125.00 a day) as an alleged
excess of authority, and alleges that under the Republic Act No. 6727, the
boards may only prescribe "minimum wages," not determine "salary
ceilings." ECOP likewise claims that Republic Act No. 6727 is meant to
promote collective bargaining as the primary mode of settling wages, and
in its opinion, the boards can not preempt collective bargaining
agreements by establishing ceilings. ECOP prays for the nullification of
Wage Order No. NCR-01-A and for the "reinstatement" of Wage Order No.
NCR-01.
The Court directed the Solicitor General to comment on behalf of the
Government, and in the Solicitor General's opinion, the Board, in
prescribing an across-the-board hike did not, in reality, "grant additional
or other benefits to workers and employees, such as the extension of
wage increases to employees and workers already receiving more than

minimum wages . . ." 6 but rather, fixed minimum wages according to

the "salary-ceiling method."
ECOP insists, in its reply, that wage-fixing is a legislative function, and
Republic Act No. 6727 delegated to the regional boards no more "than the
power to grant minimum wage adjustments" 7 and "in the absence of
clear statutory authority," 8 the boards may no more than adjust "floor
wages." 9
The Solicitor General, in his rejoinder, argues that Republic Act No. 6727
is intended to correct "wage distortions" and the salary-ceiling method (of
determining wages) is meant, precisely, to rectify wage distortions. 10
The Court is inclined to agree with the Government. In the National Wages
and Productivity Commission's Order of November 6, 1990, the
Commission noted that the determination of wages has generally
involved two methods, the "floor-wage" method and the "salary-ceilingmethod. We quote:
Historically, legislation involving the adjustment of the minimum wage
made use of two methods. The first method involves the fixing of
determinate amount that would be added to the prevailing statutory
minimum wage. The other involves "the salary-ceiling-method" whereby
the wage adjustment is applied to employees receiving a certain
denominated salary ceiling. The first method was adopted in the earlier
wage orders, while the latter method was used in R.A. Nos. 6640 and
6727. Prior to this, the salary-ceiling-method was also used in no less than
eleven issuances mandating the grant of cost-of-living allowances (P.D.
Nos. 525, 1123, 1614, 1634, 1678, 1713 and Wage Order Nos. 1, 2, 3, 5
and 6). The shift from the first method to the second method was brought
about by labor disputes arising from wage distortions, a consequence of
the implementation of the said wage orders. Apparently, the wage order
provisions that wage distortions shall be resolved through the grievance
procedure was perceived by legislators as ineffective in checking
industrial unrest resulting from wage order implementations. With the
establishment of the second method as a practice in minimum wage
fixing, wage distortion disputes were minimized. 11
As the Commission noted, the increasing trend is toward the second
mode, the salary-cap method, which has reduced disputes arising from
wage distortions (brought about, apparently, by the floor-wage method).
Of course, disputes are appropriate subjects of collective bargaining and
grievance procedures, but as the Commission observed and as we are

ourselves agreed, bargaining has helped very little in correcting wage

distortions. Precisely, Republic Act No. 6727 was intended to rationalize
wages, first, by providing for full-time boards to police wages round-theclock, and second, by giving the boards enough powers to achieve this
objective. The Court is of the opinion that Congress meant the boards to
be creative in resolving the annual question of wages without labor and
management knocking on the legislature's door at every turn. The Court's
opinion is that if Republic No. 6727 intended the boards alone to set floor
wages, the Act would have no need for a board but an accountant to keep
track of the latest consumer price index, or better, would have Congress
done it as the need arises, as the legislature, prior to the Act, has done so
for years. The fact of the matter is that the Act sought a "thinking" group
of men and women bound by statutory standards. We quote:
ART. 124. Standards/Criteria for Minimum Wage Fixing The regional
minimum wages to be established by the Regional Board shall be as
nearly adequate as is economically feasible to maintain the minimum
standards of living necessary for the health, efficiency and general wellbeing of the employees within the framework of the national economic
and social development program. In the determination of such regional
minimum wages, the Regional Board shall, among other relevant factors,
consider the following:
"(a) The demand for living wages;
"(b) Wage adjustment vis-a-vis the consumer price index;
"(c) The cost of living and changes or increases therein;
"(d) The needs of workers and their families;
"(e) The need to induce industries to invest in the countryside;
"(f) Improvements in standards of living;
"(g) The prevailing wage levels;
"(h) Fair return of the capital invested and capacity to pay of employers;
"(i)

Effects of employment generation and family income; and

"(j) The equitable distribution of income and wealth

imperatives of economic and social development." 12

along

the

The Court is not convinced that the Regional Board of the National Capital
Region, in decreeing an across-the-board hike, performed an unlawful act

of legislation. It is true that wage-fixing, like rate-fixing, constitutes an act

Congress; 13 it is also true, however, that Congress may delegate the
power to fix rates 14 provided that, as in all delegations cases, Congress
leaves sufficient standards. As this Court has indicated, it is impressed
that the above-quoted standards are sufficient, and in the light of the
floor-wage method's failure, the Court believes that the Commission
correctly upheld the Regional Board of the National Capital Region. LLpr
Apparently, ECOP is of the mistaken impression that Republic Act No.
6727 is meant to "get the Government out of the industry" and leave
labor and management alone in deciding wages. The Court does not think
that the law intended to deregulate the relation between labor and capital
for several reasons: (1) The Constitution calls upon the State to protect
the rights of workers and promote their welfare; 15 (2) the Constitution
also makes it a duty of the State "to intervene when the common goal so
demands" in regulating property and property relations; 16 (3) the
Charter urges Congress to give priority to the enactment of measures,
among other things, to diffuse the wealth of the nation and to regulate
the use of property; 17 (4) the Charter recognizes the "just share of labor
in the fruits of production;" 18 (5) under the Labor Code, the State shall
regulate the relations between labor and management; 19 (6) under
Republic Act No. 6727 itself, the State is interested in seeing that workers
receive fair and equitable wages; 20 and (7) the Constitution is primarily
a document of social justice, and although it has recognized the
importance of the private sector, 21 it has not embraced fully the
concept of laissez faire 22 or otherwise, relied on pure market forces to
govern the economy; We can not give to the Act a meaning or intent that
will conflict with these basic principles.
It is the Court's thinking, reached after the Court's own study of the Act,
that the Act is meant to rationalize wages, that is, by having permanent
boards to decide wages rather than leaving wage determination to
Congress year after year and law after law. The Court is not of course
saying that the Act is an effort of Congress to pass the buck, or worse, to
abdicate its duty, but simply, to leave the question of wages to the
expertise of experts. As Justice Cruz observed, "[w]ith the proliferation of
specialized activities and their attendant peculiar problems, the national
legislature has found it more necessary to entrust to administrative
agencies the power of subordinate legislation' as it is called." 23
The Labor Code defines "wage" as follows:

"Wage" paid to any employee shall mean the remuneration or earnings,

however designated, capable of being expressed in terms of money,
whether fixed or ascertained on a time, task, piece, or commission basis,
or other method of calculating the same, which is payable by an employer
to an employee under a written or unwritten contract of employment for
work done or to be done, or for services rendered or to be rendered and
includes the fair and reasonable value, as determined by the Secretary of
Labor, of board, lodging, or other facilities customarily formatted by the
employer to the employee. "Fair and reasonable value" shall not include
any profit to the employer or to any person affiliated with the employer.
24
The concept of "minimum wage" is, however, a different thing, and
certainly, it means more than setting a floor wage to upgrade existing
wages, as ECOP takes it to mean. "Minimum wages" underlies the effort
of the State, as Republic Act No. 6727 expresses it, "to promote
productivity-improvement and gain-sharing measures to ensure a decent
standard of living for the workers and their families; to guarantee the
rights of labor to its just share in the fruits of production; to enhance
employment generation in the countryside through industry dispersal;
and to allow business and industry reasonable returns on investment,
expansion and growth," 25 and as the Constitution expresses it, to affirm
"labor as a primary social economic force." 26 As the Court indicated, the
statute would have no need for a board if the question were simply "how
much". The State is concerned, in addition, that wages are not distributed
unevenly, and more important, that social justice is subserved. LexLib
It is another question, to be sure, had Congress created "roving" boards,
and were that the case, a problem of undue delegation would have
ensued; but as we said, we do not see a Board (National Capital Region)
"running not" here, and Wage Order No. NCR-01-A as an excess of
authority.
It is also another question whether the salary-cap method utilized by the
Board may serve the purposes of Republic Act No. 6727 in future cases
and whether that method is after all, a lasting policy of the Board;
however, it is a question on which we may only speculate at the moment.
At the moment, we find it to be reasonable policy (apparently, it has since
been Government policy); and if in the future it would be perceptibly
unfair to management, we will take it up then.
WHEREFORE, premises considered,
pronouncement as to costs.

the

petition

is

DENIED.

No

IT IS SO ORDERED.
Melencio-Herrera, Padilla and Regalado, JJ., concur.

FIRST DIVISION
[G.R. No. 62918. August 23, 1989.]
FILIPINAS GOLF & COUNTRY CLUB, INC., petitioner-appellant, vs.
NATIONAL LABOR RELATIONS COMMISSION, PTGWO and LOCAL CHAPTER
NO. 424, respondents-appellees.
SYLLABUS
1.
LABOR AND SOCIAL LEGISLATION; LABOR CODE; P.D. 1678 AND
WAGE ORDER NO. 1 PROVIDING ADDITIONAL COST OF LIVING
ALLOWANCE, CLEAR AND UNAMBIGUOUS. The provisions of PD 1678
and Wage Order No. 1 are clear and unambiguous. In prescribing that
increases granted during the periods therein specified, whether
unilaterally or by collective agreement, are creditable to the increases
mandated thereby, they create an equivalence between those legal and
contractual obligations to grant increases, rendering both susceptible of
performance by compliance with either, subject only to the condition that
where the increases given under agreement fall short in amount of those
fixed by law, the difference must be made up by the employer.
2.
ID.; ID.; ID.; NO NEED OF INTERPRETATION. Said provisions, it is
further noted, refer to collective bargaining agreements without
qualification. They make no distinction between unarbitrated agreements
and those brought about through and only after compulsory arbitration.
The decision of the Labor Arbiter, if it does not exclude all collective
bargaining agreements from the ambit of the creditability provisions in
question as much as implies that agreements concluded through
compulsory arbitration do not come within their purview. This is of course
unacceptable, for it presumes to find distinctions not in fact expressed in
said provisions or clearly to be inferred from their language. It is
axiomatic that no distinctions may be read into the law which are not
provided for therein, or clearly implicit in its terms, unless which is not
the case here the law undifferentiated would lead to results either
absurd or manifestly not intended by the lawmaker. No absurdity or
frustration of the legislative will could conceivably arise from making the
said creditability clauses operative on the coverable wage increase
provisions of all collective bargaining agreements, however concluded.
There is, therefore, neither occasion nor justification for interpreting
them, contrary to the ordinary intendment of their language, as
inapplicable to increases prescribed in arbiter-mandated collective
bargaining agreements.

3.
CIVIL LAW; OBLIGATIONS AND CONTRACTS; PARTIES ARE BOUND BY
THEIR STIPULATION AS CONSTITUTING THE LAW BETWEEN THEM. There
is nothing contrary to law, customs, public order or public policy in a
stipulation subordinating, as does the aforesaid provision in the collective
bargaining agreement, contractual wage increases to those imposed or
prescribed by law. Filipinas Golf and the respondents were therefore
perfectly free to agree thereon, and having thus agreed, are bound by
such stipulation as constituting the law between them.
4.
ID.; ID.; ID.; INTENTION OF PARTIES MUST PREVAIL AND GIVEN
EFFECT. The intention of the parties whether or not to equate benefits
under a collective bargaining agreement with those granted by law must
prevail and be given effect. The manifest will and intent of the parties to
treat the legislated increases as equivalent pro tanto to those stipulated
in their collective bargaining agreement must be respected and given
effect.
DECISION
NARVASA, J p:
The facts here are not in dispute. The question they present concerns the
effect of an employer's compliance with laws prescribing wage increases
on the obligation to grant similar increases assumed by him under a
collective bargaining agreement. The petitioner contends that in the
particular circumstances of this case, its giving of wage increases
prescribed by laws produced the effect of compliance pro tanto with
provisions for a similar increase in a collective bargaining agreement with
its employees, leaving it bound only to make up the difference in amount,
if any, between the increases legislated and that fixed by the agreement.
The respondents, on the other hand, maintain the contrary, assert that
said obligations the statutory and the contractual are cumulative
and both independently exigible, and submit that petitioner may not set
up the performance of either in avoidance or offset of the other.
On February 20, 1980, Presidential Decree No. 1678 was issued, granting
non-agricultural workers receiving less than P1,500.00 a month a twopeso (P2.00) per day increase in living allowance effective February 21,
1980. A year later, on March 25, 1981, Wage Order No. 1 was
promulgated, granting an additional two-peso (P2.00) per day increase in
emergency living allowance to non-agricultural workers, effective March
22, 1981.

Presidential Decree No. 1678 and its implementing rules made creditable
to the increase thereby granted increases in wages or allowances given
by employers on or after February 8, 1980, providing:
"Section 5. Employers who have given increases in wages and/or
allowances of at least P2.00 a day for non-agricultural workers on or after
February 8, 1980, whether granted unilaterally or by collective
agreement, shall be deemed to have complied with this Decree. Those
who have given lees than P2.00 . . . a day shall pay the difference."
Wage Order No. 1 contained a similar provision, viz.:
"Section 6. All increase in wages granted unilaterally or by collective
bargaining agreements shall be credited in compliance with this Wage
Order provided such increase were granted between 1 January and 22
March 1981. Where the increase is less than the amount provided in this
Wage Order, the employer shall pay the difference."
It is not disputed that petitioner herein, Filipinas Golf and Country Club,
Inc. (hereafter, Filipinas Golf only) has duly complied with both laws,
giving its employees covered thereby the prescribed increases. 1
On January 30, 1981, Executive Labor Arbiter Cresencio J. Ramos
rendered a decision in R04-A Case No. AB-1009-80, resolving a collective
bargaining agreement deadlock between Filipinas Golf and its employees'
union, Local Chapter No. 424 of the Philippine Transport and General
Workers Organization (PTGWO). The decision granted the employees a
three-stage wage increase totalling P5.00 a day, as follows:
P2.00, effective February 25, 1980
P2.00, effective February 25, 1981
P1.00, effective February 25, 1982,
and ordered employer and union to execute the collective bargaining
agreement stipulating such increase. Thereafter, the decision having
become final and executory, at the instance of the union execution issued
on April 13, 1981 ordering the sheriff to collect from Filipinas Golf the sum
of P91,560.00 representing the increases decreed, and was followed by
an order of garnishment for said amount against funds of Filipinas Golf on
deposit with Prudential Bank and Trust Company. 2

On May 11, 1981 Filipinas Golf executed with the union the arbitermandated collective bargaining agreement prescribing the three-stage
wage increase and incorporating the following condition:
"This provision shall be subject to application (sic) provision of decrees
and/or legislation promulgated/approved during the effectivity or life time
of the CBA." 3
At the same time it moved for reconsideration of the order of
garnishment, impugning the correctness of the computation of the wage
increases payable for not taking into account the increases it had given
under PD 1678 and Wage Order No. 1.
The Labor Arbiter found no merit in the motion and denied it, opining that
the increase prescribed by the collective bargaining agreement should be
given in addition to the legislated increases because: (1) the former
proceeded from an award made by the labor department of the
Government in the exercise of its compulsory arbitration powers, not from
a unilateral act of the employer; and (2) recent Supreme Court decisions
had set the rule that benefits under a collective bargaining agreement are
"entirely separate and distinct from that which the law grants." 4
Filipinas Golf appealed, without success, to the National Labor Relations
Commission which sustained the Labor Arbiter and ruled that:
". . . Since the CBA was executed in pursuance of a compulsory arbitration
decision, the terms embodied therein should be considered to be over
and above the standards provided for by law, unless the decision clearly
stated otherwise which is not the case here. Implicit in the appealed order
is the Labor Arbiter's statutory standards, and the Labor Arbiter is in the
best position to say what his decision means." 5
Reversal of those rulings is sought in the present petition.
The cited provisions of PD 1678 and Wage Order No. 1 upon which the
petition is anchored are clear and unambiguous. In prescribing that
increases granted during the periods therein specified, whether
unilaterally or by collective agreement, are creditable to the increases
mandated thereby, they create an equivalence between those legal and
contractual obligations to grant increases, rendering both susceptible of
performance by compliance with either, subject only to the condition that
where the increases given under agreement fall short in amount of those
fixed by law, the difference must be made up by the employer.

Said provisions, it is further noted, refer to collective bargaining

agreements without qualification. They make no distinction between
unarbitrated agreements and those brought about through and only after
compulsory arbitration. The decision of the Labor Arbiter, if it does not
exclude all collective bargaining agreements from the ambit of the
creditability provisions in question as much as implies that agreements
concluded through compulsory arbitration do not come within their
purview. This is of course unacceptable, for it presumes to find
distinctions not in fact expressed in said provisions or clearly to be
inferred from their language. It is axiomatic that no distinctions may be
read into the law which are not provided for therein, or clearly implicit in
its terms, unless which is not the case here the law undifferentiated
would lead to results either absurd or manifestly not intended by the
lawmaker. No absurdity or frustration of the legislative will could
conceivably arise from making the said creditability clauses operative on
the coverable wage increase provisions of all collective bargaining
agreements, however concluded. There is, therefore, neither occasion nor
justification for interpreting them, contrary to the ordinary intendment of
their language, as inapplicable to increases prescribed in arbitermandated collective bargaining agreements. llcd
These propositions appear all the clearer when considered in the light of
the earlier-quoted provision of the parties collective bargaining
agreement subjecting the wage increase granted therein to the ". . .
application . . . of decrees and/or legislation promulgated/approved during
the effectivity or lifetime . . ." of said agreement, a reasonable
interpretation of which is rejective of any notion that said increase was
meant to be in addition to, or "over and above," as the NLRC would put it,
increases decreed by law. Rather should the clause be read as
confirmative of what PD 1578 and Wage Order No. 1 had put into words of
more unmistakable import: that an increase given under the agreement,
if at least equal to those fixed by said laws, be deemed a compliance with
the latter or, if less, creates only the obligation to pay the difference
which is but to say that the employer is not to be made to pay twice the
concurrent amount of increases independently imposed by law and by
agreement.
There is nothing contrary to law, customs, public order or public policy in
a stipulation subordinating, as does the aforesaid provision in the
collective bargaining agreement, contractual wage increases to those
imposed or prescribed by law. Filipinas Golf and the respondents were

therefore perfectly free to agree thereon, and having thus agreed, are
bound by such stipulation as constituting the law between them.
That PD 1678 and Wage Order No. 1 both antedated the collective
bargaining agreement does not, as respondents would have it, argue
against the creditability of the increase granted by the agreement, since
said increase at least, in its first two stages or installments was
made retroactive to dates falling within the "creditability periods" (for
want of a more appropriate term) provided in the Decree and the Wage
Order, to wit: February 8, 1980 and thereafter, and between January 1
and March 22, 1981, respectively. The fact that cannot be escaped is that
in making the wage increase retroactive, the parties to all intents and
purposes dated the existence of their collective bargaining agreement
back to the effective date of the increase. It is not to be assumed that
they did not have this retroactive effect in mind when they expressly
subjected the wage increase provision to legislation passed or adopted
during the ". . . effectivity or lifetime . . ." of the agreement. Nor may it be
presumed that the agreement was meant to be retroactive only in respect
of the wage increase provision, but prospective in all its other clauses. On
the contrary, the private respondents themselves maintain that the entire
agreement was intended to be retroactive in effect, asserting that:
". . . (i)t was made retroactive to February 25, 1980 for the simple reason
that the previous CBA between the parties expired on February 24, 1980.
This was in line with the practice and to maintain continuity of CBAs that
will govern the employer-employee relationship between the parties. . . ."
5
A survey of relevant decisions of this Court fails to support the proposition
implicit in the Labor Arbiter's decision that benefits granted by law may
be claimed separately from and in addition to those granted by collective
bargaining agreements under any and all circumstances. What seems, on
the contrary, to be the common thrust of applicable rulings is that the
intention of the parties whether or not to equate benefits under a
collective bargaining agreement with those granted by law must prevail
and be given effect. Thus, in Philippine Apparel Workers Union vs. NLRC, 6
the employees of the respondent employer were held entitled to the full
amounts of both a wage increase under a collective bargaining
agreement and an increase in living allowance prescribed by law during
the period when both increases were concurrently effective, for want of
an agreement between the parties to treat the increase in living
allowance as applicable to the wage increase.

Earlier, in Marcopper Mining Corp. vs. Ople, 7 it had been ruled that the
13th month pay under Presidential Decree 851 was required on top of
other bonuses agreed upon between employer and employee. That ruling,
however, was reversed in National Federation of Sugar Workers vs.
Central Azucarera de la Carlota 8 which held that employees are no
longer entitled to an additional Christmas bonus or other Christmas
benefits if they are already entitled to 13th month pay. cdrep
Later cases, like United CMC Textile Workers Union vs. Labor Arbiter, 9
where execution of the decision based on the Marcopper ruling was
overtaken by the decision in La Carlota, and Universal Corn Products vs.
NLRC, 10 hewed to essentially the same principle: that the intention of
the parties to a collective bargaining determines how to deal with benefits
of similar character concurrently granted by both the agreement and the
law.
The manifest will and intent of the parties to treat the legislated increases
as equivalent pro tanto to those stipulated in their collective bargaining
agreement must be respected and given effect.
WHEREFORE, the decision of the National Labor Relations Commission
under review is REVERSED and SET ASIDE. The case is remanded to said
Commission, ordering it to compute anew the amount payable to the
members of the respondent union under the collective bargaining
agreement in question, taking into account such amounts of the wage
increase granted under provisions of said collective bargaining agreement
as are creditable to the increases mandated by PD 1678 and Wage Order
No. 1 and their implementing rules according to the provisions thereof.
Petitioner and the private respondents shall be notified of, and afforded
an opportunity to be heard in, the recomputation proceedings. No
pronouncement as to costs.
SO ORDERED.
Cruz, Gancayco, Grio-Aquino and Medialdea, JJ., concur.

THIRD DIVISION
[G.R. No. 86200. February 25, 1992.]
APEX MINING COMPANY, INC., petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION and SANDIGAN NG MANGGAGAWANG PILIPINO, represented
by RANULFO PEDRERA, President, respondents.
Gerardo C. Olaguer for petitioner.
Antonio Billiones, Sr. and Antonio Jolejole for private respondent.
SYLLABUS
1.
LABOR LAW; WAGE ORDERS NOS. 5 AND 6; CREDITABILITY
PROVISIONS THEREIN GROUNDED ON THAT PUBLIC POLICY OF
ENCOURAGING EMPLOYERS TO GRANT EMPLOYEES HIGHER WAGE
INCREASES THAN THOSE PRESCRIBED RATES. Both Wage Order No. 5
and Wage Order No. 6 expressly allowed the crediting of increases in
wages or allowances granted under collective bargaining agreements
towards compliance with increases in ECOLA requirements prescribed by
those Wage Orders. Section 7 of Wage Order No. 5 provided as follows:
"All increases in wages and/or allowances granted by employers between
February 1, 1984 and the effectivity of this order [16 June 1984] shall be
credited as compliance with the minimum wage and allowance
adjustments prescribed herein . . . Such increases shall not include
anniversary wage increases provided in collective bargaining agreements
unless the agreements expressly provide otherwise. . . ." Section 4 of
Wage Order No. 6 had very similar language: "All increases in wages
and/or allowances granted by employers between June 17, 1984 and the
effectivity of this order [November 1, 1984] shall be credited as
compliance with the minimum wage and allowance adjustments
prescribed herein, provided that where the increases are less than the
applicable amount provided in this order, the employer shall pay the
difference. Such increases shall not include anniversary wage increases
provided in collective bargaining agreements unless the agreements
expressly provide otherwise. This Section shall not apply to merit wage
increases and those resulting from the regularization or promotion of
employees." It is important to note that the creditability provisions in
Wage Orders Nos. 5 and 6 (as well as the parallel provisions in Wage
Orders Nos. 2, 3 and 4) are grounded in an important public policy. That
public policy may be seen to be the encouragement of employers to grant
wage and allowance increases to their employees higher than the
minimum rates of increases prescribed by statute or administrative

regulation. To obliterate the creditability provisions in the Wage Orders

through interpretation or otherwise, and to compel employers simply to
add on legislated increases in salaries or allowances without regard to
what is already being paid, would be to penalize employers who grant
their workers more than the statutorily prescribed minimum rates of
increases. Clearly, this would be counter-productive so far as securing
the interests of labor is concerned. The creditability provisions in the
Wage Orders prevent the penalizing of employers who are industry
leaders and who do not wait for statutorily prescribed increases in salary
or allowances and pay their workers more than what the law or
regulations require.
2.
ID.; ID.; INSTANCE WHEN "ANNIVERSARY WAGE INCREASE" IS
CREDITABLE TOWARDS STATUTORY INCREASES. Sandigan contends
that the 1 February 1984 P2.00 increase in basic salary was actually an
"anniversary wage increase," and therefore not creditable under Section 7
of Wage Order No. 5 and under Section 4 of Wage Order No. 6. The P2.00
increase was given by petitioner Apex under Section 3, Rule VI of the CBA
which reads as follows: "SECTION 3. The COMPANY agrees to grant
general wage increases to all employees within bargaining unit as follows:
a) Two Pesos (P2.00) general increase per day upon the effectivity of this
Agreement (February 1, 1984); b) One Peso and Fifty Centavos (P1.50)
general increase per day effective on the first anniversary date of this
Agreement (February 1, 1985); c) One Peso and Fifty Centavos (P1.50)
general increase per day effective on the second anniversary date of this
Agreement (February 1, 1986)." It appears clear to the Court from an
inspection of the above-quoted Section 3 that the P2.00 increase effective
on 1 February 1984 was distinguishable from the two (2) increases of
P1.50 each, the first being effective on the first anniversary date of the
CBA (1 February 1985) and the second being effective on the second
anniversary date (1 February 1986). In other words, the two (2) increases
of P1.50 each, one being effective on 1 February 1985 and the second
effective on 1 February 1986 were precisely the non-creditable
"anniversary wage increases." Even if it be assumed, however, that the 1
February 1984 P2.00 increase were regarded (improperly) an "anniversary
wage increase" still that P2.00 increase would be creditable towards the
statutorily mandated increases. For Wage Orders Nos. 5 and 6 themselves
allowed crediting of "anniversary wage increases" stipulated in a CBA
towards statutory increases, if the CBA itself (as here) expressly allowed
such crediting.

3.
ID.; ID.; TOTAL INCREASE CONTEMPLATED; CREDITABLE INCREASES
AS AUTHORIZED. When Wage Order No. 6 was promulgated, it
prescribed an increase of P3.00 in ECOLA. Apex paid this mandatory
increase and denominated all of it as ECOLA. Thus, the apparent
cumulated increase was P15.00. Since, however, Apex had previously
increased the basic salary by P2.00 effective 1 February 1984, the
aggregate actual increase (in basic salary plus ECOLA) was P17.00, the
same total or cumulated increase contemplated by Wage Orders Nos. 5
and 6. Thus, again, Apex was actually in compliance with the
requirements of Wage Order No. 6, with the result that no differential was
actually due from it. It remains only to note that Section 7 of Wage Order
No. 5 and Section 4 of Wage Order No. 6 expressly authorized the
crediting of all the increases "in wages" or "allowances." Thus, the fact
that Apex has denominated the P2.00 increase effective 1 February 1984,
as an increase in basic salary, rather than in ECOLA, made no legal
difference so far as concerns the creditability of such increase. Indeed,
integration of the P2.00 into the basic salary of the employees was more
beneficial to them than granting the P2.00 as part of their ECOLA: the
integration increased the base wage for purposes of computation of such
items as overtime and premium pay, fringe benefits and maternity pay. In
fact, the Implementing Rules of Wage Order No. 5, and Wage Order No. 6
itself, expressly authorized increases in basic salary in lieu of increases in
ECOLA, provided the amounts thereof were not less than the amounts
required by the Wage Orders.
4.
ID.; ARTICLE 100 OF THE LABOR CODE; NOT APPLICABLE TO
SITUATIONS ARISING AFTER ITS PROMULGATION DATE. Sandigan
argues that to consider the P2.00 increase in basic salary effective 1
February 1984 provided by the CBA as compliance with the requirements
of Wage Orders Nos. 5 and 6, would be to violate Article 100 of the Labor
Code as well as Section 6 of the Rules Implementing Wage Order No. 6.
These provisions read respectively: "Art. 100. Prohibition against
elimination or diminution of benefits Nothing in [Book Three
Conditions of Employment] 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." "Section 6. Non-diminution of benefits.
The statutory minimum wage rates shall be exclusive of whatever
supplements and other benefits the workers are enjoying without cost at
the time of the effectivity of this Order." Clearly, the prohibition against
elimination or diminution of benefits set out in Article 100 of the Labor
Code is specifically concerned with benefits already enjoyed at the time

of the promulgation of the Labor Code. Article 100 does not, in other
words, purport to apply to situations arising after the promulgation date
of the Labor Code. Section 6 of the Rules Implementing Wage Order No. 6
relates to "supplements and other benefits" which employees are already
"enjoying without cost at the time of the effectivity of [Wage] Order [No.
6]." Such benefits which employees are already enjoying "without cost"
could not, under Section 6, suddenly be ascribed monetary value so as to
offset or diminish increases in the minimum wage rates prescribed by
statute.
5.
ID.; WAGE INCREASES; COULD BE INCLUDED IN THE AWARD AND
EXECUTION OF LABOR ARBITER'S DECISION. In Filipino Pipe Workers
(163 SCRA 789 (1988)), the NLRC ordered the inclusion in its award in
favor of the union of a wage increase of P3.00 per day mandated by Wage
Orders Nos. 2 and 3, which took effect after the finality of the Labor
Arbiter's decision but pending its execution. In sustaining the award of the
NLRC, the Court, through former Chief Justice Fernan, said: "In his
Comment on the petition, the Solicitor General stated that the said P3.00
a day increase was made pursuant to Wage Orders Nos. 2 and 3, which
took effect after the finality of the Labor Arbiter's decision but pending its
execution. A common section found in both Wage Orders Nos. 2 and 3, as
well as in the subsequent Wage Orders Nos. 5 and 6 uniformly provides
that all increases and/or allowances granted by employers within a
specified period 'shall be credited as compliance with the minimum wage
and allowance adjustments prescribed herein, provided that where the
increases are less than the applicable amount provided in this Order, the
employer shall pay the difference. Such increases shall not include
anniversary wage increases provided in collective bargaining agreements
unless the agreement expressly provide otherwise.' We interpret the
above section to mean that every grant of daily increase in statutory
minimum wage rates and living allowance must be considered as
independent, separate or apart from the wage increases in the collective
bargaining agreement and must be integrated into the salary scale of the
employees to the end that the desired rates decreed by the National
Wages Council are attained." It is apparent from the foregoing that the
issue of creditability of an increase in basic salary or allowance given
pursuant to a CBA towards compliance with a statutorily prescribed
increase in emergency cost of living allowances (ECOLA) was not at all
involved and that the Court was not striking down the creditability
provisions in Wage Orders Nos. 2, 3, 5 and 6. All that the NLRC was saying
was that a wage increase which had come into effect after the Labor

Arbiter's decision could be included in the award and execution for the
aggregate amounts due obtained. In fact, the above underscored
paragraph was entirely obiter in character.
DECISION
FELICIANO, J p:
Respondent Sandigan ng Manggagawang Pilipino ("Sandigan") filed before
the Labor Arbiter a claim for Emergency Cost of Living Allowance
("ECOLA") differential against petitioner Apex Mining Company, Inc.
("Apex") alleging that Apex had paid its employees in its Maco, Davao del
Norte operations, between 1 November 1984 until 28 March 1985, an
aggregate cumulative daily ECOLA of only P15.00 which was P2.00 below
the cumulative minimum ECOLA of P17.00 (for non-agricultural workers)
established under Wage Order No. 6; and that petitioner had belatedly
granted the additional P2.00 starting on 29 March 1985 only.
Apex denied having failed to comply with Wage Order No. 6, contending
that it had, by previous agreement, incorporated the alleged P2.00
deficiency into the basic salary of its employees. In turn, Sandigan denied
that such an agreement had been made, but conceded that a P2.00
increase in basis salary had been made by Apex, in compliance with a
provision of the Collective Bargaining Agreement ("CBA") then in force
between Apex and Sandigan, and not in fulfillment of Apex's obligation
under Wage Order No. 6. Sandigan pointed out that Wage Order No. 6 had
taken effect on 1 November 1984, several months after the P2.00 had
been integrated by Apex into the basic salary of its employees. LLpr
In a supplemental memorandum, Apex reiterated that the daily salary
increase of P2.00 provided for in the then current CBA, to take effect on 1
February 1984, had been subsequently credited as partial compliance
with the P5.00 increment mandated by Wage Order No. 5 (which took
effect on 16 June 1984). Thus, Apex, in compliance with Wage Order No.
5, accordingly increased the daily ECOLA of its workers by P3.00 only
(from P9.00 to P12.00), or P2.00 less than the legislated ECOLA increase
of P5.00 (which would have increased the total daily ECOLA from P9.00 to
P14.00). Petitioner Apex added that the integration of P2.00 allowance
into the basic salary provided for in the CBA had been conformed to by
Vicente Arniego, National President of Sandigan, and that in any event,
Wage Order No. 5 had itself authorized such integration. Since petitioner
Apex had integrated P2.00 (out or the P5.00) ECOLA provided for in Wage
Order No. 5, when Apex complied with the additional ECOLA increase

mandated by Wage Order No. 6, the resulting figure for the total or
cumulative ECOLA paid by Apex appeared to be only P15.00, until one
took into account the P2.00 (out of the P5.00 ECOLA increase mandated
by Wage Order No. 5) integrated into the employees' basic salary. Finally,
petitioner Apex explained, it had granted members of Sandigan an
additional P2.00 effective 29 March 1985 not as an admission that it had
previously failed to pay something legally due, but only as a measure to
diffuse the tense atmosphere between management and the union
created by the misunderstanding over the ostensible (as distinguished
from the real) total increase paid by petitioner Apex to its employees.
In a decision dated 19 May 1987, the Labor Arbiter held that the wage
increase given in accordance with the CBA could not be credited as
compliance with increases mandated in the Wage Orders, and ordered
petitioner Apex to pay respondent Sandigan the claimed ECOLA
differential of P2.00 for the period from 1 November 1984 until 28 March
1985.
On appeal, the National Labor Relations Commission ("NLRC") affirmed
the Labor Arbiter's ruling.
There is no dispute that petitioner Apex, as the Labor Arbiter had found
out, had paid a P2.00 wage increase effective on 1 February 1984. There
is also no question that Apex raised the ECOLA of its workers by P3.00
starting on the effectivity date of Wage Order No. 6 on 1 November 1984.
The question to be resolved is whether or not Apex complied with the
increases mandated by Wage Orders Nos. 5 and 6. Resolution of this issue
in turn hinges on the question of whether or not the P2.00 per day
increase in basic salary effective starting on 1 February 1984 granted by
petitioner Apex pursuant to the CBA, was lawfully credited towards
compliance with increases in ECOLA required under Wage Orders Nos. 5
and 6. Cdpr
1.
The P2.00 increase integrated in the basic salary of Apex's
employees, effective on and after 1 February 1984, was concededly given
under the provisions of the CBA. Section 4 of Article VI of the CBA
provided as follows:
"It is understood that the grant of these general increases shall be as part
of any increase in basic pay and/or allowance that may hereafter be
decreed or imposed by law."
Both Wage Order No. 5 and Wage Order No. 6 expressly allowed the
crediting of increases in wages or allowances granted under collective

bargaining agreements towards compliance with increases in ECOLA

requirements prescribed those Wage Orders. Section 7 of Wage Order No.
5 provided as follows:
"All increases in wages and/or allowances granted by employers between
February 1, 1984 and the effectivity of this order [16 June 1984] shall be
credited as compliance with the minimum wage and allowance
adjustments prescribed herein. . . .
Such increase shall not include anniversary wage increases provided in
collective bargaining agreements unless the agreements expressly
provide otherwise.
xxx

xxx

xxx

"(Emphasis and brackets supplied).

Section 4 of Wage Order No. 6 had very similar language:
"All increases in wages and/or allowances granted by employers between
June 17, 1984 and the effectivity of this order [November 1, 1984] shall
be credited as compliance with the minimum wage and allowance
adjustments prescribed herein, provided that where the increases are less
than the applicable amount provided in this order, the employer shall pay
the difference. Such increases shall not include anniversary wage
increases provided in collective bargaining agreements unless the
agreements expressly provide otherwise.
This Section shall not apply to merit wage increases and those resulting
from the regularization or promotion of employees." (Emphasis and
brackets supplied).
It is important to note that the creditability provisions in Wage Orders
Nos. 5 and 6 (as well as the parallel provisions in Wage Orders Nos. 2, 3
and 4) are grounded in an important public policy. That public policy may
be seen to be the encouragement of employers to grant wage and
allowance increases to their employees higher than the minimum rates of
increases prescribed by statute or administrative regulation. To obliterate
the creditability provisions in the Wage Orders through interpretation or
otherwise, and so compel employers simply to add on legislated increases
in salaries or allowances without regard to what is already being paid,
would be to penalize employers who grant their workers more than the
statutorily prescribed minimum rates of increases. Clearly, this would be
counter-productive so far as securing the interests of labor is concerned.
The creditability provisions in the Wage Orders prevent the penalizing of

employers who are industry leaders and who do not wait for statutorily
prescribed increases in salary or allowances and pay their workers more
than what the law or regulations require.
2.
Sandigan, however, argues that to consider the P2.00 increase in
basic salary effective 1 February 1984 provided by the CBA as compliance
with the requirements of Wage Orders Nos. 5 and 6, would be to violate
Article 100 of the Labor Code as well as Section 6 of the Rules
Implementing Wage Order No. 6. These provisions read respectively:
"Art. 100. Prohibition against elimination or diminution of benefits
Nothing in [Book Three Conditions of Employment] 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."
(Emphasis supplied)
"Section 6.
Non-diminution of benefits The statutory minimum
wage rates shall be exclusive of whatever supplements and other benefits
the workers are enjoying without cost at the time of the effectivity of this
Order." (Emphasis supplied).
Clearly, the prohibition against elimination or diminution of benefits set
out in Article 100 of the Labor Code is specifically concerned with benefits
already enjoyed at the time of the promulgation of the Labor Code. Article
100 does not, in other words, purport to apply to situations arising after
the promulgation date of the Labor Code. Section 6 of the Rules
Implementing Wage Order No. 6 relates to "supplements and other
benefits" which employees are already "enjoying without cost at the time
of the effectivity of [Wage] Order [No. 6]." Such benefits which employees
are already enjoying "without cost" could not, under Section 6, suddenly
be ascribed monetary value so as to offset or diminish increases in the
minimum wage rates prescribed by statute. Clearly, once more, Section 6
does not relate to the problem at hand. LexLib
3.
Sandigan further contends that the 1 February 1984 P2.00 increase
in basic salary was actually an "anniversary wage increase," and
therefore not creditable under Section 7 of Wage Order No. 5 and under
Section 4 of Wage Order No. 6.
The P2.00 increase was given by petitioner Apex under Section 3 Rule VI
of the CBA which reads as follows:
"SECTION 3.
The COMPANY agrees to grant general wage increases to
all employees within bargaining unit as follows:

a)
Two Pesos (P2.00) general increase per day upon the effectivity of
this Agreement (February 1, 1984);
b)
One Peso and Fifty Centavos (P1.50) general increase per day
effective on the first anniversary date of this Agreement (February 1,
1985);
c)
One Peso And Fifty Centavos (P1.50) general increase per day
effective on the second anniversary date of this Agreement (February 1,
1986)." 1 (Emphasis supplied).
It appears clear to the Court from an inspection of the above-quoted
Section 3 that the P2.00 increase effective on 1 February 1984 was
distinguishable from the two (2) increases of P1.50 each, the first being
effective on the first anniversary date of the CBA (1 February 1985) and
the second being effective on the second anniversary dated (1 February
1986). In other words, the two (2) increases of P1.50 each, one being
effective on 1 February 1985 and the second effective on 1 February 1986
were precisely the non-creditable "anniversary wage increases." Even if it
be assumed, however, that the 1 February 1984 P2.00 increase were
regarded (improperly) as an "anniversary wage increase" still that P2.00
increase would be creditable towards the statutorily mandated increases.
For Wage Orders Nos. 5 and 6 themselves allowed crediting of
"anniversary wage increases" stipulated in a CBA towards statutory
increases, if the CBA itself (as here) expressly allowed such crediting.
Section 4, Article VI of the CBA, quoted earlier, authorized the crediting of
"general increases" towards statutorily mandated increases in basic pay
or allowance. At the same time, Section 3 of Article VI of the CBA, quoted
above, described the two (2) anniversary wage increases of P1.50 each,
and the one-time P2.00 increase, as each constituting a "general
increase."
4.
What petitioner Apex did may perhaps be most economically
presented in the following tabular form:
ECOLA Increases Statutorily Mandated
by Wage Orders Nos. 4, 5, and 6
(For non-agricultural workers outside
Metro Manila)
Wage

Mandatory

Cumulated

Apparent Actual

Actual

Order

Increase Increase Cumulated

No. (P0.00)

(P0.00)

Increase 2

(P0.00)

(P0.00)

14

12

14

17

15

17

Differential

Increase 3

Differential

(P0.00)

The respondent Sandigan did not question the fact that petitioner Apex
was in compliance with the requirements of Wage Order No. 4.
In respect of Wage Order No. 5, Apex credited the P2.00 increase in basic
salary, effective 1 February 1984, towards compliance with the statutorily
prescribed ECOLA increase of P5.00. Thus, the apparent cumulated
increase in ECOLA, as shown in Apex's books, was only P12.00. However,
the actual increases the composite of basic salary and ECOLA aggregated P14.00. Since such crediting was expressly allowed under
Wage Order No. 5, it follows that petitioner Apex was in compliance with
Wage Order No. 5. No differential was therefore due thereunder.
When Wage Order No. 6 was promulgated, it prescribed an increase of
P3.00 in ECOLA. Apex paid this mandatory increase and denominated all
of it as ECOLA. Thus, the apparent cumulated increase was P15.00. Since,
however, Apex had previously increased the basic salary by P2.00
effective 1 February 1984, the aggregate actual increase (in basic salary
Plus ECOLA) was P17.00, the same total or cumulated increase
contemplated by Wage Orders Nos. 5 and 6. Thus, again, Apex was
actually in compliance with the requirements of Wage Order No. 6, with
the result that no differential was actually due from it.
It remains only to note that Section 7 of Wage Order No. 5 and Section 4
of Wage Order No. 6 expressly authorized the crediting of all the increases
"in wages" or "allowances." Thus, the fact that Apex had denominated the
P2.00 increase effective 1 February 1984, as an increase in basic salary,
rather than in ECOLA, made no legal difference so far as concerns the
creditability of such increase. Indeed, integration of the P2.00 into the
basic salary of the employees was more beneficial to them than granting
the P2.00 as part of their ECOLA: the integration increased the base wage
for purposes of computation of such items as overtime and premium pay,
fringe benefits and maternity pay. In fact, the Implementing Rules of
Wage Order No. 5, and Wage Order No. 6 itself, 4 expressly authorized

increases in basic salary in lieu of increases in ECOLA, provided the

amounts thereof were not less than the amounts required by the Wage
Orders. prcd
5.
Lastly, Sandigan invokes Filipino Pipe Workers Union (NLU) v. Batario,
Jr.,
5 where the Court, through its Third Division, made the broad
statement that statutory wage increases are to be considered separate
from increases granted through the medium of CBAs.
In Filipino Pipe Workers, the NLRC ordered the inclusion in its award in
favor of the union of a wage increase of P3.00 per day mandated by Wage
Orders Nos. 2 and 3, which took effect after the finality of the Labor
Arbiter's decision but pending its execution. In sustaining the award of the
NLRC, the Court, through former Chief Justice Fernan, said:
"In his Comment on the petition, the Solicitor General stated that the said
P3.00 a day increase was made pursuant to Wage Orders Nos. 2 and 3,
which took effect after the finality of the Labor Arbiter's decision but
pending its execution. A common section found in both Wage Orders Nos.
2 and 3, as well as in the subsequent Wage Orders Nos. 5 and 6 uniformly
provides that all increases and/or allowances granted by employers within
a specified period 'shall be credited as compliance with the minimum
wage and allowance adjustments prescribed herein, provided that where
the increases are less than the applicable amount provided in this Order,
the employer shall pay the difference. Such increases shall not include
anniversary wage increases provided in collective bargaining agreements
unless the agreement expressly provide otherwise.' (Emphasis in the
original).
We interpret the above section to mean that every grant of daily increase
in statutory minimum wage rates and living allowance must be
considered as independent, separate or apart from the wage increases in
the collective bargaining agreement and must be integrated into the
salary scale of the employees to the end that the desired rates decreed
by the National Wages Council are attained." 6 (Emphasis supplied).
It is apparent from the foregoing that the issue of creditability of an
increase in basic salary or allowance given pursuant to a CBA towards
compliance with a statutorily prescribed increase in emergency cost of
living allowances (ECOLA) was not at all involved and that the Court was
not striking down the creditability provisions in Wage Orders Nos. 2, 3, 5
and 6. All that the NLRC was saying was that a wage increase which had
come into effect after the Labor Arbiter's decision could be included in the

award and execution for the aggregate amounts due obtained. In fact, the
above underscored paragraph was entirely obiter in character. LibLex
Petitioner Apex having lawfully credited the P2.00 increase in basic salary
towards compliance of the increase in ECOLA prescribed by Wage Orders
Nos. 5 and 6, it follows that respondent Sandigan's claim to a differential
in ECOLA lacks basis in fact and in law.
ACCORDINGLY, the Court Resolved to GRANT the Petition for Certiorari.
The Decision of the NLRC in Case No. 2915-MC-XI-86, dated 9 September
1988, and its Resolution dated 28 October 1988, denying petitioner's
motion for reconsideration, are hereby SET ASIDE and ANNULLED. No
pronouncement as to costs.
SO ORDERED.
Gutierrez, Jr., Bidin, Davide, Jr. and Romero, JJ., concur.

THIRD DIVISION
[G.R. No. 131247. January 25, 1999.]
PRUBANKERS ASSOCIATION, petitioner, vs. PRUDENTIAL BANK & TRUST
COMPANY, respondent.
Rachel F. Pastores for petitioner.
Angara Abello Concepcion Regala and Cruz for private respondent.
SYNOPSIS
This is a petition for review on certiorari, challenging the decision of the
Court of Appeals finding that no wage distortion resulted from petitioner's
separate and regional implementation of Wage Order No. 5-03 at its Naga
Branch and Wage Order No. VIII-03 at Cebu, Mabolo and P. del Rosario
branches. In ruling that there was no wage distortion; the Court of
Appeals held that the variance in the salary rates of employees in
different regions of the country was justified by the Wage Rationalization
Act (RA No. 6727). DSATCI
Petitioner argued that a wage distortion exists because the
implementation of the two Wage Orders has resulted in the discrepancy in
the compensation of employees of similar pay classification in different
regions. Hence, petitioner maintained that, as a result of the two Wage
Orders, the employees in the affected regions have higher compensation
than their counterparts of the same level in other regions.
The Supreme Court was not persuaded. A disparity in wages between
employees holding similar positions but in different regions does not
constitute wage distortion as contemplated by law. Wage distortion
presupposes an increase in the compensation of the lower ranks in an
office hierarchy without a corresponding raise for higher-tiered employees
in the same region of the country, resulting in the elimination or the
severe diminution of the distinction between the two groups. Such
distortion does not arise when a wage order gives employees in one
branch of a bank higher compensation than that given to their
counterparts in other regions occupying the same pay scale, who are not
covered by said law. The implementation of wage orders in one region but
not in others does not in itself necessarily result in wage distortion. The
fact that a person is receiving more in one region does not necessarily
mean that he or she is better off than a person receiving less in another
region. We must consider, among others, such factors as cost of living,
fulfillment of national economic goals, and standard of living. In the

present case, it is clear that no wage distortion resulted when respondent

implemented the subject Wage Orders in the covered branches. In the
said branches, there was an increase in the salary rates of all pay classes.
Furthermore, the hierarchy of positions based on skills, length of service
and other logical bases of differentiation was preserved. The quantitative
difference in compensation between pay classes remained the same in all
branches in the affected region. Hence, it cannot be said that there was a
wage distortion. Consequently, the Supreme Court affirmed the decision
of the Court of Appeals. IcaHTA
SYLLABUS
1.
REMEDIAL LAW; CIVIL PROCEDURE; PLEADINGS; FORUM-SHOPPING;
REQUISITES. As explained by this Court in First Philippine International
Bank v. Court of Appeals, forum-shopping exists where the elements of
litis pendentia are present, and where a final judgment in one case will
amount to res judicata in the other. Thus, there is forum-shopping when,
between an action pending before this Court and another one, there exist:
"a) identity of parties, or at least such parties as represent the same
interests in both actions, b) identity of rights asserted and relief prayed
for, the relief being founded on the same facts, and c) the identity of the
two preceding particulars is such that any judgment rendered in the other
action, will, regardless of which party is successful amount to res judicata
in the action under consideration; said requisites also constitutive of the
requisites for auter action pendant or lis pendens." Another case
elucidates the consequence of forum-shopping: "[W]here a litigant sues
the same party against whom another action or actions for the alleged
violation of the same right and the enforcement of the same relief is/are
still pending, the defense of litis pendentia in one case is a bar to the
others; and, a final judgment in one would constitute res judicata and
thus would cause the dismissal of the rest."
2.
ID.; ID.; ID.; ID.; ID.; PRESENT IN CASE AT BAR. The voluntary
arbitration case involved the issue of whether the adoption by the Bank of
regionalized hiring rates was valid and binding. On the other hand, the
issue now on hand revolves around the existence of a wage distortion
arising from the Bank's separate and regional implementation of the two
Wage Orders in the affected branches. A closer look would show that,
indeed, the requisites of forum-shopping are present. First, there is
identity of parties. Both cases are between the Bank and the Association
acting on behalf of all its members. Second, although the respective
issues and reliefs prayed for in the two cases are stated differently, both

actions boil down to one single issue: the validity of the Bank's
regionalization of its wage structure based on RA 6727. Even if the
voluntary arbitration case calls for striking down the Bank's regionalized
hiring scheme while the instant petition calls for the correction of the
alleged wage distortion caused by the regional implementation of Wage
Order No. VII-03, the ultimate relief prayed for in both cases is the
maintenance of the Bank's national wage structure. Hence, the final
disposition of one would constitute res judicata in the other. Thus, forumshopping is deemed to exist and, on this basis, the summary dismissal of
both actions is indeed warranted.
3.
LABOR
AND
SOCIAL
LEGISLATION;
LABOR
STANDARDS;
EMPLOYMENT; REPUBLIC ACT NO. 6727; THE WAGE RATIONALIZATION
ACT; THE SUPREME COURT HAS NO POWER TO PASS UPON THE WISDOM
THEREOF. The objective of the law also explains the wage disparity in
the example cited by petitioner: Armae Librero, though only in Pay Class 4
in Mabolo, was, as a result of the Wage Order, receiving more than Bella
Cristobal, who was already in Pay Class 5 in Subic. RA 6727 recognizes
that there are different needs for the different situations in different
regions of the country. The fact that a person is receiving more in one
region does not necessarily mean that he or she is better off than a
person receiving less in another region. We must consider, among others,
such factors as cost of living, fulfillment of national economic goals, and
standard of living. In any event, this Court, in its decisions, merely
enforces the law. It has no power to pass upon its wisdom or propriety.
SATDHE
4.
ID.; ID.; ID.; ID.; ID.; WAGE DISTORTION; EXPLAINED. The statutory
definition of wage distortion is found in Article 124 of the Labor Code, as
amended by Republic Act No. 6727. Elaborating on the statutory
definition, this Court ruled: "Wage distortion presupposes a classification
of positions and ranking of these positions at various levels. One
visualizes a hierarchy of positions with corresponding ranks basically in
terms of wages and other emoluments. Where a significant change occurs
at the lowest level of positions in terms of basic wage without a
corresponding change in the other level in the hierarchy of positions,
negating as a result thereof the distinction between one level of position
from the next higher level, and resulting in a parity between the lowest
level and the next higher level or rank, between new entrants and old
hires, there exists a wage distortion. . . . . The concept of wage distortion
assumes an existing grouping or classification of employees which
establishes distinctions among such employees on some relevant or

legitimate basis. This classification is reflected in a differing wage rate for

each of the existing classes of employees."
5.
ID.; ID.; ID.; ID.; ID.; ID.; ELEMENTS. Wage distortion involves four
elements: 1. An existing hierarchy of positions with corresponding salary
rates; 2. A significant change in the salary rate of a lower pay class
without a concomitant increase in the salary rate of a higher one; 3. The
elimination of the distinction between the two levels; 4. The existence of
the distortion in the same region of the country.
6.
ID.; ID.; ID.; ID.; ID.; ID.; DOES NOT EXIST IN CASE AT BAR. In the
present case, it is clear that no wage distortion resulted when respondent
implemented the subject Wage Orders in the covered branches. In the
said branches, there was an increase in the salary rates of all pay classes.
Furthermore, the hierarchy of positions based on skills, length of service
and other logical bases of differentiation was preserved. In other words,
the quantitative difference in compensation between different pay classes
remained the same in all branches in the affected region. Put differently,
the distinction between Pay Class 1 and Pay Class 2, for example, was not
eliminated as a result of the implementation of the two Wage Orders in
the said region. Hence, it cannot be said that there was a wage distortion.
7.
ID.; ID.; ID.; ID.; ID.; ID.; DOES NOT INVOLVE DISPARITY IN WAGES
BETWEEN EMPLOYEES HOLDING SIMILAR POSITIONS BUT IN DIFFERENT
REGIONS. The Court is not persuaded. A wage parity between
employees in different rungs is not at issue here, but a wage disparity
between employees in the same rung but located in different regions of
the country. Contrary to petitioner's postulation, a disparity in wages
between employees holding similar positions but in different regions does
not constitute wage distortion as contemplated by law. As previously
enunciated, it is the hierarchy of positions and the disparity of their
corresponding wages and other emoluments that are sought to be
preserved by the concept of wage distortion. Put differently, a wage
distortion arises when a wage order engenders wage parity between
employees in different rungs of the organizational ladder of the same
establishment. It bears emphasis that wage distortion involves a parity in
the salary rates of different pay classes which, as a result, eliminates the
distinction between the different ranks in the same region.
8.
ID.; ID.; ID.; ID.; ID.; PURPOSE. Petitioner's claim of wage distortion
must also be denied for one other reason. The difference in wages
between employees in the same pay scale in different regions is not the
mischief sought to be banished by the law. In fact, Republic Act No. 6727

(the Wage Rationalization Act), recognizes "existing regional disparities in

the cost of living." In insisting that the employees of the same pay class
in different regions should receive the same compensation, petitioner has
apparently misunderstood both the meaning of wage distortion and the
intent of the law to regionalize wage rates. It must be understood that
varying in each region of the country are controlling factors such as the
cost of living; supply and demand of basic goods, services and
necessities; and the purchasing power of the peso. Other considerations
underscore the necessity of the law. Wages in some areas may be
increased in order to prevent migration to the National Capital Region
and, hence, to decongest the metropolis. Therefore, what the petitioner
herein bewails is precisely what the law provides in order to achieve its
purpose.
9.
ID.; ID.; ID.; ID.; ID.; REGIONALIZED IMPLEMENTATION OF THE WAGE
ORDER DOES NOT VIOLATE THE EQUAL-PAY-FOR-EQUAL-WORK PRINCIPLE.
Petitioner also avers that the implementation of the Wage Order in only
one region violates the equal-pay-for-equal-work principle. This is not
correct. At the risk of being repetitive, we stress that RA 6727 mandates
that wages in every region must be set by the particular wage board of
that region, based on the prevailing situation therein. Necessarily, the
wages in different regions will not be uniform. Thus, under RA 6727, the
minimum wage in Region 1 may be different from that in Region 13,
because the socioeconomic conditions in the two regions are different.
10. ID.; ID.; ID.; ID.; ID.; TERM 'ESTABLISHMENT' DEFINED. Section 13
of RA 6727 provides that the "minimum wage rates of workers working in
branches or agencies of establishments in or outside the National Capital
Region shall be those applicable in the place where they are sanctioned."
The last part of the sentence was omitted by petitioner in its argument.
Given the entire phrase, it is clear that the statutory provision does not
support petitioner's view that "establishment" includes all branches and
offices in different regions. Further negating petitioner's theory is NWPC
Guideline No. 1 (S. 1992) entitled "Revised Guidelines on Exemption From
Compliance With the Prescribed Wage/Cost of Living Allowance Increases
Granted by the Regional Tripartite Wages and Productivity Board," which
states that "establishment" "refers to an economic unit which engages in
one or predominantly one kind of economic activity with a single fixed
location."
11. ID.; ID.; ID.; ID.; ID.; PETITIONER'S NATIONWIDE IMPLEMENTATION OF
THE WAGE ORDER CANNOT BE CONSTITUTIVE OF "MANAGEMENT

PRACTICE." Petitioner also insists that the Bank has adopted a uniform
wage policy, which has attained the status of an established management
practice; thus, it is estopped from implementing a wage order for a
specific region only. We are not persuaded. Said nationwide uniform wage
policy of the Bank had been adopted prior to the enactment of RA 6727.
After the passage of said law, the Bank was mandated to regionalize its
wage structure. Although the Bank implemented Wage Order Nos. NCR-01
and NCR-02 nationwide instead of regionally even after the effectivity of
RA 6727, the Bank at the time was still uncertain about how to follow the
new law. In any event, that single instance cannot be constitutive of
"management practice." cACTaI
DECISION
PANGANIBAN, J p:
Wage distortion presupposes an increase in the compensation of the
lower ranks in an office hierarchy without a corresponding raise for
higher-tiered employees in the same region of the country, resulting in
the elimination or the severe diminution of the distinction between the
two groups. Such distortion does not arise when a wage order gives
employees in one branch of a bank higher compensation than that given
to their counterparts in other regions occupying the same pay scale, who
are not covered by said wage order. In short, the implementation of wage
orders in one region but not in others does not in itself necessarily result
in wage distortion. cdasia
The Case
Before us is a Petition for Review on Certiorari, challenging the November
6, 1997 Decision 1 of the Court of Appeals in CA-GR SP No. 42525. The
dispositive portion of the challenged Decision reads:
"WHEREFORE, the petition is GRANTED. The assailed decision of the
Voluntary Arbitration Committee dated June 18, 1996 is hereby
REVERSED and SET ASIDE for having been issued with grave abuse of
discretion tantamount to lack of or excess of jurisdiction, and a new
judgment is rendered finding that no wage distortion resulted from the
petitioner's separate and regional implementation of Wage Order No. VII03 at its Cebu, Mabolo and P. del Rosario branches."
The June 18, 1996 Decision of the Voluntary Arbitration Committee, 2
which the Court of Appeals reversed and set aside, disposed as follows:

"WHEREFORE, it is hereby ruled that the Bank's separate and regional

implementation of Wage Order No. VII-03 at its Cebu, Mabolo and P. del
Rosario branches created a wage distortion in the Bank nationwide which
should be resolved in accordance with Art. 124 of the Labor Code." 3
The Facts
The facts of the case are summarized by the Court of Appeals thus:
"On November 18, 1993, the Regional Tripartite Wages and Productivity
Board of Region V issued Wage Order No. RB 05-03 which provided for a
Cost of Living Allowance (COLA) to workers in the private sector who
ha[d] rendered service for at least three (3) months before its effectivity,
and for the same period [t]hereafter, in the following categories:
SEVENTEEN PESOS AND FIFTY CENTAVOS (P17.50) in the cities of Naga
and Legaspi; FIFTEEN PESOS AND FIFTY CENTAVOS (P15.50) in the
municipalities of Tabaco, Daraga, Pili and the city of Iriga; and TEN PESOS
(P10.00) for all other areas in the Bicol Region.
"Subsequently on November 23, 1993, the Regional Tripartite Wages and
Productivity Board of Region VII issued Wage Order No. RB VII-03, which
directed the integration of the COLA mandated pursuant to Wage Order
No. RO VII-02-A into the basic pay of all workers. It also established an
increase in the minimum wage rates for all workers and employees in the
private sector as follows: by Ten Pesos (P10.00) in the cities of Cebu,
Mandaue and Lapulapu; Five Pesos (P5.00) in the municipalities of
Compostela, Liloan, Consolacion, Cordova, Talisay, Minglanilla, Naga and
the cities of Davao, Toledo, Dumaguete, Bais, Canlaon, and Tagbilaran.
"The petitioner then granted a COLA of P17.50 to its employees at its
Naga Branch, the only branch covered by Wage Order No. RB 5-03, and
integrated the P150.00 per month COLA into the basic pay of its rankand-file employees at its Cebu, Mabolo and P. del Rosario branches, the
branches covered by Wage Order No. RB VII-03.
"On June 7, 1994, respondent Prubankers Association wrote the petitioner
requesting that the Labor Management Committee be immediately
convened to discuss and resolve the alleged wage distortion created in
the salary structure upon the implementation of the said wage orders.
Respondent Association then demanded in the Labor Management
Committee meetings that the petitioner extend the application of the
wage orders to its employees outside Regions V and VII, claiming that the
regional implementation of the said orders created a wage distortion in
the wage rates of petitioner's employees nationwide. As the grievance

could not be settled in the said meetings, the parties agreed to submit
the matter to voluntary arbitration. The Arbitration Committee formed for
that purpose was composed of the following: public respondent Froilan M.
Bacungan as Chairman, with Attys. Domingo T. Anonuevo and Emerico O.
de Guzman as members. The issue presented before the Committee was
whether or not the bank's separate and regional implementation of Wage
Order No. 5-03 at its Naga Branch and Wage Order No. VII-03 at its Cebu,
Mabolo and P. del Rosario branches, created a wage distortion in the bank
nationwide.
"The Arbitration Committee on June 18, 1996 rendered the questioned
decision." 4
Ruling of the Court of Appeals
In ruling that there was no wage distortion, the Court of Appeals held that
the variance in the salary rates of employees in different regions of the
country was justified by RA 6727. It noted that "the underlying
considerations in issuing the wage orders are diverse, based on the
distinctive situations and needs existing in each region. Hence, there is no
basis to apply the salary increases imposed by Wage Order No. VII-03 to
employees outside of Region VII." Furthermore, the Court of Appeals ruled
that "the distinctions between each employee group in the region are
maintained, as all employees were granted an increase in minimum wage
rate." 5
The Issues
In its Memorandum, petitioner raises the following issues: 6
"I
Whether or not the Court of Appeals departed from the usual course of
judicial procedure when it disregarded the factual findings of the
Voluntary Arbitration Committee as to the existence of wage distortion.
"II
Whether or not the Court of Appeals committed grave error in law when it
ruled that wage distortion exists only within a region and not nationwide.
"III
Whether or not the Court of Appeals erred in implying that the term
'establishment' as used in Article 125 of the Labor Code refers to the
regional branches of the bank and not to the bank as a whole."

The main issue is whether or not a wage distortion resulted from

respondent's implementation of the aforecited Wage Orders. As a
preliminary matter, we shall also take up the question of forum-shopping.
The Court's Ruling
The petition is devoid of merit. 7
Preliminary Issue: Forum-Shopping
Respondent asks for the dismissal of the petition because petitioner
allegedly engaged in forum-shopping. It maintains that petitioner failed to
comply with Section 2 of Rule 42 of the Rules of Court, which requires that
parties must certify under oath that they have not commenced any other
action involving the same issues in the Supreme Court, the Court of
Appeals, or different divisions thereof, or any other tribunal or agency; if
there is such other action or proceeding, they must state the status of the
same; and if they should thereafter learn that a similar action or
proceeding has been filed or is pending before the said courts, they
should promptly inform the aforesaid courts or any other tribunal or
agency within five days therefrom. Specifically, petitioner accuses
respondent of failing to inform this Court of the pendency of NCMB-NCRRVA-04-012-97 entitled "In Re: Voluntary Arbitration between Prudential
Bank and Prubankers Association" (hereafter referred to as "voluntary
arbitration case"), an action involving issues allegedly similar to those
raised in the present controversy. LLjur
In its Reply, petitioner effectively admits that the voluntary arbitration
case was already pending when it filed the present petition. However, it
claims no violation of the rule against forum-shopping, because there is
no identity of causes of action and issues between the two cases.
We sustain the respondent. The rule on forum-shopping was first included
in Section 17 of the Interim Rules and Guidelines issued by this Court on
January 11, 1983, which imposed a sanction in this wise: "A violation of
the rule shall constitute contempt of court and shall be a cause for the
summary dismissal of both petitions, without prejudice to the taking of
appropriate action against the counsel or party concerned." Thereafter,
the Court restated the rule in Revised Circular No. 28-91 and
Administrative Circular No. 04-94. Ultimately, the rule was embodied in
the 1997 amendments to the Rules of Court.
As explained by this Court in First Philippine International Bank v. Court of
Appeals, 8 forum-shopping exists where the elements of litis pendentia

are present, and where a final judgment in one case will amount to res
judicata in the other. Thus, there is forum-shopping when, between an
action pending before this Court and another one, there exist: "a) identity
of parties, or at least such parties as represent the same interests in both
actions, b) identity of rights asserted and relief prayed for, the relief being
founded on the same facts, and c) the identity of the two preceding
particulars is such that any judgment rendered in the other action, will,
regardless of which party is successful amount to res judicata in the
action under consideration; said requisites also constitutive of the
requisites for auter action pendant or lis pendens." 9 Another case
elucidates the consequence of forum-shopping: "[W]here a litigant sues
the same party against whom another action or actions for the alleged
violation of the same right and the enforcement of the same relief is/are
still pending, the defense of litis pendentia in one case is a bar to the
others; and, a final judgment in one would constitute res judicata and
thus would cause the dismissal of the rest." 10
The voluntary arbitration case involved the issue of whether the adoption
by the Bank of regionalized hiring rates was valid and binding. On the
other hand, the issue now on hand revolves around the existence of a
wage distortion arising from the Bank's separate and regional
implementation of the two Wage Orders in the affected branches. A closer
look would show that, indeed, the requisites of forum-shopping are
present.
First, there is identity of parties. Both cases are between the Bank and the
Association acting on behalf of all its members. Second, although the
respective issues and reliefs prayed for in the two cases are stated
differently, both actions boil down to one single issue: the validity of the
Bank's regionalization of its wage structure based on RA 6727. Even if the
voluntary arbitration case calls for striking down the Bank's regionalized
hiring scheme while the instant petition calls for the correction of the
alleged wage distortion caused by the regional implementation of Wage
Order No. VII-03, the ultimate relief prayed for in both cases is the
maintenance of the Bank's national wage structure. Hence, the final
disposition of one would constitute res judicata in the other. Thus, forumshopping is deemed to exist and, on this basis, the summary dismissal of
both actions is indeed warranted.
Nonetheless, we deem it appropriate to pass upon the main issue on its
merit in view of its importance.
Main Issue: Wage Distortion

The statutory definition of wage distortion is found in Article 124 of the

Labor Code, as amended by Republic Act No. 6727, which reads:
"Article 124.

Standards/Criteria for Minimum Wage Fixing . . .

"As used herein, a wage distortion shall mean a situation where an

increase in prescribed wage results in the elimination or severe
contraction of intentional quantitative differences in wage or salary rates
between and among employee groups in an establishment as to
effectively obliterate the distinctions embodied in such wage structure
based on skills, length of service, or other logical bases of differentiation."
Elaborating on this statutory definition, this Court ruled: "Wage distortion
presupposes a classification of positions and ranking of these positions at
various levels. One visualizes a hierarchy of positions with corresponding
ranks basically in terms of wages and other emoluments. Where a
significant change occurs at the lowest level of positions in terms of basic
wage without a corresponding change in the other level in the hierarchy
of positions, negating as a result thereof the distinction between one level
of position from the next higher level, and resulting in a parity between
the lowest level and the next higher level or rank, between new entrants
and old hires, there exists a wage distortion. . . . The concept of wage
distortion assumes an existing grouping or classification of employees
which establishes distinctions among such employees on some relevant
or legitimate basis. This classification is reflected in a differing wage rate
for each of the existing classes of employees." 11
Wage distortion involves four elements:
1.

An existing hierarchy of positions with corresponding salary rates

2.
A significant change in the salary rate of a lower pay class without a
concomitant increase in the salary rate of a higher one
3.

The elimination of the distinction between the two levels

4.

The existence of the distortion in the same region of the country

In the present case, it is clear that no wage distortion resulted when

respondent implemented the subject Wage Orders in the covered
branches. In the said branches, there was an increase in the salary rates
of all pay classes. Furthermore, the hierarchy of positions based on skills,
length of service and other logical bases of differentiation was preserved.
In other words, the quantitative difference in compensation between
different pay classes remained the same in all branches in the affected

region. Put differently, the distinction between Pay Class 1 and Pay Class
2, for example, was not eliminated as a result of the implementation of
the two Wage Orders in the said region. Hence, it cannot be said that
there was a wage distortion.
Petitioner argues that a wage distortion exists, because the
implementation of the two Wage Orders has resulted in the discrepancy in
the compensation of employees of similar pay classification in different
regions. Hence, petitioner maintains that, as a result of the two Wage
Orders, the employees in the affected regions have higher compensation
than their counterparts of the same level in other regions. Several tables
are presented by petitioner to illustrate that the employees in the regions
covered by the Wage Orders are receiving more than their counterparts in
the same pay scale in other regions.
The Court is not persuaded. A wage parity between employees in
different rungs is not at issue here, but a wage disparity between
employees in the same rung but located in different regions of the
country.
Contrary to petitioner's postulation, a disparity in wages between
employees holding similar positions but in different regions does not
constitute wage distortion as contemplated by law. As previously
enunciated, it is the hierarchy of positions and the disparity of their
corresponding wages and other emoluments that are sought to be
preserved by the concept of wage distortion. Put differently, a wage
distortion arises when a wage order engenders wage parity between
employees in different rungs of the organizational ladder of the same
establishment. It bears emphasis that wage distortion involves a parity in
the salary rates of different pay classes which, as a result, eliminates the
distinction between the different ranks in the same region.
Different Regional Wages
Mandated by RA 6727
Petitioner's claim of wage distortion must also be denied for one other
reason. The difference in wages between employees in the same pay
scale in different regions is not the mischief sought to be banished by the
law. In fact, Republic Act No. 6727 (the Wage Rationalization Act),
recognizes "existing regional disparities in the cost of living." Section 2 of
said law provides:

"SEC. 2. It is hereby declared the policy of the State to rationalize the

fixing of minimum wages and to promote productivity-improvement and
gain-sharing measures to ensure a decent standard of living for the
workers and their families; to guarantee the rights of labor to its just
share in the fruits of production; to enhance employment generation in
the countryside through industry dispersal; and to allow business and
industry reasonable returns on investment, expansion and growth.
"The State shall promote collective bargaining as the primary mode of
settling wages and other terms and conditions of employment; and
whenever necessary, the minimum wage rates shall be adjusted in a fair
and equitable manner, considering existing regional disparities in the cost
of living and other socio-economic factors and the national economic and
social development plans."
RA 6727 also amended Article 124 of the Labor Code, thus:
"Art. 124. Standards/Criteria for Minimum Wage Fixing. The regional
minimum wages to be established by the Regional Board shall be as
nearly adequate as is economically feasible to maintain the minimum
standards of living necessary for the health, efficiency and general wellbeing of the employees within the frame work of the national economic
and social development program. In the determination of such regional
minimum wages, the Regional Board shall, among other relevant factors,
consider the following:
'(a) The demand for living wages;
'(b) Wage adjustment vis-a-vis the consumer price index;
'(c) The cost of living and changes or increases therein;
'(d) The needs of workers and their families;
'(e) The need to induce industries to invest in the countryside;
'(f)

Improvements in standards of living;

'(g) The prevailing wage levels;

'(h) Fair return of the capital invested and capacity to pay of employers;
'(i)

Effects on employment generation and family income; and

'(j) The equitable distribution of income and

imperatives of social and economic development."

wealth

along

the

From the above-quoted rationale of the law, as well as the criteria

enumerated, a disparity in wages between employees with similar
positions in different regions is necessarily expected. In insisting that the
employees of the same pay class in different regions should receive the
same compensation, petitioner has apparently misunderstood both the
meaning of wage distortion and the intent of the law to regionalize wage
rates.
It must be understood that varying in each region of the country are
controlling factors such as the cost of living; supply and demand of basic
goods, services and necessities; and the purchasing power of the peso.
Other considerations underscore the necessity of the law. Wages in some
areas may be increased in order to prevent migration to the National
Capital Region and, hence, to decongest the metropolis. Therefore, what
the petitioner herein bewails is precisely what the law provides in order to
achieve its purpose.
Petitioner claims that it "does not insist that the Regional Wage Boards
created pursuant to RA 6727 do not have the authority to issue wage
orders based on the distinctive situations and needs existing in each
region. So also, . . . it does not insist that the [B]ank should not
implement regional wage orders. Neither does it seek to penalize the
Bank for following Wage Order VII-03. . . . What it simply argues is that it
is wrong for the Bank to peremptorily abandon a national wage structure
and replace the same with a regionalized structure in violation of the
principle of equal pay for equal work. And, it is wrong to say that its act of
abandoning its national wage structure is mandated by law."
As already discussed above, we cannot sustain this argument. Petitioner
contradicts itself in not objecting, on the one hand, to the right of the
regional wage boards to impose a regionalized wage scheme; while
insisting, on the other hand, on a national wage structure for the whole
Bank. To reiterate, a uniform national wage structure is antithetical to the
purpose of RA 6727.
The objective of the law also explains the wage disparity in the example
cited by petitioner: Armae Librero, though only in Pay Class 4 in Mabolo,
was, as a result of the Wage Order, receiving more than Bella Cristobal,
who was already in Pay Class 5 in Subic. 12 RA 6727 recognizes that there
are different needs for the different situations in different regions of the
country. The fact that a person is receiving more in one region does not
necessarily mean that he or she is better off than a person receiving less
in another region. We must consider, among others, such factors as cost

of living, fulfillment of national economic goals, and standard of living. In

any event, this Court, in its decisions, merely enforces the law. It has no
power to pass upon its wisdom or propriety.
Equal Pay for Equal Work
Petitioner also avers that the implementation of the Wage Order in only
one region violates the equal-pay-for-equal-work principle. This is not
correct. At the risk of being repetitive, we stress that RA 6727 mandates
that wages in every region must be set by the particular wage board of
that region, based on the prevailing situation therein. Necessarily, the
wages in different regions will not be uniform. Thus, under RA 6727, the
minimum wage in Region 1 may be different from that in Region 13,
because the socioeconomic conditions in the two regions are different.
Meaning of "Establishment"
Petitioner further contends that the Court of Appeals erred in interpreting
the meaning of "establishment" in relation to wage distortion. It quotes
the RA 6727 Implementing Rules, specifically Section 13 thereof which
speaks of "workers working in branches or agencies of establishments in
or outside the National Capital Region." Petitioner infers from this that the
regional offices of the Bank do not themselves constitute, but are simply
branches of, the establishment which is the whole bank. In effect,
petitioner argues that wage distortion covers the pay scales even of
employees in different regions, and not only those of employees in the
same region or branch. We disagree.
Section 13 provides that the "minimum wage rates of workers working in
branches or agencies of establishments in or outside the National Capital
Region shall be those applicable in the place where they are sanctioned."
The last part of the sentence was omitted by petitioner in its argument.
Given the entire phrase, it is clear that the statutory provision does not
support petitioner's view that "establishment" includes all branches and
offices in different regions.
Further negating petitioner's theory is NWPC Guideline No. 1 (S. 1992)
entitled "Revised Guidelines on Exemption From Compliance With the
Prescribed Wage/Cost of Living Allowance Increases Granted by the
Regional Tripartite Wages and Productivity Board," which states that
"establishment" "refers to an economic unit which engages in one or
predominantly one kind of economic activity with a single fixed location."
Management Practice

Petitioner also insists that the Bank has adopted a uniform wage policy,
which has attained the status of an established management practice;
thus, it is estopped from implementing a wage order for a specific region
only. We are not persuaded. Said nationwide uniform wage policy of the
Bank had been adopted prior to the enactment of RA 6727. After the
passage of said law, the Bank was mandated to regionalize its wage
structure. Although the Bank implemented Wage Order Nos. NCR-01 and
NCR-02 nationwide instead of regionally even after the effectivity of RA
6727, the Bank at the time was still uncertain about how to follow the
new law. In any event, that single instance cannot be constitutive of
"management practice."
WHEREFORE, the petition is DENIED and the assailed Decision is
AFFIRMED. Costs against petitioner. cdasia
SO ORDERED.
Romero, Vitug, Purisima and Gonzaga-Reyes, JJ., concur.

THIRD DIVISION
[G.R. No. 140689. February 17, 2004.]
BANKARD EMPLOYEES UNION-WORKERS ALLIANCE TRADE UNIONS,
petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and BANKARD,
INC., respondents.
R. Go. & J. Ngo Law Office for petitioner.
Siguion Reyna Montecillo & Ongsiako for respondent.
SYNOPSIS
The issue raised in this petition is whether or not wage distortion exists as
a result of an employer's unilateral adoption of an upgraded salary scale
that increased the hiring rates of new employees without increasing the
salary rates of old employees. cCaDSA
The Supreme Court held that the issue of whether wage distortion exists
being a question of fact, the findings of quasi-judicial agencies like the
NLRC, if supported by substantial evidence, as are the findings in the case
at bar, must be respected. The NLRC and the CA found that some of the
elements of wage distortion are absent. While Art. 124 of the Labor Code
entitled "Standards/Criteria for Minimum Wage Fixing" was intended to
correct wage distortion, the compulsory mandate to correct wage
distortion principally deals with the fixing of the minimum wage. It does
not apply to voluntary and unilateral increases by the employer in fixing
hiring rates which is inherently a business judgment prerogative.
The mere factual existence of wage distortion does not ipso facto result to
an obligation to rectify it, absent a law or other source of obligation which
requires its rectification. In the case at bar, the employer's right to
increase its hiring rate and to adjust the rates of employees affected
thereby is embodied in the parties' collective bargaining agreement which
is a valid and legally enforceable source of rights between the parties.
TECIHD
SYLLABUS
1.
LABOR AND SOCIAL LEGISLATION; LABOR CODE; WAGES; WAGE
DISTORTION; ELEMENTS THEREOF. Prubankers Association v. Prudential
Bank and Trust Company laid down the four elements of wage distortion,
to wit: (1.) An existing hierarchy of positions with corresponding salary
rates; (2) A significant change in the salary rate of a lower pay class

without a concomitant increase in the salary rate of a higher one; (3) The
elimination of the distinction between the two levels; and (4) The
existence of the distortion in the same region of the country.
2.
ID.; ID.; ID.; ID.; ID.; FINDING OF THE NLRC THAT SOME ELEMENTS OF
WAGE DISTORTION ARE ABSENT IS ACCORDED RESPECT, EVEN FINALITY,
IN CASE AT BAR. The issue of whether wage distortion exists being a
question of fact that is within the jurisdiction of quasi judicial tribunals,
and it being a basic rule that findings of facts of quasi judicial agencies,
like the NLRC, are generally accorded not only respect but at times even
finality if they are supported by substantial, evidence as are the findings
in the case at bar, they must be respected. For these agencies have
acquired expertise, their jurisdiction being confined to specific matters. It
is thus clear that there is no hierarchy of positions between the newly
hired and regular employees of Bankard, hence, the first element of wage
distortion provided in Prubankers is wanting. . . As National Federation of
Labor v. NLRC, et al. teaches, the formulation of a wage structure through
the classification of employees is a matter of management judgment and
discretion. . . . As did the Court of Appeals, this Court finds that the third
element provided in Prubankers is also wanting. IDaEHS
3.
ID.; ID.; ID.; ID.; COMPULSORY MANDATE UNDER ARTICLE 124,
LABOR CODE, TO CORRECT WAGE DISTORTION SHOULD BE MADE IN
RELATION TO MINIMUM WAGE FIXING; INAPPLICABILITY TO VOLUNTARY
INCREASES BY EMPLOYER IN FIXING HIRING RATES IN CASE AT BAR.
Article 124 is entitled "Standards/Criteria for Minimum Wage Fixing." It is
found in CHAPTER V on "WAGE STUDIES, WAGE AGREEMENTS AND WAGE
DETERMINATION" which principally deals with the fixing of minimum
wage. Article 124 should thus be construed and correlated in relation to
minimum wage fixing, the intention of the law being that in the event of
an increase in minimum wage, the distinctions embodied in the wage
structure based on skills, length of service, or other logical bases of
differentiation will be preserved. If the compulsory mandate under Article
124 to correct "wage distortion" is applied to voluntary and unilateral,
increases by the employer in fixing hiring rates which is inherently a
business judgment prerogative, then the hands of the employer would be
completely tied even in cases where an increase in wages of a particular
group is justified due to a re-evaluation of the high productivity of a
particular group, or as in the present case, the need to increase the
competitiveness of Bankard's hiring rate. An employer would be
discouraged from adjusting the salary rates of a particular group of
employees for fear that it would result to a demand by all employees for a

similar increase, especially if the financial conditions of the business

cannot address an across-the-board increase.
4.
ID.; ID.; ID.; ID.; MERE FACTUAL EXISTENCE THEREOF DOES NOT
IPSO FACTO RESULT TO AN OBLIGATION TO RECTIFY IT; EXCEPTIONS;
CASE AT BAR. The mere factual existence of wage distortion does not,
however, ipso facto result to an obligation to rectify it, absent a law or
other source of obligation which requires its rectification. Unlike in Metro
Transit then where there existed a "company practice," no such
management practice is herein alleged to obligate Bankard to provide an
across-the-board increase to all its regular employees. Bankard's right to
increase its hiring rate, to establish minimum salaries for specific jobs,
and to adjust the rates of employees affected thereby is embodied under
Section 2, Article V (Salary and Cost of Living Allowance) of the parties'
Collective Bargaining Agreement (CBA). . . This CBA provision, which is
based on legitimate business-judgment prerogatives of the employer, is a
valid and legally enforceable source of rights between the parties. In fine,
absent any indication that the voluntary increase of salary rates by an
employer was done arbitrarily and illegally for the purpose of
circumventing the laws or was devoid of any legitimate purpose other
than to discriminate against the regular employees, this Court will not
step in to interfere with this management prerogative. Employees are of
course not precluded from negotiating with its employer and lobby for
wage increases through appropriate channels, such as through a CBA.
DISEaC
DECISION
CARPIO-MORALES, J p:
The present Petition for Review on Certiorari under Rule 45 of the Rules of
Court raises the issue of whether the unilateral adoption by an employer
of an upgraded salary scale that increased the hiring rates of new
employees without increasing the salary rates of old employees resulted
in wage distortion within the contemplation of Article 124 of the Labor
Code. TcSAaH
Bankard, Inc. (Bankard) classifies its employees by levels, to wit: Level I,
Level II, Level III, Level IV, and Level V. On May 28, 1993, its Board of
Directors approved a "New Salary Scale", made retroactive to April 1,
1993, for the purpose of making its hiring rate competitive in the
industry's labor market. The "New Salary Scale" increased the hiring rates
of new employees, to wit: Levels I and V by one thousand pesos

(P1,000.00), and Levels II, III and IV by nine hundred pesos (P900.00).
Accordingly, the salaries of employees who fell below the new minimum
rates were also adjusted to reach such rates under their levels.
Bankard's move drew the Bankard Employees Union-WATU (petitioner),
the duly certified exclusive bargaining agent of the regular rank and file
employees of Bankard, to press for the increase in the salary of its old,
regular employees.
Bankard took the position, however, that there was no obligation on the
part of the management to grant to all its employees the same increase
in an across-the-board manner.
As the continued request of petitioner for increase in the wages and
salaries of Bankard's regular employees remained unheeded, it filed a
Notice of Strike on August 26, 1993 on the ground of discrimination and
other acts of Unfair Labor Practice (ULP).
A director of the National Conciliation and Mediation Board treated the
Notice of Strike as a "Preventive Mediation Case" based on a finding that
the issues therein were "not strikeable".
Petitioner filed another Notice of Strike on October 8, 1993 on the
grounds of refusal to bargain, discrimination, and other acts of ULP
union busting. The strike was averted, however, when the dispute was
certified by the Secretary of Labor and Employment for compulsory
arbitration.
The Second Division of the NLRC, by Order of May 31, 1995, finding no
wage distortion, dismissed the case for lack of merit.
Petitioner's motion for reconsideration of the dismissal of the case was,
by Resolution of July 28, 1995, denied.
Petitioner thereupon filed a petition for certiorari before this Court,
docketed as G.R. 121970. In accordance with its ruling in St. Martin
Funeral Homes v. NLRC, 1 the petition was referred to the Court of
Appeals which, by October 28, 1999, denied the same for lack of merit.
Hence, the present petition which faults the appellate court as follows:
(1) It misapprehended the basic issues when it concluded that under
Bankard's new wage structure, the old salary gaps between the different
classification or level of employees were "still reflected" by the adjusted
salary rates 2 ; and

(2) It erred in concluding that "wage distortion does not appear to

exist", which conclusion is manifestly contrary to law and jurisprudence. 3
Upon the enactment of R.A. No. 6727 (WAGE RATIONALIZATION ACT,
amending, among others, Article 124 of the Labor Code) on June 9, 1989,
the term "wage distortion" was explicitly defined as:
. . . a situation where an increase in prescribed wage rates results in the
elimination or severe contraction of intentional quantitative differences in
wage or salary rates between and among employee groups in an
establishment as to effectively obliterate the distinctions embodied in
such wage structure based on skills, length of service, or other logical
bases of differentiation. 4
Prubankers Association v. Prudential Bank and Trust Company 5 laid down
the four elements of wage distortion, to wit: (1.) An existing hierarchy of
positions with corresponding salary rates; (2) A significant change in the
salary rate of a lower pay class without a concomitant increase in the
salary rate of a higher one; (3) The elimination of the distinction between
the two levels; and (4) The existence of the distortion in the same region
of the country. DISHEA
Normally, a company has a wage structure or method of determining the
wages of its employees. In a problem dealing with "wage distortion," the
basic assumption is that there exists a grouping or classification of
employees that establishes distinctions among them on some relevant or
legitimate bases. 6
Involved in the classification of employees are various factors such as the
degrees of responsibility, the skills and knowledge required, the
complexity of the job, or other logical basis of differentiation. The differing
wage rate for each of the existing classes of employees reflects this
classification.
Petitioner maintains that for purposes of wage distortion, the
classification is not one based on "levels" or "ranks" but on two groups of
employees, the newly hired and the old, in each and every level, and not
between and among the different levels or ranks in the salary structure.
Public respondent National Labor Relations Commission (NLRC) refutes
petitioner's position, however. It, through the Office of the Solicitor
General, essays in its Comment of April 12, 2000 as follows:
To determine the existence of wage distortion, the "historical"
classification of the employees prior to the wage increase must be

established. Likewise, it must be shown that as between the different

classification of employees, there exists a "historical" gap or difference.
xxx

xxx

xxx

The classification proffered by petitioner is belied by the wage structure

of private respondent as shown in the new salary scale it adopted on May
28, 1993, retroactive to April 1, 1993, which provides, thus:
Hiring

Minimum Maximum

Level

FromTo

FromTo

FromTo

3,100

4,100

3,200

4,200

7,200

9,250

II

3,200

4,100

3,300

4,200

7,500

9,500

III

3,300

4,200

3,400

4,300

8,000

10,000

IV

3,500

4,400

3,600

4,500

8,500

10,500

3,700

4,700

3,800

4,800

9,000

11,000

Thus the employees of private respondent have been "historically"

classified into levels, i.e. I to V, and not on the basis of their length of
service. Put differently, the entry of new employees to the company ipso
facto place[s] them under any of the levels mentioned in the new salary
scale which private respondent adopted retroactive [to] April 1, 1993.
Petitioner cannot make a contrary classification of private respondent's
employees without encroaching upon recognized management
prerogative of formulating a wage structure, in this case, one based on
level. 7 (Emphasis and underscoring supplied)
The issue of whether wage distortion exists being a question of fact that
is within the jurisdiction of quasi judicial tribunals, 8 and it being a basic
rule that findings of facts of quasi judicial agencies, like the NLRC, are
generally accorded not only respect but at times even finality if they are
supported by substantial, evidence as are the findings in the case at bar,
they must be respected. For these agencies have acquired expertise,
their jurisdiction being confined to specific matters. 9
It is thus clear that there is no hierarchy of positions between the newly
hired and regular employees of Bankard, hence, the first element of wage
distortion provided in Prubankers is wanting.

While seniority may be a factor in determining the wages of employees, it

cannot be made the sole basis in cases where the nature of their work
differs.
Moreover, for purposes of determining the existence of wage distortion,
employees cannot create their own independent classification and use it
as a basis to demand an across-the-board increase in salary.
As National Federation of Labor v. NLRC, et al. 10 teaches, the formulation
of a wage structure through the classification of employees is a matter of
management judgment and discretion.
[W]hether or not a new additional scheme of classification of employees
for compensation purposes should be established by the Company (and
the legitimacy or viability of the bases of distinction there embodied) is
properly a matter of management judgment and discretion, and
ultimately, perhaps, a subject matter for bargaining negotiations between
employer and employees. It is assuredly something that falls outside the
concept of "wage distortion." 11 (Emphasis and underscoring supplied)
As did the Court of Appeals, this Court finds that the third element
provided in Prubankers is also wanting. For, as the appellate court
explained:
In trying to prove wage distortion, petitioner union presented a list of five
(5) employees allegedly affected by the said increase:
Pay of Old/

Pay of Newly

Difference

Regular Employees Hired Employees

A.

Prior to April 1, 1993

Level I

P4,518.75P3,100

P1,418.75

(Sammy Guce)
Level II

P6,242.00P3,200

P3,042.00

(Nazario Abello)
Level III

P4,850.00P3,300

P1,550.00

(Arthur Chavez)
Level IV

P5,339.00P3,500

(Melissa Cordero)

P1,839.00

Level V

P7,090.69P3,700

P3,390.69

(Ma. Lourdes Dee)

B.

Effective April 1, 1993

Level I

P4,518.75P4,100

P418.75

(Sammy Guce)
Level II

P6,242.00P4,100

P2,142.00

(Nazario Abello)
Level III

P4,850.00P4,200

P650.00

(Arthur Chavez)
Level IV

P5,330.00P4,400

P939.00

(Melissa Cordero)
Level V

P7,090.69P4,700

P2,390.69

(Ma. Lourdes Dee)

Even assuming that there is a decrease in the wage gap between the pay
of the old employees and the newly hired employees, to Our mind said
gap is not significant as to obliterate or result in severe contraction of the
intentional quantitative differences in the salary rates between the
employee group. As already stated, the classification under the wage
structure is based on the rank of an employee, not on seniority. For this
reason, wage distortion does not appear to exist. 12 (Emphasis and
underscoring supplied)
Apart from the findings of fact of the NLRC and the Court of Appeals that
some of the elements of wage distortion are absent, petitioner cannot
legally obligate Bankard to correct the alleged "wage distortion" as the
increase in the wages and salaries of the newly-hired was not due to a
prescribed law or wage order.
The wordings of Article 124 are clear. If it was the intention of the
legislators to cover all kinds of wage adjustments, then the language of
the law should have been broad, not restrictive as it is currently phrased:
Article 124.
xxx

Standards/Criteria for Minimum Wage Fixing.

xxx

xxx

Where the application of any prescribed wage increase by virtue of a law

or Wage Order issued by any Regional Board results in distortions of the
wage structure within an establishment, the employer and the union shall
negotiate to correct the distortions. Any dispute arising from the wage
distortions shall be resolved through the grievance procedure under their
collective bargaining agreement and, if it remains unresolved, through
voluntary arbitration. aETAHD
xxx

xxx

xxx (Italics and emphasis supplied)

Article 124 is entitled "Standards/Criteria for Minimum Wage Fixing." It is

found in CHAPTER V on "WAGE STUDIES, WAGE AGREEMENTS AND WAGE
DETERMINATION" which principally deals with the fixing of minimum
wage. Article 124 should thus be construed and correlated in relation to
minimum wage fixing, the intention of the law being that in the event of
an increase in minimum wage, the distinctions embodied in the wage
structure based on skills, length of service, or other logical bases of
differentiation will be preserved.
If the compulsory mandate under Article 124 to correct "wage distortion"
is applied to voluntary and unilateral, increases by the employer in fixing
hiring rates which is inherently a business judgment prerogative, then the
hands of the employer would be completely tied even in cases where an
increase in wages of a particular group is justified due to a re-evaluation
of the high productivity of a particular group, or as in the present case,
the need to increase the competitiveness of Bankard's hiring rate. An
employer would be discouraged from adjusting the salary rates of a
particular group of employees for fear that it would result to a demand by
all employees for a similar increase, especially if the financial conditions
of the business cannot address an across-the-board increase.
Petitioner cites Metro Transit Organization, Inc. v. NLRC, 13 to support its
claim that the obligation to rectify wage distortion is not confined to wage
distortion resulting from government decreed law or wage order.
Reliance on Metro Transit is however misplaced, as the obligation therein
to rectify the wage distortion was not by virtue of Article 124 of the Labor
Code, but on account of a then existing "company practice" that
whenever rank-and-file employees were paid a statutorily mandated
salary increase, supervisory employees were, as a matter of practice, also
paid the same amount plus an added premium. Thus this Court held in
said case:

We conclude that the supervisory employees, who then (i.e., on April 17,
1989) had, unlike the rank-and-file employees, no CBA governing the
terms and conditions of their employment, had the right to rely on the
company practice of unilaterally correcting the wage distortion effects of
a salary increase given to the rank-and-file employees, by giving the
supervisory employees a corresponding salary increase plus a premium . .
.. 14 (Emphasis supplied)
Wage distortion is a factual and economic condition that may be brought
about by different causes. In Metro Transit, the reduction or elimination of
the normal differential between the wage rates of rank-and-file and those
of supervisory employees was due to the granting to the former of wage
increase which was, however, denied to the latter group of employees.
The mere factual existence of wage distortion does not, however, ipso
facto result to an obligation to rectify it, absent a law or other source of
obligation which requires its rectification.
Unlike in Metro Transit then where there existed a "company practice," no
such management practice is herein alleged to obligate Bankard to
provide an across-the-board increase to all its regular employees.
Bankard's right to increase its hiring rate, to establish minimum salaries
for specific jobs, and to adjust the rates of employees affected thereby is
embodied under Section 2, Article V (Salary and Cost of Living Allowance)
of the parties' Collective Bargaining Agreement (CBA), to wit:
Section 2. Any salary increase granted under this Article shall be without
prejudice to the right of the Company to establish such minimum salaries
as it may hereafter and appropriate specific jobs, and to adjust the rates
the employees thereby affected to such minimum salaries thus
established. 15 (Italics and italics supplied)
This CBA provision, which is based on legitimate business-judgment
prerogatives of the employer, is a valid and legally enforceable source of
rights between the parties.
In fine, absent any indication that the voluntary increase of salary rates
by an employer was done arbitrarily and illegally for the purpose of
circumventing the laws or was devoid of any legitimate purpose other
than to discriminate against the regular employees, this Court will not
step in to interfere with this management prerogative. Employees are of
course not precluded from negotiating with its employer and lobby for
wage increases through appropriate channels, such as through a CBA.

This Court, time and again, has shown concern and compassion to the
plight of workers in adherence to the Constitutional provisions on social
justice and has always upheld the right of workers to press for better
terms and conditions of employment. It does not mean, however, that
every dispute should be decided in favor of labor, for employers
correspondingly have rights under the law which need to be respected.
WHEREFORE, the present petition is hereby DENIED. aDHCcE
SO ORDERED.
Vitug, Sandoval-Gutierrez and Corona, JJ., concur.

THIRD DIVISION
[G.R. No. 121439. January 25, 2000.]
AKLAN ELECTRIC COOPERATIVE INCORPORATED (AKELCO), petitioner, vs.
NATIONAL LABOR RELATIONS COMMISSION (Fourth Division), RODOLFO M.
RETISO and 165 OTHERS, 1 respondents.
Villa & Partners for petitioners.
Lou F. Tirol and Teodulfo L.C. Castro for private respondents.
SYNOPSIS
Sometime in January, 1992, the Board of Directors of AKELCO, by way of a
resolution, allowed the temporary transfer of its office from Lezo, Aklan to
Amon Theater, Kalibo, Aklan, because it was dangerous to hold office at
the former. Another resolution, though unnumbered, was passed in
February, 1992 withdrawing the designation of office at Kalibo and the
daily operations again were held at Lezo, Aklan. Between June 1992 and
March 1993, private respondents herein who continuously reported for
work at Lezo, Aklan were not paid their salaries. Hence, several
complaints were filed and were consolidated for the non-payment of
salaries and wages, 13th month pay, ECOLA, and other fringe benefits
submitted by the private respondents against the petitioner herein. The
labor arbiter dismissed the complaints. Dissatisfied with the decision,
private respondents appealed to the respondent Commission. On appeal,
the NLRC reversed and set aside the decision of the labor arbiter and held
that private respondents are entitled to unpaid wages. The petitioner filed
a motion for reconsideration, but the same was denied. Petitioner brought
the case to the Supreme Court. The sole issue for determination is
whether or not NLRC committed grave abuse of discretion when it
reversed the findings of the labor arbiter that private respondents refused
to work under the lawful orders of the petitioner AKELCO management;
hence they are covered by the "no work, no pay" principle and are not
thus entitled to the claim of unpaid wages from June 1992 to March 1993.
cDAEIH
The Supreme Court did not agree with the findings of the NLRC that the
private respondents had rendered services from June 1992 to March 1993
so as to entitle them to payment of wages. Based on evidence presented,
petitioner was able to show that private respondents did not render
services during the stated period. The petition for certiorari was granted.

The private respondents' complaint for payment of unpaid wages before

the labor arbiter was dismissed.
SYLLABUS
1.
REMEDIAL LAW; SPECIAL CIVIL ACTIONS; CERTIORARI; WHEN
PROPER. In certiorari proceedings under Rule 65, this Court does not
assess and weigh the sufficiency of evidence upon which the labor arbiter
and public respondent NLRC based their resolutions. The Court's query is
limited to the determination of whether or not public respondent NLRC
acted without or in excess of its jurisdiction or with grave abuse of
discretion in rendering the assailed resolutions.
2.
ID.; EVIDENCE; FINDINGS OF FACT OF ADMINISTRATIVE AGENCIES;
ACCORDED GREAT RESPECT AND EVEN FINALITY WHEN SUPPORTED BY
SUBSTANTIAL EVIDENCE; EXCEPTIONS. While administrative findings of
fact are accorded great respect, and even finality when supported by
substantial evidence, nevertheless, when it can be shown that
administrative bodies grossly misappreciated evidence of such nature as
to compel a contrary conclusion, this court had not hesitated to reverse
their factual findings. Factual findings of administrative agencies are not
infallible and will be set aside when they fail the test of arbitrariness.
Moreover, where the findings of NLRC contradict those of the labor
arbiter, this Court, in the exercise of its equity jurisdiction, may look into
the records of the case and reexamine the questioned findings.
3.
ID.; ID.; SUBSTANTIAL EVIDENCE; DEFINED. Substantial evidence
is that amount of relevant evidence which a reasonable mind might
accept as adequate to justify a conclusion. These evidences relied upon
by public respondent did not establish the fact that private respondents
actually rendered services in the Kalibo office during the stated period.
4.
ID.; ID.; BURDEN OF PROOF; LIES WITH THE PARTY WHO ASSERTS
THE AFFIRMATIVE ALLEGATION. It is a basic rule in evidence that each
party must prove his affirmative allegation. Since the burden of evidence
lies with the party who asserts the affirmative allegation, the plaintiff or
complainant has to prove his affirmative allegations in the complaint and
the defendant or the respondent has to prove the affirmative allegation in
his affirmative defenses and counterclaim.
5.
LABOR AND SOCIAL LEGISLATION; LABOR CODE; CONDITION OF
EMPLOYMENT; WAGES; "FAIR DAY'S WAGE FOR A FAIR DAY'S LABOR";
REMAINS THE BASIC FACTOR IN DETERMINING EMPLOYEE'S WAGES.
The age-old rule governing the relation between labor and capital, or

management and employee of a "fair day's wage for a fair day's labor"
remains as the basic factor in determining employees' wages. If there is
no work performed by the employee there can be no wage or pay unless,
of course, the laborer was able, willing and ready to work but was illegally
locked out, suspended or dismissed, or otherwise illegally prevented from
working, a situation which the Court found not present in the instant case.
It would neither be fair nor just to allow private respondents to recover
something they have not earned and could not have earned because they
did not render services at the Kalibo office during the stated period.
aESTAI
DECISION
GONZAGA-REYES, J p:
In his petition for certiorari and prohibition with prayer for writ of
preliminary injunction and/or temporary restraining order, petitioner
assails (a) the decision dated April 20, 1995, of public respondent
National Labor Relations Commission (NLRC), Fourth (4th) Division, Cebu
City, in NLRC Case No. V-0143-94 reversing the February 25, 1994
decision of Labor Arbiter Dennis D. Juanon and ordering petitioner to pay
wages in the aggregate amount of P6,485,767.90 to private respondents,
and (b) the resolution dated July 28, 1995 denying petitioner's motion for
reconsideration, for having been issued with grave abuse of discretion.
cdtai
A temporary restraining order was issued by this Court on October 9,
1995 enjoining public respondent from executing the questioned decision
upon a surety bond posted by petitioner in the amount of P6,400,000.00.
2
The facts as found by the Labor Arbiter are as follows: 3
"These are consolidated cases/claims for non-payment of salaries and
wages, 13th month pay, ECOLA and other fringe benefits as rice, medical
and clothing allowances, submitted by complainant Rodolfo M. Retiso and
163 others, Lyn E. Banilla and Wilson B. Sallador against respondents
Aklan Electric Cooperative, Inc. (AKELCO), Atty. Leovigildo Mationg in his
capacity as General Manager; Manuel Calizo, in his capacity as Acting
Board President, Board of Directors, AKELCO.
Complainants alleged that prior to the temporary transfer of the office of
AKELCO from Lezo Aklan to Amon Theater, Kalibo, Aklan, complainants

were continuously performing their task and were duly paid of their
salaries at their main office located at Lezo, Aklan.
That on January 22, 1992, by way of resolution of the Board of Directors
of AKELCO allowed the temporary transfer holding of office at Amon
Theater, Kalibo, Aklan per information by their Project Supervisor, Atty.
Leovigildo Mationg, that their head office is closed and that it is
dangerous to hold office thereat;
Nevertheless, majority of the employees including herein complainants
continued to report for work at Lezo Aklan and were paid of their salaries.
That on February 6, 1992, the administrator of NEA, Rodrigo Cabrera,
wrote a letter addressed to the Board of AKELCO, that he is not
interposing any objections to the action taken by respondent Mationg . . .
That on February 11, 1992, unnumbered resolution was passed by the
Board of AKELCO withdrawing the temporary designation of office at
Kalibo, Aklan, and that the daily operations must be held again at the
main office of Lezo, Aklan; 4
That complainants who were then reporting at the Lezo office from
January 1992 up to May 1992 were duly paid of their salaries, while in the
meantime some of the employees through the instigation of respondent
Mationg continued to remain and work at Kalibo, Aklan;
That from June 1992 up to March 18, 1993, complainants who
continuously reported for work at Lezo, Aklan in compliance with the
aforementioned resolution were not paid their salaries;
That on March 19, 1993 up to the present, complainants were again
allowed to draw their salaries; with the exception of a few complainants
who were not paid their salaries for the months of April and May 1993;
Per allegations of the respondents, the following are the facts:
1.
That these complainants voluntarily abandoned their respective
work/job assignments, without any justifiable reason and without notifying
the management of the Aklan Electric Cooperative, Inc. (AKELCO), hence
the cooperative suffered damages and systems loss;
2.
That the complainants herein defied the lawful orders and other
issuances by the General Manager and the Board of Directors of the
AKELCO. These complainants were requested to report to work at the
Kalibo office . . . but despite these lawful orders of the General Manager,

the complainants did not follow and wilfully and maliciously defied said
orders and issuance of the General Manager; that the Board of Directors
passed a Resolution resisting and denying the claims of these
complainants, . . . under the principle of "no work no pay" which is legally
justified; That these complainants have "mass leave" from their
customary work on June 1992 up to March 18, 1993 and had a "sit-down"
stance for these periods of time in their alleged protest of the
appointment of respondent Atty. Leovigildo Mationg as the new General
Manager of the Aklan Electric Cooperative, Inc. (AKELCO) by the Board of
Directors and confirmed by the Administrator of the National
Electrification Administration (NEA), Quezon City; That they engaged in " .
. . slowdown mass leaves, sit downs, attempts to damage, destroy or
sabotage plant equipment and facilities of the Aklan Electric Cooperative,
Inc. (AKELCO)." LLpr
On February 25, 1994, a decision was rendered by Labor Arbiter Dennis D.
Juanon dismissing the complaints. 5
Dissatisfied with the decision, private respondents appealed to the
respondent Commission.
On appeal, the NLRC's Fourth Division, Cebu City, 6 reversed and set
aside the Labor Arbiter's decision and held that private respondents are
entitled to unpaid wages from June 16, 1992 to March 18, 1993, thus: 7
"The evidence on records, more specifically the evidence submitted by
the complainants, which are: the letter dated April 7, 1993 of Pedrito L.
Leyson, Office Manager of AKELCO (Annex "C"; complainants' position
paper; Rollo, p. 102) addressed to respondent Atty. Leovigildo T. Mationg;
respondent AKELCO General Manager; the memorandum of said Atty.
Mationg dated 14 April 1993, in answer to the letter of Pedrito Leyson
(Annex "D" complainants' position paper); as well as the computation of
the unpaid wages due to complainants (Annexes "E" to "E-3";
complainants' position paper, Rollo, pages 1024 to 1027) clearly show
that complainants had rendered services during the period - June 16,
1992 to March 18, 1993. The record is bereft of any showing that the
respondents had submitted any evidence, documentary or otherwise, to
controvert this asseveration of the complainants that services were
rendered during this period. Subjecting these evidences submitted by the
complainants to the crucible of scrutiny, We find that respondent Atty.
Mationg responded to the request of the Office Manager, Mr. Leyson,
which We quote, to wit:

"Rest assured that We shall recommend your aforesaid request to our

Board of Directors for their consideration and appropriate action. This
payment, however, shall be subject, among others, to the availability of
funds."
This assurance is an admission that complainants are entitled to payment
for services rendered from June 16, 1992 to March 18, 1993, specially so
that the recommendation and request comes from the office manager
himself who has direct knowledge regarding the services and
performance of employees under him. For how could one office manager
recommend payment of wages, if no services were rendered by
employees under him. An office manager is the most qualified person to
know the performance of personnel under him. And therefore, any
request coming from him for payment of wages addressed to his superior
as in the instant case shall be given weight.
Furthermore, the record is clear that complainants were paid of their
wages and other fringe benefits from January, 1992 to May, 1992 and
from March 19, 1993 up to the time complainants filed the instant cases.
In the interregnum, from June 16, 1992 to March 18, 1993, complainants
were not paid of their salaries, hence these claims. We could see no
rhyme nor reason in respondents' refusal to pay complainants salaries
during this period when complainants had worked and actually rendered
service to AKELCO.
While the respondents maintain that complainants were not paid during
this interim period under the principle of "no work, no pay", however, no
proof was submitted by the respondents to substantiate this allegation.
The labor arbiter, therefore, erred in dismissing the claims of the
complainants, when he adopted the "no work, no pay" principle advanced
by the respondents.
WHEREFORE, in view of the foregoing, the appealed decision dated
February 25, 1994 is hereby Reversed and Set Aside and a new one
entered ordering respondent AKELCO to pay complainants their claims
amounting to P6,485,767.90 as shown in the computation (Annexes "E" to
"E-3")."
A motion for reconsideration was filed by petitioner but the same was
denied by public respondent in a resolution dated July 28, 1995. 8
Petitioner brought the case to this Court alleging that respondent NLRC
committed grave abuse of discretion citing the following grounds: 9

1.
PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION IN
REVERSING THE FACTUAL FINDINGS AND CONCLUSIONS OF THE LABOR
ARBITER, AND DISREGARDING THE EXPRESS ADMISSION OF PRIVATE
RESPONDENTS THAT THEY DEFIED PETITIONER'S ORDER TRANSFERRING
THE PETITIONER'S OFFICIAL BUSINESS OFFICE FROM LEZO TO KALIBO
AND FOR THEM TO REPORT THEREAT.
2.
PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION IN
CONCLUDING THAT PRIVATE RESPONDENTS WERE REALLY WORKING OR
RENDERING SERVICE ON THE BASIS OF THE COMPUTATION OF WAGES
AND THE BIASED RECOMMENDATION SUBMITTED BY LEYSON WHO IS ONE
OF THE PRIVATE RESPONDENTS WHO DEFIED THE LAWFUL ORDERS OF
PETITIONER.
3.
PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION IN
CONSIDERING THE ASSURANCE BY PETITIONER'S GENERAL MANAGER
MATIONG TO RECOMMEND THE PAYMENT OF THE CLAIMS OF PRIVATE
RESPONDENTS AS AN ADMISSION OF LIABILITY OR A RECOGNITION THAT
COMPENSABLE SERVICES WERE ACTUALLY RENDERED.
4.
GRANTING THAT PRIVATE RESPONDENTS CONTINUED TO REPORT AT
THE LEZO OFFICE, IT IS STILL GRAVE ABUSE OF DISCRETION FOR PUBLIC
RESPONDENT TO CONSIDER THAT PETITIONER IS LEGALLY OBLIGATED TO
RECOGNIZE SAID CIRCUMSTANCE AS COMPENSABLE SERVICE AND PAY
WAGES TO PRIVATE RESPONDENTS FOR DEFYING THE ORDER FOR THEM
TO REPORT FOR WORK AT THE KALIBO OFFICE WHERE THE OFFICIAL
BUSINESS AND OPERATIONS WERE CONDUCTED. dctai
5.
PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION
AND SERIOUS, PATENT AND PALPABLE ERROR IN RULING THAT THE "NO
WORK, NO PAY" PRINCIPLE DOES NOT APPLY FOR LACK OF EVIDENTIARY
SUPPORT WHEN PRIVATE RESPONDENTS ALREADY ADMITTED THAT THEY
DID NOT REPORT FOR WORK AT THE KALIBO OFFICE.
6.
PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION IN
ACCORDING WEIGHT AND CREDIBILITY TO THE SELF-SERVING AND
BIASED ALLEGATIONS OF PRIVATE RESPONDENTS, AND ACCEPTING THEM
AS PROOF, DESPITE THE ESTABLISHED FACT AND ADMISSION THAT
PRIVATE RESPONDENTS DID NOT REPORT FOR WORK AT THE KALIBO
OFFICE, OR THAT THEY WERE NEVER PAID FOR ANY WAGES FROM THE
TIME THEY DEFIED PETITIONER'S ORDERS.
Petitioner contends that public respondent committed grave abuse of
discretion in finding that private respondents are entitled to their wages

from June 16, 1992 to March 18, 1993, thus disregarding the principle of
"no work, no pay." It alleges that private respondents stated in their
pleadings that they not only objected to the transfer of petitioner's
business office to Kalibo but they also defied the directive to report
thereat because they considered the transfer illegal. It further claims that
private respondents refused to recognize the authority of petitioner's
lawful officers and agents resulting in the disruption of petitioner's
business operations in its official business office in Lezo, Aklan, forcing
petitioner to transfer its office from Lezo to Kalibo transferring all its
equipments, records and facilities; that private respondents cannot
choose where to work, thus, when they defied the lawful orders of
petitioner to report at Kalibo, private respondents were considered
dismissed as far as petitioner was concerned. Petitioner also disputes
private respondents' allegation that they were paid their salaries from
January to May 1992 and again from March 19, 1993 up to the present
but not for the period from June 1992 to March 18, 1993 saying that
private respondents illegally collected fees and charges due petitioner
and appropriated the collections among themselves for which reason they
are claiming salaries only for the period from June 1992 to March 1993
and that private respondents were paid their salaries starting only in April
1993 when petitioner's Board agreed to accept private respondents back
to work at Kalibo office out of compassion and not for the reason that
they rendered service at the Lezo office. Petitioner also adds that
compensable service is best shown by timecards, payslips and other
similar documents and it was an error for public respondent to consider
the computation of the claims for wages and benefits submitted merely
by private respondents as substantial evidence.
The Solicitor General filed its Manifestation in lieu of Comment praying
that the decision of respondent NLRC be set aside and payment of wages
claimed by private respondents be denied for lack of merit alleging that
private respondents could not have worked for petitioner's office in Lezo
during the stated period since petitioner transferred its business
operation in Kalibo where all its records and equipments were brought;
that computations of the claims for wages and benefits submitted by
private respondents to petitioner is not proof of rendition of work. Filing
its own Comment, public respondent NLRC claims that the original and
exclusive jurisdiction of this Court to review decisions or resolutions of
respondent NLRC does not include a correction of its evaluation of
evidence as factual issues are not fit subject for certiorari.

Private respondents, in their Comment, allege that review of a decision of

NLRC in a petition for certiorari under Rule 65 does not include the
correctness of its evaluation of the evidence but is confined to issues of
jurisdiction or grave abuse of discretion and that factual findings of
administrative bodies are entitled to great weight, and accorded not only
respect but even finality when supported by substantial evidence. They
claim that petitioner's Board of Directors passed an unnumbered
resolution on February 11, 1992 returning back the office to Lezo from
Kalibo Aklan with a directive for all employees to immediately report at
Lezo; that the letter-reply of Atty. Mationg to the letter of office manager
Leyson that he will recommend the payment of the private respondents'
salary from June 16, 1992 to March 18, 1993 to the Board of Directors was
an admission that private respondents are entitled to such payment for
services rendered. Private respondents state that in appreciating the
evidence in their favor, public respondent NLRC at most may be liable for
errors of judgment which, as differentiated from errors of jurisdiction, are
not within the province of the special civil action of certiorari.
Petitioner filed its Reply alleging that review of the decision of public
respondent is proper if there is a conflict in the factual findings of the
labor arbiter and the NLRC and when the evidence is insufficient and
insubstantial to support NLRC's factual findings; that public respondent's
findings that private respondents rendered compensable services were
merely based on private respondents' computation of claims which is selfserving; that the alleged unnumbered board resolution dated February
11, 1992, directing all employees to report to Lezo Office was never
implemented because it was not a valid action of AKELCO's legitimate
board.
The sole issue for determination is whether or not public respondent NLRC
committed grave abuse of discretion amounting to excess or want of
jurisdiction when it reversed the findings of the Labor Arbiter that private
respondents refused to work under the lawful orders of the petitioner
AKELCO management; hence they are covered by the "no work, no pay"
principle and are thus not entitled to the claim for unpaid wages from
June 16, 1992 to March 18, 1993.
We find merit in the petition.
At the outset, we reiterate the rule that in certiorari proceedings under
Rule 65, this Court does not assess and weigh the sufficiency of evidence
upon which the labor arbiter and public respondent NLRC based their
resolutions. Our query is limited to the determination of whether or not

public respondent NLRC acted without or in excess of its jurisdiction or

with grave abuse of discretion in rendering the assailed resolutions. 10
While administrative findings of fact are accorded great respect, and even
finality when supported by substantial evidence, nevertheless, when it
can be shown that administrative bodies grossly misappreciated evidence
of such nature as to compel a contrary conclusion, this court had not
hesitated to reverse their factual findings. 11 Factual findings of
administrative agencies are not infallible and will be set aside when they
fail the test of arbitrariness. 12 Moreover, where the findings of NLRC
contradict those of the labor arbiter, this Court, in the exercise of its
equity jurisdiction, may look into the records of the case and reexamine
the questioned findings. 13
We find cogent reason, as shown by the petitioner and the Solicitor
General, not to affirm the factual findings of public respondent NLRC.
We do not agree with the finding that private respondents had rendered
services from June 16, 1992 to March 18, 1993 so as to entitle them to
payment of wages. Public respondent based its conclusion on the
following: (a) the letter dated April 7, 1993 of Pedrito L. Leyson, Office
Manager of AKELCO addressed to AKELCO's General Manager, Atty.
Leovigildo T. Mationg, requesting for the payment of private respondents'
unpaid wages from June 16, 1992 to March 18, 1993; (b) the
memorandum of said Atty. Mationg dated 14 April 1993, in answer to the
letter request of Pedrito Leyson where Atty. Mationg made an assurance
that he will recommend such request; (c) the private respondents' own
computation of their unpaid wages. We find that the foregoing does not
constitute substantial evidence to support the conclusion that private
respondents are entitled to the payment of wages from June 16, 1992 to
March 18, 1993. Substantial evidence is that amount of relevant evidence
which a reasonable mind might accept as adequate to justify a
conclusion. 14 These evidences relied upon by public respondent did not
establish the fact that private respondents actually rendered services in
the Kalibo office during the stated period. cdrep
The letter of Pedrito Leyson to Atty. Mationg was considered by public
respondent as evidence that services were rendered by private
respondents during the stated period, as the recommendation and
request came from the office manager who has direct knowledge
regarding the services and performance of employees under him. We are
not convinced. Pedrito Leyson is one of the herein private respondents
who are claiming for unpaid wages and we find his actuation of

requesting in behalf of the other private respondents for the payment of

their backwages to be biased and self-serving, thus not credible.
On the other hand, petitioner was able to show that private respondents
did not render services during the stated period. Petitioner's evidences
show that on January 22, 1992, petitioner's Board of Directors passed a
resolution temporarily transferring the Office from Lezo, Aklan to Amon
Theater, Kalibo, Aklan upon the recommendation of Atty. Leovigildo
Mationg, then project supervisor, on the ground that the office at Lezo
was dangerous and unsafe. Such transfer was approved by then NEA
Administrator, Rodrigo E. Cabrera, in a letter dated February 6, 1992
addressed to petitioner's Board of Directors. 15 Thus, the NEA
Administrator, in the exercise of supervision and control over all electric
cooperatives, including petitioner, wrote a letter dated February 6, 1992
addressed to the Provincial Director PC/INP Kalibo Aklan requesting for
military assistance for the petitioner's team in retrieving the electric
cooperative's equipments and other removable facilities and/or fixtures
consequential to the transfer of its principal business address from Lezo
to Kalibo and in maintaining peace and order in the cooperative's
coverage area. 16 The foregoing establishes the fact that the continuous
operation of the petitioner's business office in Lezo Aklan would pose a
serious and imminent threat to petitioner's officials and other employees,
hence the necessity of temporarily transferring the operation of its
business office from Lezo to Kalibo. Such transfer was done in the
exercise of a management prerogative and in the absence of contrary
evidence is not unjustified. With the transfer of petitioner's business office
from its former office, Lezo, to Kalibo, Aklan, its equipments, records and
facilities were also removed from Lezo and brought to the Kalibo office
where petitioner's official business was being conducted; thus private
respondents' allegations that they continued to report for work at Lezo to
support their claim for wages has no basis.
Moreover, private respondents in their position paper admitted that they
did not report at the Kalibo office, as Lezo remained to be their office
where they continuously reported, to wit: 17
"On January 22, 1991 by way of a resolution of the Board of Directors of
AKELCO it allowed the temporary holding of office at Amon Theater,
Kalibo, Aklan, per information by their project supervisor, Atty. Leovigildo
Mationg that their head office is closed and that it is dangerous to hold
office thereat.

Nevertheless, majority of the employees including the herein

complainants, continued to report for work at Lezo, Aklan and were paid
of their salaries.
xxx

xxx

xxx

The transfer of office from Lezo, Aklan to Kalibo, Aklan being illegal for
failure to comply with the legal requirements under P.D. 269, the
complainants remained and continued to work at the Lezo Office until
they were illegally locked out therefrom by the respondents. Despite the
illegal lock out however, complainants continued to report daily to the
location of the Lezo Office, prepared to continue in the performance of
their regular duties.
Complainants thus could not be considered to have abandoned their work
as Lezo remained to be their office and not Kalibo despite the temporary
transfer thereto. Further the fact that they were allowed to draw their
salaries up to May, 1992 is an acknowledgment by the management that
they are working during the period.
xxx

xxx

xxx

It must be pointed out that complainants worked and continuously

reported at Lezo office despite the management holding office at Kalibo.
In fact, they were paid their wages before it was withheld and then were
allowed to draw their salaries again on March 1993 while reporting at
Lezo up to the present.
Respondents' acts and payment of complainants' salaries and again from
March 1993 is an unequivocal recognition on the part of respondents that
the work of complainants is continuing and uninterrupted and they are
therefore entitled to their unpaid wages for the period from June 1992 to
March 1993."
The admission is detrimental to private respondents' cause. Their excuse
is that the transfer to Kalibo was illegal but we agree with the Labor
Arbiter that it was not for private respondents to declare the
management's act of temporarily transferring the AKELCO office to Kalibo
as an illegal act. There is no allegation nor proof that the transfer was
made in bad faith or with malice. The Labor Arbiter correctly rationalized
in its decision as follows: 18
"We do not subscribe to complainants theory and assertions. They, by
their own allegations, have unilaterally committed acts in violation of
management's/respondents' directives purely classified as management

prerogative. They have taken amongst themselves declaring

management's acts of temporarily transferring the holding of the AKELCO
office from Lezo to Kalibo, Aklan as illegal. It is never incumbent upon
themselves to declare the same as such. It is lodged in another forum or
body legally mantled to do the same. What they should have done was
first to follow management's orders temporarily transferring office for it
has the first presumption of legality. Further, the transfer was only
temporary. For:
"The employer as owner of the business, also has inherent rights, among
which are the right to select the persons to be hired and discharge them
for just and valid cause; to promulgate and enforce reasonable
employment rules and regulations and to modify, amend or revoke the
same; to designate the work as well as the employee or employees to
perform it; to transfer or promote employees; to schedule, direct, curtail
or control company operations; to introduce or install new or improved
labor or money savings methods, facilities or devices; to create, merge,
divide, reclassify and abolish departments or positions in the company
and to sell or close the business.
xxx

xxx

xxx

Even as the law is solicitous of the welfare of the employees it must also
protect the right of an employer to exercise what are clearly management
prerogatives. The free will of management to conduct its own business
affairs to achieve its purpose can not be denied. The transfer of
assignment of a medical representative from Manila to the province has
therefore been held lawful where this was demanded by the requirements
of the drug company's marketing operations and the former had at the
time of his employment undertaken to accept assignment anywhere in
the Philippines. (Abbot Laboratories (Phils.), Inc., et al. vs. NLRC, et al.,
G.R. No. 76959, Oct. 12, 1987).
It is the employer's prerogative to abolish a position which it deems no
longer necessary, and the courts, absent any findings of malice on the
part of the management, cannot erase that initiative simply to protect the
person holding office (Great Pacific Life Assurance Corporation vs. NLRC,
et al., G.R. No. 88011, July 30, 1990)."
Private respondents claim that petitioner's Board of Directors passed an
unnumbered resolution dated February 11, 1992 returning back the office
from its temporary office in Kalibo to Lezo. Thus, they did not defy any
lawful order of petitioner and were justified in continuing to remain at

Lezo office. This allegation was controverted by petitioner in its Reply

saying that such unnumbered resolution was never implemented as it
was not a valid act of petitioner's Board. We are convinced by petitioner's
argument that such unnumbered resolution was not a valid act of
petitioners legitimate Board considering the subsequent actions taken by
the petitioner's Board of Directors decrying private respondents inimical
act and defiance, to wit (1) Resolution No. 411, s. of 1992 on September
9, 1992, dismissing all AKELCO employees who were on illegal strike and
who refused to return to work effective January 31, 1992 despite the
directive of the NEA project supervisor and petitioner's acting general
manager; 19 (2) Resolution No. 477, s. of 1993 dated March 10, 1993
accepting back private respondents who staged illegal strike, defied legal
orders and issuances, out of compassion, reconciliation, Christian values
and humanitarian reason subject to the condition of "no work, no pay" 20
(3) Resolution No. 496, s. of 1993 dated June 4, 1993, rejecting the
demands of private respondents for backwages from June 16, 1992 to
March 1993 adopting the policy of "no work, no pay" as such demand has
no basis, and directing the COOP Legal Counsel to file criminal cases
against employees who misappropriated collections and officers who
authorized disbursements of funds without legal authority from the NEA
and the AKELCO Board. 21 If indeed there was a valid board resolution
transferring back petitioner's office to Lezo from its temporary office in
Kalibo, there was no need for the Board to pass the above-cited
resolutions. llcd
We are also unable to agree with public respondent NLRC when it held
that the assurance made by Atty. Mationg to the letter-request of office
manager Leyson for the payment of private respondents' wages from June
1992 to March 1993 was an admission on the part of general manager
Mationg that private respondents are indeed entitled to the same. The
letter reply of Atty. Mationg to Leyson merely stated that he will
recommend the request for payment of backwages to the Board of
Directors for their consideration and appropriate action and nothing else,
thus, the ultimate approval will come from the Board of Directors. We find
well-taken the argument advanced by the Solicitor General as follows: 22
The allegation of private respondents that petitioner had already
approved payment of their wages is without basis. Mationg's offer to
recommend the payment of private respondents' wages is hardly
approval of their claim for wages. It is just an undertaking to recommend
payment. Moreover, the offer is conditional. It is subject to the condition
that petitioner's Board of Directors will give its approval and that funds

were available. Mationg's reply to Leyson's letter for payment of wages

did not constitute approval or assurance of payment. The fact is that, the
Board of Directors of petitioner rejected private respondents demand for
payment (Board Resolution No. 496, s. 1993).
We are accordingly constrained to overturn public respondent's findings
that petitioner is not justified in its refusal to pay private respondents'
wages and other fringe benefits from June 16, 1992 to March 18, 1993;
public respondents stated that private respondents were paid their
salaries from January to May 1992 and again from March 19, 1993 up to
the present. As cited earlier, petitioner's Board in a Resolution No. 411
dated September 9, 1992 dismissed private respondents who were on
illegal strike and who refused to report for work at Kalibo office effective
January 31, 1992; since no services were rendered by private respondents
they were not paid their salaries. Private respondents never questioned
nor controverted the Resolution dismissing them and nowhere in their
Comment is it stated that they questioned such dismissal. Private
respondents also have not rebutted petitioner's claim that private
respondents illegally collected fees and charges due petitioner and
appropriated the collections among themselves to satisfy their salaries
from January to May 1992, for which reason, private respondents are
merely claiming salaries only for the period from June 16, 1992 to March
1993.
Private respondents were dismissed by petitioner effective January 31,
1992 and were accepted back by petitioner, as an act of compassion,
subject to the condition of "no work, no pay" effective March 1993 which
explains why private respondents were allowed to draw their salaries
again. Notably, the letter-request of Mr. Leyson for the payment of
backwages and other fringe benefits in behalf of private respondents was
made only in April 1993, after a Board Resolution accepting them back to
work out of compassion and humanitarian reason. It took private
respondents about ten months before they requested for the payment of
their backwages, and the long inaction of private respondents to file their
claim for unpaid wages cast doubts as to the veracity of their claim.
The age-old rule governing the relation between labor and capital, or
management and employee of a "fair day's wage for a fair day's labor"
remains as the basic factor in determining employees' wages. If there is
no work performed by the employee there can be no wage or pay unless,
of course, the laborer was able, willing and ready to work but was illegally
locked out, suspended or dismissed, 23 or otherwise illegally prevented

from working, 24 a situation which we find is not present in the instant

case. It would neither be fair nor just to allow private respondents to
recover something they have not earned and could not have earned
because they did not render services at the Kalibo office during the stated
period.
Finally, we hold that public respondent erred in merely relying on the
computations of compensable services submitted by private respondents.
There must be competent proof such as time cards or office records to
show that they actually rendered compensable service during the stated
period to entitle them to wages. It has been established that the
petitioner's business office was transferred to Kalibo and all its
equipments, records and facilities were transferred thereat and that it
conducted its official business in Kalibo during the period in question. It
was incumbent upon private respondents to prove that they indeed
rendered services for petitioner, which they failed to do. It is a basic rule
in evidence that each party must prove his affirmative allegation. Since
the burden of evidence lies with the party who asserts the affirmative
allegation, the plaintiff or complainant has to prove his affirmative
allegations in the complaint and the defendant or the respondent has to
prove the affirmative allegation in his affirmative defenses and
counterclaim. 25
WHEREFORE, in view of the foregoing, the petition for CERTIORARI is
GRANTED. Consequently the decision of public respondent NLRC dated
April 20, 1995 and the Resolution dated July 28, 1995 in NLRC Case No. V0143-94 are hereby REVERSED and SET ASIDE for having been rendered
with grave abuse of discretion amounting to lack or excess of jurisdiction.
Private respondents complaint for payment of unpaid wages before the
Labor Arbiter is DISMISSED. prLL
SO ORDERED.
Melo, Vitug, Panganiban and Purisima, JJ., concur.

FIRST DIVISION
[G.R. No. 128003. July 26, 2000.]
RUBBERWORLD [PHILS.], INC., and JULIE YAO ONG, petitioner, vs.
NATIONAL LABOR RELATIONS COMMISSION, AQUINO MAGSALIN, PEDRO
MANIBO, RICARDO BORJA, ALICIA M. SAN PEDRO AND FELOMENA B.
TOLIN, respondents.
Yngson and Associates and Laya Managhaya for petitioners.
The Solicitor General for public respondent.
Flores Miralles & Associates Law Offices for private respondents.
SYNOPSIS
On August 26, 1994, petitioner Corporation filed with the Department of
Labor and Employment a notice of temporary shutdown of operations to
take effect on September 26, 1994. Before the effectivity date, however,
petitioner corporation was forced to prematurely shutdown its operations.
On November 11, 1994, private respondents, employees of petitioner
Corporation, filed with the National Labor Relations Commission a
complaint against petitioner Corporation for illegal dismissal and nonpayment of separation pay. On November 22, 1994, petitioner
Corporation filed with the Securities and Exchange Commission (SEC) a
petition for declaration of suspension of payments with a proposed
rehabilitation plan. On December 28, 1994, the SEC issued an order
suspending all actions against a company under rehabilitation by a
management committee created by the SEC. On January 24, 1995,
petitioners submitted to the labor arbiter a motion to suspend the
proceedings invoking the SEC order. The labor arbiter did not act on the
motion and ordered the parties to submit their respective position papers.
On December 10, 1995, the labor arbiter rendered a decision declaring
petitioner Corporation guilty of illegal shutdown and ordered to pay
separation pay, and moral and exemplary damages. On appeal, the NLRC
affirmed the labor arbiter's award but deleted the award of moral and
exemplary damages. Petitioners moved for reconsideration, but the same
was denied by the NLRC. Hence, this petition. HDICSa
Presidential Decree No. 902-A is clear that "all actions for claims against
corporations, partnerships or associations under management or
receivership pending before any court, tribunal, board or body shall be
suspended accordingly." The law did not make any exception in favor of
labor claims.

The power to hear and decide labor disputes is deemed suspended when
the Securities and Exchange Commission puts the corporation under
rehabilitation. Thus, when the NLRC proceeded to decide the case despite
the SEC suspension order, the NLRC acted without or in excess of its
jurisdiction to hear and decide cases. As a consequence, any resolution,
decision or order that it rendered or issued without jurisdiction is a nullity.
The petition was granted and the Labor Arbiter's decision and the NLRC
resolution were set aside.
SYLLABUS
1.
COMMERCIAL
LAW;
PRIVATE
CORPORATION;
RECEIVERSHIP;
PRESIDENTIAL DECREE NO. 902-A; DID NOT MAKE ANY EXCEPTION IN
FAVOR OF LABOR CLAIMS. Presidential Decree No. 902-A is clear that
"all actions for claims against corporations, partnerships or associations
under management or receivership pending before any court, tribunal,
board or body shall be suspended accordingly." The law did not make any
exception in favor of labor claims.
2.
ID.; ID.; ID.; ID.; JUSTIFICATION FOR AUTOMATIC STAY OF ALL
PENDING ACTIONS FOR CLAIMS AGAINST A COMPANY UNDER
MANAGEMENT OR RECEIVERSHIP. "The justification for the automatic
stay of all pending actions for claims is to enable the management
committee or the rehabilitation receiver to effectively exercise its/his
powers free from any judicial or extra-judicial interference that might
unduly hinder or prevent the 'rescue' of the debtor company. To allow
such other actions to continue would only add to the burden of the
management committee or rehabilitation receiver, whose time, effort and
resources would be wasted in defending claims against the corporation
instead of being directed toward its restructuring and rehabilitation."
Thus, the labor case would defeat the purpose of an automatic stay. To
rule otherwise would open the floodgates to numerous claims and would
defeat the rescue efforts of the management committee.
3.
LABOR AND SOCIAL LEGISLATION; NLRC; POWER TO HEAR AND
DECIDE LABOR DISPUTES IS DEEMED SUSPENDED WHEN CORPORATION IS
UNDER REHABILITATION. Even if an award is given to private
respondents, the ruling could not be enforced as long as petitioner is
under management committee. This finds ratiocination in that the power
to hear and decide labor disputes is deemed suspended when the
Securities and Exchange Commission puts the corporation under
rehabilitation. Thus, when NLRC proceeded to decide the case despite the
SEC suspension order, the NLRC acted without or in excess of its

jurisdiction to hear and decide cases. As a consequence, any resolution,

decision or order that it rendered or issued without jurisdiction is a nullity.
TIDcEH
DECISION
PARDO, J p:
What is before the Court for resolution is a petition to annul the resolution
of the National Labor Relations Commission (NLRC), 1 affirming the laborarbiter's award but deleting the moral and exemplary damages. TSEHcA
The facts are as follows:
Petitioner Rubberworld (Phils.), Inc. [hereinafter Rubberworld], a
corporation established in 1965, was engaged in manufacturing footwear,
bags and garments.
Aquilino Magsalin, Pedro Manibo, Ricardo Borja, Benjamin Camitan, Alicia
M. San Pedro, and Felomena Tolin were employed as dispatcher,
warehouseman, issue monitor, foreman, jacks cementer and outer sole
attacher, respectively.
On August 26, 1994, Rubberworld filed with the Department of Labor and
Employment a notice of temporary shutdown of operations to take effect
on September 26, 1994. Before the effectivity date, however,
Rubberworld was forced to prematurely shutdown its operations.
On November 11, 1994, private respondents filed with the National Labor
Relations Commission a complaint 2 against petitioner for illegal dismissal
and non-payment of separation pay.
On November 22, 1994, Rubberworld filed with the Securities and
Exchange Commission (SEC) a petition for declaration of suspension of
payments with a proposed rehabilitation plan. 3
On December 28, 1994, SEC issued the following order:
"Accordingly, with the creation of the Management Committee, all actions
for claims against Rubberworld Philippines, Inc. pending before any court,
tribunal, office, board, body, Commission or sheriff are hereby deemed
SUSPENDED.
"Consequently, all pending incidents for preliminary injunctions, writ or
attachments, foreclosures and the like are hereby rendered moot and
academic. SaCIDT

"SO ORDERED." 4
On January 24, 1995, petitioners submitted to the labor arbiter a motion
to suspend the proceedings invoking the SEC order dated December 28,
1994. The labor arbiter did not act on the motion and ordered the parties
to submit their respective position papers.
On December 10, 1995, the labor arbiter rendered a decision, which
provides:
"In the light of the foregoing, respondents are hereby declared guilty of
ILLEGAL SHUTDOWN and that respondents are ordered to pay
complainants their separation pay equivalent to one (1) month pay for
every year of service.
Considering the malicious act of closing the business precipitately without
due regard to the rights of complainants, moral damages and exemplary
damage in the sum of P50,000.00 and P30,000.00 respectively is hereby
awarded for each of the complainants.
Finally 10 % of all sums owing to complainants is hereby adjudged as
attorney's fees.
SO ORDERED." 5
On February 5, 1996, petitioners appealed to the National Labor Relations
Commission (NLRC) alleging abuse of discretion and serious errors in the
findings of facts of the labor arbiter.
On August 30, 1996, NLRC issued a resolution, the dispositive portion of
which reads:
"PREMISES CONSIDERED, the decision appealed from is hereby,
AFFIRMED with MODIFICATION in that the award of moral and exemplary
damages is hereby, DELETED.
SO ORDERED." 6
On November 20,
reconsideration.

1996,

NLRC

denied

petitioners'

motion

for

Hence, this petition. 7

The issue is whether or not the Department of Labor and Employment,
the Labor Arbiter and the National Labor Relations Commission may
legally act on the claims of respondents despite the order of the
Securities and Exchange Commission suspending all actions against a

company under rehabilitation by a management committee created by

the Securities and Exchange Commission. AEIHaS
Presidential Decree No. 902-A is clear that "all actions for claims against
corporations, partnerships or associations under management or
receivership pending before any court, tribunal, board or body shall be
suspended accordingly." The law did not make any exception in favor of
labor claims. 8
"The justification for the automatic stay of all pending actions for claims is
to enable the management committee or the rehabilitation receiver to
effectively exercise its/his powers free from any judicial or extrajudicial
interference that might unduly hinder or prevent the 'rescue' of the
debtor company. To allow such other actions to continue would only add
to the burden of the management committee or rehabilitation receiver,
whose time, effort and resources would be wasted in defending claims
against the corporation instead of being directed toward its restructuring
and rehabilitation." 9
Thus, the labor case would defeat the purpose of an automatic stay. To
rule otherwise would open the floodgates to numerous claims and would
defeat the rescue efforts of the management committee.
Besides, even if an award is given to private respondents, the ruling could
not be enforced as long as petitioner is under management committee.
10
This finds ratiocination in that the power to hear and decide labor
disputes is deemed suspended when the Securities and Exchange
Commission puts the corporation under rehabilitation.
Thus, when NLRC proceeded to decide the case despite the SEC
suspension order, the NLRC acted without or in excess of its jurisdiction to
hear and decide cases. As a consequence, any resolution, decision or
order that it rendered or issued without jurisdiction is a nullity.
WHEREFORE, the petition is hereby GRANTED. The decision of the labor
arbiter dated December 10, 1995 and the NLRC resolution dated August
30, 1996, are SET ASIDE.
No costs. HSDCTA
SO ORDERED.
Davide, Jr., C.J., Puno, Kapunan, and Ynares-Santiago, JJ., concur.

SECOND DIVISION
[G.R. No. 82028. January 29, 1990.]
FILOMENO N. LANTION, CLARITA C. LANTION, AND JUANA C. FUENTES,
petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, GREGORIO
ARANETA UNIVERSITY FOUNDATION AND OBED JOSE MENESES,
respondents.
Marcelo C. Amiana and Filomeno n. Lantion for petitioners.
DECISION
MELENCIO-HERRERA, J p:
The instant controversy traces its roots to the retrenchment and
reorganization program (RRR) adopted in 1983 by respondent Gregorio
Araneta University Foundation (the University, for short).
In particular, this Petition for Certiorari seeks a reversal of the Decision of
public respondent National Labor Relations Commission (NLRC), dated 20
January 1988, which modified the judgment of the Labor Arbiter in the
Illegal Dismissal Case entitled "Filomeno N. Lantion et als., vs. Gregorio
Araneta University Foundation et als.," in NLRC Case No. NCR-3-981-85.
The three (3) Complainants in this case charged the University with Illegal
Dismissal, Non-payment of separation pay, retirement pay, and gratuity
pay, Unfair Labor Practice with Damages, and Attorney's Fees.
The first Complainant, Filomeno Lantion, was the Acting Vice President
and Executive Officer of the University at the time of his dismissal. He
started as a clerk and has had thirty-two (32) years and seven (7) months
of service. His last monthly salary was P4,247.00.
The second Complainant, Clarita C. Lantion, is his wife. The last position
she held was that of Dean of the Institute of Business and Agricultural
Administration and concurrently Head and Professor of the Department of
Business and Finance. She is a holder of a Ph. D in Commerce and has
had twenty-six (26) years of service in the University. Her last monthly
salary was P2,550.00.
The third Complainant is Juana C. Fuentes, sister-in-law
Filomeno Lantion. She joined the University in 1967, her
being that of Secretary of the Chief Legal Officer. She is a
and has served the University for sixteen (16) years. Her
salary was P998.00. LexLib

of petitioner
last position
BSBA holder
last monthly

On 15 March 1983, Mr. Cesar A. Mijares, then President of the University,

addressed a letter to the Minister of Labor and Employment informing him
of the financial predicament of the University, thus:
"This University can no longer afford to continue operation under the
present salary rates of its personnel. The reduction of personnel is not an
adequate solution to this problem, because to do so would not enable the
University to accommodate its present enrollment. . . . .
"Reducing the salaries of personnel even to an amount which is not below
the statutory minimum is not legally allowable. Therefore, the only
effective solution is for the University to have all its personnel resign and
pay them their separation pays, or retirement pays, whichever is higher,
so that it could effect a top-to-bottom reorganization and restructure its
salary rates and other benefits not mandated by law . . . .
"After we have paid our employees their separation/retirement pays, we
will immediately rehire them in accordance with new and restructured
salary rates . . . and without the benefits not mandated by law . . . ,
subject to the University's actual needs under its reorganized set-up.
" . . ." (Emphasis ours).
On 29 March 1983, then Minister Ople replied:
"We understand that under the proposed retrenchment
reorganization plan, the following measures are envisaged:

and

"1. a top-to-bottom, University-wide reorganization, functional and

structural in scope, as well as restructuring of salary rates and other
personnel benefits not mandated by existing labor standard laws;
"2. separation or retirement of ALL personnel with corresponding grants
of termination pay or retirement benefits, whichever is higher;
"3. re-hiring of ALL personnel so separated or retired under terms and
conditions of employment to be established for the reorganized University
Foundation, with the possible exception of those whose present positions
will be affected by the proposed reorganizational changes.
xxx

xxx

xxx

"On the basis of the foregoing considerations, we find no serious

objections that may be interposed to the proposed reorganization and
retrenchment program of the University Foundation. Implementation of
this program shall of course be instituted without prejudice to whatever

benefits that might have accrued to the employees concerned at the

effective date of reorganization." (Emphasis supplied).
On 14 October 1983, the Executive Committee of the Board of Trustees of
the University issued a Memorandum-Circular providing, among others:
"The following guidelines are hereby issued:
"1. All ad hoc, ad interim and temporary appointments will be
considered terminated as of the date indicated in their respective
appointments, or as of October 31, 1983, whichever is earlier;
"2. GAUF faculty members and associates are invited to submit courtesy
letters of resignation to the Executive Vice President on or before October
31, 1983. Those who submit may be re-appointed while those who would
fail to submit may be retrenched;
xxx

xxx

xxx"

We come now to the respective situations of petitioners. On 10 November

1983, petitioner Filomeno Lantion received a letter, dated 9 November
1983, terminating him as the Acting Vice-President and concurrently
Executive Officer of the University effective 11 November 1983. Petitioner
Clarita Lantion, wife of Filomeno, was terminated as Dean of the Institute
of Business and Agricultural Administration and Concurrent Head of the
Department of Business, Finance, and Management effective 1 June 1984.
While petitioner Fuentes, Filomeno's sister-in-law, was terminated as
Secretary to the Legal Office on 21 November 1983. DTEAHI
On 25 March 1985, petitioners filed their Complaint against the University
and its President, respondent Obed Jose Meneses, before the NLRC.
Petitioners maintain that their positions were not affected by the
reorganization program; that they were not re-hired despite their seniority
in service, superior qualifications, and efficiency; that petitioner, Clarita
Lantion, was replaced by a faculty member who does not even possess
the necessary academic qualification required by the University and the
Ministry of Education; that petitioner, Juana Fuentes, was replaced by an
undergraduate and very much her junior in terms of service; that their
dismissal was motivated by vindictiveness since petitioner, Filomeno, had
previously testified in the administrative charge against respondent
Meneses; that petitioners were illegally dismissed without the one-month
notice and are entitled to their monetary claims and reinstatement
without loss of seniority rights and with full backwages. prLL

Traversing the foregoing averments, the University contends that on 18

November 1983, petitioner Filomeno Lantion expressed in clear and
unequivocal terms his conformity to be retired and separated from the
service such that he has no cause for illegal dismissal, much less for
reinstatement; that on 3 November 1983, petitioner Clarita Lantion was
extended an ad interim appointment as Acting Officer-in-Charge of the
Institute of Business and Agricultural Administration up to 31 March 1984;
that her appointment was extended to 31 May 1984 after which she was
not reappointed so that since her appointment was for a fixed period the
same had expired; she then ceased to be employed in the University and,
in fact, she requested the payment of her termination benefits which has
been partially met by the University; that petitioner Juana C. Fuentes
tendered a courtesy resignation in a letter, dated 29 October 1983, which
was accepted; that her position had been abolished; and that she had
already been paid partially her retirement benefits.
Referring to all three complainants, the University submits that they were
not illegally dismissed nor was their removal motivated by vindictiveness;
that the claim of vendetta is a childish and immature display of ill-feeling
and animosity to respondent Meneses because of their futile attempt to
hold or to administer the University; that the retrenchment program was
already being implemented when respondent Meneses was appointed;
and that the letter of some employees terminating their services was
even signed by petitioner Filomeno Lantion.
Resolving the issues raised, in a Decision, dated 17 June 1986, the Labor
Arbiter opined that failure of respondents to pay retirement and other
benefits due complainants does not make their retrenchment illegal (p. 7,
Decision) since retrenchment was effected to avert bigger losses in the
future. By reason thereof, the entitlement of complainants was limited to
the payment of "retirement benefits under the Blue Book," namely, "to
petitioner Filomeno Lantion, the amount of P165,526.59; to Clarita C.
Lantion P72,769.89; and to Juana C. Fuentes, P17,577.17; plus 10%
interest from the date of their separation, with 10% attorney's fees.
Partial payments received are deductible. All other claims are hereby
dismissed."
Both parties appealed to the NLRC. cdrep
On 20 January 1988, the NLRC affirmed the Labor Arbiter's finding that
retrenchment was not illegal since it was resorted to in order to avert the
financial collapse of the University. But it modified the amounts awarded
by deleting the 10% interest as well as the 10% attorney's fees and

adjusting the award of COLA to Fuentes to P5,269.30. The following

explanation was given in the matter of interest and attorney's fees:
"Regarding the correctness of the 10% interest of the monetary awards
and 10% attorney's fees raised by the respondents in their appeal which
is certainly an added financial burden because the complainants were not
illegally dismissed nor was it proven that their discharge was motivated
by ill-feelings or vindictiveness, we find no sufficient or factual basis for
the award. The 10% interest, is to our mind, in the form of damages and
this must not only be prayed for but must also be properly averred and
proven. With respect to the award of attorney's fees, we have considered
the fact that respondents never resisted complainants' claim of
retirement benefits which they are entitled to and which they have
partially received even before filing of the complaint and therefore, we do
not see any legal basis to award attorneys fees against respondents."
In this Petition for Certiorari, petitioners assign the following errors to the
NLRC:
"1. The interest of 10% awarded by the Honorable Arbiter a quo is even
a far cry of the amount of actual damages pleaded and duly established
which were sustained by herein petitioners as a result of the non-payment
of their retirement/gratuity pay and other employee benefits by private
respondent.
"2. The attorney's fees awarded by the Honorable Labor Arbiter a quo
was also duly pleaded and established and herein petitioners are entitled
to the same because of the obstinate refusal of private respondents to
settle in full the money claims of the former despite verbal and written
demands therefor, necessitating the filing of the instant case and hiring of
the services of counsel.
"3. Herein petitioners who had served respondent university from 16 to
32 years had been terminated from service discriminatorily, arbitrarily
and illegally and had not been rehired by private respondents contrary to
their own guidelines and those set forth by MOLE in the implementation
of GAUF RRR program, and in not ordering the reinstatement with
backwages of herein petitioners. The NLRC, Second Division, abusively
ignored and/or totally disregarded applicable and clear-cut decision
and/or rulings of the Supreme Court on cases which transpired
contemporaneously in the same respondent university which are foursquare on the matter, and which decision had been timely brought to the

attention of said NLRC Division causing flagrant and

discrimination against herein petitioners." (pp. 10-11, Rollo)

notorious

Significantly, in his Comment/Memorandum, the Solicitor General

supports the position adopted by petitioners, on this principal ground that
the NLRC departed from the Decision of this Court in Gregorio Araneta
University Foundation vs. NLRC et al., (G.R. Nos. 79525-26, October 29,
1987, 155 SCRA 301) [hereinafter, the First GAUF Case], in that "since
petitioners' positions were not abolished, their dismissal should have
been held illegal in the absence of basis to consider them retired or
separated from the service under the retrenchment program of the
University nor are their dismissals in accordance with the regular rules
and procedures on dismissal of employees" (p. 18, Comment). cdrep
On the other hand, private respondents and the NLRC, on its own behalf,
contend that there was no grave abuse of discretion amounting to lack of
jurisdiction in holding that there was no basis in law and in fact for the
award of 10% interest in the absence of malice or bad faith that preceded
the termination of service of petitioners; nor was there reversible error in
deleting the award of attorney's fees there being nothing in the record
that petitioners even spent any amount for attorney's fees; that there was
neither a departure from the rule in the First GAUF Case, supra, inasmuch
as the complainants in those cases did not tender their resignation while
petitioner Filomeno Lantion did; petitioner Clarita's re-appointment was
for a fixed period and the same had expired; while petitioner Clarita
Fuentes had resigned. What is more, except for petitioner Clarita Fuentes,
their positions had been abolished. Additionally, the University claims that
petitioners have received partial payment of their retirement benefits
whereas complainants in the First GAUF Case had not.
We gave due course to the Petition and required the submittal of
Memoranda, with which directive the parties have complied.
There is a striking parallelism between the facts and issues in this case
and those in the First GAUF Case. Both cases arose from the
implementation of the retrenchment and reorganization program of the
University. In the First GAUF Case, Complainants were permanent
employees and had worked in the University from eighteen (18) to
twenty-five (25) years. Petitioners in this case are also permanent
employees and have rendered service within a span of from sixteen (16)
to thirty-two (32) years. In both cases, Complainants were retrenched and
not reappointed. The difference between the two cases lies in that in the
First GAUF Case, Complainants therein did not submit their courtesy

resignations, whereas in this case petitioners Clarita Lantion and Fuentes

did. Petitioners Filomeno and Clarita Lantion were reappointed but were
subsequently terminated because petitioner Filemono allegedly resigned
and Clarita's term had expired. Noting these similarities and variances,
the NLRC held in the First GAUF Case, that the dismissal was illegal as
their positions were not affected by the reorganization. But in this case
the dismissal was pronounced legal and only the payment of retirement
pay under the "Blue Book" was ordered.
The basic question for determination is whether or not the NLRC gravely
abused its discretion in holding in this case that petitioners were not
illegally dismissed.
Following the First GAUF Case as a precedent, the answer must be in the
affirmative.
Under the guidelines to the retrenchment program given by the
University and the Ministry of Labor, the following considerations emerge
clear: (1) there was to be a separation or retirement of ALL personnel with
corresponding grant of termination pay or retirement benefits, whichever
is higher; (2) top-to-bottom University-wide reorganization subject,
however, to the condition of rehiring of ALL personnel so separated or
retired; (3) but with the exception of those whose present positions will be
affected by the proposed reorganizational changes.
That retrenchment was proper, therefore, there can be no question. The
conditions laid down, however, were not religiously followed. Petitioners
were not rehired although they fall outside the exception provided. Their
positions were not affected by the re-organizational changes envisioned
in the retrenchment program. The position of Vice-President continued to
exist (Exh. K). And as far as Filomeno and Clarita Lantion are concerned,
their temporary appointment to other positions could not have affected
their permanent status pursuant to the ruling in the First GAUF Case.
Clarita's position was neither abolished. She was replaced by another
faculty member.
It may be that petitioners Filomeno and Clarita Lantion had expressed
their conformity to their termination, while Fuentes had tendered her
courtesy resignation. As is obvious, however, those steps were but in
administrative compliance with the Memorandum Circular of 14 October
1983 of the University, ante. As a matter of fact, courtesy resignations
could have been dispensed with as all personnel were deemed resigned.
Besides, such compliance had placed them in a better position than the

Complainants in the First GAUF Case considering the proviso in the MemoCircular of the University that "those who submit courtesy resignations
may be re-appointed while those who would fail to submit may be
retrenched."
Reinstatement of petitioners with backwages for three (3) years is thus
called for as held in the First GAUF Case. In fact, in its Comment dated 10
December 1988, the NLRC now admits that petitioner Fuentes is entitled
to reinstatement with three (3) years backwages as it is not clear from
the records that her position as Secretary to the Legal Office was
abolished under the retrenchment program of the University. prLL
Petitioners call attention, however, to the amendatory provision in
Republic Act No. 6715 (March, 1989) to substantiate their contention that
full backwages should be awarded. That provision reads:
"Sec. 34. Article 279 of the Labor Code is hereby amended to read as
follows:
"Art. 279. Security of Tenure. . . . An employee who is unjustly
dismissed from work shall be entitled to reinstatement without loss of
seniority rights and other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary equivalent
computed from the time his compensation was withheld from him up to
the time of his actual reinstatement." (Emphasis ours)
Nothing in said law, however, provides for its retroactive application aside
from the fact that the University is in dire financial straits and can hardly
assume additional monetary obligations.
As to the award by the Labor Arbiter of 10% interest on the retirement
pay, respondent NLRC did not err in deleting it for lack of legal basis.
There is no showing that private respondents were motivated by ill-feeling
or bad faith. Respondents had effected partial payments of petitioners'
retirement benefits even before the filing of this case except that
payment could not be made in full due to financial constraints. An
additional monetary burden may only exacerbate the University's inability
to meet its monetary obligations due to its precarious financial state.
In respect of the argument that the inflation that has supervened justifies
the imposition of interest, this Court has held that the effects of
extraordinary inflation are not to be applied without an agreement
between the parties and without an official declaration thereof by
competent authorities (Velasco vs. Manila Electric Co., G.R. No. L-18390,

December 20, 1971, 42 SCRA 556; Commissioner of Public Highways vs.

Burgos, L-36706, March 31, 1980, 96 SCRA 831).
And in regards attorney's fees, respondent NLRC properly disallowed the
award as the same is granted only in case of unlawful withholding of
wages (Gregorio Araneta University Foundation vs. NLRC, et al., G.R. No.
L-75583, November 8, 1988, 167 SCRA 79; Article 111 (a), P.D. 442 as
amended). In this case, it cannot be said that wages had been unlawfully
withheld by the University. In fact, it had made partial payments of
retirement benefits. cdrep
WHEREFORE, the Decision of respondent National Labor Relations
Commission is REVERSED in so far as it holds that the dismissal of
petitioners was not illegal and hereby ORDERS respondent Gregorio
Araneta University Foundation to REINSTATE petitioners to their former
positions with three (3) years backwages under the new terms and
conditions of employment in the University as reorganized. In all other
respects, the Decision of the National Labor Relations Commission is
AFFIRMED. No costs.
SO ORDERED.
Paras, Padilla, Sarmiento and Regalado, JJ., concur.

SECOND DIVISION
[G.R. No. 77959. January 9, 1989.]
RADIO COMMUNICATIONS OF THE PHILIPPINES, INC., petitioner, vs. THE
SECRETARY OF LABOR AND EMPLOYMENT, THE REGIONAL DIRECTOR OF
THE NATIONAL CAPITAL REGION, DEPARTMENT OF LABOR AND
EMPLOYMENT AND UNITED RCPI COMMUNICATIONS LABOR ASSOCIATION
(URCPICLA)-FUR, respondents.
Ermitano, Asuncion, Manzano & Associates for petitioner.
The Solicitor General for public respondent.
Abad, Leao & Associates for respondent URCPICLA.
SYLLABUS
1.
LABOR AND SOCIAL LEGISLATION; LABOR CODE; RIGHT OF UNION
TO "UNION SERVICE FEE" INSPITE OF LACK OF EXPRESS PROVISION IN
THE ORDER OF THE NATIONAL WAGE COUNCIL, BUT UNQUALIFIEDLY
ADMITTED IN A SUBSEQUENT COMPROMISE AGREEMENT BY EMPLOYEEOBLIGOR. While it is true that the original decision of said Council did
not expressly provide for payment of attorney's fees, that particular
aspect or deficiency is deemed to have been supplied, if not modified pro
tanto, by the compromise agreement subsequently executed between the
parties. A cursory perusal of said agreement shows an unqualified
admission by petitioner that "from the aforesaid total amount due every
employee, 10% thereof shall be considered as attorney's fee," although,
as hereinafter discussed, it sought to withhold it from respondent union.
Considering, however, that respondent union was categorically found by
the Labor Secretary to have been responsible for the successful
prosecution of the case to its ultimate conclusion in behalf of its member,
employees of herein petitioner, its right to fees for services rendered, or
what it termed as "union service fee," is indubitable.
2.
ID.; ID.; LABOR FEDERATIONS; APPEARANCE AS COUNSEL IN LABOR
PROCEEDINGS, ACCORDED LEGAL SANCTION. The appearance of labor
federations and local unions as counsel in labor proceedings has been
given legal sanction and we need only cite Art. 222 of the Labor Code
which allows non-lawyers to represent their organization or members
thereof.
3.
ID.; ID.; INDIVIDUAL WRITTEN AUTHORIZATION AS PRE-REQUISITE TO
WAGE DEDUCTION NOT APPLICABLE STRICTLY TO DEDUCTIONS OF

EMPLOYEES WITH THEIR KNOWLEDGE AND CONSENT AND AUTHORIZED

BY LAW. The Court agrees that Article 222 of the Labor Code requiring
an individual written authorization as a prerequisite to wage deductions
seeks to protect the employee against unwarranted practices that would
diminish his compensation without his knowledge and consent. However,
for all intents and purposes, the deductions required of the petitioner and
the employees do not run counter to the express mandate of the law
since the same are not unwarranted or without their knowledge and
consent. Also, the deductions for the union service fee in question are
authorized by law and do not require individual check-off authorizations.
DECISION
REGALADO, J p:
This petition for certiorari seeks the annulment of the orders issued by
public respondents in NWC Ref. No. W01-13, viz: (1) the order of May 7,
1986 of respondent Regional Director requiring petitioner Radio
Communications of the Philippines, Inc. (hereinafter, RCPI) and its
employees represented by Buklod ng Manggagawa sa RCPI-NFL (BMRCPINFL, for brevity) to pay private respondent United RCPI Communications
Labor Association (URCPICLA-FUR, for short) its 15% union service fee of
P427,845.60, jointly and severally, and accordingly directing the issuance
of a writ of execution and garnishment of RCPI's bank account for the
satisfaction of said fee; (2) the order of August 16, 1986 of respondent
Secretary of Labor and Employment modifying the foregoing order by
reducing the union service fee to 10% of the awarded amounts and
holding petitioner solely liable for the payment of such fee; and (3) the
order, dated March 20, 1987, of respondent Secretary denying petitioner's
motion for reconsideration.
The records
1 show that on May 4, 1981, petitioner, a domestic
corporation engaged in the telecommunications business, filed with the
National Wages Council an application for exemption from the coverage of
Wage Order No. 1. 2 The application was opposed by respondent
URCPICLA-FUR, a labor organization affiliated with the Federation of
Unions of Rizal (FUR). On May 22, 1981, the National Wages Council,
through its Chairman, rendered a letter-decision 3 disapproving said
application and ordering the petitioner to pay its covered employees the
mandatory living allowance of P2.00 daily effective March 22, 1981. Said
letter-decision was affirmed by the Office of the President in O.P. Case No.
1882 and, subsequently, this Court in its resolution of July 15, 1985 in

G.R. No. 70148 dismissed RCPI's petition for certiorari for lack of merit.
Entry of final judgment was issued by the Court on July 15, 1985. 4
Furthermore, it is not denied that as early as March 13, 1985, before the
aforesaid case was elevated to this Court, respondent union filed a motion
for the issuance of a writ of execution, asserting therein its claim to 15%
of the total backpay due to all its members as "union service fee" for
having successfully prosecuted the latter's claim for payment of wages
and for reimbursement of expenses incurred by FUR, and prayed for the
segregation and remittance of said amount to FUR thru its National
President. 5
In a subsequent "Motion for Immediate Issuance of Writ of Execution",
dated September 9, 1985, respondent union reiterated its claim for said
union service fee but this time in an amount equivalent to 20% of the
total backpay due its members, to be remitted to the institution
previously adverted to. 6
On September 24, 1985, petitioner filed its opposition to said motion,
asserting, among others, that "there is no legal basis for respondent
Union to have the sum equivalent to 20% union service fee deducted
from the amount due to every recipient member." 7 An alias writ of
execution was issued on September 26, 1985. 8
On October 24, 1985, without the knowledge and consent of respondent
union, petitioner entered into a compromise agreement 9 with BMRCPINFL, as the new bargaining agent of oppositors RCPI employees, the
pertinent provisions whereof are hereunder reproduced: LLphil
"WHEREAS, there are now pending with the National Labor Relations
Commission Case No. NLRC-NCR-11-5265-83 (NFL, et al. vs. RCPI) relative
to RCPI's alleged liabilities under P.D. 1713 and Wage Orders 1, 2 and 3
and NLRC Certified Case No. 0356, with the National Wages Council and
the Office of the Regional Director, Ministry of Labor and Employment,
National Capital Region NWC Case Ref. No. WO-1-13 (O.P. Case No. 1882,
S.C. G.R. No. 70148) relative to RCPI's alleged liabilities under Wage Order
No. 1; and with the Office of the Regional Director, MOLE-NCR, a similar
case (NCR-FSD-10-118-83);
"WHEREAS, RCPI is one of the parties in the above cases and is herein
represented by its duly authorized representative/s while the
complainants/employees of RCPI are the other real parties in interest in
the said cases and are represented herein by BMRCPI-NFL, the duly
certified bargaining agent of the said complainant/employees;

"WHEREAS, it is to the actual interest and benefit of the parties

mentioned in the preceding WHEREAS (the herein parties) that this
Compromise Agreement be entered into by and between them for the
purpose of novating the above mentioned cases, particularly any and all
decisions therein, with the view of re-defining the parties' rights and
obligations under the various Presidential Decrees and/or Wage Orders
subjects of the above mentioned cases.
"NOW, THEREFORE, for and in consideration of the foregoing premises
and the terms and conditions herein stated, the parties have agreed and
bound themselves as follows: THAT
1.
RCPI by way of a compromise settlement acknowledges its alleged
liability under PD 1713 (mandatory third year) and Wage Order 1 (first
and third year) subject of the cases mentioned in the first WHEREAS
hereof;
2.
As consideration for the dismissal with prejudice of the abovecaptioned cases and the novation thereof and of all decisions in said
cases, the parties hereby further agree that:
a)
On November 30, 1985, RCPI shall pay to each of its
employees/complainants 30% of whatever is due him/her under PD 1713
(mandatory third year) and Wage Order 1 (first and third year) subject of
the cases mentioned in the first WHEREAS hereof;
b)
The balance of 70% due to each employee/complainant under PD
1713 (mandatory third year) and Wage Order 1 (first and third year)
subject of the cases mentioned in the first WHEREAS hereof shall be the
subject of re-opening and/or negotiation by the parties on July 31, 1986
for the purpose of reaching a compromise settlement thereon on terms
mutually acceptable. Against this 30% shall be deducted in full all
personal cash advances of every covered employee;
c)
Of and from the aforesaid total amount due every employee, 10%
thereof shall be considered as attorney's fee due Atty. Rodolfo Capocyan,
the same to be deducted from the remaining 70% and distributed to Atty.
R. Capocyan at the time of the distribution of the remaining 70%. In this
connection, Atty. Rodolfo Capocyan manifest (sic) that he is authorized by
the covered employee (sic) to collect 10% of whatever is/are due them as
attorney's fees and undertakes and binds himself to submit to RCPI the
required individual check-off authorization with respect to the 30%. He
and the herein union assume sole responsibility for and shall hold RCPI

free and harmless from any claim, suit or complaint arising from the
deduction of this 10% attorney's fee;"
xxx

xxx

xxx

What transpired thereafter is more completely and undisputedly narrated

by the Solicitor General in behalf of public respondent, thus:
"Thereupon, the parties to the compromise agreement filed a joint Motion
to Dismiss with Prejudice praying for the dismissal of the same with
prejudice on the ground that the decision of the National Wages Council
dated May 22, 1981 had already been novated by the Compromise
Agreement re-defining the rights and obligations of the parties.
Respondent Union on November 7, 1985 countered by opposing the
motion and alleging that one of the signatories thereof Buklod ng
Manggagawa sa RCPI is not a party in interest in the case but that it
was respondent Union which represented oppositors RCPI employees all
the way from the level of the National Wages Council up the Supreme
Court. Respondent Union therefore claimed that the Compromise
Agreement is irregular and invalid, apart from the fact that there was
nothing to compromise in the face of a final and executory decision. LLpr
"On November 22, 1985, respondent Union filed an Urgent Motion for Lien
(15% Union Service Fee) calling attention to a Resolution passed and
approved by the URCPICLA-FUR Legislative Board on June 4, 1984
declaring respondent Union entitled to a sum equivalent to 15% of the
total backpay received by each RCPI employee from RCPI as union service
fee and reimbursement of expenses incurred in successfully handling the
instant case. Respondent Union prayed that RCPI be required to deposit
with the Cashier of the National Capital Region, Ministry of Labor and
Employment an amount equivalent to 15% of the total amount due to the
covered employees as union service fee. Copy of this motion was
received by the Office of the President, RCPI on November 28, 1985.
xxx

xxx

xxx

"Acting on the Urgent Motion for Lien, Director Severo M. Pucan issued an
Order dated November 25, 1985 awarding to URCPICLA-FUR and FUR 15%
of the total backpay of RCPI employees as their union service fees, and
directing RCPI to deposit said amount with the cashier of the Regional
Office for proper disposition to said awardees.
"Despite notice of the Order of November 25, 1985 and its accompanying
letter requesting the management of RCPI to withhold the 15% union

service fee from each employee affected, petitioner paid in full the
covered employees on November 29, 1985, without deducting the union
service fee of 15%. In its motion for reconsideration and to set aside the
Order of November 25, 1985, petitioner argued that said Order has been
rendered moot and academic by the fact that it had already paid in full
the award under the decision of the National Wages Council. It proposed
instead that URCPICLA and/or FUR re-direct their efforts at collection to
the rank and file employees of RCPI. It also attacked the questioned order
as null and void ab initio for lack of jurisdiction and due process.
"On December 16, 1985, respondent Union filed a petition praying for
garnishment of petitioner's funds in its depository banks to effect
remittance of its 15% union service fee in view of the payment in full by
the latter of the wages due its covered employees. Petitioner moved to
dismiss the petition for garnishment as illegal, irregular and highly
anomalous. This was opposed by respondent Union." 10
At this juncture, the record shows that on December 19, 1985, said
Regional Director issued an order declaring the decision fully satisfied and
lifting all the garnishments effected pursuant thereto "(C)onsidering that
the Alias Writ of Execution dated 26 September 1985 in this case had
already been fully satisfied." 11
However, it appears that thereafter, in an order dated May 7, 1986, NCR
officer-in-charge Romeo A. Young found petitioner RCPI and its employees
jointly and severally liable for the payment of the 15% union service fee
amounting to P427,845.60 to private respondent URCPICLA-FUR and
consequently ordered the garnishment of petitioner's bank account to
enforce said claim. It was his position that although the decision of the
National Wages Council did not categorically require payment of the 15%
service fee directly to URCPICLA-FUR, it had acted as the counsel of
record of petitioner's employees, hence said payment could be authorized
by applying suppletorily the provisions of Section 37, Rule 138 of the
Rules of Court on attorney's lien. Said order further noted that the
transaction entered into by petitioner in favor of BMRCPI-NFL, in the guise
of a compromise agreement, was made without the consent of URCPICLAFUR in clear defraudation of the latter's right to the 15% union service fee
justly due it. 12
Acting on petitioner's "Omnibus Motion" seeking, among others, a
reconsideration of said order of May 7, 1986, which motion was treated as
an appeal, respondent Secretary of Labor and Employment issued an
order on August 18, 1986 modifying the order appealed from by holding

petitioner solely liable to respondent union for 10% of the awarded

amounts as attorney's fees, on the rationale that:
". . . oppositor's claim for attorney's fee was the ultimate consequence of
the non-compliance of RCPI with Wage Order No. 1. The RCPI employees
were forced to avail of the services of oppositor as counsel, RCPI having
continuously withheld payment of said benefit. They were forced to
litigate up to the Supreme Court for the protection of their interest. In the
case of Cristobal vs. ECC, L-49280 promulgated February 26, 1981, 103
SCRA 339, the Supreme Court ruled that 'the defaulting employer or
government agency remains liable for attorney's fees because it
compelled the complainant to employ the services of counsel by unjustly
refusing to recognize the validity of the claim.' Attorney's fee due the
oppositor is, thus, chargeable against RCPI." 13
Hence, the instant petition, basically on the sole issue of whether the
public respondents acted with grave abuse of discretion amounting to
lack of jurisdiction in holding the petitioner solely liable for "union service
fee" to respondent URCPICLA-FUR. LLpr
We hold in the negative.
The contention of petitioner that the challenged order of May 7, 1986 was
issued with grave abuse of discretion, for supposedly imposing an
additional obligation in the form of attorney's fees not contemplated in
the decision of the National Wages Council, is bereft of merit.
While it is true that the original decision of said Council did not expressly
provide for payment of attorney's fees, that particular aspect or
deficiency is deemed to have been supplied, if not modified pro tanto, by
the compromise agreement subsequently executed between the parties.
A cursory perusal of said agreement shows an unqualified admission by
petitioner that "from the aforesaid total amount due every employee,
10% thereof shall be considered as attorney's fee," 14 although, as
hereinafter discussed, it sought to withhold it from respondent union.
Considering, however, that respondent union was categorically found by
the Labor Secretary to have been responsible for the successful
prosecution of the case to its ultimate conclusion in behalf of its member,
employees of herein petitioner, its right to fees for services rendered, or
what it termed as "union service fee," is indubitable.
The further pretension of petitioner that respondent union is not entitled
to attorney's fee or union service fee because it is not a member of the

Bar is both untenable and in disregard of the liberalized scheme and

theory of representation for labor adopted in the Labor Code.
As explained by the order of the Deputy Minister of August 18, 1986
hereinbefore adverted to
". . . The appearance of labor federations and local unions as counsel in
labor proceedings has been given legal sanction and we need only cite
Art. 222 of the Labor Code which allows non-lawyers to represent their
organization or members thereof.
"It is undisputed that oppositor (private respondent herein) was the
counsel on record of the RCPI employees in their claim for ECOLA under
Wage Order No. 1 since the inception of the proceedings at the National
Wages Council up to the Supreme Court. It had therefore a valid claim for
attorney's fee which it called 'union service fee' . . ." 15 (Parenthetical
indication supplied).
As affirmed and further clarified by respondent Secretary of Labor and
Employment in his order of March 20, 1987
"While the claim for union service fee was initially directed against the
union members, there is no dispute that the claim was basically for
attorney's fee. As a matter of fact, RCPI admitted that the union service
fee is 'for compensation for services rendered by the union" . . . 16
We also cannot but look askance and take a quizzical view of the
aforequoted compromise agreement on which petitioner anchors its main
arguments.
Aside from the fact that, as already stated, the same was concluded
behind the back of private respondent, so to speak, and with another
labor union and a lawyer neither of whom prior thereto had a hand in the
recovery of benefits for the RCPI employees concerned, there are certain
indicia which cast serious doubts on the motives and actuations therein of
petitioner.
As already stated, as early as March 13, 1985, private respondent had
moved for the deduction of said fee from the total backpay awarded in
the decision of the Council. It reiterated such claim in its motion for a writ
of execution filed on September 10, 1985 after this Court had dismissed
the petition for certiorari filed by petitioner in G.R. No. 70148. Petitioner
was fully aware of these proceedings since it even filed its opposition
thereto on September 23, 1985, but in the aforestated order of November
25, 1985, private respondent was awarded 15% of the total backpay of

the RCPI employees as its union service fee, with petitioner being directed
to deposit said amount with the NCR office. Yet, on November 29, 1985,
petitioner, despite timely notice of said order and in total disregard
thereof, directly paid its employees the full amount of their backpay,
without deducting the union service fee. 17
Again, as is evident in the aforequoted provisions of the compromise
agreement, petitioner was bound to pay only 30% of the amount due
each employee on November 30, 1985, while the balance of 70% would
still be the subject of renegotiation by the parties on July 31, 1986. Yet,
despite such conditions beneficial to it, petitioner paid in full the backpay
of its employees on November 29, 1985, ignoring the service fee due the
private respondent. LLjur
Worse, petitioner supposedly paid to one Atty. Rodolfo M. Capocyan the
10% fee that properly pertained to herein private respondent, an
unjustified and baffling diversion of funds. It tried to explain away such
obvious tergiversation by claiming that said 10% fee corresponded to the
other claims embraced in the compromise agreement but not the liability
under Wage Order No. 1, an apocryphal contradiction of its contrary
admission in Paragraph 7 of its Reply 18 and the provisions of Paragraph
2(c) of the compromise agreement.
On top of that, the records do not show any rejoinder or explanation by
petitioner of this grave revelation and accusation of the Solicitor General:
"But the spurious and fraudulent character of such disposition made by
petitioner is clearly inferable from the circumstances that: . . . (2) there is
no such Atty. Rodolfo Capocyan in the Attorney's Roll of this Court (See
Communication from the Office of the Bar Confidant of the Supreme Court
dated March 17, 1986 found on page 459 of the record). Atty. Capocyan,
being a mere fictitious character, his 'attorney's fees' which included the
claim of private respondent, necessarily devolved upon petitioner.
"It would now appear that petitioner had a secret interest over the 10%
fees due and owing to private respondent and thru the manipulations of
petitioner's agents were given the appearance of 'attorney's fees' to a
certain Atty. Rodolfo Capocyan. It cannot be denied that by such
fraudulent method, private respondent was deprived of its just and lawful
fees." 19
Even the employment of the term "novation" in the compromise
agreement appears to have been dictated by the dubious motive to
secure dismissal with prejudice of the decision of the National Wages

Council. For, despite the express, albeit improper use of such term, there
could have been no valid novation of the prior judgment for the simple
reason that the pre-existing obligation thereunder and the new one
sought to be created are not absolutely incompatible. On the contrary,
the compromise agreement expressly recognizes the respective
obligations of the parties in said judgment and precisely provides a
method by which the same shall be extinguished, which method is, as
expressly stated in said contract, by installment payments. The contract,
instead of containing provisions incompatible with the obligations in the
judgment, expressly ratifies such obligations and contains provisions for
satisfying them. The said agreement simply gave the petitioner a method
and more time for the satisfaction of said judgment. It did not extinguish
the obligations contained in the judgment, until the terms of said
agreement had been fully complied with. Had the petitioner continued to
comply with the conditions of said agreement, it could have successfully
invoked its provisions against the issuance of a writ of execution upon
said judgment. The contract and the punctual compliance with its terms
only delayed the right of the respondent union to the execution of the
judgment. The judgment was not satisfied and the obligations existing
thereunder still subsisted until the terms of the agreement had been fully
complied with. 20
Finally, petitioner cannot invoke the lack of an individual written
authorization from the employees as a shield for its fraudulent refusal to
pay the service fee of private respondent. Prior to the payment made to
its employees, petitioner was ordered by the Regional Director to deduct
the 15% attorney's fee from the total amount due its employees and to
deposit the same with the Regional Labor Office. Petitioner failed to do so
allegedly because of the absence of individual written authorizations. Be
that as it may, the lack thereof was remedied and supplied by the
execution of the compromise agreement whereby the employees,
expressly approved the 10% deduction and held petitioner RCPI free from
any claim, suit or complaint arising from the deduction thereof. When
petitioner was thereafter again ordered to pay the 10% fees to
respondent union, it no longer had any legal basis or subterfuge for
refusing to pay the latter.
We agree that Article 222 of the Labor Code requiring an individual
written authorization as a pre-requisite to wage deductions seeks to
protect the employee against unwarranted practices that would diminish
his compensation without his knowledge and consent. 21 However, for all
intents and purposes, the deductions required of the petitioner and the

employees do not run counter to the express mandate of the law since
the same are not unwarranted or without their knowledge and consent.
Also, the deductions for the union service fee in question are authorized
by law and do not require individual check-off authorizations. 22
On the foregoing considerations, We find no cogent reason to disturb the
order of the Secretary of Labor and Employment finding petitioner liable
for the union service fee of private respondent.
WHEREFORE, the order of the Secretary of Labor of August 16, 1986 is
hereby AFFIRMED and the petition at bar is DISMISSED, with double costs
against petitioner. The temporary restraining order issued pursuant to the
Resolution of the Court of June 22, 1987 is LIFTED and declared of no
further force and effect.
SO ORDERED.
Melencio-Herrera, Paras, Padilla and Sarmiento, JJ., concur.

FIRST DIVISION
[G.R. No. 80039. April 18, 1989.]
ERNESTO M. APODACA, petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION, JOSE M. MIRASOL, AND INTRANS PHILS., INC., respondents.
Diego O. Untalan for petitioner.
The Solicitor General for public respondent.
Barcelona, Perlas, Joven & Academia Law Offices for private respondents.
SYLLABUS
1.
LABOR LAW; NATIONAL LABOR RELATIONS COMMISSION; HAS NO
JURISDICTION
OVER
INTRA-CORPORATE
DISPUTE
BETWEEN
STOCKHOLDER AND THE CORPORATION. The NLRC has no jurisdiction
to determine such intra-corporate dispute between the stockholder and
the corporation as in the matter of unpaid subscriptions. This controversy
is within the exclusive jurisdiction of the Securities and Exchange
Commission.
2.
COMMERCIAL LAW; CORPORATION; UNPAID SUBSCRIPTION; NOT DUE
AND DEMANDABLE UNTIL A CALL FOR PAYMENT IS MADE BY THE
CORPORATION. The unpaid subscriptions are not due and payable until
a call is made by the corporation for payment. Private respondents have
not presented a resolution of the board of directors of respondent
corporation calling for the payment of the unpaid subscriptions. It does
not even appear that a notice of such call has been sent to petitioner by
the respondent corporation.
3.
LABOR LAW; WAGE DEDUCTION; INSTANCES WHEN ALLOWED. The
NLRC cannot validly set it off against the wages and other benefits due
petitioner. Article 113 of the Labor Code allows such a deduction from the
wages of the employees by the employer, only in three instances, to wit:
"ART. 113. Wage Deduction. No employer, in his own behalf or in behalf
of any person, shall make any deduction from the wages of his
employees, except: (a) In cases where the worker is insured with his
consent by the employer, and the deduction is to recompense the
employer for the amount paid by him as premium on the insurance. (b)
For union dues, in cases where the right of the worker or his union to
checkoff has been recognized by the employer or authorized in writing by
the individual worker concerned; and (c) In cases where the employer is
authorized by law or regulations issued by the Secretary of Labor."

DECISION
GANCAYCO, J p:
Does the National Labor Relations Commission (NLRC) have jurisdiction to
resolve a claim for non-payment of stock subscriptions to a corporation?
Assuming that it has, can an obligation arising therefrom be offset against
a money claim of an employee against the employer? These are the
issues brought to this court through this petition for review of a decision
of the NLRC dated September 18, 1987.
The only remedy provided for by law from such a decision is a special civil
action for certiorari under Rule 65 of the Rules of Court based on
jurisdictional grounds or on alleged grave abuse of discretion amounting
to lack or excess of jurisdiction, not by way of an appeal by certiorari.
Nevertheless, in the interest of justice, this petition is treated as a special
civil action for certiorari.
Petitioner was employed in respondent corporation. On August 28, 1985,
respondent Jose M. Mirasol persuaded petitioner to subscribe to P1,500
shares of respondent corporation at P100.00 per share or a total of
P150,000.00. He made an initial payment of P37,500.00. On September 1,
1975, petitioner was appointed President and General Manager of the
respondent corporation. However, on January 2, 1986, he resigned.
On December 19, 1986, petitioner instituted with the NLRC a complaint
against private respondents for the payment of his unpaid wages, his cost
of living allowance, the balance of his gasoline and representation
expenses and his bonus compensation for 1986. Petitioner and private
respondents submitted their position papers to the labor arbiter. Private
respondents admitted that there is due to petitioner the amount of
P17,060.07 but this was applied to the unpaid balance of his subscription
in the amount of P95,439.93. Petitioner questioned the set-off alleging
that there was no call or notice for the payment of unpaid subscription
and that, accordingly, the alleged obligation is not enforceable.
In a decision dated April 28, 1987, the labor arbiter sustained the claim of
petitioner for P17,060.07 on the ground that the employer has no right to
withhold payment of wages already earned under Article 103 of the Labor
Code. Upon the appeal of the private respondents to public respondent
NLRC, the decision of the labor arbiter was reversed in a decision dated
September 18, 1987. The NLRC held that a stockholder who fails to pay
his unpaid subscription on call becomes a debtor of the corporation and

that the set off of said obligation against the wages and others due to
petitioner is not contrary to law, morals and public policy. LLjur
Hence, the instant petition.
The petition is impressed with merit.
Firstly, the NLRC has no jurisdiction to determine such intra-corporate
dispute between the stockholder and the corporation as in the matter of
unpaid subscriptions. This controversy is within the exclusive jurisdiction
of the Securities and Exchange Commission. 1
Secondly, assuming arguendo that the NLRC may exercise jurisdiction
over the said subject matter under the circumstances of this case, the
unpaid subscriptions are not due and payable until a call is made by the
corporation for payment. 2 Private respondents have not presented a
resolution of the board of directors of respondent corporation calling for
the payment of the unpaid subscriptions. It does not even appear that a
notice of such call has been sent to petitioner by the respondent
corporation.
What the records show is that the respondent corporation deducted the
amount due to petitioner from the amount receivable from him for the
unpaid subscriptions. 3 No doubt such set-off was without lawful basis, if
not premature. As there was no notice or call for the payment of unpaid
subscriptions, the same is not yet due and payable.
Lastly, assuming further that there was a call for payment of the unpaid
subscription, the NLRC cannot validly set it off against the wages and
other benefits due petitioner. Article 113 of the Labor Code allows such a
deduction from the wages of the employees by the employer, only in
three instances, to wit:
"ART. 113.Wage Deduction. No employer, in his own behalf or in behalf
of any person, shall make any deduction from the wages of his
employees, except:
(a) In cases where the worker is insured with his consent by the
employer, and the deduction is to recompense the employer for the
amount paid by him as premium on the insurance;
(b) For union dues, in cases where the right of the worker or his union to
checkoff has been recognized by the employer or authorized in writing by
the individual worker concerned; and

(c) In cases where the employer is authorized by law or regulations

issued by the Secretary of Labor." 4
WHEREFORE, the petition is GRANTED and the questioned decision of the
NLRC dated September 18, 1987 is hereby set aside and another
judgment is hereby rendered ordering private respondents to pay
petitioner the amount P17,060.07 plus legal interest computed from the
time of the filing of the complaint on December 19, 1986, with costs
against private respondents.
SO ORDERED.
Narvasa, Cruz, Grio-Aquino and Medialdea, JJ., concur.