Arts. 97-102

FIRST DIVISION
ARTICLE XIV Retirement Gratuity
G.R. No. L-50999 March 23, 1990
Section l(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 salaryas used in this paragraph shall be
deemed equivalent to the salary at date of retirement; years of
service shall be deemed equivalent to total service credits, a
fraction of at least six months being considered one year, including
probationary employment. (Emphasis supplied)
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.
MEDIALDEA, J.:
On the other hand, Article 284 of the Labor Code then prevailing provides:
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., RespondentAppellee" and NLRC Case No. RN- IV-20855-78-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.
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)
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 P40,000. In addition, they
received commissions for every sale they made.
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):
In addition, Sections 9(b) and 10, Rule 1, Book VI of the Rules Implementing the
Labor Code provide:
xxx
Sec. 9(b). Where the termination of employment is due to retrechment 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
LABOR LAW I CASES (Arts.97-102) |1
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)
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 reasonable value'
shall not include any profit to the employer or to any person affiliated with the
employer.
On June 26,1978, the Labor Arbiter rendered a decision, the dispositive portion of
which reads (p. 78, Rollo):
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.
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 on one's salary, to wit;
(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
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.
We shall concern ourselves now with the issue of whether or not earned sales
commission should be included in the monthly salary of petitioner 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-2 7455, 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. How ever, 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 gainsaid 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.
Upon the other hand, the provisions of Section 10, Rule 1, 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.
x x x.
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 pecularities 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 there from. 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 anomalies (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.
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 remuneration services rendered which
contributed to the increase of income of Zuellig . Commission is the recompense,
compensation or reward of an agent, salesman, executor, trustees, receiver, factor,
broker or bailee, when the same is calculated as a percentage on the amount of his
transactions or on the profit to the principal (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 commission 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, are part of
petitioners' wage or salary. We take judicial notice of the fact that some salesman do
not received any basic salary but depend on commissions and allowances or
commissions alone, although an employer-employee relationship exists. Bearing in
mind the preceeding dicussions, 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 the the streets to face the harsh necessities of life.
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.
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.
THIRD DIVISION
G.R. No. L-72654-61 January 22, 1990

ALIPIO R. RUGA, JOSE PARMA, ELADIO CALDERON, LAURENTE BAUTU,
JAIME BARBIN, NICANOR FRANCISCO, PHILIP CERVANTES and ELEUTERIO
BARBIN, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and DE GUZMAN FISHING
ENTERPRISES and/or ARSENIO DE GUZMAN, respondents.
FERNAN, C.J.:
The issue to be resolved in the instant case is whether or not the fishermen-crew
members of the trawl fishing vessel 7/B Sandyman II are employees of its owneroperator, De Guzman Fishing Enterprises, and if so, whether or not they were illegally
dismissed from their employment.
Records show that the petitioners were the fishermen-crew members of 7/B
Sandyman II, one of several fishing vessels owned and operated by private
respondent De Guzman Fishing Enterprises which is primarily engaged in the fishing
business with port and office at Camaligan, Camarines Sur. Petitioners rendered
service aboard said fishing vessel in various capacities, as follows: Alipio Ruga and
Jose Parma patron/pilot; Eladio Calderon, chief engineer; Laurente Bautu, second
engineer; Jaime Barbin, master fisherman; Nicanor Francisco, second fisherman;
Philip Cervantes and Eleuterio Barbin, fishermen.
For services rendered in the conduct of private respondent's regular business of
"trawl" fishing, petitioners were paid on percentage commission basis in cash by one
Mrs. Pilar de Guzman, cashier of private respondent. As agreed upon, they received
thirteen percent (13%) of the proceeds of the sale of the fish-catch if the total
proceeds exceeded the cost of crude oil consumed during the fishing trip, otherwise,
they received ten percent (10%) of the total proceeds of the sale. The patron/pilot,
chief engineer and master fisherman received a minimum income of P350.00 per
week while the assistant engineer, second fisherman, and fisherman-winchman
received a minimum income of P260.00 per week. 1
On September 11, 1983 upon arrival at the fishing port, petitioners were told by Jorge
de Guzman, president of private respondent, to proceed to the police station at
Camaligan, Camarines Sur, for investigation on the report that they sold some of their
fish-catch at midsea to the prejudice of private respondent. Petitioners denied the

charge claiming that the same was a countermove to their having formed a labor
union and becoming members of Defender of Industrial Agricultural Labor
Organizations and General Workers Union (DIALOGWU) on September 3, 1983.
During the investigation, no witnesses were presented to prove the charge against
petitioners, and no criminal charges were formally filed against them.
Notwithstanding, private respondent refused to allow petitioners to return to the
fishing vessel to resume their work on the same day, September 11, 1983.
On September 22, 1983, petitioners individually filed their complaints for illegal
dismissal and non-payment of 13th month pay, emergency cost of living allowance
and service incentive pay, with the then Ministry (now Department) of Labor and
Employment, Regional Arbitration Branch No. V, Legaspi City, Albay, docketed as
Cases Nos. 1449-83 to 1456-83. 2 They uniformly contended that they were arbitrarily
dismissed without being given ample time to look for a new job.
On October 24, 1983, private respondent, thru its operations manager, Conrado S. de
Guzman, submitted its position paper denying the employer-employee relationship
between private respondent and petitioners on the theory that private respondent and
petitioners were engaged in a joint venture. 3
After the parties failed to reach an amicable settlement, the Labor Arbiter scheduled
the case for joint hearing furnishing the parties with notice and summons. On
December 27, 1983, after two (2) previously scheduled joint hearings were postponed
due to the absence of private respondent, one of the petitioners herein, Alipio Ruga,
the pilot/captain of the 7/B Sandyman II, testified, among others, on the manner the
fishing operations were conducted, mode of payment of compensation for services
rendered by the fishermen-crew members, and the circumstances leading to their
dismissal. 4
On March 31, 1984, after the case was submitted for resolution, Labor Arbiter Asisclo
S. Coralde rendered a joint decision 5 dismissing all the complaints of petitioners on a
finding that a "joint fishing venture" and not one of employer-employee relationship
existed between private respondent and petitioners.
From the adverse decision against them, petitioners appealed to the National Labor
Relations Commission.
On May 30, 1985, the National Labor Relations Commission promulgated its
resolution 6 affirming the decision of the labor arbiter that a "joint fishing venture"
relationship existed between private respondent and petitioners.
Hence, the instant petition.

Petitioners assail the ruling of the public respondent NLRC that what exists between
private respondent and petitioners is a joint venture arrangement and not an
employer-employee relationship. To stress that there is an employer-employee
relationship between them and private respondent, petitioners invite attention to the
following: that they were directly hired by private respondent through its general
manager, Arsenio de Guzman, and its operations manager, Conrado de Guzman;
that, except for Laurente Bautu, they had been employed by private respondent from
8 to 15 years in various capacities; that private respondent, through its operations
manager, supervised and controlled the conduct of their fishing operations as to the
fixing of the schedule of the fishing trips, the direction of the fishing vessel, the
volume or number of tubes of the fish-catch the time to return to the fishing port,
which were communicated to the patron/pilot by radio (single side band); that they
were not allowed to join other outfits even the other vessels owned by private
respondent without the permission of the operations manager; that they were
compensated on percentage commission basis of the gross sales of the fish-catch
which were delivered to them in cash by private respondent's cashier, Mrs. Pilar de
Guzman; and that they have to follow company policies, rules and regulations
imposed on them by private respondent.
Disputing the finding of public respondent that a "joint fishing venture" exists between
private respondent and petitioners, petitioners claim that public respondent exceeded
its jurisdiction and/or abused its discretion when it added facts not contained in the
records when it stated that the pilot-crew members do not receive compensation from
the boat-owners except their share in the catch produced by their own efforts; that
public respondent ignored the evidence of petitioners that private respondent
controlled the fishing operations; that public respondent did not take into account
established jurisprudence that the relationship between the fishing boat operators and
their crew is one of direct employer and employee.
Aside from seeking the dismissal of the petition on the ground that the decision of the
labor arbiter is now final and executory for failure of petitioners to file their appeal with
the NLRC within 10 calendar days from receipt of said decision pursuant to the
doctrine laid down in Vir-Jen Shipping and Marine Services, Inc. vs. NLRC, 115
SCRA 347 (1982), the Solicitor General claims that the ruling of public respondent
that a "joint fishing venture" exists between private respondent and petitioners rests
on the resolution of the Social Security System (SSS) in a 1968 case, Case No. 708
(De Guzman Fishing Enterprises vs. SSS), exempting De Guzman Fishing
Enterprises, private respondent herein, from compulsory coverage of the SSS on the
ground that there is no employer-employee relations between the boat-owner and the
fishermen-crew members following the doctrine laid down inPajarillo vs. SSS, 17
SCRA 1014 (1966). In applying to the case at bar the doctrine in Pajarillo
vs. SSS, supra, that there is no employer-employee relationship between the boat-
owner and the pilot and crew members when the boat-owner supplies the boat and
equipment while the pilot and crew members contribute the corresponding labor and
the parties get specific shares in the catch for their respective contribution to the
venture, the Solicitor General pointed out that the boat-owners in the Pajarillo case,
as in the case at bar, did not control the conduct of the fishing operations and the pilot
and crew members shared in the catch.
We rule in favor of petitioners.
Fundamental considerations of substantial justice persuade Us to decide the instant
case on the merits rather than to dismiss it on a mere technicality. In so doing, we
exercise the prerogative accorded to this Court enunciated in Firestone Filipinas
Employees Association, et al. vs. Firestone Tire and Rubber Co. of the
Philippines, Inc., 61 SCRA 340 (1974), thus "the well-settled doctrine is that in labor
cases before this Tribunal, no undue sympathy is to be accorded to any claim of a
procedural misstep, the idea being that its power be exercised according to justice
and equity and substantial merits of the controversy."
Circumstances peculiar to some extent to fishermen-crew members of a fishing
vessel regularly engaged in trawl fishing, as in the case of petitioners herein, who
spend one (1) whole week or more 7 in the open sea performing their job to earn a
living to support their families, convince Us to adopt a more liberal attitude in applying
to petitioners the 10-calendar day rule in the filing of appeals with the NLRC from the
decision of the labor arbiter.
Records reveal that petitioners were informed of the labor arbiter's decision of March
31, 1984 only on July 3,1984 by their non-lawyer representative during the arbitration
proceedings, Jose Dialogo who received the decision eight (8) days earlier, or on
June 25, 1984. As adverted to earlier, the circumstances peculiar to petitioners'
occupation as fishermen-crew members, who during the pendency of the case
understandably have to earn a living by seeking employment elsewhere, impress
upon Us that in the ordinary course of events, the information as to the adverse
decision against them would not reach them within such time frame as would allow
them to faithfully abide by the 10-calendar day appeal period. This peculiar
circumstance and the fact that their representative is a non-lawyer provide equitable
justification to conclude that there is substantial compliance with the ten-calendar day
rule of filing of appeals with the NLRC when petitioners filed on July 10, 1984, or
seven (7) days after receipt of the decision, their appeal with the NLRC through
registered mail.
We have consistently ruled that in determining the existence of an employeremployee relationship, the elements that are generally considered are the following
(a) the selection and engagement of the employee; (b) the payment of wages; (c) the
power of dismissal; and (d) the employer's power to control the employee with
respect to the means and methods by which the work is to be accomplished. 8 The
employment relation arises from contract of hire, express or implied. 9 In the absence
of hiring, no actual employer-employee relation could exist.
From the four (4) elements mentioned, We have generally relied on the so-called
right-of-control test 10 where the person for whom the services are performed reserves
a right to control not only the end to be achieved but also the means to be used in
reaching such end. The test calls merely for the existence of the right to control the
manner of doing the work, not the actual exercise of the right. 11
The case of Pajarillo vs. SSS, supra, invoked by the public respondent as authority
for the ruling that a "joint fishing venture" existed between private respondent and
petitioners is not applicable in the instant case. There is neither light of control nor
actual exercise of such right on the part of the boat-owners in the Pajarillo case,
where the Court found that the pilots therein are not under the order of the boatowners as regards their employment; that they go out to sea not upon directions of
the boat-owners, but upon their own volition as to when, how long and where to go
fishing; that the boat-owners do not in any way control the crew-members with whom
the former have no relationship whatsoever; that they simply join every trip for which
the pilots allow them, without any reference to the owners of the vessel; and that they
only share in their own catch produced by their own efforts.
The aforementioned circumstances obtaining in Pajarillo case do not exist in the
instant case. The conduct of the fishing operations was undisputably shown by the
testimony of Alipio Ruga, the patron/pilot of 7/B Sandyman II, to be under the control
and supervision of private respondent's operations manager. Matters dealing on the
fixing of the schedule of the fishing trip and the time to return to the fishing port were
shown to be the prerogative of private respondent. 12 While performing the fishing
operations, petitioners received instructions via a single-side band radio from private
respondent's operations manager who called the patron/pilot in the morning. They are
told to report their activities, their position, and the number of tubes of fish-catch in
one day. 13 Clearly thus, the conduct of the fishing operations was monitored by
private respondent thru the patron/pilot of 7/B Sandyman II who is responsible for
disseminating the instructions to the crew members.
The conclusion of public respondent that there had been no change in the situation of
the parties since 1968 when De Guzman Fishing Enterprises, private respondent
herein, obtained a favorable judgment in Case No. 708 exempting it from compulsory
coverage of the SSS law is not supported by evidence on record. It was erroneous for
public respondent to apply the factual situation of the parties in the 1968 case to the
instant case in the light of the changes in the conditions of employment agreed upon
by the private respondent and petitioners as discussed earlier.
Records show that in the instant case, as distinguished from the Pajarillo case where
the crew members are under no obligation to remain in the outfit for any definite
period as one can be the crew member of an outfit for one day and be the member of
the crew of another vessel the next day, the herein petitioners, on the other hand,
were directly hired by private respondent, through its general manager, Arsenio de
Guzman, and its operations manager, Conrado de Guzman and have been under the
employ of private respondent for a period of 8-15 years in various capacities, except
for Laurente Bautu who was hired on August 3, 1983 as assistant engineer. Petitioner
Alipio Ruga was hired on September 29, 1974 as patron/captain of the fishing vessel;
Eladio Calderon started as a mechanic on April 16, 1968 until he was promoted as
chief engineer of the fishing vessel; Jose Parma was employed on September 29,
1974 as assistant engineer; Jaime Barbin started as a pilot of the motor boat until he
was transferred as a master fisherman to the fishing vessel 7/B Sandyman II; Philip
Cervantes was hired as winchman on August 1, 1972 while Eleuterio Barbin was
hired as winchman on April 15, 1976.
While tenure or length of employment is not considered as the test of employment,
nevertheless the hiring of petitioners to perform work which is necessary or desirable
in the usual business or trade of private respondent for a period of 8-15 years since
1968 qualify them as regular employees within the meaning of Article 281 of the
Labor Code as they were indeed engaged to perform activities usually necessary or
desirable in the usual fishing business or occupation of private respondent. 14
Aside from performing activities usually necessary and desirable in the business of
private respondent, it must be noted that petitioners received compensation on a
percentage commission based on the gross sale of the fish-catch i.e. 13% of the
proceeds of the sale if the total proceeds exceeded the cost of the crude oil
consumed during the fishing trip, otherwise only 10% of the proceeds of the sale.
Such compensation falls within the scope and meaning of the term "wage" as defined
under Article 97(f) of the Labor Code, thus:
(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 included 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. . . .
The claim of private respondent, which was given credence by public respondent, that
petitioners get paid in the form of share in the fish-catch which the patron/pilot as
head of the team distributes to his crew members in accordance with their own
understanding 15 is not supported by recorded evidence. Except that such claim
appears as an allegation in private respondent's position paper, there is nothing in the

records showing such a sharing scheme as preferred by private respondent.
Furthermore, the fact that on mere suspicion based on the reports that petitioners
allegedly sold their fish-catch at midsea without the knowledge and consent of private
respondent, petitioners were unjustifiably not allowed to board the fishing vessel on
September 11, 1983 to resume their activities without giving them the opportunity to
air their side on the accusation against them unmistakably reveals the disciplinary
power exercised by private respondent over them and the corresponding sanction
imposed in case of violation of any of its rules and regulations. The virtual dismissal of
petitioners from their employment was characterized by undue haste when less
extreme measures consistent with the requirements of due process should have been
first exhausted. In that sense, the dismissal of petitioners was tainted with illegality.
Even on the assumption that petitioners indeed sold the fish-catch at midsea the act
of private respondent virtually resulting in their dismissal evidently contradicts private
respondent's theory of "joint fishing venture" between the parties herein. A joint
venture, including partnership, presupposes generally a parity of standingbetween the
joint co-venturers or partners, in which each party has an equal proprietary interest in
the capital or property contributed 16 and where each party exercises equal lights in
the conduct of the business. 17 It would be inconsistent with the principle of parity of
standing between the joint co-venturers as regards the conduct of business, if private
respondent would outrightly exclude petitioners from the conduct of the business
without first resorting to other measures consistent with the nature of a joint venture
undertaking, Instead of arbitrary unilateral action, private respondent should have
discussed with an open mind the advantages and disadvantages of petitioners' action
with its joint co-venturers if indeed there is a "joint fishing venture" between the
parties. But this was not done in the instant case. Petitioners were arbitrarily
dismissed notwithstanding that no criminal complaints were filed against them. The
lame excuse of private respondent that the non-filing of the criminal complaints
against petitioners was for humanitarian reasons will not help its cause either.
also because they were subject to the control, supervision and dismissal of the boatowner, thru its agent, Simplicio Panganiban, the alleged "partner" of Dr. Abong; that
while these fishermen crew members were paid in kind, or by "pakiao basis" still that
fact did not alter the character of their relationship with Dr. Abong as employees of the
latter.
In Philippine Fishing Boat Officers and Engineers Union vs. Court of Industrial
Relations, 112 SCRA 159 (1982), we held that the employer-employee relationship
between the crew members and the owners of the fishing vessels engaged in deep
sea fishing is merely suspended during the time the vessels are drydocked or
undergoing repairs or being loaded with the necessary provisions for the next fishing
trip. The said ruling is premised on the principle that all these activities i.e., drydock,
repairs, loading of necessary provisions, form part of the regular operation of the
company fishing business.
WHEREFORE, in view of the foregoing, the petition is GRANTED. The questioned
resolution of the National Labor Relations Commission dated May 30,1985 is hereby
REVERSED and SET ASIDE. Private respondent is ordered to reinstate petitioners to
their former positions or any equivalent positions with 3-year backwages and other
monetary benefits under the law. No pronouncement as to costs.
SO ORDERED.
We have examined the jurisprudence on the matter and find the same to be
supportive of petitioners' stand. InNegre vs. WCC 135 SCRA 653 (1985), we held that
fishermen crew members who were recruited by one master fisherman locally known
as "maestro" in charge of recruiting others to complete the crew members are
considered employees, not industrial partners, of the boat-owners. In an earlier case
of Abong vs. WCC, 54 SCRA 379 (1973) where petitioner therein, Dr. Agustin Abong,
owner of the fishing boat, claimed that he was not the employer of the fishermen crew
members because of an alleged partnership agreement between him, as financier,
and Simplicio Panganiban, as his team leader in charge of recruiting said fishermen
to work for him, we affirmed the finding of the WCC that there existed an employeremployee relationship between the boat-owner and the fishermen crew members not
only because they worked for and in the interest of the business of the boat-owner but
EN BANC
G.R. No. L-12444
February 28, 1963
STATES MARINE CORPORATION and ROYAL

vs.
CEBU SEAMEN'S ASSOCIATION, INC., respondent.
LINE,
INC., petitioners,
PAREDES, J.:
Petitioners States Marine Corporation and Royal Line, Inc. were engaged in the
business of marine coastwise transportation, employing therein several steamships of
Philippine registry. They had a collective bargaining contract with the respondent
Cebu Seamen's Association, Inc. On September 12, 1952, the respondent union filed
with the Court of Industrial Relations (CIR), a petition (Case No. 740-V) against the
States Marine Corporation, later amended on May 4, 1953, by including as party
respondent, the petitioner Royal Line, Inc. The Union alleged that the officers and
men working on board the petitioners' vessels have not been paid their sick leave,
vacation leave and overtime pay; that the petitioners threatened or coerced them to
accept a reduction of salaries, observed by other shipowners; that after the Minimum
Wage Law had taken effect, the petitioners required their employees on board their
vessels, to pay the sum of P.40 for every meal, while the masters and officers were
not required to pay their meals and that because Captain Carlos Asensi had refused
to yield to the general reduction of salaries, the petitioners dismissed said captain
who now claims for reinstatement and the payment of back wages from December
25, 1952, at the rate of P540.00, monthly.
The petitioners' shipping companies, answering, averred that very much below 30 of
the men and officers in their employ were members of the respondent union; that the
work on board a vessel is one of comparative ease; that petitioners have suffered
financial losses in the operation of their vessels and that there is no law which
provides for the payment of sick leave or vacation leave to employees or workers of
private firms; that as regards the claim for overtime pay, the petitioners have always
observed the provisions of Comm. Act No. 444, (Eight-Hour Labor Law),
notwithstanding the fact that it does not apply to those who provide means of
transportation; that the shipowners and operators in Cebu were paying the salaries of
their officers and men, depending upon the margin of profits they could realize and
other factors or circumstances of the business; that in enacting Rep. Act No. 602
(Minimum Wage Law), the Congress had in mind that the amount of P.40 per meal,
furnished the employees should be deducted from the daily wages; that Captain
Asensi was not dismissed for alleged union activities, but with the expiration of the
terms of the contract between said officer and the petitioners, his services were
terminated.
A decision was rendered on February 21, 1957 in favor of the respondent union. The
motion for reconsideration thereof, having been denied, the companies filed the
present writ of certiorari, to resolve legal question involved. Always bearing in mind
the deep-rooted principle that the factual findings of the Court of Industrial Relations
should not be disturbed, if supported by substantial evidence, the different issues are
taken up, in the order they are raised in the brief for the petitioners.
1. First assignment of error. The respondent court erred in holding that it had
jurisdiction over case No. 740-V, notwithstanding the fact that those who had
dispute with the petitioners, were less than thirty (30) in number.
The CIR made a finding that at the time of the filing of the petition in case
No. 740-V, respondent Union had more than thirty members actually working
with the companies, and the court declared itself with jurisdiction to take
cognizance of the case. Against this order, the herein petitioners did not file
a motion for reconsideration or a petition for certiorari. The finding of fact
made by the CIR became final and conclusive, which We are not now
authorized to alter or modify. It is axiomatic that once the CIR had acquired
jurisdiction over a case, it continues to have that jurisdiction, until the case is
terminated (Manila Hotel Emp. Association v. Manila Hotel Company, et al.,
40 O.G. No. 6, p. 3027). It was abundantly shown that there were 56
members who signed Exhibits A, A-I to A-8, and that 103 members of the
Union are listed in Exhibits B, B-1 to B-35, F, F-1 and K-2 to K-3. So that at
the time of the filing of the petition, the respondent union had a total
membership of 159, working with the herein petitioners, who were presumed
interested in or would be benefited by the outcome of the case (NAMARCO
v. CIR, L-17804, Jan. 1963). Annex D, (Order of the CIR, dated March 8,
1954), likewise belies the contention of herein petitioner in this regard. The
fact that only 7 claimed for overtime pay and only 7 witnesses testified, does
not warrant the conclusion that the employees who had some dispute with
the present petitioners were less than 30. The ruling of the CIR, with respect
to the question of jurisdiction is, therefore, correct.
2. Second assignment of error. The CIR erred in holding, that inasmuch
as in the shipping articles, the herein petitioners have bound themselves to
supply the crew with provisions and with such "daily subsistence as shall be
mutually agreed upon" between the master and the crew, no deductions for
meals could be made by the aforesaid petitioners from their wages or
salaries.
3. Third assignment of error. The CIR erred in holding that inasmuch as
with regard to meals furnished to crew members of a vessel, section 3(f) of
Act No. 602 is the general rule, which section 19 thereof is the exception, the
cost of said meals may not be legally deducted from the wages or salaries of
the aforesaid crew members by the herein petitioners.
4. Fourth assignment of error. The CIR erred in declaring that the
deduction for costs of meals from the wages or salaries after August 4, 1951,
is illegal and same should be reimbursed to the employee concerned, in
spite of said section 3, par. (f) of Act No. 602.
It was shown by substantial evidence, that since the beginning of the operation of the
petitioner's business, all the crew of their vessels have been signing "shipping
articles" in which are stated opposite their names, the salaries or wages they would
receive. All seamen, whether members of the crew or deck officers or engineers,
have been furnished free meals by the ship owners or operators. All the shipping
articles signed by the master and the crew members, contained, among others, a
stipulation, that "in consideration of which services to be duly performed, the said
master hereby agrees to pay to the said crew, as wages, the sums against their
names respectively expressed in the contract; and to supply them with provisions as
provided herein ..." (Sec. 8, par. [b], shipping articles), and during the duration of the
contract "the master of the vessel will provide each member of the crewsuch daily
subsistence as shall be mutually agreed daily upon between said master and crew;
or, in lieu of such subsistence the crew may reserve the right to demand at the time of
execution of these articles that adequatedaily rations be furnished each member of
the crew." (Sec. 8, par. [e], shipping articles). It is, therefore, apparent that, aside from
the payment of the respective salaries or wages, set opposite the names of the crew
members, the petitioners bound themselves to supply the crew with ship's provisions,
daily subsistence or daily rations, which include food.
This was the situation before August 4, 1951, when the Minimum Wage Law became
effective. After this date, however, the companies began deducting the cost of meals
from the wages or salaries of crew members; but no such deductions were made
from the salaries of the deck officers and engineers in all the boats of the petitioners.
Under the existing laws, therefore, the query converges on the legality of such
deductions. While the petitioners herein contend that the deductions are legal and
should not be reimbursed to the respondent union, the latter, however, claims that
same are illegal and reimbursement should be made.
Wherefore, the parties respectfully pray that the foregoing stipulation of facts be
admitted and approved by this Honorable Court, without prejudice to the parties
adducing other evidence to prove their case not covered by this stipulation of
facts. 1wph1.t
We hold that such deductions are not authorized. In the coastwise business of
transportation of passengers and freight, the men who compose the complement of a
vessel are provided with free meals by the shipowners, operators or agents, because
they hold on to their work and duties, regardless of "the stress and strain concomitant
of a bad weather, unmindful of the dangers that lurk ahead in the midst of the high
seas."
Section 3, par. f, of the Minimum Wage Law, (R.A. No. 602), provides as follows
(f) Until and unless investigations by the Secretary of Labor on his initiative
or on petition of any interested party result in a different determination of the
fair and reasonable value, the furnishing of meals shall be valued at not
more than thirty centavos per meal for agricultural employees and not more
than fortycentavos for any other employees covered by this Act, and the
furnishing of housing shall be valued at not more than twenty centavos daily
for agricultural workers and not more than forty centavos daily for other
employees covered by this Act.
Petitioners maintain, in view of the above provisions, that in fixing the minimum wage
of employees, Congress took into account the meals furnished by employers and that
in fixing the rate of forty centavos per meal, the lawmakers had in mind that the latter
amount should be deducted from the daily wage, otherwise, no rate for meals should
have been provided.
However, section 19, same law, states
SEC. 19. Relations to other labor laws and practices. Nothing in this Act
shall deprive an employee of the right to seek fair wages, shorter working
hours and better working conditions nor justify an employer in violating any
other labor law applicable to his employees, in reducing the wage now paid
to any of his employees in excess of the minimum wage established under
this Act, or in reducing supplements furnished on the date of enactment.
At first blush, it would appear that there exists a contradiction between the provisions
of section 3(f) and section 19 of Rep. Act No. 602; but from a careful examination of
the same, it is evident that Section 3(f) constitutes the general rule, while section 19 is
the exception. In other words, if there are no supplements given, within the meaning
and contemplation of section 19, but merely facilities, section 3(f) governs. There is
no conflict; the two provisions could, as they should be harmonized. And even if there
is such a conflict, the respondent CIR should resolve the same in favor of the safety
and decent living laborers (Art. 1702, new Civil Code)..
It is argued that the food or meals given to the deck officers, marine engineers and
unlicensed crew members in question, were mere "facilities" which should be
deducted from wages, and not "supplements" which, according to said section 19,
should not be deducted from such wages, because it is provided therein: "Nothing in
this Act shall deprive an employee of the right to such fair wage ... or in reducing
supplements furnished on the date of enactment." In the case of Atok-Big Wedge

Assn. v. Atok-Big Wedge Co., L-7349, July 19, 1955; 51 O.G. 3432, the two terms are
defined as follows
"Supplements", therefore, constitute extra remuneration or special privileges
or benefits given to or received by the laborers over and above their ordinary
earnings or wages. "Facilities", on the other hand, are items of expense
necessary for the laborer's and his family's existence and subsistence so
that by express provision of law (Sec. 2[g]), they form part of the wage and
when furnished by the employer are deductible therefrom, since if they are
not so furnished, the laborer would spend and pay for them just the same.
In short, the benefit or privilege given to the employee which constitutes an extra
remuneration above and over his basic or ordinary earning or wage, is supplement;
and when said benefit or privilege is part of the laborers' basic wages, it is a facility.
The criterion is not so much with the kind of the benefit or item (food, lodging, bonus
or sick leave) given, but its purpose. Considering, therefore, as definitely found by the
respondent court that the meals were freely given to crew members prior to August 4,
1951, while they were on the high seas "not as part of their wages but as a necessary
matter in the maintenance of the health and efficiency of the crew personnel during
the voyage", the deductions therein made for the meals given after August 4, 1951,
should be returned to them, and the operator of the coastwise vessels affected should
continue giving the same benefit..
In the case of Cebu Autobus Company v. United Cebu Autobus Employees Assn., L9742, Oct. 27, 1955, the company used to pay to its drivers and conductors, who
were assigned outside of the City limits, aside from their regular salary, a certain
percentage of their daily wage, as allowance for food. Upon the effectivity of the
Minimum Wage Law, however, that privilege was stopped by the company. The order
CIR to the company to continue granting this privilege, was upheld by this Court.
The shipping companies argue that the furnishing of meals to the crew before the
effectivity of Rep. Act No. 602, is of no moment, because such circumstance was
already taken into consideration by Congress, when it stated that "wage" includes the
fair and reasonable value of boards customarily furnished by the employer to the
employees. If We are to follow the theory of the herein petitioners, then a crew
member, who used to receive a monthly wage of P100.00, before August 4, 1951,
with no deduction for meals, after said date, would receive only P86.00 monthly (after
deducting the cost of his meals at P.40 per meal), which would be very much less
than the P122.00 monthly minimum wage, fixed in accordance with the Minimum
Wage Law. Instead of benefiting him, the law will adversely affect said crew member.
Such interpretation does not conform with the avowed intention of Congress in
enacting the said law.
One should not overlook a fact fully established, that only unlicensed crew members
were made to pay for their meals or food, while the deck officers and marine
engineers receiving higher pay and provided with better victuals, were not. This
pictures in no uncertain terms, a great and unjust discrimination obtaining in the
present case (Pambujan Sur United Mine Workers v. CIR, et al., L-7177, May 31,
1955).
Fifth, Sixth and Seventh assignments of error. The CIR erred in holding that
Severino Pepito, a boatsman, had rendered overtime work, notwithstanding the
provisions of section 1, of C.A. No. 444; in basing its finding ofthe alleged overtime,
on the uncorroborated testimony of said Severino Pepito; and in ordering the herein
petitioners to pay him. Severino Pepito was found by the CIR to have worked
overtime and had not been paid for such services. Severino Pepito categorically
stated that he worked during the late hours of the evening and during the early hours
of the day when the boat docks and unloads. Aside from the above, he did other jobs
such as removing rusts and cleaning the vessel, which overtime work totalled to 6
hours a day, and of which he has not been paid as yet. This statement was not
rebutted by the petitioners. Nobody working with him on the same boat "M/V Adriana"
contrawise. The testimonies of boatswains of other vessels(M/V Iruna and M/V
Princesa), are incompetent and unreliable. And considering the established fact that
the work of Severino Pepito was continuous, and during the time he was not working,
he could not leave and could not completely rest, because of the place and nature of
his work, the provisions of sec. 1, of Comm. Act No. 444, which states "When the
work is not continuous, the time during which the laborer is not working and can leave
his working place and can rest completely shall not be counted", find no application in
his case.
8. Eighth assignment of error. The CIR erred in ordering petitioners to reinstate
Capt. Carlos Asensi to his former position, considering the fact that said officer had
been employed since January 9, 1953, as captain of a vessel belonging to another
shipping firm in the City of Cebu.
The CIR held
Finding that the claims of Captain Carlos Asensi for back salaries from the
time of his alleged lay-off on March 20, 1952, is not supported by the
evidence on record, the same is hereby dismissed. Considering, however,
that Captain Asensi had been laid-off for a long time and that his failure to
report for work is not sufficient cause for his absolute dismissal, respondents
are hereby ordered to reinstate him to his former job without back salary but
under the same terms and conditions of employment existing prior to his layoff, without loss of seniority and other benefits already acquired by him prior
to March 20, 1952. This Court is empowered to reduce the punishment
meted out to an erring employee (Standard Vacuum Oil Co., Inc. v.
Katipunan Labor Union, G.R. No. L-9666, Jan. 30, 1957). This step taken is
in consonance with section 12 of Comm. Act 103, as amended." (p. 16,
Decision, Annex 'G').
The ruling is in conformity with the evidence, law and equity.
Ninth and Tenth assignments of error. The CIR erred in denying a duly verified
motion for new trial, and in overruling petitioner's motion for reconsideration.
The motion for new trial, supported by an affidavit, states that the movants have a
good and valid defense and the same is based on three orders of the WAS (Wage
Administration Service), dated November 6, 1956. It is alleged that they would
inevitably affect the defense of the petitioners. The motion for new trial is without
merit. Having the said wage Orders in their possession, while the case was pending
decision, it was not explained why the proper move was not taken to introduce them
before the decision was promulgated. The said wage orders, dealing as they do, with
the evaluation of meals and facilities, are irrelevant to the present issue, it having
been found and held that the meals or food in question are not facilities but
supplements. The original petition in the CIR having been filed on Sept. 12, 1952, the
WAS could have intervened in the manner provided by law to express its views on the
matter. At any rate, the admission of the three wage orders have not altered the
decision reached in this case.
IN VIEW HEREOF, the petition is dismissed, with costs against the petitioners.
THIRD DIVISION
"L" to the Petition. p. 8; Rollo, p. 116]. On 23 September 1976, complainant was again
subjected to an examination and interview by the Pilot Acceptance Qualifications
Board as part of the regularization process, which examination revealed the following:
G.R. No. 55159 December 22, 1989

PHILIPPINE
vs.
NATIONAL
LABOR
DOLINA, respondents.
AIRLINES,
RELATIONS
COMMISSION
INC., petitioner
and
ARMANDO
CORTES, J.:
Petitioner impugns in this petition for certiorari that part of the public respondent
National Labor Relations Commission's (NLRC) decision in NLRC Case No. RB-IV9319-77 which ordered petitioner to restore private respondent Dolina to its payroll,
and to pay his salaries from 1 April 1979 "until this case is finally resolved" [Rollo, p.
33]. Petitioner contends that public respondent NLRC gravely abused its discretion
considering that in the same decision public respondent affirmed the decision of the
Labor Arbiter in toto granting respondent's application for clearance to dismiss the
private respondent.
The pertinent facts are as follows:
Private respondent Dolina was admitted to the Philippine Airlines (PAL) Aviation
School for training as a pilot beginning 16 January 1973. The training agreement
bound PAL to provide regular and permanent employment to Dolina upon completion
of the training course. On 25 January 1974, Dolina completed the course, and
undertook an equipment qualification course up to 4 October 1974. On 9 October
1974, the Civil Aeronautics Administration issued him a license as Commercial Pilot
and PAL then extended him a temporary appointment for six (6) months as Limited
First Officer. When his appointment was due to expire on 30 April 1975, Dolina had
only logged eighty four (84) hours and fifty five (55) minutes flying time, short of the
minimum 500 flying hours required for regularization as First Officer. To enable him to
complete the requirement, his employment was extended for another six months
which appointment was described as "permanent." On 31 October 1975, when his
appointment was again due to expire, he was still short of the minimum flying time
requirement such that his appointment was again extended up to 30 April 1976.
During this third extension of his appointment, Dolina completed the 500 flying hours
requirement, and thus on 31 March 1976 he applied for regularization as First Officer.
Pending his physical examination by the chief Flight Surgeon, his appointment was
again extended to 31 October 1976. On 17 August 1976, Dolina took a psychological
examination wherein his "Adaptability Rating" was found to be "unacceptable" [Annex
xxx xxx xxx

b. Armando Dolina - After thorough evaluation of the candidate's past records, his
performance and the result of his medical examination as submitted by the
Medical Sub-Department, the Board finds Mr. A. Dolina not qualified for regular
employment in the Company.
xxx xxx xxx
[NLRC Decision, pp. 3-4; Rollo, pp. 25-26].
Conformably, the Board recommended the termination of the complainant pursuant to
which PAL filed a clearance application [Rollo, p. 34] for Dolina's termination. In the
meantime Dolina was placed under preventive suspension effective 1 October 1976.
Dolina countered with a complaint for illegal dismissal on 6 October 1976 [Rollo, 35].
On 26 January 1977 the Officer-in-Charge of the Department of Labor Regional Office
No. IV lifted the preventive suspension, and ordered petitioner to reinstate Dolina to
his former position with full backwages from 1 October 1976 up to actual
reinstatement. The issue of termination and damages was referred to the Executive
Labor Arbiter for compulsory arbitration [Rollo, p. 71].
Petitioner appealed the order lifting Dolina's suspension to the Secretary of Labor.
However, on 2 March 1977, pending the resolution of petitioner's appeal, the parties
signed an agreement before the Undersecretary of Labor, the terms of which are as
follows:
AGREEMENT
The undersigned parties hereby agree to the following:
1 While pending final resolution of the complaint of Mr. Armando Dolina against
the Philippine Airlines, he shall be considered in the payroll effective 1 October
1976.
2 The order of Regional Director Vicente Leogardo for the reinstatement with
backwages of Mr. Dolina is hereby rendered moot and academic.
3 The parties shall consider this arrangement pending final resolution of the case
by arbitration.
salaries from 1 April 1979, the date he was dropped from the respondent's
payroll.
xxx xxx xxx
WHEREFORE, the Decision appealed from should be as it is hereby affirmed in

toto. However the respondent is ordered to restore the complainant to its payroll
and to pay his salaries from 1 April 1979 until this case is finally resolved.
Subsequently, on 30 May 1977, the Acting Secretary of Labor issued an order finding
that the propriety of the suspension had been rendered moot and academic by the
above agreement and referred the case for compulsory arbitration to the Executive
Labor Arbiter [Annex "J" to the Petition; Rollo, p. 85]. On 23 March 1979, the Labor
Arbiter rendered its decision, the dispositive portion of which reads as follows:
SO ORDERED. [NLRC Decision, pp. 10-11; Rollo, pp. 32-33; Italics supplied]
IN VIEW OF ALL THE FOREGOING, it is our considered opinion that there is

merit on the application for clearance, and therefore, the same should be as it is
hereby GRANTED. Consequently, the oppositor's TERMINATION IS IN ORDER.
Hence, this petition, with a prayer for a temporary restraining order. The Court issued
a temporary restraining order on 10 October 1980. Private respondent Dolina failed to
file his comment and the Solicitor General submitted his own Comment supporting
the stand of petitioner. Due to the adverse stand of the Solicitor General, public
respondent NLRC submitted its own Comment.
Since the termination is upheld, perforce the claim for moral damages is denied.
Besides pursuant to P.D. No. 1367 dated May 1, 1978, this office is devoid of
jurisdiction to entertain said claim.
The issue before the Court is whether or not the NLRC committed grave abuse of
discretion in holding that private respondent Dolina was entitled to his salaries from 1
April 1979 "until this case is finally resolved."
SO ORDERED. [Decision of Labor Arbiter, p. 12; Rollo, p. 97].
PAL contends that inasmuch as the respondent Commission acting en banc had
affirmed in toto the decision of the Labor Arbiter granting petitioner the clearance for
the dismissal of private respondent Dolina, it is an act of grave abuse of discretion
amounting to lack of jurisdiction on its part to order petitioner to pay private
respondent's salaries from 1 April 1979 until the case is finally terminated. PAL
contends that said stipulation refers only to the resolution of the case by arbitration
and said arbitration of the case was terminated when the Labor Arbiter rendered its
decision dated 23 March 1979. PAL argues that the arbitration of the case is limited to
and comprises merely the proceedings before the Labor Arbiter such that when the
latter renders a decision, arbitration of the dispute is terminated .
By virtue of the above decision, PAL removed Dolina from its payroll effective 1 April
1979. Dolina then appealed the Labor Arbiter's decision to the public respondent
NLRC on 29 April 1979 and there filed a motion praying that PAL be ordered to return
him to PAL's payroll, contending that the Labor Arbiter's decision was not yet final
because of his timely appeal. PAL opposed the motion claiming that it was no longer
obliged to return Dolina to its payroll since the decision of the Labor Arbiter dated 23
March 1979 in its favor was a final resolution of the case by arbitration [Annex "N" to
the Petition, p. 1; Rollo, p. 137].
On 8 February 1980, public respondent NLRC rendered its decision containing the
assailed portion to wit:
xxx xxx xxx
In fine it is our considered view that the respondent's application for clearance to
dismiss the complainant has sufficiently surmounted the test of validity.
Be that as it may, we are not in accord with the discontinuation of the payment of
complainant's salaries. The agreement of the parties stipulated in no uncertain
terms that the complainant [Dolina] is to be carried in respondent's payroll until
this case is finally resolved. As things stand, the main issue is still being litigated.
The complainant, therefore, must be restored to the payroll and paid for his
Public respondent NLRC on the other hand contends that arbitration is a continuing
process from the time the case is referred by the Secretary of Labor to the Arbitration
Branch until the final judgment is had on appeal. Since the Labor Arbiter's decision in
favor of petitioner did not finally resolve the case in view of the timely appeal by
private respondent from said decision, the case was not yet finally terminated by
arbitration and Dolina is entitled to be placed in petitioner's payroll until the complaint
is finally resolved.
The above contentions call for the proper interpretation of the agreement between the
parties, specifically the third stipulation containing the clause "pending final resolution
of the case by arbitration."
It is a basic rule in interpretation of contracts that the circumstances under which an
instrument was made, including the situation of the subject thereof and the parties to
it, may be considered so that the intention of the contracting parties may be judged
correctly [Art. 1371, Civil Code of the Philippines; Section 11, Rule 130, Rules of
Court; Lim v. Court of Appeals, G.R. No. L-40258, September 11, 1980, 99 SCRA
668.] In the instant case, the stipulation in the 2 March 1977 agreement that Dolina
shag be included in the payroll of PAL until final resolution of the case by arbitration
was intended to supersede the order of the Regional Director which, by stipulation of
the parties, was rendered moot and academic. In lieu of reinstatement and the
payment of his backwages, private respondent was included in petitioner's payroll,
effective from the time he was preventively suspended until final resolution of the
case by arbitration, without having to perform any work for the petitioner. In entering
into the agreement, the parties could not have intended to include in the clause "final
resolution of the case by arbitration" the whole adjudicatory process, including
appeal. For if it were so, even proceedings on certiorari before this Court would be
embraced by the term "arbitration" and private respondent will continue to receive
monthly salary without rendering any service to the petitioner regardless of the
outcome of the proceedings before the Labor Arbiter, for as long as one of the parties
appeal to the NLRC and until the case is finally resolved by this Court. This is clearly
an absurdity which could not have been contemplated by the parties.
Neither can proceedings on appeal before the NLRC en banc be considered as part
of the arbitration proceeding. In its broad sense, arbitration is the reference of a
dispute to an impartial third person, chosen by the parties or appointed by statutory
authority to hear and decide the case in controversy [Chan Linte v. Law Union and
Rock, Ins. Co., 42 Phil. 548 (1921)]. When the consent of one of the parties is
enforced by statutory provisions, the proceeding is referred to as compulsory
arbitration. In labor cases, compulsory arbitration is the process of settlement of labor
disputes by a government agency which has the authority to investigate and to make
an award which is binding on all the parties [See Wood v. Seattle, 23 Wash. 1, 62 P
135, 52 LRA 369 (1920); Amalgamated Association v. Wisconsin Employees'
Relations Board, 340 U.S. 383-410,95 L. Ed. 381 (1951)]. Under the Labor Code, it is
the Labor Arbiter who is clothed with the authority to conduct compulsory arbitration
on cases involving termination disputes [Article 217, Pres. Decree No. 442, as
amended]. When the Labor Arbiter renders his decision, compulsory arbitration is
deemed terminated because by then the hearing and determination of the
controversy has ended. Any appeal raised by an aggrieved party from the Labor
Arbiter's decision is already beyond the scope of arbitration since in the appeal stage,
the NLRC en banc merely reviews the Labor Arbiter's decision for errors of fact or law
and no longer duplicates the proceedings before the Labor Arbiter. Thus, the clause
"pending final resolution of the case by arbitration" should be understood to be limited
only to the proceedings before the Labor Arbiter, such that when the latter rendered
his decision, the case was finally resolved by arbitration.
upholding the validity of Dolina's dismissal. In affirming the Labor Arbiter's decision
granting the termination clearance, the NLRC held that:
With respect to the issue of whether or not the complainant's [Dolina] dismissal
was sufficiently grounded, we are not persuaded that the respondent [herein
petitioner PAL] is under obligation to employ him as regular employee simply
because he was certified physically fit and technically to proficient by the CAA.
This is understandable for it concerns the safety of its properties, and above all,
the safety of the lives and properties of its passengers, which by law it is
committed to transport safely. In the absence, therefore, of any showing that its
standards are unreasonable and discriminatory, which we do not find here, We
cannot disturb them. We can only say that for exercising extraordinary diligence
in the selection of its pilots, We join the public in commending it.
xxx xxx xxx
In fine, it is Our considered view that the respondent's application
for clearance to dismiss the complainant has sufficiently
surmounted the test of validity.
In view of the above finding of valid dismissal, the NLRC had no authority to order the
continued payment of Dolina's salaries from 1 April 1979 until the case is finally
resolved. The NLRC's order would result in compensating Dolina for services no
longer rendered and when he is no longer in PAL's employ. This is contrary to the
age-old rule of "a fair day's wage for a fair day's labor" which continues to govern the
relation between labor and capital and remains a basic factor in determining
employees' wages [Durabilt Recapping Plant & Co. v. National Labor Relations
Commission, G.R. No. 76746, July 27, 1987, 152 SCRA 328]. So that, if there is no
work performed by the employee there can be no wage or pay unless the laborer was
able, willing and ready to work but was prevented by management or was illegally
locked out, suspended or dismissed. Where the employee's dismissal was for a just
cause, it would neither be fair nor just to allow the employee to recover something he
has not earned and could not have earned [Santos v. National Labor Relations
Commission, G.R. No. 76721, September 21, 1987, 154 SCRA 166].
Moreover, in ordering the continued payment of Dolina's salaries from 1 April 1979
until the case is finally resolved, the NLRC in effect ordered the payment of
backwages to Dolina notwithstanding its finding of a valid dismissal.
This is clearly untenable.
More important, however, is the fact that the NLRC's order for the continued payment
of Dolina's salaries is inconsistent with its affirmance of the Labor Arbiter's decision
In the first place, backwages in general are granted on grounds of equity for earnings
which a worker or employee has lost due to his illegal dismissal [New Manila Candy
Workers Union (NACONWA-PAFLU) v. Court of Industrial Relations, G.R. No. L29728, October 30, 1978, 86 SCRA 37; Durabilt Recapping Plant & Co. v. National
Labor Relations Commission, supra; Chong Guan Trading v. National Labor Relations
Commission, G. R. No. 81471, April 26, 1989; Santos v. National Labor Relations
Commission, supra]. Where, as in this case, the dismissal was for a just cause, there
is no factual or legal basis for ordering the payment of backwages. The order of the
NLRC for the continued payment of Dolina's salaries would allow the latter to unjustly
enrich himself at the expense of the petitioner. This Court has reiterated time and
again that the law, in protecting the rights of the laborer, authorizes neither oppression
nor self-destruction of the employer [Colgate Palmolive Philippines, Inc. v. Ople, G.R.
No. 73681, June 30,1988,163 SCRA 323]. In this case, the NLRC chose not to
adhere with fidelity to this doctrine.
SO ORDERED.
Secondly, NLRC's order for continued payment of Dolina's salary from 1 April 1979 up
to the final resolution of the case would place Dolina in a better position than those
workers who were found to have been illegally dismissed by their employer. For in the
latter case, the backwages that can be recovered by the worker is limited to three
years [Mercury Drug Co., Inc. v. Court of Industrial Relations, G.R. No. L-23357, April
30, 1974, 56 SCRA 694; Philippine Airlines, Inc. v. National Labor Relations
Commission, G.R. No. 64809, November 29, 1983, 126 SCRA 223; Madrigal & Co.,
Inc. v. Zamora, G.R. No. L-48237, Madrigal & Co., Inc. v. Minister of Labor, G.R. No.
L-49023, June 30,1987] while Dolina, whose dismissal was found to be valid, can
recover approximately ten years backwages, which corresponds to the period from 1
April 1979 until "final resolution" of the instant case.
Considering the foregoing, the Court holds that respondent NLRC's order for the
continued payment of Dolina's salaries from "l April 1979 until the case is finally
resolved" is contrary to law and established jurisprudence and the NLRC acted in
excess of its jurisdiction in issuing the assailed order. In the recent case of Llora
Motors, Inc. v. Drilon, G.R. No. 82895, November 7, 1989 the Court held as an act
without or in excess of jurisdiction the portion of the Labor Arbiter's award, which
required the employer to pay to its employee an amount equivalent to a half month's
pay for every year of service as retirement benefits, for being without basis either in
law or contract. Similarly, there is in this case an excess of jurisdiction on the part of
the NLRC in ordering the continued payment of Dolina's salaries "from 1 April 1979
until the case is finally resolved."
WHEREFORE, that part of the dispositive portion of the decision of the National
Labor Relations Commission in NLRC CASE NO. RB-IV-9319-77 requiring petitioner
to restore private respondent to its payroll and ordering the payment of his salaries
from 1 April 1979 until the case is finally resolved is hereby declared NULL and VOID
and SET ASIDE. The temporary Restraining Order issued by the Court on 10 October
1980 is made PERMANENT.
FIRST DIVISION
G.R. No. 128845
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
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.
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.
The School grants foreign-hires certain benefits not accorded localhires.1avvphi1 These include housing, transportation, shipping costs, taxes, and
home leave travel allowance. Foreign-hires are also paid a salary rate twenty-five
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:
KAPUNAN, J.:
Receiving salaries less than their counterparts hired abroad, the local-hires 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.1wphi1.nt
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) local-hires. 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?
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 along 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, Crescenciano 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.
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).
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 nonFilipino 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 applications 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
which include the employment contract.
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
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 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;
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 local-hires
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 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.
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.
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.
In this case, we 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.1avvphi1
We agree, however, that foreign-hires do not belong to the same bargaining unit as
the local-hires.
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, foreign-hires are accorded certain benefits not granted to localhires. These benefits, such as housing, transportation, shipping costs, taxes, and
home leave travel allowance, are reasonably related to their status as foreign-hires,
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.
EN BANC
G.R. No. L-5276
March 3, 1953
ATOK-BIG
WEDGE
MINING
CO.,
INC., petitioner,
vs.
ATOK-BIG WEDGE MUTUAL BENEFIT ASSOCIATION, respondent.
Vicente Hilado, Pedro Lopez and Artemio
Sanidad, Ayson and Casia for respondent.
A.
Almendral
for
petitioner.
LABRADOR, J.:
This is an appeal by certiorari against a decision of the Court of Industrial Relations.
On September 4, 1950, demand was submitted to petitioner by respondent union
through its officers for various concession, among which were (a) an increase of
P0.50 in wages, (b) commutation of sick and vacation leave if not enjoyed during the
year, (c) various privileges, such as free medical care, medicine, and hospitalization,
(d) right to a closed shop, check off, etc., (e) no dismissal without prior just cause and
with a prior investigation, etc. Some of the demands, were granted by the petitioner,
and the other were rejected, and so hearings were held and evidence submitted on
the latter. After the hearing the respondent court rendered a decision, the most
important provisions of which were those fixing the minimum wage for the laborers at
P3.20, declaring that additional compensation representing efficiency bonus should
not be included as part of the wage, and making the award effective from September
4, 1950. It is against these portion of the decision that this appeal is taken.
On the issue of the wage, it is contended by petitioner that as the respondent court
found that the laborer and his family at least need the amount of P2.58 for food, this
should be the basis for the determination of his wage, not what he actually spends;
that it is not justifiable to fix a wage higher than that provided by Republic Act No.
602; and that respondent union made the demand in accordance with a pernicious
practice of claiming more after an original demand is granted. The respondent court
found that P2.58 is the minimum amount actually needed by the laborer and his
family. That does not mean that it is his actual expense. A person's needs increase as
his means increase. This is true not only as to food but as to everything else
education, clothing, entertainment, etc. The law guarantees the laborer a fair and just
wage. The minimum must be fair and just. The "minimum wage" can by no means
imply only the actual minimum. Some margin or leeway must be provided, over and
above the minimum, to take care of contingencies such as increase of prices of
commodities and desirable improvement in his mode of living. Certainly, the amount
of P0.22 a day (difference between P2.80 fixed and P2.58 actual) is not excessive for
this purpose. That the P3 minimum wage fixed in the law is still far below what is
considered a fair and just minimum is shown by the fact that this amount is only for
the year after the law takes effect, as thereafter the law fixes it at P4. Neither may it
be correctly contended that the demand for increase is due to an alleged pernicious
practice. Frequent demands for increase are indicative of a healthy spirit of
wakefulness to the demands of a progressing and an increasingly more expensive
world. We, therefore, find no reason or ground for disturbing the finding contained in
the decision fixing the amount of P3.20 as the minimum wage.
It is next contended that the efficiency bonus paid the laborer should have been
included in his (minimum) wage, in the same manner as the value of living quarters.
Whether or not bonus forms part of wages depends upon the circumstances or
condition for its payment. If it is an additional compensation which the employer
promised and agreed to give without any conditions imposed for its payment, such as
success of business or greater production or output, then it is part of the wage. But if
it is paid only if profits are realized or a certain amount of productivity achieved, it
cannot be considered part of the wages. In the case at bar, it is not payable to all but
to laborers only. It is also paid on the basis of actual production or actual work
accomplished. If the desired goal of production is not obtained or the amount of actual
work accomplished, the bonus does not accrue. It is evidence that under the
circumstances it is paid only when the labor becomes more efficient or more
productive. It is only an inducement for efficiency, a prize therefor, not a part of the
wage.
The last question raised in the appeal is the grant of the increase from September 4,
1950, the date of the presentation of the original demand, instead of from April 5,
1951, the date of the amended demand. The decision states:
Both parties agreed that any award should be retroactive to the date of the
presentation of the demand, which is September 4, 1950. (Annex A, p. 5.)
The terms of the stipulation are clearly against petitioner's contention. There being no
question as to its (agreement) existence, the same must be given force and effect.
The petition is hereby dismissed, with costs.
EN BANC
G.R. No. L-23542
January 2, 1968
JUANA T. VDA. DE RACHO, plaintiff-appellee,

vs.
MUNICIPALITY OF ILAGAN, defendant-appellant.
BENGZON, J.P., J.:
Plaintiff Juana T. Vda. de Racho and the decedent, Manuel Racho, were spouses and
had five minor children. On July 1, 1954 the decedent was appointed as market
cleaner in the Municipality of Ilagan, Isabela, at the rate of P660.00 per annum
(P55.00 monthly) which amount he received up to June 30, 1958. On July 1, 1958,
decedent's salary was increased to P720.00 per annum (P60.00 monthly) by virtue of
a promotional appointment extended to him by the Municipal Mayor. He received this
amount until January 6, 1960 when he tendered his resignation effective July 7, 1960.
Decedent was then paid the money value of his accumulated leaves from January 7,
1960 to May 23, 1960 at the rate of P60.00 a month.
should have been implemented or at least steps to implement it should have been
taken right then. To excuse the defendant municipality now would be to permit it to
benefit from its non-feasance. It would also make the effectivity of the law dependent
upon the will and initiative of said municipality without statutory sanction. Defendant's
remedy, therefore, is not to seek an excuse from implementing the law but, as the
lower court suggested, to upgrade and improve its tax collection machinery with a
view towards realizing more revenues. Or, it could for the present forego all nonessential expenditures.
WHEREFORE, the appealed judgment is, as it is hereby affirmed. No costs. So
ordered.
On October 5, 1960, decedent died intestate at Ilagan. Plaintiff then filed on

December 9, 1960 a claim for salary differentials with the Regional Office of the
Department of Labor which dropped the case later for lack of jurisdiction.
Based on the foregoing facts, the Court of First Instance of Isabela, in an action
brought on December 5, 1961, by plaintiff, in her own behalf and as guardian ad
litem of her minor children, ruled that defendant Municipality of Ilagan must pay
P1,766.00 to plaintiff representing the wage differentials and adjusted terminal leave
of the decedent from December 9, 1957 1 to May 23, 1960, based on the monthly
wage rate of P120.00 pursuant to the Minimum Wage Law.
Defendant municipality immediately appealed the case to Us on the sole submission
that its shortage and lack of available funds and expected revenue validly exempted it
from complying with the Minimum Wage Law.
The appeal must be dismissed. We have already answered the question posed
in Rivera vs. Colago, L-12323, February 24, 1961, wherein We ruled that lack of
funds of a municipality does not excuse it from paying the statutory minimum wages
to its employees, which, after all, is a mandatory statutory obligation of the
municipality. To uphold such defense of lack of available funds would render the
Minimum Wage Law futile and defeat its purpose. This also disposes of the
implication appellant is trying to make that its duty to pay minimum wages is not a
statutory obligation which would command preference in the municipal budget and
appropriation ordinance.2
Moreover, We cannot sanction appellant's proposition that it would eventually and
gradually implement the Minimum Wage Law, "if and when its revenues can afford."
The law insofar as it affects government employees took effect in 1952. 3 It
SECOND DIVISION
G.R. No. 144619 November 11, 2005
C.
PLANAS
COMMERCIAL
and/or
MARCIAL
COHU, Petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (Second Division), ALFREDO
OFIALDA, DIOLETO MORENTE and RUDY ALLAUIGAN, Respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
Before us is a petition for review on certiorari filed by C. Planas Commercial and/or
Marcial Cohu, (petitioners) assailing the Decision of the Court of Appeals (CA) dated
January 19, 20001 which affirmed in toto the decision of the National Labor Relations
Commission (NLRC) and the Resolution dated August 15, 20002 denying petitioners
motion for reconsideration.
On September 14, 1993, Dioleto Morente, Rudy Allauigan and Alfredo Ofialda (private
respondents) together with 5 others3 filed a complaint for underpayment of wages,
nonpayment of overtime pay, holiday pay, service incentive leave pay and premium
pay for holiday and rest day and night shift differential against petitioners with the
Arbitration Branch of the NLRC. The case was docketed as NLRC Case No. 00-0905804-93.4
In their position paper, private respondents alleged that petitioner Cohu, owner of C.
Planas Commercial, is engaged in wholesale of plastic products and fruits of different
kinds with more than 24 employees; that private respondents were hired by
petitioners on January 14, 1990, May 14, 1990 and July 1, 1991, respectively, as
helpers/laborers; that they were paid below the minimum wage law for the past 3
years; that they were required to work for more than 8 hours a day without overtime
pay; that they never enjoyed holiday pay and did not have a rest day as they worked
for 7 days a week; and they were not paid service incentive leave pay although they
had been working for more than one year. Private respondent Ofialda asked for night
shift differential as he had worked from 8 p.m. to 8 a.m. the following day for more
than one year.
Petitioners filed their comment admitting that private respondents were their helpers
who used to accompany the delivery trucks and helped in the loading and unloading
of merchandise being distributed to clients; that they usually started their work from
10 a.m. to 6 p.m.; that private respondents stopped working with petitioners sometime
in September 1993 as they were already working in other establishments/stalls in
Divisoria; that they only worked for 6 days a week; that they were not entitled to
holiday and service incentive leave pays for they were employed in a retail and
service establishment regularly employing less than ten workers.
On December 6, 1994, a decision5 was rendered by the Labor Arbiter dismissing

private respondents money claims for lack of factual and legal basis. He made the
following findings:
The basic issue raised before us is whether or not complainants are entitled to the
money claims.
The rule in this jurisdiction is that employers who are regularly employing not more
than ten workers in retail establishments are exempt from the coverage of the
minimum wage law.
In connection therewith and in consonance with Sec. 1, Rule 131 of the Rules of
Court, it is incumbent upon the party to support affirmative allegation that an employer
regularly employs more than ten (10) workers.
In the case at bar, complainants failed to substantiate their claim that the respondent
establishment regularly employs twenty (sic) (24) workers.
Accordingly, we have no factual basis to grant salary differentials to complainants. In
the same context, under Sec. 1 (b), Rule IV and Sec. 1(g), Rule V of the
Implementing Rules of the Labor Code, complainants are not entitled to legal holiday
pay and service incentive leave pay.
We also do not have sufficient factual basis to award overtime pay and premium pay
for holiday and rest day because complainants failed to substantiate that they
rendered overtime and during rest days.6
Private respondents filed their appeal with the NLRC which was opposed by
petitioners. However, pending the appeal, private respondents Morente 7 and
Allauigan8 filed their respective motions to dismiss with release and quitclaim before
the NLRC.
On September 30, 1997, the NLRC rendered its decision, 9 the dispostive portion of
which reads:
WHEREFORE, in view of all the foregoing considerations, the decision appealed from
should be, as it is hereby, MODIFIED by directing the respondent to pay Alfredo
Ofialda, Diolito Morente and Rudy Allauigan the total amount of Seventy-Five
Thousand One Hundred Twenty Five Pesos (P75,125.00) representing their
combined salary differentials, holiday pay, and service incentive leave pay.
The NLRC made the following ratiocinations:
On claims for underpayment/non-payment of legally mandated wages and fringe
benefits where exemption from coverage of the minimum wage law is put up as a
defense, he who invokes such an exemption (usually the employer) has the burden of
showing the basis for the exemption like for instance the fact of employing regularly
less than ten workers.
In the instant case, complainants alleged that despite employing more than twentyfour (24) workers in his establishment, hence covered by the minimum wage law,
nevertheless the individual respondent did not pay his workers the legal rates and
benefits due them since their employment. By way of answer, respondents countered
that they employ less than ten (10) persons, hence the money claims of complainants
lack factual and legal basis.
Stated differently, against complainants charge of underpayment in wages and nonpayment of fringe benefits legally granted to them, the respondents raised the
defense of exemption from coverage of the minimum wage law and in support thereof
alleged that they regularly employed less than ten (10) workers to serve as basis for
their exemption under the law, they (respondents) must prove that they employed less
than ten workers, instead of more than twenty-four (24) workers as alleged by the
complainants.
However, apart from their allegation, respondents presented no evidence to show the
number of workers they employed regularly. This failure is fatal to respondents
defense. This in turn brings us to the question of whether the complainants were
underpaid and unpaid of legal holiday pay and service incentive leave pay due them.
Stated earlier are the different amounts that each complainant was receiving by way
of salary on certain periods of their employment with respondents, which amounts
according to complainants are "way below the minimum wage then prevailing."
Considering that respondents failed to present the payrolls or vouchers which could
prove otherwise, the money claims deserve favorable consideration.
Taking note of the 3 year prescription, the period covered is from September 14, 1990
to September 14, 1993 when the instant case was filed, and based on a 6-day work
per week, the underpayment (salary differential), legal holiday pay, and service
incentive leave pay due to complainants, as computed, are as follows:
Salary Diff.
Holiday Pay
SILP
1. A. OFIALDA
P14,934.00
P2,362.00
P1,180.00
2. D. MORENTE
23,964.00
3,258.00
1,730.00
3. R. ALLAUIGAN
22,609.00
3,258.00
1,730.00
With respect to the other claims, i.e., overtime pay and premium pay for holiday and
rest day, We find no reason to disturb the Labor Arbiters ruling thereon, that there is
no sufficient factual basis to award the claims because complainants failed to
substantiate that they rendered overtime and during rest days. These claims, unlike
claims for underpayment and non-payment of fringe benefits mandated by law, need
to be proven by the claimants.10
Petitioners filed a petition for certiorari11 with prayer for temporary restraining order
and preliminary injunction before this Court on November 26, 1997. Respondents
were required to file their Comment but only public respondent NLRC, through the
Solicitor General, complied therewith. In a Resolution dated June 28, 1999, 12 the
petition was referred to the CA pursuant to our ruling in St. Martin Funeral Homes vs.
NLRC.
On January 19, 2000,13 the CA denied the petition for lack of merit and affirmed in
toto the NLRC decision. It said:
Having claimed exemption from the coverage of the minimum wage laws or order, it
was incumbent upon petitioner to prove such claim. Apart from simply denying private
respondents allegation that it employs more than 24 workers in its business,
petitioner failed to adduce evidence to prove that it is, indeed, a "retail establishment"
which employs less than ten (10) employees. Its failure to present records of its
workers and their respective wages gives rise to the presumption that these are
adverse to its claims. Indeed, it is hard to believe that petitioner does not keep such
records. More so, considering private respondents claim that petitioner "employs
more than twenty four (24) employees and engaged in both wholesale and retail
business of fruits by volume on CONTAINER BASIS, not by price of fruit, but by
container size retail, involving millions of pesos capital, fruits coming from China,
Australia and the United States" (p. 170, Rollo).
Needless to say, the inclusion of respondents Morente and Allauigan in the NLRC
award is in order. In its decision, public respondent awarded P75,125.00,
representing the combined salary differentials, holiday pay and service incentive
leave pay of all three (3) private respondents. Of this, P28,952.00 is earmarked for
respondent Morente, and P27,597.00 for respondent Allauigan, both of whom
executed quitclaims after receiving P3,000.00 and P6,000.00 respectively, from
petitioner.
On this score, the Court quotes with approval the arguments advanced by the
Solicitor General thus:
While a compromise agreement or amicable settlement is not against public policy
per se it must be shown however that it was "voluntarily entered into and represents a
reasonable settlement, and the consideration for the quitclaim is credible and
reasonable" (Santiago v. NLRC, 198 SCRA 111 [1991]). For the law usually looks with
disfavor upon quitclaims and releases executed by employees usually resulting from
a compromise with their employers. (Velasco v. DOLE, 200 SCRA 201 [1991]). This is
so because the employers and the employees obviously do not stand on equal
footing. Driven against the wall by the employer, the employee is in no position to
resist the money offered. (Lopez Sugar Corp v. FFW-PLU, 189 SCRA 179 [1990]).
Thus, Fuentes v. NLRC, 167 SCRA 767 (1988) enunciates:
In the absence of any showing that the compromise settlement and the quitclaims
and releases entered into and made by the employees were free, fair and
reasonable- especially as to the amount or consideration given by the employer in
exchange therefore, the fact that they executed the same and received their monetary
benefits thereunder does not militate against them. The Law does not consider as
valid any agreement to receive less compensation than what a worker is entitled to
receive.
In the case at bar, it will be noticed that the vouchers dated September 13, 1995 and
September 20, 1996 (pp. 194 and 197, NLRC Record), submitted by petitioners (pp.
191-192, Record), show that private respondent Allauigan was only paid P6,000.00
and Morente, P3,000.00 --- when they are legally entitled to receiveP28,952.00
and P27,597.00, respectively. Under the circumstances, subject compromise
settlements cannot be considered valid and binding upon the NLRC as they do not
represent fair and reasonable settlements, nor do they demonstrate voluntariness on
the part of private respondents Morente and Allauigan. These employees should still
be paid the full amounts of their salary differentials, holiday pay and service incentive
leave pay less the amounts they had already received under the compromise
settlements with petitioners (pp. 174-175, Rollo).
Parenthetically, the Court notes that petitioner availed itself of this remedy without first
seeking a reconsideration of the assailed decision. As a general rule, certiorari will not
lie unless an inferior court, has through a motion for reconsideration, a chance to
correct the errors imputed to it. While the rule admits of exceptions, petitioner has not
shown any reason for this Court not to apply said rule, which would have justified
outright dismissal of the petition were it not for the Courts desire to resolve the case
not on a technicality but on the merits.14
Petitioners motion for reconsideration was denied in a Resolution dated August 15,
2000.15
Hence, the instant petition for review on certiorari filed by petitioners.
Petitioners insist that C. Planas Commercial is a retail establishment principally
engaged in the sale of plastic products and fruits to the customers for personal use,
thus exempted from the application of the minimum wage law; that it merely leases
and occupies a stall in the Divisoria Market and the level of its business activity
requires and sustains only less than ten employees at a time. Petitioners contend that
private respondents were paid over and above the minimum wage required for a retail
establishment, thus the Labor Arbiter is correct in ruling that private respondents
claim for underpayment has no factual and legal basis. Petitioners claim that since
private respondents alleged that petitioners employed 24 workers, it was incumbent
upon them to prove such allegation which private respondents failed to do.
Petitioners also contend that the CA erred in applying strictly the rules of evidence
against them by holding that it was incumbent upon them to prove that their company
is exempted from the minimum wage law. They contend that they could not present
records of their workers and their respective wages because by the very nature of
their business, the system of management is very loose and informal, thus salaries
and wages are paid by merely handing the money to the worker without the latter
being required to sign anything as proof of receipt. Thus, it would be unreasonable to
insist upon petitioner to present documents that they do not possess or keep in the
first place.
We are not persuaded.
R.A. No. 6727 known as the Wage Rationalization Act provides for the statutory
minimum wage rate of all workers and employees in the private sector. Section 4 of
the Act provides for exemption from the coverage, thus:
Sec. 4.
...
(c) Exempted from the provisions of this Act are household or domestic helpers and
persons employed in the personal service of another, including family drivers.
Retail/service establishments regularly employing not more than ten (10) workers
may be exempted from the applicability of this Act upon application with and as
determined by the appropriate Regional Board in accordance with the applicable rules
and regulations issued by the Commission. Whenever an application for exemption
has been duly filed with the appropriate Regional Board, action on any complaint for
alleged non-compliance with this Act shall be deferred pending resolution of the
application for exemption by the appropriate Regional Board.
In the event that applications for exemptions are not granted, employees shall receive
the appropriate compensation due them as provided for by this Act plus interest of
one percent (1%) per month retroactive to the effectivity of this Act.
Clearly, for a retail/service establishment to be exempted from the coverage of the
minimum wage law, it must be shown that the establishment is regularly employing
not more than ten (10) workers and had applied for exemptions with and as
and regulations issued by the Commission. Petitioners main defense in controverting
private respondents claim for underpayment of wages is that they are exempted from
the application of the minimum wage law, thus the burden of proving 16 such
exemption rests on petitioners. Petitioners had not shown any evidence to show that
they had applied for such exemption and if they had applied, the same was granted.
In Murillo vs. Sun Valley Realty, Inc.17 where the respondents claim that petitioners
therein are not entitled to service incentive leave pay inasmuch as establishment
employing less than ten (10) employees are exempted by the Labor Code and the
Implementing Rules from paying service incentive leave pay, we held:
..the clear policy of the Labor Code is to include all establishments, except a few
classes, under the coverage of the provision granting service incentive leave to
workers. Private respondents' claim is that they fell within the exception. Hence, it
was incumbent upon them to prove that they belonged to a class excepted by law
from the general rule. Specifically, it was the duty of respondents, not of petitioners, to
prove that there were less than ten (10) employees in the company. Having failed to
discharge its task, private respondents must be deemed to be covered by the general
rule, notwithstanding the failure of petitioners to allege the exact number of
employees of the corporation. In other words, petitioners must be deemed entitled to
service incentive leave.18
Moreover, in C. Planas Commercial vs. NLRC,19 where herein petitioners are also
involved in a case filed by one of its employees, we ruled:
Petitioners invoke the exemption provided by law for retail establishments which
employ not more than ten (10) workers to justify their non-liability for the salary
differentials in question. They insist that PLANAS is a retail establishment leasing a
very small and cramped stall in the Divisoria market which cannot accommodate
more than ten (10) workers in the conduct of its business.
We are unconvinced. The records disclose de los Reyes' clear entitlement to salary
differentials. Well-settled is the rule that factual findings of labor officials who are
deemed to have acquired expertise in matters within their jurisdiction are generally
accorded not only respect but even finality and bind this Court when supported by
substantial evidence or that amount of relevant evidence which a reasonable mind
might accept as adequate to justify a conclusion. Thus, as long as their decisions are
devoid of any unfairness or arbitratriness in the process of their deduction from the
evidence proferred by the parties before them, all that is left is our stamp of finality by
affirming the factual findings made by them. In this case, the award of salary
differentials by the NLRC in favor of de los Reyes was made pursuant to RA 6727
otherwise known as the Wage Rationalization Act, and the Rules Implementing Wage
Order Nos. NCR-01 and NCR-01-A and Wage Order Nos. NCR-02 and NCR-02-A.
Petitioners claim exemption under the aforestated law. However, the best proof that
they could have adduced was their approved application for exemption in accordance
with applicable guidelines issued by the Commission. Section 4, subpar. (c) of RA
6727 categorically provides:
Retail/service establishments regularly employing not more than ten (10) workers
may be exempted from the applicability of this Act upon application with and as
and regulations issued by the Commission. Whenever an application for exemption
has been duly filed with the appropriate Regional Board, action on any complaint for
alleged non-compliance with this Act shall be deferred pending resolution of the
application for exemption by the appropriate Regional Board. In the event that
applications for exemptions are not granted, employees shall receive the appropriate
compensation due them as provided for by this Act plus interest of one percent (1%)
per month retroactive to the effectivity of this Act (emphasis supplied).
Extant in the records is the fact that petitioners had persistently raised the matter of
their exemption from any liability for underpayment without substantiating it by
showing compliance with the aforecited provision of law. It bears stressing that the
NLRC affirmed the Labor Arbiters award of salary differentials due to underpayment
on the ground that de los Reyes' claim therefor was not even denied or rebutted by
petitioners.
More importantly, NLRC correctly upheld the Labor Arbiter's finding that PLANAS
employed around thirty (30) workers. We have every reason to believe that petitioners
need at least thirty (30) persons to conduct their business considering that Manager
Cohu did not submit any employment record to prove otherwise. As employer,
Manager Cohu ought to be the keeper of the employment records of all his workers.
Thus, it was well within his means to refute any monetary claim alleged to be unpaid.
His inability to produce the payrolls from their files without any satisfactory
explanation can be interpreted no less as suppression of vital evidence adverse to
PLANAS.
Petitioners aver that the CA erred in ruling that private respondents Morente and
Allauigan are still entitled to monetary awards despite the latters execution of release
and quitclaims because the settlement was not voluntarily entered into by private
respondents. Petitioners insist that both private respondents Morente and Allauigan
voluntarily entered into an amicable settlement with them on September 17 and 18,
1995, respectively; that they were the ones who initiated the talks for settlement and
who pegged the amount; that they both voluntarily appeared before the Labor Arbiter
to move for the dismissal of their case insofar as their claims are concerned as well
as submitted to the Labor Arbiter their respective quitclaims and releases which were
duly subscribed before the Labor Arbiter and duly notarized.
We find merit in petitioners argument.
It has been held that not all quitclaims are per se invalid or against public policy,
except (1) where there is clear proof that the waiver was wangled from an
unsuspecting or gullible person, or (2) where the terms of settlement are
unconscionable on their face. In these cases, the law will step in to annul the
questionable transactions.20Such quitclaim and release agreements are regarded as
ineffective to bar the workers from claiming the full measure of their legal rights. 21
We find these two instances not present in private respondents Allauigan and
Morentes case. They failed to refute petitioners allegation that the settlement was
voluntarily made as they had not filed any pleadings before the CA. Notably, we have
required private respondents to file their comment on the instant petition, however,
they failed to do so. They were then required to show cause why they should not be
disciplinarily dealt with or held in contempt.22 However, they still failed to file their
comment, thus, they were imposed a fine of P1,000.0023 which was subsequently
increased to P2,000.00 as there was still no compliance. In a Resolution dated July
22, 2002, the Court ordered the National Bureau of Investigation to arrest and detain
private respondents and the private respondents to file their comment. 24 As private
respondents could not be located at their given address and they are not known in
their locality, the order of arrest and commitment was returned unserved, 25 thus the
Court required the Office of the Solicitor General to file the comment in behalf of all
the respondents.26 The Court finds such inaction on the part of private respondents
Allauigan and Morente an indication that they already relented in their claims and
gives credence to petitioners claim that they had voluntarily executed the release and
quitclaim and the motion to dismiss.
The CA found that the subject compromise agreements are not valid considering that
they did not represent the fair and reasonable settlements, i.e., that private
respondent Allauigan was only paid P6,000.00 and Morente,P3,000.00 --- when they
are legally entitled to receive P28,952.00 and P27,597.00, respectively.
We do not agree. It bears stressing that at the time of the execution of the release
and quitclaim, the case filed by private respondents against petitioners was already
dismissed by the Labor Arbiter and it was pending appeal before the NLRC. Private
respondents could have executed the release and quitclaim because of a possibility
that their appeal with the NLRC may not be successful. Since there was yet no
decision rendered by the NLRC when the quitclaims were executed, it could not be
said that the amount of the settlement is unconscionable. In any event, no deception
has been established that would justify the annulment of private respondents
quitclaims.27 InMercer vs. NLRC,28 we held that:
In Samaniego v. NLRC, we ruled that: "A quitclaim executed in favor of a company by
an employee amounts to a valid and binding compromise agreement between them."
Recently, we held that in the absence of any showing that petitioner was "coerced or
tricked" into signing the above-quoted Quitclaim and Release or that the
consideration thereof was very low, she is bound by the conditions thereof.
As computed by the NLRC, private respondent Alfredo Ofialda is entitled to the
payment of P14,934.00 as salary differential, P2,362.00 as legal holiday pay
and P1,180.00 as service incentive leave pay, all in the total amount ofP18,476.00.
WHEREFORE, the petition is PARTLY GRANTED. The Decision of the Court of
Appeals dated January 19, 2000 and its Resolution dated August 15, 2000
are AFFIRMED with MODIFICATION that petitioners are ordered to pay private
respondent Alfredo Ofialda the total amount of P18,476.00 and the monetary awards
in favor of private respondents Rudy Allauigan and Dioleto Morente are
hereby DELETED.
SO ORDERED.
THIRD DIVISION
G.R. No. 102132. March 19, 1993.
DAVAO INTEGRATED PORT STEVEDORING SERVICES, petitioner, vs. RUBEN V.
ABARQUEZ, in his capacity as an accredited Voluntary Arbitrator and THE
ASSOCIATION OF TRADE UNIONS (ATU-TUCP), respondents.
Libron, Gaspar & Associates for petitioner.
Bansalan B. Metilla for Association of Trade Unions (ATUTUCP).
SYLLABUS
1. LABOR LAWS AND SOCIAL LEGISLATION; LABOR RELATIONS; COLLECTIVE
BARGAINING AGREEMENT; DEFINED; NATURE THEREOF; CONSTRUCTION TO
BE PLACED THEREON. A collective bargaining agreement (CBA), as used in
Article 252 of the Labor Code, refers to a contract executed upon request of either the
employer or the exclusive bargaining representative incorporating the agreement
reached after negotiations with respect to wages, hours of work and all other terms
and conditions of employment, including proposals for adjusting any grievances or
questions arising under such agreement. While the terms and conditions of a CBA
constitute the law between the parties, it is not, however, an ordinary contract to
which is applied the principles of law governing ordinary contracts. A CBA, as a labor
contract within the contemplation of Article 1700 of the Civil Code of the Philippines
which governs the relations between labor and capital, is not merely contractual in
nature but impressed with public interest, thus, it must yield to the common good. As
such, it must be construed liberally rather than narrowly and technically, and the
courts must place a practical and realistic construction upon it, giving due
consideration to the context in which it is negotiated and purpose which it is intended
to serve.
2. ID.; ID.; ID.; ID.; ID.; ID.; CASE AT BAR. It is thus erroneous for petitioner to
isolate Section 1, Article VIII of the 1989 CBA from the other related section on sick
leave with pay benefits, specifically Section 3 thereof, in its attempt to justify the
discontinuance or withdrawal of the privilege of commutation or conversion to cash of
the unenjoyed portion of the sick leave benefit to regular intermittent workers. The
manner they were deprived of the privilege previously recognized and extended to
them by petitioner-company during the lifetime of the CBA of October 16, 1985 until
three (3) months from its renewal on April 15, 1989, or a period of three (3) years and
nine (9) months, is not only tainted with arbitrariness but likewise discriminatory in
nature. It must be noted that the 1989 CBA has two (2) sections on sick leave with
pay benefits which apply to two (2) distinct classes of workers in petitioner's company,
namely: (1) the regular non-intermittent workers or those workers who render a daily
eight-hour service to the company and are governed by Section 1, Article VIII of the
1989 CBA; and (2) intermittent field workers who are members of the regular labor
pool and the present regular extra labor pool as of the signing of the agreement on
April 15, 1989 or those workers who have irregular working days and are governed by
Section 3, Article VIII of the 1989 CBA. It is not disputed that both classes of workers
are entitled to sick leave with pay benefits provided they comply with the conditions
set forth under Section 1 in relation to the last paragraph of Section 3, to wit: (1) the
employee-applicant must be regular or must have rendered at least one year of
service with the company; and (2) the application must be accompanied by a
certification from a company-designated physician. the phrase "herein sick leave
privilege," as used in the last sentence of Section 1, refers to the privilege of having a
fixed 15-day sick leave with pay which, as mandated by Section 1, only the nonintermittent workers are entitled to. This fixed 15-day sick leave with pay benefit
should be distinguished from the variable number of days of sick leave, not to exceed
15 days, extended to intermittent workers under Section 3 depending on the number
of hours of service rendered to the company, including overtime pursuant to the
schedule provided therein. It is only fair and reasonable for petitioner-company not to
stipulate a fixed 15-day sick leave with pay for its regular intermittent workers since,
as the term "intermittent" implies, there is irregularity in their work-days. Reasonable
and practical interpretation must be placed on contractual provisions. Interpetatio
fienda est ut res magis valeat quam pereat. Such interpretation is to be adopted, that
the thing may continue to have efficacy rather than fail.
3. ID.; ID.; ID.; SICK LEAVE BENEFITS; NATURE AND PURPOSE. Sick leave
benefits, like other economic benefits stipulated in the CBA such as maternity leave
and vacation leave benefits, among others, are by their nature, intended to be
replacements for regular income which otherwise would not be earned because an
employee is not working during the period of said leaves. They are non-contributory in
nature, in the sense that the employees contribute nothing to the operation of the
benefits. By their nature, upon agreement of the parties, they are intended to alleviate
the economic condition of the workers.
4. ID.; ID.; JURISDICTION OF VOLUNTARY ARBITRATOR; CASE AT BAR.
Petitioner-company's objection to the authority of the Voluntary Arbitrator to direct the
commutation of the unenjoyed portion of the sick leave with pay benefits of
intermittent workers in his decision is misplaced. Article 261 of the Labor Code is
clear. The questioned directive of the herein public respondent is the necessary
consequence of the exercise of his arbitral power as Voluntary Arbitrator under Article
261 of the Labor Code "to hear and decide all unresolved grievances arising from the
interpretation or implementation of the Collective Bargaining Agreement." We,
therefore, find that no grave abuse of discretion was committed by public respondent
in issuing the award (decision). Moreover, his interpretation of Sections 1 and 3,
Article VIII of the 1989 CBA cannot be faulted with and is absolutely correct.
5. ID.; CONDITIONS OF EMPLOYMENT; PROHIBITION AGAINST ELIMINATION
OR DIMINUTION OF BENEFITS; BENEFITS GRANTED PURSUANT TO COMPANY
PRACTICE OR POLICY CANNOT BE PEREMPTORILY WITHDRAWN. Whatever
doubt there may have been early on was clearly obliterated when petitioner-company
recognized the said privilege and paid its intermittent workers the cash equivalent of
the unenjoyed portion of their sick leave with pay benefits during the lifetime of the
CBA of October 16, 1985 until three (3) months from its renewal on April 15, 1989.
Well-settled is it that the said privilege of commutation or conversion to cash, being
an existing benefit, the petitioner-company may not unilaterally withdraw, or diminish
such benefits. It is a fact that petitioner-company had, on several instances in the
past, granted and paid the cash equivalent of the unenjoyed portion of the sick leave
benefits of some intermittent workers. Under the circumstances, these may be
deemed to have ripened into company practice or policy which cannot be
peremptorily withdrawn.
with pay under the following schedule based on the number of hours rendered
including overtime, to wit:
DECISION
826 900 7 7
ROMERO, J p:
901 925 8 8
In this petition for certiorari, petitioner Davao Integrated Port Services Corporation
seeks to reverse the Award 1 issued on September 10, 1991 by respondent Ruben V.
Abarquez, in his capacity as Voluntary Arbitrator of the National Conciliation and
Mediation Board, Regional Arbitration Branch XI in Davao City in Case No. AC-211BX1-10-003-91 which directed petitioner to grant and extend the privilege of
commutation of the unenjoyed portion of the sick leave with pay benefits to its
intermittent field workers who are members of the regular labor pool and the present
regular extra pool in accordance with the Collective Bargaining Agreement (CBA)
executed between petitioner and private respondent Association of Trade Unions
(ATU-TUCP), from the time it was discontinued and henceforth.
926 1,050 9 9
The facts are as follows:
The conditions for the availment of the herein vacation and sick leaves shall be in
accordance with the above provided Sections 1 and 2 hereof, respectively."
Petitioner Davao Integrated Port Stevedoring Services (petitioner-company) and

private respondent ATU-TUCP (Union), the exclusive collective bargaining agent of
the rank and file workers of petitioner-company, entered into a collective bargaining
agreement (CBA) on October 16, 1985 which, under Sections 1 and 3, Article VIII
thereof, provide for sick leave with pay benefits each year to its employees who have
rendered at least one (1) year of service with the company, thus:
"ARTICLE VIII
Section 1. Sick Leaves The Company agrees to grant 15 days sick leave with pay
each year to every regular non-intermittent worker who already rendered at least one
year of service with the company. However, such sick leave can only be enjoyed upon
certification by a company designated physician, and if the same is not enjoyed within
one year period of the current year, any unenjoyed portion thereof, shall be converted
to cash and shall be paid at the end of the said one year period. And provided
however, that only those regular workers of the company whose work are not
intermittent, are entitled to the herein sick leave privilege.
Hours of Service Per Vacation Sick Leave

Calendar Year Leave
Less than 750 NII NII
751 825 6 days 6 days
1,051 1,125 10 10
1,126 1,200 11 11
1,201 1,275 12 12
1,276 1,350 13 13
1,351 1,425 14 14
1,426 1,500 15 15
Upon its renewal on April 15, 1989, the provisions for sick leave with pay benefits
were reproduced under Sections 1 and 3, Article VIII of the new CBA, but the
coverage of the said benefits was expanded to include the "present Regular Extra
Labor Pool as of the signing of this Agreement." Section 3, Article VIII, as revised,
provides, thus:
"Section 3. All intermittent field workers of the company who are members of the
Regular Labor Pool and present Regular Extra Labor Pool as of the signing of this
agreement shall be entitled to vacation and sick leaves per year of service with pay
under the following schedule based on the number of hours rendered including
overtime, to wit:
Hours of Service Per Vacation Sick Leave
Calendar Year Leave
Less than 750 NII NII
xxx xxx xxx
751 825 6 days 6 days
Section 3. All intermittent field workers of the company who are members of the
Regular Labor Pool shall be entitled to vacation and sick leaves per year of service
826 900 7 7
901 925 8 8
926 1,050 9 9
1,051 1,125 10 10
1,126 1,200 11 11
1,201 1,275 12 12
1,276 1,350 13 13
1,351 1,425 14 14
1,426 1,500 15 15
The conditions for the availment of the herein vacation and sick leaves shall be in
accordance with the above provided Sections 1 and 2 hereof, respectively."
During the effectivity of the CBA of October 16, 1985 until three (3) months after its
renewal on April 15, 1989, or until July 1989 (a total of three (3) years and nine (9)
months), all the field workers of petitioner who are members of the regular labor pool
and the present regular extra labor pool who had rendered at least 750 hours up to
1,500 hours were extended sick leave with pay benefits. Any unenjoyed portion
thereof at the end of the current year was converted to cash and paid at the end of
the said one-year period pursuant to Sections 1 and 3, Article VIII of the CBA. The
number of days of their sick leave per year depends on the number of hours of
service per calendar year in accordance with the schedule provided in Section 3,
Article VIII of the CBA.
The commutation of the unenjoyed portion of the sick leave with pay benefits of the
intermittent workers or its conversion to cash was, however, discontinued or
withdrawn when petitioner-company under a new assistant manager, Mr. Benjamin
Marzo (who replaced Mr. Cecilio Beltran, Jr. upon the latter's resignation in June
1989), stopped the payment of its cash equivalent on the ground that they are not
entitled to the said benefits under Sections 1 and 3 of the 1989 CBA.
The Union objected to the said discontinuance of commutation or conversion to cash
of the unenjoyed sick leave with pay benefits of petitioner's intermittent workers
contending that it is a deviation from the true intent of the parties that negotiated the
CBA; that it would violate the principle in labor laws that benefits already extended
shall not be taken away and that it would result in discrimination between the nonintermittent and the intermittent workers of the petitioner-company.
Upon failure of the parties to amicably settle the issue on the interpretation of
Sections 1 and 3, Article VIII of the 1989 CBA, the Union brought the matter for
voluntary arbitration before the National Conciliation and Mediation Board, Regional
Arbitration Branch XI at Davao City by way of complaint for enforcement of the CBA.
The parties mutually designated public respondent Ruben Abarquez, Jr. to act as
voluntary arbitrator.
After the parties had filed their respective position papers, 2 public respondent Ruben
Abarquez, Jr. issued on September 10, 1991 an Award in favor of the Union ruling
that the regular intermittent workers are entitled to commutation of their unenjoyed
sick leave with pay benefits under Sections 1 and 3 of the 1989 CBA, the dispositive
portion of which reads:
"WHEREFORE, premises considered, the management of the respondent Davao
Integrated Port Stevedoring Services Corporation is hereby directed to grant and
extend the sick leave privilege of the commutation of the unenjoyed portion of the sick
leave of all the intermittent field workers who are members of the regular labor pool
and the present extra pool in accordance with the CBA from the time it was
discontinued and henceforth.
SO ORDERED."
Petitioner-company disagreed with the aforementioned ruling of public respondent,
hence, the instant petition.
Petitioner-company argued that it is clear from the language and intent of the last
sentence of Section 1, Article VIII of the 1989 CBA that only the regular workers
whose work are not intermittent are entitled to the benefit of conversion to cash of the
unenjoyed portion of sick leave, thus: ". . . And provided, however, that only those
regular workers of the Company whose work are not intermittent are entitled to the
herein sick leave privilege."
Petitioner-company further argued that while the intermittent workers were paid the
cash equivalent of their unenjoyed sick leave with pay benefits during the previous
management of Mr. Beltran who misinterpreted Sections 1 and 3 of Article VIII of the
1985 CBA, it was well within petitioner-company's rights to rectify the error it had
committed and stop the payment of the said sick leave with pay benefits. An error in
payment, according to petitioner-company, can never ripen into a practice.
We find the arguments unmeritorious.
A collective bargaining agreement (CBA), as used in Article 252 of the Labor Code,
refers to a contract executed upon request of either the employer or the exclusive
bargaining representative incorporating the agreement reached after negotiations with
respect to wages, hours of work and all other terms and conditions of employment,
including proposals for adjusting any grievances or questions arising under such
agreement.
While the terms and conditions of a CBA constitute the law between the parties, 3 it is
not, however, an ordinary contract to which is applied the principles of law governing
ordinary contracts. 4 A CBA, as a labor contract within the contemplation of Article
1700 of the Civil Code of the Philippines which governs the relations between labor
and capital, is not merely contractual in nature but impressed with public interest,
thus, it must yield to the common good. As such, it must be construed liberally rather
than narrowly and technically, and the courts must place a practical and realistic
construction upon it, giving due consideration to the context in which it is negotiated
and purpose which it is intended to serve. 5
It is thus erroneous for petitioner to isolate Section 1, Article VIII of the 1989 CBA from
the other related section on sick leave with pay benefits, specifically Section 3
thereof, in its attempt to justify the discontinuance or withdrawal of the privilege of
commutation or conversion to cash of the unenjoyed portion of the sick leave benefit
to regular intermittent workers. The manner they were deprived of the privilege
previously recognized and extended to them by petitioner-company during the lifetime
of the CBA of October 16, 1985 until three (3) months from its renewal on April 15,
1989, or a period of three (3) years and nine (9) months, is not only tainted with
arbitrariness but likewise discriminatory in nature. Petitioner-company is of the
mistaken notion that since the privilege of commutation or conversion to cash of the
unenjoyed portion of the sick leave with pay benefits is found in Section 1, Article VIII,
only the regular non-intermittent workers and no other can avail of the said privilege
because of the proviso found in the last sentence thereof.
It must be noted that the 1989 CBA has two (2) sections on sick leave with pay
benefits which apply to two (2) distinct classes of workers in petitioner's company,
namely: (1) the regular non-intermittent workers or those workers who render a daily
eight-hour service to the company and are governed by Section 1, Article VIII of the
1989 CBA; and (2) intermittent field workers who are members of the regular labor
pool and the present regular extra labor pool as of the signing of the agreement on
April 15, 1989 or those workers who have irregular working days and are governed by
Section 3, Article VIII of the 1989 CBA.
It is not disputed that both classes of workers are entitled to sick leave with pay
benefits provided they comply with the conditions set forth under Section 1 in relation
to the last paragraph of Section 3, to wit: (1) the employee-applicant must be regular
or must have rendered at least one year of service with the company; and (2) the
application must be accompanied by a certification from a company-designated
physician.
Sick leave benefits, like other economic benefits stipulated in the CBA such as
maternity leave and vacation leave benefits, among others, are by their nature,
intended to be replacements for regular income which otherwise would not be earned
because an employee is not working during the period of said leaves. 6 They are noncontributory in nature, in the sense that the employees contribute nothing to the
operation of the benefits. 7 By their nature, upon agreement of the parties, they are
intended to alleviate the economic condition of the workers.
After a careful examination of Section 1 in relation to Section 3, Article VIII of the 1989
CBA in light of the facts and circumstances attendant in the instant case, we find and
so hold that the last sentence of Section 1, Article VIII of the 1989 CBA, invoked by
petitioner-company does not bar the regular intermittent workers from the privilege of
commutation or conversion to cash of the unenjoyed portion of their sick leave with
pay benefits, if qualified. For the phrase "herein sick leave privilege," as used in the
last sentence of Section 1, refers to the privilege of having a fixed 15-day sick leave
with pay which, as mandated by Section 1, only the non-intermittent workers are
entitled to. This fixed 15-day sick leave with pay benefit should be distinguished from
the variable number of days of sick leave, not to exceed 15 days, extended to
intermittent workers under Section 3 depending on the number of hours of service
rendered to the company, including overtime pursuant to the schedule provided
therein. It is only fair and reasonable for petitioner-company not to stipulate a fixed
15-day sick leave with pay for its regular intermittent workers since, as the term
"intermittent" implies, there is irregularity in their work-days. Reasonable and practical
interpretation must be placed on contractual provisions. Interpetatio fienda est ut res
magis valeat quam pereat. Such interpretation is to be adopted, that the thing may
continue to have efficacy rather than fail. 8
We find the same to be a reasonable and practical distinction readily discernible in
Section 1, in relation to Section 3, Article VIII of the 1989 CBA between the two
classes of workers in the company insofar as sick leave with pay benefits are
concerned. Any other distinction would cause discrimination on the part of intermittent
workers contrary to the intention of the parties that mutually agreed in incorporating
the questioned provisions in the 1989 CBA.
Public respondent correctly observed that the parties to the CBA clearly intended the
same sick leave privilege to be accorded the intermittent workers in the same way
that they are both given the same treatment with respect to vacation leaves - noncommutable and non-cumulative. If they are treated equally with respect to vacation
leave privilege, with more reason should they be on par with each other with respect
to sick leave privileges. 9 Besides, if the intention were otherwise, during its
renegotiation, why did not the parties expressly stipulate in the 1989 CBA that regular
intermittent workers are not entitled to commutation of the unenjoyed portion of their
sick leave with pay benefits?
Whatever doubt there may have been early on was clearly obliterated when
petitioner-company recognized the said privilege and paid its intermittent workers the
cash equivalent of the unenjoyed portion of their sick leave with pay benefits during
the lifetime of the CBA of October 16, 1985 until three (3) months from its renewal on
April 15, 1989. Well-settled is it that the said privilege of commutation or conversion to
cash, being an existing benefit, the petitioner-company may not unilaterally withdraw,
or diminish such benefits. 10 It is a fact that petitioner-company had, on several
instances in the past, granted and paid the cash equivalent of the unenjoyed portion
of the sick leave benefits of some intermittent workers. 11 Under the circumstances,
these may be deemed to have ripened into company practice or policy which cannot
be peremptorily withdrawn. 12
Moreover, petitioner-company's objection to the authority of the Voluntary Arbitrator to
direct the commutation of the unenjoyed portion of the sick leave with pay benefits of
intermittent workers in his decision is misplaced. Article 261 of the Labor Code is
clear. The questioned directive of the herein public respondent is the necessary
consequence of the exercise of his arbitral power as Voluntary Arbitrator under Article
261 of the Labor Code "to hear and decide all unresolved grievances arising from the
interpretation or implementation of the Collective Bargaining Agreement." We,
therefore, find that no grave abuse of discretion was committed by public respondent
in issuing the award (decision). Moreover, his interpretation of Sections 1 and 3,

Article VIII of the 1989 CBA cannot be faulted with and is absolutely correct.
WHEREFORE, in view of the foregoing, the petition is DISMISSED. The award
(decision) of public respondent dated September 10, 1991 is hereby AFFIRMED. No
costs.
SO ORDERED.
FIRST DIVISION
G.R. No. 91231
February 4, 1991
NESTL PHILIPPINES, INC., petitioner,

vs.
THE NATIONAL LABOR RELATIONS COMMISSION and UNION OF FILIPRO
EMPLOYEES, respondents.
GRIO-AQUINO, J.:
Nestl Philippines, Inc., by this petition for certiorari, seeks to annul, on the ground of
grave abuse of discretion, the decision dated August 8, 1989 of the National Labor
Relations Commission (NLRC), Second Division, in Cert. Case No. 0522 entitled, "In
Re: Labor Dispute of Nestl Philippines, Inc." insofar as it modified the petitioner's
existing non-contributory Retirement Plan.
Four (4) collective bargaining agreements separately covering the petitioner's
employees in its:
1. Alabang/Cabuyao factories;
2. Makati Administration Office. (Both Alabang/Cabuyao factories and Makati
office were represented by the respondent, Union of Filipro Employees [UFE]);
3. Cagayan de Oro Factory represented by WATU; and
4. Cebu/Davao Sales Offices represented by the Trade Union of the Philippines
and Allied Services (TUPAS),
all expired on June 30, 1987.
Thereafter, UFE was certified as the sole and exclusive bargaining agent for all
regular rank-and-file employees at the petitioner's Cagayan de Oro factory, as well as
its Cebu/Davao Sales Office.
In August, 1987, while the parties, were negotiating, the employees at Cabuyao
resorted to a "slowdown" and walk-outs prompting the petitioner to shut down the
factory. Marathon collective bargaining negotiations between the parties ensued.
On September 2, 1987, the UFE declared a bargaining deadlock. On September 8,
1987, the Secretary of Labor assumed jurisdiction and issued a return to work order.
In spite of that order, the union struck, without notice, at the Alabang/Cabuyao factory,
the Makati office and Cagayan de Oro factory on September 11, 1987 up to
December 8, 1987. The company retaliated by dismissing the union officers and
members of the negotiating panel who participated in the illegal strike. The NLRC
affirmed the dismissals on November 2, 1988.
On January 26, 1988, UFE filed a notice of strike on the same ground of CBA
deadlock and unfair labor practices. However, on March 30, 1988, the company was
able to conclude a CBA with the union at the Cebu/Davao Sales Office, and on
August 5, 1988, with the Cagayan de Oro factory workers. The union assailed the
validity of those agreements and filed a case of unfair labor practice against the
company on November 16, 1988.
After conciliation efforts of the National Conciliation and Mediation Board (NCMB)
yielded negative results, the dispute was certified to the NLRC by the Secretary of
Labor on October 28, 1988.
After the parties had filed their pleadings, the NLRC issued a resolution on June 5,
1989, whose pertinent disposition regarding the union's demand for liberalization of
the company's retirement plan for its workers, provides as follows:
xxx
xxx
xxx
7. Retirement Plan
The company shall continue implementing its retirement plan modified as follows:
a) for fifteen years of service or less an amount equal to 100% of the
employee's monthly salary for every year of service;
b) more than 15 but less than 20 years 125% of the employee's monthly
salary for every year of service;
c) 20 years or more 150% of the employee's monthly salary for every year of
service. (pp. 58-59, Rollo.)
Both parties separately moved for reconsideration of the decision.
On August 8, 1989, the NLRC issued a resolution denying the motions for
reconsideration. With regard to the Retirement Plan, the NLRC held:
Anent management's objection to the modification of its Retirement Plan, We find
no cogent reason to alter our previous decision on this matter.
While it is not disputed that the plan is non-contributory on the part of the
workers, tills does not automatically remove it from the ambit of collective
bargaining negotiations. On the contrary, the plan is specifically mentioned in the
previous bargaining agreements (Exhibits "R-1" and "R-4"), thereby integrating or
incorporating the provisions thereof to the agreement. By reason of its
incorporation, the plan assumes a consensual character which cannot be
terminated or modified at will by either party. Consequently, it becomes part and
parcel of CBA negotiations.
However, We need to clarify Our resolution on this issue. When we increased the
emoluments in the plan, the conditions for the availment of the benefits set forth
therein remain the same. (p. 32, Rollo.)
On December 14, 1989, the petitioner filed this petition for certiorari, alleging that
since its retirement plan is non-contributory, it (Nestl) has the sole and exclusive
prerogative to define the terms of the plan "because the workers have no vested and
demandable rights thereunder, the grant thereof being not a contractual obligation but
merely gratuitous. At most the company can only be directed to maintain the same
but not to change its terms. It should be left to the discretion of the company on how
to improve or mollify the same" (p. 10, Rollo).
The Court agrees with the NLRC's finding that the Retirement Plan was "a collective
bargaining issue right from the start" (p. 109, Rollo) for the improvement of the
existing Retirement Plan was one of the original CBA proposals submitted by the UFE
on May 8, 1987 to Arthur Gilmour, president of Nestl Philippines. The union's original
proposal was to modify the existing plan by including a provision for early retirement.
The company did not question the validity of that proposal as a collective bargaining
issue but merely offered to maintain the existing non-contributory retirement plan
which it believed to be still adequate for the needs of its employees, and competitive
with those existing in the industry. The union thereafter modified its proposal, but the
company was adamant. Consequently, the impass on the retirement plan become
one of the issues certified to the NLRC for compulsory arbitration.
The company's contention that its retirement plan is non-negotiable, is not welltaken.1wphi1 The NLRC correctly observed that the inclusion of the retirement plan
in the collective bargaining agreement as part of the package of economic benefits
extended by the company to its employees to provide them a measure of financial
security after they shall have ceased to be employed in the company, reward their
loyalty, boost their morale and efficiency and promote industrial peace, gives "a
consensual character" to the plan so that it may not be terminated or modified at will
by either party (p. 32, Rollo).
CBA previously entered into by the parties included provisions for the
implementation of a "Retirement and Separation Plan." it is only to be expected
that the parties would seek a renewal or an improvement of said item in the new
CBA. In fact, the parties themselves expressly included retirement benefits
among the economic issues to be resolved by voluntary arbitration. Petitioner is
estopped from now contesting the validity of the increased award granted by the
arbitrators. (p. 145, Rollo.)
The NLRC's resolution of the bargaining deadlock between Nestl and its employees
is neither arbitrary, capricious, nor whimsical. The benefits and concessions given to
the employees were based on the NLRC's evaluation of the union's demands, the
evidence adduced by the parties, the financial capacity of the Company to grant the
demands, its longterm viability, the economic conditions prevailing in the country as
they affect the purchasing power of the employees as well as its concommitant effect
on the other factors of production, and the recent trends in the industry to which the
Company belongs (p. 57, Rollo). Its decision is not vitiated by abuse of discretion.
WHEREFORE, the petition for certiorari is dismissed, with costs against the
petitioner.
SO ORDERED.
The fact that the retirement plan is non-contributory, i.e., that the employees
contribute nothing to the operation of the plan, does not make it a non-issue in the
CBA negotiations. As a matter of fact, almost all of the benefits that the petitioner has
granted to its employees under the CBA salary increases, rice allowances, midyear bonuses, 13th and 14th month pay, seniority pay, medical and hospitalization
plans, health and dental services, vacation, sick & other leaves with pay are noncontributory benefits. Since the retirement plan has been an integral part of the CBA
since 1972, the Union's demand to increase the benefits due the employees under
said plan, is a valid CBA issue. The deadlock between the company and the union on
this issue was resolvable by the Secretary of Labor, or the NLRC, after the Secretary
had assumed jurisdiction over the labor dispute (Art. 263, subparagraph [i] of the
Labor Code).
The petitioner's contention, that employees have no vested or demandable right to a
non-contributory retirement plan, has no merit for employees do have a vested and
demandable right over existing benefits voluntarily granted to them by their employer.
The latter may not unilaterally withdraw, eliminate or diminish such benefits (Art. 100,
Labor Code; Tiangco, et al. vs. Hon. Leogardo, et al., 122 SCRA 267).
This Court ruled similarly in Republic Cement Corporation vs. Honorable Panel of
Arbitrators, G.R. No. 89766, Feb. 19, 1990:
. . . Petitioner's claim that retirement benefits, being noncontributory in nature,
are not proper subjects for voluntary arbitration is devoid of merit. The expired
SECOND DIVISION
G.R. No. L-57636 May 16, 1983
REYNALDO TIANGCO and VICTORIA TIANGCO, petitioners,
vs.
HON. VICENTE LEOGARDO, JR., as Deputy Minister of the Ministry of Labor
and Employment, AURELIO ILUSTRISIMO, ABRAHAM GILBUENA, ROGELIO
CARABIO, JESUS GILBUENA, PEPITO GILBUENA, DOMINADOR LASERNA,
CLEMENTE VILLARUEL, RUSTOM OFQUERIA, ERNESTO DIONG, GRACIANO
DURANA, AGUEDO MARABE, SOLOMON CLARIN, ALCAFONE ESGANA, JUAN
CASTRO, ANTONIO GILBUENA, GREGORIO LAYLAY, DANIEL CABRERA,
ROBERTO BAYON-ON, ELIAS ESCARAN, ERNESTO BATOY, EDDIE
BATOBALANOS, TOMAS CAPALAR, JUAN GIHAPON, JOSE OFQUERIA, FRUTO
GIHAPON, PEPITO BATOY, and SERAFIO YADAWON, respondents.
CONCEPCION, JR., J.:
Petition for certiorari and prohibition, with preliminary injunction and/or restraining
order, to annul and set aside the order of the respondent Deputy Minister of Labor
which modified and affirmed the order of Director of the National Capitol Region of the
Ministry of Labor directing the petitioners to pay the private respondents their legal
holiday pay, service incentive pay, and differentials in their emergency cost of living
allowances.
The petitioner, Reynaldo Tiangco, is a fishing operator who owns the Reynaldo
Tiangco Fishing Company and a fleet of fishing vessels engaged in deep-sea fishing
which operates from Navotas, Rizal. His business is capitalized at
P2,000,000.00, 1 while the petitioner, Victoria Tiangco, is a fish broker whose
business is capitalized at P100,000.00. 2
The private respondents, Aurelio Ilustrisimo, Pepito Gilbuena, Rogelio Carabio,
Abraham Gilbuena, Rustom Ofqueria, Ernesto Diong, Jesus Gilbuena, Clemente
(Emerenciano)
Villaruel,
Dominador
Lacerna,
and
Graciano
Durana,
are batillos engaged by the petitioner Reynaldo Tiangco to unload the fish catch from
the vessels and take them to the Fish Stall of the petitioner Victoria Tiangco. The
private respondents, Eddie Batobalanos, Aguedo Marabe, Gregorio Laylay, Fruto
Gihapon, Solomon Clarin, Pepito Batoy, Jose Ofqueria, Daniel Cabrera, Juan Castro,
Alcafone Esgana, Tomas Capalar, Antonio Gilbuena, Ernesto Batoy, Serafio
Yadawon, Juan Gihapon, Elias Escaran and Roberto Bayon-on, were batillos
engaged by Victoria Tiangco. 3 The work of these batillos were limited to days of
arrival of the fishing vessels and their working days in a month are comparatively few.
Their working hours average four (4) hours a day.
On April 8, 1980, the private respondents filed a complaint against the petitioners with
the Ministry of Labor and Employment for non-payment of their legal holiday pay and
service incentive leave pay, as well as underpayment of their emergency cost of living
allowances which used to be paid in full irrespective of their working days, but which
were reduced effective February, 1980, in contravention of Article 100 of the new
Labor Code which prohibits the elimination or diminution of existing benefits. 4
The petitioners denied the laborers' contention, claiming that the laborers were all
given, in addition to their regular daily wage, a daily extra pay in amounts ranging
from 30 centavos to 10 pesos which are sufficient to offset the laborers' claim for
service incentive leave and legal holiday pay. As regards the claim for emergency
allowance differentials, the petitioners admitted that they discontinued their practice of
paying their employees a fixed monthly allowance, and effective February, 1980, they
no longer paid allowances for non-working days. They argued, however, that no law
was violated as their refusal to pay allowances for non-working days is in consonance
with the principle of "no work, no allowance"; and that they could not pay private
respondents a fixed monthly allowance without risking the viability of their business. 5
Resolving the case, the Director of the National Capitol Region of the Ministry of
Labor and Employment ruled that the daily extra pay given to private respondents
was a ,'production incentive benefit", separate and distinct from the service incentive
leave pay and legal holiday pay, payment of which cannot be used to offset a benefit
provided by law, and ordered the petitioners to pay the private respondents their
service incentive leave pay and legal holiday pay. However, he denied the laborers'
claim for differentials in the emergency cost of living allowance for the reason that the
emergency cost of living allowance accrues only when the laborers actually work
following the principle of "no work, no pay," and private respondents are not entitled to
a fixed monthly allowance since they work on a part time basis which average only
four (4) days a week. The private respondents should not be paid their allowances
during non-working days. 6
From this order, both parties appealed.
On May 22, 1981, the respondent Deputy Minister of Labor and Employment modified
the order and directed the petitioners to restore and pay the individual respondents
their fixed monthly allowance from March, 1980 and to pay them the amount of
P58,860.00, as underpayment of their living allowance from May, 1977 to February
21, 1980. 7
When their motion for the reconsideration of the above order was denied, the
petitioners interposed the present recourse.
The petitioners claim that the respondent Deputy Minister of Labor and Employment
acted in excess of jurisdiction, or with grave abuse of discretion in ordering them to
pay the private respondents a fixed monthly allowance from March, 1980, despite the
"no work, no pay," law; the private respondents' consent to receive an allowance for
days worked for, as stated in their appeal; and the findings of the Director of the
National Capitol Region that private respondents work for other employers and are
part-time employees of the petitioners.
Indeed, the record shows that the private respondents work for the petitioners on a
part-time basis and their work average only four (4) days a week. It is not also
disputed that the private respondents work for more than one employer so that the
private respondents should be paid their living allowance only for the days they
actually worked in a week or month and all the employers of the employee shall share
proportionately in the payment of the allowance of the employee. Section 12 of the
Rules and Regulations implementing P.D. 525 which made mandatory the payment of
emergency cost of living allowances to workers in the private section, provides, as
follows:
Section 12. Allowance on Daily Paid & Part Time employees. Employees
who are paid on a daily basis shall be paid their allowances for the number of
days they actually worked in a week or month, on the basis of the scales
provided in Section 7 hereof.
In case of part-time employment, the allowances shall be paid in the amount
proportionate to the time worked by the employee, or higher. If employed by
more than one employer, all employers of such employee shall share
proportionately in the payment of the allowance of the employee.
Section 11 of the Rules implementing P.D. 1123, increasing the emergency
allowance under P.D. 525, also provides, as follows:
Section 11. Allowances of full-time and part-time employees. Employees shall
be paid in full the monthly allowances on the basis of the scales provided in
Section 3 hereof, regardless of the number of their regular working days, if they
incur no absence during the month. If they incur absences, the amounts
corresponding to their absences may be deducted from the monthly allowance.
In case of part-time employment, the allowance to be paid shall be proportionate
to the time worked by the employee. This requirement shall apply to any
employee with more than one employer.
However, the respondent Deputy Minister of Labor and Employment correctly ruled
that since the petitioners had been paying the private respondents a fixed monthly
emergency allowance since November, 1976 up to February, 1980, as a matter of
practice and/or verbal agreement between the petitioners and the private
respondents, the discontinuance of the practice and/or agreement unilaterally by the
petitioners contravened the provisions of the Labor Code, particularly Article 100
thereof which prohibits the elimination or diminution of existing benefits.
Section 15 of the Rules on P.D. 525 and Section 16 of the Rules on P. D. 1123 also
prohibits the diminution of any benefit granted to the employees under existing laws,
agreements, and voluntary employer practice. Section 15 of the Rules on P.D. 525
provides, as follows:
Section 15. Relation to Agreement. Nothing herein shall prevent the employer
and his employees from entering into any agreement with terms more favorable
to the employees than those provided therein, or be construed to sanction the
diminution of any benefit granted to the employees under existing laws,
agreements, and voluntary employer practice.
Section 16 of the Rules on P.D. 1123 similarly prohibits diminution of benefits. It

provides, as follows:
Section 16. Relation to other agreements. Nothing herein shall prevent
employers from granting allowances to their employees in excess of those
provided under the Decree and the Rules nor shall it be construed to
countenance any reduction of benefits already being enjoyed.
The petitioners further claim that the respondent Deputy Minister of Labor and
Employment erred in ordering them to pay the amount of P58,860.00 to the private
respondents as underpayment of respondents' allowances from May, 1977 to
February 20, 1980. The petitioners contend that the emergency cost of living
allowances of the private respondents had been paid in full.
We find no merit in the contention. However, a revision of the amount due the private
respondents is in order for the reason that the respondent Deputy Minister of Labor
and Employment failed to take into consideration, in computing the amount due each
worker, the fact that the private respondents are employed by two different individuals
whose businesses are divergent and capitalized at various amounts, contrary to the
provisions of P.D. 525 and subsequent amendatory decrees, wherein the amount of
the emergency cost of living allowance to be paid to a worker is made to depend
upon the capitalization of the business of his employer or its total assets, whichever is
higher. Thus, Section 7 of the Rules and Regulations implementing P.D. 525 reads, as
follows:
Section 7. Amount of Allowances. Every covered employer shall give to each
of his employees who is receiving less than P600.00 a month not less than the
following allowances;
(a) P50.00 where the authorized capital stock or total assets, whichever is
applicable and higher, is 71 million or more;
(b) P30.00 where the authorized capital stock or total assets, whichever is
applicable and higher is at least P100,000.00 but less than P 1miilion and
(c) P15.00 where the authorized capital stock or total assets, whichever is
applicable and higher, is less than P100,000.00.
Nothing herein shall prevent employers from granting allowances to their
employees who will receive more than P600.00 a month, including the
allowances. An employer, however, may grant his employees an allowance which
if added to their monthly salary, will not yield to them more than P600.00 a
month.
In this case, the private respondents admit that only ten (10) of them, namely: Aurelio
Ilustrisimo, Pepito Gilbuena, Rogelio Carabio, Abraham Gilbuena, Rustom Ofquiera,
Ernesto Diong, Jesus Gilbuena, Emerenciano Villaruel, Dominador Lacerna, and
Graciano Durana, were employees of the petitioner Reynaldo Tiangco, while the
remaining seventeen (17) were employed by the petitioner Victoria
Tiangco. 8 Accordingly, the workers of the petitioner Victoria Tiangco, whose business
as fish broker is capitalized at P100,000.00, 9 should receive a lesser amount of
allowance (P30.00) than those workers employed by the petitioner Reynaldo Tiangco
whose business, as a fishing operator with a fleet of fishing vessels, is capitalized at
more than P2,000,000.00, and are entitled to receive a fixed monthly allowance of
P50.00 a month, each.
After P.D. 525, the following amendatory decrees, directing the payment of additional
allowances to employees, were promulgated:
1. P.D. 1123. providing for an across-the-board increase of P60.00 a month
effective May 1, 1977;
2. P.D. 1614, which directed the payment of P60.00 monthly allowance effective
April 1, 1979;
3. P.D. 1634, which provided for the payment of an additional P60.00 a month
effective September 1, 1979, and another P30.00 a month beginning January 1,
1980; and
4. P.D. 1678,which directed the payment of an additional P2.00 a day from
February 21, 1980.
Hence, for the period from November, 1976 to April 30, 1977, the petitioner Victoria
Tiangco should pay her workers a fixed monthly allowance of P 30.00, while the
workers of the petitioner Reynaldo Tiangco were entitled to a fixed monthly allowance
of P50.00, each. The record shows that during this period, the petitioner Victoria
Tiangco was paying her workers a monthly allowance of P30.00 each. 10 Accordingly,
there was no underpayment for this period insofar as her batillos are concerned. The
petitioner Reynaldo Tiangco, however, paid his employees P30.00, instead of P50.00,
as mandated by law. 11 Therefore, there was an underpayment of P20.00 a month for
each batillo under his employ. For the 6-month period, he should pay his workers
differentials in the amount of P120.00 each.
For the period from May, 1977 to March 1979, the workers of the petitioner Victoria
Tiangco were entitled to a fixed monthly allowance of P90.00 in view of the
promulgation of P.D. 1123 which granted an across-the-board increase of P60.00 a
month in their allowances. For this period, however, the said petitioner paid her
workers only P60.00 a month, or a difference of P30.00 a month. 12 There was,
therefore, an underpayment of P690.00 for everybatillo under her employ for the 23month period.
With the addition of P60.00 across-the-board increase in their allowances, the
workers of the petitioner Reynaldo Tiangco were entitled to receive a fixed monthly
allowance of P110.00. However, the record shows that his workers were only paid
P60.00 a month, 13 or a difference of P50.00 a month. Consequently,
each batillo hired by him should be paid a differential of P1,150.00 for the 23-month
period.
For the period from April, 1979 to August, 1979, the employees of the petitioner
Victoria Tiangco were entitled to a fixed monthly allowance of P150.00 while the
workers employed by the petitioner Reynaldo Tiangco were entitled to an allowance
of P170.00, pursuant to P.D. 1614. The record shows, however, that both petitioners
paid their workers only P120.00 a month. 14 There was a difference of P30.00 a month
in the case of the petitioner Victoria Tiangco, and P50.00, a month, in the case of the
petitioner Reynaldo Tiangco. Hence, for this period, the petitioner Victoria Tiangco
should pay the amount of P150.00 to each batillo in her employ, while the petitioner
Reynaldo Tiangco should pay the amount of P250.00, as differentials in the cost of
living allowances of the workers under his employ.
Upon the promulgation of P.D. 1634, directing the payment of an additional P60.00 a
month effective September, 1979 and another P30.00 effective January 1, 1980, the
workers of the petitioner Victoria Tiangco were entitled to receive a fixed monthly
allowance of P210.00 a month from September, 1979, and P340.00, a month
beginning January, 1980. The workers of the petitioner Reynaldo Tiangco, upon the
other hand, were entitled to a monthly allowance of P230.00, effective September,
1979, and P260.00, a month beginning January, 1980. The record shows, however,
that both petitioners paid their workers the amounts of P180.00 a month for the
months of September to December, 1979, 15 and P210.00 a month for the months of
January and February, 1980. 16 There was underpayment, therefore, in the
allowances of the workers of the petitioner Victoria Tiangco in the amount of P30.00,
a month, for the months of September, 1979 to February, 1980, or P180.00 for
each batillo in her employ. The private respondents hired by the petitioner Reynaldo
Tiangco, upon the other hand, are entitled to differentials in the amount of P50.00 a
month for the same period, or P300.00 each.
Then, beginning February, 21, 1980, the workers should be paid an additional P2.00,
a day, pursuant to P.D. 1678. The record shows that the petitioners had complied with
this requirement. 17 The petitioners, however, failed to pay the fixed monthly
allowance of their workers which was P240.00, in the case of the workers employed
by the petitioner Victoria Tiangco, and P260.00, in the case of the workers of the
petitioner Reynaldo Tiangco. Thus, for the month of March, 1980, the petitioner
Victoria Tiangco paid her workers varying amounts, the lowest of which was P30.00,
paid to Eddie Batobalanos and Fruto Gihapon, and the highest of which was P210.00,
paid to Juan Gihapon and Roberto Bayonon. 18 Hence, there was underpayment in
their emergency cost of living allowances. But, since, the respondents employed by
Victoria Tiangco are wining to accept P50.00 a month as differentials for the months
of March, 1980 to May, 1980, 19 the workers employed by her should be paid P50.00,
each, for the month of March, 1980, except Juan Gihapon and Roberto Bayon-on
who should be paid P30.00, each, for the said month, having received the amount of
P210.00, each as allowance for that month.
For the month of April, 1980, the workers of the petitioner, Victoria Tiangco, were paid
varying amounts ranging from P120.00 to P210.00. 20 Hence, there was also
underpayment in their allowances. Accordingly, they should be paid the amount of
P50.00, each, except for Juan Gihapon, Antonio Gilbuena, Juan Castro, and Aguedo
Marabe, who should be paid P40.00, each, and Solomon Clarin, Daniel Cabrera, and
Gregorio Laylay who should be paid P30.00 each.
............
1
6
0
.
0
0
3.
Gregorio
Laylay.......
...........
1
,
1
5
0
.
0
0
4.
Fruto
Gihapon....
.................
1
,
1
7
0
.
0
0
5.
Solomon
Clarin .......
............
1
,
1
5
0
.
0
0
6.
Pepito
Batoy........
................
1
,
1
7
0
.
0
0
For the month of May, 1980, the petitioner Victoria Tiangco, paid her workers varying
amounts less that what was provided for by law. 21 Hence, they should be paid the
amount of P50.00, each, for this month.
The petitioner, Reynaldo Tiangco, also paid the employees varying amounts, ranging
from P210.00 to P250.00, as emergency cost of living allowance, for the month of
March, 22, 1980. 22 Since they were entitled to a fixed monthly allowance of P260.00,
each, there was underpayment in their cost of living allowances. Accordingly, the
petitioner should pay the respondent Pepito Gilbuena the amount of P50.00; the
respondents Dominador Lacerna and Graciano Durano, the amount of P40.00, each;
the respondent Ernesto Diong, the amount of P30.00; the respondents Rustom
Ofqueria and Aurelio Ilustrisimo, the amount of P20.00, each; and the respondents
Abraham Gilbuena, Jesus Gilbuena, Rogelio Carabio, and Emerenciano Villaruel, the
amount of P10.00 each.
For the month of April, 1980, the workers of the petitioner Reynaldo Tiangco, were not
also paid their emergency cost of living allowance in full. 23 Hence, the said petitioner
should pay his workers the amount of P30.00 each, except for Pepito Gilbuena, who
should be paid the amount of P50.00, and Rustom Ofqueria, Jesus Gilbuena, and
Graciano Durano, who are entitled to only P40.00 each.
The petitioner, Reynaldo Tiangco did not also pay his workers their full cost of living
allowance for the month of May, 1980. The workers were paid varying amounts of
P130.00 to P150.00, instead of P260.00, as required by law. 24 Hence, they should be
paid the amunt of P50.00 each for the month of May, 1980.
WHEREFORE, the petitioners Victoria Tiangco and Reynaldo Tiangco should be, as
they are hereby, ordered to PAY the private respondents the following amounts as
differentials in their emergency cost of living allowance:
Petitioner Victoria Tiangco:
1
2.
Eddie
Batobalan
os.............
P
l,
1
7
0
.
0
0
Aguedo
Morabe.....
1
,
7.
8.
9.
10.
11.
Jose
Ofqueria...
.................
...
1
,
1
7
0
.
0
0
Daniel
Cabrera....
.................
1
,
1
5
0
.
0
0
Juan
Castro.......
.................
..
1
,
1
6
0
.
0
0
Alcafone
Esgana.....
............
1
,
1
7
0
.
0
0
Tomas
Capalar ....
................
1
,
1
7
0
.
0
0
12.
Antonio
Gilbuena...
.............
1
,
1
6
0
.
0
0
13.
Ernesto
Batoy........
..............
1
,
1
7
0
.
0
0
14.
Serapio
Yadawon...
.............
1
,
1
5
0
.
0
0
15.
Juan
Gihapon....
.................
..
1
,
1
4
0
.
0
0
16.
Elias
Escaran ...
.................
..
1
,
1
5
0
.
0
0
17.
Roberto
Bayonon.............
.
1
,
1
3
0
.
0
0
4.
Abraha
m
Gilbuen
a...........
..
1
,
9
1
0
.
0
0
5.
Rustom
Ofqueri
a...........
.....
1
,
9
3
0
.
0
0
6.
Ernesto
Diong....
.............
...
1
,
9
3
0
.
0
0
7.
Jesus
Gilbuen
a...........
........
1
,
9
2
0
.
0
0
8.
Emeren
ciano
Villaruel.
.......
1
,
9
1
0
.
0
Petitioner Reynaldo Tiangco:

1
2.
3.
Aurelio
Ilustrisi
mo........
....
Pepito
Gilbuen
a...........
......
1
,
9
7
0
.
0
0
Rogelio
Carabio.
.............
...
1
,
9
1
0
.
0
0
l
,
9
2
0
.
0
0
0
9.
Domina
dor
Lacerna
............
1
,
9
4
0
.
0
0
10.
Gracian
o
Durano.
.............
...
1
,
9
5
0
.
0
0
With this modification, the judgment appealed from is AFFIRMED in all other
respects. With costs against the petitioners.
SO ORDERED.
SECOND DIVISION
G.R. No. 74156 June 29, 1988
GLOBE MACKAY CABLE AND RADIO CORPORATION, FREDERICK WHITE and
JESUS
SANTIAGO,petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, FFW-GLOBE MACKAY
EMPLOYEES UNION and EDA CONCEPCION, respondents.
MELENCIO-HERRERA, J.:
A special civil action for certiorari with a prayer for a Temporary Restraining Order to
enjoin respondents from enforcing the Decision of 10 March 1986 of the National
Labor Relations Commission (NLRC), in NCR Case No. 1-168-85 entitled "FFWGlobe Mackay Employees Union, et al., vs. Globe Mackay Cable & Radio
Corporation, et al.," the dispositive portion of which reads:
WHEREFORE, premises considered, the appealed Decision is as it is hereby
SET ASIDE and another one issued:
1. Declaring respondents-appellees
deductions of cost-of-living allowance;
(petitioners herein)
guilty of
illegal
2. Ordering respondents-appellees to pay complainants-appellants their back

allowances reckoned from the time of illegal deduction; and
3. Ordering respondents-appellees from further illegally deducting the allowances
of complainants-appellants.
SO ORDERED.
Presiding Commissioner of the NLRC, Diego P. Atienza, concurred in the result, while
Commissioner Cleto T. Villaltuya dissented and voted to affirm in toto the Labor
Arbiter's Decision.
On 19 May 1986, we issued the Temporary Restraining Order enjoining respondents
from enforcing the assailed Decision. On 2 September 1987, we gave due course to
the petition and required the submittal of memoranda, by the parties, which has been
complied with.
Wage Order No. 6, which took effect on 30 October 1984, increased the cost-of-living
allowance of non-agricultural workers in the private sector. Petitioner corporation
complied with the said Wage Order by paying its monthly-paid employees the
mandated P3.00 per day COLA. However, in computing said COLA, Petitioner
Corporation multiplied the P 3.00 daily COLA by 22 days, which is the number of
working days in the company.
Respondent Union disagreed with the computation of the monthly COLA claiming that
the daily COLA rate of P3.00 should be multiplied by 30 days to arrive at the monthly
COLA rate. The union alleged furthermore that prior to the effectivity of Wage Order
No. 6, Petitioner Corporation had been computing and paying the monthly COLA on
the basis of thirty (30) days per month and that this constituted an employer practice,
which should not be unilaterally withdrawn.
After several grievance proceedings proved futile, the Union filed a complaint against
Petitioner Corporation, its President, F. White, and Vice-President, J. Santiago, for
illegal deduction, underpayment, unpaid allowances, and violation of Wage Order No.
6. Petitioners White and Santiago were sought to be held personally liable for the
money claims thus demanded.
Labor Arbiter Adelaido F. Martinez sustained the position of Petitioner Corporation by
holding that since the individual petitioners acted in their corporate capacity they
should not have been impleaded; and that the monthly COLA should be computed on
the basis of twenty two (22) days, since the evidence showed that there are only 22
paid days in a month for monthly-paid employees in the company. His
reasoning, inter alia, was as follows:
To compel the respondent company to use 30 days in a month to compute the
allowance and retain 22 days for vacation and sick leave, overtime pay and other
benefits is inconsistent and palpably unjust. If 30 days is used as divisor, then it
must be used for the computation of all benefits, not just the allowance. But this
is not fair to complainants, not to mention that it will contravene the provision of
the parties' CBA.
On appeal, the NLRC reversed the Labor Arbiter, as heretofore stated, and held that
Petitioner Corporation was guilty of illegal deductions, upon the following
considerations: (1) that the P3.00 daily COLA under Wage Order No. 6 should be paid
and computed on the basis of thirty (30) days instead of twenty-two (22) days since
workers paid on a monthly basis are entitled to COLA on Saturdays, Sundays and
legal holidays "even if unworked;" (2) that the full allowance enjoyed by Petitioner
Corporation's monthly-paid employees before the CBA executed between the parties
in 1982 constituted voluntary employer practice, which cannot be unilaterally
The facts follow:

withdrawn; and (3) that petitioners White and Santiago were properly impleaded as
respondents in the case below.
Hence, this Petition, anchored on the charge of grave abuse of discretion by the
NLRC.
We are constrained to reverse the reversal.
Section 5 of the Rules Implementing Wage Orders Nos. 2, 3, 5 and 6 uniformly read
as follows:
Section 5. Allowance for Unworked Days.
All covered employees shall be entitled to their daily living allowance during the
days that they are paid their basic wage, even if unworked. (Emphasis supplied)
The primordial consideration, therefore, for entitlement to COLA is that basic wage is
being paid. In other words, the payment of COLA is mandated only for the days that
the employees are paid their basic wage, even if said days are unworked. So that, on
the days that employees are not paid their basic wage, the payment of COLA is not
mandated. As held in University of Pangasinan Faculty Union vs. University of
Pangasinan, L-63122, February 20, 1984, 127 SCRA 691):
... it is evident that the intention of the law is to grant ECOLA upon the payment
of basic wages. Hence, we have the principle of 'No Pay, No ECOLA.
Applied to monthly-paid employees if their monthly salary covers all the days in a
month, they are deemed paid their basic wages for all those days and they should be
entitled to their COLA on those days "even if unworked," as the NLRC had opined.
Peculiar to this case, however, is the circumstance that pursuant to the Collective
Bargaining Agreement (CBA) between Petitioner Corporation and Respondent Union,
the monthly basic pay is computed on the basis of five (5) days a week, or twenty two
(22) days a month. Thus, the pertinent provisions of that Agreement read:
Art. XV(a)Eight net working hours shall constitute the regular work day for five
days.
Art. XV(b)Forty net hours of work, 5 working days, shall constitute the regular
work week.
Art. XVI, Sec. 1(b)All overtime worked in excess of eight net hours daily or in
excess of 5 days weekly shall be computed on hourly basis at the rate of time
and one half.
The Labor Arbiter also found that in determining the hourly rate of monthly paid
employees for purposes of computing overtime pay, the monthly wage is divided by
the number of actual work days in a month and then, by eight (8) working hours. If a
monthly-paid employee renders overtime work, he is paid his basic salary rate plus
one-half thereof. For example, after examining the specimen payroll of employee
Jesus L. Santos, the Labor Arbiter found:
the employee Jesus L. Santos, who worked on Saturday and Sunday was paid
base pay plus 50% premium. This is over and above his monthly basic pay as
supported by the fact that base pay was paid. If the 6th and 7th days of the week
are deemed paid even if unworked and included in the monthly salary, Santos
should not have been paid his base pay for Saturday and Sunday but should
have received only the 50% overtime premium.
Similarly, the specimen payrolls of employees, Dennis Dungon and Rene
Sanvictores, showed that in computing the vacation and sick leaves of the
employees, Petitioner Corporation consistently used twenty-two (22) days.
Under the peculiar circumstances obtaining, therefore, where the company observes
a 5-day work week, it will have to be held that the COLA should be computed on the
basis of twenty two (22) days, which is the period during which the monthly-paid
employees of Petitioner Corporation receive their basic wage. The CBA is the law
between the parties and, if not acceptable, can be the subject of future re-negotiation.
2) Payment in full by Petitioner Corporation of the COLA before the execution of the
CBA in 1982 and in compliance with Wage Orders Nos. 1 (26 March 1981) to 5 (11
June 1984), should not be construed as constitutive of voluntary employer practice,
which cannot now be unilaterally withdrawn by petitioner. To be considered as such, it
should have been practiced over a long period of time, and must be shown to have
been consistent and deliberate. Adequate proof is wanting in this respect. The test of
long practice has been enunciated thus:
... Respondent Company agreed to continue giving holiday pay knowing fully
well that said employees are not covered by the law requiring payment of holiday
pay.' (Oceanic Pharmacal Employees Union [FFW] vs. Inciong, L-50568,
November 7, 1979, 94 SCRA 270). (Emphasis ours)
Moreover, before Wage Order No. 4, there was lack of administrative guidelines for
the implementation of the Wage Orders. It was only when the Rules Implementing
Wage Order No. 4 were issued on 21 May 1984 that a formula for the conversion of
the daily allowance to its monthly equivalent was laid down, thus:
Section 3. Application of Section 2--
xxx xxx xxx

(a) Monthly rates for non-agricultural workers covered Under PDs
1614, 1634, 1678 and 1713:
xxx xxx xxx
(3) For workers who do not work and are not considered paid on
Saturdays and Sundays:
P60 + P90 + P60 + (P2.00 x 262) divided by 12 = P 253.70
(Emphasis ours)
As the Labor Arbiter had analyzed said formula:
Under the aforecited formula/guideline, issued for the first time,
when applied to a company like respondent which observes a 5day work week (or where 2 days in a week, not necessarily
Saturday and Sunday, are not considered paid), the monthly
equivalent of a daily allowance is arrived at by multiplying the daily
allowance by 262 divided by 12. This formula results in the
equivalent of 21.8 days in a month.
Absent clear administrative guidelines, Petitioner Corporation cannot be faulted for
erroneous application of the law. Payment may be said to have been made by reason
of a mistake in the construction or application of a "doubtful or difficult question of
law." (Article 2155, 1 in relation to Article 2154 2 of the Civil Code). Since it is a past
error that is being corrected, no vested right may be said to have arisen nor any
diminution of benefit under Article 100 of the Labor Code 3 may be said to have
resulted by virtue of the correction.
With the conclusions thus reached, there is no further need to discuss the liability of
the officers of Petitioner Corporation.
WHEREFORE, certiorari is granted, the Decision of the National Labor Relations
Commission, dated 10 March 1986, is SET ASIDE, and the Decision of the Labor
Arbiter, dated 9 May 1985, is hereby REINSTATED. The Temporary Restraining Order
heretofore issued is hereby made permanent.
SO ORDERED.
THIRD DIVISION
G.R. No. 113856 September 7, 1998
SAMAHANG MANGGAGAWA SA TOP FORM MANUFACTURING UNITED
WORKERS OF THE PHILIPPINES (SMTFM-UWP), its officers and
members, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, HON. JOSE G. DE VERA and
TOP FORM MANUFACTURING PHIL., INC., respondents.
ROMERO, J.:
The issue in this petition for certiorari is whether or not an employer committed an
unfair labor practice by bargaining in bad faith and discriminating against its
employees. The charge arose from the employer's refusal to grant across-the-board
increases to its employees in implementing Wage Orders Nos. 01 and 02 of the
Regional Tripartite Wages and Productivity Board of the National Capital Region
(RTWPB-NCR). Such refusal was aggravated by the fact that prior to the issuance of
said wage orders, the employer allegedly promised at the collective bargaining
conferences to implement any government-mandated wage increases on an acrossthe-board basis.
Petitioner Samahang Manggagawa sa Top Form Manufacturing United Workers of
the Philippines (SMTFM) was the certified collective bargaining representative of all
regular rank and file employees of private respondent Top Form Manufacturing
Philippines, Inc. At the collective bargaining negotiation held at the Milky Way
Restaurant in Makati, Metro Manila on February 27, 1990, the parties agreed to
discuss unresolved economic issues. According to the minutes of the meeting, Article
VII of the collective bargaining agreement was discussed. The following appear in
said Minutes:
Art. VII, Wages
Sect. 1. Defer
Sect. 2. Status quo
Sec. 3. Union proposed that any future wage increase given by the government
should be implemented by the company across-the-board or non-conditional.
Management requested the union to retain this provision since their sincerity was
already proven when the P25.00 wage increase was granted across-the-board.
The union acknowledges management's sincerity but they are worried that in
case there is a new set of management, they can just show their CBA. The union
decided to defer this provision. 1
In their joint affidavit dated January 30, 1992, 2 union members Salve L. Barnes,
Eulisa Mendoza, Lourdes Barbero and Concesa Ibaez affirmed that at the
subsequent collective bargaining negotiations, the union insisted on the incorporation
in the collective bargaining agreement (CBA) of the union proposal on "automatic
across-the-board wage increase." They added that:
11. On the strength of the representation of the negotiating panel of the company
and the above undertaking/promise made by its negotiating panel, our union
agreed to drop said proposal relying on the undertakings made by the officials of
the company who negotiated with us, namely, Mr. William Reynolds, Mr. Samuel
Wong and Mrs. Remedios Felizardo. Also, in the past years, the company has
granted to us government mandated wage increases on across-the-board basis.
On October 15, 1990, the RTWPB-NCR issued Wage Order No. 01 granting an
increase of P17.00 per day in the salary of workers. This was followed by Wage Order
No. 02 dated December 20, 1990 providing for a P12.00 daily increase in salary.
As expected, the union requested the implementation of said wage orders. However,
they demanded that the increase be on an across-the-board basis. Private
respondent refused to accede to that demand. Instead, it implemented a scheme of
increases purportedly to avoid wage distortion. Thus, private respondent granted the
P17.00 increase under Wage Order No. 01 to workers/employees receiving salary of
P125.00 per day and below. The P12.00 increase mandated by Wage Order No. 02
was granted to those receiving the salary of P140.00 per day and below. For
employees receiving salary higher than P125.00 or P140.00 per day, private
respondent granted an escalated increase ranging from P6.99 to P14.30 and from
P6.00 to P10.00, respectively. 3
On October 24, 1991, the union, through its legal counsel, wrote private respondent a
letter demanding that it should "fulfill its pledge of sincerity to the union by granting an
across-the-board wage increases (sic) to all employees under the wage orders." The
union reiterated that it had agreed to "retain the old provision of CBA" on the strength
of private respondent's "promise and assurance" of an across-the-board salary
increase should the government mandate salary increases. 4Several conferences
between the parties notwithstanding, private respondent adamantly maintained its
position on the salary increases it had granted that were purportedly designed to
avoid wage distortion.
Consequently, the union filed a complaint with the NCR NLRC alleging that private
respondent's act of "reneging on its undertaking/promise clearly constitutes act of
unfair labor practice through bargaining in bad faith." It charged private respondent
with acts of unfair labor practices or violation of Article 247 of the Labor Code, as
amended, specifically "bargaining in bad faith," and prayed that it be awarded actual,
moral and exemplary damages. 5 In its position paper, the union added that it was
charging private respondent with "violation of Article 100 of the Labor Code." 6
Private respondent, on the other hand, contended that in implementing Wage Orders
Nos. 01 and 02, it had avoided "the existence of a wage distortion" that would arise
from such implementation. It emphasized that only "after a reasonable length of time
from the implementation" of the wage orders "that the union surprisingly raised the
question that the company should have implemented said wage orders on an acrossthe-board basis." It asserted that there was no agreement to the effect that future
wage increases mandated by the government should be implemented on an acrossthe-board basis. Otherwise, that agreement would have been incorporated and
expressly stipulated in the CBA. It quoted the provision of the CBA that reflects the
parties' intention to "fully set forth" therein all their agreements that had been arrived
at after negotiations that gave the parties "unlimited right and opportunity to make
demands and proposals with respect to any subject or matter not removed by law
from the area of collective bargaining." The same CBA provided that during its
effectivity, the parties "each voluntarily and unqualifiedly waives the right, and each
agrees that the other shall not be obligated, to bargain collectively, with respect to any
subject or matter not specifically referred to or covered by this Agreement, even
though such subject or matter may not have been within the knowledge or
contemplation of either or both of the parties at the time they negotiated or signed this
Agreement." 7
On March 11, 1992, Labor Arbiter Jose G. de Vera rendered a decision dismissing the
complaint for lack of merit. 8 He considered two main issues in the case: (a) whether
or not respondents are guilty of unfair labor practice, and (b) whether or not the
respondents are liable to implement Wage Orders Nos. 01 and 02 on an across-theboard basis. Finding no basis to rule in the affirmative on both issues, he explained as
follows:
The charge of bargaining in bad faith that the complainant union attributes to the
respondents is bereft of any certitude inasmuch as based on the complainant
union's own admission, the latter vacillated on its own proposal to adopt an
across-the-board stand or future wage increases. In fact, the union
acknowledges the management's sincerity when the latter allegedly implemented
Republic Act 6727 on an across-the-board basis. That such union proposal was
not adopted in the existing CBA was due to the fact that it was the union itself
which decided for its deferment. It is, therefore, misleading to claim that the
management undertook/promised to implement future wage increases on an
across-the-board basis when as the evidence shows it was the union who asked
for the deferment of its own proposal to that effect.
The alleged discrimination in the implementation of the subject wage orders does
not inspire belief at all where the wage orders themselves do not allow the grant
of wage increases on an across-the-board basis. That there were employees
who were granted the full extent of the increase authorized and some others who
received less and still others who did not receive any increase at all, would not
ripen into what the complainants termed as discrimination. That the
implementation of the subject wage orders resulted into an uneven
implementation of wage increases is justified under the law to prevent any wage
distortion. What the respondents did under the circumstances in order to deter an
eventual wage distortion without any arbitral proceedings is certainly
commendable.
The alleged violation of Article 100 of the Labor Code, as amended, as well as
Article XVII, Section 7 of the existing CBA as herein earlier quoted is likewise
found by this Branch to have no basis in fact and in law. No benefits or privileges
previously enjoyed by the employees were withdrawn as a result of the
implementation of the subject orders. Likewise, the alleged company practice of
implementing wage increases declared by the government on an across-theboard basis has not been duly established by the complainants' evidence. The
complainants asserted that the company implemented Republic Act No. 6727
which granted a wage increase of P25.00 effective July 1, 1989 on an acrossthe-board basis. Granting that the same is true, such isolated single act that
respondents adopted would definitely not ripen into a company practice. It has
been said that "a sparrow or two returning to Capistrano does not a summer
make."
Finally, on the second issue of whether or not the employees of the respondents
are entitled to an across-the-board wage increase pursuant to Wage Orders Nos.
01 and 02, in the face of the above discussion as well as our finding that the
respondents correctly applied the law on wage increases, this Branch rules in the
negative.
Likewise, for want of factual basis and under the circumstances where our
findings above are adverse to the complainants, their prayer for moral and
exemplary damages and attorney's fees may not be granted.
Not satisfied, petitioner appealed to the NLRC that, in turn, promulgated the assailed
Resolution of April 29, 19939 dismissing the appeal for lack of merit. Still dissatisfied,
petitioner sought reconsideration which, however, was denied by the NLRC in the
Resolution
dated
January
17,
1994.
Hence,
the
instant
petition
for certiorari contending that:
- ATHE PUBLIC RESPONDENTS GROSSLY ERRED IN NOT DECLARING THE

PRIVATE RESPONDENTS GUILTY OF ACTS OF UNFAIR LABOR PRACTICES
WHEN, OBVIOUSLY, THE LATTER HAS BARGAINED IN BAD FAITH WITH
THE UNION AND HAS VIOLATED THE CBA WHICH IT EXECUTED WITH THE
HEREIN PETITIONER UNION.
-BTHE PUBLIC RESPONDENTS SERIOUSLY ERRED IN NOT DECLARING THE
PRIVATE RESPONDENTS GUILTY OF ACTS OF DISCRIMINATION IN THE
IMPLEMENTATION OF NCR WAGE ORDER NOS. 01 AND 02.
-CTHE PUBLIC RESPONDENTS SERIOUSLY ERRED IN NOT FINDING THE
PRIVATE RESPONDENTS GUILTY OF HAVING VIOLATED SECTION 4,
ARTICLE XVII OF THE EXISTING CBA.
-DTHE PUBLIC RESPONDENTS GRAVELY ERRED IN NOT DECLARING THE
PRIVATE RESPONDENTS GUILTY OF HAVING VIOLATED ARTICLE 100 OF
THE LABOR CODE OF THE PHILIPPINES, AS AMENDED.
-EASSUMING, WITHOUT ADMITTING THAT THE PUBLIC RESPONDENTS HAVE
CORRECTLY RULED THAT THE PRIVATE RESPONDENTS ARE GUILTY OF
ACTS OF UNFAIR LABOR PRACTICES, THEY COMMITTED SERIOUS
ERROR IN NOT FINDING THAT THERE IS A SIGNIFICANT DISTORTION IN
THE WAGE STRUCTURE OF THE RESPONDENT COMPANY.
-FTHE PUBLIC RESPONDENTS ERRED IN NOT AWARDING TO THE
PETITIONERS HEREIN ACTUAL, MORAL, AND EXEMPLARY DAMAGES AND
ATTORNEY'S FEES.
As the Court sees it, the pivotal issues in this petition can be reduced into two, to wit:
(a) whether or not private respondent committed an unfair labor practice in its refusal
to grant across-the-board wage increases in implementing Wage Orders Nos. 01 and
02, and (b) whether or not there was a significant wage distortion of the wage
structure in private respondent as a result of the manner by which said wage orders
were implemented.
With respect to the first issue, petitioner union anchors its arguments on the alleged
commitment of private respondent to grant an automatic across-the-board wage
increase in the event that a statutory or legislated wage increase is promulgated. It
cites as basis therefor, the aforequoted portion of the Minutes of the collective
bargaining negotiation on February 27, 1990 regarding wages, arguing additionally
that said Minutes forms part of the entire agreement between the parties.
The basic premise of this argument is definitely untenable. To start with, if there was
indeed a promise or undertaking on the part of private respondent to obligate itself to
grant an automatic across-the-board wage increase, petitioner union should have
requested or demanded that such "promise or undertaking" be incorporated in the
CBA. After all, petitioner union has the means under the law to compel private
respondent to incorporate this specific economic proposal in the CBA. It could have
invoked Article 252 of the Labor Code defining "duty to bargain," thus, the duty
includes "executing a contract incorporating such agreements if requested by either
party." Petitioner union's assertion that it had insisted on the incorporation of the
same proposal may have a factual basis considering the allegations in the
aforementioned joint affidavit of its members. However, Article 252 also states that the
duty to bargain "does not compel any party to agree to a proposal or make any
concession." Thus, petitioner union may not validly claim that the proposal embodied
in the Minutes of the negotiation forms part of the CBA that it finally entered into with
private respondent.
The CBA is the law between the contracting parties 10 the collective bargaining
representative and the employer-company. Compliance with a CBA is mandated by
the expressed policy to give protection to labor. 11 In the same vein, CBA provisions
should be "construed liberally rather than narrowly and technically, and the courts
must place a practical and realistic construction upon it, giving due consideration to
the context in which it is negotiated and purpose which it is intended to serve." 12 This
is founded on the dictum that a CBA is not an ordinary contract but one impressed
with public interest. 13 It goes without saying, however, that only provisions embodied
in the CBA should be so interpreted and complied with. Where a proposal raised by a
contracting party does not find print in the CBA, 14 it is not a part thereof and the
proponent has no claim whatsoever to its implementation.
Hence, petitioner union's contention that the Minutes of the collective bargaining
negotiation meeting forms part of the entire agreement is pointless. The Minutes
reflects the proceedings and discussions undertaken in the process of bargaining for
worker benefits in the same way that the minutes of court proceedings show what
transpired therein. 15 At the negotiations, it is but natural for both management and
labor to adopt positions or make demands and offer proposals and counter-proposals.
However, nothing is considered final until the parties have reached an agreement. In
fact, one of management's usual negotiation strategies is to ". . . agree tentatively as
you go along with the understanding that nothing is binding until the entire agreement
is reached." 16 If indeed private respondent promised to continue with the practice of
granting across-the-board salary increases ordered by the government,
such promise could only be demandable in law if incorporated in the CBA.
Moreover, by making such promise, private respondent may not be considered in bad
faith or at the very least, resorting to the scheme of feigning to undertake the
negotiation proceedings through empty promises. As earlier stated, petitioner union
had, under the law, the right and the opportunity to insist on the foreseeable fulfillment
of the private respondent's promise by demanding its incorporation in the CBA.
Because the proposal was never embodied in the CBA, the promise has remained
just that, a promise, the implementation of which cannot be validly demanded under
the law.
Petitioner's reliance on this Court's pronouncements 17 in Kiok Loy v. NLRC 18 is,
therefore, misplaced. In that case, the employer refused to bargain with the collective
bargaining representative, ignoring all notices for negotiations and requests for
counter proposals that the union had to resort to conciliation proceedings. In that
case, the Court opined that "(a) Company's refusal to make counter-proposal, if
considered in relation to the entire bargaining process, may indicate bad faith and this
is specially true where the Union's request for a counter-proposal is left unanswered."
Considering the facts of that case, the Court concluded that the company was
"unwilling to negotiate and reach an agreement with the Union." 19
In the case at bench, however, petitioner union does not deny that discussion on its
proposal that all government-mandated salary increases should be on an across-theboard basis was "deferred," purportedly because it relied upon the "undertaking" of
the negotiating panel of private respondent. 20 Neither does petitioner union deny the
fact that "there is no provision of the 1990 CBA containing a stipulation that the
company will grant across-the-board to its employees the mandated wage increase."
They simply assert that private respondent committed "acts of unfair labor practices
by virtue of its contractual commitment made during the collective bargaining
process." 21 The mere fact, however, that the proposal in question was not included in
the CBA indicates that no contractual commitment thereon was ever made by private
respondent as no agreement had been arrived at by the parties. Thus:
Obviously the purpose of collective bargaining is the reaching of an agreement
resulting in a contract binding on the parties; but the failure to reach an
agreement after negotiations continued for a reasonable period does not
establish a lack of good faith. The statutes invite and contemplate a collective
bargaining contract, but they do not compel one. The duty to bargain does not
include the obligation to reach an agreement. . . . 32
With the execution of the CBA, bad faith bargaining can no longer be imputed upon
any of the parties thereto. All provisions in the CBA are supposed to have been jointly
and voluntarily incorporated therein by the parties. This is not a case where private
respondent exhibited an indifferent attitude towards collective bargaining because the
negotiations were not the unilateral activity of petitioner union. The CBA is proof
enough that private respondent exerted "reasonable effort at good faith bargaining." 23
Indeed, the adamant insistence on a bargaining position to the point where the
negotiations reach an impasse does not establish bad faith. Neither can bad faith be
inferred from a party's insistence on the inclusion of a particular substantive provision
unless it concerns trivial matters or is obviously intolerable. 24
The question as to what are mandatory and what are merely permissive subjects
of collective bargaining is of significance on the right of a party to insist on his
position to the point of stalemate. A party may refuse to enter into a collective
bargaining contract unless it includes a desired provision as to a matter which is
a mandatory subject of collective bargaining; but a refusal to contract unless the
agreement covers a matter which is not a mandatory subject is in substance a
refusal to bargain about matters which are mandatory subjects of collective
bargaining, and it is no answer to the charge of refusal to bargain in good faith
that the insistence on the disputed clause was not the sole cause of the failure to
agree or that agreement was not reached with respect to other disputed
clauses. 25
On account of the importance of the economic issue proposed by petitioner union, it
could have refused to bargain and to enter into a CBA with private respondent. On the
other hand, private respondent's firm stand against the proposal did not mean that it
was bargaining in bad faith. It had the right "to insist on (its) position to the point of
stalemate." On the part of petitioner union, the importance of its proposal dawned on
it only after the wage orders were issued after the CBA had been entered into.
Indeed, from the facts of this case, the charge of bad faith bargaining on the part of
private respondent was nothing but a belated reaction to the implementation of the
wage orders that private respondent made in accordance with law. In other words,
petitioner union harbored the notion that its members and the other employees could
have had a better deal in terms of wage increases had it relentlessly pursued the
incorporation in the CBA of its proposal. The inevitable conclusion is that private
respondent did not commit the unfair labor practices of bargaining in bad faith and
discriminating against its employees for implementing the wage orders pursuant to
law.
The Court likewise finds unmeritorious petitioner union's contention that by its failure
to grant across-the-board wage increases, private respondent violated the provisions
of Section 5, Article VII of the existing CBA 26 as well as Article 100 of the Labor Code.
The CBA provision states:
Presiding Commissioner Edna Bonto-Perez unanimously ruled that no wage

distortions marred private respondent's implementation of the wage orders. The
NLRC said:
On the issue of wage distortion, we are satisfied that there was a
meaningful implementation of Wage Orders Nos. 01 and 02. This
debunks the claim that there was wage distortion as could be
shown by the itemized wages implementation quoted above. It
should be noted that this itemization has not been successfully
traversed by the appellants. . . . . 30
Sec. 5. The COMPANY agrees to comply with all the applicable provisions of the
Labor Code of the Philippines, as amended, and all other laws, decrees, orders,
instructions, jurisprudence, rules and regulations affecting labor.
Art. 100 of the Labor Code on prohibition against elimination or diminution of
benefits provides that "(n)othing in this Book shall be construed to eliminate or in
any way diminish supplements, or other employee benefits being enjoyed at the
time of promulgation of this Code."
We agree with the Labor Arbiter and the NLRC that no benefits or privileges
previously enjoyed by petitioner union and the other employees were withdrawn as a
result of the manner by which private respondent implemented the wage orders.
Granted that private respondent had granted an across-the-board increase pursuant
to Republic Act No. 6727, that single instance may not be considered an established
company practice. Petitioner union's argument in this regard is actually tied up with its
claim that the implementation of Wage Orders Nos. 01 and 02 by private respondent
resulted in wage distortion.
The issue of whether or not a wage distortion exists is a question of
fact 27 that is within the jurisdiction of the quasi-judicial tribunals below. Factual
findings of administrative agencies are accorded respect and even finality in this
Court if they are supported by substantial evidence. 28 Thus, in Metropolitan Bank and
Trust Company, Inc. v. NLRC, the Court said:
The issue of whether or not a wage distortion exists as a consequence of the
grant of a wage increase to certain employees, we agree, is, by and large, a
question of fact the determination of which is the statutory function of the NLRC.
Judicial review of labor cases, we may add, does not go beyond the evaluation of
the sufficiency of the evidence upon which the labor officials' findings rest. As
such, the factual findings of the NLRC are generally accorded not only respect
but also finality provided that its decisions are supported by substantial evidence
and devoid of any taint of unfairness or arbitrariness. When, however, the
members of the same labor tribunal are not in accord on those aspects of a case,
as in this case, this Court is well cautioned not to be as so conscious in passing
upon the sufficiency of the evidence, let alone the conclusions derived
therefrom. 29
The NLRC then quoted the labor arbiter's ruling on wage distortion.
We find no reason to depart from the conclusions of both the labor arbiter and the
NLRC. It is apropos to note, moreover, that petitioner's contention on the issue of
wage distortion and the resulting allegation of discrimination against the private
respondent's employees are anchored on its dubious position that private
respondent's promise to grant an across-the-board increase in government-mandated
salary benefits reflected in the Minutes of the negotiation is an enforceable part of the
CBA.
In the resolution of labor cases, this Court has always been guided by the State policy
enshrined in the Constitution that the rights of workers and the promotion of their
welfare shall be protected. 31 The Court is likewise guided by the goal of attaining
industrial peace by the proper application of the law. It cannot favor one party, be it
labor or management, in arriving at a just solution to a controversy if the party has no
valid support to its claims. It is not within this Court's power to rule beyond the ambit
of the law.
WHEREFORE, the instant petition for certiorari is hereby DISMISSED and the
questioned Resolutions of the NLRC AFFIRMED. No costs.
SO ORDERED.
Unlike in above-cited case where the Decision of the NLRC was not unanimous, the
NLRC Decision in this case which was penned by the dissenter in that case,
FIRST DIVISION
7. BERMEJO JIMMY JR.
04.01.97
221.00
11.00
8. EDRADAN ELDEMAR P.
04.17.97
221.00
11.00
9. REBOTON RONILO
05.14.97
221.00
11.00
10. TABAOG ALBERT
04.10.97
221.00
11.00
DECISION
11. SALEN EDILBERTO
02.10.97
221.00
11.00
CALLEJO, SR., J.:
13. PAEZ REYNALDO
02.27.97.
235.00
11.00
This is a Petition for Review on Certiorari of the Decision 1 of the Court of Appeals
(CA) in CA-G.R. SP No. 65171 ordering Pag-Asa Steel Works, Inc. to pay the
members of Pag-Asa Steel Workers Union (Union) the wage increase prescribed
under Wage Order No. NCR-08. Also assailed in this petition is the CA Resolution
denying the corporations motion for reconsideration.
14. HERNANDEZ ALFREDO
03.23.96
246.00
10.00
15. BANIA LUIS JR.
12.08.95
246.00
10.00
16. MAGBOO VICTOR
05.25.96
246.00
10.00
Petitioner Pag-Asa Steel Works, Inc. is a corporation duly organized and existing
under Philippine laws and is engaged in the manufacture of steel bars and wire rods.
Pag-Asa Steel Workers Union is the duly authorized bargaining agent of the rankand-file employees of petitioner.
17. NINORA BONIFACIO
03.22.96
246.00
10.00
18. ALANCADO RODERICK
11.10.95
246.00
10.00
19. PUTONG PASCUAL
06.23.96
246.00
10.00
20. PAR EULOGIO JR.
08.16.95
246.00
10.00
21. SALON FONDADOR
11.16.95
246.00
10.00
22. RODA GEORGE
10.11.95
246.00
10.00
23. RIOJA JOSEPH
12.28.95
246.00
10.00
24. RAYMUNDO ANTONIO
06.05.96
246.00
10.00
25. BUGTAI ROBERTO
04.10.96
246.00
10.00
07.07.96
265.00
10.00
27. REGACHUELO DENNIS
11.30.95
265.00
10.00
28. ORNOPIA REYNALDO
08.09.94
268.00
10.00
29. PULPULAAN JAIME
01.18.96
275.00
10.00
30. PANLAAN FERDINAND
01.18.96
275.00
10.00
31.BAGASBAS EULOGIO JR.
01.18.96
275.00
10.00
32. ALEJANDRO OLIVER
12.03.95
275.00
10.00
33. PRIELA DANILO
11.30.95
280.00
10.00
G.R. No. 166647
March 31, 2006
PAG-ASA
STEEL
WORKS,
INC., Petitioner,
vs.
COURT OF APPEALS, FORMER SIXTH DIVISION and PAG-ASA STEEL
WORKERS UNION (PSWU),Respondent.
On January 8, 1998, the Regional Tripartite Wages and Productivity Board (Wage
Board) of the National Capital Region (NCR) issued Wage Order No. NCR-06. 2 It
provided for an increase of P13.00 per day in the salaries of employees receiving the
minimum wage, and a consequent increase in the minimum wage rate to P198.00 per
day. Petitioner and the Union negotiated on how to go about the wage adjustments.
Petitioner forwarded a letter3dated March 10, 1998 to the Union with the list of the
salary adjustments of the rank-and-file employees after the implementation of Wage
Order No. NCR-06, and the notation that said "adjustments [were] in accordance with
the formula [they] have discussed and [were] designed so as no distortion shall result
from the implementation of Wage Order No. NCR-06."
NAME
DATE
REGULAR
PRESENT
RATE
ADJUST EFF
26. RELATO RAMON
2/6/98
1. PEPINO EMMANUEL
08.01.97
191.00
13.00
2. SEVANDRA RODOLFO
01.17.98
192.00
13.00
3. BERNABE ALFREDO
10.24.97
200.00
13.00
4. UMBAL ADOLFO
08.18.97
215.00
12.00
5. AQUINO JONAS
08.25.97
215.00
12.00
6. AGCAOILI JAIME
01.08.98
220.00
11.00
58. DOROL ERWIN
09.16.93
288.00
10.00
34. NOBELJAS EDGAR
07.10.95
283.00
10.00
59. CURAMBAO TIRSO
09.23.93
288.00
10.00
35. SAJOT RONNIE
10.02.93
288.00
10.00
60. VENTURA FERDINAND
09.20.94
292.00
10.00
36. WHITING JOEL
09.30.93
288.00
10.00
61. ALBANO JESUS
01.06.94
297.00
10.00
37. SURINGA FRANKLIN
12.19.93
288.00
10.00
62. CALLEJA JOSEPH
05.10.93
303.00
10.00
38. SIBOL MICHAEL
12.11.93
288.00
10.00
63. PEREZ DANILO
03.01.93
303.00
10.00
39. SOLO JOSE
02.20.94
288.00
10.00
64. BATOY ERNIE
06.15.93
305.00
10.00
40. TIZON JOEL
12.23.93
288.00
10.00
65. SAMPAGA EDGARDO
06.07.93
307.00
10.00
41. SABATIN GILBERT
04.19.94
288.00
10.00
66. SOLON ROBINSON
05.10.94
315.00
10.00
42. REYES RONALDO
04.14.94
288.00
10.00
67. ELEDA FULGENIO
06.07.93
322.00
10.00
43. AMANIA WILFREDO
01.06.94
288.00
10.00
68. CASCARA RODRIGO
06.07.93
322.00
10.00
44. QUIDATO ARISTON
12.12.93
288.00
10.00
69. ROMANOS ARNULFO
06.07.93
322.00
10.00
45. LAROGA CLAUDIO JR.
10.13.93
288.00
10.00
70. LUMANSOC MARIANO
06.07.93
322.00
10.00
46. MORALES LUIS
09.30.93
288.00
10.00
71. RAMOS GRACIANO
06.07.93
322.00
10.00
47. ANTOLO DANILO
12.26.93
288.00
10.00
72. MAZON NESTOR
07.24.90
330.00
10.00
48. EXMUNDO HERCULES
05.13.94
288.00
10.00
73. BRIN LUCENIO
07.26.90
330.00
10.00
49. AMPER VALENTINO
08.02.93
288.00
10.00
74. SE FREDIE
03.25.90
340.00
10.00
50. BAYO-ANG ALDEN JR.
07.14.93
288.00
10.00
75. RONCALES DIOSDADO
04.30.90
340.00
10.00
51. BASCONES NELSON
02.26.94
288.00
10.00
76. DISCAYA EDILBERTO
09.06.89
340.00
10.00
52. DECENA LAURO
09.18.93
288.00
10.00
77. SUAREZ LUISTO
06.10.92
347.00
10.00
53. CHUA MARLONITO
10.20.93
288.00
10.00
78. CASTRO PEDRO
10.30.92
348.00
10.00
54. CATACUTAN JUNE
03.02.94
288.00
10.00
79. CLAVECILLA AMBROSIO
09.09.88
351.00
10.00
55.DE LOS SANTOS REYNALDO
12.23.93
288.00
10.00
80. YSON ROMEO
09.11.88
351.00
10.00
56. REYES EFREN
10.23.93
288.00
10.00
81. JUMAWAN URBANO JR.
12.20.87
354.00
10.00
57. CAGOMOC DANILO
01.13.94
288.00
10.00
82. MARASIGAN GRACIANO
05.20.88
354.00
10.00
83. MAGLENTE ROLANDO
09.03.87
354.00
10.00
84. NEBRIA CALIX
02.25.88
354.00
10.00
109. ARNALDO LOPE
05.02.69
378.50
10.00
85. BARBIN DANIEL
09.03.87
354.00
10.00
110. SURIGAO HERNANDO
12.29.79
379.00
10.00
86. CAMAING CARLITO
12.22.87
354.00
10.00
111. DE LA CRUZ CHARLIE
07.14.76
379.00
10.00
87. BUBAN JONATHAN
10.22.87
354.00
10.00
112. ROSAURO JUAN
07.15.76
379.50
10.00
88. GUEVARRA ARNOLD
10.04.87
354.00
10.00
113 HILOTIN ARLEN
10.10.77
383.00
10.00
89. MALAPO MARCOS JR.
08.04.87
354.00
90. ZUNIEGA CARLOS
02.19.88
354.00
10.00On September 23, 1999, petitioner and the Union entered into a Collective Bargaining
Agreement (CBA), effective July 1, 1999 until July 1, 2004. Section 1, Article VI
10.00(Salaries and Wage) of said CBA provides:
91. SABORNIDO JULITO
12.20.87
354.00
92. DALUYO LOTERIO
04.02.88
354.00
10.00Section 1. WAGE ADJUSTMENT - The COMPANY agrees to grant all the workers,
who are already regular and covered by this AGREEMENT at the effectivity of this
10.00AGREEMENT, a general wage increase as follows:
93. AGUILLON GRACIANO
05.27.87
359.00
10.00
94. CRISTY EMETERIO
04.06.87
359.50
10.00
95. FULGUERAS DOMINGO
01.25.87
362.00
96. ZIPAGAN NELSON
02.07.84
370.00
97. LAURIO JESUS
06.01.82
371.00
98. ACASIO PEDRO
11.21.79
372.00
99. MACALISANG EPIFANIO
02.01.88
372.00
100. OFILAN ANTONIO
03.12.79
374.50
101. SEVANDRA ALFREDO
05.02.69
374.50
10.00The difference of the first year adjustment to retroact to July 1, 1999.
102. VILLAMER JOEY
11.04.81
374.50
103. GRIPON GIL
01.17.76
374.75
10.00The across-the-board wage increase for the 4th and 5th year of this AGREEMENT
shall be subject for a re-opening or renegotiation as provided for by Republic Act No.
10.006715.5
104. CARLON HERMINIGILDO, JR.
04.17.87
375.00
105. MANLABAO HEROHITO
04.14.81
106. VILLANUEVA DOMINGO
12.01.77
107. APITAN NAZARIO
09.04.79
108. SALAMEDA EDUARDO
02.13.79
July 1, 1999 . . . . . . . . . . . P15.00 per day per employee


10.00
The aforesaid wage increase shall be implemented across the board. Any Wage
10.00Order to be implemented by the Regional Tripartite Wage and Productivity Board shall
be in addition to the wage increase adverted to above. However, if no wage increase
10.00is given by the Wage Board within six (6) months from the signing of this
AGREEMENT, the Management is willing to give the following increases, to wit:
10.00
10.00
10.00
10.00For the first year of the CBAs effectivity, the salaries of Union members were
increased as follows:
375.00
10.00
WAGE
NAME
WAGE
375.50
10.00
1. Pedro Acasio
P427.00
53. Nestor Mazon
P385.00
376.00
10.00
2. Roderick Alancado
301.00
54. Luis Morales
343.00
377.00 3. Jesus10.00
Albano
352.00
55. Calix Nebria
409.00
33. Edilberto Discaya
395.00
85. Rodolfo Sevandra
250.00
liver Alejandro
330.00
56. Bonifacio Ninora Jr.
34.301.00
Erwin Dorol
343.00
86. Jose Solo
343.00
Welfredo Amania
343.00
57. Edgar Noblejas
35.338.00
Eldemar Edradan
277.00
87. Robinson Solon
370.00
alentino Amper
343.00
58. Antonio Ofilan
36.429.50
Fulgencio Eleda
377.00
88. Luisito Suarez
402.00
anilo Antolo
343.00
59. Reynaldo Ornopia
37.323.00
Hercules Exmundo
343.00
89. Jeriel Suico
223.00
azario Apitan
431.00
60. Reynaldo Paez
38.291.00
Domingo Fulgueras
417.00
90. Hernando Surigao
434.00
onas Aquino
272.00
61. Ferdinand Panlaan
39.330.00
Federico Garcia
277.00
91. Franklin Suringa
343.00
Eulogio Bagasbas, Jr.
330.00
62. Eulogio Par Jr.
40.301.00
Gil Gripon
429.75
92. Albert Tabaog
277.00
Luis Bania, Jr.
301.00
63. Marvin Peco
41.223.00
Arnold Guevarra
409.00
93. Joel Tizon
343.00
Daniel Barbin
409.00
64. Emmanuel Pepino
42.249.00
Arlen Hilotin
438.00
94. Alfredo Umbal
272.00
Nelson Bascones
343.00
65. Danilo Perez
43.358.00
Urbano Jumawan, Jr.
409.00
95. Ferdinand Ventura
347.00
Alden Bayo-ang, Jr.
343.00
66. Jaime Pulpulaan
44.330.00
Ronilo Lacandoze
265.00
96. Joey Villamer
429.50
Jimmy Bermejo
277.00
67. Ariston Quidato
45.343.00
Claudio Laroga, Jr.
343.00
97.Domingo Villanueva
430.50
Alfredo Bernabe
258.00
68. Graciano Ramos Jr.
46.377.00
Jesus Laurio
426.00
98. Joel Whiting
343.00
Lucenio Brin
385.00
69. Antonio Raymundo
47.301.00
Mariano Lumansoc
377.00
99. Romeo Yson
406.00
Jonathan Buban
409.00
70. Ronilo Reboton
48.277.00
Victor Magboo
301.00
100. Carlos Zuniega
409.00
Roberto Bugtai
301.00
71. Ramon Relato
49.320.00
Rolando Maglente
409.00
101. Nelson Zipagan
425.00
Danilo Cagomoc
343.00
72. Efren Reyes
50.343.00
Marcos Malapo Jr.
409.00
102. Michael Sibol
343.00
Joseph Calleja
358.00
73. Ronaldo Reyes
51.343.00
Herohito Manlabao
430.00
103. Renante Tangian
223.00
Carlito Camaing
409.00
74. Joseph Rioja
52.301.00
Graciano Marasigan
409.00
104. Rodrigo Cascara
377.006
Hermenigildo Carlon, Jr.
430.00
75. George Roda
301.00
June Catacutan
343.00
76. Diosdado Roncales
395.00
Marlonito Chua
343.00
77. Gilbert Sabatin
343.00
Ambrocio Clavecilla
406.00
78. Julito Sabornido
409.00
Emeterio Cristy
414.50
79. Ronnie Sajot
343.00
Tirso Curambao
343.00
80. Eduardo Salameda
432.00
Loterio Daluyo
409.00
81. Edilberto Salen
277.00
Lauro Decena
343.00
82. Fundador Salon
301.00
Charlie dela Cruz
434.00
83. Edgar Sampaga
362.00
Raynaldo delos Santos
343.00
84. Fredie Se
395.00
On October 14, 1999, Wage Order No. NCR-07 7 was issued, and on October 26,
1999, its Implementing Rules and Regulations. It provided for a P25.50 per day
increase in the salary of employees receiving the minimum wage and increased the
minimum wage to P223.50 per day. Petitioner paid the P25.50 per day increase to all
of its rank-and-file employees.
On July 1, 2000, the rank-and-file employees were granted the second year increase
provided in the CBA in the amount of P25.00 per day.8
On November 1, 2000, Wage Order No. NCR-08 9 took effect. Section 1 thereof
provides:
Section 1. Upon the effectivity of this Wage Order, private sector workers and
employees in the National Capital Region receiving the prescribed daily minimum
wage rate of P223.50 shall receive an increase of TWENTY SIX PESOS and FIFTY
CENTAVOS (P26.50) per day, thereby setting the new minimum wage rate in the
National Capital Region at TWO HUNDRED FIFTY PESOS (P250.00) per day.10
negotiations, it steadfastly rejected the following proposal of the Unions counsel, Atty.
Florente Yambot, to include an across-the-board implementation of the wage orders:15
Then Union president Lucenio Brin requested petitioner to implement the increase
under Wage Order No. NCR-08 in favor of the companys rank-and-file employees.
Petitioner rejected the request, claiming that since none of the employees were
receiving a daily salary rate lower than P250.00 and there was no wage distortion, it
was not obliged to grant the wage increase.
x x x To supplement the above wage increases, the parties agree that additional wage
increases equal to the wage orders shall be paid across-the-board whenever the
Regional Tripartite Wage and Productivity Board issues wage orders. It is understood
that these additional wage increases will be paid not as wage orders but as agreed
additional salary increases using the wage orders merely as a device to fix or
determine how much the additional wage increases shall be paid.16
The Union elevated the matter to the National Conciliation and Mediation Board.
When the parties failed to settle, they agreed to refer the case to voluntary arbitration.
In the Submission Agreement, the parties agreed that the sole issue is "[w]hether or
not the management is obliged to grant wage increase under Wage Order No. NCR
#8 as a matter of practice,"11 and that the award of the Voluntary Arbitrator (VA) shall
be final and binding.12
In its Position Paper, the Union alleged that it has been the companys practice to
grant a wage increase under a government-issued wage order, aside from the yearly
wage increases in the CBA. It averred that petitioner paid the salary increases
provided under the previous wage orders in full (aside from the yearly CBA
increases), regardless of whether there was a resulting wage distortion, or whether
Union members salaries were above the minimum wage rate. Wage Order No. NCR06, where rank-and-file employees were given different wage increases ranging
from P10.00 to P13.00, was an exception since the adjustments were the result of the
formula agreed upon by the Union and the employer after negotiations. The Union
averred that all of their CBAs with petitioner had a "collateral agreement" where
petitioner was mandated to pay the equivalent of the wage orders across-the-board,
or at least to negotiate how much will be paid. It pointed out that an established
practice cannot be discontinued without running afoul of Article 100 of the Labor Code
on non-diminution of benefits.13
For its part, petitioner alleged that there is no such company practice and that it
complied with the previous wage orders (Wage Order Nos. NCR-01-05) because
some of its employees were receiving wages below the minimum prescribed under
said orders. As for Wage Order No. NCR-07, petitioner alleged that its compliance
was in accordance with its verbal commitment to the Union during the CBA
negotiations that it would implement any wage order issued in 1999. Petitioner further
averred that it applied the wage distortion formula prescribed under Wage Order Nos.
NCR-06 and NCR-07 because an actual distortion occurred as a result of their
implementation. It asserted that at present, all its employees enjoy regular status and
that none receives a daily wage lower than the P250.00 minimum wage rate
prescribed under Wage Order No. NCR-08.14
In reply to the Unions position paper, petitioner contended that the full
implementation of the previous wage orders did not give rise to a company practice
as it was not given to the workers within the bargaining unit on a silver platter, but
only per request of the Union and after a series of negotiations. In fact, during CBA
The Union, however, insisted that there was such a company practice. It pointed out
that despite the fact that all the employees were already receiving salaries above the
minimum wage, the CBA still provided for the payment of a wage increase using
wage orders as the yardstick. It claimed that the parties intended that petitioneremployer would pay the additional increases apart from those in the CBA. 17 The
Union further asserted that the CBA did not include all the agreements of the parties;
hence, to determine the true intention of the parties, parol evidence should be
resorted to. Thus, Atty. Yambots version of the wage adjustment provision should be
considered.18
On June 6, 2001, the VA rendered judgment in favor of the company and ordered the
case dismissed.19 It held that there was no company practice of granting a wage order
increase to employees across-the-board, and that there is no provision in the CBA
that would oblige petitioner to grant the wage increase under Wage Order No. NCR
08 across-the-board.20
The Union filed a petition for review with the CA under Rule 43 of the Rules of Court.
It defined the issue for resolution as follows:
The principal issue in the present petition is whether or not the wage increase
of P26.50 under Wage Order No. NCR-08 must be paid to the union members as a
matter of practice and whether or not parol evidence can be resorted to in proving or
explaining or elucidating the existence of a collateral agreement/company practice for
the payment of the wage increase under the wage order despite that the employees
were already receiving wages way above the minimum wage of P250.00/day as
prescribed by Wage Order No. NCR-08 and irrespective of whether wage distortion
exists.21
On September 23, 2004, the CA rendered judgment in favor of the Union and
reversed that of the VA. The fallo of the decision reads:
WHEREFORE, the assailed Decision dated June 6, 2001 of public respondent
Voluntary Arbitrator is REVERSED and SET ASIDE. Private respondent Pag-Asa
Steel Works, Inc. is ordered to pay the members of the petitioner union the P26.50
daily wage by applying the wage increase prescribed under Wage Order No. NCR-08.
Costs against private respondent.
SO ORDERED.22
The CA stressed that the CBA constitutes the law between the employer and the
Union. It held that the CBA is plain and clear, and leaves no doubt as to the intention
of the parties, that is, to grant a wage increase that may be ordered by the Wage
Board in addition to the CBA-mandated salary increases regardless of whether the
employees are already receiving wages way above the minimum wage. The appellate
court further held that the employer has no valid reason not to implement the wage
increase mandated by Wage Order No. NCR-08 because prior thereto, it had been
paying the wage increase provided for in the CBA even though the employees
concerned were already receiving wages way above the applicable minimum
wage.23 Petitioner filed a motion for reconsideration which the CA denied for lack of
merit on January 11, 2005.24
Petitioner then filed the instant petition in which it raises the following issues:
I. WHETHER THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE
REVERSIBLE ERROR IN NOT FINDING THAT THE INCREASES PROVIDED FOR
UNDER WAGE ORDER NO. 8 CANNOT BE DEMANDED AS A MATTER OF RIGHT
BY THE RESPONDENT UNDER THE 1999 CBA, in that:
a) Issue not averred in the complaint nor raised during the trial
cannot be raised for the first time on appeal; and
b) The Rules of Statutory Construction, in relation to Article 1370
and 1374 of the New Civil Code, as well as Section 11 of the Rules
of Court, requires that contract must be read in its entirety and the
various stipulations in a contract must be read together to give
effect to all.
II. WHETHER THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE
REVERSIBLE ERROR IN NOT FINDING THAT THE INCREASES PROVIDED FOR
UNDER WAGE ORDER NO. 8 CANNOT BE DEMANDED BY THE RESPONDENT
UNION AS A MATTER OF PRACTICE.25
Petitioner points out that the only issue agreed upon during the voluntary arbitration
proceedings was whether or not the company was obliged to grant the wage increase
under Wage Order No. NCR-08 as a matter of practice. It posits that the respondent
did not anchor its claim for such wage increase on the CBA but on an alleged
company practice of granting the increase pursuant to a wage order. According to
petitioner, respondent Union changed its theory on appeal when it claimed before the
CA that the CBA is ambiguous. 26 Petitioner contends that respondent Union was
precluded from raising this issue as it was not raised during the voluntary arbitration.
It insists that an issue cannot be raised for the first time on appeal.27
Petitioner further argues that there is no ambiguity in the CBA. It avers that Section 1,
Article VI of the CBA should be read in its entirety.28 From the said provision, it is clear
that the CBA contemplated only the implementation of a wage order issued within six
months from the execution of the CBA, and not every wage order issued during its
effectivity. Hence, petitioner complied with Wage Order No. NCR-07 which was
issued 28 days from the execution of the CBA. Petitioner emphasizes that this was
implemented not because it was a matter of practice but because it was agreed upon
in the CBA.29 It alleges that respondent Union in fact realized that it could not invoke
the provisions of the CBA to enforce Wage Order No. NCR-08, which is why it agreed
to limit the issue for voluntary arbitration to whether respondent Union is entitled to
the wage increase as a matter of practice. The fact that the "Yambot proposals" were
left out in the final document simply means that the parties never agreed to them.30
In any case, petitioner avers that respondent Union is not entitled to the wage
increase provided under Wage Order No. NCR-08 as a matter of practice. There is no
company practice of granting a wage-order-mandated increase in addition to the
CBA-mandated wage increase. It points out that, as admitted by respondent Union,
the previous wage orders were not automatically implemented and were made
applicable only after negotiations. Petitioner argues that the previous wage orders
were implemented because at that time, some employees were receiving salaries
below the minimum wage and the resulting wage distortion had to be remedied.31
For its part, respondent Union avers that the provision "[a]ny Wage Order to be
implemented by the Regional Tripartite Wage and Productivity Board shall be in
addition to the wage increase adverted to above" referred to a company practice of
paying a wage increase whenever the government issues a wage order even if the
employees salaries were above the minimum wage and there is no resulting wage
distortion. According to respondent, the CBA contemplated all the salary increases
that may be mandated by wage orders to be issued in the future. Since the wage
order was only a device to determine exactly how much and when the increase would
be given, these increases are, in effect, CBA-mandated and not wage order
increases. 32 Respondent further avers that the ambiguity in the wage adjustment
provision of the CBA can be clarified by resorting to parol evidence, that is, Atty.
Yambots version of said provision.33
The petition is meritorious. We rule that petitioner is not obliged to grant the wage
increase under Wage Order No. NCR-08 either by virtue of the CBA, or as a matter of
company practice.
On the procedural issue, well-settled is the rule, also applicable in labor cases, that
issues not raised below cannot be raised for the first time on appeal. 34 Points of law,
theories, issues and arguments not brought to the attention of the lower court need
not be, and ordinarily will not be, considered by the reviewing court, as they cannot be
raised for the first time at that late stage. Basic considerations of due process impel
this rule.35
We agree with petitioners contention that the issue on the ambiguity of the CBA and
its failure to express the true intention of the parties has not been expressly raised
before the voluntary arbitration proceedings. The parties specifically confined the
issue for resolution by the VA to whether or not the petitioner is obliged to grant an
increase to its employees as a matter of practice. Respondent did not anchor its claim
for an across-the-board wage increase under Wage Order No. NCR-08 on the CBA.
However, we note that it raised before the CA two issues, namely:
x x x whether or not the wage increase of P26.50 under Wage Order No. NCR-08
must be paid to the union members as a matter of practice and whether or not parol
evidence can be resorted to in proving or explaining or elucidating the existence of a
collateral agreement/company practice for the payment of the wage increase under
the wage order despite that the employees were already receiving wages way above
the minimum wage ofP250.00/day as prescribed by Wage Order No. NCR-08 and
irrespective of whether wage distortion exists.36
Petitioner, in its Comment on the petition, delved into these issues and elaborated on
its contentions. By so doing, it thereby agreed for the CA to take cognizance of such
issues as defined by respondent (petitioner therein). Moreover, a perusal of the
records shows that the issue of whether or not the CBA is ambiguous and does not
reflect the true agreement of the parties was, in fact, raised before the voluntary
arbitration proceedings. Despite the submission agreement confining the issue to
whether petitioner was obliged to grant an increase pursuant to Wage Order No.
NCR-08 as a matter of practice, respondent Union nevertheless raised the same
issues in its pleadings. In its Position Paper, it asserted that the CBA consistently
contained a collateral agreement to pay the equivalent of the wage orders across-theboard; in its Reply, it claimed that such provision clearly provided that petitioner would
pay the additional increases apart from the CBA and that the wage order serves only
as a measure of said increase. These assertions indicate that respondent Union also
relied on the CBA to support its claim for the wage increase.
Central to the substantial issue is Article VI, Section I, of the CBA of the parties, dated
September 23, 1999, viz:
SALARIES AND WAGE
Section 1. WAGE ADJUSTMENT The COMPANY agrees to grant to all workers
who are already regular and covered by this AGREEMENT at the effectivity of this
AGREEMENT a general wage increase as follows:
July 1, 1999 . P15.00 per day per employee
July 1, 2000 . P25.00 per day per employee
July 1, 2001 . P 30.00 per day per employee
The aforesaid wage increase shall be implemented across the board. Any Wage
Order to be implemented by the Regional Tripartite Wage and Productivity Board shall
be in addition to the wage increase adverted to above. However, if no wage increase
is given by the Wage Board within six (6) months from the signing of this
AGREEMENT, the Management is willing to give the following increases, to wit:
July 1, 2001 P 30.00 per day per employee

The difference of the first year adjustment to retroact to July 1, 1999.
The across-the-board wage increase for the 4th and 5th year of this AGREEMENT
shall be subject for a reopening or renegotiation as provided for by Republic Act No.
6715.37
On the other hand, Wage Order No. NCR-08 specifically provides that only those in
the private sector in the NCR receiving the prescribed daily minimum wage rate
of P223.00 per day would receive an increase of P26.50 a day, thereby setting the
new minimum wage rate in said region to P250.00 per day. There is no dispute that,
when the order was issued, the lowest paid employee of petitioner was receiving a
wage higher than P250.00 a day. As such, its employees had no right to demand for
an increase under said order. As correctly ruled by the VA:
We now come to the core of this case. Is [petitioner] under an obligation to grant
wage increase to its workers under W.O. No. NCR-08 as a matter of practice? It is
submitted that employers (unless exempt) in Metro Manila (including the [petitioner])
are mandated to implement the said wage order but limited to those entitled thereto.
There is no legal basis to implement the same across-the-board. A perusal of the
record shows that the lowest paid employee before the implementation of Wage
Order #8 is P250.00/day and none was receiving belowP223.50 minimum. This could
only mean that the union can no longer demand for any wage distortion adjustment.
Neither could they insist for an adjustment of P26.50 increase under Wage Order #8.
The provision of wage order #8 and its implementing rules are very clear as to who
are entitled to the P26.50/day increase, i.e., "private sector workers and employees in
the National Capital Region receiving the prescribed daily minimum wage rate
of P223.50 shall receive an increase of Twenty-Six Pesos and Fifty Centavos
(P26.50) per day," and since the lowest paid is P250.00/day the company is not
obliged to adjust the wages of the workers.
With the above narration of facts and with the union not having effectively
controverted the same, we find no merit to the complainants assertion of such a
company practice in the grant of wage order increase applied across-the-board. The
fact that it was shown the increases granted under the Wage Orders were obtained
thru request and negotiations because of the existence of wage distortion and not as
company practice as what the union would want.
Neither do we find merit in the argument that under the CBA, such increase should be
implemented across-the-board. The provision in the CBA that "Any Wage Order to be
implemented by the Regional Tripartite Wage and Productivity Board shall be in
addition to the wage increase adverted above" cannot be interpreted in support of an
across-the-board increase. If such were the intentions of this provision, then the
company could have simply accepted the original demand of the union for such
across-the-board implementation, as set forth in their original proposal (Annex "2"
union[]s counsel proposal). The fact that the company rejected this proposal can only
mean that it was never its intention to agree, to such across-the-board
implementation. Thus, the union will have to be contented with the increase of P30.00
under the CBA which is due on July 31, 2001 barely a month from now.38
The error of the CA lies in its considering only the CBA in interpreting the wage
adjustment provision, without taking into account Wage Order No. NCR-08, and the
fact that the members of respondent Union were already receiving salaries higher
than P250.00 a day when it was issued. The CBA cannot be considered
independently of the wage order which respondent Union relied on for its claim.
Wage Order No. NCR-08 clearly states that only those employees receiving salaries
below the prescribed minimum wage are entitled to the wage increase provided
therein, and not all employees across-the-board as respondent Union would want
petitioner to do. Considering therefore that none of the members of respondent Union
are receiving salaries below the P250.00 minimum wage, petitioner is not obliged to
grant the wage increase to them.
The ruling of the Court in Capitol Wireless, Inc. v. Bate 39 is instructive on how to
construe a CBA vis--vis a wage order. In that case, the company and the Union
signed a CBA with a similar provision: "[s]hould there be any government mandated
wage increases and/or allowances, the same shall be over and above the benefits
herein granted."40 Thereafter, the Wage Board of the NCR issued several wage orders
providing for an across-the-board increase in the minimum wage of all employees in
the private sector. The company implemented the wage increases only to those
employees covered by the wage orders - those receiving not more than the minimum
wage. The Union protested, contending that, pursuant to said provision, any and all
government-mandated increases in salaries and allowance should be granted to all
employees across-the-board. The Court held as follows:
x x x The wage orders did not grant across-the-board increases to all employees in
the National Capital Region but limited such increases only to those already receiving
wage rates not more than P125.00 per day under Wage Order Nos. NCR-01 and
NCR-01-A and P142.00 per day under Wage Order No. NCR-02. Since the wage
orders specified who among the employees are entitled to the statutory wage
increases, then the increases applied only to those mentioned therein. The provisions
of the CBA should be read in harmony with the wage orders, whose benefits should
be given only to those employees covered thereby. (Emphasis added)41
In this case, as gleaned from the pleadings of the parties, respondent Union relied on
a collateral agreement between it and petitioner, an agreement extrinsic of the CBA
based on an alleged established practice of the latter as employer. The VA rejected
this claim:
Complainant Pag-Asa Steel Workers Union additionally advances the arguments that
"there exist a collateral agreement to pay the equivalent of wage orders across the
board or at least to negotiate how much will be paid" and that "parol evidence is now
applicable to show or explain what the unclean provisions of the CBA means
regarding wage adjustment." The respondent cites Article XXVII of the CBA in effect,
as follows:
"The parties acknowledged that during the negotiation which resulted in this
AGREEMENT, each had the unlimited right & opportunity to make demands, claims
and proposals of every kind and nature with respect to any subject or matter not
removed by law from the Collective Bargaining and the understanding and
agreements arrived at by the parties after the exercise of that right & opportunity are
set forth in this AGREEMENT. Therefore, the COMPANY and the UNION, for the life
of this AGREEMENT, agrees that neither party shall not be obligated to bargain
collectively with respect to any subject matter not specifically referred to or covered in
this AGREEMENT, and furthermore, that each party voluntarily & unqualifiedly waives
such right even though such subject may not have been within the knowledge or
contemplation of either or both of the parties at the time they signed this
AGREEMENT."
From the said CBA provision and upon an appreciation of the entire CBA, we find it to
have more than amply covered all aspects of the collective bargaining. To allow
alleged collateral agreements or parol/oral agreements would be violative of the CBA
provision afore-quoted.42
We agree with petitioners contention that the rule excluding parol evidence to vary or
contradict a written agreement, does not extend so far as to preclude the admission
of extrinsic evidence, to show prior or contemporaneous collateral parol agreements
between the parties. Such evidence may be received regardless of whether or not the
written agreement contains reference to such collateral agreement. 43 As the Court
ruled in United Kimberly-Clark Employees Union, et al. v. Kimberly-Clark Philippines,
Inc.:44
A CBA is more than a contract; it is a generalized code to govern a myriad of cases
which the draftsmen cannot wholly anticipate. It covers the whole employment
relationship and prescribes the rights and duties of the parties. It is a system of
industrial self-government with the grievance machinery at the very heart of the
system. The parties solve their problems by molding a system of private law for all the
problems which may arise and to provide for their solution in a way which will
generally accord with the variant needs and desires of the parties.
If the terms of a CBA are clear and have no doubt upon the intention of the
contracting parties, the literal meaning of its stipulation shall prevail. However, if, in a
CBA, the parties stipulate that the hirees must be presumed of employment
qualification standards but fail to state such qualification standards in said CBA, the
VA may resort to evidence extrinsic of the CBA to determine the full agreement
intended by the parties. When a CBA may be expected to speak on a matter, but
does not, its sentence imports ambiguity on that subject. The VA is not merely to rely
on the cold and cryptic words on the face of the CBA but is mandated to discover the
intention of the parties. Recognizing the inability of the parties to anticipate or address
all future problems, gaps may be left to be filled in by reference to the practices of the
industry, and the step which is equally a part of the CBA although not expressed in it.
In order to ascertain the intention of the contracting parties, their contemporaneous
and subsequent acts shall be principally considered. The VA may also consider and
rely upon negotiating and contractual history of the parties, evidence of past practices
interpreting ambiguous provisions. The VA has to examine such practices to
determine the scope of their agreement, as where the provision of the CBA has been
loosely formulated. Moreover, the CBA must be construed liberally rather than
narrowly and technically and the Court must place a practical and realistic
construction upon it.45
However, just like any other fact, habits, customs, usage or patterns of conduct must
be proved. Thus was the ruling of the Court in Bank of Commerce v. Manalo, et al.:46
Habit, custom, usage or pattern of conduct must be proved like any other facts.
Courts must contend with the caveat that, before they admit evidence of usage, of
habit or pattern of conduct, the offering party must establish the degree of specificity
and frequency of uniform response that ensures more than a mere tendency to act in
a given manner but rather, conduct that is semi-automatic in nature. The offering
party must allege and prove specific, repetitive conduct that might constitute evidence
of habit. The examples offered in evidence to prove habit, or pattern of evidence must
be numerous enough to base on inference of systematic conduct. Mere similarity of
contracts does not present the kind of sufficiently similar circumstances to outweigh
the danger of prejudice and confusion.
In determining whether the examples are numerous enough, and sufficiently regular,
the key criteria are adequacy of sampling and uniformity of response. After all, habit
means a course of behavior of a person regularly represented in like circumstances. It
is only when examples offered to establish pattern of conduct or habit are numerous
enough to lose an inference of systematic conduct that examples are admissible. The
key criteria are adequacy of sampling and uniformity of response or ratio of reaction
to situations.
We have reviewed the records meticulously and find no evidence to prove that the
grant of a wage-order-mandated increase to all the employees regardless of their
salary rates on an agreement collateral to the CBA had ripened into company practice
before the effectivity of Wage Order No. NCR-08. Respondent Union failed to adduce
proof on the salaries of the employees prior to the issuance of each wage order to
establish its allegation that, even if the employees were receiving salaries above the
minimum wage and there was no wage distortion, they were still granted salary
increase. Only the following lists of salaries of respondent Unions members were
presented in evidence: (1) before Wage Order No. NCR-06 was issued; (2) after
Wage Order No. NCR-06 was implemented; (3) after the grant of the first year
increase under the CBA; (4) after Wage Order No. NCR-07 was implemented; and (5)
after the second year increase in the CBA was implemented.
employees in particular. As petitioner explains, a wage distortion occurred as a result

of granting the increase to those employees who were receiving salaries below the
prescribed minimum wage. The wage distortion necessitated the upward adjustment
of the salaries of the other employees and not because it was a matter of company
practice or usage. The situation of the employees before Wage Order No. NCR-08,
however, was different. Not one of the members of respondent Union was then
receiving less than P250.00 per day, the minimum wage requirement in said wage
order.
The only instance when petitioner admittedly implemented a wage order despite the
fact that the employees were not receiving salaries below the minimum wage was
under Wage Order No. NCR-07. Petitioner, however, explains that it did so because it
was agreed upon in the CBA that should a wage increase be ordered within six
months from its signing, petitioner would give the increase to the employees in
addition to the CBA-mandated increases. Respondents isolated act could hardly be
classified as a "company practice" or company usage that may be considered an
enforceable obligation.
Moreover, to ripen into a company practice that is demandable as a matter of right,
the giving of the increase should not be by reason of a strict legal or contractual
obligation, but by reason of an act of liberality on the part of the employer. Hence,
even if the company continuously grants a wage increase as mandated by a wage
order or pursuant to a CBA, the same would not automatically ripen into a company
practice. In this case, petitioner granted the increase under Wage Order No. NCR-07
on its belief that it was obliged to do so under the CBA.
WHEREFORE, premises considered, the petition is GRANTED. The Decision of the
Court of Appeals in CA-G.R. SP No. 65171 and Resolution dated January 11, 2005
are REVERSED and SET ASIDE. The Decision of the Voluntary Arbitrator is
REINSTATED. No costs.
SO ORDERED.
The list of the employees salaries before Wage Order No. NCR-06 was implemented
belie respondent Unions claim that the wage-order-mandated increases were given
to employees despite the fact that they were receiving salaries above the minimum
wage. This list proves that some employees were in fact receiving salaries below
theP198.00 minimum wage rate prescribed by the wage order two rank-and-file
EN BANC
G.R. No. L-24632
October 26, 1968
LEXAL LABORATORIES and/or JOSE ANGELES, Manager, petitioners,

vs.
NATIONAL CHEMICAL INDUSTRIES WORKERS UNION-PAFLU (Lexal
Laboratories
Chapter)
and
THE
COURT
OF
INDUSTRIAL
RELATIONS, respondents.
SANCHEZ, J.:
Condensed, the question before us is this: Are per diems included in backpay? This
problem came about because of the implementation of the decision of the Court of
Industrial Relations (CIR) of June 29, 1963 1directing petitioner Lexal Laboratories
(Lexal) to reinstate Guillermo Ponseca, a dismissed employee, to his former position
"with full back wages from the day of his dismissal up to the time he is actually
reinstated without loss of his seniority rights and of such other rights and privileges
enjoyed by him prior to his lay-off."
CIR, confirming the report of its Chief Examiner and Economist, ruled in its order of
February 16, 1965 that Ponseca was entitled to back wages from November 5, 1958
when he ceased reporting for work, to November 24, 1963 a day prior to his
reinstatement on November 25, 1963; and that for the number of days that he was
supposed to be in Manila, he was to earn P4.50 a day, and during the periods when
he should have been in the provinces, P4.50 a day plus a per diem of P4.00 or a total
of P8.50 daily. This order was subsequently modified by CIR's resolution of May 22,
1965 which directed the deduction of P5,000.00 previously paid Ponseca under the
judgment and P610.00 which Ponseca earned from other sources during his lay-off.
Petitioners vigorously objected to the inclusion of the P4.00 per diem in the
computation of Ponseca's back wages because the latter "did not actually spend for
his meals and lodgings for he was all the time in Manila, his station." CIR brushed this
contention aside. Whereupon, petitioners appealed to this Court from the order of
February 16, 1965 and the resolution of May 22, 1965.2
1. Our attention has not been drawn to a rule of law or jurisprudence which holds
that per diems are integral parts of regular wages or salaries. Neither is it suggested
in the record that per diems formed part of the terms of employment between
petitioners and respondent union (of which Ponseca is a member), or with Ponseca
himself for that matter. Nor was pronouncement made either in the original decision or
in the questioned order and resolution of CIR that per diems are part of back wages.
CIR simply hit upon the idea that per diems should be paid as part of the back wages
because they were "paid to him regularly."
Per diem, the dictionary definition tells us, is "a daily allowance" given "for each day
he (an officer or employee) was away from his home base". 3 It would seem to us
that per diem is intended to cover the cost of lodging and subsistence of officers and
employees when the latter are on duty outside of their permanent station. 4 Lexal
concedes that whenever its employee, Guillermo Ponseca, was out of Manila, he was
allowed a per diem of P4.00 broken down as follows: P1.00 for breakfast; P1.00 for
lunch; P1.00 for dinner; and P1.00 for lodging. Ponseca during the period involved
did not leave Manila. Therefore, he spent nothing for meals and lodging outside of
Manila. Because he spent nothing, there is nothing to be reimbursed. Since per
diems are in the nature of reimbursement, Ponseca should not be entitled to per
diems.
Besides, back wages are what an employee has lost "in the way of wages" due to his
dismissal. So that, because Ponseca earned P4.50 a day, "then that is the amount
which he lost daily by reason of his dismissal, nothing more nothing less:"5
We, accordingly, rule that CIR erred in including per diems in the back wages due and
payable to Guillermo Ponseca.
2. The rest is a matter of mathematical computation but first to the facts. The union's
evidence is that since the last part of October, 1958 Ponseca had been reporting
everyday to the bodega of respondents.6 Anyway, prior to Ponseca's dismissal, he
worked daily either in Manila or in the provinces.7
But the order of February 15, 1965 credits Ponseca with 1,856 days for the period
from November 5, 1958 to November 24, 1963. We checked the accuracy of this
figure. We found that there should only be 1,846 days from November 5, 1958 to
November 24, 1963, viz:
November 5, 1958 to December 31, 1958
57 days
January 1, 1959 to December 31, 1959
365 days
366 days
365 days
365 days
January 1, 1963 to November 24, 1963
328 days
T O TAL
1,846 days
This brings us to the total amount due from Lexa1 to Guillermo Ponseca, as follows: .
1,846 days
Less:
P4.50
Advance payment
P8,307.00
P5,000.00
Earnings from other sources

NET BACKPAY
P610.00
P5,610.008
P2,697.00 .
For the foregoing reasons, the order of February 16, 1965, and the resolution of May
22, 1965, both of the Court of Industrial Relations, in its Case No. 2002-ULP, entitled
"National Chemical Industries Workers Union-PAFLU (Lexal Laboratories Chapter),
Complainant, versus Lexal Laboratories and Jose Angeles, its Manager,
Respondents", are hereby modified; and
Judgment is hereby rendered ordering petitioner Lexal Laboratories to pay Guillermo
Ponseca, by way of net backpay, the sum of P2,697.00.
No costs. So ordered.
SECOND DIVISION
G.R. No. 101761. March 24, 1993.
NATIONAL SUGAR REFINERIES CORPORATION, petitioner, vs. NATIONAL LABOR
RELATIONS COMMISSION and NBSR SUPERVISORY UNION, (PACIWU) TUCP,
respondents.
Jose Mario C. Bunag for petitioner.
The Solicitor General and the Chief Legal Officer, NLRC, for public respondent.
Zoilo V. de la Cruz for private respondent.
DECISION
REGALADO, J p:
The main issue presented for resolution in this original petition for certiorari is whether
supervisory employees, as defined in Article 212 (m), Book V of the Labor Code,
should be considered as officers or members of the managerial staff under Article 82,
Book III of the same Code, and hence are not entitled to overtime rest day and
holiday pay.
Petitioner National Sugar Refineries Corporation (NASUREFCO), a corporation which
is fully owned and controlled by the Government, operates three (3) sugar refineries
located at Bukidnon, Iloilo and Batangas. The Batangas refinery was privatized on
April 11, 1992 pursuant to Proclamation No. 50. 1 Private respondent union
represents the former supervisors of the NASUREFCO Batangas Sugar Refinery,
namely, the Technical Assistant to the Refinery Operations Manager, Shift Sugar
Warehouse Supervisor, Senior Financial/Budget Analyst, General Accountant, Cost
Accountant, Sugar Accountant, Junior Financial/Budget Analyst, Shift Boiler
Supervisor,, Shift Operations Chemist, Shift Electrical Supervisor, General Services
Supervisor, Instrumentation Supervisor, Community Development Officer,
Employment and Training Supervisor, Assistant Safety and Security Officer, Head and
Personnel Services, Head Nurse, Property Warehouse Supervisor, Head of Inventory
Control Section, Shift Process Supervisor, Day Maintenance Supervisor and
Motorpool Supervisor.
On June 1, 1988, petitioner implemented a Job Evaluation (JE) Program affecting all
employees, from rank-and-file to department heads. The JE Program was designed
to rationalized the duties and functions of all positions, reestablish levels of
responsibility, and recognize both wage and operational structures. Jobs were ranked
according to effort, responsibility, training and working conditions and relative worth of
the job. As a result, all positions were re-evaluated, and all employees including the
members of respondent union were granted salary adjustments and increases in
benefits commensurate to their actual duties and functions.
We glean from the records that for about ten years prior to the JE Program, the
members of respondent union were treated in the same manner as rank-and file
employees. As such, they used to be paid overtime, rest day and holiday pay
pursuant to the provisions of Articles 87, 93 and 94 of the Labor Code as amended.
With the implementation of the JE Program, the following adjustments were made: (1)
the members of respondent union were re-classified under levels S-5 to S-8 which
are considered managerial staff for purposes of compensation and benefits; (2) there
was an increase in basic pay of the average of 50% of their basic pay prior to the JE
Program, with the union members now enjoying a wide gap (P1,269.00 per month) in
basic pay compared to the highest paid rank-and-file employee; (3) longevity pay was
increased on top of alignment adjustments; (4) they were entitled to increased
company COLA of P225.00 per month; (5) there was a grant of P100.00 allowance for
rest day/holiday work.
On May 11, 1990, petitioner NASUREFCO recognized herein respondent union,
which was organized pursuant to Republic Act NO. 6715 allowing supervisory
employees to form their own unions, as the bargaining representative of all the
supervisory employees at the NASUREFCO Batangas Sugar Refinery.
Two years after the implementation of the JE Program, specifically on June 20, 1990,
the members of herein respondent union filed a complainant with the executive labor
arbiter for non-payment of overtime, rest day and holiday pay allegedly in violation of
Article 100 of the Labor Code.
On January 7, 1991, Executive Labor Arbiter Antonio C. Pido rendered a decision 2
disposing as follows:
"WHEREFORE, premises considered,
Corporation is hereby directed to
respondent
National
Sugar
refineries
1. pay the individual members of complainant union the usual overtime pay, rest day
pay and holiday pay enjoyed by them instead of the P100.00 special allowance which
was implemented on June 11, 1988; and
2. pay the individual members of complainant union the difference in money value
between the P100.00 special allowance and the overtime pay, rest day pay and
holiday pay that they ought to have received from June 1, 1988.
All other claims are hereby dismissed for lack of merit.
SO ORDERED."
In finding for the members therein respondent union, the labor ruled that the along
span of time during which the benefits were being paid to the supervisors has
accused the payment thereof to ripen into contractual obligation; at the complainants
cannot be estopped from questioning the validity of the new compensation package
despite the fact that they have been receiving the benefits therefrom, considering that
respondent union was formed only a year after the implementation of the Job
Evaluation Program, hence there was no way for the individual supervisors to express
their collective response thereto prior to the formation of the union; and the
comparative computations presented by the private respondent union showed that
the P100.00 special allowance given NASUREFCO fell short of what the supervisors
ought to receive had the overtime pay rest day pay and holiday pay not been
discontinued, which arrangement, therefore, amounted to a diminution of benefits.
On appeal, in a decision promulgated on July 19, 1991 by its Third Division,
respondent National Labor Relations Commission (NLRC) affirmed the decision of the
labor arbiter on the ground that the members of respondent union are not managerial
employees, as defined under Article 212 (m) of the Labor Code and, therefore, they
are entitled to overtime, rest day and holiday pay. Respondent NLRC declared that
these supervisory employees are merely exercising recommendatory powers subject
to the evaluation, review and final action by their department heads; their
responsibilities do not require the exercise of discretion and independent judgment;
they do not participate in the formulation of management policies nor in the hiring or
firing of employees; and their main function is to carry out the ready policies and
plans of the corporation. 3 Reconsideration of said decision was denied in a
resolution of public respondent dated August 30, 1991. 4
Hence this petition for certiorari, with petitioner NASUREFCO asseverating that public
respondent commission committed a grave abuse of discretion in refusing to
recognized the fact that the members of respondent union are members of the
managerial staff who are not entitled to overtime, rest day and holiday pay; and in
making petitioner assume the "double burden" of giving the benefits due to rank-andfile employees together with those due to supervisors under the JE Program.
We find creditable merit in the petition and that the extraordinary writ of certiorari shall
accordingly issue.
The primordial issue to be resolved herein is whether the members of respondent
union are entitled to overtime, rest day and holiday pay. Before this can be resolved,
however it must of necessity be ascertained first whether or not the union members,
as supervisory employees, are to be considered as officers or members of the
managerial staff who are exempt from the coverage of Article 82 of the Labor Code.
It is not disputed that the members of respondent union are supervisory employees,
as defined employees, as defined under Article 212(m), Book V of the Labor Code on
Labor Relations, which reads:
"(m) 'Managerial employee' is one who is vested with powers or prerogatives to lay
down and execute management policies and/or to hire, transfer, suspend, lay-off,
recall, discharged, assign or discipline employees. Supervisory employees are those
who, in the interest of the employer effectively recommend such managerial actions if
the exercise of such authority is not merely routinary or clerical in nature but requires
the use of independent judgment. All employees not falling within any of those above
definitions are considered rank-and-file employees of this Book."
Respondent NLRC, in holding that the union members are entitled to overtime, rest
day and holiday pay, and in ruling that the latter are not managerial employees,
adopted the definition stated in the aforequoted statutory provision.
Petitioner, however, avers that for purposes of determining whether or not the
members of respondent union are entitled to overtime, rest day and holiday pay, said
employees should be considered as "officers or members of the managerial staff" as
defined under Article 82, Book III of the Labor Code on "Working Conditions and Rest
Periods" and amplified in Section 2, Rule I, Book III of the Rules to Implement the
Labor Code, to wit:
"Art. 82 Coverage. The provisions of this title shall apply to employees in all
establishments and undertakings whether for profit or not, but not to government
employees, managerial employees, field personnel, members of the family of the
employer who are dependent on him for support, domestic helpers, persons in the
personal service of another, and workers who are paid by results as determined by
the Secretary of Labor in Appropriate regulations.
"As used herein, 'managerial employees' refer to those whose primary duty consists
of the management of the establishment in which they are employed or of a
department or subdivision thereof, and to other officers or members of the managerial
staff." (Emphasis supplied.)
xxx xxx xxx
'Sec. 2. Exemption. The provisions of this rule shall not apply to the following
persons if they qualify for exemption under the condition set forth herein:
xxx xxx xxx
(b) Managerial employees, if they meet all of the following conditions, namely:
(1) Their primary duty consists of the management of the establishment in which they
are employed or of a department or subdivision thereof:
(2) They customarily and regularly direct the work of two or more employees therein:
(3) They have the authority to hire or fire other employees of lower rank; or their
suggestions and recommendations as to the hiring and firing and as to the promotion
or any other change of status of other employees are given particular weight.
(c) Officers or members of a managerial staff if they perform the following duties and
responsibilities:
(1) The primary duty consists of the performance of work directly related to
management policies of their employer;
(2) Customarily and regularly exercise discretion and independent judgment;
(3) (i) Regularly and directly assist a proprietor or a managerial employee whose
primary duty consists of the management of the establishment in which he is
employed or subdivision thereof; or (ii) execute under general supervision work along
specialized or technical lines requiring special training, experience, or knowledge; or

(iii) execute under general supervision special assignments and tasks; and
(4) Who do not devote more 20 percent of their hours worked in a work-week to
activities which are not directly and closely related to the performance of the work
described in paragraphs (1), (2), and above."
It is the submission of petitioner that while the members of respondent union, as
supervisors, may not be occupying managerial positions, they are clearly officers or
members of the managerial staff because they meet all the conditions prescribed by
law and, hence, they are not entitled to overtime, rest day and supervisory employees
under Article 212 (m) should be made to apply only to the provisions on Labor
Relations, while the right of said employees to the questioned benefits should be
considered in the light of the meaning of a managerial employee and of the officers or
members of the managerial staff, as contemplated under Article 82 of the Code and
Section 2, Rule I Book III of the implementing rules. In other words, for purposes of
forming and joining unions, certification elections, collective bargaining, and so forth,
the union members are supervisory employees. In terms of working conditions and
rest periods and entitlement to the questioned benefits, however, they are officers or
members of the managerial staff, hence they are not entitled thereto.
While the Constitution is committed to the policy of social justice and the protection of
the working class, it should not be supposed that every labor dispute will be
automatically decided in favor of labor. Management also has its own rights which, as
such, are entitled to respect and enforcement in the interest of simple fair play. Out of
its concern for those with less privileges in life, this Court has inclined more often than
not toward the worker and upheld his cause in his conflicts with the employer. Such
favoritism, however, has not blinded us to the rule that justice is in every case for the
deserving, to be dispensed in the light of the established facts and the applicable law
and doctrine. 5
employees are likewise responsible for the effective and efficient operation of their
respective departments. More specifically, their duties and functions include, among
others, the following operations whereby the employee:
1) assists the department superintendent in the following:
a) planning of systems and procedures relative to department activities;
b) organizing and scheduling of work activities of the department, which includes
employee shifting scheduled and manning complement;
c) decision making by providing relevant information data and other inputs;
d) attaining the company's set goals and objectives by giving his full support;
e) selecting the appropriate man to handle the job in the department; and
f) preparing annual departmental budget;
2) observes, follows and implements company policies at all times and recommends
disciplinary action on erring subordinates;
3) trains and guides subordinates on how to assume responsibilities and become
more productive;
4) conducts semi-annual performance evaluation of his subordinates and
recommends necessary action for their development/advancement;
5) represents the superintendent or the department when appointed and authorized
by the former;
6) coordinates and communicates with other inter and intra department supervisors
when necessary;
7) recommends disciplinary actions/promotions;
This is one such case where we are inclined to tip the scales of justice in favor of the
employer.
8) recommends measures to improve work methods, equipment performance, quality

of service and working conditions;
The question whether a given employee is exempt from the benefits of the law is a
factual one dependent on the circumstances of the particular case, In determining
whether an employee is within the terms of the statutes, the criterion is the character
of the work performed, rather than the title of the employee's position. 6
9) sees to it that safety rules and regulations and procedure and are implemented and
followed by all NASUREFCO employees, recommends revisions or modifications to
said rules when deemed necessary, and initiates and prepares reports for any
observed abnormality within the refinery;
Consequently, while generally this Court is not supposed to review the factual findings
of respondent commission, substantial justice and the peculiar circumstances
obtaining herein mandate a deviation from the rule.
10) supervises the activities of all personnel under him and goes to it that instructions
to subordinates are properly implemented; and
A cursory perusal of the Job Value Contribution Statements 7 of the union members
will readily show that these supervisory employees are under the direct supervision of
their respective department superintendents and that generally they assist the latter in
planning, organizing, staffing, directing, controlling communicating and in making
decisions in attaining the company's set goals and objectives. These supervisory
11) performs other related tasks as may be assigned by his immediate superior.
From the foregoing, it is apparent that the members of respondent union discharge
duties and responsibilities which ineluctably qualify them as officers or members of
the managerial staff, as defined in Section 2, Rule I Book III of the aforestated Rules
to Implement the Labor Code, viz.: (1) their primary duty consists of the performance
of work directly related to management policies of their employer; (2) they customarily
and regularly exercise discretion and independent judgment; (3) they regularly and
directly assist the managerial employee whose primary duty consist of the
management of a department of the establishment in which they are employed (4)
they execute, under general supervision, work along specialized or technical lines
requiring special training, experience, or knowledge; (5) they execute, under general
supervision, special assignments and tasks; and (6) they do not devote more than
20% of their hours worked in a work-week to activities which are not directly and
clearly related to the performance of their work hereinbefore described.
Under the facts obtaining in this case, we are constrained to agree with petitioner that
the union members should be considered as officers and members of the managerial
staff and are, therefore, exempt from the coverage of Article 82. Perforce, they are not
entitled to overtime, rest day and holiday.
The distinction made by respondent NLRC on the basis of whether or not the union
members are managerial employees, to determine the latter's entitlement to the
questioned benefits, is misplaced and inappropriate. It is admitted that these union
members are supervisory employees and this is one instance where the
nomenclatures or titles of their jobs conform with the nature of their functions. Hence,
to distinguish them from a managerial employee, as defined either under Articles 82
or 212 (m) of the Labor Code, is puerile and in efficacious. The controversy actually
involved here seeks a determination of whether or not these supervisory employees
ought to be considered as officers or members of the managerial staff. The
distinction, therefore, should have been made along that line and its corresponding
conceptual criteria.
II. We likewise no not subscribe to the finding of the labor arbiter that the payment of
the questioned benefits to the union members has ripened into a contractual
obligation.
A. Prior to the JE Program, the union members, while being supervisors, received
benefits similar to the rank-and-file employees such as overtime, rest day and holiday
pay, simply because they were treated in the same manner as rank-and-file
employees, and their basic pay was nearly on the same level as those of the latter,
aside from the fact that their specific functions and duties then as supervisors had not
been properly defined and delineated from those of the rank-and-file. Such fact is
apparent from the clarification made by petitioner in its motion for reconsideration 8
filed with respondent commission in NLRC Case No. CA No. I-000058, dated August
16, 1991, wherein, it lucidly explained:
"But, complainants no longer occupy the same positions they held before the JE
Program. Those positions formerly classified as 'supervisory' and found after the JE
Program to be rank-and-file were classified correctly and continue to receive
overtime, holiday and restday pay. As to them, the practice subsists.
"However, those whose duties confirmed them to be supervisory, were re-evaluated,
their duties re-defined and in most cases their organizational positions re-designated
to confirm their superior rank and duties. Thus, after the JE program, complainants
cannot be said to occupy the same positions." 9
It bears mention that this positional submission was never refuted nor controverted by
respondent union in any of its pleadings filed before herein public respondent or with
this Court. Hence, it can be safely concluded therefrom that the members of
respondent union were paid the questioned benefits for the reason that, at that time,
they were rightfully entitled thereto. Prior to the JE Program, they could not be
categorically classified as members or officers of the managerial staff considering that
they were then treated merely on the same level as rank-and-file. Consequently, the
payment thereof could not be construed as constitutive of voluntary employer
practice, which cannot be now be unilaterally withdrawn by petitioner. To be
considered as such, it should have been practiced over a long period of time, and
must be shown to have been consistent and deliberate. 10
The test or rationale of this rule on long practice requires an indubitable showing that
the employer agreed to continue giving the benefits knowingly fully well that said
employees are not covered by the law requiring payment thereof. 11 In the case at
bar, respondent union failed to sufficiently establish that petitioner has been motivated
or is wont to give these benefits out of pure generosity.
B. It remains undisputed that the implementation of the JE Program, the members of
private respondent union were re-classified under levels S-5 S-8 which were
considered under the program as managerial staff purposes of compensation and
benefits, that they occupied re-evaluated positions, and that their basic pay was
increased by an average of 50% of their basic salary prior to the JE Program. In other
words, after the JE Program there was an ascent in position, rank and salary. This in
essence is a promotion which is defined as the advancement from one position to
another with an increase in duties and responsibilities as authorized by law, and
usually accompanied by an increase in salary. 12
Quintessentially, with the promotion of the union members, they are no longer entitled
to the benefits which attach and pertain exclusively to their positions. Entitlement to
the benefits provided for by law requires prior compliance with the conditions set forth
therein. With the promotion of the members of respondent union, they occupied
positions which no longer met the requirements imposed by law. Their assumption of
these positions removed them from the coverage of the law, ergo, their exemption
therefrom.
As correctly pointed out by petitioner, if the union members really wanted to continue
receiving the benefits which attach to their former positions, there was nothing to
prevent them from refusing to accept their promotions and their corresponding
benefits. As the sating goes by, they cannot have their cake and eat it too or, as
petitioner suggests, they could not, as a simple matter of law and fairness, get the
best of both worlds at the expense of NASUREFCO.
Promotion of its employees is one of the jurisprudentially-recognized exclusive
prerogatives of management, provided it is done in good faith. In the case at bar,
private respondent union has miserably failed to convince this Court that the
petitioner acted implementing the JE Program. There is no showing that the JE
Program was intended to circumvent the law and deprive the members of respondent
union of the benefits they used to receive.
Not so long ago, on this particular score, we had the occasion to hold that:
". . . it is the prerogative of the management to regulate, according to its discretion
and judgment, all aspects of employment. This flows from the established rule that
labor law does not authorize the substitution of the judgment of the employer in the
conduct of its business. Such management prerogative may be availed of without fear
of any liability so long as it is exercised in good faith for the advancement of the
employer's interest and not for the purpose of defeating on circumventing the rights of
employees under special laws or valid agreement and are not exercised in a
malicious, harsh, oppressive, vindictive or wanton manner or out of malice or spite."
13
WHEREFORE, the impugned decision and resolution of respondent National Labor
Relations Commission promulgated on July 19, 1991 and August 30, 1991,
respectively, are hereby ANNULLED and SET ASIDE for having been rendered and
adopted with grave abuse of discretion, and the basic complaint of private respondent
union is DISMISSED.
G.R. No. 155059. April 29, 2005
d. Promotional Increase.
AMERICAN WIRE AND CABLE DAILY RATED EMPLOYEES UNION, Petitioner,

vs.
AMERICAN WIRE AND CABLE CO., INC. and THE COURT OF
APPEALS, Respondents.
A promotional increase was asked by the petitioner for fifteen (15) of its members
who were given or assigned new job classifications. According to petitioner, the new
job classifications were in the nature of a promotion, necessitating the grant of an
increase in the salaries of the said 15 members.
DECISION
On 21 June 2001, a Submission Agreement was filed by the parties before the Office
for Voluntary Arbitration. Assigned as Voluntary Arbitrator was Angel A. Ancheta.
CHICO-NAZARIO, J.:
1
Before Us is a special civil action for certiorari, assailing the Decision of the Special
Eighth Division of the Court of Appeals dated 06 March 2002. Said Decision upheld
the Decision2 and Order3 of Voluntary Arbitrator Angel A. Ancheta of the National
Conciliation and Mediation Board (NCMB) dated 25 September 2001 and 05
November 2001, respectively, which declared the private respondent herein not guilty
of violating Article 100 of the Labor Code, as amended. Assailed likewise, is the
Resolution4 of the Court of Appeals dated 12 July 2002, which denied the motion for
reconsideration of the petitioner, for lack of merit.
THE FACTS
The facts of this case are quite simple and not in dispute.
American Wire and Cable Co., Inc., is a corporation engaged in the manufacture of
wires and cables. There are two unions in this company, the American Wire and
Cable Monthly-Rated Employees Union (Monthly-Rated Union) and the American
Wire and Cable Daily-Rated Employees Union (Daily-Rated Union).
On 16 February 2001, an original action was filed before the NCMB of the
Department of Labor and Employment (DOLE) by the two unions for voluntary
arbitration. They alleged that the private respondent, without valid cause, suddenly
and unilaterally withdrew and denied certain benefits and entitlements which they
have long enjoyed. These are the following:
a. Service Award;
b. 35% premium pay of an employees basic pay for the work rendered during Holy
Monday, Holy Tuesday, Holy Wednesday, December 23, 26, 27, 28 and 29;
c. Christmas Party; and
On 04 July 2001, the parties simultaneously filed their respective position papers with
the Office of the Voluntary Arbitrator, NCMB, and DOLE.
On 25 September 2001, a Decision5 was rendered by Voluntary Arbitrator Angel A.
Ancheta in favor of the private respondent. The dispositive portion of the said
Decision is quoted hereunder:
WHEREFORE, with all the foregoing considerations, it is hereby declared that the
Company is not guilty of violating Article 100 of the Labor Code, as amended, or
specifically for withdrawing the service award, Christmas party and 35% premium for
work rendered during Holy Week and Christmas season and for not granting any
promotional increase to the alleged fifteen (15) Daily-Rated Union Members in the
absence of a promotion. The Company however, is directed to grant the service
award to deserving employees in amounts and extent at its discretion, in consultation
with the Unions on grounds of equity and fairness.6
A motion for reconsideration was filed by both unions 7 where they alleged that the
Voluntary Arbitrator manifestly erred in finding that the company did not violate Article
100 of the Labor Code, as amended, when it unilaterally withdrew the subject
benefits, and when no promotional increase was granted to the affected employees.
On 05 November 2001, an Order 8 was issued by Voluntary Arbitrator Angel A.
Ancheta. Part of the Order is quoted hereunder:
Considering that the issues raised in the instant case were meticulously evaluated
and length[i]ly discussed and explained based on the pleadings and documentary
evidenc[e] adduced by the contending parties, we find no cogent reason to change,
modify, or disturb said decision.
WHEREFORE, let the instant MOTION[S] FOR RECONSIDERATION be, as they are
hereby, denied for lack of merit. Our decision dated 25 September 2001 is affirmed
"en toto."9
An appeal under Rule 43 of the 1997 Rules on Civil Procedure was made by the
Daily-Rated Union before the Court of Appeals 10 and docketed as CA-G.R. SP No.
68182. The petitioner averred that Voluntary Arbitrator Angel A. Ancheta erred in
finding that the company did not violate Article 100 of the Labor Code, as amended,
when the subject benefits were unilaterally withdrawn. Further, they assert, the
Voluntary Arbitrator erred in adopting the companys unaudited Revenues and
Profitability Analysis for the years 1996-2000 in justifying the latters withdrawal of the
questioned benefits.11
On 06 March 2002, a Decision in favor of herein respondent company was
promulgated by the Special Eighth Division of the Court of Appeals in CA-G.R. SP
No. 68182. The decretal portion of the decision reads:
WHEREFORE, premises considered, the present petition is hereby DENIED DUE
COURSE and accordingly DISMISSED, for lack of merit. The Decision of Voluntary
Arbitrator Angel A. Ancheta dated September 25, 2001 and his Order dated
November 5, 2001 in VA Case No. AAA-10-6-4-2001 are hereby AFFIRMED and
UPHELD.12
A motion for reconsideration13 was filed by the petitioner, contending that the Court of
Appeals misappreciated the facts of the case, and that it committed serious error
when it ruled that the unaudited financial statement bears no importance in the instant
case.
INCIDENTAL BENEFITS; AND 3) SERVICE AWARD, WHICH IN TRUTH AND IN

FACT SAID BENEFITS/ENTITLEMENTS HAVE BEEN GIVEN THEM SINCE TIME
IMMEMORIAL, AS A MATTER OF LONG ESTABLISHED COMPANY PRACTICE,
WITH THE FURTHER FACT THAT THE SAME NOT BEING DEPENDENT ON
PROFITS.
II
THE COURT OF APPEALS ERRED WHEN IT JUST ACCEPTED HOOK, LINE AND
SINKER, THE RESPONDENT COMPANYS SELF SERVING AND UNAUDITED
REVENUES AND PROFITABILITY ANALYSIS FOR THE YEARS 1996-2000 WHICH
THEY SUBMITTED TO FALSELY JUSTIFY THEIR UNLAWFUL ACT OF
UNILATERALLY AND SUDDENLY WITHDRAWING OR DENYING FROM THE
PETITIONER THE SUBJECT BENEFITS/ENTITLEMENTS.
III
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE YEARLY
SERVICE AWARD IS NOT DEPENDENT ON PROFIT BUT ON SERVICE AND
THUS, CANNOT BE UNILATERALLY WITHDRAWN BY RESPONDENT COMPANY.
ISSUE
The Court of Appeals denied the motion in its Resolution dated 12 July
200214 because it did not present any new matter which had not been considered in
arriving at the decision. The dispositive portion of the Resolution states:
Synthesized, the solitary issue that must be addressed by this Court is whether or not
private respondent is guilty of violating Article 100 of the Labor Code, as amended,
when the benefits/entitlements given to the members of petitioner union were
withdrawn.
WHEREFORE, the motion for reconsideration is hereby DENIED for lack of merit.15
THE COURTS RULING
Dissatisfied with the court a quos ruling, petitioner instituted the instant special civil
action for certiorari,16 citing grave abuse of discretion amounting to lack of jurisdiction.
Before we address the sole issue presented in the instant case, it is best to first
discuss a matter which was raised by the private respondent in its Comment. The
private respondent contends that this case should have been dismissed outright
because of petitioners error in the mode of appeal. According to it, the petitioner
should have elevated the instant case to this Court through a petition for review
on certiorari under Rule 45, and not through a special civil action for certiorari under
Rule 65, of the 1997 Rules on Civil Procedure.17
ASSIGNMENT OF ERRORS
The petitioner assigns as errors the following:
I
THE COURT OF APPEALS ERRED IN HOLDING THAT THE COMPANY DID NOT
VIOLATE ARTICLE 100 OF THE LABOR CODE, AS AMENDED, WHEN IT
UNILATERALLY WITHDREW THE BENEFITS OF THE MEMBERS OF PETITIONER
UNION, TO WIT: 1) 35% PREMIUM PAY; 2) CHRISTMAS PARTY AND ITS
Assuming arguendo that the mode of appeal taken by the petitioner is improper, there
is no question that the Supreme Court has the discretion to dismiss it if it is defective.
However, sound policy dictates that it is far better to dispose the case on the merits,
rather than on technicality.18
The Supreme Court may brush aside the procedural barrier and take cognizance of
the petition as it raises an issue of paramount importance. The Court shall resolve the
solitary issue on the merits for future guidance of the bench and bar.19
With that out of the way, we shall now resolve whether or not the respondent
company is guilty of violating Article 100 of the Labor Code, as amended.
Article 100 of the Labor Code provides:
ART. 100. PROHIBITION AGAINST ELIMINATION OR DIMINUTION OF BENEFITS.
Nothing in this Book shall be construed to eliminate or in any way diminish
supplements, or other employee benefits being enjoyed at the time of promulgation of
this Code.
The petitioner submits that the withdrawal of the private respondent of the 35%
premium pay for selected days during the Holy Week and Christmas season, the
holding of the Christmas Party and its incidental benefits, and the giving of service
awards violated Article 100 of the Labor Code. The grant of these benefits was a
customary practice that can no longer be unilaterally withdrawn by private respondent
without the tacit consent of the petitioner. The benefits in question were given by the
respondent to the petitioner consistently, deliberately, and unconditionally since time
immemorial. The benefits/entitlements were not given to petitioner due to an error in
interpretation, or a construction of a difficult question of law, but simply, the grant has
been a practice over a long period of time. As such, it cannot be withdrawn from the
petitioner at respondents whim and caprice, and without the consent of the former.
The benefits given by the respondent cannot be considered as a "bonus" as they are
not founded on profit. Even assuming that it can be treated as a "bonus," the grant of
the same, by reason of its long and regular concession, may be regarded as part of
regular compensation.20
With respect to the fifteen (15) employees who are members of petitioner union that
were given new job classifications, it asserts that a promotional increase in their
salaries was in order. Salary adjustment is a must due to their promotion.21
On respondent companys Revenues and Profitability Analysis for the years 19962000, the petitioner insists that since the former was unaudited, it should not have
justified the companys sudden withdrawal of the benefits/entitlements. The normal
and/or legal method for establishing profit and loss of a company is through a
financial statement audited by an independent auditor.22
The petitioner cites our ruling in the case of Saballa v. NLRC,23 where we held
that financial statements audited by independent auditors constitute the normal
method of proof of the profit and loss performance of the company.Our ruling in the
case of Bogo-Medellin Sugarcane Planters Association, Inc., et al. v. NLRC, et

al.24 was likewise invoked. In this case, we held:
The Court has previously ruled that financial statements audited by independent
external auditors constitute the normal method of proof of the profit and loss
performance of a company.
On the matter of the withdrawal of the service award, the petitioner argues that it is
the employees length of service which is taken as a factor in the grant of this benefit,
and not whether the company acquired profit or not.25
In answer to all these, the respondent corporation avers that the grant of all subject
benefits has not ripened into practice that the employees concerned can claim a
demandable right over them. The grant of these benefits was conditional based upon
the financial performance of the company and that conditions/circumstances that
existed before have indeed substantially changed thereby justifying the
discontinuance of said grants. The companys financial performance was affected by
the recent political turmoil and instability that led the entire nation to a bleeding
economy. Hence, it only necessarily follows that the companys financial situation at
present is already very much different from where it was three or four years ago.26
On the subject of the unaudited financial statement presented by the private
respondent, the latter contends that the cases cited by the petitioner indeed uniformly
ruled that financial statements audited by independent external auditors constitute the
normal method of proof of the profit and loss performance of a company. However,
these cases do not require that the only legal method to ascertain profit and loss is
through an audited financial statement. The cases only provide that an audited
financial statement is the normal method.27
The respondent company likewise asseverates that the 15 members of petitioner
union were not actually promoted. There was only a realignment of positions.28
From the foregoing contentions, it appears that for the Court to resolve the issue
presented, it is critical that a determination must be first made on whether the
benefits/entitlements are in the nature of a bonus or not, and assuming they are so,
whether they are demandable and enforceable obligations.
In the case of Producers Bank of the Philippines v. NLRC29 we have characterized
what a bonus is, viz:
A bonus is an amount granted and paid to an employee for his industry and loyalty
which contributed to the success of the employers business and made possible the
realization of profits. It is an act of generosity granted by an enlightened employer to
spur the employee to greater efforts for the success of the business and realization of
bigger profits. The granting of a bonus is a management prerogative, something given

in addition to what is ordinarily received by or strictly due the recipient. Thus, a bonus
is not a demandable and enforceable obligation, except when it is made part of the
wage, salary or compensation of the employee.
bonus should have been done over a long period of time, and must be shown to have
been consistent and deliberate.36The downtrend in the grant of these two bonuses
over the years demonstrates that there is nothing consistent about it. Further, as held
by the Court of Appeals:
Based on the foregoing pronouncement, it is obvious that the benefits/entitlements

subjects of the instant case are all bonuses which were given by the private
respondent out of its generosity and munificence. The additional 35% premium pay
for work done during selected days of the Holy Week and Christmas season, the
holding of Christmas parties with raffle, and the cash incentives given together with
the service awards are all in excess of what the law requires each employer to give its
employees. Since they are above what is strictly due to the members of petitionerunion, the granting of the same was a management prerogative, which, whenever
management sees necessary, may be withdrawn, unless they have been made a part
of the wage or salary or compensation of the employees.
Anent the Christmas party and raffle of prizes, We agree with the Voluntary Arbitrator
that the same was merelysponsored by the respondent corporation out of generosity
and that the same is dependent on the financial performance of the company for a
particular year37
The consequential question therefore that needs to be settled is if the subject

benefits/entitlements, which are bonuses, are demandable or not. Stated another
way, can these bonuses be considered part of the wage or salary or compensation
making them enforceable obligations?
The Court does not believe so.
For a bonus to be enforceable, it must have been promised by the employer and
expressly agreed upon by the parties,30 or it must have had a fixed amount31 and had
been a long and regular practice on the part of the employer.32
The benefits/entitlements in question were never subjects of any express agreement
between the parties. They were never incorporated in the Collective Bargaining
Agreement (CBA). As observed by the Voluntary Arbitrator, the records reveal that
these benefits/entitlements have not been subjects of any express agreement
between the union and the company, and have not yet been incorporated in the CBA.
In fact, the petitioner has not denied having made proposals with the private
respondent for the service award and the additional 35% premium pay to be made
part of the CBA.33
The Christmas parties and its incidental benefits, and the giving of cash incentive
together with the service award cannot be said to have fixed amounts. What is clear
from the records is that over the years, there had been a downtrend in the amount
given as service award.34 There was also a downtrend with respect to the holding of
the Christmas parties in the sense that its location changed from paid venues to one
which was free of charge,35evidently to cut costs. Also, the grant of these two
aforementioned bonuses cannot be considered to have been the private respondents
long and regular practice. To be considered a "regular practice," the giving of the
The additional 35% premium pay for work rendered during selected days of the Holy
Week and Christmas season cannot be held to have ripened into a company practice
that the petitioner herein have a right to demand. Aside from the general averment of
the petitioner that this benefit had been granted by the private respondent since time
immemorial, there had been no evidence adduced that it had been a regular practice.
As propitiously observed by the Court of Appeals:
. . . [N]otwithstanding that the subject 35% premium pay was deliberately given and
the same was in excess of that provided by the law, the same however did not ripen
into a company practice on account of the fact that it was only granted for two (2)
years and with the express reservation from respondent corporations owner that it
cannot continue to rant the same in view of the companys current financial situation.38
To hold that an employer should be forced to distribute bonuses which it granted out
of kindness is to penalize him for his past generosity.39
Having thus ruled that the additional 35% premium pay for work rendered during
selected days of the Holy Week and Christmas season, the holding of Christmas
parties with its incidental benefits, and the grant of cash incentive together with the
service award are all bonuses which are neither demandable nor enforceable
obligations of the private respondent, it is not necessary anymore to delve into the
Revenues and Profitability Analysis for the years 1996-2000 submitted by the private
respondent.
On the alleged promotion of 15 members of the petitioner union that should warrant
an increase in their salaries, the factual finding of the Voluntary Arbitrator is
revealing, viz:
Considering that the Union was unable to adduce proof that a promotion indeed
occur[ed] with respect to the 15 employees, the Daily Rated Unions claim for
promotional increase likewise fall[s] there being no promotion established under the
records at hand.40
WHEREFORE, in view of all the foregoing, the assailed Decision and Resolution of
the Court of Appeals dated 06 March 2002 and 12 July 2002, respectively, which
affirmed and upheld the decision of the Voluntary Arbitrator, are hereby AFFIRMED.
No pronouncement as to costs.
SO ORDERED.
EN BANC
G.R. No. L-11744
May 28, 1958
PILAR GIL VDA. DE MURCIANO, represented in this case by her attorney-infact,

CARLOS
RODRIGUEZ,petitioner,
vs.
THE AUDITOR GENERAL, ET AL., respondents.
Mariano
C.
Omea
for
petitioner.
Office of the Solicitor General Ambrosio Padilla and Solicitor Sumilang V. Bernardo
for the respondent Auditor General.
REYES, J.B.L., J.:
This is a petition to review a decision of the Auditor General denying payment of
petitioner Pilar Gil Vda. de Murciano's claim for the balance of back rentals on her
property in Porac and Floridablanca, Pampanga, which was used as impact area by
the Armed Forces of the Philippines from May 1, 1948 to October 8, 1949.
The property in question was originally occupied by the United States Army after
liberation, and the United States Government paid for it a monthly rental of P6.00 per
hectare. After the withdrawal of the United States Army from the premises, a portion
thereof was occupied and utilized from May 1, 1949 to October 8, 1949, by the
Artillery Firing Group of the Philippine Ground Force, Armed Forces of the Philippines,
as impact area. To indemnify petitioner for this occupancy and use of her property, the
Office of the Chief of Engineers, Philippine Service Command, Armed Forces of the
Philippines, at Camp Murphy, through Lt. Col. Rigoberto J. Atienza, on July 27, 1950
forwarded to petitioner for her signature a quitclaim agreement whereby she was to
be paid the amount of P15,067.31 representing "complete payment of rentals for the
entire period of occupancy from 1 May 1948 to 8 October 1949 at the rate of P6.00
per hectare per month", "the same rate the U. S. Army was paying before for similar
lot within the area", with the understanding that upon payment of said amount, "the
Armed Forces of the Philippines is released from all claims which you may have
against it for the occupancy of the land upon payment of the above-mentioned
rentals". (Annexes "C" and "D", Petition)
The above quitclaim agreement was signed by petitioner, through her attorney-in-fact,
on August 14, 1950, but for some reason or another was not received by the Office of
the Chief of Engineers of the Armed Forcers of the Philippines; so that on February 5,
1951, Lt. Col. Atienza sent petitioner another letter asking for the return of the signed
quitclaim agreement in order that payment thereof may be made upon availability of
funds. A new quitclaim agreement of exactly the same tenor as the first was,
therefore, on April 4, 1951, prepared and signed by petitioner, through her attorney-infact, and again returned to the Office of the Chief of Engineers of the Armed Forces of
the Philippines at Camp Murphy, but before it could be signed by Lt. Col. Littaua of
the Philippine Service Command in representation of the Republic of the Philippines,
the Armed Forces of the Philippines was reorganized and the Philippine Service
Command abolished. Whereupon, Col. Antonio P. Chanco, Deputy and Ex-O, Office
of the Chief of Engineers, sent petitioner another copy of the quitclaim agreement
similar to the first, informing petitioner that due to the reorganization of the Armed
Forces and the abolition of the Philippine Service Command, it was the Acting Chief
of Staff who had been authorized to sign contracts of lease in behalf of the Republic
of the Philippines, and asking petitioner to sign said agreement and forward the same
to his Office. The agreement was signed by petitioner's attorney-in-fact and returned
to the Armed Forces of the Philippines.
Before signing the agreement in behalf of the Republic, however, the Chief of Staff of
the Armed Forces appointed a survey party to ascertain the amount of damage to
petitioner's property, and the survey party found that no substantial damage was
caused thereto to justify the payment of P15,067.31 to petitioner. Wherefore,
petitioner was offered the amount of P3,386.40 in full satisfaction of her claim, which
she refused to accept. Protracted negotiations followed, resulting in the payment by
the Armed Forces of the Philippines to petitioner of the sum of P7,000, without
prejudice to "further claims on the balance" (Annex E).
On June 26, 1956, petitioner sent a letter to the Auditor General requesting payment
of her claim of P15,067.31, plus interests at the rate of 6% per annum from May 1,
1948 until full payment, minus the sum of P7,000 already received by her from the
Armed Forces of the Philippines. This letter was endorsed by the Auditor General to
the Chief of Staff of the Armed Forces, who returned the claim with the
recommendation that it be denied, for the reason that the use of petitioner's land by
the Armed Forces was only intermittent; that the Armed Forces did not have any
contract, express or implied, with petitioner for the payment of rentals on her property;
that its payment to petitioner of the sum of P7,000 was based on the principle of
"quantum meruit" that petitioner had not submitted satisfactory proof that the damage
to her property warranted the payment of her additional claim; and that although
petitioner had reserved her right to make further claims upon the government, such
reservation did not bind the government to accept the same, totally or partially. In
view of the explanations and recommendation of the Chief of Staff, the Deputy Auditor
General denied petitioner's claim, hence the present petition for review.
On the basis of the above facts, we believe the Deputy Auditor General erred in
denying petitioner's claim.
It appears that it was the Armed Forces of the Philippines, through the Office of the
Chief of Engineers, which, on July 27, 1950, offered to pay the petitioner the total
amount of P15,067.31 as rentals for its use of her property from May 1, 1948 to
October 8, 1949, even enclosing in its offer a quitclaim agreement prepared by the
Army for petitioner's signature. The authority of the representatives of the Armed
Forces who made this offer to petitioner is not denied; therefore, the offer was binding
and effective on the Armed Forces of the Philippines. Said offer was accepted by
petitioner and the quitclaim agreement, duly signed by petitioner's attorney-in-fact,
was returned to the offer or. Receipt of petitioner's acceptance is, again, admitted by
the Armed Forces of the Philippines. From the time the Armed Forces received
petitioner's acceptance, therefore, a contract for the payment of P15,067.31 to
petitioner in full satisfaction of rentals on her property during its use and occupancy
by the Philippine Army was perfected between the parties (Art. 1319, New Civil
Code).
Even after the reorganization of the Armed Forces of the Philippines and the transfer
of authority to sign contracts of lease in behalf of the Republic of the Philippines to the
Chief of Staff, the Armed Forces, had recognized the existence of a perfected
contract to pay petitioner the sum of P15,067.31, as shown by the letter of Col.
Antonio P. Chanco of the Office of the Chief of Engineers, Camp Murphy, advising
petitioner of said reorganization and transfer of authority to sign the quitclaim
agreement to the Chief of Staff, and asking her to sign anew the same agreement
(Orig. Recs., p. 14). The Armed Forces claim that after the signed agreement was
returned by petitioner, the Chief of Staff refused to sign it in behalf of the Republic
because it was found that the damage to petitioner's property did not warrant the
payment to her of the sum of P15,067,31. But that as it may, this circumstance does
not in the least affect petitioner's right to ask for the fulfillment of her perfected
agreement with the Armed Forces of the Philippines for the payment to her of the
amount of P15,067.31. It is elementary that a contract, once perfected, is binding on
both parties and its validity or compliance cannot be left to the will of one of them (Art,
1308, Civil Code). The absence of a writing does not preclude the binding effect of the
contract duly perfected by a meeting of the minds, the contract not being of the class
called "formal" or "solemn" in which the writing is essential to their binding effect. Nor
may contracts deliberately entered into be overturned by reason of mistake of one of
the parties to which the other in no way has contributed (De Gonzales
Mondragon vs. Santos, 48 Off. Gaz., (2), 560, 87 Phil., 471; also Tanda vs. Aldaya, 89
Phil., 497).
The Armed Forces of the Philippines claim that when it had refused to pay petitioner
her claim of P15,067.31, her attorney-in-fact submitted a counteroffer of P7,000.00
allegedly in full satisfaction of her claim. Granting the truth of this allegation, the
Armed Forces admit, however, that said counteroffer was not considered by its
Headquarters "due, among other things, to lack of funds". In fact, what appears is that
the Armed Forces insisted in paying petitioner no more than P3,386.40. Assuming
therefore, that petitioner did offer to novate her original contract with the Army by
reducing her claim to P7,000.00, such offer was not accepted by the latter; hence, no
novation took place and the parties are still bound by their original agreement.
The Solicitor General asserts that petitioner had waived whatever rights she had to
make further claims on the Armed Forces when she finally accepted the sum of
P7,000.00 and signed with the Republic of the Philippines an agreement (Orig. Recs.,
pp. 20-21) providing, among other things, that she accepted said amount of
P7,000.00 "in the complete payment and full satisfaction" of all her claims against the
Republic, and that "both parties agree to release each other from all claims
whatsoever". We find the argument untenable, for in the same agreement that
petitioner signed with the Republic, she made the following reservation:
Notwithstanding the stipulation in this contract, the Party of the First Part
hereby reserves her rights in accordance with the letter of her counsel dated
April 12, 1956, to the Chief of staff, AFP.
In fact, it appears that the amount of P7,000.00 was paid to petitioner "without
prejudice of further claim on the balance" (Orig. Recs., p. 19) ; and this is confirmed
by the endorsement of the chief of Staff returning petitioner's claim to the Auditor
General, stating that "after protracted negotiations, the Armed Forces of the
Philippines paid the claimant the compromise sum of P7,000.00 which the latter
accepted without prejudice to her right to make further claims" (supra, p. 25). It is thus
clear that petitioner had never waived, but had always insisted on, her right to make
further claims upon the Armed Forces of the Philippines, even as she had accepted
the amount of P7,000.00, which she merely considered as partial payment of her
claim.
The Solicitor General also argues that petitioner's claim is not one for rentals but for
damages to her property and that the extent of damages to which petitioner is entitled
is only the reasonable compensation for the use of the premises, which the Office of
the Chief of Staff later found to be only P3,386.40. Whether petitioner's claim be for
rentals or damages, however, the fact remains that from the very beginning the
Armed Forces of the Philippines had itself fixed the reasonable compensation or
indemnity due to petitioner at the amount of P15,067.31, even justifying its
reasonableness on the ground that "this is the same rate the U.S. Army was paying
before for similar lots within the area" (Orig. Recs., p. 17). As this offer was, as
already stated, legally accepted by petitioner, the Armed Forces can not, by unilateral
act and without petitioner's consent or approval, modify or alter its previous perfected
contract with her by reducing the amount payable.
For the above reasons, we hold that petitioner is entitled to, and should be paid, the
balance of her claim against the Republic of the Philippines in the amount of
P8,067.31. She can not, however, recover interests on this amount from May 1, 1948,
as prayed for by her. The rule is that a debtor is considered to incur in delay only from
the time the obligee judicially or extrajudicially demands the fulfillment of the
obligation (Art. 1169, New Civil Code), and it is only from the time of delay that
interest is recoverable (Art. 2209, supra). There being no evidence showing that
petitioner made demands upon the Armed Forces of the Philippines for the payment
of the balance of her claim prior to her filing thereof with the Auditor General on June
26, 1956, she must be considered to have made demand for its payment only on this
date. Therefore, petitioner is entitled to the payment of interests only from June 26,
1956.
The decision appealed from is reversed, and the Auditor General is ordered to
approve payment for petitioner the amount of P8,067.31, with legal interests thereon
from June 26, 1956 until full payment. Cost de oficio. So ordered.
FIRST DIVISION
Fourth, the refusal by management to recall active union members

from the branches which were being transferred without prior
notice, solely at the instance of the branch manager. (p. 26, Rollo.)
G.R. No. 88168 August 30, 1990
In its answer to the union's complaint, TRB pointed out that the NLRC, not the Bureau
of Labor Relations, had jurisdiction over the money claims of the employees.
TRADERS
ROYAL
BANK, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION & TRADERS ROYAL BANK
EMPLOYEES UNION, respondents.
On March 24, 1987, the Secretary of Labor certified the complaint to the NLRC for
resolution of the following issues raised by the complainants:
San Juan, Gonzalez, San Agustin & Sinense for petitioner.

E.N.A. Cruz, Enfero & Associates for private respondent.
GRIO-AQUINO, J.:
This petition for certiorari seeks to nullify or set aside the decision dated September 2,
1988 of the National Labor Relations Commission, which found the petitioner, Traders
Royal Bank (or TRB), guilty of diminution of benefits due the private respondents and
ordered it to pay the said employees' claims for differentials in their holiday, mid-year,
and year-end bonuses.
On November 18, 1986, the Union, through its president, filed a letter-complaint
against TRB with the Conciliation Division of the Bureau of Labor Relations claiming
that:
First, the management of TRB per memo dated October 10, 1986
paid the employees their HOLIDAY PAY, but has withheld from the
Union the basis of their computation.
Second, the computation in question, has allegedly decreased the
daily salary rate of the employees. This diminution of existing
benefits has decreased our overtime rate and has affected the
employees' take home pay.
Third, the diminution of benefits being enjoyed by the employees
since time immemorial, e.g. mid-year bonus, from two (2) months
gross pay to two (2) months basic and year-end bonus from three
(3) months gross to only two (2) months.
l) The Management of TRB per memo dated October 10, 1986 paid
the employees their holiday pay but has withheld from the union the
basis of their computation.
2) The computation in question has allegedly decreased the daily
salary rate of the employees. This diminution of existing benefits
has decreased our overtime rate and has affected the employees'
take home pay.
3) The diminution of benefits being enjoyed by the employees since
the (sic) immemorial, e.g. mid-year bonus, from two (2) months
gross pay to two (2) months basic and year-end bonus from three
(3) months gross to only two (2) months.
4) The refusal by management to recall active union members from
the branches which were being transferred without prior notice,
solely at the instance of the branch, manager. (p. 28, Rollo.)
In the meantime, the parties who had been negotiating for a collective bargaining
agreement, agreed on the terms of the CBA, to wit:
1. The whole of the bonuses given in previous years is not
demandable, i.e., there is no diminution, as to be liable for a
differential, if the bonus given is less than that in previous years.
2. Since only two months bonus is guaranteed, only to that extent
are bonuses deemed part of regular compensation.
3. As regards the third and fourth bonuses, they are entirely
dependent on the income of the bank, and not demandable as part
of compensation. (pp. 67-68, Rollo.)
Despite the terms of the CBA, however, the union insisted on pursuing the case,
arguing that the CBA would apply prospectively only to claims arising after its
effectivity.
Petitioner, on the other hand, insisted that it had paid the employees holiday pay. The
practice of giving them bonuses at year's end, would depend on how profitable the
operation of the bank had been. Generally, the bonus given was two (2) months basic
mid-year and two (2) months gross end-year.
On September 2, 1988, the NLRC rendered a decision in favor of the employees, the
dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of the
petitioner and ordering respondent bank to pay petitioner membersemployees the following:
1. Holiday differential for the period covering l983-1986 as
embodied in Resolution No. 4984-1986 of respondent's Board of
Directors but to start from November 11, 1983 and using the Divisor
251 days in determining the daily rate of the employees;
2. Mid-year bonus differential representing the difference between
two (2) months gross pay and two (2) months basic pay and endyear bonus differential of one (1) month gross pay for 1986.
The claim for holiday differential for the period earlier than
November 11, 1983 is hereby dismissed, the same having
prescribed.
Likewise, the charge of unfair labor practice against the respondent
company is hereby dismissed for lack of merit. (pp. 72-73, Rollo.)
A motion for reconsideration was filed by TRB but it was denied. Hence, this petition
for certiorari.
There is merit in the petitioner's contention that the NLRC gravely abused its
discretion in ordering it to pay mid-year/year-end bonus differential for 1986 to its
employees.
cannot be forced upon the employer "who may not be obliged to assume the onerous
burden of granting bonuses or other benefits aside from the employee's basic salaries
or wages" . . . (Kamaya Point Hotel vs. National Labor Relations Commission,
Federation of Free Workers and Nemia Quiambao, G.R. No. 75289, August 31,
1989).
It is clear from the above-cited rulings that the petitioner may not be obliged to pay
bonuses to its employees. The matter of giving them bonuses over and above their
lawful salaries and allowances is entirely dependent on the profits, if any, realized by
the Bank from its operations during the past year.
From 1979-1985, the bonuses were less because the income of the Bank had
decreased. In 1986, the income of the Bank was only 20.2 million pesos, but the Bank
still gave out the usual two (2) months basic mid-year and two months gross year-end
bonuses. The petitioner pointed out, however, that the Bank weakened considerably
after 1986 on account of political developments in the country. Suspected to be a
Marcos-owned or controlled bank, it was placed under sequestration by the present
administration and is now managed by the Presidential Commission on Good
Government (PCGG).
In the light of these submissions of the petitioner, the contention of the Union that the
granting of bonuses to the employees had ripened into a company practice that may
not be adjusted to the prevailing financial condition of the Bank has no legal and
moral bases. Its fiscal condition having declined, the Bank may not be forced to
distribute bonuses which it can no longer afford to pay and, in effect, be penalized for
its past generosity to its employees.
Private respondent's contention, that the decrease in the midyear and year-end
bonuses constituted a diminution of the employees' salaries, is not correct, for
bonuses are not part of labor standards in the same class as salaries, cost of living
allowances, holiday pay, and leave benefits, which are provided by the Labor Code.
WHEREFORE, the petition for certiorari is granted. The decision of the National
Labor Relations Commission is modified by deleting the award of bonus differentials
to the employees for 1986. In other respects, the decision is affirmed. Costs against
the respondent union.
SO ORDERED.
A bonus is "a gratuity or act of liberality of the giver which the recipient has no right to
demand as a matter of right" (Aragon vs. Cebu Portland Cement Co., 61 O.G. 4597).
"It is something given in addition to what is ordinarily received by or strictly due the
recipient." The granting of a bonus is basically a management prerogative which
EN BANC
G.R. No. L-59743 May 31 1982
NATIONAL FEDERATION OF SUGAR WORKERS (NFSW), petitioner,
vs.
ETHELWOLDO R. OVEJERA, CENTRAL AZUCARERA DE LA CARLOTA (CAC),
COL. ROGELIO DEINLA, as Provincial Commander, 3311st P.C. Command,
Negros Occidental, respondents.
PLANA, J:
This is a petition for prohibition seeking to annul the decision dated February 20, 1982
of Labor Arbiter Ethelwoldo R. Ovejera of the National Labor Relations Commission
(NLRC) with station at the Regional Arbitration Branch No. VI-A, Bacolod City, which,
among others, declared illegal the ongoing strike of the National Federation of Sugar
Workers (NFSW) at the Central Azucarera de la Carlota (CAC), and to restrain the
implementation thereof.
I. FACTS
1. NFSW has been the bargaining agent of CAC rank and file employees (about 1200
of more than 2000 personnel) and has concluded with CAC a collective bargaining
agreement effective February 16, 1981 February 15, 1984. Under Art. VII, Sec. 5
of the said CBA
Bonuses The parties also agree to maintain the present practice
on the grant of Christmas bonus, milling bonus, and amelioration
bonus to the extent as the latter is required by law.
The Christmas and milling bonuses amount to 1- months' salary.
2. On November 28, 1981, NFSW struck allegedly to compel the payment of the 13th
month pay under PD 851, in addition to the Christmas, milling and amelioration
bonuses being enjoyed by CAC workers.
3. To settle the strike, a compromise agreement was concluded between CAC and
NFSW on November 30,1981. Under paragraph 4 thereof
The parties agree to abide by the final decision of the Supreme

Court in any case involving the 13th Month Pay Law if it is clearly
held that the employer is liable to pay a 13th month pay separate
and distinct from the bonuses already given.
4. As of November 30, 1981, G.R. No. 51254 (Marcopper Mining Corp. vs. Blas Ople
and Amado Inciong, Minister and Deputy Minister of Labor, respectively, and
Marcopper Employees Labor Union, Petition for certiorari and Prohibition) was still
pending in the Supreme Court. The Petition had been dismissed on June 11, 1981 on
the vote of seven Justices. 1 A motion for reconsideration thereafter filed was denied
in a resolution dated December 15, 1981, with only five Justices voting for denial. (3
dissented; 2 reserved their votes: 4 did not take part.)
On December 18, 1981 the decision of June 11, 1981 having become final and
executory entry of judgment was made.
5. After the Marcopper decision had become final, NFSW renewed its demand that
CAC give the 13th month pay. CAC refused.
6. On January 22, 1982, NFSW filed with the Ministry of Labor and Employment
(MOLE) Regional Office in Bacolod City a notice to strike based on non-payment of
the 13th month pay. Six days after, NFSW struck.
7. One day after the commencement of the strike, or on January 29, 1982, a report of
the strike-vote was filed by NFSW with MOLE.
8. On February 8, 1982, CAC filed a petition (R.A.B. Case No. 0110-82) with the
Regional Arbitration Branch VI-A, MOLE, at Bacolod City to declare the strike illegal,
principally for being violative of Batas Pambansa Blg. 130, that is, the strike was
declared before the expiration of the 15-day cooling-off period for unfair labor practice
(ULP) strikes, and the strike was staged before the lapse of seven days from the
submission to MOLE of the result of the strike-vote.
9. After the submission of position papers and hearing, Labor Arbiter Ovejera
declared the NFSW strike illegal. The dispositive part of his decision dated February
20, 1982 reads:
Wherefore, premises considered, judgment is hereby rendered:
1. Declaring the strike commenced by NFSW on January 28, 1982,
illegal,
2. Directing the Central to resume operations immediately upon

receipt hereof;
3. Directing the Central to accept back to work all employees
appearing in its payroll as of January 28, 1982 except those
covered by the February 1, 1982 memorandum on preventive
suspension but without prejudice to the said employees' instituting
appropriate actions before this Ministry relative to whatever causes
of action they may have obtained proceeding from said
memorandum;
4. Directing the Central to pay effective from the date of resumption
of operations the salaries of those to be placed on preventive
suspension as per February 1, 1982 memorandum during their
period of preventive suspension; and
5. Directing, in view of the finding that the subject strike is illegal,
NFSW, its officers, members, as well as sympathizers to
immediately desist from committing acts that may impair or impede
the milling operations of the Central
The law enforcement authorities are hereby requested to assist in
the peaceful enforcement and implementation of this Decision.
SO ORDERED.
10. On February 26, 1982, the NFSW by passing the NLRC filed the instant
Petition for prohibition alleging that Labor Arbiter Ovejera, CAC and the PC Provincial
Commander of Negros Occidental were threatening to immediately enforce the
February 20, 1982 decision which would violate fundamental rights of the petitioner,
and praying that
WHEREFORE, on the foregoing considerations, it is prayed of the
Honorable Court that on the Petition for Preliminary Injunction, an
order, after hearing, issue:
1. Restraining implementation or enforcement of the Decision of
February 20, 1982;
2. Enjoining respondents to refrain from the threatened acts
violative of the rights of strikers and peaceful picketers;
3. Requiring maintenance of the status quo as of February 20,

1982, until further orders of the Court;
and on the Main Petition, judgment be rendered after hearing.
1. Declaring the Decision of February 2O, l982 null and void;
2. Making the preliminary injunction permanent;
3. Awarding such other relief as may be just in the premises.
11. Hearing was held, after which the parties submitted their memoranda. No
restraining order was issued.
II ISSUES
The parties have raised a number of issues, including some procedural points.
However, considering their relative importance and the impact of their resolution on
ongoing labor disputes in a number of industry sectors, we have decided in the
interest of expediency and dispatch to brush aside non-substantial items and
reduce the remaining issues to but two fundamental ones:
1. Whether the strike declared by NFSW is illegal, the resolution of which mainly
depends on the mandatory or directory character of the cooling-off period and the 7day strike ban after report to MOLE of the result of a strike-vote, as prescribed in the
Labor Code.
2. Whether under Presidential Decree 851 (13th Month Pay Law), CAC is obliged to
give its workers a 13th month salary in addition to Christmas, milling and amelioration
bonuses, the aggregate of which admittedly exceeds by far the disputed 13th month
pay. (See petitioner's memorandum of April 12, 1982, p. 2; CAC memorandum of April
2, 1982, pp. 3-4.) Resolution of this issue requires an examination of the thrusts and
application of PD 851.
III. DISCUSSION
1. Articles 264 and 265 of the Labor Code, insofar as pertinent, read:
Art. 264, Strikes, picketing and lockouts. ...
(c) In cases of bargaining deadlocks, the certified or duly
recognized bargaining representative may file a notice of strike with
the Ministry (of Labor and Employment) at least thirty (30)
days before the intended date thereof. In cases of unfair labor

practices, the period of notice shall be shortened tofifteen (15)
days; ...
(d) During the cooling-off period, it shall be the duty of the voluntary
sttlement. Should the dispute remain unsettled until the lapse of the
requisite number of days from the mandatory filing of the notice,
the labor union may strike or the employer may declare a lockout.
(f) A decision to declae a strike must be approved by at least twothirds (2/3) of the total union membership in the bargaining unit
concerened by secret ballots in meetings or referenda. A decision
to declae a lockout must be approved by at least two-thirds (2/3) of
the board of direcotrs of the employer corporation or association or
of the partners in a partnership obtained by secret ballot in a
meeting called for the purpose. the decision shall be valid for the
duration of the dispute based on substantially the same grounds
considered when the strike or lockout vote was taken . The Ministry,
may at its own intitiative or upon the request of any affected party,
supervise the conduct of the secret balloting. In every case, the
union of the employer shall furnish the Ministry the results of the
voting at least seven (7) days before the intended strike or
lockout, subject to the cooling-off periodherein provided. (Emphasis
supplied).
ART. 265. Prohibited activities. It shall be unlawful for any labor
organization or employer to declare a strike or lockout without first
having bargained collectively in accordance with Title VII of this
Book or without first having filed the notice required in the
preceding Article or without the necessary strike or lockout vote first
having been obtained and reported to the Ministry.
It shall likewise be unlawful to declare a strike or lockout after
assumption of jurisdiction by the President or the Minister or after
certification or submission of the dispute to compulsory or voluntary
arbitration or during the pendency of cases involving the same
grounds for the strike or lockout. (Emphasis supplied.)
(a) Language of the law. The foregoing provisions hardly leave any room for doubt
that the cooling-off period in Art. 264(c) and the 7-day strike ban after the strike-vote
report prescribed in Art. 264(f) were meant to be, and should be deemed, mandatory.
filing of the notice," the unmistakable implication is that the union may not strike
before the lapse of the cooling-off period. Similarly, the mandatory character of the 7day strike ban after the report on the strike-vote is manifest in the provision that "in
every case," the union shall furnish the MOLE with the results of the voting "at least
seven (7) days before the intended strike, subject to the (prescribed) cooling-off
period." It must be stressed that the requirements of cooling-off period and 7-day
strike ban must both be complied with, although the labor union may take a strike
vote and report the same within the statutory cooling-off period.
If only the filing of the strike notice and the strike-vote report would be deemed
mandatory, but not the waiting periods so specifically and emphatically prescribed by
law, the purposes (hereafter discussed) for which the filing of the strike notice and
strike-vote report is required would not be achieved, as when a strike is
declaredimmediately after a strike notice is served, or when as in the instant case
the strike-vote report is filed with MOLE after the strike had actually commenced
Such interpretation of the law ought not and cannot be countenanced. It would indeed
be self-defeating for the law to imperatively require the filing on a strike notice and
strike-vote report without at the same time making the prescribed waiting periods
mandatory.
(b) Purposes of strike notice and strike-vote report. In requiring a strike notice and a
cooling-off period, the avowed intent of the law is to provide an opportunity for
mediation and conciliation. It thus directs the MOLE "to exert all efforts at mediation
and conciliation to effect a voluntary settlement" during the cooling-off period . As
applied to the CAC-NFSW dispute regarding the 13th month pay, MOLE intervention
could have possibly induced CAC to provisionally give the 13th month pay in order to
avert great business loss arising from the project strike,without prejudice to the
subsequent resolution of the legal dispute by competent authorities; or
mediation/conciliation could have convinced NFSW to at least postpone the intended
strike so as to avoid great waste and loss to the sugar central, the sugar planters and
the sugar workers themselves, if the strike would coincide with the mining season.
So, too, the 7-day strike-vote report is not without a purpose. As pointed out by the
Solicitor General
Many disastrous strikes have been staged in the past based merely
on the insistence of minority groups within the union. The
submission of the report gives assurance that a strike vote has
been taken and that, if the report concerning it is false, the majority
of the members can take appropriate remedy before it is too late.
(Answer of public respondents, pp. 17-18.)
When the law says "the labor union may strike" should the dispute "remain
unsettled until the lapse of the requisite number of days (cooling-off period) from the
If the purpose of the required strike notice and strike-vote report are to be achieved,
the periods prescribed for their attainment must, as aforesaid, be deemed
mandatory.,
... when a fair interpretation of the statute, which directs acts or
proceedings to be done in a certain way, shows the legislature
intended a compliance with such provision to be essential to the
validity of the act or proceeding, or when some antecedent and
prerequisite conditions must exist prior to the exercise of power or
must be performed before certain other powers can be exercised,
the statute must be regarded as mandatory. So it has been held
that, when a statute is founded on public policy [such as the policy
to encourage voluntary settlement of disputes without resorting to
strikes], those to whom it applies should not be permitted to waive
its provisions. (82 C.J.S. 873-874. Emphasis supplied.)
(c) Waiting period after strike notice and strike-vote report, valid regulation of right to
strike. To quote Justice Jackson in International Union vs. Wisconsin Employment
Relations Board, 336 U.S. 245, at 259
The right to strike, because of its more serious impact upon the
public interest, is more vulnerable to regulation than the right to
organize and select representatives for lawful purposes of collective
bargaining ...
The cooling-off period and the 7-day strike ban after the filing of a strike- vote report,
as prescribed in Art. 264 of the Labor Code, are reasonable restrictions and their
imposition is essential to attain the legitimate policy objectives embodied in the law.
We hold that they constitute a valid exercise of the police power of the state.
(d) State policy on amicable settlement of criminal liability. Petitioner contends that
since the non-compliance (with PD 851) imputed to CAC is an unfair labor practice
which is an offense against the state, the cooling-off period provided in the Labor
Code would not apply, as it does not apply to ULP strikes. It is argued that mediation
or conciliation in order to settle a criminal offense is not allowed.
In the first place, it is at best unclear whether the refusal of CAC to give a 13th month
pay to NFSW constitutes a criminal act. Under Sec. 9 of the Rules and regulations
Implementing Presidential Decree No. 851
Non-payment of the thirteenth-month pay provided by the Decree
and these rules shall be treated as money claims cases and shall
be processed in accordance with the Rules Implementing the Labor
Code of the Philippines and the Rules of the National Labor

Relations Commission.
Secondly, the possible dispute settlement, either permanent or
temporary, could very well be along legally permissible lines, as
indicated in (b) above or assume the form of measures designed to
abort the intended strike, rather than compromise criminal liability, if
any. Finally, amicable settlement of criminal liability is not inexorably
forbidden by law. Such settlement is valid when the law itself clearly
authorizes it. In the case of a dispute on the payment of the 13th
month pay, we are not prepared to say that its voluntary settlement
is not authorized by the terms of Art. 264(e) of the Labor Code,
which makes it the duty of the MOLE to exert all efforts at mediation
and conciliation to effect a voluntary settlement of labor disputes.
(e) NFSW strike is illegal. The NFSW declared the strike six (6)
days after filing a strike notice, i.e., before the lapse of the
mandatory cooling-off period. It also failed to file with the
MOLE beforelaunching the strike a report on the strike-vote, when it
should have filed such report "at least seven (7) days before the
intended strike." Under the circumstances, we are perforce
constrained to conclude that the strike staged by petitioner is not in
conformity with law. This conclusion makes it unnecessary for us to
determine whether the pendency of an arbitration case against
CAC on the same issue of payment of 13th month pay [R.A.B No.
512-81, Regional Arbitration Branch No. VI-A, NLRC, Bacolod City,
in which the National Congress of Unions in the Sugar Industry of
the Philippines (NACUSIP) and a number of CAC workers are the
complainants, with NFSW as Intervenor seeking the dismissal of
the arbitration case as regards unnamed CAC rank and file
employees] has rendered illegal the above strike under Art. 265 of
the Labor Code which provides:
It shall likewise be unlawful to declare a strike or lockout after
assumption of jurisdiction by the President or the Minister, or after
certification or submission of the dispute to compulsory or voluntary
arbitration or during the pendency of cases involving the same
grounds for the strike or lockout. (Emphasis supplied.)
(2) The Second Issue. At bottom, the NFSW strike arose from a dispute on the
meaning and application of PD 851, with NFSW claiming entitlement to a 13th month
pay on top of bonuses given by CAC to its workers, as against the diametrically
opposite stance of CAC. Since the strike was just an offshoot of the said dispute, a
simple decision on the legality or illegality of the strike would not spell the end of the
NFSW-CAC labor dispute. And considering further that there are other disputes and
strikes actual and impending involving the interpretation and application of PD
851, it is important for this Court to definitively resolve the problem: whether under PD
851, CAC is obliged to give its workers a 13th month salary in addition to Christmas,
milling and amelioration bonuses stipulated in a collective bargaining agreement
amounting to more than a month's pay.
Keenly sensitive to the needs of the workingmen, yet mindful of the mounting
production cost that are the woe of capital which provides employment to labor,
President Ferdinand E. Marcos issued Presidential Decree No. 851 on 16 December
1975. Thereunder, "all employers are hereby required to pay salary of not more than
all their employees receiving a basic P1,000 a month, regardless of the nature of their
employment, a 13th month pay not later than December 24 of every year." Exempted
from the obligation however are:
Employers already paying their employees a 13th month pay or its
equivalent
...
(Section 2.)
1/12th of the employee's basic salary, the employer shall pay the
difference." (Italics supplied.)
Having been issued by the agency charged with the implementation of PD 851 as its
contemporaneous interpretation of the law, the quoted rule should be accorded great
weight.
Pragmatic considerations also weigh heavily in favor of crediting both voluntary and
contractual bonuses for the purpose of determining liability for the 13th month pay. To
require employers (already giving their employees a 13th month salary or its
equivalent) to give a second 13th month pay would be unfair and productive of
undesirable results. To the employer who had acceded and is already bound to give
bonuses to his employees, the additional burden of a 13th month pay would amount
to a penalty for his munificence or liberality. The probable reaction of one so
circumstance would be to withdraw the bonuses or resist further voluntary grants for
fear that if and when a law is passed giving the same benefits, his prior concessions
might not be given due credit; and this negative attitude would have an adverse
impact on the employees.
The evident intention of the law, as revealed by the law itself, was to grant an
additional income in the form of a 13th month pay to employees not already receiving
the same. Otherwise put, the intention was to grant some relief not to all workers
but only to the unfortunate ones not actually paid a 13th month salary or what
amounts to it, by whatever name called; but it was not envisioned that a double
burden would be imposed on the employer already paying his employees a 13th
month pay or its equivalent whether out of pure generosity or on the basis of a
binding agreement and, in the latter ease, regardless of the conditional character of
the grant (such as making the payment dependent on profit), so long as there is
actual payment. Otherwise, what was conceived to be a 13th month salary would in
effect become a 14th or possibly 15th month pay.
In the case at bar, the NFSW-CAC collective bargaining agreement provides for the
grant to CAC workers of Christmas bonus, milling bonus and amelioration bonus, the
aggregate of which is very much more than a worker's monthly pay. When a dispute
arose last year as to whether CAC workers receiving the stipulated bonuses
would additionally be entitled to a 13th month pay, NFSW and CAC concluded a
compromise agreement by which they
This view is justified by the law itself which makes no distinction in the grant of
exemption: "Employers already paying their employees a 13th month pay or its
equivalent are not covered by this Decree." (P.D. 851.)
When this agreement was forged on November 30,1981, the original decision
dismissing the petition in the aforecited Marcopper case had already been
promulgated by this Court. On the votes of only 7 Justices, including the distinguished
Chief Justice, the petition of Marcopper Mining Corp. seeking to annul the decision of
Labor Deputy Minister Amado Inciong granting a 13th month pay to Marcopper
employees (in addition to mid- year and Christmas bonuses under a CBA) had
been dismissed. But a motion for reconsideration filed by Marcopper was pending as
of November 30, 1981. In December 1981, the original decision was affirmed when
this Court finally denied the motion for reconsideration. But the resolution of denial
was supported by the votes of only 5 Justices. The Marcopper decision is therefore a
Court decision but without the necessary eight votes to be doctrinal. This being so, it
cannot be said that the Marcopper decision "clearly held" that "the employer is liable
to pay a 13th month pay separate and distinct from the bonuses already given," within
The Rules Implementing P.D. 851 issued by MOLE immediately after the adoption of
said law reinforce this stand. Under Section 3(e) thereof
The term "its equivalent" ... shall include Christmas bonus, midyear
bonus, profit-sharing
payments
and other
cash
bonuses amounting to not less than 1/12th of the basic salary but
shall not include cash and stock dividends, cost of living allowances
and all other allowances regularly enjoyed by the employee, as well
as non-monetary benefits. Where an employer pays less than
agree(d) to abide by the final decision of the Supreme Court in any

case involving the 13th Month Pay Law if it is clearly held that the
employer is liable to pay a 13th month pay separate and distinct
from the bonuses already given.
the meaning of the NFSW-CAC compromise agreement. At any rate, in view of the
rulings made herein, NFSW cannot insist on its claim that its members are entitled to
a 13th month pay in addition to the bonuses already paid by CAC. WHEREFORE, the
petition is dismissed for lack of merit. No costs.
SO ORDERED.
SECOND DIVISION
G.R. No. L-60337 August 21, 1987
UNIVERSAL CORN PRODUCTS (A DIVISION OF UNIVERSAL ROBINA
CORPORATION), petitioner,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION and JOSE ARMAS,
ENGRACIO ASIS, AUSTERINAO ELEUTERIO, FAUSTINO ATIENZA, MARIO
ALTARES, JAIME ALTARES, ISIDRO ARANO, LEONILO ARANO, ALFREDO
ANCHETA, DOMINGO ANCHETA, RIZALITO, ABANTO, RIZALITO, CRESENCIO
ASCUTIA, JESUS ASCUTIA, FELICIANO ABORQUE, WILFREDO ARMENIO,
ALEJANDRO ABAGAT, PABLO ADLAWAN, FILEMON ABADINES, ROMEO
AREVALO, PABLO BUTIAL, BANAAG REMIGIO, LUCIO BERDIJO, ANTONIO
BIONSON, ABELARDO BRACAMONTE, SAMSON BORDEOS, TEODORO,
BARBIANA, FRANCISCO BABOR, HERCULANO BARRAMEDA, RODRIGO
BONGAIS, JAIME BERANA, EDUARDO, BUENAVENTURA, RODRIGO
BAUTISTA, FELEMON BAUTISTA, DIONISIO BERNALES, MARIANO BALAGTAS,
ALFREDO BERNADAS, EPIGENIO BORDEOS, BRIGIDO BAER, OSCAR
BONDOC, JOSE BONDOC, ROMEO BUCAYAN, VITALIANO BATOBATO,
DOMINGO BALLON, JOSE BORLEO, JOSE BORJA, RUFINO CLEMENTE, JUAN
CABALLERO, TRANQUILINA CAUSON, AUGORIO CALNEA, LEOPOLDO
CUARTERO, ALBERTO CATBAGAN, ROMEO CALIVO, ANDRES CUNTAPAY,
ALBERTO CASTRO, CASTOR RODRIGO, SIMPLICIO CACATIAN, NILO
DALANON, BIENVENIDO DUMAGAT, SR., BIENVENIDO DUMAGAT, JR.,
DOMINADOR DUMANTAY, TEODORO DULOMBAL, RODOLFO DANDAN,
SALVADOR DASIGO, ELIAS DASIGO, FRANCISCO ESTOLANO, LEOPOLDO
ESTIOCO, ROGELIO ESTANISLAO, MONTANO ESTANISLAO, ELIAS ESTRADA,
ERNESTO ESTABALLIO, FERNANDO FERNANDEZ, PEDRO GETEZO, ALFONSO
DE GUZMAN, LORENZO DE GUZMAN, MODESTO DE GUZMAN, ARELLANO
GARCIA, ALFREDO GARCIA, MANUEL GOROSPE, RAYMUNDO GELLIDO,
RODOLFO GALEON, ROMEO GONZALES, GERARDO GERMEDIA, BENITO
GALE, ROBERTO HASAL, EDILBERTO HERNANDEZ, RAFAEL IGUIZ,
MARGARITO JAVIER, PABLO JOSE, PEDRO JOVE, CELEDONIO JACA,
REYNALDO JALLA, EDUARDO JUMAQUIO, DOMINGO JUANO, AGUSTIN KHO,
ANTONIO LAMERA, RODOLFO LINEZO, MANUEL LAMBATIN, MANUEL LOPEZ,
BENEDICTO LOPEZ, MARIANO LARA, ELINO MISA, FRANCISCO MINA,
RODOLFO MIRABEL, ROGER MIRABEL, ROLANDO MIRABEL, OSCAR
MARTINEZ, MIGUEL MANACIO, PEDRO MANALO, LEOPOLDO MARQUEZ,
ANTONIO, MEDINA, SALVADOR MARAINAN, NAPOLEON MAGAYA, ALFREDO
MAQUI, EDUARDO MILLET, PABLO MENDEZ, DULCISIMO NATIVIDAD, ROMEO
NAGTALON, ALFONSO NOQUEZ, ALEJANDRO NOQUEZ, ANASTACIO NIVAL,
EMILIO ORTIZ, PONCIANO ORLANDA, GERARDO POSADAS, ATICO
PEDRIGOZA, ALFREDO PASCUA, LEONARDO PATRON, MIGUEL PACHECO,

DOMINGO PACHECO, FELIMON POLICARPIO, ERNESTO QUIJANO, EFREN
QUIBOTE, SIMEON RESCO, FERNANDO REYNOSO, EMILIO RIVERA,
GRACIANO RAMOS, REYNALDO RAMIREZ, PAQUITO RAMIREZ, THOMAS
ROSARIO, JR., ROMULO REYES, REYNALDO RAPSING, ALFREDO DEL
ROSARIO, FLORENCIO SASAN, ALFONSO SAMSON, LUIS SUAREZ,
GREGORIO SOMODO, FRANCISCO SAPLAN, LUCIANO SARNO, RICARDO
SOREL, CRESENCIO SANTOS, ARSENIO SERGA JR., BALTAZAR TALATO,
DIOSDADO TULANG, EUGENIO TOLENTINO, AMADOR TABULOG, LAZARO
TORRES, JAIME TRAJANO, GENEROSO TANTE, SERGIO TABUAC, ANASTACIO
TIMOG, DANIEL UDAN, HERMENIGILDO VITO, VICENTE VITO, BENJAMIN
VILLAMOR, ARTURO VALIENTE, ERNESTO VALIENTE, FELICISIMO
VERA, respondents.
SARMIENTO, J.:
The petitioner invokes National Federation of Sugar Workers (NFSW) v. Ovejera, 1 in
which we held that Presidential Decree No. 851, 2 the 13th-month pay law, does not
cover employers already paying their employees an "equivalent" to the 13th month
pay.
There is no dispute as to the facts.
Sometime in May, 1972, the petitioner and the Universal Corn Products Workers
Union entered into a collective bargaining agreement in which it was provided, among
other things, that:
xxx xxx xxx
The COMPANY agrees to grant all regular workers within the
bargaining unit with at least one (1) year of continuous service, a
Christmas bonus equivalent to the regular wages for seven (7)
working days, effective December, 1972. The bonus shall be given
to the workers on the second week of December.
In the event that the service of a worker is not continuous due to
factory shutdown, machine breakdown or prolonged absences or
leaves, the Christmas bonus shall be prorated in accordance with
the length of services that worker concerned has served during the
year . 3
xxx xxx xxx

The agreement had a duration of three years, effective June 1, 1971, or until June 1,
1974.
On account however of differences between the parties with respect to certain
economic issues, the collective bargaining agreement in question expired without
being renewed. On June 1, 1979, the parties entered into an "addendum" stipulating
certain wage increases covering the years from 1974 to 1977. Simultaneously, they
entered into a collective bargaining agreement for the years from 1979 to 1981. Like
the "addendum," the new collective bargaining agreement did not refer to the
"Christmas bonus" theretofore paid but dealt only with salary adjustments. According
to the petitioner, the new agreements deliberately excluded the grant of Christmas
bonus with the enactment of Presidential Decree No. 851 4 on December 16, 1975. It
further claims that since 1975, it had been paying its employees 13th-month pay
pursuant to the Decree. 5
For failure of the petitioner to pay the seven-day Christmas bonus for 1975 to 1978
inclusive, in accordance with the 1972 CBA, the union went to the labor arbiter for
relief. In his decision, 6 the labor arbiter ruled that the payment of the 13th month pay
precluded the payment of further Christmas bonus. The union appealed to the
National Labor Relations Commission (NLRC). The NLRC set aside the decision of
the labor arbiter appealed from and entered another one, "directing respondent
company [now the petitioner] to pay the members concerned of complainants [sic]
union their 7-day wage bonus in accordance with the 1972 CBA from 1975 to 1978."
Justifying its reversal of the arbiter's decision, the NLRC held:
xxx xxx xxx
It is clear that the company implemented the aforequoted provision
of the CBA in 1972, 1973 and 1974. In view thereof it is our
considered opinion that the crediting of said benefit to the 13th
month pay cannot be sanctioned on the ground that it is contrary to
Section 10 of the Rules and Regulations Implementing Presidential
Decree No. 85 1, which provides, to wit;
More so because the benefit involved was not magnanimously

extended by the company to its employees but was obtained by the
latter thru bargaining negotiations. The aforementioned CBA was
the law between the parties and the provisions thereof must be
faithfully observed by them during its effectivity. In this connection, it
should be noted that the same parties entered into another 3-year
CBA on June 11, 1979, which no longer provides for a 7-day wage
Christmas bonus. In effect, therefore, the parties agreed to
discontinue the privilege, which agreement should also be
respected.7
xxx xxx xxx
We hold that in the case at bar, Ovejera (La Carlota) case does not apply.
We apply instead, United CMC Textile Workers Union v. Valenzuela 8 a recent
decision. In that case this Court, speaking through Mr. Justice Edgardo Paras, held:
xxx xxx xxx
... If the Christmas bonus was included in the 13th month pay, then
there would be no need for having a specific provision on
Christmas bonus in the CBA. But it did not provide for a bonus in
graduated amounts depending on the length of service of the
employee. The intention is clear therefore that the bonus provided
in the CBA was meant to be in addition to the legal requirement.
Moreover, why exclude the payment of the 1978 Christmas bonus
and pay only the 1979-1980 bonus. The classification of the
company's workers in the CBA according to their years of service
supports the allegation that the reason for the payment of bonus
was to give bigger award to the senior employees-a purpose which
is not found by P.D. 851. A bonus under the CBA is an obligation
created by the contract between the management and workers
while the 13th month pay is mandated by the law (P. D. 851). 9
xxx xxx xxx
Section 10. Prohibition against reduction or

elimination of benefits. Nothing herein shall be
construed to authorize any employer to eliminate,
or diminish in any way, supplements, or other
employee benefits or favorable practice being
enjoyed by the employee at the time of
promulgation of this issuance.
In the same vein, we consider the seven-day bonus here demanded "to be in addition
to the legal requirement." Although unlike the Valenzuela CBA, which took effect after
the promulgation of Presidential Decree No. 851 in 1975, the subject agreement was
entered into as early as 1972, that is no bar to our application of Valenzuela.What is
significant for us is the fact that, like the Valenzuela, agreement, the Christmas bonus
provided in the collective bargaining agreement accords a reward, in this case, for
loyalty, to certain employees. This is evident from the stipulation granting the bonus in
question to workers "with at least one (1) year of continuous service." As we said in
Valenzuela" this is "a purpose not found in P.D. 851." 10
It is claimed, however, that as a consequence of the impasse between the parties
beginning 1974 through 1979, no collective bargaining agreement was in force during
those intervening years. Hence, there is allegedly no basis for the money award
granted by the respondent labor body. But it is not disputed that under the 1972
collective bargaining agreement, [i]f no agreement and negotiations are continued, all
the provisions of this Agreement shall remain in full force up to the time a new
agreement is executed." 11 The fact, therefore, that the new agreements are silent on
the seven-day bonus demanded should not preclude the private respondents' claims
thereon. The 1972 agreement is basis enough for such claims for the whole writing is
" "instinct with an obligation," imperfectly express." 12
WHEREFORE, premises considered, the petition is hereby DISMISSED. The
Decision of the public respondent NLRC promulgated on February 11, 1982, and its
Resolution dated March 23, 1982, are hereby AFFIRMED. The temporary restraining
order issued on May 19, 1982 is LIFTED.
This Decision is IMMEDIATELY EXECUTORY.
SO ORDERED.
THIRD DIVISION
G.R. No. 114280 July 26, 1996

PHILIPPINE
AIRLINES,
INC.
vs.
NATIONAL LABOR RELATIONS COMMISSION and
ASSOCIATION OF THE PHILIPPINES (ALPAP), respondents.
(PAL), petitioner,
AIRLINE
PILOTS
G.R. No. 115224 July 26, 1996

AIRLINE PILOTS ASSOCIATION OF THE PHILIPPINES (ALPAP), petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and PHILIPPINE AIRLINES, INC.
(PAL), respondents.
FRANCISCO, R., J.:p

For refusing to pay its pilots their thirteenth (13th) month pay, a complaint [docketed
as NLRC Case No. 00-09-005598-91] for unfair labor practice was filed against
Philippine Airlines, Inc. (PAL) by the Airline Pilots Association of the Philippines
(ALPAP). the Labor Arbiter ruled in favor of ALPAP and ordered PAL to pay its pilots
belonging to ALPAP their thirteenth month pay from 1988 to 1990. Both parties
appealed to the National Labor Relations Commission which in turn affirmed with
modifications the decision of the Labor Arbiter. Their motions for reconsideration
having been denied, PAL and ALPAP proceeded to this Court with their respective
petitions forcertiorari assailing the Resolutions promulgated by the NLRC on
November 23, 1993 and February 28, 1994 in NLRC Case No. 003480-92.
In G.R. No. 114280, petitioner PAL takes exception to the findings of the NLRC
holding it liable to the members of ALPAP for non-payment of their thirteenth month
pay from 1988 to 1990. On the other hand, in G.R. No. 115224, petitioner ALPAP
disputes the deletion of the award of moral and exemplary damages in its favor, as
well as the non-imposition of legal interest in the payment of the amounts due to them
from PAL. Upon motion of ALPAP's counsel, the court ordered the consolidation of
both petitions. 1
ALPAP filed its complaint 2 on September, 1991, charging PAL of violating Presidential
Decree No. 851, its Implementing Rules and Regulations and Memorandum Order
No. 28 issued by then President Corazon C. Aquino, for unlawfully refusing and failing
to pay the pilots their thirteenth month pay from 1988 to 1990. Aside from their
accumulated thirteenth month pay, ALPAP prayed for an award of P500,000.00 as
moral damages and P100,000.00 as exemplary damages to each of their pilots, plus
attorney's fees equivalent to ten percent (10%) of the total awards adjudged.
Subsequently, however, ALPAP expanded the coverage of its claim from 1986 to
1990 upon filing its position paper. 3
In answer to the complaint, PAL denied any liability to ALPAP and maintained that it
was not obliged to give its pilots a thirteenth month pay under P.D. 851 as it was
already paying said employees the equivalent of a thirteenth month pay in the form of
a year-end bonus. PAL invokes that under Section 2 of PD 851 and its Implementing
Rules and Regulations, "employers already paying their employees a 13th month pay
or more in a calendar year or its equivalent at the time of this issuance," are not
covered by PD 851. 4 Additionally, PAL contends that there is no demandable
obligation in the absence of any contractual stipulation or a legal provision requiring it
to give its pilots a thirteenth month pay as aside from a year-end bonus that the latter
are already receiving. 5
Disputing PAL's contention, ALPAP argued that the payment of the year-end bonus
cannot be equated within the thirteenth month pay since the payment of the former is
conditional in character and not fixed in its amount, while that of the thirteenth month
pay
is
mandatory
in
character
and
definite
in
its
amount. 6
On May 29, 1992, judgment was rendered by the Labor Arbiter in ALPAP's favor and
ordered PAL to pay the following amounts:
WHEREFORE, judgment is hereby rendered in this case, declaring
respondent Philippine Airlines (PAL) guilty of non-payment of the thirteenth
month pay. Respondent is therefore ordered to pay members of the
complainant Airlines Pilots Association of the Philippines (ALPAP) the
following sums of money:
13th
month
Moral
damages
Attorney's
Grand Total P83,726,768.00
pay
and
fees
69,167,244.00
Exemplary
6,948,000.00
7,611,542.00
All other claims are denied for lack of legal or factual basis. 7
In the aforecited decision, the Labor Arbiter discarded PAL's contentions and took
note of the fact that the payment of the year-end bonus is conditional and uncertain.
PAL's argument that is exempted from the coverage of PD 851 was ruled out because
it was shown that except for the pilots, all other employees of PAL were receiving both
the thirteenth moth pay and the year-end bonus. However, the coverage of the award
for thirteenth month pay was confined to 1988 until 1990, excluding those from 1986
and 1987, due to ALPAP's failure to amend its complaint.
Not satisfied, both parties appealed to the NLRC which in turn promulgated the
assailed resolution on November 23, 1993 8 and ruled in this wise:
WHEREFORE, premises considered, the decision of (sic) dated 29, May
1992 is hereby AFFIRMED with the modification that the respondent PAL
also pay the 13th month pay to the ALPAP pilots for the years 1986 and
1987; the dismissal of the claim for moral and exemplary damages; the
payment of PAL of legal interest form the dates the 13th month pay of the
ALPAP pilots accrued up to the time of actual payment; and the payment of
attorney's fees of 10% of the total award.
SO ORDERED. 9
Still dissatisfied, the parties sought reconsideration which, however, were both denied
by the NLRC in this resolution dated February 28, 1994. 10 The NLRC also reduced
the award of attorney's fees to five percent (5%) and deleted the payment of legal
interest for lack of basis. 11
Hence, these petitions.
The pivotal issue in this petition is whether or not the NLRC committed grave abuse
of discretion in holding PAL liable to the members of ALPAP for non-payment of their
thirteenth month pay from 1988 to 1990, not withstanding that, as claimed by PAL,
there is no legal basis for the said finding.
PAL's contention is premised on the following arguments:
1) Payment of the thirteenth month pay under P.D. 851 and Memorandum Order No.
28 covers only rank and file employees. Pilots are excluded from the coverage
because they are not rank and file employees but rather supervisory employees.
Hence, they are not entitled to any thirteenth month pay.
2) There is no contractual obligation to pay the pilots any thirteenth month pay in the
absence of any provision in their CBA. And even assuming that they are entitled to a
thirteenth month pay, the payment of a year-end bonus is already equivalent to a
thirteenth month pay.
Anent the first argument, PAL cites Memorandum Order No. 28 which provides as
follows:
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.
PAL maintains that pilots cannot be classified as rank and file employees since the
nature of their job includes the exercise of supervision over the cabin crew and the
power to recommend disciplinary actions over the latter. 12
Interestingly, however, the contention was raised by PAL rather belatedly and invoked
for the first time on appeal. Worse, this issue was not even discussed in PAL's original
Memorandum and was raised only much later when PAL filed a Supplemental
Memorandum on Appeal through a new counsel. In fact, in denying PAL's appeal, the
NLRC did not even bother to consider the new issue raised by PAL. This precludes us
from taking cognizance of and resolving the aforementioned issue with respect to the
employment status of the pilots as it would be violative of the proscription against the
presentation of new issues on appeal. The rule is well-settled that points of law,
theories, issues and arguments not adequately brought to the attention of the trial
court need not be, and ordinarily will not be considered by a reviewing court as they
cannot be raised for the first time on appeal 13because this would be offensive to the
basic rules of fair play, justice and due process. 14 By invoking the alleged supervisory
status of the pilots during the pendency of its appeal and raising the issue only later in
their Supplemental Memorandum, it was evident that this was a last ditch effort to
shift to a new theory and raise a new matter in the hope of a favorable result. This,
however, is the pernicious practice that has consistently been rejected. Thus, PAL is
now barred from claiming that their pilots are not rank and file employees.
The other argument of PAL is that there is no provision in the CBA of ALPAP which
obligates the former to pay the members of the latter any thirteenth month pay. PAL
contends that it is of no moment that its other employees, namely, the flight
attendants belonging to the Flight Attendants' and Stewards' Association of the
Philippines (FASAP) and the other rank and file employees belonging to Philippine
Airlines Employees' Association (PALEA), are being granted both the thirteenth month
pay and the year-end bonus because the payment of the said benefits were the result
of contractual negotiations in their respective CBA's. the absence of such contractual
grant to the members of ALPAP only shows that there was no intention to give the
pilots the same benefits. Furthermore, PAL argues that even assuming that the pilots
are legally entitled to a thirteenth month pay, the law exempts them from compliance
with the same because the payment of a year-end/Christmas bonus is already
equivalent to the thirteenth month pay. To bolster this claim, PAL relies on the doctrine
laid down by this Court in the cases of National Federation of Sugar Workers (NFSW)
vs Ovejera, [114 SCRA 354 (1982)], Dole Philippines, Inc. vs. Leogardo, Jr. [117
SCRA 938 (1982)] and Brokenshire Memorial Hospital vs. NLRC [143 SCRA 564
(1986)], which was crystallized as follows:
Clearly, from the discussions in National Federation of Sugar Workers
(NFSW), Dole and Brokenshire, what the law wants to prevent is the
imposition of a "double burden" upon the employer who is already paying the
equivalent of a 13th month pay. The law exempts from the payment of the
13th month pay employers who are already giving its equivalent. Otherwise
the goal of uniformly providing employees with additional income will not be
met. Another inequity will result; while most employees will be paid thirteen
(13) months salary, some by virtue of P.D. No. 851, will be receiving salary
for fourteen (14) months. 15
ALPAP however disputes the abovementioned contentions of PAL and maintains that
the grant of a thirteenth month pay being statutory, the same is mandatory in
character and need not be embodied in any written agreement because it is deemed
incorporated therein. It is therefore inconsequential if the payment of the thirteenth
month pay is not expressly provided in the CBA. ALPAP also doubts the applicability
of the cases invoked by PAL considering the difference in the factual background of
this case. According to ALPAP what is squarely applicable herein are the
pronouncements in the cases of United CMC Textile Workers Union vs. Labor Arbiter,
149 SCRA 424 (1987), Universal Corn Products v. NLRC, 153 SCRA 191 (1987)
and UST Faculty Union vs. NLRC, 190 SCRA 215 (1990 ), which uniformly ruled that
where the purpose for the giving of a Christmas bonus is not the same as the reasons
for the granting of a thirteenth month pay under P.D. 851, which is to uniformly
provide employees with additional income, then the employer is still obligated to give
the thirteenth month pay in addition to the bonus. ALPAP also decries the fact that it is
only their pilots who are deprived of both the thirteenth month pay and the year-end
bonus, as opposed to the rest of the PAL's employees belonging to FASAP and
PALEA who are enjoying both benefits.
The absence of an express provision in the CBA between PAL and ALPAP obligating
the former to pay the members of the latter a thirteenth month pay is immaterial. It
cannot be disputed that the tenor of P.D. 851 as amended by Memorandum Order
No. 28 is mandatory in so providing that "all employers are hereby required to pay all
their rank and file employees a thirteenth month pay not later than December 24 of
every year." Non-compliance with this mandate cannot be excused by the simple
expedient of pointing to the absence of a similar provision in the CBA for this would
contravene the basic rule that an existing law enters into and forms part of a valid
contract without the need for the parties to expressly make reference to it. 16 Not
withstanding therefore the absence of any contractual agreement, the payment of a
thirteenth month pay being a statutory grant, compliance with the same is mandatory
and is deemed incorporate in the CBA.
But whether or not PAL can claim the exception provided under the law by equation
the year-end bonus with the payment of the thirteenth month pay deserves a very
close scrutiny in this case.
Although P.D. 851 as amended by Memorandum Order No. 28 requires all employers
to pay all their rank and file employees a thirteenth month pay, the rule is subject to
certain exceptions. Excluded from the coverage are "employers already paying their
employees a thirteenth month pay or more in a calendar year or its equivalent at the
time of the issuance of the law. 17 Construing the term "its equivalent", the same was
defined as inclusive of "Christmas bonus, mid-year bonus, profit-sharing payments
and other cash bonuses amounting to not less that 1/12th of the basic salary but shall
not include cash and stock dividend, cost of living allowances and all other
allowances regularly enjoyed by the employee, as well as non-monetary benefits.
When an employer pays less than 1/12th of the employee's basic salary, the
employer shall pay the difference. 18
The term "bonus" was in turn interpreted to mean:
"[A] bonus is an amount granted and paid to an employee for his industry
and loyalty which contributed to the success of the employer's business and
made possible the realization of profits. It is an act of generosity of the
employer . . . it is also granted by an enlightened employer to spur the
employee to greater efforts for the success of the business and realization of
bigger profits. 19
Applying the aforecited definitions, it would seem that the year-end bonus being
granted by PAL to the employees may be considered as an equivalent of the
thirteenth month pay considering the similarity in the purpose for granting the same.
As advanced by ALPAP, the rationale for PAL's grant of a year-end bonus was to give
regard for the loyalty, dedication and hardwork of the employee. 20 Confirming this
purpose is the declaration made by the PAL President, Feliciano Belmonte Jr. in his
letter addressed to the employees of PAL dated October 30, 1991, announcing the
granting of a Christmas bonus equivalent to 125% of the employee's monthly pay for
a "job well done" to wit:
xxx xxx xxx
In simple terms, we made a profit from our efforts to increase revenues and
cut costs. I believe it is only proper that appreciation for a job well done
should be expressed in a tangible manner.
I am therefore pleased to announce that for this year, management has
decided to award a Christmas bonus equivalent to 125% of your monthly
basic pay . . . 21
From the foregoing, it appears that the rationale for the grant of the year-end bonus
by PAL coincides with the nature of the bonus which can be equated with the
payment of a thirteenth month pay.
However, notwithstanding the above disquisitions, the peculiar circumstances in this
case wavers against the outright application of the rule preventing the imposition of a
double burden against the employer who is already paying the equivalent of the
thirteenth month pay, and hereby exempt PAL from granting both benefits of a yearend bonus and a thirteenth month pay to its pilots.
It bears to stress that this Court is not precluded from going into a meticulous scrutiny
of the attendant facts and circumstances from which we could extract the real
intention and purpose behind the grant by PAL of the year-end bonus to its
employees. In previous cases, we denied the claim for an exemption under the guide
of paying the equivalent of a thirteenth month pay under P.D. 851, where it has been
shown that the true purpose for the grant of the bonus to the employees is different
from the avowed intention of P.D. 851, that is to uniformly provide the low paid
employee with additional income. 22
In the instant case, it is beyond dispute the except for the pilots belonging to ALPAP,
all other employees of PAL who are either members of FASAP or PALEA are enjoying
both benefits of a thirteenth month pay and a year-end bonus. explaining this
discrepancy, PAL argues that whatever benefits are being enjoyed by the members of
the FASAP and PALEA resulted from negotiations in their respective CBA's The
absence of a provision granting both benefits to the members of ALPAP confirms that
there was no intention on the part of the PAL to extend additional benefits to the
former over and above that required by law.
We find no merit in PAL's assertion. The inclusion of a provision for the continued
payment of the year-end bonus in the 1988-1991 CBA of ALPAP and PAL belies the
latter contention that the grant of the year-end bonus was intended to be credited as
compliance with the mandate to pay the pilots a thirteenth month pay. Memorandum
Order No. 28 which amended P.D. 851, requiring all employers to pay all rank and file
employees, regardless of the amount of their salaries, a thirteenth month pay, was
issued on August 13, 1986. As early as said date, PAL was therefore fully aware that
it was legally obliged to grant all its rank and file employees a thirteenth month pay.
Thus, if PAL really intended to equate the year-end bonus with the thirteenth month
pay, then the same should have been expressly declared in their 1988-1991 CBA, or
the provision on the year-end bonus should have been deleted because it would only
be a mere superfluity. But as it is, the provision for the continued payment of a yearend bonus was incorporated in the CBA without any qualification, from which the only
logical conclusion that could be derived is that PAL intended to give the members of
ALPAP a year-end bonus in addition to its obligation to grant a thirteenth month pay.
Moreover, there is no rational basis for withholding from the members of ALPAP the
benefit of a year-end bonus is addition to the thirteenth month pay, while the same
being granted to the other rank and field employees of PAL. PAL's failure to extend
the same benefits to its pilots is a blatant act of discrimination and is grossly unfair to
the latter considering the heavy and delicate responsibilities that they bear in the
airline business, particularly in ensuring the safety and comfort of thousands of
passengers. In fact, it cannot be discounted that pilots are the lifeblood of every
airline company. This makes it imperative that due regard must be exercised in
safeguarding their rights and welfare as employees. Finally, it is worth mentioning that
herein pilots of ALPAP are not even seeking more benefits and treatment already
being extended by PAL's management to the other employees. In this regard, we
must therefore uphold their claims.
With respect however to the deletion of the award of moral and exemplary damages,
the non-imposition of legal interest on the awards, and the award of attorney's fees,
we find no cogent reason to reverse the conclusion reached by respondent NLRC,
bearing in mind that the award of these items are subject to sound the discretion of
the court, which if properly exercised will not be disturbed on appeal. 23 The claim for
moral and exemplary damages was not properly dismissed in this case due to the
absence of clear and convincing evidence to merit the same. For moral damages to
be awarded, it is essential that the claimant must have satisfactorily proved during the
trial that the existence of the factual basis of the damages and its casual connection
with the adverse party's acts. 24 If the court has no proof, of evidence upon on which
the claim for moral damages could not be based, such indemnity could not be
outrightly awarded. 25 The same holds true with respect to the award of exemplary
damages where it must be shown that the party acted in wanton, oppressive or
malevolent manner. 26
The award of attorney's fees on the basis of quantum meruit at the rate of five percent
(5%) of the total monetary award is reasonable in this case considering the explicit
provisions laid out in Article III of the Labor Code and in Rule VIII, Sec. II, Book III of
the Omnibus Rules Implementing the Labor Code, 27 to wit:
Art. III. Attorney's fees. (a) in cases of unlawful withholding of wages the
culpable party may be assessed attorney's fees equivalent to ten percent of
the amount wages recovered.
xxx xxx xxx

Sec. 11, Attorney's fees Attorney's fees in any judicial or administrative
proceedings for the recovery of wages shall not exceed 10% of the amount
awarded. The fees may be deducted from the total amount due the winning
party.
WHEREFORE, finding no merit in the petitions, the same are hereby DENIED and
the Resolutions of public respondent NLRC promulgated on November 23, 1993 and
February 28, 1994 are hereby AFFIRMED.
SO ORDERED.
FIRST DIVISION
G.R. No. 72616-17 March 8, 1989
FRAMANLIS FARMS, INC., ELOISA SYCIP and LINCOLN SYCIP, petitioners
vs.
HON. MINISTER OF LABOR, MANILA, PAFLU SEPTEMBER CONVENTION,
ZOILO ESTANISLAO, EMILIO ANITO, JAIME ARNEJO, CASIMIRO ARRABIS,
RENATO BACONADOR ,VICENTE BACONADOR, ROMEO BACONADOR,
ROGELIO BAYONITA ,RODOLFO BAYONITA, ROGELIO BONDOCIO, NAPOLEON
BONDOCIO, TEODORO BLANCAFLOR, PANFILO BROOLA, ALFREDO
DICHOSA, EDGARDO ENOPOSA, WILSON ENOPOSA, SANCHO GALAGATE,
GERARDO GALAGATE, NELITO GALLEGO, FRANCISCO INDORES, EDUARDO
LOZADA, JESUS LABRADOR, PANFILO LAORENTE, ROGELIO MITRA,
FERNANDO MATTE, EDUARDO MARONE, ROSELLER MARONE, IGLESERIO
PANOGOT ,SILVERIO PANOGOT, ARTURO PANOGOT ,ARMANDO SAGAYA
ERNESTO TAGAMTAM, ROMEO GARCIA, TEODORICO ATANGAN, LOURDES
DE LA CRUZ, CLARITA DELORIA ,DANILO MENDOZA, WILLIAM GONZALES,
RAFAEL PADRANES, JUAN PADRANES, JUAN PANOGOT, MAGDALENA
PANOGOT, JOSE SAGAYA, PABLO TUNDAG, VIVENCIO NABAY, RAFAEL
MARONE, RODOLFO ENOPOSA, BALODOY ACADEMIA and GERARDO
GALLEGO, respondents.
the milling season, to do piece-work on the farms, hence, they were not entitled to the
benefits claimed by them. They also alleged that under the decrees, the living
allowance shall be paid on a monthly, not percentage, basis depending on the total
assets or authorized capital stock of the employer, whichever is higher and
applicable. They admitted that their total assets and authorized capital stock
exceeded P2 million. However, in 1977 they had applied for exemption under PDs
525 and 1123 but no ruling has been issued by the Ministry of Labor on their
application.
The claims for holiday pay, service incentive leave pay, social amelioration bonus and
underpayment of minimum wage were not controverted. With respect to the
complainants' other claims, the petitioners submitted only random payrolls which
showed that the women workers were underpaid as they were receiving an average
daily wage of P5.94 only, although the male workers received P10 more or less, per
day.
In an Order November 10, 1980, the Minister of Labor, through Assistant Regional
Director Dante Ardivilia adopting the recommendations of the Chief of the Labor
Regulation Section, Bacolod District Office, directed the respondents (now
petitioners) to pay the following:
1. Deficiency payment of P2.00 per day to female workers under
PD 925 ** from May 1, 1976 to April 30, 1979;
Rodolfo B. Garbanzos, Jr. for petitioners.

The Solicitor General for public respondent.
2. Deficiency payment of P3.00 per day to female workers and Pl

-00 per day to male workers, under PD 1614 from April 1, 1979 to
August 17, 1980;
GRIO-AQUINO, J.:
3. Deficiency payment of P5.50 per day to female workers and

P3.50 to male workers under Ministry Order No. 5 effective at the
start of grinding (sic) for the crop year 1979-80;
In April 1980, eighteen (18) employees of the petitioners filed against their employer,
and the other petitioners two labor standard cases which were docketed in the
Regional Office of the Ministry of Labor in Bacolod City as FAD Cases Nos. 179180
and 0792-80 ("PAFLU SEPTEMBER CONVENTION VS. FRAMANLIS FARMS"),
alleging that in 1977 to 1979 they were not paid emergency cost of living allowance
(ECOLA) minimum wage, 13th month pay, holiday pay, and service incentive leave
pay.
In their answer to the amended complaint, petitioners alleged that the private
respondents were not regular workers on their hacienda but were migratory (sacadas)
or pakyaw workers who worked on-and-off and were hired seasonally, or only during
4. Effective August 18, 1980, P6.50 per day to female workers and
P4.50 to male workers up to the date of restitution;
5. Deficiency payment of emergency living allowance at P60 per
month under PD 1678 and another P60 per month under Ministry
Order No. 5;
6. Service incentive leave pay, holiday pay and social amelioration
bonus for 3 years for 1977 to 1979;
7. The claims for 13th month pay for 1977 and emergency living
allowance under PD 1123 and 525 are held in abeyance due to the
application for exemption which is unacted up to the present.
3. in not precisely stating who among the private respondents are

pakyaw and non-pakyaw workers.
The petition is not impressed with merit.
Compliance must be made within ten (10) days from receipt of the
Order." (p. 34, Rollo.)
Upon the petitioners' appeal of that Order, the Deputy Minister of Labor Vicente
Leogardo, Jr. modified it on January 18, 1983 by ordering the employer to pay:
1. all non-pakyaw workers their claim for holiday and incentive
leave pay for the years 1977, 1978 and 1979;
2. all complainants their 13th month pay for the years 1978 and
1979;
In 1976, PD No. 928 fixed a minimum wage of P7.00 for agricultural workers in any
plantation or agricultural enterprise irrespective of whether or not the worker was paid
on a piece-rate basis. However, effective July 1, 1978, the minimum wage was
increased to P8.00 (Sec. 1, PD 1389). Subsequently, PD 1614 provided for a P2.00
increase in the daily wage of all workers effective April 1, 1979. The petitioners admit
that those were the minimum rates prevailing then. Therefore, the respondent
Minister did not err in requiring the petitioners to pay wage differentials to their
pakyaw workers who worked for at least eight hours daily and earned less than P8.00
per day in 1978 to 1979.
3. all 'pakyaw' workers for the same period on days they worked for
at least eight (8) hours and earned below P8.06 daily, their pay
differentials.
With regard to the 13th month pay, petitioners admitted that they failed to pay their
workers 13th month pay in 1978 and 1979. However, they argued that they
substantially complied with the law by giving their workers a yearly bonus and other
non-monetary benefits amounting to not less than 1/12th of their basic salary, in the
form of:
The claims for 13th month pay for 1977, as well as for ECOLA
under PD Nos. 525 and 1123 shall, pending outcome of
respondent's application for exemption therefrom, be held in
abeyance." (Annex H, p. 55, Rollo.)
1. a weekly subsidy of choice pork meat for only P9.00 per kilo and
later increased to P11 per kilo in March 1980, instead of the market
price of P10 to P15 per kilo;
2. free choice pork meat in May and December of every year; and
The Deputy Minister clarified that pakyaw workers were excluded from holiday and
service incentive leave pay (p. 54, Rollo).
3. free light or electricity.
Upon the denial of its motion for reconsideration, Framanlis Farms, Inc. filed this
petition for certiorari alleging that the Deputy Minister erred:
1. in awarding pay differentials, holiday and service incentive leave
for pakyaw workers who are not regular employees but are merely
paid on piece-rate, contrary to Art. 82 of the Labor Code;
2. in requiring the petitioners to pay 13th month pay despite the fact
that they (petitioners) had substantially complied with the
requirement by extending yearly bonuses and other benefits in kind
and in cash to the complainants, pursuant to Section 3(c) of PD 851
which exempts the employer from paying 13th month pay when its
equivalent has already been given; and
4. all of which were allegedly "the equivalent" of the 13th month

pay.
Unfortunately, under Section 3 of PD No. 851, such benefits in the form of food or free
electricity, assuming they were given, were not a proper substitute for the 13th month
pay required by law. PD 851 provides:
Section 3. Employees covered The Decree shall apply to all
employees except to:
x x x. x x x x x x
The term 'its equivalent' as used in paragraph (c) hereof shall
include Christmas bonus, mid-year bonus, profit-sharing payments
and other cash bonuses amounting to not less than 1/12 of the
basic salary but shall not include cash and stock dividends, cost of
living allowances and all other allowances regularly enjoyed by the
employee, as well as non-monetary benefits.
Where an employer pays less than 1/12 of the employee's basic
salary, the employer shall pay the difference."
Neither may year-end rewards for loyalty and service be considered in lieu of 13th
month pay. Section 10 of the Rules and Regulations Implementing Presidential
Decree No. 851 provides:
Section 10. Prohibition against reduction or elimination of benefitsNothing herein shall be construed to authorize any employer to
eliminate, or diminish in any way, supplements, or other employee
benefits or favorable practice being enjoyed by the employee at the
time of promulgation of this issuance."
The failure of the Minister's decision to identify the pakyaw and non-pakyaw workers
does not render said decision invalid. The workers may be identified or determined in
the proceedings for execution of the judgment.
WHEREFORE, the petition for certiorari is dismissed with costs against the
petitioners.
SO ORDERED.
FIRST DIVISION
G.R. No. L-49774 February 24, 1981
SAN MIGUEL CORPORATION (CAGAYAN COCA-COLA PLANT), petitioner,
vs.
Hon. AMADO G. INCIONG, Deputy Minister of Labor and CAGAYAN COCACOLA FREE WORKERS UNION,respondents.
DE CASTRO, J.:
Petition for certiorari and prohibition, with preliminary injunction to review the
Order 1 dated December 19, 1978 rendered by the Deputy Minister of Labor in STF
ROX Case No. 009-77 docketed as "Cagayan Coca-Cola Free Workers Union vs.
Cagayan Coca-Cola Plant, San Miguel Corporation, " which denied herein petitioner's
motion for reconsideration and ordered the immediate execution of a prior
Order 2 dated June 7, 1978.
On January 3, 1977, Cagayan Coca-Cola Free Workers Union, private respondent
herein, filed a complaint against San Miguel Corporation (Cagayan Coca-Cola Plant),
petitioner herein, alleging failure or refusal of the latter to include in the computation
of 13th- month pay such items as sick, vacation or maternity leaves, premium for
work done on rest days and special holidays, including pay for regular holidays and
night differentials.
An Order 3 dated February 15, 1977 was issued by Regional Office No. X where the
complaint was filed requiring herein petitioner San Miguel Corporation (Cagayan
Coca-Cola Plant) "to pay the difference of whatever earnings and the amount actually
received as 13th month pay excluding overtime premium and emergency cost of
living allowance. "
Herein petitioner appealed from that Order to the Minister of Labor in whose behalf
the Deputy Minister of Labor Amado G. Inciong issued an Order 4 dated June 7, 1978
affirming the Order of Regional Office No. X and dismissing the appeal for lack of
merit. Petitioner's motion for reconsideration having been denied, it filed the instant
petition.
On February 14, 1979, this Court issued a Temporary Restraining Order 5 enjoining
respondents from enforcing the Order dated December 19, 1978.
The crux of the present controversy is whether or not in the computation of the 13thmonth pay under Presidential Decree 851, payments for sick, vacation or maternity
leaves, premium for work done on rest days and special holidays, including pay for
regular holidays and night differentials should be considered.
Public respondent's consistent stand on the matter since the effectivity of Presidential
Decree 851 is that "payments for sick leave, vacation leave, and maternity benefits,
as well as salaries paid to employees for work performed on rest days, special and
regular holidays are included in the computation of the 13th-month pay. 6 On its part,
private respondent cited innumerable past rulings, opinions and decisions rendered
by then Acting Labor Secretary Amado G. Inciong to the effect that, "in computing the
mandatory bonus, the basis is the total gross basic salary paid by the employer
during the calendar year. Such gross basic salary includes: (1) regular salary or
wage; (2) payments for sick, vacation and maternity leaves; (3) premium for work
performed on rest days or holidays: (4) holiday pay for worked or unworked regular
holiday; and (5) emergency allowance if given in the form of a wage adjustment." 7
Petitioner, on the other hand, assails as erroneous the aforesaid order, ruling and
opinions, vigorously contends that Presidential Decree 851 speaks only of basic
salary as basis for the determination of the 13th-month pay; submits that payments
for sick, vacation, or maternity leaves, night differential pay, as well as premium paid
for work performed on rest days, special and regular holidays do not form part of the
basic salary; and concludes that the inclusion of those payments in the computation
of the 13th-month pay is clearly not sanctioned by Presidential Decree 851.
The Court finds petitioner's contention meritorious.
The provision in dispute is Section 1 of Presidential Decree 851 and provides:
All employers are hereby required to pay all their employees
receiving a basic salary of not more than Pl,000 a month,
regardless of the nature of the employment, a 13th-month pay not
later than December 24 of every year.
Section 2 of the Rules and Regulations for the implementation of Presidential Decree
851 provides:
a) Thirteenth-month pay shall mean one twelfth (1/12) of the basic
salary of an employee within a calendar year
b) Basic salary shall include all remunerations on 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.
Under Presidential Decree 851 and its implementing rules, the basic salary of an
employee is used as the basis in the determination of his 13th-month pay. Any
compensations or remunerations which are deemed not part of the basic pay is
excluded as basis in the computation of the mandatory bonus.
Under the Rules and Regulations Implementing Presidential Decree 851, the
following compensations are deemed not part of the basic salary:
a) Cost-of-living allowances granted pursuant to Presidential
Decree 525 and Letter of Instructions No. 174;
b) Profit sharing payments;
c) All allowances and monetary benefits which are not considered
or integrated as part of the regular basic salary of tile employee at
the time of the promulgation of the Decree on December 16, 1975.
Under a later set of Supplementary Rules and Regulations Implementing Presidential
Decree 851 issued by the then Labor Secretary Blas Ople, overtime pay, earnings
and other remunerations are excluded as part of the basic salary and in the
computation of the 13th-month pay.
The exclusion of cost-of-living allowances under Presidential Decree 525 and Letter
of Instructions No. 174, and profit sharing payments indicate the intention to strip
basic salary of other payments which are properly considered as "fringe" benefits.
Likewise, the catch-all exclusionary phrase "all allowances and monetary benefits
which are not considered or integrated as part of the basic salary" shows also the
intention to strip basic salary of any and all additions which may be in the form of
allowances or "fringe" benefits.
Moreover, the Supplementary Rules and Regulations Implementing Presidential
Decree 851 is even more emphatic in declaring that earnings and other
remunerations which are not part of the basic salary shall not be included in the
computation of the 13th-month pay.
While doubt may have been created by the prior Rules and Regulations Implementing
Presidential Decree 851 which defines basic salary to include all remunerations or
earnings paid by an employer to an employee, this cloud is dissipated in the later and
more controlling Supplementary Rules and Regulations which categorically, exclude
from the definition of basic salary earnings and other remunerations paid by employer
to an employee. A cursory perusal of the two sets of Rules indicates that what has
hitherto been the subject of a broad inclusion is now a subject of broad exclusion. The
Supplementary rules and Regulations cure the seeming tendency of the former rules
to include all remunerations and earnings within the definition of basic salary.
The all-embracing phrase "earnings and other renumeration" which are deemed not
part of the basic salary includes within its meaning payments for sick, vacation, or
maternity leaves. Maternity premium for works performed on rest days and special
holidays pays for regular holidays and night differentials. As such they are deemed
not part of the basic salary and shall not be considered in the computation of the
13th-month they, were not so excluded, it is hard to find any "earnings and other
remunerations" expressly excluded in the computation of the 13th-month pay. Then
the exclusionary provision would prove to be Idle and with no purpose.
This conclusion finds strong support under the Labor Code of the Philippines. To cite
a few provisions:
Art. 87. overtime work. Work may be performed beyond eight
hours a day provided what the employee is paid for the overtime
work, additional compensation equivalent to his regular wage plus
at least twenty-five (25%) percent thereof.
It is clear that overtime pay is an additional compensation other than and added to the
regular wage or basic salary, for reason of which such is categorically excluded from
the definition of basic salary under the Supplementary Rules and Regulations
Implementing Presidential Decree 851.
In Article 93 of the same Code, paragraph
c) work performed on any special holiday shall be paid an
additional compensation of at least thirty percent (30%) of the
regular wage of the employee.
It is likewise clear that prernium for special holiday which is at least 30% of the
regular wage is an additional compensation other than and added to the regular wage
or basic salary. For similar reason it shall not be considered in the computation of the
13th- month pay.
WHEREFORE, the Orders of the Deputy Labor Minister dated June 7, 1978 and
December 19, 1978 are hereby set aside and a new one entered as above indicated.
The Temporary Restraining Order issued by this Court on February 14, 1979 is
hereby made permanent. No pronouncement as to costs.
SO ORDERED.
EN BANC
G.R. No. 110068 February 15, 1995

PHILIPPINE
DUPLICATORS,
INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and PHILIPPINE DUPLICATORS
EMPLOYEES UNION-TUPAS,respondents.
RESOLUTION
FELICIANO, J.:
On 11 November 1993, this Court, through its Third Division, rendered a decision
dismissing the Petition forCertiorari filed by petitioner Philippine Duplicators, Inc.
(Duplicators) in G.R. No. 110068. The Court upheld the decision of public respondent
National Labor Relations Commission (NLRC), which affirmed the order of Labor
Arbiter Felipe T. Garduque II directing petitioner to pay 13th month pay to private
respondent employees computed on the basis of their fixed wages plus sales
commissions. The Third Division also denied with finality on 15 December 1993 the
Motion for Reconsideration filed (on 12 December 1993) by petitioner.
On 17 January 1994, petitioner Duplicators filed (a) a Motion for Leave to Admit
Second Motion for Reconsideration and (b) a Second Motion for Reconsideration.
This time, petitioner invoked the decision handed down by this Court, through its
Second Division, on 10 December 1993 in the two (2) consolidated cases of BoieTakeda Chemicals, Inc. vs. Hon. Dionisio de la Serna and Philippine Fuji Xerox
Corp. vs. Hon. Cresenciano B.Trajano, in G.R. Nos. 92174 and 102552, respectively.
In its decision, the Second Division inter alia declared null and void the second
paragraph of Section 5 (a) 1 of the Revised Guidelines issued by then Secretary of
Labor Drilon. Petitioner submits that the decision in the Duplicators case should now
be considered as having been abandoned or reversed by the Boie-Takeda decision,
considering that the latter went "directly opposite and contrary to" the conclusion
reached in the former. Petitioner prays that the decision rendered in Duplicators be
set aside and another be entered directing the dismissal of the money claims of
private respondent Philippine Duplicators' Employees' Union.
In view of the nature of the issues raised, the Third Division of this Court referred the
petitioner's Second Motion for Reconsideration, and its Motion for Leave to Admit the
Second Motion for Reconsideration, to the Court en banc en consulta. The Court en
banc, after preliminary deliberation, and inorder to settle the condition of the relevant
case law, accepted G.R. No. 110068 as a banc case.
Deliberating upon the arguments contained in petitioner's Second Motion for
Reconsideration, as well as its Motion for Leave to Admit the Second Motion for
Reconsideration, and after review of the doctrines embodied, respectively,
in Duplicators and Boie-Takeda, we consider that these Motions must fail.
The decision rendered in Boie-Takeda cannot serve as a precedent under the
doctrine of stare decisis. The Boie-Takeda decision was promulgated a month after
this Court, (through its Third Division), had rendered the decision in the instant case.
Also, the petitioner's (first) Motion for Reconsideration of the decision dated 10
November 1993 had already been denied, with finality, on 15 December
1993, i.e.; before the Boie-Takeda decision became final on 5 January 1994.
Preliminarily, we note that petitioner Duplicators did not put in issue the validity of the
Revised Guidelines on the Implementary on of the 13th Month Pay Law, issued on
November 16, 1987, by then Labor Secretary Franklin M. Drilon, either in its Petition
for Certiorari or in its (First) Motion for Reconsideration. In fact, petitioner's counsel
relied upon these Guidelines and asserted their validity in opposing the decision
rendered by public respondent NLRC. Any attempted change in petitioner's theory, at
this late stage of the proceedings, cannot be allowed.
More importantly, we do not agree with petitioner that the decision in Boie-Takeda is
"directly opposite or contrary to" the decision in the present (Philippine Duplicators).
To the contrary, the doctrines enunciated in these two (2) cases in fact co-exist one
with the other. The two (2) cases present quite different factual situations (although
the same word "commissions" was used or invoked) the legal characterizations of
which must accordingly differ.
The Third Division in Durplicators found that:
In the instant case, there is no question that the sales commission
earned by the 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 galary structure was intended for the benefit of the
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
commissions. This, however, does not detract from the character of
such commissions as part of the salary or wage paid to each of its
salesmen for rendering services to petitioner corporation.
In other words, the sales commissions received for every duplicating machine sold
constituted part of the basic compensation or remuneration of the salesmen of
Philippine Duplicators for doing their job. The portion of the salary structure
representing commissions simply comprised an automatic increment to the monetary
value initially assigned to each unit of work rendered by a salesman. Especially
significant here also is the fact that the fixed or guaranteed portion of the wages paid
to the Philippine Duplicators' salesmen represented only 15%-30% of an employee's
total earnings in a year. We note the following facts on record:
Salesmen's
Total
For the Year 1986 2
Earnings
and
13th
Month
Name
of
Total
Amount
Paid
Montly
Salesman Earnings as 13th Month Pay Wages x 12 3
Baylon,
Benedicto
Bautista
Salvador
Brito,
Tomas
Bunagan,
Jorge
Canilan,
Rogelio
Dasig,
Jeordan
Centeno,
Melecio, Jr.
Pay
Fixed
P76,610.30
P1,350.00
P16,200.00
90,780.85
1,182.00
14,184.00
64,382.75
89,287.75
74,678.17
54,625.16
51,854.15
1,238.00
14,856.00
1,266.00
15,192.00
1,350.00
16,200.00
1,378,00
16,536.00
1,266.04
15,192.00
De
los
Ricardo
Santos
del
Mundo,
Wilfredo
Garcia,
Delfin
73,551.39
1,322.00
108,230.35
93,753.75
1,406.00
15,864.00
16,872.00
1,294.00
15,528.00
Navarro,
Ma. Teresa
98,618.71
1,266.00
15,192.00
Ochosa,
Rolano
66,275.65
1,406.00
16,872.00
Quisumbing,
Teofilo
101,065.75
1,406.00
16,872.00
Rubina,
Emma
42,209.73
1,266.00
15,192.00
Salazar,
Celso
64,643.65
1,238.00
14,856.00
Sopelario,
Ludivico
Tan,
Leynard
Talampas,
Pedro
Villarin,
Constancio
52,622.27
30,127.50
1,238.00
146,510.25
41,888.10
Carrasco,
Cicero
Punzalan,
Reynaldo
1,350.00
1,434.00
1,434.00
50,201.20
24,351.89
1,266.00
16,200.00
14,856.00
17,208.00
17,208.00
403.75*
15,192.00
Poblador,
Alberto
Cruz,
Danilo
Baltazar,
Carlito
25,516.75
32,950.45
15,681.35
323.00*
323.00*
323.00*
Considering the above circumstances, the Third Division held, correctly, that the sales
commissions were an integral part of the basic salary structure of Philippine
Duplicators' employees salesmen. These commissions are not overtime
payments, nor profit-sharing payments nor any other fringe benefit. Thus, the
salesmen's commissions, comprising a pre-determined percent of the selling price of
the goods sold by each salesman, were properly included in the term "basic salary"
for purposes of computing their 13th month pay.
In Boie-Takeda the so-called commissions "paid to or received by medical
representatives of Boie-Takeda Chemicals or by the rank and file employees of
Philippine Fuji Xerox Co.," were excluded from the term "basic salary" because these
were paid to the medical representatives and rank-and-file employees as "productivity
bonuses." 4 The Second Division characterized these payments as additional
monetary benefits not properly included in the term "basic salary" in computing their
13th month pay. We note that productivity bonuses are generally tied to the
productivity, or capacity for revenue production, of a corporation; such bonuses
closely resemble profit-sharing payments and have no clear director necessary
relation to the amount of work actually done by each individual employee. More
generally, a bonus is an amount granted and paid ex gratia to the employee; its
payment constitutes an act of enlightened generosity and self-interest on the part of
the employer, rather than as a demandable or enforceable obligation. In Philippine
Education Co. Inc. (PECO) v. Court of Industrial Relations, 5 the Court explained the
nature of a bonus in the following general terms:
As a rule a bonus is an amount granted and paid to an employee
for his industry loyalty which contributed to the success of the
employer's business and made possible the realization of profits. It
is an act of generosity of the employer for which the employee
ought to be thankful and grateful. It is also granted by an
enlightened employer to spur the employee to greater efforts for
the success of the business and realization of bigger profits. . . . .
From the legal point of view a bonus is not and mandable and
enforceable obligation. It is so when It is made part of the wage or
salary or compensation. In such a case the latter would be a fixed
amount and the former would be a contingent one dependent upon

the realization of profits. . . . 6 (Emphasis supplied)
In Atok-Big Wedge Mining Co.,
Association, 7 the Court amplified:
Inc. v. Atok-Big
Wedge
Mutual
Benefit
. . . . Whether or not [a] bonus forms part of waqes depends upon

the circumstances or conditions for its payment. If it is an additional
compensation which the employer promised and agreed to give
without any conditions imposed for its payment, such as success of
business or greater production or output, then it is part of the
wage. But if it is paid only if profits are realized or a certain amount
of productivity achieved, it cannot be considered part of wages. . . .
It is also paid on the basis of actual or actual work accomplished. If
the desired goal of production is not obtained, or the amount of
actual
work
accomplished,
the
bonus
does
not
accrue. . . . 8 (Emphasis supplied)
More recently, the non-demandable character of a bonus was stressed by the Court
in Traders Royal Bank v.National Labor Relations Commission: 9
A bonus is a "gratuity or act of liberality of the giver which the
recipient has no right to demand as a matter of right." (Aragon v.
Cebu Portland Cement Co., 61 O.G. 4567). "It is something given
in addition to what is ordinarily received by or strictly due the
recipient." The granting of a bonus is basically a management
prerogative which cannot be forced upon the employer "who may
not be obliged to assume the onerous burden of granting bonuses
or other benefits aside from the employee's basic salaries or wages
. . ." (Kamaya Point Hotel v. NLRC, 177 SCRA 160
[1989]). 10(Emphasis supplied)
If an employer cannot be compelled to pay a productivity bonus to his employees, it
should follow that such productivity bonus, when given, should not be deemed to fall
within the "basic salary" of employees when the time comes to compute their 13th
month pay.
It is also important to note that the purported "commissions" paid by the Boie-Takeda
Company to its medical representatives could not have been "sales commissions" in
the same sense that Philippine Duplicators paid its salesmen Sales commissions.
Medical representatives are not salesmen; they do not effect any sale of any article at
all. In common commercial practice, in the Philippines and elsewhere, of which we
take judicial notice, medical representatives are employees engaged in the promotion
of pharmaceutical products or medical devices manufactured by their employer. They
promote such products by visiting identified physicians and inform much physicians,
orally and with the aid of printed brochures, of the existence and chemical
composition and virtues of particular products of their company. They commonly
leave medical samples with each physician visited; but those samples are not "sold"
to the physician and the physician is, as a matter of professional ethics, prohibited
from selling such samples to their patients. Thus, the additional payments made to
Boie-Takeda's medical representatives were not in fact sales commissions but rather
partook of the nature of profit-sharing bonuses.
The doctrine set out in the decision of the Second Division is, accordingly, that
additional payments made to employees, to the extent they partake of the nature of
profit-sharing payments, are properly excluded from the ambit of the term "basic
salary" for purposes of computing the 13th month pay due to employees. Such
additional payments are not "commissions" within the meaning of the second
paragraph of Section 5 (a) of the Revised Guidelines Implementing 13th Month Pay.
The Supplementary Rules and Regulations Implementing P.D. No. 851 subsequently
issued by former Labor Minister Ople sought to clarify the scope of items excluded in
the computation of the 13th month pay; viz.:
Commissions are paid upon the specific results achieved by a salesman-employee. It

is a percentage of the sales closed by a salesman and operates as an integral part of
such salesman's basic pay.
Finally, the statement of the Second Division in Boie-Takeda declaring null and void
the second paragraph of Section 5(a) of the Revised Guidelines Implementing the
13th Month Pay issued by former Labor Secretary Drilon, is properly understood as
holding that that second paragraph provides no legal basis for including within the
term "commission" there used additional payments to employees which are, as a
matter of fact, in the nature of profit-sharing payments or bonuses. If and to the extent
that such second paragraph is so interpreted and applied, it must be regarded as
invalid as having been issued in excess of the statutory authority of the Secretary of
Labor. That same second paragraph however, correctly recognizes that commissions,
like those paid inDuplicators, may constitute part of the basic salary structure of
salesmen and hence should be included in determining the 13th month pay; to this
extent, the second paragraph is and remains valid.
ACCORDINGLY, the Motions for (a) Leave to File a Second Motion for
Reconsideration and the (b) aforesaid Second Reconsideration are DENIED for lack
of merit. No further pleadings will be entertained.
Sec. 4. Overtime pay, earnings and other remunerations which are

not part of the basic salary shall not be included in the computation
of the 13th month pay.
We observe that the third item excluded from the term "basic salary" is cast in open
ended and apparently circular terms: "other remunerations which are not part of the
basic salary." However, what particular types of earnings and remuneration are or are
not properly included or integrated in the basic salary are questions to be resolved on
a case to case basis, in the light of the specific and detailed facts of each case. In
principle, where these earnings and remuneration are closely akin to fringe benefits,
overtime pay or profit-sharing payments, they are properly excluded in computing the
13th month pay. However, sales commissions which are effectively an integral portion
of the basic salary structure of an employee, shall be included in determining his 13th
month pay.
We recognize that both productivity bonuses and sales commissions may have an
incentive effect. But there is reason to distinguish one from the other here.
Productivity bonuses are generally tied to the productivity or profit generation of the
employer corporation. Productivity bonuses are not directly dependent on the extent
an individual employee exerts himself. A productivity bonus is something extra for
which no specific additional services are rendered by any particular employee and
hence not legally demandable, absent a contractual undertaking to pay it. Sales
commissions, on the other hand, such as those paid in Duplicators, are intimately
related to or directly proportional to the extent or energy of an employee's endeavors.
THIRD DIVISION
should, instead, be made on the basis of a full one month basic salary. The
corporation countered that its own computation of the 13th month pay accorded with
the CBA provisions and Presidential Decree No. 851.
G.R. No. 100167 March 2, 1995
On 05 January 1988, the union filed a notice of strike with the Department of Labor
and Employment, Region X, Cagayan de Oro, alleging the commission of unfair labor
practice and CBA violation by the corporation. After several conferences, the National
Conciliation and Mediation Board ("NCMB") succeeded in having the dispute
amicably settled except for the 13th month pay differential which remained in
contention. The union insisted that the failure of the corporation to implement fully the
13th month pay provision of the CBA amounted to unfair labor practice. The
corporation argued that the 13th month pay was a mere money claim and therefore
not a "strikeable issue." The case was ultimately indorsed to the NLRC for
compulsory arbitration.
ISALAMA
MACHINE
WORKS
CORPORATION, petitioner,
vs.
HON. LABOR RELATIONS COMMISSION, FIFTH DIVISION and ISALAMA
MACHINE WORKS CORPORATION LABOR UNION-WORKERS ALLIANCE
TRADE UNION AND/OR HENRY BAYGAN, NATHAN PURACAN, GREGORIO
LAYSON, JR., NANDY VIRTUDAZO, JIMMY SACRO, CHARITO ESTRERA,
DENISON AMBOAYEN, BIENVENIDO CABIL, MELCHOR MARTINEZ, FLORIDAN
BILAR, NOEL LAYSON, EDISON ALMORADES, MA. CELESTINA CLEMEN,
LEONCIO CUIZON, VENNIE OPORTO, RODOLFO IGNACIO and ALMIRANTE
ZAGADO, respondents.
VITUG, J.:
This petition for certiorari assails the Decision, 1 dated 09 June 1989, of the National
Labor Relations Commission ("NLRC"), Fifth Division, Cagayan de Oro City, ordering
the reinstatement, without back salaries, of private respondents, with the exception of
Henry Baygan, and the Resolution 2 of 30 April 1991 of the same division denying the
motion for reconsideration and, consistent with the decision, requiring petitioner
corporation to pay private respondents, in case the latter have not been reinstated
actually or by payroll, back salaries, without qualification or deductions, from 25 July
1989 until their reinstatement (RABX Case No. 10-02-00107-88).
On 25 March 1987, petitioner Isalama Machine Works Corporation and private
respondent Isalama Machine Works Corporation Labor Union-Workers Alliance Trade
Union entered into a collective bargaining agreement ("CBA") covering the period
from 01 November 1986 to 03 October 1989. Following the signing of the CBA, the
union made repeated demands on the corporation, allegedly to no avail, for it to
comply with the CBA provisions,i.e., to furnish the workers with safety shoes and free
company laminated IDs and, in general, to improve the employees' working
conditions.
On 21 December 1987, the corporation paid the workers the 13th month pay based
on the average number of days actually worked during the year. The union, through
its president, private respondent Henry Baygan, demanded that the 13th month pay
The above notwithstanding, the union still went on strike on 15 February 1988. The
wide publicity accorded the strike, according to petitioner, had caused a dearth of
work orders and withdrawal of existing job orders that forced it to adopt a rotation
system of work. On 22 February 1988, it also filed with the Regional Arbitration
Branch 10 of the NLRC a petition charging the union with conducting an illegal strike
and engaging in an unfair labor practice (RABX Case No. 10-02-00107-88).
On 16 May 1988, the Executive Labor Arbiter rendered a decision holding the strike to
be illegal and declaring Baygan and the "participating" union members 3 to have
thereby lost their employment status. The dismissed employees appealed the
decision of the Executive Labor Arbiter to the NLRC which, on 09 June 1989,
promulgated its herein questioned decision ordering, except for Baygan, the
reinstatement, without back salaries, of the dismissed union members.
The corporation filed a motion for reconsideration of the NLRC decision. On 30 April
1991, the NLRC resolved said motion thusly:
ACCORDINGLY, the Motion for Reconsideration is DENIED for lack
of merit. No further motion for reconsideration shall henceforth be
entertained.
Consistent with the disposition in the challenged resolution of June
9, 1989, the immediate reinstatement without backwages of the 16
afore-named respondents to their former positions sans loss of
seniority rights is hereby ordered. The cut-off date for the
forbearance in the payment of backwages is up to July 24, 1989
which on record is the date of receipt of said disputed Resolution.
Henceforth, in the event the afore-named respondents have not
been reinstated actually or by payroll, appellee is directed to pay

backwages without qualifications or deductions from July 25, 1989
until they are reinstated.
Parenthetically, the CBA likewise specifies that the company "agrees to grant
one (1) month basic salary to all employees-workers as Christmas bonus" in
compliance with Presidential Decree No. 851 but that a violation thereof will
not constitute an unfair labor practice by an employer.
SO ORDERED. 4
Article 248 of the Labor Code, in turn, provides:
On 23 May 1991, the union filed with the NLRC a motion for execution of the
judgment, asserting additionally that the corporation was operating under the new
trade name, "Golden Engineering," owned and managed by the same family, of which
change neither the employees nor the NLRC had been formally notified.
Art. 248. Unfair labor practices of employers. It shall be unlawful

for an employer to commit any of the following unfair labor practice:
xxx xxx xxx
On 03 June 1991, before the motion for execution could be acted upon by the NLRC,
the corporation filed the instant petition. The Court issued, on 01 July 1991, a
temporary restraining order enjoining respondent NLRC from implementing its 09
June 1989 decision and 30 April 1991 resolution.
Petitioner submits that private respondents cannot claim good faith in staging their
strike since the attention of both parties had been called by the conciliator at the
hearings before the NCMB to the "non-strikeable" character of the 13th month pay.
Private respondents continue to claim, however, that the questioned 13th month pay
should be considered a "strikeable issue." They have averred that the illegal work
rotation scheme employed by petitioner has pushed them to the honest belief that the
latter has, once again, perpetrated an unfair labor practice.
Section 3 of the "Omnibus Rules and Regulations Implementing Presidential Decree
No. 851" generally states that all employees (subject to its exclusionary clauses) shall
be entitled to the 13th month pay. Its Section 4 provides that employees "who are
receiving not more than P1,000.00 a month" shall enjoy the 13th month pay
"regardless of their position, designation or employment status, and irrespective of
the method by which their wages are paid, provided that they have worked for at least
one month during the calendar year." If an employee has worked for an employer for
less than a year, he may still be entitled to the full 13th month pay provided his
monthly wage is P1,000.00 or less and he has worked for the employer for at least
one month.
The CBA contains, among other things, a "no strike" clause; thus
During the term of this Agreement, the Company stipulates and
agrees that there shall be no lockouts, and the Union in turn, as
well as its officers and agents, stipulate and agree that there shall
be no strike or will they authorize, instigate or engage in any work
stoppage slowdown or any other form of interruption of work by the
employees and laborers that may hamper or impede the operations
of the business of the Company. 5
(i) To violate a collective bargaining agreement.

The above provision, however, must be read together with Article 261 of the Labor
Code; viz.:
Art. 261. Jurisdiction of Voluntary Arbitrators or panel of Voluntary
Arbitrators. The Voluntary Arbitrator or panel of Voluntary
Arbitrators shall have original and exclusive jurisdiction to hear and
decide all unresolved grievances arising from the interpretation or
implementation of the Collective Bargaining Agreement and those
arising from the interpretation or enforcement of company
personnel policies referred to in the immediately preceding
article. Accordingly, violations of a Collective Bargaining
Agreement, except those which are gross in character, shall no
longer be treated as unfair labor practice and shall be resolved as
grievances under the Collective Bargaining Agreement. For
purposes of this article, gross violations of Collective Bargaining
Agreement shall mean flagrant and/or malicious refusal to comply
with the other economic provisions of such agreement. (Emphasis
supplied.)
Hence, Section 1, Rule XIII, Book V, of the Omnibus Rules Implementing the
Labor Code expresses:
Sec. 1. Grounds for strike and lockout. A strike or lockout may be
declared in cases of bargaining deadlocks and unfair labor
practices. Violations of collective bargaining agreements, except
flagrant and/or malicious refusal to comply with its economic
provisions, shall not be considered unfair labor practice and shall
not be strikeable. . . .
In this case, the real reason for the strike is clearly traceable to the unresolved
dispute between the parties on 13th month pay differentials under Presidential
Decree No. 851, i.e., the proper manner of its application and computation. The Court
does not see this issue, given the aforequoted provisions of the law and its
implementing rules, to be constitutive of unfair labor practice. Section 9 of Rules and
Regulations Implementing Presidential Decree No. 851, in fact, specifically states that
"(n)onpayment of the thirteenth-month pay provided by the Decree and (the) rules
shall be treated as money claims cases and shall be processed in accordance with
the Rules Implementing the Labor Code of the Philippines and the Rules of the
National Labor Relations Commission."
Private respondents, indeed, showed little prudence, if at all, in their precipitate and
ill-considered strike. The NLRC likewise found private respondents to have violated
Art. 264 (e) 6 of the Labor Code when they blocked and barricaded the entrance of
petitioner's premises preventing free ingress and egress. Unfortunately for petitioner,
however, the identity of those who committed those illegal acts during the strike,
except for Baygan, had not been adequately established. Specifically, the NLRC said
that no sufficient evidence could be found "to pin down the afore-named 16
respondents as having committed illegal acts during the strike," 7 that could warrant a
loss of their employment status. 8The dismissal of Baygan, however, was warranted.
Being the union president and leader of the strike, his liability was greater than that of
mere members, 9 and he had the responsibility to ensure that his followers respected
the law. 10
Petitioner tells us that it can no longer accept the strikers due to its decision to close
down its operations on account of damages and losses it has incurred because of the
strike, and that Golden Engineering, which has taken over the business, is presently
owned by one Alfredo Chan and not Charlie Chan of petitioner corporation.11 This
claim raises factual issues which evidently are still awaiting resolution by the NLRC in
the motion for execution now pending before it. It is there, not here, where these
issues can be finally resolved.
This case arose in 1988 or prior to the effectivity of Republic Act No. 6715;
accordingly, the back salaries of the dismissed employee should be limited to three
years, without deduction or qualification, following the rule inMaranaw Hotels and
Resorts Corporation vs. Court of Appeals. 12
WHEREFORE, the questioned decision and resolution of the NLRC are AFFIRMED
subject to the MODIFICATION that the back salaries ordered to be paid should be
limited, without deduction or qualification, to only three (3) years. No costs.
SO ORDERED.
EN BANC
2. Metropolitan Waterworks and Sewerage System (MWSS)

Katipunan Road, Balara, Quezon City
G.R. No. L-60403 August 3, 1983

ALLIANCE OF GOVERNMENT WORKERS (AGW); PNB-FEMA BANK
EMPLOYEES ASSOCIATION (AGW); KAISAHAN AT KAPATIRAN NG MGA
MANGAGAWA AT KAWANI NG MWSS (AGW); BALARA EMPLOYEES
ASSOCIATION (AGW); GSIS WORKERS ASSOCIATION (AGW); SSS
EMPLOYEES ASSOCIATION (AGW); PVTA EMPLOYEES ASSOCIATION (AGW);
NATIONAL
ALLIANCE
OF
TEACHERS
AND
OFFICE
WORKERS
(AGW);
, petitioners,
vs.
THE HONORABLE MINISTER OF LABOR and EMPLOYMENT, PHILIPPINE
NATIONAL BANK (PNB); METROPOLITAN WATERWORKS and SEWERAGE
SYSTEM (MWSS); GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS);
SOCIAL SECURITY SYSTEM (SSS); PHILIPPINE VIRGINIA TOBACCO
ADMINISTRATION
(PVTA)
PHILIPPINE
NORMAL
COLLEGE
(PNC);
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES (PUP),respondents.
The Solicitor General for MOLE, PNB, SSS, PNC and PUP.
Oliver Gesmundo for petitioners.
Jesus C. Gentiles for petitioner SSSEA-AGW.
3. Government Service Insurance System (GSIS) Arroceros Street,

Manila
4. Social Security System (SSS) East Avenue, Quezon City
5. Philippine Virginia Tobacco Administration (PVTA) Consolacion
Building, Cubao, Quezon City
6. Philippine Normal College (PNC) Ayala Boulevard, Manila
7. Polytechnic University of the Philippines (PUP) Hippodromo
Street, Sta. Mesa, Manila
On February 28, 1983, the Philippine Government Employees Association (PGEA)
filed a motion to come in as an additional petitioner.
Presidential Decree No. 851 provides in its entirety:
WHEREAS, it is necessary to further protect the level of real f
wages from the ravage of world-wide inflation;
WHEREAS, there has been no increase case in the legal minimum
wage rates since 1970;
GUTIERREZ, JR., J.:

Are the branches, agencies, subdivisions, and instrumentalities of the Government,
including government owned or controlled corporations included among the 4
"employers"" under Presidential Decree No. 851 which are required to pay an their
employees receiving a basic salary of not more than P1,000.00 a month, a thirteenth
(13th) month pay not later than December 24 of every year?
Petitioner Alliance of Government Workers (AGW) is a registered labor federation
while the other petitioners are its affiliate unions with members from among the
employees of the following offices, schools, or government owned or controlled
corporations:
1. Philippine National Bank (PNB) Escolta Street, Manila
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.
NOW, THEREFORE, I, FERDINAND E. MARCOS, by virtue of the
powers vested in me by the Constitution do hereby decree as
follows:
SECTION 1. All employers are hereby required to pay all their
employees receiving a basic salary of not more than Pl,000 a
month, regardless of the nature of their employment, a 13th-month
pay not later than December 24 of every year.
SECTION 2. Employers already paying their employees a 13thmonth pay or its equivalent are not covered by this Decree.
SECTION 3. This Decree shall take effect immediately. Done in the

City of Manila, this 16th day of December 1975.
According to the petitioners, P.D. No. 851 requires all employers to pay the 13thmonth pay to their employees with one sole exception found in Section 2 which states
that "(E)mployers already paying their employees a 13th month pay or its equivalent
are not covered by this Decree. " The petitioners contend that Section 3 of the Rules
and Regulations Implementing Presidential Decree No. 851 included other types of
employers not exempted by the decree. They state that nowhere in the decree is the
secretary, now Minister of Labor and Employment, authorized to exempt other types
of employers from the requirement.
Section 3 of the Rules and Regulations Implementing Presidential Decree No. 851
provides:
Section 3. Employers covered The Decree shall apply to all
employers except to:
a) Distressed employers, such as (1) those which are currently
incurring substantial losses or 112) in the case of non-profit
institutions and organizations, where their income, whether from
donations, contributions, grants and other earnings from any
source, has consistently declined by more than forty (40%) per cent
of their normal income for the last two (2) )years, subject to the
provision of Section 7 of this issuance.
b) The Government and any of its political subdivisions, including
government-owned and controlled corporations, except)t those
corporation, operating essentially as private, ,subsidiaries of the
government;
c) Employers already paying their employees 13th-month pay or
more in a calendar year or its equivalent at the of this issuance;
d) Employers of household helpers and persons in the personal
service of another in relation to such workers: and
e) Employers of those who are paid on purely commission,
boundary, or task basis and those who are paid a fixed for
performing a specific work, irrespective of the time consumed in the
performance thereof, except where the workers are paid an piecerate basis in which case the employer shall be covered by this
issuance :insofar ab such workers are concerned ...
The petitioners assail this rule as ultra vires and void. Citing Philippine Apparel
Workers'Union v. NIRC et al., (106 SCRA 444); Teoxon v. Members of the Board of'
Administators (33 SCRA 585); Santos u. Hon. Estenzo et al., (109 Phil. 419); Hilado
u. Collector of Internal Revenue (100 Phil. 288), and Olsen & Co. Inc. v. Aldanese
and Trinidad (43 Phil. 259), the petitioners argue that regulations adopted under
legislative authority must be in harmony with the provisions of the law and for the sole
purpose of carrying into effect its general provisions. They state that a legislative act
cannot be amended by a rule and an administrative officer cannot change the law.
Section 3 is challenged as a substantial modification by rule of a Presidential Decree
and an unlawful exercise of legislative power.
Our initial reaction was to deny due course to the petition in a minute resolution,
however, considering the important issues propounded and the fact, that
constitutional principles are involved, we have now decided to give due course to the
petition, to consider the various comments as answers and to resolve the questions
raised through a full length decision in the exercise of this Court's symbolic function
as an aspect of the power of judicial review.
At the outset, the petitioners are faced with a procedural barrier. The petition is one
for declaratory relief, an action not embraced within the original jurisdiction of the
Supreme Court. (Remotigue v. Osmena,, Jr., 21 SCRA 837; Rural Bank of Olongapo
v. Commission of Land Registration, 102 SCRA 794; De la Llana v. Alba, 112 SCRA
294). There is no statutory or jurisprudential basis for the petitioners' statement that
the Supreme Court has original and exclusive jurisdiction over declaratory relief suits
where only questions of law are involved. Jurisdiction is conferred by law. The
petitioners have not pointed to any provision of the Constitution or statute which
sustains their sweeping assertion. On this ground alone, the petition could have been
dismissed outright.
Following similar action taken in Nacionalista Party v. Angelo Bautista (85 Phil. 101)
and Aquino v. Commission on Elections (62 SCRA 275) we have, however, decided
to treat the petition as one for mandamus. The petition has far reaching implications
and raises questions that should be resolved. Have the respondents unlawfully
excluded the petitioners from the use and enjoyment of rights to which they are
entitled under the law?
An analysis of the "whereases" of P.D. No. 851 shows that the President had in mind
only workers in private employment when he issued the decree. There was no
intention to cover persons working in the government service. The decree states:
xxx xxx xxx
WHEREAS, there has been no increase in the legal minimum wage
rates since 1970;
xxx xxx xxx
Moreover, where employees in the government service were to

benefit from labor standard laws, their coverage is explicitly stated
in the statute or presidential enactment. This is evident in (a)
Presidential Decree No. 390, Sec. 1 which granted emergency cost
of living allowance to employees in the national government; (b)
Republic Act No. 6111, Sec. 10 on medicare benefits; (c)
Presidential Decree No -442, Title II, Article 97 on the applicable
minimum wage rates; (d) Presidential Decree No. 442, Title 11,
Article 167 (g) on workmen's compensation; (e) Presidential Decree
No. 1123 which provides for increases in emergency allowance to
employees in the private sector and in salary to government
employees in Section 2 thereof; and (f) Executive Order No. 752
granting government employees a year-end bonus equivalent to
one week's pay. Thus, had the intention been to include
government employees under the coverage of Presidential Decree
No. 851, said Decree should have expressly so provided and there
should have been accompanying yearly appropriation measures to
implement the same. That no such express provision was provided
and no accompanying appropriation measure to was passed clearly
show the intent to exclude government employees from the
coverage of P. D. No. 85 1.
As pointed out by the Solicitor General in his comment for the Minister of Labor and
Employment, the Social Security System the Philippine Normal College, and
Polytechnic University, the contention that govermment owned and controlled
corporations and state colleges and universities are covered by the term "all
employers" is belied by the nature of the 13- month pay and the intent behind the
decree.
The Solicitor General states:
"Presidential Decree No. 851 is a labor standard law which requires covered
employers to pay their employees receiving not more than P1,000.00 a month an
additional thirteenth-month pay. Its purpose is to increase the real wage of the worker
(Marcopper Mining Corp. v. Ople, 105 SCRA 75; and National Federation of Sugar
Workers v. Ovejera, G.R. No. 59743, May 31, 1982) as explained in
the'whereas'clause which read:
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 rates since 1970; 11
WHEREAS, the Christmas season is an
opportune time for society to show its concern for
the plight of the working masses so they may
celebrate the Christmas and New Year.
We agree.
It is an old rule of statutory construction that restrictive statutes and acts which
impose burdens on the public treasury or which diminish rights and interests, no
matter how broad their terms do not embrace the Sovereign, unless the Sovereign is
specifically mentioned. (See Dollar Savings Bank v. United States, 19 Wall (U.S.) 227;
United States v. United Mine Workers of America, 330 U.S. 265). The Republic of the
Philippines, as sovereign, cannot be covered by a general term like "employer" unless
the language used in the law is clear and specific to that effect.
xxx xxx xxx

What the P.D. No. 851 intended to cover, as explained in the
prefatory statement of the Decree, are only those in the private
sector whose real wages require protection from world-wide
inflation. This is emphasized by the "whereas" clause which states
that 'there has been no increase in the legal minimum wage rates
since 1970'. This could only refer to the private sector, and not to
those in the government service because at the time of the
enactment of Presidential Decree No. 851 in 1975, only the
employees in the private sector had not been given any increase in
their minimum wage. The employees in the government service
had already been granted in 1974 a ten percent across-the-board
increase on their salaries as stated in P.D. No. 525, Section 4.
The issue raised in this petition, however, is more basic and fundamental than a mere
ascertainment of intent or a construction of statutory provisions. It is concerned with a
revisiting of the traditional classification of government employment into governmental
functions and proprietary functions and of the many ramifications that this
dichotomous treatment presents in the handling of concerted activities, collective
bargaining, and strikes by government employees to wrest concessions in
compensation, fringe benefits, hiring and firing, and other terms and conditions of
employment.
The workers in the respondent institutions have not directly petitioned the heads of
their respective offices nor their representatives in the Batasang Pambansa. They
have acted through a labor federation and its affiliated unions. In other words, the
workers and employees of these state firms, college, and university are taking
collective action through a labor federation which uses the bargaining power of
organized labor to secure increased compensation for its members.
lesser laws like the Labor Code and the Civil Service Act can overturn the clear
message of the Constitution with respect to these rights to self-organization and
collective bargaining.
Under the present state of the law and pursuant to the express language of the
Constitution, this resort to concerted activity with the ever present threat of a strike
can no longer be allowed.
These statements of the petitioners are error insofar as government workers are now
concerned.
The general rule in the past and up to the present is that "the terms and conditions of
employment in the Government, including any political subdivision or instrumentality
thereof are governed by law" (Section 11, the Industrial Peace Act, R.A. No. 875, as
amended and Article 277, the Labor Code, P.D. No. 442, as amended). Since the
terms and conditions of government employment are fixed by law, government
workers cannot use the same weapons employed by workers in the private sector to
secure concessions from their employers. The principle behind labor unionism in
private industry is that industrial peace cannot be secured through compulsion by law.
Relations between private employers and their employees rest on an essentially
voluntary basis. Subject to the minimum requirements of wage laws and other labor
and welfare legislation, the terms and conditions of employment in the unionized
private sector are settled through the process of collective bargaining. In government
employment, however, it is the legislature and, where properly given delegated power,
the administrative heads of government which fix the terms and conditions of
employment. And this is effected through statutes or administrative circulars, rules,
and regulations, not through collective bargaining agreements.
At the same time, the old Industrial Peace Act excepted employees and workers in
proprietary functions of government from the above compulsion of law. Thus, in the
past, government employees performing proprietary functions could belong to labor
organizations imposing the obligation to join in strikes or engage in other concerted
action. (Section 11, R.A. 875, as amended). They could and they did engage in
concerted activities and various strikes against government owned and controlled
corporations and other government institutions discharging proprietary functions.
Among the institutions as falling under the exception in Section 11 of the Industrial
Peace Act were respondents Government Service Insurance System (GSISEA v.
Alvendia, 108 Phil. 505) and Social Security System (SSSEA v. Soriano, 7 SCRA
1016). And this Court has supported labor completely in the various strikes and
concerted activities in firms and agencies discharging proprietary functions because
the Constitution and the laws allowed these activities.
The exception, however belongs to the past.
Under the present Constitution, govemment-owned or controlled corporations are

specifically mentioned as embraced by the civil service. (Section 1, Article XII-B,
Constitution). The inclusion of the clause "including every government owned or
controlled corporation" in the 1973 amendments to the Constitution was a deliberate
amendment for an express purpose. There may be those who disagree with the intent
of the framers of the amendment but because it is fundamental law, we are all bound
by it. The amendment was intended to correct the situation where more favored
employees of the government could enjoy the benefits of two worlds. They were
protected by the laws governing government employment. They could also engage in
collective bargaining and join in strikes to secure higher wages and fringe benefits
which equally hardworking employees engaged in government functions could only
envy but not enjoy.
Presidential Decree No. 807, the Civil Service Decree of the Philippines has
implemented the 1973 Constitutional amendment. It is categorical about the inclusion
of personnel of government-owned or controlled corporations in the civil service and
their being subject to civil service requirements:
SECTION 56. Government- owned or Controlled Corporations
Personnel.All permanent personnel of government- owned or
controlled corporations whose positions are now embraced in the
civil service shall continue in the service until they have been given
a chance to qualify in an appropriate examination, but in the
meantime, those who do not possess the appropriate civil service
eligibility shall not be promoted until they qualify in an appropriate
civil service examination. Services of temporary personnel ma be y
terminated any time.
Personnel of government-owned or controlled corporations are now part of the civil
service. It would not be fair to allow them to engage in concerted activities to wring
higher salaries or fringe benefits from Government even as other civil service
personnel such as the hundreds of thousands of public school teachers, soldiers,
policemen, health personnel, and other government workers are denied the right to
engage in similar activities.
The petitioners state in their counter comment filed July 23, 1982 that the 1973
Constitution is categorical about the grant of the rights to self- organization and
collective bargaining to all workers and that no amount of stretched interpretation of
To say that the words "all employers" in P.D. No. 851 includes the Government and all
its agencies, instrumentalities, and government-owned or controlled corporations
would also result in nightmarish budgetary problems.
For instance, the Supreme Court is trying its best to alleviate the financial difficulties
of courts, judges, and court personnel in the entire country but it can do so only within
the limits of budgetary appropriations. Public school teachers have been resorting to
what was formerly unthinkable, to mass leaves and demonstrations, to get not a 13thmonth pay but promised increases in basic salaries and small allowances for school
uniforms. The budget of the Ministry of Education, Culture and Sports has to be
supplemented every now and then for this purpose. The point is, salaries and fringe
benefits of those embraced by the civil service are fixed by law. Any increases must
come from law, from appropriations or savings under the law, and not from concerted
activity.
The Government Corporate Counsel, Justice Manuel Lazaro, in his consolidated
comment * for respondents GSIS, MWSS, and PVTA gives the background of the
amendment which includes every government-owned or controlled corporation in the
embrace of the civil service:
Records of the 1971 Constitutional Convention show that in the
deliberations held relative to what is now Section 1(1) Article XIIB, supra the issue of the inclusion of government-owned or
controlled corporations figured prominently.
The late delegate Roberto S. Oca, a recognized labor leader,
vehemently objected to the inclusion of government-owned or
controlled corporations in the Civil Service. He argued that such
inclusion would put asunder the right of workers in government
corporations, recognized in jurisprudence under the 1935
Constitution, to form and join labor unions for purposes of collective
bargaining with their employers in the same manner as in the
private section (see: records of 1971 Constitutional Convention).
In contrast, other labor experts and delegates to the 1971
Constitutional Convention enlightened the members of the
Committee on Labor on the divergent situation of government
workers under the 1935 Constitution, and called for its rectification.
Thus, in a Position Paper dated November-22, 1971, submitted to
the Committee on Labor, 1971 Constitutional Convention, then
Acting Commissioner of Civil Service Epi Rev Pangramuyen
declared:
It is the stand, therefore, of this Commission that

by reason of the nature of the public employer
and the peculiar character of the public service, it
must necessarily regard the right to strike given
to unions in private industry as not applying to
public employees and civil service employees. It
has been stated that the Government, in contrast
to the private employer, protects the interests of
all people in the public service, and that
accordingly, such conflicting interests as are
present in private labor relations could not exist in
the relations between government and those
whom they employ.
Moreover,
determination
of
employment
conditions as well as supervision of the
management of the public service is in the hands
of legislative bodies. It is further emphasized that
government agencies in the performance of their
duties have a right to demand undivided
allegiance from their workers and must always
maintain a pronounced esprit de corps or firm
discipline among their staff members. It would be
highly incompatible with these requirements of
the public service, if personnel took orders from
union leaders or put solidarity with members of
the working class above solidarity with the
Government. This would be inimical to the public
interest.
Moreover, it is asserted that public employees by
joining labor unions may be compelled to support
objectives which are political in nature and thus
jeopardize the fundamental principle that the
governmental machinery must be impartial and
non-political in the sense of party politics.' (see:
Records of 1971 Constitutional Convention).
Similarly, Delegate Leandro P. Garcia, expressing support for the
inclusion of government-owned or controlled corporations in the
Civil Service, argued:
It is meretricious to contend that because
Govermnent owned or controlled corporations
yield profits, their employees are entitled to better

wages and fringe benefits than employees of
Government other than Government- owned and
controlled cor orations which are not making
profits. There is no gainsaying the fact that the
capital they use is the people's (see Records of
the 1971 Constitutional Convention).
Summarizing the deliberations of the 1971 Constitutional
Convention on the inclusion of Government owned or controlled
corporations, Dean Joaquin G. Bernas, SJ., of the Ateneo de
Manila University Professional School of Law, stated that
government-owned corporations came under attack as milking
cows of a privileged few enjoying salaries far higher than their
counterparts in the various branches of government, while the
capital of these corporations belongs to the Government and
government money is pumped into them whenever on the brink of
disaster, and they should therefore come under the strick
surveillance of the Civil Service System. (Bernas, The 1973
Philippine Constitution, Notes and Cases, 1974 ed., p. 524).
The Government Corporate Counsel cites the precedent setting decision in
Agricultural- Credit and Cooperative Financing Administration (ACCFA v.
Confederation of Unions in Government Corporations and Offtces CUGCO et al., 30
SCRA 649) as giving the rationale for coverage of government-owned or controlled
corporations by the civil service. We stated ACCFA v. CUGCO that:
government quite unrealistic, not to say obsolete. The areas which

used to be left to private enterprise and initiative and which the
government was called upon to enter optionally, and only "because
it was better equipped to administer for the public welfare than is
any private individual or group of individuals," (Malcolm, The
Government of the Philippines, pp. 19-20; Bacani vs. National
Coconut Corporation, supra) continue to lose their well- defined
boundaries and to be absorbed within activities that the government
must undertake in its sovereign capacity if it is to meet the
increasing social challenges of the times. Here as almost
everywhere else the tendency is undoubtedly towards a greater
socialization of economic forces, Here of course this development
was envisioned, indeed adopted as a national policy, by the
Constitution itself in its declaration of principle concerning the
promotion of social justice.
Chief Justice Fernando, then an Associate Justice of this Court, observed in a
concurring opinion that the traditional classification into constituent and ministrant
functions reflects the primacy at that time of the now discredited and
repudiated laissez faire concept carried over into government. He stated:
... The ACA is a government office or agency engaged in

governmental, not proprietary functions. These functions may not
be strictly what President Wilson described as "constituent" (as
distinguished from 'ministrant'), [Bacani vs. National Coconut
Corporation, G.R. No. L-9657, Nov. 29,1956, 53 O.G. p. 2800] such
as those relating to the maintenance of peace and the prevention of
crime, those regulating property and property rights, those relating
to the administration of justice and the determination of political
duties of citizens, and those relating to national defense and foreign
relations. Under this traditional classification, such constituent
functions are exercised by the State as attributes of sovereignty,
and not merely to promote the welfare, progress and prosperity of
the people these latter functions being ministrant, the exercise of
which is optional on the part of the government.
The influence exerted by American constitutional doctrines

unavoidable when the Philippines was still under American rule
notwithstanding, an influence that has not altogether vanished even
after independence, the laissez faire principle never found fun
acceptance in this jurisdiction, even during the period of its full
flowering in the United States. Moreover, to erase any doubts, the
Constitutional Convention saw to it that our fundamental law
embodies a policy of the responsibility thrust on government to
cope with social and economic problems and an earnest and
sincere commitment to the promotion of the general welfare
through state action. It would thus follow that the force of any legal
objection to regulatory measures adversely affecting property rights
or to statutes organizing public corporations that may engage in
competition with private enterprise has been blunted. Unless there
be a clear showing of any invasion of rights guaranteed by the
Constitution, their validity is a foregone conclusion. No fear need be
entertained that thereby spheres hitherto deemed outside
government domain have been encroached upon. With our explicit
disavowal of the 'constituent-ministrant' test, the ghost of the
laissez-faire concept no longer stalks the juridical stage."
The growing complexities of modern society, however, have

rendered this traditional classification of the functions of
Our dismissal of this petiti/n should not, by any means, be interpreted to imply that
workers in government-owned and controlled corporations or in state colleges and
universities may not enjoy freedom of association. The workers whom the petitioners
purport to represent have the right, which may not be abridged, to form associations
or societies for purposes not contrary to law. (Constitution, Article IV, Section 7). This
is a right which share with all public officers and employees and, in fact, by everybody
living in this country. But they may not join associations which impose the obligation
to engage in concerted activities in order to get salaries, fringe benefits, and other
emoluments higher than or different frm that provided by law and regulation.
SEC. 2. Declaration of Policy. It is hereby declared to be the

policy, of the national government to provide equal pay for
substantially, equal work and to base differences in pay upon
substantive differences in duties and responsibilities, and
qualification requirements of the positions. In determining rates of
pay, due regard shall be given to, among others, prevailing rates in
private industry for comparable work. For this purpose, there is
hereby established a system of compensation standardization and
position classification in the national government for all
departments, bureaus, agencies, and officers including
government-owned or controlled corporations and financial
institutions: Provided, That notwithstanding a standardized salary
system established for all employees, additional financial incentives
may be established by government corporations and financial
institutions for their employees to be supported fully from their
corporate funds and for such technical positions as may be
approved by the President in critical government agencies.
The very Labor Code, P.D. No. 442 as amended,, which governs the registration and
provides for the rights of legitimate labor organizations states:
ART. 277. Government employees. The terms and conditions of
employment of all government employees, including employees of
government-owned and controlled corporations, shall be governed
by the Civil Service Law, rules and regulations. Their salaries shall
be standardized by the National Assembly as provided for in the
new constitution. However, there shall be no reduction of existing
wages, benefits, and other terms and conditions of employment
being enjoyed by them at the time of the adoption of this code.
Section 6, Article XII-B of the Constitution gives added reasons why the government
employees represented by the petitioners cannot expect treatment in matters of
salaries different from that extended to all others government personnel. The
provision states:
SEC. 6. The National Assembly shall provide for the
standardization of compensation of government officials and
employees, including those in government-owned or controlled
corporations, taking into account the nature of the responsibilities
pertaining to, and the qualifications required for the positions
concerned.
It is the legislature or, in proper cases, the administrative heads of government and
not the collective bargaining process nor the concessions wrung by labor unions from
management that determine how much the workers in government-owned or
controlled corporations may receive in terms of salaries, 13th month pay, and other
conditions or terms of employment. There are government institutions which can
afford to pay two weeks, three weeks, or even 13th-month salaries to their personnel
from their budgetary appropriations. However, these payments must be pursuant to
law or regulation. Presidential Decree No. 985 as amended provides:
xxx xxx xxx
The Solicitor-General correctly points out that to interpret P.D. No. 851 as including
government employees would upset the compensation levels of government
employees in violation of those fixed according to P.D. No. 985.
Here as in other countries, government salaries and wages have always been lower
than salaries, wages, and bonuses in the private sector. However, civil servants have
no cause for despair. Service in the government may at times be a sacrifice but it is
also a welcome privilege. Apart from the emotional and psychic satisfactions, there
are various material advantages. The security of tenure guaranteed to those in the
civil service by the Constitution and statutes, the knowledge that one is working for
the most stable of employers and not for private persons, the merit system in
appointments and promotions, the scheme of vacation, sick, and maternity leave
privileges, and the prestige and dignity associated with public office are only a few of
the joys of government employment.
Section 3 of the Rules and Regulations Implementing Presidential Decree No. 851 is,
therefore, a correct interpretation of the decree. It has been implemented and
enforced from December 22, 1975 to the present, The petitioners have shown no
valid reason why it should be nullified because of their petition filed six and a half
years after the issuance and implementation of the rule.
WHEREFORE, the petition is hereby DISMISSED for lack of merit.
SO ORDERED.
SECOND DIVISION
G.R. No. 151228
August 15, 2002
ROLANDO
vs.
LEOVIGILDO
LAGRAMA
APPEALS, respondents.
Y.
and
TAN, petitioner,
THE
HONORABLE
COURT
OF
MENDOZA, J.:
This is a petition for review on certiorari of the decision,1 dated May 31, 2001, and the
resolution,2 dated November 27, 2001, of the Court of Appeals in C.A.-G.R. SP. No.
63160, annulling the resolutions of the National Labor Relations Commission (NLRC)
and reinstating the ruling of the Labor Arbiter which found petitioner Rolando Tan
guilty of illegally dismissing private respondent Leovigildo Lagrama and ordering him
to pay the latter the amount of P136,849.99 by way of separation pay, backwages,
and damages.
The following are the facts.
Petitioner Rolando Tan is the president of Supreme Theater Corporation and the
general manager of Crown and Empire Theaters in Butuan City. Private respondent
Leovigildo Lagrama is a painter, making ad billboards and murals for the motion
pictures shown at the Empress, Supreme, and Crown Theaters for more than 10
years, from September 1, 1988 to October 17, 1998.
On October 17, 1998, private respondent Lagrama was summoned by Tan and
upbraided: "Nangihi na naman ka sulod sa imong drawinganan." ("You again urinated
inside your work area.") When Lagrama asked what Tan was saying, Tan told him,
"Ayaw daghang estorya. Dili ko gusto nga mo-drawing ka pa. Guikan karon, wala nay
drawing. Gawas." ("Don't say anything further. I don't want you to draw anymore.
From now on, no more drawing. Get out.")
Lagrama denied the charge against him. He claimed that he was not the only one
who entered the drawing area and that, even if the charge was true, it was a minor
infraction to warrant his dismissal. However, everytime he spoke, Tan shouted
"Gawas" ("Get out"), leaving him with no other choice but to leave the premises.
Lagrama filed a complaint with the Sub-Regional Arbitration Branch No. X of the
National Labor Relations Commission (NLRC) in Butuan City. He alleged that he had
been illegally dismissed and sought reinvestigation and payment of 13th month pay,
service incentive leave pay, salary differential, and damages.
Petitioner Tan denied that Lagrama was his employee. He asserted that Lagrama was
an independent contractor who did his work according to his methods, while he
(petitioner) was only interested in the result thereof. He cited the admission of
Lagrama during the conferences before the Labor Arbiter that he was paid on a fixed
piece-work basis, i.e., that he was paid for every painting turned out as ad billboard or
mural for the pictures shown in the three theaters, on the basis of a "no
mural/billboard drawn, no pay" policy. He submitted the affidavits of other cinema

owners, an amusement park owner, and those supervising the construction of a
church to prove that the services of Lagrama were contracted by them. He denied
having dismissed Lagrama and alleged that it was the latter who refused to paint for
him after he was scolded for his habits.
As no amicable settlement had been reached, Labor Arbiter Rogelio P. Legaspi
directed the parties to file their position papers. On June 17, 1999, he rendered a
decision, the dispositive portion of which reads:
WHEREFORE, premises considered judgment is hereby ordered:
1. Declaring complainant's [Lagrama's] dismissal illegal and
2. Ordering respondents [Tan] to pay complainant the following:
A. Separation Pay
P 59,000.00
B.
Backwages (from 17 October 1998 to 17 June 1999)
47,200.00
C. 13th month pay (3 years)
17,700.00
D. Service Incentive Leave Pay (3 years)
2, 949.99
E. Damages
10,000.00
TOTAL
[P136,849.99]
Complainant's other claims are dismissed for lack of merit.3

Petitioner Rolando Tan appealed to the NLRC Fifth Division, Cagayan de Oro City,
which, on June 30, 2000, rendered a decision4 finding Lagrama to be an independent
contractor, and for this reason reversing the decision of the Labor Arbiter.
Respondent Lagrama filed a motion for reconsideration, but it was denied for lack of
merit by the NLRC in a resolution of September 29, 2000. He then filed a petition for
certiorari under Rule 65 before the Court of Appeals.
The Court of Appeals found that petitioner exercised control over Lagrama's work by
dictating the time when Lagrama should submit his billboards and murals and setting
rules on the use of the work area and rest room. Although it found that Lagrama did
work for other cinema owners, the appeals court held it to be a mere sideline
insufficient to prove that he was not an employee of Tan. The appeals court also
found no evidence of any intention on the part of Lagrama to leave his job or sever
his employment relationship with Tan. Accordingly, on May 31, 2001, the Court of
Appeals rendered a decision, the dispositive portion of which reads:
IN THE LIGHT OF ALL THE FOREGOING, the Petition is hereby
GRANTED. The Resolutions of the Public Respondent issued on June 30,
2000 and September 29, 2000 are ANNULLED. The Decision of the
Honorable Labor Arbiter Rogelio P. Legaspi on June 17, 1999 is hereby

REINSTATED.
Petitioner moved for a reconsideration, but the Court of Appeals found no reason to
reverse its decision and so denied his motion for lack of merit.5 Hence, this petition for
review on certiorari based on the following assignments of errors:
I. With all due respect, the decision of respondent Court of Appeals in CAG.R. SP NO. 63160 is bereft of any finding that Public Respondent NLRC,
5th Division, had no jurisdiction or exceeded it or otherwise gravely abused
its discretion in its Resolution of 30 June 2000 in NLRC CA-NO. M-00495099.
II. With all due respect, respondent Court of Appeals, absent any positive
finding on its part that the Resolution of 30 June 2000 of the NLRC is not
supported by substantial evidence, is without authority to substitute its
conclusion for that of said NLRC.
III. With all due respect, respondent Court of Appeals' discourse on
"freelance artists and painters" in the decision in question is misplaced or
has no factual or legal basis in the record.
IV. With all due respect, respondent Court of Appeals' opening statement in
its decision as to "employment," "monthly salary of P1,475.00" and "work
schedule from Monday to Saturday, from 8:00 o'clock in the morning up to
5:00 o'clock in the afternoon" as "facts" is not supported by the evidence on
record.
V. With all due respect, the case of Lambo, et al., v. NLRC, et al., 317 SCRA
420 [G.R. No. 111042 October 26, 1999] relied upon by respondent Court of
Appeals is not applicable to the peculiar circumstances of this case.6
The issues raised boil down to whether or not an employer-employee relationship
existed between petitioner and private respondent, and whether petitioner is guilty of
illegally dismissing private respondent. We find the answers to these issues to be in
the affirmative.
I.
In determining whether there is an employer-employee relationship, we have applied
a "four-fold test," to wit: (1) whether the alleged employer has the power of selection
and engagement of employees; (2) whether he has control of the employee with
respect to the means and methods by which work is to be accomplished; (3) whether
he has the power to dismiss; and (4) whether the employee was paid wages. 7 These
elements of the employer-employee relationship are present in this case.
First. The existence in this case of the first element is undisputed. It was petitioner
who engaged the services of Lagrama without the intervention of a third party. It is the
existence of the second element, the power of control, that requires discussion here.
Of the four elements of the employer-employee relationship, the "control test" is the
most important. Compared to an employee, an independent contractor is one who
carries on a distinct and independent business and undertakes to perform the job,
work, or service on its own account and under its own responsibility according to its
own manner and method, free from the control and direction of the principal in all
matters connected with the performance of the work except as to the results
thereof.8 Hence, while an independent contractor enjoys independence and freedom
from the control and supervision of his principal, an employee is subject to the
employer's power to control the means and methods by which the employee's work is
to be performed and accomplished.
In the case at bar, albeit petitioner Tan claims that private respondent Lagrama was
an independent contractor and never his employee, the evidence shows that the latter
performed his work as painter under the supervision and control of petitioner.
Lagrama worked in a designated work area inside the Crown Theater of petitioner, for
the use of which petitioner prescribed rules. The rules included the observance of
cleanliness and hygiene and a prohibition against urinating in the work area and any
place other than the toilet or the rest rooms. 9 Petitioner's control over Lagrama's work
extended not only to the use of the work area, but also to the result of Lagrama's
work, and the manner and means by which the work was to be accomplished.
Moreover, it would appear that petitioner not only provided the workplace, but
supplied as well the materials used for the paintings, because he admitted that he
paid Lagrama only for the latter's services.10
Private respondent Lagrama claimed that he worked daily, from 8 o'clock in the
morning to 5 o'clock in the afternoon. Petitioner disputed this allegation and
maintained that he paid Lagrama P1,475.00 per week for the murals for the three
theaters which the latter usually finished in 3 to 4 days in one week. 11 Even assuming
this to be true, the fact that Lagrama worked for at least 3 to 4 days a week proves
regularity in his employment by petitioner.
Second. That petitioner had the right to hire and fire was admitted by him in his
position paper submitted to the NLRC, the pertinent portions of which stated:
Complainant did not know how to use the available comfort rooms or toilets
in and about his work premises. He was urinating right at the place where he
was working when it was so easy for him, as everybody else did and had he
only wanted to, to go to the comfort rooms. But no, the complainant had to
make a virtual urinal out of his work place! The place then stunk to high
heavens, naturally, to the consternation of respondents and everyone who
could smell the malodor.
...
Given such circumstances, the respondents had every right, nay all the
compelling reason, to fire him from his painting job upon discovery and his
admission of such acts. Nonetheless, though thoroughly scolded, he was not

fired. It was he who stopped to paint for respondents.12
had rendered service, admitted in a sworn statement that he was told by Lagrama
that the latter worked for petitioner.23
By stating that he had the right to fire Lagrama, petitioner in effect acknowledged
Lagrama to be his employee. For the right to hire and fire is another important
element of the employer-employee relationship.13 Indeed, the fact that, as petitioner
himself said, he waited for Lagrama to report for work but the latter simply stopped
reporting for work reinforces the conviction that Lagrama was indeed an employee of
petitioner. For only an employee can nurture such an expectancy, the frustration of
which, unless satisfactorily explained, can bring about some disciplinary action on the
part of the employer.
Lagrama had been employed by petitioner since 1988. Under the law, therefore, he is
deemed a regular employee and is thus entitled to security of tenure, as provided in
Art. 279 of Labor Code:
Third. Payment of wages is one of the four factors to be considered in determining the
existence of employer-employee relation. Wages are defined as "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." 14 That Lagrama worked for Tan on a fixed
piece-work basis is of no moment. Payment by result is a method of compensation
and does not define the essence of the relation.15 It is a method of computing
compensation, not a basis for determining the existence or absence of employeremployee relationship. One may be paid on the basis of results or time expended on
the work, and may or may not acquire an employment status, depending on whether
the elements of an employer-employee relationship are present or not.16
The Rules Implementing the Labor Code require every employer to pay his
employees by means of payroll.17The payroll should show among other things, the
employee's rate of pay, deductions made, and the amount actually paid to the
employee. In the case at bar, petitioner did not present the payroll to support his claim
that Lagrama was not his employee, raising speculations whether his failure to do so
proves that its presentation would be adverse to his case.18
The primary standard for determining regular employment is the reasonable
connection between the particular activity performed by the employee in relation to
the usual trade or business of the employer.19 In this case, there is such a connection
between the job of Lagrama painting billboards and murals and the business of
petitioner. To let the people know what movie was to be shown in a movie theater
requires billboards. Petitioner in fact admits that the billboards are important to his
business.20
The fact that Lagrama was not reported as an employee to the SSS is not conclusive
on the question of whether he was an employee of petitioner.21 Otherwise, an
employer would be rewarded for his failure or even neglect to perform his obligation.22
Neither does the fact that Lagrama painted for other persons affect or alter his
employment relationship with petitioner. That he did so only during weekends has not
been denied by petitioner. On the other hand, Samuel Villalba, for whom Lagrama
ART. 279. Security of Tenure. In cases of regular employment, the

employer shall not terminate the services of an employee except for a just
cause or when authorized by this Title. 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.
This Court has held that if the employee has been performing the job for at least one
year, even if not continuously but intermittently, the repeated and continuing need for
its performance is sufficient evidence of the necessity, if not indispensability, of that
activity to the business of his employer. Hence, the employment is also considered
regular, although with respect only to such activity, and while such activity exists.24
It is claimed that Lagrama abandoned his work. There is no evidence to show this.
Abandonment requires two elements: (1) the failure to report for work or absence
without valid or justifiable reason, and (2) a clear intention to sever the employeremployee relationship, with the second element as the more determinative factor and
being manifested by some overt acts.25 Mere absence is not sufficient. What is more,
the burden is on the employer to show a deliberate and unjustified refusal on the part
of the employee to resume his employment without any intention of returning. 26 In the
case at bar, the Court of Appeals correctly ruled:
Neither do we agree that Petitioner abandoned his job. In order for
abandonment to be a just and valid ground for dismissal, the employer must
show, by clear proof, the intention of the employee to abandon his job. . . .
In the present recourse, the Private Respondent has not established clear
proof of the intention of the Petitioner to abandon his job or to sever the
employment relationship between him and the Private Respondent. On the
contrary, it was Private Respondent who told Petitioner that he did not want
the latter to draw for him and thereafter refused to give him work to do or any
mural or billboard to paint or draw on.
More, after the repeated refusal of the Private Respondent to give Petitioner
murals or billboards to work on, the Petitioner filed, with the Sub-Regional
Arbitration Branch No. X of the National Labor Relations Commission, a
Complaint for "Illegal Dismissal and Money Claims." Such act has, as the
Supreme Court declared, negate any intention to sever employment
relationship. . . .27
II.
The second issue is whether private respondent Lagrama was illegally dismissed. To
begin, the employer has the burden of proving the lawfulness of his employee's
dismissal.28 The validity of the charge must be clearly established in a manner
consistent with due process. The Implementing Rules of the Labor Code29 provide
that no worker shall be dismissed except for a just or authorized cause provided by
law and after due process. This provision has two aspects: (1) the legality of the act of
dismissal, that is, dismissal under the grounds provided for under Article 282 of the
Labor Code and (2) the legality in the manner of dismissal. The illegality of the act of
dismissal constitutes discharge without just cause, while illegality in the manner of
dismissal is dismissal without due process.30
respondent Leovigildo Lagrama should be computed from the time of his dismissal up
to the time of the finality of this decision, without any deduction and qualification.
However, the service incentive leave pay awarded to him is DELETED.
SO ORDERED.
In this case, by his refusal to give Lagrama work to do and ordering Lagrama to get
out of his sight as the latter tried to explain his side, petitioner made it plain that
Lagrama was dismissed. Urinating in a work place other than the one designated for
the purpose by the employer constitutes violation of reasonable regulations intended
to promote a healthy environment under Art. 282(1) of the Labor Code for purposes of
terminating employment, but the same must be shown by evidence. Here there is no
evidence that Lagrama did urinate in a place other than a rest room in the premises of
his work.
Instead of ordering his reinstatement as provided in Art. 279 of the Labor Code, the
Labor Arbiter found that the relationship between the employer and the employee has
been so strained that the latter's reinstatement would no longer serve any purpose.
The parties do not dispute this finding. Hence, the grant of separation pay in lieu of
reinstatement is appropriate. This is of course in addition to the payment of
backwages which, in accordance with the ruling in Bustamante v. NLRC,31 should be
computed from the time of Lagrama's dismissal up to the time of the finality of this
decision, without any deduction or qualification.
The Bureau of Working Conditions32 classifies workers paid by results into two
groups, namely; (1) those whose time and performance is supervised by the
employer, and (2) those whose time and performance is unsupervised by the
employer. The first involves an element of control and supervision over the manner
the work is to be performed, while the second does not. If a piece worker is
supervised, there is an employer-employee relationship, as in this case. However,
such an employee is not entitled to service incentive leave pay since, as pointed out
in Makati Haberdashery v. NLRC33 and Mark Roche International v. NLRC,34 he is
paid a fixed amount for work done, regardless of the time he spent in accomplishing
such work.
WHEREFORE, based on the foregoing, the petition is DENIED for lack of showing
that the Court of Appeals committed any reversible error. The decision of the Court of
Appeals, reversing the decision of the National Labor Relations Commission and
reinstating
the
decision
of
the
Labor
Arbiter,
is AFFIRMED with
the MODIFICATIONthat the backwages and other benefits awarded to private
SECOND DIVISION
AVELINO LAMBO VICENTE BELOCURA

I. BACKWAGES P64,896.00 P64,896.00
G.R. No. 111042 October 26, 1999
II. OVERTIME PAY 13,447.90 13,447.90
AVELINO
LAMBO
and
VICENTE
BELOCURA, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and J.C. TAILOR SHOP and/or
JOHNNY CO, respondents.
III. HOLIDAY PAY 1,399.30 1,399.30

IV. 13TH MONTH PAY 4,992.00 4,992.00
V. SEPARATION PAY 9,984.00 11,648.00
MENDOZA, J.:
This is a petition for certiorari to set aside the decision 1 of the National Labor
Relations Commission (NLRC) which reversed the awards made by the Labor Arbiter
in favor of petitioners, except one for P4,992.00 to each, representing 13th month
pay.
The facts are as follows.

TOTAL P94,719.20 P96,383.20 = P191,102.40
Add: 10% Attorney's Fees 19,110.24
Petitioners Avelino Lambo and Vicente Belocura were employed as tailors by private
respondents J.C. Tailor Shop and/or Johnny Co on September 10, 1985 and March 3,
1985, respectively. They worked from 8:00 a.m. to 7:00 p.m. daily, including Sundays
and holidays. As in the case of the other 100 employees of private respondents,
petitioners were paid on a piece-work basis, according to the style of suits they made.
Regardless of the number of pieces they finished in a day, they were each given a
daily pay of at least P64.00.
On January 17, 1989, petitioners filed a complaint against private respondents for
illegal dismissal and sought recovery of overtime pay, holiday pay, premium pay on
holiday and rest day, service incentive leave pay, separation pay, 13th month pay, and
attorneys fees.1wphi1.nt
After hearing, Labor Arbiter Jose G. Gutierrez found private respondents guilty of
illegal dismissal and accordingly ordered them to pay petitioners claims. The
dispositive portion of the Labor Arbiters decision reads:
WHEREFORE, in the light of the foregoing, judgment is
hereby rendered declaring the complainants to have been
illegally dismissed and ordering the respondents to pay
the complainants the following monetary awards:
GRAND TOTAL P210,212.64

=========
or a total aggregate amount of TWO HUNDRED TEN
THOUSAND TWO HUNDRED TWELVE AND 64/100
(P210,212.64).
All other claims are dismissed for lack of merit.
SO ORDERED. 2
On appeal by private respondents, the NLRC reversed the decision of the Labor
Arbiter. It found that petitioners had not been dismissed from employment but merely
threatened with a closure of the business if they insisted on their demand for a
"straight payment of their minimum wage," after petitioners, on January 17, 1989,
walked out of a meeting with private respondents and other employees. According to
the NLRC, during that meeting, the employees voted to maintain the company policy
of paying them according to the volume of work finished at the rate of P18.00 per
dozen of tailored clothing materials. Only petitioners allegedly insisted that they be
paid the minimum wage and other benefits. The NLRC held petitioners guilty of
abandonment of work and accordingly dismissed their claims except that for 13th
month pay. The dispositive portion of its decision reads:
WHEREFORE, in view of the foregoing, the appealed decision is
hereby vacated and a new one entered ordering respondents to
pay each of the complainants their 13th month pay in the amount of
P4,992.00. All other monetary awards are hereby deleted.
SO ORDERED. 3
Petitioners allege that they were dismissed by private respondents as they were
about to file a petition with the Department of Labor and Employment (DOLE) for the
payment of benefits such as Social Security System (SSS) coverage, sick leave and
vacation leave. They deny that they abandoned their work.
The petition is meritorious.
First. There is no dispute that petitioners were employees of private respondents
although they were paid not on the basis of time spent on the job but according to the
quantity and the quality of work produced by them. There are two categories of
employees paid by results: (1) those whose time and performance are supervised by
the employer. (Here, there is an element of control and supervision over the manner
as to how the work is to be performed. A piece-rate worker belongs to this category
especially if he performs his work in the company premises.); and (2) those whose
time and performance are unsupervised. (Here, the employers control is over the
result of the work. Workers on pakyao and takay basis belong to this group.) Both
classes of workers are paid per unit accomplished. Piece-rate payment is generally
practiced in garment factories where work is done in the company premises, while
payment on pakyao and takay basis is commonly observed in the agricultural
industry, such as in sugar plantations where the work is performed in bulk or in
volumes difficult to quantify. 4 Petitioners belong to the first category, i.e., supervised
employees.
In determining the existence of an employer-employee relationship, the following
elements must be considered: (1) the selection and engagement of the employee; (2)
the payment of wages; (3) the power of dismissal; and (4) the power to control the
employees conduct. 5 Of these elements, the most important criterion is whether the
employer controls or has reserved the right to control the employee not only as to the
result of the work but also as to the means and methods by which the result is to be
accomplished. 6
rate basis does not negate their status as regular employees of private respondents.
The term "wage" is broadly defined in Art. 97 of the Labor Code as remuneration or
earnings, capable of being expressed in terms of money whether fixed or ascertained
on a time, task, piece or commission basis. Payment by the piece is just a method of
compensation and does not define the essence of the relations. 7 Nor does the fact
that petitioners are not covered by the SSS affect the employer-employee
relationship.
Indeed, the following factors show that petitioners, although piece-rate workers, were
regular employees of private respondents: (1) within the contemplation of Art. 280 of
the Labor Code, their work as tailors was necessary or desirable in the usual
business of private respondents, which is engaged in the tailoring business; (2)
petitioners worked for private respondents throughout the year, their employment not
being dependent on a specific project or season; and, (3) petitioners worked for
private respondents for more than one year. 8
Second. Private respondents contend, however, that petitioners refused to report for
work after learning that the J.C. Tailoring and Dress Shop Employees Union had
demanded their (petitioners) dismissal for conduct unbecoming of employees. In
support of their claim, private respondents presented the affidavits 9 of Emmanuel Y.
Caballero, president of the union, and Amado Cabaero, member, that petitioners had
not been dismissed by private respondents but that practically all employees of the
company, including the members of the union had asked management to terminate
the services of petitioners. The employees allegedly said they were against
petitioners request for change of the mode of payment of their wages, and that when
a meeting was called to discuss this issue, a petition for the dismissal of petitioners
was presented, prompting the latter to walk out of their jobs and instead file a
complaint for illegal dismissal against private respondents on January 17, 1989, even
before all employees could sign the petition and management could act upon the
same.1wphi1.nt
To justify a finding of abandonment of work, there must be proof of a deliberate and
unjustified refusal on the part of an employee to resume his employment. The burden
of proof is on the employer to show an unequivocal intent on the part of the employee
to discontinue employment. 10 Mere absence is not sufficient. It must be accompanied
by manifest acts unerringly pointing to the fact that the employee simply does not
want to work anymore. 11
In this case, private respondents exercised control over the work of petitioners. As
tailors, petitioners worked in the companys premises from 8:00 a.m. to 7:00 p.m.
daily, including Sundays and holidays. The mere fact that they were paid on a pieceLABOR LAW I CASES (Arts.97-102) |116
Private respondents failed to discharge this burden. Other than the self-serving
declarations in the affidavits of their two employees, private respondents did not
adduce proof of overt acts of petitioners showing their intention to abandon their work.
On the contrary, the evidence shows that petitioners lost no time in filing the case for
illegal dismissal against private respondent. This fact negates any intention on their
part to sever their employment relationship. 12 Abandonment is a matter of intention; it
cannot be inferred or presumed from equivocal acts. 13
Third. Private respondents invoke the compromise agreement, 14 dated March 2,
1993, between them and petitioner Avelino Lambo, whereby in consideration of the
sum of P10,000.00, petitioner absolved private respondents from liability for money
claims or any other obligations.
To be sure, not all quitclaims are per se invalid or against public policy. But those (1)
where there is clear proof that the waiver was wangled from an unsuspecting or
gullible person or (2) where the terms of settlement are unconscionable on their face
are invalid. In these cases, the law will step in to annul the questionable
transaction.15 However, considering that the Labor Arbiter had given petitioner Lambo
a total award of P94,719.20, the amount of P10,000.00 to cover any and all monetary
claims is clearly unconscionable. As we have held in another case, 16 the subordinate
position of the individual employee vis-a-vis management renders him especially
vulnerable to its blandishments, importunings, and even intimidations, and results in
his improvidently waiving benefits to which he is clearly entitled. Thus, quitclaims,
waivers or releases are looked upon with disfavor for being contrary to public policy
and are ineffective to bar claims for the full measure of the workers legal rights. 17 An
employee who is merely constrained to accept the wages paid to him is not precluded
from recovering the difference between the amount he actually received and that
amount which he should have received.
Fourth. The Labor Arbiter awarded backwages, overtime pay, holiday pay, 13th month
pay, separation pay and attorneys fees, corresponding to 10% of the total monetary
awards, in favor of petitioners.
As petitioners were illegally dismissed, they are entitled to reinstatement with
backwages. Considering that petitioners were dismissed from the service on January
17, 1989, i.e., prior to March 21, 1989, 18 the Labor Arbiter correctly applied the rule in
the Mercury Drug case, 19 according to which the recovery of backwages should be
limited to three years without qualifications or deductions. Any award in excess of
three years is null and void as to the excess. 20
The Labor Arbiter correctly ordered private respondents to give separation pay.
Considerable time has lapsed since petitioners dismissal, so that reinstatement
would now be impractical and hardly in the best interest of the parties. In lieu of
reinstatement, separation pay should be awarded to petitioners at the rate of one
month salary for every year of service, with a fraction of at least six (6) months of
service being considered as one (1) year. 21
The awards for overtime pay, holiday pay and 13th month pay are in accordance with
our finding that petitioners are regular employees, although paid on a piece-rate
basis. 22 These awards are based on the following computation of the Labor Arbiter:
AVELINO LAMBO
I. BACKWAGES: Jan. 17/89 - Jan. 17/92 = 36
mos.
P 64.00/day x 26 days =
1,664.00/mo. x 36 mos. = P59,904.00
13th Mo. Pay:
P1,664.00/yr. x 3 yrs. = 4,992.00 P64,896.00
II. OVERTIME PAY: Jan. 17/86 - Jan. 17/89

Jan. 17/86 - April 30/87 = 15 mos. & 12 day =
(15 mos. x 26 days + 12 days) = 402 days
*2 hours = 25%
402 days x 2 hrs./days = 804 hrs.
P 32.00/day 8 hrs. =
4.00/hr. x 25% =
1.00/hr. + P4.00/hr. =
5.00/hr. x 804 hrs. = 4,020.00
May 1/87 - Sept. 30/87 = 4 mos. & 26 days =
Jan. 17/86 - April 30/87 = 12 RHs; 8 SHs
130 days x 2 hrs./day = 260 hrs.
P 32.00/day x 200% =
P 41.00/day 8 hrs. =
64.00/day x 12 days = 768.00
5.12/hr. x 25% =
32.00/day x 12 days = (384.00) P384.00
1.28/hr. + P5.12/hr. =
32.00/day x 30% =
6.40/hr. x 260 hrs. = P1,664.00
9.60/day x 8 days = 76.80 460.80
Oct. 1/87 - Dec. 13/87 = 2 mos. & 11 days =
May 1/87 - Sept. 30/87 = 3 RHs; 3 SHs
P 41.00/day x 200% =
P 49.00/day 8 hrs. =
82.00/day 3 days = 246.00
6.12/hr. x 25% =
41.00/day x 3 days = (123.00) P123.00
1.53/hr. + P6.12/hr. =
41.00/day x 30% =
7.65/hr. x 126 hrs. = P963.90
12.30/day x 3 days = 36.90 159.90
Dec. 14/87 - Jan. 17/89 = 13 mos. & 2 days =
Oct. 1/87 - Dec. 13/87 = 1 RH
P 49.00/day x 200% =
P 64.00/day 8 hrs. =
98.00/day x 1 day = P98.00
8.00/hr. x 25% =
49.00/day x 1 day = (49.00) 49.00
2.00/hr. + P8.00/hr =
10.00/hr. x 680 hrs. = P6,800.00 P13,447.90
Dec. 14/87 - Jan. 17/89 = 9 RHs; 8 SHs
III. HOLIDAY PAY: Jan. 17/86 - Jan. 17/89
P 64.00/day x 200% =
128.00/day x 9 days = P1,152.00
IV. 13TH MO. PAY: Jan. 17/86 - Jan. 17/89
64.00/day x 9 days = (576.00) P576.00

64.00/day x 30% =
Same computation as A. Lambo 4,992.00

V. SEPARATION PAY: March 3/85 - Jan. 17/92 = 7 yrs.
19.20/day x 8 days = 153.60 729.60 1,399.30

P1,664.00/mo. x 7 yrs. = 11,648.00
IV. 13TH MO. PAY: Jan. 17/86 - Jan. 17/89 = 3 yrs.
TOTAL AWARD
P96,383.20
OF
VICENTE
BELOCURA
P 64.00/day x 26 days =
=========
1,664.00/yr. x 3 yrs. = 4,992.00
SUMMARY
V. SEPARATION PAY: Sept. 10/85 - Jan. 17/92 = 6 yrs.
P1,664.00/mo. x 6 yrs. = 9,984.00

I. BACKWAGES P64,896.00 P64,896.00

TOTAL AWARD OF AVELINO LAMBO
P94,719.20
========
II. OVERTIME PAY 13,447.90 13,447.90

III. HOLIDAY PAY 1,399.30 1,399.30
VICENTE BELOCURA
IV. 13TH MO. PAY 4,992.00 4,992.00
I. BACKWAGES: Jan. 17/89 - Jan. 17/92 = 36 mos.

Same computation as A. Lambo P64,896.00
II. OVERTIME PAY: Jan. 17/86 - Jan. 17/89
III. HOLIDAY PAY: Jan. 17/86 - Jan. 17/89
V. SEPARATION PAY 9,984.00 11,648.00

TOTAL P94,719.20 P96,383.20
= P191,102.40
ADD: 10% Attorney's Fees 19,110.24

=========
Except for the award of attorneys fees in the amount of P19,110.24, the above
computation is affirmed. The award of attorneys fees should be disallowed, it
appearing that petitioners were represented by the Public Attorneys Office. With
regard to petitioner Avelino Lambo, the amount of P10,000.00 paid to him under the
compromise agreement should be deducted from the total award of P94,719.20.
Consequently, the award to each petitioner should be as follows:
WHEREFORE, the decision of the National Labor Relations Commission is SET

ASIDE and another one is RENDERED ordering private respondents to pay
petitioners the total amount of One Hundred Eighty-One Thousand One Hundred Two
Pesos and 40/100 (P181,102.40), as computed above.1wphi1.nt
SO ORDERED.

I. BACKWAGES P64,896.00 P64,896.00
II. OVERTIME PAY 13,447.90 13,447.90
III. HOLIDAY PAY 1,399.30 1,399.30
IV. 13TH MONTH PAY 4,992.00 4,992.00
V. SEPARATION PAY 9,984.00 11,648.00

P 94,719.20
Less 10,000.00
TOTAL P84,719.20 P96,383.20

=========
THIRD DIVISION
G.R. Nos. 83380-81 November 15, 1989
MAKATI HABERDASHERY, INC., JORGE LEDESMA and CECILIO G.
INOCENCIO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, CEFERINA J. DIOSANA (Labor
Arbiter, Department of Labor and Employment, National Capital Region),
SANDIGAN NG MANGGAGAWANG PILIPINO (SANDIGAN)-TUCP and its
members, JACINTO GARCIANO, ALFREDO C. BASCO, VICTORIO Y. LAURETO,
ESTER NARVAEZ, EUGENIO L. ROBLES, BELEN N. VISTA, ALEJANDRO A.
ESTRABO, VEVENCIO TIRO, CASIMIRO ZAPATA, GLORIA ESTRABO,
LEONORA MENDOZA, MACARIA G. DIMPAS, MERILYN A. VIRAY, LILY OPINA,
JANET SANGDANG, JOSEFINA ALCOCEBA and MARIA ANGELES, respondents.
Ledesma, Saludo & Associates for petitioners.
Pablo S. Bernardo for private respondents.
FERNAN, C.J.:
This petition for certiorari involving two separate cases filed by private respondents
against herein petitioners assails the decision of respondent National Labor Relations
Commission in NLRC CASE No. 7-2603-84 entitled "Sandigan Ng Manggagawang
Pilipino (SANDIGAN)-TUCP etc., et al. v. Makati Haberdashery and/or Toppers
Makati, et al." and NLRC CASE No. 2-428-85 entitled "Sandigan Ng Manggagawang
Pilipino (SANDIGAN)-TUCP etc., et al. v. Toppers Makati, et al.", affirming the
decision of the Labor Arbiter who jointly heard and decided aforesaid cases, finding:
(a) petitioners guilty of illegal dismissal and ordering them to reinstate the dismissed
workers and (b) the existence of employer-employee relationship and granting
respondent workers by reason thereof their various monetary claims.
The undisputed facts are as follows:
Individual complainants, private respondents herein, have been working for petitioner
Makati Haberdashery, Inc. as tailors, seamstress, sewers, basters (manlililip) and
"plantsadoras". They are paid on a piece-rate basis except Maria Angeles and Leonila
Serafina who are paid on a monthly basis. In addition to their piece-rate, they are
given a daily allowance of three (P 3.00) pesos provided they report for work before
9:30 a.m. everyday.
Private respondents are required to work from or before 9:30 a.m. up to 6:00 or 7:00
p.m. from Monday to Saturday and during peak periods even on Sundays and
holidays.
On July 20, 1984, the Sandigan ng Manggagawang Pilipino, a labor organization of
the respondent workers, filed a complaint docketed as NLRC NCR Case No. 7-260384 for (a) underpayment of the basic wage; (b) underpayment of living allowance; (c)
non-payment of overtime work; (d) non-payment of holiday pay; (e) non-payment of
service incentive pay; (f) 13th month pay; and (g) benefits provided for under Wage
Orders Nos. 1, 2, 3, 4 and 5. 1
During the pendency of NLRC NCR Case No. 7-2603-84, private respondent
Dioscoro Pelobello left with Salvador Rivera, a salesman of petitioner Haberdashery,
an open package which was discovered to contain a "jusi" barong tagalog. When
confronted, Pelobello replied that the same was ordered by respondent Casimiro
Zapata for his customer. Zapata allegedly admitted that he copied the design of
petitioner Haberdashery. But in the afternoon, when again questioned about said
barong, Pelobello and Zapata denied ownership of the same. Consequently a
memorandum was issued to each of them to explain on or before February 4, 1985
why no action should be taken against them for accepting a job order which is
prejudicial and in direct competition with the business of the company. 2 Both
respondents allegedly did not submit their explanation and did not report for
work. 3 Hence, they were dismissed by petitioners on February 4, 1985. They
countered by filing a complaint for illegal dismissal docketed as NLRC NCR Case No.
2-428-85 on February 5, 1985. 4
On June 10, 1986, Labor Arbiter Ceferina J. Diosana rendered judgment, the
dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in NLRC NCR Case
No. 2-428-85 finding respondents guilty of illegal dismissal and
ordering them to reinstate Dioscoro Pelobello and Casimiro Zapata
to their respective or similar positions without loss of seniority
rights, with full backwages from July 4, 1985 up to actual
reinstatement. The charge of unfair labor practice is dismissed for
lack of merit.
In NLRC NCR Case No. 7-26030-84, the complainants' claims for

underpayment re violation of the minimum wage law is hereby
ordered dismissed for lack of merit.
controls or has reserved the right to control the employee not only as to the result of
the work but also as to the means and method by which the same is to be
accomplished. 9
Respondents are hereby found to have violated the decrees on the

cost of living allowance, service incentive leave pay and the 13th
Month Pay. In view thereof, the economic analyst of the
Commission is directed to compute the monetary awards due each
complainant based on the available records of the respondents
retroactive as of three years prior to the filing of the instant case.
The facts at bar indubitably reveal that the most important requisite of control is
present. As gleaned from the operations of petitioner, when a customer enters into a
contract with the haberdashery or its proprietor, the latter directs an employee who
may be a tailor, pattern maker, sewer or "plantsadora" to take the customer's
measurements, and to sew the pants, coat or shirt as specified by the customer.
Supervision is actively manifested in all these aspects the manner and quality of
cutting, sewing and ironing.
SO ORDERED. 5
From the foregoing decision, petitioners appealed to the NLRC. The latter on March
30, 1988 affirmed said decision but limited the backwages awarded the Dioscoro
Pelobello and Casimiro Zapata to only one (1) year. 6
Furthermore, the presence of control is immediately evident in this memorandum

issued by Assistant Manager Cecilio B. Inocencio, Jr. dated May 30, 1981 addressed
to Topper's Makati Tailors which reads in part:
4. Effective immediately, new procedures shall be followed:
After their motion for reconsideration was denied, petitioners filed the instant petition
raising the following issues:
I
THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT AN EMPLOYEREMPLOYEE RELATIONSHIP EXISTS BETWEEN PETITIONER HABERDASHERY
AND RESPONDENTS WORKERS.
II
THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT RESPONDENTS
WORKERS ARE ENTITLED TO MONETARY CLAIMS DESPITE THE FINDING
THAT THEY ARE NOT ENTITLED TO MINIMUM WAGE.
III
THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT RESPONDENTS
PELOBELLO AND ZAPATA WERE ILLEGALLY DISMISSED. 7
The first issue which is the pivotal issue in this case is resolved in favor of private
respondents. We have repeatedly held in countless decisions that the test of
employer-employee relationship is four-fold: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to
control the employee's conduct. It is the so called "control test" that is the most
important element. 8 This simply means the determination of whether the employer
A. To follow instruction and orders from the undersigned Roger

Valderama, Ruben Delos Reyes and Ofel Bautista. Other than this
person (sic) must ask permission to the above mentioned before
giving orders or instructions to the tailors.
B. Before accepting the job orders tailors must check the materials,
job orders, due dates and other things to maximize the efficiency of
our production. The materials should be checked (sic) if it is
matched (sic) with the sample, together with the number of the job
order.
C. Effective immediately all job orders must be finished one day
before the due date. This can be done by proper scheduling of job
order and if you will cooperate with your supervisors. If you have
many due dates for certain day, advise Ruben or Ofel at once so
that they can make necessary adjustment on due dates.
D. Alteration-Before accepting alteration person attending on
customs (sic) must ask first or must advise the tailors regarding the
due dates so that we can eliminate what we call 'Bitin'.
E. If there is any problem regarding supervisors or co-tailor inside
our shop, consult with me at once settle the problem. Fighting
inside the shop is strictly prohibited. Any tailor violating this
memorandum will be subject to disciplinary action.
For strict compliance. 10

From this memorandum alone, it is evident that petitioner has reserved the right to
control its employees not only as to the result but also the means and methods by
which the same are to be accomplished. That private respondents are regular
employees is further proven by the fact that they have to report for work regularly
from 9:30 a.m. to 6:00 or 7:00 p.m. and are paid an additional allowance of P 3.00
daily if they report for work before 9:30 a.m. and which is forfeited when they arrive at
or after 9:30 a.m. 11
Since private respondents are regular employees, necessarily the argument that they
are independent contractors must fail. As established in the preceding paragraphs,
private respondents did not exercise independence in their own methods, but on the
contrary were subject to the control of petitioners from the beginning of their tasks to
their completion. Unlike independent contractors who generally rely on their own
resources, the equipment, tools, accessories, and paraphernalia used by private
respondents are supplied and owned by petitioners. Private respondents are totally
dependent on petitioners in all these aspects.
Coming now to the second issue, there is no dispute that private respondents are
entitled to the Minimum Wage as mandated by Section 2(g) of Letter of Instruction
No. 829, Rules Implementing Presidential Decree No. 1614 and reiterated in Section
3(f), Rules Implementing Presidential Decree 1713 which explicitly states that, "All
employees paid by the result shall receive not less than the applicable new minimum
wage rates for eight (8) hours work a day, except where a payment by result rate has
been established by the Secretary of Labor. ..." 12No such rate has been established
in this case.
But all these notwithstanding, the question as to whether or not there is in fact an
underpayment of minimum wages to private respondents has already been resolved
in the decision of the Labor Arbiter where he stated: "Hence, for lack of sufficient
evidence to support the claims of the complainants for alleged violation of the
minimum wage, their claims for underpayment re violation of the Minimum Wage Law
under Wage Orders Nos. 1, 2, 3, 4, and 5 must perforce fall." 13
The records show that private respondents did not appeal the above ruling of the
Labor Arbiter to the NLRC; neither did they file any petition raising that issue in the
Supreme Court. Accordingly, insofar as this case is concerned, that issue has been
laid to rest. As to private respondents, the judgment may be said to have attained
finality. For it is a well-settled rule in this jurisdiction that "an appellee who has not
himself appealed cannot obtain from the appellate court-, any affirmative relief other
than the ones granted in the decision of the court below. " 14
As a consequence of their status as regular employees of the petitioners, they can

claim cost of living allowance. This is apparent from the provision defining the
employees entitled to said allowance, thus: "... All workers in the private sector,
regardless of their position, designation or status, and irrespective of the method by
which their wages are paid. " 15
Private respondents are also entitled to claim their 13th Month Pay under Section 3(e)
of the Rules and Regulations Implementing P.D. No. 851 which provides:
Section 3. Employers covered. The Decree shall apply to all
employers except to:
xxx xxx xxx
(e) Employers of those who are paid on purely commission,
boundary, or task basis, and those who are paid a fixed amount for
performing a specific work, irrespective of the time consumed in the
performance thereof, except where the workers are paid on piecerate basis in which case the employer shall be covered by this
issuance insofar as such workers are concerned. (Emphasis
supplied.)
On the other hand, while private respondents are entitled to Minimum Wage, COLA
and 13th Month Pay, they are not entitled to service incentive leave pay because as
piece-rate workers being paid at a fixed amount for performing work irrespective of
time consumed in the performance thereof, they fall under one of the exceptions
stated in Section 1(d), Rule V, Implementing Regulations, Book III, Labor Code. For
the same reason private respondents cannot also claim holiday pay (Section 1(e),
Rule IV, Implementing Regulations, Book III, Labor Code).
With respect to the last issue, it is apparent that public respondents have misread the
evidence, for it does show that a violation of the employer's rules has been committed
and the evidence of such transgression, the copied barong tagalog, was in the
possession of Pelobello who pointed to Zapata as the owner. When required by their
employer to explain in a memorandum issued to each of them, they not only failed to
do so but instead went on AWOL (absence without official leave), waited for the
period to explain to expire and for petitioner to dismiss them. They thereafter filed an
action for illegal dismissal on the far-fetched ground that they were dismissed
because of union activities. Assuming that such acts do not constitute abandonment
of their jobs as insisted by private respondents, their blatant disregard of their
employer's memorandum is undoubtedly an open defiance to the lawful orders of the
latter, a justifiable ground for termination of employment by the employer expressly
provided for in Article 283(a) of the Labor Code as well as a clear indication of guilt for
the commission of acts inimical to the interests of the employer, another justifiable
ground for dismissal under the same Article of the Labor Code, paragraph (c). Well
established in our jurisprudence is the right of an employer to dismiss an employee
whose continuance in the service is inimical to the employer's interest. 16
In fact the Labor Arbiter himself to whom the explanation of private respondents was
submitted gave no credence to their version and found their excuses that said barong
tagalog was the one they got from the embroiderer for the Assistant Manager who
was investigating them, unbelievable.
Under the circumstances, it is evident that there is no illegal dismissal of said
employees. Thus, We have ruled that:
Under the foregoing facts, it is evident that petitioner Haberdashery had valid grounds
to terminate the services of private respondents.
WHEREFORE, the decision of the National Labor Relations Commission dated
March 30, 1988 and that of the Labor Arbiter dated June 10, 1986 are hereby
modified. The complaint filed by Pelobello and Zapata for illegal dismissal docketed
as NLRC NCR Case No. 2-428-85 is dismissed for lack of factual and legal bases.
Award of service incentive leave pay to private respondents is deleted.
SO ORDERED.
No employer may rationally be expected to continue in employment

a person whose lack of morals, respect and loyalty to his employer,
regard for his employer's rules, and appreciation of the dignity and
responsibility of his office, has so plainly and completely been
bared.
That there should be concern, sympathy, and solicitude for the
rights and welfare of the working class, is meet and proper. That in
controversies between a laborer and his master, doubts reasonably
arising from the evidence, or in the interpretation of agreements
and writings should be resolved in the former's favor, is not an
unreasonable or unfair rule. But that disregard of the employer's
own rights and interests can be justified by that concern and
solicitude is unjust and unacceptable. (Stanford Microsystems, Inc.
v. NLRC, 157 SCRA 414-415 [1988] ).
The law is protecting the rights of the laborer authorizes neither oppression nor selfdestruction of the employer.17 More importantly, while the Constitution is committed to
the policy of social justice and the protection of the working class, it should not be
supposed that every labor dispute will automatically be decided in favor of labor. 18
Finally, it has been established that the right to dismiss or otherwise impose
discriplinary sanctions upon an employee for just and valid cause, pertains in the first
place to the employer, as well as the authority to determine the existence of said
cause in accordance with the norms of due process. 19
There is no evidence that the employer violated said norms. On the contrary, private
respondents who vigorously insist on the existence of employer-employee
relationship, because of the supervision and control of their employer over them, were
the very ones who exhibited their lack of respect and regard for their employer's rules.
FIRST DIVISION
G.R. No. 123938 May 21, 1998
NLRC RAB III Case No. 01-1964-91 which affirmed the Decision 2 of Labor Arbiter
Ariel C. Santos dismissing their complaint for utter lack of merit.
The antecedents of this case, as summarized by the Office of the Solicitor General in
its Manifestation and Motion in Lieu of Comment, 3 are as follows:
LABOR CONGRESS OF THE PHILIPPINES (LCP) for and in behalf of its

members, ANA MARIE OCAMPO, MARY INTAL, ANNABEL CARESO, MARLENE
MELQIADES, IRENE JACINTO, NANCY GARCIA, IMELDA SARMIENTO, LENITA
VIRAY, GINA JACINTO, ROSEMARIE DEL ROSARIO, CATHERINE ASPURNA,
WINNIE PENA, VIVIAN BAA, EMILY LAGMAN, LILIAN MARFIL, NANCY DERACO,
JANET DERACO, MELODY JACINTO, CAROLYN DIZON, IMELDA MANALOTO,
NORY VIRAY, ELIZA SALAZAR, GIGI MANALOTO, JOSEFINA BASILIO, MARY
ANN MAYATI, ZENAIDA GARCIA, MERLY CANLAS, ERLINDA MANALANG,
ANGELINA QUIAMBAO, LANIE GARCIA, ELVIRA PIEDRA, LOURDES PANLILIO,
LUISA PANLILIO, LERIZA PANLILIO, ALMA CASTRO, ALDA DAVID, MYRA T.
OLALIA, MARIFE PINLAC, NENITA DE GUZMAN, JULIE GACAD, EVELYN
MANALO, NORA PATIO, JANETH CARREON, ROWENA MENDOZA, ROWENA
MANALO, LENY GARCIA, FELISISIMA PATIO, SUSANA SALOMON, JOYDEE
LANSANGAN, REMEDIOS AGUAS, JEANIE LANSANGAN, ELIZABETH
MERCADO, JOSELYN MANALESE, BERNADETH RALAR, LOLITA ESPIRITU,
AGNES SALAS, VIRGINIA MENDIOLA, GLENDA SALITA, JANETH RALAR,
ERLINDA BASILIO, CORA PATIO, ANTONIA CALMA, AGNES CARESO, GEMMA
BONUS, MARITESS OCAMPO, LIBERTY GELISANGA, JANETH MANARANG,
AMALIA DELA CRUZ, EVA CUEVAS, TERESA MANIAGO, ARCELY PEREZ,
LOIDA BIE, ROSITA CANLAS, ANALIZA ESGUERRA, LAILA MANIAGO, JOSIE
MANABAT, ROSARIO DIMATULAC, NYMPA TUAZON, DAIZY TUASON, ERLINDA
NAVARRO, EMILY MANARANG, EMELITA CAYANAN, MERCY CAYANAN,
LUZVIMINDA CAYANAN, ANABEL MANALO, SONIA DIZON, ERNA CANLAS,
MARIAN BENEDICTA, DOLORES DOLETIN, JULIE DAVID, GRACE VILLANUEVA,
VIRGINIA MAGBAG, CORAZON RILLION, PRECY MANALILI, ELENA RONOZ,
IMELDA MENDOZA, EDNA CANLAS and ANGELA CANLAS, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, EMPIRE FOOD PRODUCTS, its
Proprietor/President & Manager, MR. GONZALO KEHYENG and MRS. EVELYN
KEHYENG, respondents.
The 99 persons named as petitioners in this proceeding were rankand-file employees of respondent Empire Food Products, which
hired them on various dates (Paragraph 1, Annex "A" of Petition,
Annex "B;" Page 2, Annex "F" of Petition).
DAVIDE, JR., J.:
3. That Management of the Empire Food Products shall make the

proper adjustment of the Employees Wages within fifteen (15) days
from the signing of this Agreement and further agreed to register all
the employees with the SSS;
In this special civil action for certiorari under Rule 65, petitioners seek to reverse the
29 March 1995 resolution 1of the National Labor Relations Commission (NLRC) in
Petitioners filed against private respondents a complaint for

payment of money claim[s] and for violation of labor standard[s]
laws (NLRC Case No. RAB-111-10-1817-90). They also filed a
petition for direct certification of petitioner Labor Congress of the
Philippines as their bargaining representative (Case No. R03009010-RU-005).
On October 23, 1990, petitioners represented by LCP President
Benigno B. Navarro, Sr. and private respondents Gonzalo Kehyeng
and Evelyn Kehyeng in behalf of Empire Food Products, Inc.
entered into a Memorandum of Agreement which provided, among
others, the following:
1. That in connection with the pending Petition for Direct
Certification filed by the Labor Congress with the DOLE,
Management of the Empire Food Products has no objection [to] the
direct certification of the LCP Labor Congress and is now
recognizing the Labor Congress of the Philippines (LCP) and its
Local Chapter as the SOLE and EXCLUSIVE Bargaining Agent and
Representative for all rank and file employees of the Empire Food
Products regarding "WAGES, HOURS Of WORK, AND OTHER
TERMS AND CONDITIONS OF EMPLOYMENT;"
2. That with regards [sic] to NLRC CASE NO. RAB-III-10-1817-90
pending with the NLRC parties jointly and mutually agreed that the
issues thereof, shall be discussed by the parties and resolve[d]
during the negotiation of the Collective Bargaining Agreement;
4. That Employer, Empire Food Products thru its Management

agreed to deduct thru payroll deduction UNION DUES and other
Assessment[s] upon submission by the LCP Labor Congress
individual Check-Off Authorization[s] signed by the Union Members
indicating the amount to be deducted and further agreed all
deduction[s] made representing Union Dues and Assessment[s]
shall be remitted immediately to the LCP Labor Congress Treasurer
or authorized representative within three (3) or five (5) days upon
deductions [sic], Union dues not deducted during the period due,
shall be refunded or reimbursed by the Employer/Management.
Employer/Management further agreed to deduct Union dues from
non-union members the same amount deducted from union
members without need of individual Check-Off Authorizations [for]
Agency Fee;
In an Order dated October 24, 1990, Mediator Arbiter Antonio

Cortez approved the memorandum of agreement and certified LCP
"as the sole and exclusive bargaining agent among the rank-andfile employee of Empire Food Products for purposes of collective
bargaining with respect to wages, hours of work and other terms
and conditions of employment" (Annex "B" of Petition).
5. That in consideration [of] the foregoing covenant, parties jointly

and mutually agreed that NLRC CASE NO. RAB-III-10-1817-90
shall be considered provisionally withdrawn from the Calendar of
the National Labor Relations Commission (NLRC), while the
Petition for direct certification of the LCP Labor Congress parties
jointly move for the direct certification of the LCP Labor Congress;
a. Unfair Labor Practice by way of Illegal Lockout and/or Dismissal;
6. That parties jointly and mutually agreed that upon signing of this
Agreement, no Harassments [sic], Threats, Interferences [sic] of
their respective rights under the law, no Vengeance or Revenge by
each partner nor any act of ULP which might disrupt the operations
of the business;
7. Parties jointly and mutually agreed that pending negotiations or
formalization of the propose[d] CBA, this Memorandum of
Agreement shall govern the parties in the exercise of their
respective rights involving the Management of the business and the
terms and condition[s] of employment, and whatever problems and
grievances may arise by and between the parties shall be resolved
by them, thru the most cordial and good harmonious relationship by
communicating the other party in writing indicating said grievances
before taking any action to another forum or government agencies;
8. That parties [to] this Memorandum of Agreement jointly and
mutually agreed to respect, abide and comply with all the terms and
conditions hereof. Further agreed that violation by the parties of any
provision herein shall constitute an act of ULP. (Annex "A" of
Petition).
On November 9, 1990, petitioners through LCP President Navarro

submitted to private respondents a proposal for collective
bargaining (Annex "C" of Petition).
On January 23, 1991, petitioners filed a complaint docketed as
NLRC Case No. RAB-III-01-1964-91 against private respondents
for:
b. Union busting thru Harassments [sic], threats, and interfering

with the rights of employees to self-organization;
c. Violation of the Memorandum of Agreement dated October 23,
1990;
d. Underpayment of Wages in violation of R.A. No. 6640 and R.A.
No. 6727, such as Wages promulgated by the Regional Wage
Board;
e. Actual, Moral and Exemplary Damages. (Annex "D" of Petition)
After the submission by the parties of their respective position
papers and presentation of testimonial evidence, Labor Arbiter Ariel
C. Santos absolved private respondents of the charges of unfair
labor practice, union busting, violation of the memorandum of
agreement, underpayment of wages and denied petitioners' prayer
for actual, moral and exemplary damages. Labor Arbiter Santos,
however, directed the reinstatement of the individual complainants:
The undersigned Labor Arbiter is not oblivious to
the fact that respondents have violated a cardinal
rule in every establishment that a payroll and
other papers evidencing hours of work,
payments, etc. shall always be maintained and
subjected to inspection and visitation by
personnel of the Department of Labor and

Employment. As such penalty, respondents
should not escape liability for this technicality,
hence, it is proper that all individual complainants
except those who resigned and executed
quitclaim[s] and releases prior to the filing of this
complaint should be reinstated to their former
position[s] with the admonition to respondents
that any harassment, intimidation, coercion or
any form of threat as a result of this immediately
executory reinstatement shall be dealt with
accordingly.
SO ORDERED. (Annex "G" of petition)
May 1991, Record, p. 102; 16 May 1991, Record, p. 103, 11 June

1991, Record, p. 105). Formal offer of Documentary and
Testimonial Evidence was made by complainant on June 24, 1991
(Record, p. 106-109)
The Labor Arbiter must have overlooked the testimonies of some of
the individual complainants which are now on record. Other
individual complainants should have been summoned with the end
in view of receiving their testimonies. The complainants should be
afforded the time and opportunity to fully substantiate their claims
against the respondents. Judgment should be rendered only based
on the conflicting positions of the parties. The Labor Arbiter is called
upon to consider and pass upon the issues of fact and law raised
by the parties.
On appeal, the National Labor Relations Commission vacated the Decision dated
April 14, 1972 [sic] and remanded the case to the Labor Arbiter for further
proceedings for the following reasons:
Toward this end, therefore, it is Our considered view [that] the case
should be remanded to the Labor Arbiter of origin for further
proceedings. (Annex "H" of Petition)
The Labor Arbiter, through his decision, noted that ". . . complainant
did not present any single witness while respondent presented four
(4) witnesses in the persons of Gonzalo Kehyeng, Orlando Cairo,
Evelyn Kehyeng and Elvira Bulagan . . ." (p. 183, Records), that
". . . complainant before the National Labor Relations Commission
must prove with definiteness and clarity the offense charged. . . ."
(Record, p. 183); that ". . . complainant failed to specify under what
provision of the Labor Code particularly Art. 248 did respondents
violate so as to constitute unfair labor practice . . ." (Record, p.
183); that "complainants failed to present any witness who may
describe in what manner respondents have committed unfair labor
practice . . ." (Record, p. 185); that ". . . complainant LCP failed to
present anyone of the so-called 99 complainants in order to testify
who committed the threats and intimidation . . ." (Record, p. 185).
In a Decision dated July 27, 1994, Labor Arbiter Santos made the following
determination:
Upon review of the minutes of the proceedings on record, however,

it appears that complainant presented witnesses, namely,
BENIGNO NAVARRO, JR. (28 February 1991, RECORD, p. 91; 8
March 1991, RECORD, p. 92, who adopted its POSITION PAPER
AND CONSOLIDATED AFFIDAVIT, as Exhibit "A" and the annexes
thereto as Exhibit "B", "B-1" to "B-9", inclusive. Minutes of the
proceedings on record show that complainant further presented
other witnesses, namely: ERLINDA BASILIO (13 March 1991,
RECORD, p. 93; LOURDES PANTILLO, MARIFE PINLAC, LENIE
GARCIA (16 April 1991, Record, p. 96, see back portion thereof ; 2
Complainants failed to present with definiteness and clarity the

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

what type of threats or intimidation was committed and who
committed the same. What are the acts or utterances constitutive of
harassments [sic] being complained of? These are the specifics
which should have been proven with definiteness and clarity by
complainants who chose to rely heavily on its position paper
through generalizations to prove their case.
Insofar as violation of [the] Memorandum of Agreement dated
October 23, 1990 is concerned, both parties agreed that:
2 That with regards [sic] to the NLRC Case
No. RAB III-10-1817-90 pending with the NLRC,
parties jointly and mutually agreed that the issues
thereof shall be discussed by the parties and
resolve[d] during the negotiation of the CBA.
The aforequoted provision does not speak of [an] obligation on the
part of respondents but on a resolutory condition that may occur or
may not happen. This cannot be made the basis of an imposition of
an obligation over which the National Labor Relations Commission
has exclusive jurisdiction thereof.
Anent the charge that there was underpayment of wages, the
evidence points to the contrary. The enumeration of complainants'
wages in their consolidated Affidavits of merit and position paper
which implies underpayment has no leg to stand on in the light of
the fact that complainants' admission that they are piece workers or
paid on a pakiao [basis] i.e. a certain amount for every thousand
pieces of cheese curls or other products repacked. The only
limitation for piece workers or pakiao workers is that they should
receive compensation no less than the minimum wage for an eight
(8) hour work [sic]. And compliance therewith was satisfactorily
explained by respondent Gonzalo Kehyeng in his testimony (TSN,
p. 12-30) during the July 31, 1991 hearing. On cross-examination,
complainants failed to rebut or deny Gonzalo Kehyeng's testimony
that complainants have been even receiving more than the
minimum wage for an average workers [sic]. Certainly, a lazy
worker earns less than the minimum wage but the same cannot be
attributable to respondents but to the lazy workers.
Finally, the claim for moral and exemplary damages has no leg to
stand on when no malice, bad faith or fraud was ever proven to
have been perpetuated by respondents.
WHEREFORE, premises considered, the complaint is hereby

DISMISSED for utter lack of merit. (Annex "I" of Petition). 4
On appeal, the NLRC, in its Resolution dated 29 March 1995, 5 affirmed in toto the
decision of Labor Arbiter Santos. In so doing, the NLRC sustained the Labor Arbiter's
findings that: (a) there was a dearth of evidence to prove the existence of unfair labor
practice and union busting on the part of private respondents; (b) the agreement of 23
October 1990 could not be made the basis of an obligation within the ambit of the
NLRC's jurisdiction, as the provisions thereof, particularly Section 2, spoke of a
resolutory condition which could or could not happen; (c) the claims for underpayment
of wages were without basis as complainants were admittedly "pakiao" workers and
paid on the basis of their output subject to the lone limitation that the payment
conformed to the minimum wage rate for an eight-hour workday; and (d) petitioners
were not underpaid.
Their motion for reconsideration having been denied by the NLRC in its Resolution of
31 October 1995, 6petitioners filed the instant special civil action for certiorari raising
the following issues:
I
WHETHER OR NOT THE PUBLIC RESPONDENT NATIONAL
LABOR RELATIONS COMMISSION GRAVELY ABUSED ITS
DISCRETION WHEN IT DISREGARDED OR IGNORED NOT
ONLY THE EVIDENCE FAVORABLE TO HEREIN PETITIONERS,
APPLICABLE JURISPRUDENCE BUT ALSO ITS OWN
DECISIONS AND THAT OF THIS HONORABLE HIGHEST
TRIBUNAL WHICH [WAS] TANTAMOUNT NOT ONLY TO THE
DEPRIVATION OF PETITIONERS' RIGHT TO DUE PROCESS
BUT WOULD RESULT [IN] MANIFEST INJUSTICE.
II
WHETHER OR NOT THE PUBLIC RESPONDENT GRAVELY
ABUSED ITS DISCRETION WHEN IT DEPRIVED THE
PETITIONERS OF THEIR CONSTITUTIONAL RIGHT TO SELFORGANIZATION, SECURITY OF TENURE, PROTECTION TO
LABOR, JUST AND HUMANE CONDITIONS OF WORK AND DUE
PROCESS.
III
WHETHER OR NOT THE PETITIONERS WERE ILLEGALLY

EASED OUT [OF] OR CONSTRUCTIVELY DISMISSED FROM
THEIR ONLY MEANS OF LIVELIHOOD.
IV
WHETHER OR NOT PETITIONERS SHOULD BE REINSTATED
FROM THE DATE OF THEIR DISMISSAL UP TO THE TIME OF
THEIR REINSTATEMENT, WITH BACKWAGES, STATUTORY
BENEFITS, DAMAGES AND ATTORNEY'S FEES. 7
We required respondents to file their respective Comments.
In their Manifestation and Comment, private respondents asserted that the petition
was filed out of time. As petitioners admitted in their Notice to File Petition for Review
on Certiorari that they received a copy of the resolution (denying their motion for
reconsideration) on 13 December 1995, they had only until 29 December 1995 to file
the petition. Having failed to do so, the NLRC thus already entered judgment in
private respondents' favor.
In their Reply, petitioners averred that Mr. Navarro, a non-lawyer who filed the notice
to file a petition for review on their behalf, mistook which reglementary period to apply.
Instead of using the "reasonable time" criterion forcertiorari under Rule 65, he used
the 15-day period for petitions for review on certiorari under Rule 45. They hastened
to add that such was a mere technicality which should not bar their petition from being
decided on the merits in furtherance of substantial justice, especially considering that
respondents neither denied nor contradicted the facts and issues raised in the
petition.
In its Manifestation and Motion in Lieu of Comment, the Office of the Solicitor General
(OSG) sided with petitioners. It pointed out that the Labor Arbiter, in finding that
petitioners abandoned their jobs, relied solely on the testimony of Security Guard
Rolando Cairo that petitioners refused to work on 21 January 1991, resulting in the
spoilage of cheese curls ready for repacking. However, the OSG argued, this refusal
to report for work for a single day did not constitute abandonment, which pertains to a
clear, deliberate and unjustified refusal to resume employment, and not mere
absence. In fact, the OSG stressed, two days after allegedly abandoning their work,
petitioners filed a complaint for, inter alia, illegal lockout or illegal dismissal. Finally,
the OSG questioned the lack of explanation on the part of Labor Arbiter Santos as to
why he abandoned his original decision to reinstate petitioners.
In view of the stand of the OSG, we resolved to require the NLRC to file its own
Comment.
In its Comment, the NLRC invokes the general rule that factual findings of an
administrative agency bind a reviewing court and asserts that this case does not fall
under the exceptions. The NLRC further argues that grave abuse of discretion may
not be imputed to it, as it affirmed the factual findings and legal conclusions of the
Labor Arbiter only after carefully reviewing, weighing and evaluating the evidence in
support thereof, as well as the pertinent provisions of law and jurisprudence.
In their Reply, petitioners claim that the decisions of the NLRC and the Labor Arbiter
were not supported by substantial evidence; that abandonment was not proved; and
that much credit was given to self-serving statements of Gonzalo Kehyeng, owner of
Empire Foods, as to payment of just wages.
On 7 July 1997, we gave due course to the petition and required the parties to file
their respective memoranda. However, only petitioners and private respondents filed
their memoranda, with the NLRC merely adopting its Comment as its Memorandum.
We find for petitioners.
Invocation of the general rule that factual findings of the NLRC bind this Court is
unavailing under the circumstances. Initially, we are unable to discern any compelling
reason justifying the Labor Arbiter's volte facefrom his 14 April 1992 decision
reinstating petitioners to his diametrically opposed 27 July 1994 decision, when in
both instances, he had before him substantially the same evidence. Neither do we
find the 29 March 1995 NLRC resolution to have sufficiently discussed the facts so as
to comply with the standard of substantial evidence. For one thing, the NLRC
confessed its reluctance to inquire into the veracity of the Labor Arbiter's factual
findings, staunchly declaring that it was "not about to substitute [its] judgment on
matters that are within the province of the trier of facts." Yet, in the 21 July 1992
NLRC resolution, 8 it chastised the Labor Arbiter for his errors both in judgment and
procedure; for which reason it remanded the records of the case to the Labor Arbiter
for compliance with the pronouncements therein.
What cannot escape from our attention is that the Labor Arbiter did not heed the
observations and pronouncements of the NLRC in its resolution of 21 July 1992,
neither did he understand the purpose of the remand of the records to him. In said
resolution, the NLRC summarized the grounds for the appeal to be:
1. that there is a prima facie evidence of abuse of discretion and
acts of gross incompetence committed by the Labor Arbiter in
rendering the decision.
2. that the Labor Arbiter in rendering the decision committed
serious errors in the findings of facts.
After which, the NLRC observed and found:

Complainant alleged that the Labor Arbiter disregarded the
testimonies of the 99 complainants who submitted their
Consolidated Affidavit of Merit and Position Paper which was
adopted as direct testimonies during the hearing and crossexamined by respondents' counsel.
Evelyn Kehyeng and Elvira Bulagan . . ." (Records, p. 183), that
(Record, p. 183; that ". . . complainant failed to specify under what
practice . . ." (Record, p. 185); that ". . . complainant a [sic] LCP
failed to present anyone of the so called 99 complainants in order
to testify who committed the threats and intimidation . . ." (Record,
p.185).
their claims against the respondents. Judgment should [have been]

rendered only based on the conflicting positions of the parties. The
Labor Arbiter is called upon to consider and pass upon the issues
of fact and law raised by the parties.
Toward this end, therefore, it is Our considered view the case
proceedings.
Further, We take note that the decision does not contain a
dispositive portion or fallo. Such being the case, it may be well said
that the decision does not resolve the issues at hand. On another
plane, there is no portion of the decision which could be carried out
by way of execution.
It may be argued that the last paragraph of the decision may be
categorized as the dispositive portion thereof:
xxx xxx xxx
The undersigned Labor Arbiter is not oblivious
[to] the fact that respondents have violated a
cardinal rule in every establishment that a payroll
and other papers evidencing hour[s] of work,
payment, etc. shall always be maintained and
hence, it is proper that all the individual
complainants except those who resigned and
executed quitclaim[s] and release[s] prior to the
filing of this complaint should be reinstated to
their former position with the admonition to
respondents that any harassment, intimidation,
coercion or any form of threat as a result of this
immediately executory reinstatement shall be
dealt with accordingly.

it appears that complainant presented witnesses, namely
March 1991, RECORD, p. 92), who adopted its POSITION PAPER
AND CONSOLIDATED AFFIDAVIT as Exhibit A and the annexes
thereto as Exhibit B, B-1 to B-9, inclusive. Minutes of the
RECORD, p. 93; LOURDES PANTILLO, MARIFE PINLAC, LENI
GARCIA (16 April 1991, Record, p. 96, see back portion thereof; 2
May 1991, Record, p. 102; 16 May 1991, Record, p. 103; 11 June
Testimonial Evidence was made by the complainant on June 24,
1991 (Record, p.106-109).
in view of receiving their testimonies. The complainants should
[have been] afforded the time and opportunity to fully substantiate
SO ORDERED.
It is Our considered view that even assuming arguendo that the
respondents failed to maintain their payroll and other papers
evidencing hours of work, payment etc., such circumstance,
standing alone, does not warrant the directive to reinstate

complainants to their former positions. It is [a] well settled rule that
there must be a finding of illegal dismissal before reinstatement be
mandated.
In this regard, the LABOR ARBITER is hereby directed to include in
his clarificatory decision, after receiving evidence, considering and
resolving the same, the requisite dispositive portion. 9
Apparently, the Labor Arbiter perceived that if not for petitioners, he would not have
fallen victim to this stinging rebuke at the hands of the NLRC. Thus does it appear to
us that the Labor Arbiter, in concluding in his 27 July 1994 Decision that petitioners
abandoned their work, was moved by, at worst, spite, or at best, lackadaisically
glossed over petitioner's evidence. On this score, we find the following observations
of the OSG most persuasive:
In finding that petitioner employees abandoned their work, the
Labor Arbiter and the NLRC relied on the testimony of Security
Guard Rolando Cairo that on January 21, 1991, petitioners refused
to work. As a result of their failure to work, the cheese curls ready
for repacking on said date were spoiled.
The failure to work for one day, which resulted in the spoilage of
cheese curls does not amount to abandonment of work. In fact two
(2) days after the reported abandonment of work or on January 23,
1991, petitioners filed a complaint for, among others, unfair labor
practice, illegal lockout and/or illegal dismissal. In several cases,
this Honorable Court held that "one could not possibly abandon his
work and shortly thereafter vigorously pursue his complaint for
illegal dismissal (De Ysasi III v. NLRC, 231 SCRA 173; Ranara v.
NLRC, 212 SCRA 631; Dagupan Bus Co. v. NLRC, 191 SCRA 328;
Atlas Consolidated Mining and Development Corp. v. NLRC, 190
SCRA 505; Hua Bee Shirt Factory v. NLRC, 186 SCRA 586;
Mabaylan v. NLRC, 203 SCRA 570 and Flexo Manufacturing v.
NLRC, 135 SCRA 145). In Atlas Consolidated, supra, this
Honorable Court explicitly stated:
It would be illogical for Caballo, to abandon his
work and then immediately file an action seeking
for his reinstatement. We can not believe that
Caballo, who had worked for Atlas for two years
and ten months, would simply walk away from
his job unmindful of the consequence of his
act. i.e. the forfeiture of his accrued employment
benefits. In opting to finally to [sic] contest the

legality of his dismissal instead of just claiming
his separation pay and other benefits, which he
actually did but which proved to be futile after all,
ably supports his sincere intention to return to
work, thus negating Atlas' stand that he had
abandoned his job.
In De Ysasi III v. NLRC (supra), this Honorable Court stressed that
it is the clear, deliberate and unjustified refusal to resume
employment and not mere absence that constitutes abandonment.
The absence of petitioner employees for one day on January 21,
1991 as testified [to] by Security Guard Orlando Cairo did not
constitute abandonment.
In his first decision, Labor Arbiter Santos expressly directed the
reinstatement of the petitioner employees and admonished the
private respondents that "any harassment, intimidation, coercion or
any form of threat as a result of this immediately executory
reinstatement shall be dealt with accordingly.
In his second decision, Labor Arbiter Santos did not state why he
was abandoning his previous decision directing the reinstatement
of petitioner employees.
By directing in his first decision the reinstatement of petitioner
employees, the Labor Arbiter impliedly held that they did not
abandon their work but were not allowed to work without just cause.
That petitioner employees are "pakyao" or piece workers does not
imply that they are not regular employees entitled to reinstatement.
Private respondent Empire Food Products, Inc. is a food and fruit
processing company. In Tabas v. California Manufacturing Co., Inc.
(169 SCRA 497), this Honorable Court held that the work of
merchandisers of processed food, who coordinate with grocery
stores and other outlets for the sale of the processed food is
necessary in the day-to-day operation[s] of the company. With more
reason, the work of processed food repackers is necessary in the
day-to-day operation[s] of respondent Empire Food Products. 10
It may likewise be stressed that the burden of proving the existence of just cause for
dismissing an employee, such as abandonment, rests on the employer, 11 a burden
private respondents failed to discharge.
Private respondents, moreover, in considering petitioners' employment to have been

terminated by abandonment, violated their rights to security of tenure and
constitutional right to due process in not even serving them with a written notice of
such termination. 12 Section 2, Rule XIV, Book V of the Omnibus Rules Implementing
the Labor Code provides:
Sec. 2. Notice of Dismissal Any employer who seeks to dismiss
a worker shall furnish him a written notice stating the particular acts
or omission constituting the grounds for his dismissal. In cases of
abandonment of work, the notice shall be served at the worker's
last known address.
pay, 18 inter alia, "field personnel and other employees whose time and performance
is unsupervised by the employer, including those who are engaged on task or
contract basis, purely commission basis, or those who are paid a fixed amount for
performing work irrespective of the time consumed in the performance thereof."
Plainly, petitioners as piece-rate workers do not fall within this group. As mentioned
earlier, not only did petitioners labor under the control of private respondents as their
employer, likewise did petitioners toil throughout the year with the fulfillment of their
quota as supposed basis for compensation. Further, in Section 8 (b), Rule IV, Book III
which we quote hereunder, piece workers are specifically mentioned as being entitled
to holiday pay.
Sec. 8. Holiday pay of certain employees.
Petitioners are therefore entitled to reinstatement with full back wages pursuant to
Article 279 of the Labor Code, as amended by R.A. No. 6715. Nevertheless, the
records disclose that taking into account the number of employees involved, the
length of time that has lapsed since their dismissal, and the perceptible resentment
and enmity between petitioners and private respondents which necessarily strained
their relationship, reinstatement would be impractical and hardly promotive of the best
interests of the parties. In lieu of reinstatement then, separation pay at the rate of one
month
for
every
year
of
service,
with
a fraction of at least six (6) months of service considered as one (1) year, is in
order. 13
That being said, the amount of back wages to which each petitioner is entitled,
however, cannot be fully settled at this time. Petitioners, as piece-rate workers having
been paid by the piece, 14 there is need to determine the varying degrees of
production and days worked by each worker. Clearly, this issue is best left to the
National Labor Relations Commission.
As to the other benefits, namely, holiday pay, premium pay, 13th month pay and
service incentive leave which the labor arbiter failed to rule on but which petitioners
prayed for in their complaint, 15 we hold that petitioners are so entitled to these
benefits. Three (3) factors lead us to conclude that petitioners, although piece-rate
workers, were regular employees of private respondents. First, as to the nature of
petitioners' tasks, their job of repacking snack food was necessary or desirable in the
usual business of private respondents, who were engaged in the manufacture and
selling of such food products; second, petitioners worked for private respondents
throughout the year, their employment not having been dependent on a specific
project or season; and third, the length of time 16 that petitioners worked for private
respondents. Thus, while petitioners' mode of compensation was on a "per piece
basis," the status and nature of their employment was that of regular employees.
The Rules Implementing the Labor Code exclude certain employees from receiving
benefits such as nighttime pay, holiday pay, service incentive leave 17 and 13th month
(b) Where a covered employee

is paid by results or output,
such as payment on piece
work, his holiday pay shall not
be less than his average daily
earnings for the last seven (7)
actual working days preceding
the regular holiday: Provided,
however, that in no case shall
the holiday pay be less than
the
applicable
statutory
minimum wage rate.
In addition, the Revised Guidelines on the Implementation of the 13th Month Pay
Law, in view of the modifications to P.D. No. 851 19 by Memorandum Order No. 28,
clearly exclude the employer of piece rate workers from those exempted from paying
13th month pay, to wit:
2. EXEMPTED EMPLOYERS
The following employers are still not covered by P.D. No. 851:
d. Employers of those who are
paid on purely commission,
boundary or task basis, and
those who are paid a fixed
amount for performing specific
work, irrespective of the time
consumed in the performance
thereof, except
where
the
workers are paid on piece-rate
basis in which case the

employer shall grant the
required 13th month pay to
such
workers.
(emphasis
supplied)
IN VIEW WHEREOF, the instant petition is hereby GRANTED. The Resolution of the
National Labor Relations Commission of 29 March 1995 and the Decision of the
Labor Arbiter of 27 July 1994 in NLRC Case No. RAB-III-01-1964-91 are hereby SET
ASIDE, and another is hereby rendered:
1. DECLARING petitioners to have been illegally
dismissed by private respondents, thus entitled to
full back wages and other privileges, and
separation pay in lieu of reinstatement at the rate
of one month's salary for every year of service
with a fraction of six months of service
considered as one year;
The Revised Guidelines as well as the Rules and Regulations identify those
workers who fall under the piece-rate category as those who are paid a
standard amount for every piece or unit of work produced that is more or
less regularly replicated, without regard to the time spent in producing the
same. 20
As to overtime pay, the rules, however, are different. According to Sec. 2(e), Rule I,
Book III of the Implementing Rules, workers who are paid by results including those
who are paid on piece-work, takay, pakiao, or task basis, if their output rates are in
accordance with the standards prescribed under Sec. 8, Rule VII, Book III, of these
regulations, or where such rates have been fixed by the Secretary of Labor in
accordance with the aforesaid section, are not entitled to receive overtime pay. Here,
private respondents did not allege adherence to the standards set forth in Sec. 8 nor
with the rates prescribed by the Secretary of Labor. As such, petitioners are beyond
the ambit of exempted persons and are therefore entitled to overtime pay. Once
more, the National Labor Relations Commission would be in a better position to
determine the exact amounts owed petitioners, if any.
As to the claim that private respondents violated petitioners' right to self-organization,
the evidence on record does not support this claim. Petitioners relied almost entirely
on documentary evidence which, per se, did not prove any wrongdoing on private
respondents' part. For example, petitioners presented their complaint 21 to prove the
violation of labor laws committed by private respondents. The complaint, however, is
merely "the pleading alleging the plaintiff's cause or causes of action." 22 Its contents
are merely allegations, the verity of which shall have to be proved during the trial.
They likewise offered their Consolidated Affidavit of Merit and Position Paper 23 which,
like the offer of their Complaint, was a tautological exercise, and did not help nor
prove their cause. In like manner, the petition for certification election 24 and the
subsequent order of certification 25 merely proved that petitioners sought and acquired
the status of bargaining agent for all rank-and-file employees. Finally, the existence of
the memorandum of agreement 26 offered to substantiate private respondents' noncompliance therewith, did not prove either compliance or non-compliance, absent
evidence of concrete, overt acts in contravention of the provisions of the
memorandum.
2. REMANDING the records of this case to the

National Labor Relations Commission for its
determination of the back wages and other
benefits and separation pay, taking into account
the foregoing observations; and
3. DIRECTING the National Labor Relations
Commission to resolve the referred issues within
sixty (60) days from its receipt of a copy of this
decision and of the records of the case and to
submit to this Court a report of its compliance
hereof within ten (10) days from the rendition of
its resolution.
Costs against private respondents.
SO ORDERED.
SECOND DIVISION
Disputing the complaint, petitioners contend that respondent Fredelito Juanatas was
not an employee of the firm but was merely a helper of his father Pedro; that all
commissions for 1988 and 1989, as well as those up to March, 1990, were duly paid;
and that the truck driven by respondent Pedro Juanatas was sold to one Winston
Flores in 1991 and, therefore, private respondents were not illegally dismissed. 2
G.R. No. 116960 April 2, 1996

BERNARDO JIMENEZ and JOSE JIMENEZ,
TRUCKING, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION,
FREDELITO JUANATAS,respondents.
as
Operators
PEDRO
of
JUANATAS
JJ's
and
REGALADO, J.:p
This petition for certiorari seeks the annulment of the decision of respondent National
Labor Relations Commission (NLRC), dated May 27, 1994, as well as its resolution,
dated August 8, 1994, denying petitioners's motion for reconsideration, 1 which
assailed decision affirmed with modifications the adverse decision of the labor arbiter
against herein petitioners.
On June 29, 1990, herein private respondent Pedro and Fredelito Juanatas, father
and son, filed a claim for unpaid wages/commissions, separation pay and damages
against JJ's Trucking and/or Dr. Bernardo Jimenez. Said respondents, as
complainants therein, alleged that in December, 1987, they were hired by herein
petitioner Bernardo Jimenez as driver/mechanic and helper, respectively, in his
trucking firm, JJ Trucking. They were assigned to a ten-wheeler truck to haul soft
drinks of Coca-Cola Bottling Company and paid on commission basis, initially fixed at
17% but later increased to 20% in 1988.
Private respondents further alleged that for the years 1988 and 1989 they received
only a partial commission of P84,000.00 from petitioners' total gross income of almost
P1,000,000.00 for the said two years. Consequently, with their commission for that
period being computed at 20% of said income, there was an unpaid balance to them
of P106,211.86; that until March, 1990 when their services were illegally terminated,
they were further entitled to P15,050.309 which, excluding the partial payment of
P7,000.00, added up to a grand total of P114,261.86 due and payable to them; and
that petitioners' refusal to pay their aforestated commission was a ploy to unjustly
terminate them.
After hearings duly conducted, and with the submission of the parties'
position/supporting papers, Labor Arbiter Rogue B. de Guzman rendered a decision
dated March 9, 1993, with this decretal portion:
WHEREFORE, decision is hereby issued ordering respondents JJ's
Trucking and/or Dr. Bernardo Jimenez to pay jointly and severally
complainant Pedro Juanatas a separation pay of FIFTEEN
THOUSAND FIFTY (P15,050.00) PESOS, plus attorney's fee
equivalent to ten percent (10%) of the award. The complaint of
Fredelito Juanatas is hereby dismissed for lack of merit. 3
On appeal filed by private respondents, the NLRC modified the decision of the labor
arbiter and disposed as follows:
PREMISES CONSIDERED, the Decision of March 9, 1993 is
hereby MODIFIED, to wit:
1. Complainant Fredelito Juanatas is hereby declared respondents'
employee and shares in (the) commission and separation pay
awarded to complainant Pedro Juanatas, his father.
2. Respondent JJ's Trucking and Dr. Bernardo Jimenez are jointly
and severally liable to pay complainants their unpaid commissions
in the total amount of Eighty Four Thousand Three Hundred Eighty
Seven Pesos and 05/100 (P84,387.05).
3. The award of attorney's fees is reduced accordingly to eight
thousand four hundred thirty eight pesos and 70/100 (P8,438.70).
4. The other findings stand affirmed. 4
Petitioners' motion for reconsideration having been denied thereafter in public
respondent's resolution dated August 8, 1994, 5 petitioners have come to us in this
recourse, raising for resolution the issues as to whether or not respondent NLRC
committed grave abuse of discretion in ruling (a) that private respondents were not
paid their commissions in full, and (b) that respondent Fredelito Juanatas was an
employee of JJ's Trucking.
The review of labor cases elevated to us on certiorari is confined to questions of
jurisdiction or grave abuse of discretion. 6 As a rule, this Court does not review
supposed errors in the decision of the NLRC which raise factual issues, because
factual findings of agencies exercising quasi-judicial functions are accorded not only
respect but even finality, 7aside from the consideration that the Court is essentially not
a trier of facts. However, in the case at bar, a review of the records thereof with an
assessment of the facts is necessary since the factual findings of the NLRC and the
labor arbiter are at odds with each other. 8
On the first issue, we find no reason to disturb the findings of respondent NLRC that
the entire amount of commissions was not paid, this by reason of the evident failure
of herein petitioners to present evidence that fullpayment thereof has been made. It is
a basic rule in evidence that each party must prove his affirmative allegation. Since
the burden of evidence lies with the party who asserts an affirmative allegation, the
plaintiff or complainant has to prove his affirmative allegations in the complaint and
the defendant or respondent has to prove the affirmative allegations in his affirmative
defenses and counterclaim. Considering that petitioners herein assert that the
disputed commissions have been paid, they have the bounden duty to prove that fact.
As a general rule, one who pleads payment has the burden of proving it. 9 Even where
the plaintiff must allege non-payment, the general rule is that the burden rests on the
defendant to prove payment, rather than on the plaintiff to prove non-payment. 10 The
debtor has the burden of showing with legal certainty that the obligation has been
discharged by payment. 11
When the existence of a debt is fully established by the evidence contained in the
record, the burden of proving that it has been extinguished by payment devolves
upon the debtor who offers such a defense to the claim of the creditor. 12 Where the
debtor introduces some evidence of payment, the burden of going forward with the
evidence as distinct from the general burden of proof shifts to the creditor, who
is then under a duty of producing some evidence to show non-payment. 13
In the instant case, the right of respondent Pedro Juanatas to be paid a commission
equivalent to 17%, later increased to 20%, of the gross income is not disputed by
petitioners. Although private respondents admit receipt of partial payment, petitioners
still have to present proof of full payment. Where the defendant sued for a debt
admits that the debt was originally owed, and pleads payment in whole or in part, it is
incumbent upon him to prove such payment. That a plaintiff admits that some
payments have been made does not change the burden of proof. The defendant still
has the burden of establishing payments beyond those admitted by plaintiff. 14
The testimony of petitioners which merely denied the claim of private respondents,
unsupported by documentary evidence, is not sufficient to establish payment.
Although petitioners submitted a notebook showing the allegedvales of private
respondents for the year 1990, 15 the same is inadmissible and cannot be given
probative value considering that it is not properly accomplished, is undated and
unsigned, and is thus uncertain as to its origin and authenticity. 16
The positive testimony of a creditor may be sufficient of it self to show non-payment,
even when met by indefinite testimony of the debtor. Similarly, the testimony of the
debtor may also be sufficient to show payment, but, where his testimony is
contradicted by the other party or by a disinterested witness, the issue may be
determined against the debtor since he has the burden of proof. The testimony of the
debtor creating merely an inference of payment will not be regarded as conclusive on
that issue. 17
Hence, for failure to present evidence to prove payment, petitioners defaulted in their
defense and in effect admitted the allegations of private respondents.
With respect to the second issue, however, we agree with petitioners that the NLRC
erred in holding that the son, Fredelito, was an employee of petitioners.
We have consistently ruled that in determining the existence of an employeremployee relationship, the elements that are generally considered are the following:
(1) the selection and engagement of the employee; (2) the Payment of wages; (3) the
power of dismissal; and (4) the power to control the employee's conduct, 18 with the
control test assuming primacy in the overall consideration.
In the case at bar, the aforementioned elements are not present. The agreement was
between petitioner JJ's Trucking and respondent Pedro Juanatas. The hiring of a
helper was discretionary on the part of Pedro. Under their contract, should he employ
a helper, he would be responsible for the latter's compensation. With or without a
helper, respondent Pedro Juanatas was entitled to the same percentage of
commission. Respondent Fredelito Juanatas was hired by his father, Pedro, and the
compensation he received was paid by his father out of the latter's commission.
Further, Fredelito was not subject to the control and supervision of and dismissal by
petitioners but of and by his father.
Even the Solicitor General, in his comment, agreed with the finding of the labor arbiter
that Fredelito was not an employee of petitioners, to wit:
Public respondent committed grave abuse of discretion in holding
that said private respondent is an employee of JJ's Trucking on the
ground that, citing Article 281 of the Labor Code, "Fredelito's
functions as helper was (sic) necessary and desirable to

respondent's trucking business".
In the first place, Article 281 of the Labor Code does not refer to the
basic factors that must underlie every existing employer-employee
relationship, the absence of any of which will negate such
existence. It refers instead to the qualifications of "(A)n employee
who is allowed to work after a probationary period" and who, as a
consequence, "shall be considered a regular employee." Secondly,
the test in determining the existence of an employee-employer
relationship is not the necessity and/or desirability of one's
functions in relation to an employer's business, but "(1) the
selection and engagement of the employee; (2) the payment of
wages; (3) the power of dismissal; and (4) the power to control the
employee's conduct. The latter is the most important element"
(Singer Sewing Machine Company vs. Drilon, 193 SCRA 270, 275;
Deferia vs. NLRC, 194 SCRA 531, 525; Ecal vs. NLRC, 224, 228,
Hijos De F. Escano, Inc vs. NLRC, 224 SCRA 781, 785). The
aforequoted pertinent findings of the Labor Arbiter indicate (that)
the foregoing requirements do not exist between petitioner and
private respondent Fredelito Juanatas. Thus, the labor arbiter
stated that respondent Fredelito Juanatas was never hired by
petitioners. Instead the former's services were availed of by
respondent Pedro Juanatas his father, who, at the same time,
supervised and controlled his work and paid his commissions.
Respondent NLRC's ruling did not traverse these findings of the
labor arbiter. 19
WHEREFORE, the judgment of respondent National Labor Relations Commission is
hereby AFFIRMED, with the MODIFICATION that paragraph 1 thereof, declaring
Fredelito Juanatas an employee of petitioners and entitled to share in the award for
commission and separation pay, is hereby DELETED.
SO ORDERED.
FIRST DIVISION
G.R. No. 123938 May 21, 1998
NLRC RAB III Case No. 01-1964-91 which affirmed the Decision 2 of Labor Arbiter
Ariel C. Santos dismissing their complaint for utter lack of merit.
The antecedents of this case, as summarized by the Office of the Solicitor General in
its Manifestation and Motion in Lieu of Comment, 3 are as follows:
LABOR CONGRESS OF THE PHILIPPINES (LCP) for and in behalf of its

members, ANA MARIE OCAMPO, MARY INTAL, ANNABEL CARESO, MARLENE
MELQIADES, IRENE JACINTO, NANCY GARCIA, IMELDA SARMIENTO, LENITA
VIRAY, GINA JACINTO, ROSEMARIE DEL ROSARIO, CATHERINE ASPURNA,
WINNIE PENA, VIVIAN BAA, EMILY LAGMAN, LILIAN MARFIL, NANCY DERACO,
JANET DERACO, MELODY JACINTO, CAROLYN DIZON, IMELDA MANALOTO,
NORY VIRAY, ELIZA SALAZAR, GIGI MANALOTO, JOSEFINA BASILIO, MARY
ANN MAYATI, ZENAIDA GARCIA, MERLY CANLAS, ERLINDA MANALANG,
ANGELINA QUIAMBAO, LANIE GARCIA, ELVIRA PIEDRA, LOURDES PANLILIO,
LUISA PANLILIO, LERIZA PANLILIO, ALMA CASTRO, ALDA DAVID, MYRA T.
OLALIA, MARIFE PINLAC, NENITA DE GUZMAN, JULIE GACAD, EVELYN
MANALO, NORA PATIO, JANETH CARREON, ROWENA MENDOZA, ROWENA
MANALO, LENY GARCIA, FELISISIMA PATIO, SUSANA SALOMON, JOYDEE
LANSANGAN, REMEDIOS AGUAS, JEANIE LANSANGAN, ELIZABETH
MERCADO, JOSELYN MANALESE, BERNADETH RALAR, LOLITA ESPIRITU,
AGNES SALAS, VIRGINIA MENDIOLA, GLENDA SALITA, JANETH RALAR,
ERLINDA BASILIO, CORA PATIO, ANTONIA CALMA, AGNES CARESO, GEMMA
BONUS, MARITESS OCAMPO, LIBERTY GELISANGA, JANETH MANARANG,
AMALIA DELA CRUZ, EVA CUEVAS, TERESA MANIAGO, ARCELY PEREZ,
LOIDA BIE, ROSITA CANLAS, ANALIZA ESGUERRA, LAILA MANIAGO, JOSIE
MANABAT, ROSARIO DIMATULAC, NYMPA TUAZON, DAIZY TUASON, ERLINDA
NAVARRO, EMILY MANARANG, EMELITA CAYANAN, MERCY CAYANAN,
LUZVIMINDA CAYANAN, ANABEL MANALO, SONIA DIZON, ERNA CANLAS,
MARIAN BENEDICTA, DOLORES DOLETIN, JULIE DAVID, GRACE VILLANUEVA,
VIRGINIA MAGBAG, CORAZON RILLION, PRECY MANALILI, ELENA RONOZ,
IMELDA MENDOZA, EDNA CANLAS and ANGELA CANLAS, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, EMPIRE FOOD PRODUCTS, its
Proprietor/President & Manager, MR. GONZALO KEHYENG and MRS. EVELYN
KEHYENG, respondents.
The 99 persons named as petitioners in this proceeding were rankand-file employees of respondent Empire Food Products, which
hired them on various dates (Paragraph 1, Annex "A" of Petition,
Annex "B;" Page 2, Annex "F" of Petition).
DAVIDE, JR., J.:
3. That Management of the Empire Food Products shall make the

proper adjustment of the Employees Wages within fifteen (15) days
from the signing of this Agreement and further agreed to register all
the employees with the SSS;
In this special civil action for certiorari under Rule 65, petitioners seek to reverse the
29 March 1995 resolution 1of the National Labor Relations Commission (NLRC) in
Petitioners filed against private respondents a complaint for

payment of money claim[s] and for violation of labor standard[s]
laws (NLRC Case No. RAB-111-10-1817-90). They also filed a
petition for direct certification of petitioner Labor Congress of the
Philippines as their bargaining representative (Case No. R03009010-RU-005).
On October 23, 1990, petitioners represented by LCP President
Benigno B. Navarro, Sr. and private respondents Gonzalo Kehyeng
and Evelyn Kehyeng in behalf of Empire Food Products, Inc.
entered into a Memorandum of Agreement which provided, among
others, the following:
1. That in connection with the pending Petition for Direct
Certification filed by the Labor Congress with the DOLE,
Management of the Empire Food Products has no objection [to] the
direct certification of the LCP Labor Congress and is now
recognizing the Labor Congress of the Philippines (LCP) and its
Local Chapter as the SOLE and EXCLUSIVE Bargaining Agent and
Representative for all rank and file employees of the Empire Food
Products regarding "WAGES, HOURS Of WORK, AND OTHER
TERMS AND CONDITIONS OF EMPLOYMENT;"
2. That with regards [sic] to NLRC CASE NO. RAB-III-10-1817-90
pending with the NLRC parties jointly and mutually agreed that the
issues thereof, shall be discussed by the parties and resolve[d]
during the negotiation of the Collective Bargaining Agreement;
4. That Employer, Empire Food Products thru its Management

agreed to deduct thru payroll deduction UNION DUES and other
Assessment[s] upon submission by the LCP Labor Congress
individual Check-Off Authorization[s] signed by the Union Members
indicating the amount to be deducted and further agreed all
deduction[s] made representing Union Dues and Assessment[s]
shall be remitted immediately to the LCP Labor Congress Treasurer
or authorized representative within three (3) or five (5) days upon
deductions [sic], Union dues not deducted during the period due,
shall be refunded or reimbursed by the Employer/Management.
Employer/Management further agreed to deduct Union dues from
non-union members the same amount deducted from union
members without need of individual Check-Off Authorizations [for]
Agency Fee;
In an Order dated October 24, 1990, Mediator Arbiter Antonio

Cortez approved the memorandum of agreement and certified LCP
"as the sole and exclusive bargaining agent among the rank-andfile employee of Empire Food Products for purposes of collective
bargaining with respect to wages, hours of work and other terms
and conditions of employment" (Annex "B" of Petition).
5. That in consideration [of] the foregoing covenant, parties jointly

and mutually agreed that NLRC CASE NO. RAB-III-10-1817-90
shall be considered provisionally withdrawn from the Calendar of
the National Labor Relations Commission (NLRC), while the
Petition for direct certification of the LCP Labor Congress parties
jointly move for the direct certification of the LCP Labor Congress;
a. Unfair Labor Practice by way of Illegal Lockout and/or Dismissal;
6. That parties jointly and mutually agreed that upon signing of this
Agreement, no Harassments [sic], Threats, Interferences [sic] of
their respective rights under the law, no Vengeance or Revenge by
each partner nor any act of ULP which might disrupt the operations
of the business;
7. Parties jointly and mutually agreed that pending negotiations or
formalization of the propose[d] CBA, this Memorandum of
Agreement shall govern the parties in the exercise of their
respective rights involving the Management of the business and the
terms and condition[s] of employment, and whatever problems and
grievances may arise by and between the parties shall be resolved
by them, thru the most cordial and good harmonious relationship by
communicating the other party in writing indicating said grievances
before taking any action to another forum or government agencies;
8. That parties [to] this Memorandum of Agreement jointly and
mutually agreed to respect, abide and comply with all the terms and
conditions hereof. Further agreed that violation by the parties of any
provision herein shall constitute an act of ULP. (Annex "A" of
Petition).
On November 9, 1990, petitioners through LCP President Navarro

submitted to private respondents a proposal for collective
bargaining (Annex "C" of Petition).
On January 23, 1991, petitioners filed a complaint docketed as
NLRC Case No. RAB-III-01-1964-91 against private respondents
for:
b. Union busting thru Harassments [sic], threats, and interfering

with the rights of employees to self-organization;
c. Violation of the Memorandum of Agreement dated October 23,
1990;
d. Underpayment of Wages in violation of R.A. No. 6640 and R.A.
No. 6727, such as Wages promulgated by the Regional Wage
Board;
e. Actual, Moral and Exemplary Damages. (Annex "D" of Petition)
After the submission by the parties of their respective position
papers and presentation of testimonial evidence, Labor Arbiter Ariel
C. Santos absolved private respondents of the charges of unfair
labor practice, union busting, violation of the memorandum of
agreement, underpayment of wages and denied petitioners' prayer
for actual, moral and exemplary damages. Labor Arbiter Santos,
however, directed the reinstatement of the individual complainants:
The undersigned Labor Arbiter is not oblivious to
the fact that respondents have violated a cardinal
rule in every establishment that a payroll and
other papers evidencing hours of work,
payments, etc. shall always be maintained and

hence, it is proper that all individual complainants
except those who resigned and executed
quitclaim[s] and releases prior to the filing of this
complaint should be reinstated to their former
position[s] with the admonition to respondents
that any harassment, intimidation, coercion or
any form of threat as a result of this immediately
executory reinstatement shall be dealt with
accordingly.
SO ORDERED. (Annex "G" of petition)
May 1991, Record, p. 102; 16 May 1991, Record, p. 103, 11 June

Testimonial Evidence was made by complainant on June 24, 1991
(Record, p. 106-109)
in view of receiving their testimonies. The complainants should be
afforded the time and opportunity to fully substantiate their claims
against the respondents. Judgment should be rendered only based
on the conflicting positions of the parties. The Labor Arbiter is called
upon to consider and pass upon the issues of fact and law raised
by the parties.
On appeal, the National Labor Relations Commission vacated the Decision dated
April 14, 1972 [sic] and remanded the case to the Labor Arbiter for further
proceedings for the following reasons:
Toward this end, therefore, it is Our considered view [that] the case
proceedings. (Annex "H" of Petition)
Evelyn Kehyeng and Elvira Bulagan . . ." (p. 183, Records), that
(Record, p. 183); that ". . . complainant failed to specify under what
practice . . ." (Record, p. 185); that ". . . complainant LCP failed to
present anyone of the so-called 99 complainants in order to testify
who committed the threats and intimidation . . ." (Record, p. 185).
In a Decision dated July 27, 1994, Labor Arbiter Santos made the following
determination:

it appears that complainant presented witnesses, namely,
March 1991, RECORD, p. 92, who adopted its POSITION PAPER
AND CONSOLIDATED AFFIDAVIT, as Exhibit "A" and the annexes
thereto as Exhibit "B", "B-1" to "B-9", inclusive. Minutes of the
RECORD, p. 93; LOURDES PANTILLO, MARIFE PINLAC, LENIE
GARCIA (16 April 1991, Record, p. 96, see back portion thereof ; 2
Complainants failed to present with definiteness and clarity the

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

what type of threats or intimidation was committed and who
committed the same. What are the acts or utterances constitutive of
harassments [sic] being complained of? These are the specifics
which should have been proven with definiteness and clarity by
complainants who chose to rely heavily on its position paper
through generalizations to prove their case.
Insofar as violation of [the] Memorandum of Agreement dated
October 23, 1990 is concerned, both parties agreed that:
2 That with regards [sic] to the NLRC Case
No. RAB III-10-1817-90 pending with the NLRC,
parties jointly and mutually agreed that the issues
thereof shall be discussed by the parties and
resolve[d] during the negotiation of the CBA.
The aforequoted provision does not speak of [an] obligation on the
part of respondents but on a resolutory condition that may occur or
may not happen. This cannot be made the basis of an imposition of
an obligation over which the National Labor Relations Commission
has exclusive jurisdiction thereof.
Anent the charge that there was underpayment of wages, the
evidence points to the contrary. The enumeration of complainants'
wages in their consolidated Affidavits of merit and position paper
which implies underpayment has no leg to stand on in the light of
the fact that complainants' admission that they are piece workers or
paid on a pakiao [basis] i.e. a certain amount for every thousand
pieces of cheese curls or other products repacked. The only
limitation for piece workers or pakiao workers is that they should
receive compensation no less than the minimum wage for an eight
(8) hour work [sic]. And compliance therewith was satisfactorily
explained by respondent Gonzalo Kehyeng in his testimony (TSN,
p. 12-30) during the July 31, 1991 hearing. On cross-examination,
complainants failed to rebut or deny Gonzalo Kehyeng's testimony
that complainants have been even receiving more than the
minimum wage for an average workers [sic]. Certainly, a lazy
worker earns less than the minimum wage but the same cannot be
attributable to respondents but to the lazy workers.
Finally, the claim for moral and exemplary damages has no leg to
stand on when no malice, bad faith or fraud was ever proven to
have been perpetuated by respondents.
WHEREFORE, premises considered, the complaint is hereby

DISMISSED for utter lack of merit. (Annex "I" of Petition). 4
On appeal, the NLRC, in its Resolution dated 29 March 1995, 5 affirmed in toto the
decision of Labor Arbiter Santos. In so doing, the NLRC sustained the Labor Arbiter's
findings that: (a) there was a dearth of evidence to prove the existence of unfair labor
practice and union busting on the part of private respondents; (b) the agreement of 23
October 1990 could not be made the basis of an obligation within the ambit of the
NLRC's jurisdiction, as the provisions thereof, particularly Section 2, spoke of a
resolutory condition which could or could not happen; (c) the claims for underpayment
of wages were without basis as complainants were admittedly "pakiao" workers and
paid on the basis of their output subject to the lone limitation that the payment
conformed to the minimum wage rate for an eight-hour workday; and (d) petitioners
were not underpaid.
Their motion for reconsideration having been denied by the NLRC in its Resolution of
31 October 1995, 6petitioners filed the instant special civil action for certiorari raising
the following issues:
I
WHETHER OR NOT THE PUBLIC RESPONDENT NATIONAL
LABOR RELATIONS COMMISSION GRAVELY ABUSED ITS
DISCRETION WHEN IT DISREGARDED OR IGNORED NOT
ONLY THE EVIDENCE FAVORABLE TO HEREIN PETITIONERS,
APPLICABLE JURISPRUDENCE BUT ALSO ITS OWN
DECISIONS AND THAT OF THIS HONORABLE HIGHEST
TRIBUNAL WHICH [WAS] TANTAMOUNT NOT ONLY TO THE
DEPRIVATION OF PETITIONERS' RIGHT TO DUE PROCESS
BUT WOULD RESULT [IN] MANIFEST INJUSTICE.
II
WHETHER OR NOT THE PUBLIC RESPONDENT GRAVELY
ABUSED ITS DISCRETION WHEN IT DEPRIVED THE
PETITIONERS OF THEIR CONSTITUTIONAL RIGHT TO SELFORGANIZATION, SECURITY OF TENURE, PROTECTION TO
LABOR, JUST AND HUMANE CONDITIONS OF WORK AND DUE
PROCESS.
III
WHETHER OR NOT THE PETITIONERS WERE ILLEGALLY

EASED OUT [OF] OR CONSTRUCTIVELY DISMISSED FROM
THEIR ONLY MEANS OF LIVELIHOOD.
IV
WHETHER OR NOT PETITIONERS SHOULD BE REINSTATED
FROM THE DATE OF THEIR DISMISSAL UP TO THE TIME OF
THEIR REINSTATEMENT, WITH BACKWAGES, STATUTORY
BENEFITS, DAMAGES AND ATTORNEY'S FEES. 7
We required respondents to file their respective Comments.
In their Manifestation and Comment, private respondents asserted that the petition
was filed out of time. As petitioners admitted in their Notice to File Petition for Review
on Certiorari that they received a copy of the resolution (denying their motion for
reconsideration) on 13 December 1995, they had only until 29 December 1995 to file
the petition. Having failed to do so, the NLRC thus already entered judgment in
private respondents' favor.
In their Reply, petitioners averred that Mr. Navarro, a non-lawyer who filed the notice
to file a petition for review on their behalf, mistook which reglementary period to apply.
Instead of using the "reasonable time" criterion forcertiorari under Rule 65, he used
the 15-day period for petitions for review on certiorari under Rule 45. They hastened
to add that such was a mere technicality which should not bar their petition from being
decided on the merits in furtherance of substantial justice, especially considering that
respondents neither denied nor contradicted the facts and issues raised in the
petition.
In its Manifestation and Motion in Lieu of Comment, the Office of the Solicitor General
(OSG) sided with petitioners. It pointed out that the Labor Arbiter, in finding that
petitioners abandoned their jobs, relied solely on the testimony of Security Guard
Rolando Cairo that petitioners refused to work on 21 January 1991, resulting in the
spoilage of cheese curls ready for repacking. However, the OSG argued, this refusal
to report for work for a single day did not constitute abandonment, which pertains to a
clear, deliberate and unjustified refusal to resume employment, and not mere
absence. In fact, the OSG stressed, two days after allegedly abandoning their work,
petitioners filed a complaint for, inter alia, illegal lockout or illegal dismissal. Finally,
the OSG questioned the lack of explanation on the part of Labor Arbiter Santos as to
why he abandoned his original decision to reinstate petitioners.
In view of the stand of the OSG, we resolved to require the NLRC to file its own
Comment.
In its Comment, the NLRC invokes the general rule that factual findings of an
administrative agency bind a reviewing court and asserts that this case does not fall
under the exceptions. The NLRC further argues that grave abuse of discretion may
not be imputed to it, as it affirmed the factual findings and legal conclusions of the
Labor Arbiter only after carefully reviewing, weighing and evaluating the evidence in
support thereof, as well as the pertinent provisions of law and jurisprudence.
In their Reply, petitioners claim that the decisions of the NLRC and the Labor Arbiter
were not supported by substantial evidence; that abandonment was not proved; and
that much credit was given to self-serving statements of Gonzalo Kehyeng, owner of
Empire Foods, as to payment of just wages.
On 7 July 1997, we gave due course to the petition and required the parties to file
their respective memoranda. However, only petitioners and private respondents filed
their memoranda, with the NLRC merely adopting its Comment as its Memorandum.
We find for petitioners.
Invocation of the general rule that factual findings of the NLRC bind this Court is
unavailing under the circumstances. Initially, we are unable to discern any compelling
reason justifying the Labor Arbiter's volte facefrom his 14 April 1992 decision
reinstating petitioners to his diametrically opposed 27 July 1994 decision, when in
both instances, he had before him substantially the same evidence. Neither do we
find the 29 March 1995 NLRC resolution to have sufficiently discussed the facts so as
to comply with the standard of substantial evidence. For one thing, the NLRC
confessed its reluctance to inquire into the veracity of the Labor Arbiter's factual
findings, staunchly declaring that it was "not about to substitute [its] judgment on
matters that are within the province of the trier of facts." Yet, in the 21 July 1992
NLRC resolution, 8 it chastised the Labor Arbiter for his errors both in judgment and
procedure; for which reason it remanded the records of the case to the Labor Arbiter
for compliance with the pronouncements therein.
What cannot escape from our attention is that the Labor Arbiter did not heed the
observations and pronouncements of the NLRC in its resolution of 21 July 1992,
neither did he understand the purpose of the remand of the records to him. In said
resolution, the NLRC summarized the grounds for the appeal to be:
1. that there is a prima facie evidence of abuse of discretion and
acts of gross incompetence committed by the Labor Arbiter in
rendering the decision.
2. that the Labor Arbiter in rendering the decision committed
serious errors in the findings of facts.
After which, the NLRC observed and found:

Complainant alleged that the Labor Arbiter disregarded the
testimonies of the 99 complainants who submitted their
Consolidated Affidavit of Merit and Position Paper which was
adopted as direct testimonies during the hearing and crossexamined by respondents' counsel.
Evelyn Kehyeng and Elvira Bulagan . . ." (Records, p. 183), that
(Record, p. 183; that ". . . complainant failed to specify under what
practice . . ." (Record, p. 185); that ". . . complainant a [sic] LCP
failed to present anyone of the so called 99 complainants in order
to testify who committed the threats and intimidation . . ." (Record,
p.185).
their claims against the respondents. Judgment should [have been]

rendered only based on the conflicting positions of the parties. The
Labor Arbiter is called upon to consider and pass upon the issues
of fact and law raised by the parties.
Toward this end, therefore, it is Our considered view the case
proceedings.
Further, We take note that the decision does not contain a
dispositive portion or fallo. Such being the case, it may be well said
that the decision does not resolve the issues at hand. On another
plane, there is no portion of the decision which could be carried out
by way of execution.
It may be argued that the last paragraph of the decision may be
categorized as the dispositive portion thereof:
xxx xxx xxx
The undersigned Labor Arbiter is not oblivious
[to] the fact that respondents have violated a
cardinal rule in every establishment that a payroll
and other papers evidencing hour[s] of work,
payment, etc. shall always be maintained and
hence, it is proper that all the individual
complainants except those who resigned and
executed quitclaim[s] and release[s] prior to the
filing of this complaint should be reinstated to
their former position with the admonition to
respondents that any harassment, intimidation,
coercion or any form of threat as a result of this
immediately executory reinstatement shall be
dealt with accordingly.

it appears that complainant presented witnesses, namely
March 1991, RECORD, p. 92), who adopted its POSITION PAPER
AND CONSOLIDATED AFFIDAVIT as Exhibit A and the annexes
thereto as Exhibit B, B-1 to B-9, inclusive. Minutes of the
RECORD, p. 93; LOURDES PANTILLO, MARIFE PINLAC, LENI
GARCIA (16 April 1991, Record, p. 96, see back portion thereof; 2
May 1991, Record, p. 102; 16 May 1991, Record, p. 103; 11 June
Testimonial Evidence was made by the complainant on June 24,
1991 (Record, p.106-109).
in view of receiving their testimonies. The complainants should
[have been] afforded the time and opportunity to fully substantiate
SO ORDERED.
It is Our considered view that even assuming arguendo that the
respondents failed to maintain their payroll and other papers
evidencing hours of work, payment etc., such circumstance,
standing alone, does not warrant the directive to reinstate

complainants to their former positions. It is [a] well settled rule that
there must be a finding of illegal dismissal before reinstatement be
mandated.
In this regard, the LABOR ARBITER is hereby directed to include in
his clarificatory decision, after receiving evidence, considering and
resolving the same, the requisite dispositive portion. 9
Apparently, the Labor Arbiter perceived that if not for petitioners, he would not have
fallen victim to this stinging rebuke at the hands of the NLRC. Thus does it appear to
us that the Labor Arbiter, in concluding in his 27 July 1994 Decision that petitioners
abandoned their work, was moved by, at worst, spite, or at best, lackadaisically
glossed over petitioner's evidence. On this score, we find the following observations
of the OSG most persuasive:
In finding that petitioner employees abandoned their work, the
Labor Arbiter and the NLRC relied on the testimony of Security
Guard Rolando Cairo that on January 21, 1991, petitioners refused
to work. As a result of their failure to work, the cheese curls ready
for repacking on said date were spoiled.
The failure to work for one day, which resulted in the spoilage of
cheese curls does not amount to abandonment of work. In fact two
(2) days after the reported abandonment of work or on January 23,
1991, petitioners filed a complaint for, among others, unfair labor
practice, illegal lockout and/or illegal dismissal. In several cases,
this Honorable Court held that "one could not possibly abandon his
work and shortly thereafter vigorously pursue his complaint for
illegal dismissal (De Ysasi III v. NLRC, 231 SCRA 173; Ranara v.
NLRC, 212 SCRA 631; Dagupan Bus Co. v. NLRC, 191 SCRA 328;
Atlas Consolidated Mining and Development Corp. v. NLRC, 190
SCRA 505; Hua Bee Shirt Factory v. NLRC, 186 SCRA 586;
Mabaylan v. NLRC, 203 SCRA 570 and Flexo Manufacturing v.
NLRC, 135 SCRA 145). In Atlas Consolidated, supra, this
Honorable Court explicitly stated:
It would be illogical for Caballo, to abandon his
work and then immediately file an action seeking
for his reinstatement. We can not believe that
Caballo, who had worked for Atlas for two years
and ten months, would simply walk away from
his job unmindful of the consequence of his
act. i.e. the forfeiture of his accrued employment
benefits. In opting to finally to [sic] contest the

legality of his dismissal instead of just claiming
his separation pay and other benefits, which he
actually did but which proved to be futile after all,
ably supports his sincere intention to return to
work, thus negating Atlas' stand that he had
abandoned his job.
In De Ysasi III v. NLRC (supra), this Honorable Court stressed that
it is the clear, deliberate and unjustified refusal to resume
employment and not mere absence that constitutes abandonment.
The absence of petitioner employees for one day on January 21,
1991 as testified [to] by Security Guard Orlando Cairo did not
constitute abandonment.
In his first decision, Labor Arbiter Santos expressly directed the
reinstatement of the petitioner employees and admonished the
private respondents that "any harassment, intimidation, coercion or
any form of threat as a result of this immediately executory
reinstatement shall be dealt with accordingly.
In his second decision, Labor Arbiter Santos did not state why he
was abandoning his previous decision directing the reinstatement
of petitioner employees.
By directing in his first decision the reinstatement of petitioner
employees, the Labor Arbiter impliedly held that they did not
abandon their work but were not allowed to work without just cause.
That petitioner employees are "pakyao" or piece workers does not
imply that they are not regular employees entitled to reinstatement.
Private respondent Empire Food Products, Inc. is a food and fruit
processing company. In Tabas v. California Manufacturing Co., Inc.
(169 SCRA 497), this Honorable Court held that the work of
merchandisers of processed food, who coordinate with grocery
stores and other outlets for the sale of the processed food is
necessary in the day-to-day operation[s] of the company. With more
reason, the work of processed food repackers is necessary in the
day-to-day operation[s] of respondent Empire Food Products. 10
It may likewise be stressed that the burden of proving the existence of just cause for
dismissing an employee, such as abandonment, rests on the employer, 11 a burden
private respondents failed to discharge.
Private respondents, moreover, in considering petitioners' employment to have been

terminated by abandonment, violated their rights to security of tenure and
constitutional right to due process in not even serving them with a written notice of
such termination. 12 Section 2, Rule XIV, Book V of the Omnibus Rules Implementing
the Labor Code provides:
Sec. 2. Notice of Dismissal Any employer who seeks to dismiss
a worker shall furnish him a written notice stating the particular acts
or omission constituting the grounds for his dismissal. In cases of
abandonment of work, the notice shall be served at the worker's
last known address.
pay, 18 inter alia, "field personnel and other employees whose time and performance
is unsupervised by the employer, including those who are engaged on task or
contract basis, purely commission basis, or those who are paid a fixed amount for
performing work irrespective of the time consumed in the performance thereof."
Plainly, petitioners as piece-rate workers do not fall within this group. As mentioned
earlier, not only did petitioners labor under the control of private respondents as their
employer, likewise did petitioners toil throughout the year with the fulfillment of their
quota as supposed basis for compensation. Further, in Section 8 (b), Rule IV, Book III
which we quote hereunder, piece workers are specifically mentioned as being entitled
to holiday pay.
Sec. 8. Holiday pay of certain employees.
Petitioners are therefore entitled to reinstatement with full back wages pursuant to
Article 279 of the Labor Code, as amended by R.A. No. 6715. Nevertheless, the
records disclose that taking into account the number of employees involved, the
length of time that has lapsed since their dismissal, and the perceptible resentment
and enmity between petitioners and private respondents which necessarily strained
their relationship, reinstatement would be impractical and hardly promotive of the best
interests of the parties. In lieu of reinstatement then, separation pay at the rate of one
month
for
every
year
of
service,
with
a fraction of at least six (6) months of service considered as one (1) year, is in
order. 13
That being said, the amount of back wages to which each petitioner is entitled,
however, cannot be fully settled at this time. Petitioners, as piece-rate workers having
been paid by the piece, 14 there is need to determine the varying degrees of
production and days worked by each worker. Clearly, this issue is best left to the
National Labor Relations Commission.
As to the other benefits, namely, holiday pay, premium pay, 13th month pay and
service incentive leave which the labor arbiter failed to rule on but which petitioners
prayed for in their complaint, 15 we hold that petitioners are so entitled to these
benefits. Three (3) factors lead us to conclude that petitioners, although piece-rate
workers, were regular employees of private respondents. First, as to the nature of
petitioners' tasks, their job of repacking snack food was necessary or desirable in the
usual business of private respondents, who were engaged in the manufacture and
selling of such food products; second, petitioners worked for private respondents
throughout the year, their employment not having been dependent on a specific
project or season; and third, the length of time 16 that petitioners worked for private
respondents. Thus, while petitioners' mode of compensation was on a "per piece
basis," the status and nature of their employment was that of regular employees.
The Rules Implementing the Labor Code exclude certain employees from receiving
benefits such as nighttime pay, holiday pay, service incentive leave 17 and 13th month
(b) Where a covered employee

is paid by results or output,
such as payment on piece
work, his holiday pay shall not
be less than his average daily
earnings for the last seven (7)
actual working days preceding
the regular holiday: Provided,
however, that in no case shall
the holiday pay be less than
the
applicable
statutory
minimum wage rate.
In addition, the Revised Guidelines on the Implementation of the 13th Month Pay
Law, in view of the modifications to P.D. No. 851 19 by Memorandum Order No. 28,
clearly exclude the employer of piece rate workers from those exempted from paying
13th month pay, to wit:
2. EXEMPTED EMPLOYERS
The following employers are still not covered by P.D. No. 851:
d. Employers of those who are
paid on purely commission,
boundary or task basis, and
those who are paid a fixed
amount for performing specific
work, irrespective of the time
consumed in the performance
thereof, except
where
the
workers are paid on piece-rate
basis in which case the

employer shall grant the
required 13th month pay to
such
workers.
(emphasis
supplied)
IN VIEW WHEREOF, the instant petition is hereby GRANTED. The Resolution of the
National Labor Relations Commission of 29 March 1995 and the Decision of the
Labor Arbiter of 27 July 1994 in NLRC Case No. RAB-III-01-1964-91 are hereby SET
ASIDE, and another is hereby rendered:
1. DECLARING petitioners to have been illegally
dismissed by private respondents, thus entitled to
full back wages and other privileges, and
separation pay in lieu of reinstatement at the rate
of one month's salary for every year of service
with a fraction of six months of service
considered as one year;
The Revised Guidelines as well as the Rules and Regulations identify those
workers who fall under the piece-rate category as those who are paid a
standard amount for every piece or unit of work produced that is more or
less regularly replicated, without regard to the time spent in producing the
same. 20
As to overtime pay, the rules, however, are different. According to Sec. 2(e), Rule I,
Book III of the Implementing Rules, workers who are paid by results including those
who are paid on piece-work, takay, pakiao, or task basis, if their output rates are in
accordance with the standards prescribed under Sec. 8, Rule VII, Book III, of these
regulations, or where such rates have been fixed by the Secretary of Labor in
accordance with the aforesaid section, are not entitled to receive overtime pay. Here,
private respondents did not allege adherence to the standards set forth in Sec. 8 nor
with the rates prescribed by the Secretary of Labor. As such, petitioners are beyond
the ambit of exempted persons and are therefore entitled to overtime pay. Once
more, the National Labor Relations Commission would be in a better position to
determine the exact amounts owed petitioners, if any.
As to the claim that private respondents violated petitioners' right to self-organization,
the evidence on record does not support this claim. Petitioners relied almost entirely
on documentary evidence which, per se, did not prove any wrongdoing on private
respondents' part. For example, petitioners presented their complaint 21 to prove the
violation of labor laws committed by private respondents. The complaint, however, is
merely "the pleading alleging the plaintiff's cause or causes of action." 22 Its contents
are merely allegations, the verity of which shall have to be proved during the trial.
They likewise offered their Consolidated Affidavit of Merit and Position Paper 23 which,
like the offer of their Complaint, was a tautological exercise, and did not help nor
prove their cause. In like manner, the petition for certification election 24 and the
subsequent order of certification 25 merely proved that petitioners sought and acquired
the status of bargaining agent for all rank-and-file employees. Finally, the existence of
the memorandum of agreement 26 offered to substantiate private respondents' noncompliance therewith, did not prove either compliance or non-compliance, absent
evidence of concrete, overt acts in contravention of the provisions of the
memorandum.
2. REMANDING the records of this case to the

National Labor Relations Commission for its
determination of the back wages and other
benefits and separation pay, taking into account
the foregoing observations; and
3. DIRECTING the National Labor Relations
Commission to resolve the referred issues within
sixty (60) days from its receipt of a copy of this
decision and of the records of the case and to
submit to this Court a report of its compliance
hereof within ten (10) days from the rendition of
its resolution.
Costs against private respondents.
SO ORDERED.
SECOND DIVISION
Disputing the complaint, petitioners contend that respondent Fredelito Juanatas was
not an employee of the firm but was merely a helper of his father Pedro; that all
commissions for 1988 and 1989, as well as those up to March, 1990, were duly paid;
and that the truck driven by respondent Pedro Juanatas was sold to one Winston
Flores in 1991 and, therefore, private respondents were not illegally dismissed. 2
G.R. No. 116960 April 2, 1996

BERNARDO JIMENEZ and JOSE JIMENEZ,
TRUCKING, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION,
FREDELITO JUANATAS,respondents.
as
Operators
PEDRO
of
JUANATAS
JJ's
and
REGALADO, J.:p
This petition for certiorari seeks the annulment of the decision of respondent National
Labor Relations Commission (NLRC), dated May 27, 1994, as well as its resolution,
dated August 8, 1994, denying petitioners's motion for reconsideration, 1 which
assailed decision affirmed with modifications the adverse decision of the labor arbiter
against herein petitioners.
On June 29, 1990, herein private respondent Pedro and Fredelito Juanatas, father
and son, filed a claim for unpaid wages/commissions, separation pay and damages
against JJ's Trucking and/or Dr. Bernardo Jimenez. Said respondents, as
complainants therein, alleged that in December, 1987, they were hired by herein
petitioner Bernardo Jimenez as driver/mechanic and helper, respectively, in his
trucking firm, JJ Trucking. They were assigned to a ten-wheeler truck to haul soft
drinks of Coca-Cola Bottling Company and paid on commission basis, initially fixed at
17% but later increased to 20% in 1988.
Private respondents further alleged that for the years 1988 and 1989 they received
only a partial commission of P84,000.00 from petitioners' total gross income of almost
P1,000,000.00 for the said two years. Consequently, with their commission for that
period being computed at 20% of said income, there was an unpaid balance to them
of P106,211.86; that until March, 1990 when their services were illegally terminated,
they were further entitled to P15,050.309 which, excluding the partial payment of
P7,000.00, added up to a grand total of P114,261.86 due and payable to them; and
that petitioners' refusal to pay their aforestated commission was a ploy to unjustly
terminate them.
After hearings duly conducted, and with the submission of the parties'
position/supporting papers, Labor Arbiter Rogue B. de Guzman rendered a decision
dated March 9, 1993, with this decretal portion:
WHEREFORE, decision is hereby issued ordering respondents JJ's
Trucking and/or Dr. Bernardo Jimenez to pay jointly and severally
complainant Pedro Juanatas a separation pay of FIFTEEN
THOUSAND FIFTY (P15,050.00) PESOS, plus attorney's fee
equivalent to ten percent (10%) of the award. The complaint of
Fredelito Juanatas is hereby dismissed for lack of merit. 3
On appeal filed by private respondents, the NLRC modified the decision of the labor
arbiter and disposed as follows:
PREMISES CONSIDERED, the Decision of March 9, 1993 is
hereby MODIFIED, to wit:
1. Complainant Fredelito Juanatas is hereby declared respondents'
employee and shares in (the) commission and separation pay
awarded to complainant Pedro Juanatas, his father.
2. Respondent JJ's Trucking and Dr. Bernardo Jimenez are jointly
and severally liable to pay complainants their unpaid commissions
in the total amount of Eighty Four Thousand Three Hundred Eighty
Seven Pesos and 05/100 (P84,387.05).
3. The award of attorney's fees is reduced accordingly to eight
thousand four hundred thirty eight pesos and 70/100 (P8,438.70).
4. The other findings stand affirmed. 4
Petitioners' motion for reconsideration having been denied thereafter in public
respondent's resolution dated August 8, 1994, 5 petitioners have come to us in this
recourse, raising for resolution the issues as to whether or not respondent NLRC
committed grave abuse of discretion in ruling (a) that private respondents were not
paid their commissions in full, and (b) that respondent Fredelito Juanatas was an
employee of JJ's Trucking.
The review of labor cases elevated to us on certiorari is confined to questions of
jurisdiction or grave abuse of discretion. 6 As a rule, this Court does not review
supposed errors in the decision of the NLRC which raise factual issues, because
factual findings of agencies exercising quasi-judicial functions are accorded not only
respect but even finality, 7aside from the consideration that the Court is essentially not
a trier of facts. However, in the case at bar, a review of the records thereof with an
assessment of the facts is necessary since the factual findings of the NLRC and the
labor arbiter are at odds with each other. 8
On the first issue, we find no reason to disturb the findings of respondent NLRC that
the entire amount of commissions was not paid, this by reason of the evident failure
of herein petitioners to present evidence that fullpayment thereof has been made. It is
a basic rule in evidence that each party must prove his affirmative allegation. Since
the burden of evidence lies with the party who asserts an affirmative allegation, the
plaintiff or complainant has to prove his affirmative allegations in the complaint and
the defendant or respondent has to prove the affirmative allegations in his affirmative
defenses and counterclaim. Considering that petitioners herein assert that the
disputed commissions have been paid, they have the bounden duty to prove that fact.
As a general rule, one who pleads payment has the burden of proving it. 9 Even where
the plaintiff must allege non-payment, the general rule is that the burden rests on the
defendant to prove payment, rather than on the plaintiff to prove non-payment. 10 The
debtor has the burden of showing with legal certainty that the obligation has been
discharged by payment. 11
When the existence of a debt is fully established by the evidence contained in the
record, the burden of proving that it has been extinguished by payment devolves
upon the debtor who offers such a defense to the claim of the creditor. 12 Where the
debtor introduces some evidence of payment, the burden of going forward with the
evidence as distinct from the general burden of proof shifts to the creditor, who
is then under a duty of producing some evidence to show non-payment. 13
In the instant case, the right of respondent Pedro Juanatas to be paid a commission
equivalent to 17%, later increased to 20%, of the gross income is not disputed by
petitioners. Although private respondents admit receipt of partial payment, petitioners
still have to present proof of full payment. Where the defendant sued for a debt
admits that the debt was originally owed, and pleads payment in whole or in part, it is
incumbent upon him to prove such payment. That a plaintiff admits that some
payments have been made does not change the burden of proof. The defendant still
has the burden of establishing payments beyond those admitted by plaintiff. 14
The testimony of petitioners which merely denied the claim of private respondents,
unsupported by documentary evidence, is not sufficient to establish payment.
Although petitioners submitted a notebook showing the allegedvales of private
respondents for the year 1990, 15 the same is inadmissible and cannot be given
probative value considering that it is not properly accomplished, is undated and
unsigned, and is thus uncertain as to its origin and authenticity. 16
The positive testimony of a creditor may be sufficient of it self to show non-payment,
even when met by indefinite testimony of the debtor. Similarly, the testimony of the
debtor may also be sufficient to show payment, but, where his testimony is
contradicted by the other party or by a disinterested witness, the issue may be
determined against the debtor since he has the burden of proof. The testimony of the
debtor creating merely an inference of payment will not be regarded as conclusive on
that issue. 17
Hence, for failure to present evidence to prove payment, petitioners defaulted in their
defense and in effect admitted the allegations of private respondents.
With respect to the second issue, however, we agree with petitioners that the NLRC
erred in holding that the son, Fredelito, was an employee of petitioners.
We have consistently ruled that in determining the existence of an employeremployee relationship, the elements that are generally considered are the following:
(1) the selection and engagement of the employee; (2) the Payment of wages; (3) the
power of dismissal; and (4) the power to control the employee's conduct, 18 with the
control test assuming primacy in the overall consideration.
In the case at bar, the aforementioned elements are not present. The agreement was
between petitioner JJ's Trucking and respondent Pedro Juanatas. The hiring of a
helper was discretionary on the part of Pedro. Under their contract, should he employ
a helper, he would be responsible for the latter's compensation. With or without a
helper, respondent Pedro Juanatas was entitled to the same percentage of
commission. Respondent Fredelito Juanatas was hired by his father, Pedro, and the
compensation he received was paid by his father out of the latter's commission.
Further, Fredelito was not subject to the control and supervision of and dismissal by
petitioners but of and by his father.
Even the Solicitor General, in his comment, agreed with the finding of the labor arbiter
that Fredelito was not an employee of petitioners, to wit:
Public respondent committed grave abuse of discretion in holding
that said private respondent is an employee of JJ's Trucking on the
ground that, citing Article 281 of the Labor Code, "Fredelito's
functions as helper was (sic) necessary and desirable to

respondent's trucking business".
In the first place, Article 281 of the Labor Code does not refer to the
basic factors that must underlie every existing employer-employee
relationship, the absence of any of which will negate such
existence. It refers instead to the qualifications of "(A)n employee
who is allowed to work after a probationary period" and who, as a
consequence, "shall be considered a regular employee." Secondly,
the test in determining the existence of an employee-employer
relationship is not the necessity and/or desirability of one's
functions in relation to an employer's business, but "(1) the
employee's conduct. The latter is the most important element"
(Singer Sewing Machine Company vs. Drilon, 193 SCRA 270, 275;
Deferia vs. NLRC, 194 SCRA 531, 525; Ecal vs. NLRC, 224, 228,
Hijos De F. Escano, Inc vs. NLRC, 224 SCRA 781, 785). The
aforequoted pertinent findings of the Labor Arbiter indicate (that)
the foregoing requirements do not exist between petitioner and
private respondent Fredelito Juanatas. Thus, the labor arbiter
stated that respondent Fredelito Juanatas was never hired by
petitioners. Instead the former's services were availed of by
respondent Pedro Juanatas his father, who, at the same time,
supervised and controlled his work and paid his commissions.
Respondent NLRC's ruling did not traverse these findings of the
labor arbiter. 19
WHEREFORE, the judgment of respondent National Labor Relations Commission is
hereby AFFIRMED, with the MODIFICATION that paragraph 1 thereof, declaring
Fredelito Juanatas an employee of petitioners and entitled to share in the award for
commission and separation pay, is hereby DELETED.
SO ORDERED.
FIRST DIVISION
G.R. No. 158255
July 8, 2004
MANILA
WATER
COMPANY,
INC., petitioner,
vs.
HERMINIO D. PENA, ESTEBAN B. BALDOZA, JORGE D. CANONIGO, JR., IKE S.
DELFIN, RIZALINO M. INTAL, REY T. MANLEGRO, JOHN L. MARTEJA, MARLON
B. MORADA, ALLAN D. ESPINA, EDUARDO ONG, AGNESIO D. QUEBRAL,
EDMUNDO B. VICTA, VICTOR C. ZAFARALLA, EDILBERTO C. PINGUL and
FEDERICO M. RIVERA, respondents.
DECISION
YNARES-SANTIAGO, J.:
This petition assails the decision1 of the Court of Appeals dated November 29, 2002,
in CA-G.R. SP No. 67134, which reversed the decision of the National Labor
Relations Commission and reinstated the decision of the Labor Arbiter with
modification.
Petitioner Manila Water Company, Inc. is one of the two private concessionaires
contracted by the Metropolitan Waterworks and Sewerage System (MWSS) to
manage the water distribution system in the East Zone of Metro Manila, pursuant to
Republic Act No. 8041, otherwise known as the National Water Crisis Act of 1995.
Under the Concession Agreement, petitioner undertook to absorb former employees
of the MWSS whose names and positions were in the list furnished by the latter, while
the employment of those not in the list was terminated on the day petitioner took over
the operation of the East Zone, which was on August 1, 1997. Private respondents,
being contractual collectors of the MWSS, were among the 121 employees not
included in the list; nevertheless, petitioner engaged their services without written
contract from August 1, 1997 to August 31, 1997. Thereafter, on September 1, 1997,
they signed a three-month contract to perform collection services for eight branches
of petitioner in the East Zone.2
Before the end of the three-month contract, the 121 collectors incorporated the
Association Collectors Group, Inc. (ACGI),3 which was contracted by petitioner to
collect charges for the Balara Branch. Subsequently, most of the 121 collectors were
asked by the petitioner to transfer to the First Classic Courier Services, a newly
registered corporation. Only private respondents herein remained with ACGI.
Petitioner continued to transact with ACGI to do its collection needs until February 8,
1999, when petitioner terminated its contract with ACGI.4
Private respondents filed a complaint for illegal dismissal and money claims against
petitioner, contending that they were petitioners employees as all the methods and
procedures of their collections were controlled by the latter.
On the other hand, petitioner asserts that private respondents were employees of
ACGI, an independent contractor. It maintained that it had no control and supervision
over private respondents manner of performing their work except as to the results.
Thus, petitioner did not have an employer-employee relationship with the private
respondents, but only a service contractor-client relationship with ACGI.
On May 31, 2000, Labor Arbiter Eduardo J. Carpio rendered a decision finding the
dismissal of private respondents illegal. He held that private respondents were regular
employees of petitioner not only because the tasks performed by them were
controlled by it but, also, the tasks were obviously necessary and desirable to
petitioners principal business. The dispositive portion of the decision reads:
WHEREFORE, premises considered, judgment is hereby rendered, finding
that complainants were employees of respondent [petitioner herein], that
they were illegally dismissed, and respondent [petitioner herein] is hereby
ordered to pay their separation pay based on the following computed
amounts:
HERMINIO D. PENA
P15,000.00
ESTEBAN BALDOZA
P12,000.00
JORGE D. CANONIGO, JR.
P16,000.00
IKE S. DELFIN
P12,000.00
RIZALINO M. INTAL
P16,000.00
REY T. MANLEGRO
P16,000.00
JOHN L. MARTEJA
P12,000.00
MARLON B. MORADA
P16,000.00
ALLAN D. ESPINA
P14,000.00
EDUARDO ONG
P15,000.00
AGNESIO D. QUEBRAL
P16,000.00
EDMUNDO B. VICTA
P13,000.00
VICTOR P. ZAFARALLA
P15,000.00
EDILBERTO C. PINGUL
P19,500.00
FEDERICO M. RIVERA
TOTAL
P15,000.00
P222,500.00
Respondent [petitioner herein] is further directed to pay ten (10%) percent of

the total award as attorneys fee or the sum of P22,250.00.
SO ORDERED.5
Both parties appealed to the NLRC, which reversed the decision of the Labor Arbiter
and ruled that the documentary evidence, e.g., letters and memoranda by the
petitioner to ACGI regarding the poor performance of the collectors, did not constitute
proof of control since these documents merely identified the erring collectors; the
appropriate disciplinary actions were left to the corporation to impose. 6 Further, there
was no evidence showing that the incorporation of ACGI was irregular.
Private respondents filed a petition for certiorari with the Court of Appeals, contending
that the NLRC acted with grave abuse of discretion amounting to lack or excess of
jurisdiction when it reversed the decision of the Labor Arbiter.
The Court of Appeals reversed the decision of the NLRC and reinstated with
modification the decision of the Labor Arbiter.7 It held that petitioner deliberately
prevented the creation of an employment relationship with the private respondents;
and that ACGI was not an independent contractor. It likewise denied petitioners
motion for reconsideration.8
Hence, this petition for review raising the following errors:
THE HONORABLE COURT OF APPEALS IN RENDERING THE ASSAILED
DECISION AND RESOLUTION COMMITTED GRAVE REVERSIBLE
ERRORS:
A. IN GOING BEYOND ITS JURISDICTION AND PROCEEDING TO GIVE
DUE COURSE TO RESPONDENTS PETITION FOR CERTIORARI UNDER
RULE 65 OF THE RULES OF COURT, NOTWITHSTANDING THE
ABSENCE OF ANY PROOF OF GRAVE ABUSE OF DISCRETION ON THE
PART OF THE NATIONAL LABOR RELATIONS COMMISSION WHEN IT
RENDERED THE DECISION ASSAILED BY HEREIN RESPONDENTS.
B. WHEN IT MANIFESTLY OVERLOOKED THE EVIDENCE PRESENTED
BY THE PETITIONER COMPANY AND RULING THAT THE PETITIONERS
DEFENSE OF LACK OF EMPLOYER-EMPLOYEE RELATIONS IS

WITHOUT MERIT.
C. IN CONCLUDING THAT PETITIONER COMPANY REQUIRED
RESPONDENTS TO INCORPORATE THE ASSOCIATED COLLECTORS
GROUP, INC. ["ACGI"] NOTWITHSTANDING ABSENCE OF ANY SPECIFIC
EVIDENCE IN SUPPORT OF THE SAME.
D. IN FINDING PETITIONER COMPANY GUILTY OF BAD FAITH
NOTWITHSTANDING ABSENCE OF ANY SPECIFIC EVIDENCE IN
SUPPORT OF THE SAME, AND AWARDING MORAL AND EXEMPLARY
DAMAGES TO HEREIN RESPONDENTS.9
The pivotal issue to be resolved in this petition is whether or not there exists an
employer-employee relationship between petitioner and private respondents.
Corollary thereto is the issue of whether or not private respondents were illegally
dismissed by petitioner.
The issue of whether or not an employer-employee relationship exists in a given case
is essentially a question of fact.10 As a rule, the Supreme Court is not a trier of facts,
and this applies with greater force in labor cases. Hence, factual findings of quasijudicial bodies like the NLRC, particularly when they coincide with those of the Labor
Arbiter and if supported by substantial evidence, are accorded respect and even
finality by this Court.11However, a disharmony between the factual findings of the
Labor Arbiter and the National Labor Relations Commission opens the door to a
review thereof by this Court. Factual findings of administrative agencies are not
infallible and will be set aside when they fail the test of arbitrariness. Moreover, when
the findings of the National Labor Relations Commission contradict with 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.12
The resolution of the foregoing issues initially boils down to a determination of the
true status of ACGI, i.e., whether it is an independent contractor or a labor-only
contractor.
Petitioner asserts that ACGI, a duly organized corporation primarily engaged in
collection services, is an independent contractor which entered into a service contract
for the collection of petitioners accounts starting November 30, 1997 until the early
part of February 1999. Thus, it has no employment relationship with private
respondents, being employees of ACGI.
The existence of an employment relationship between petitioner and private
respondents cannot be negated by simply alleging that the latter are employees of
ACGI as an independent contractor, it being crucial that ACGIs status, whether as
"labor-only contractor" or "independent contractor", be measured in terms of and
determined by the criteria set by statute.
The case of De los Santos v. NLRC13 succinctly enunciates this statutory criteria
Job contracting is permissible only if the following conditions are met: 1) the
contractor carries on an independent business and undertakes the contract
work on his own account under his own responsibility according to his own
manner and method, free from the control and direction of his employer or
principal in all matters connected with the performance of the work except as
to the results thereof; and 2) the contractor has substantial capital or
investment in the form of tools, equipment, machineries, work premises, and
other materials which are necessary in the conduct of the business.
"Labor-only contracting" as defined in Section 5, Department Order No. 18-02, Rules
Implementing Articles 106-109 of the Labor Code14 refers to an arrangement where
the contractor or subcontractor merely recruits, supplies or places workers to perform
job, work or service for a principal, and any of the following elements is present:
(i) The contractor or subcontractor does not have substantial capital or
investment which relates to the job, work or service to be performed and the
employees recruited, supplied or placed by such contractor or subcontractor
are performing activities which are directly related to the main business of
the principal; or
(ii) The contractor does not exercise the right to control over the
performance of the work of the contractual employee.
Given the above criteria, we agree with the Labor Arbiter that ACGI was not an
independent contractor.
First, ACGI does not have substantial capitalization or investment in the form of tools,
equipment, machineries, work premises, and other materials, to qualify as an
independent contractor. While it has an authorized capital stock of P1,000,000.00,
only P62,500.00 is actually paid-in, which cannot be considered substantial
capitalization. The 121 collectors subscribed to four shares each and paid only the
amount of P625.00 in order to comply with the incorporation requirements. 15 Further,
private respondents reported daily to the branch office of the petitioner because ACGI
has no office or work premises. In fact, the corporate address of ACGI was the
residence of its president, Mr. Herminio D. Pea.16 Moreover, in dealing with the
consumers, private respondents used the receipts and identification cards issued by
petitioner.17
Second, the work of the private respondents was directly related to the principal
business or operation of the petitioner. Being in the business of providing water to the
consumers in the East Zone, the collection of the charges therefor by private
respondents for the petitioner can only be categorized as clearly related to, and in the
pursuit of the latters business.
Lastly, ACGI did not carry on an independent business or undertake the performance
of its service contract according to its own manner and method, free from the control
and supervision of its principal, petitioner. Prior to private respondents alleged
employment with ACGI, they were already working for petitioner, subject to its rules
and regulations in regard to the manner and method of performing their tasks. This
form of control and supervision never changed although they were already under the
seeming employ of ACGI. Petitioner issued memoranda regarding the billing methods
and distribution of books to the collectors;18 it required private respondents to report
daily and to remit their collections on the same day to the branch office or to deposit
them with Bank of the Philippine Islands; it monitored strictly their attendance as
when a collector cannot perform his daily collection, he must notify petitioner or the
branch office in the morning of the day that he will be absent; and although it was
ACGI which ultimately disciplined private respondents, the penalty to be imposed was
dictated by petitioner as shown in the letters it sent to ACGI specifying the penalties to
be meted on the erring private respondents.19 These are indications that ACGI was
not left alone in the supervision and control of its alleged employees. Consequently, it
can be concluded that ACGI was not an independent contractor since it did not carry
a distinct business free from the control and supervision of petitioner.
Under this factual milieu, there is no doubt that ACGI was engaged in labor-only
contracting, and as such, is considered merely an agent of the petitioner. In labor-only
contracting, the statute creates an employer-employee relationship for a
comprehensive purpose: to prevent a circumvention of labor laws. The contractor is
considered merely an agent of the principal employer and the latter is responsible to
the employees of the labor-only contractor as if such employees had been directly
employed by the principal employer.20 Since ACGI is only a labor-only contractor, the
workers it supplied should be considered as employees of the petitioner.
Even the "four-fold test" will show that petitioner is the employer of private
respondents. The elements to determine the existence of an employment relationship
are: (a) the selection and engagement of the employee; (b) the payment of wages; (c)
the power of dismissal; and (d) the employers power to control the employees
conduct. The most important element is the employers control of the employees
conduct, not only as to the result of the work to be done, but also as to the means and
methods to accomplish it.21
We agree with the Labor Arbiter that in the three stages of private respondents
services with the petitioner, i.e., (1) from August 1, 1997 to August 31, 1997; (2) from
September 1, 1997 to November 30, 1997; and (3) from December 1, 1997 to
February 8, 1999, the latter exercised control and supervision over the formers
conduct.
Petitioner contends that the employment of private respondents from August 1, 1997
to August 30, 1997 was only temporary and done to accommodate their request to be
absorbed since petitioner was still undergoing a transition period. It was only when its
business became settled that petitioner employed private respondents for a fixed term
of three months.
Although petitioner was not obliged to absorb the private respondents, by engaging
their services, paying their wages in the form of commission, subjecting them to its
rules and imposing punishment in case of breach thereof, and controlling not only the
end result but the manner of achieving the same as well, an employment relationship
existed between them.
Notably, private respondents performed activities which were necessary or desirable
to its principal trade or business. Thus, they were regular employees of petitioner,
regardless of whether the engagement was merely an accommodation of their
request, pursuant to Article 280 of the Labor Code which reads:
The provisions of written agreement to the contrary notwithstanding and
regardless of the oral agreement of the parties, an employment shall be
deemed to be regular where the employee has been engaged to perform
activities which are usually necessary or desirable in the usual business or
trade of the employer, except where the employment has been fixed for a
specific project or undertaking the completion or termination of which has
been determined at the time of the engagement of the employee or where
the work or services to be performed is seasonal in nature and the
employment is for the duration of the season.
As such regular employees, private respondents are entitled to security of tenure
which may not be circumvented by mere stipulation in a subsequent contract that
their employment is one with a fixed period. While this Court has upheld the legality of
fixed-term employment, where from the circumstances it is apparent that the periods
have been imposed to preclude acquisition of tenurial security by the employee, they
should be struck down or disregarded as contrary to public policy and morals.22
In the case at bar, we find that the term fixed in the subsequent contract was used to
defeat the tenurial security which private respondents already enjoy. Thus, we concur
with the Labor Arbiter, as affirmed by the Court of Appeals, when it held that:
The next question if whether, with respect to the period, the individual
contracts are valid. Not all contracts of employment fixing a period are
invalid. Under Article 280, the evil sought to be prevented is singled out:
agreements entered into precisely to circumvent security of tenure. It has no
application where a fixed period of employment was agreed upon knowingly
and voluntarily by the parties, without any force, duress or improper pressure
being brought upon the employee and absent any circumstances vitiating his
consent, or where it satisfactorily appears that the employer and employee
dealt with each other on more or less terms with no moral dominance
whatever being exercised by the former over the latter. That is the doctrine in
Brent School, Inc. v. Zamora, 181 SCRA 702. The individual contracts in
question were prepared by MWC in the form of the letter addressed to
complainants. The letter-contract is dated September 1, 1997, when
complainants were already working for MWC as collectors. With their
employment as their means of survival, there was no room then for
complainants to disagree with the presented letter-contracts. Their choice
then was not to negotiate for the terms of the contract but to lose or not to
lose their employment employment which they already had at that time.
The choice is obvious, as what they did, to sign the ready made lettercontract to retain their employment, and survive. It is a defiance of the
teaching in Brent School, Inc. v. Zamora if this Office rules that the individual
contracts in question are valid, so, in deference to Brent School ruling, this
Office rules they are null and void.23
In view of the foregoing, we hold that an employment relationship exists between
petitioner and private respondents. We now proceed to ascertain whether private
respondents were dismissed in accordance with law.
As private respondents employer, petitioner has the burden of proving that the
dismissal was for a cause allowed under the law and that they were afforded
procedural due process.24 Petitioner failed to discharge this burden by substantial
evidence as it maintained the defense that it was not the employer of private
respondents. Having established that the schemes employed by petitioner were
devious attempts to defeat the tenurial rights of private respondents and that it failed
to comply with the requirements of termination under the Labor Code, the dismissal of
the private respondent is tainted with illegality.
Under Article 279 of the Labor Code, an employee who is unjustly dismissed from
work is 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. However, if reinstatement is no longer
possible, the employer has the alternative of paying the employee his separation pay
in lieu of reinstatement.25
This Court however cannot sustain the award of moral and exemplary damages in
favor of private respondents. Such an award cannot be justified solely upon the
premise that the employer dismissed his employee without just cause or due process.
Additional facts must be pleaded and proved to warrant the grant of moral damages
under the Civil Code. The act of dismissal must be attended with bad faith, or fraud,
or was oppressive to labor or done in a manner contrary to morals, good customs or
public policy and, of course, that social humiliation, wounded feelings, or grave
anxiety resulted therefrom. Similarly, exemplary damages are recoverable only when
the dismissal was effected in a wanton, oppressive or malevolent manner.26 Those
circumstances have not been adequately established.
However, private respondents are entitled to attorneys fees as they were compelled
to litigate with petitioners and incur expenses to enforce and protect their
interests.27 The award by the Labor Arbiter of P22,250.00 as attorneys fees to private
respondents, being reasonable, is sustained.
WHEREFORE, in view of the foregoing, the decision of the Court of Appeals dated
November 29, 2002, in CA-G.R. SP No. 67134, reversing the decision of the National
Labor Relations Commission and reinstating the decision of the Labor Arbiter is
AFFIRMED with the MODIFICATION that the awards of P10,000.00 as moral
damages and P5,000.00 as exemplary damages are DELETED for lack of evidentiary
basis.
SO ORDERED.
THIRD DIVISION
G.R. No. 149011
June 28, 2005
SAN
MIGUEL
CORPORATION, petitioner
vs.
PROSPERO A. ABALLA, BONNY J. ABARING, EDWIN M. ADLA-ON, ALVIN C.
ALCALDE, CELANIO D. ARROLLADO, EDDIE A. ARROLLADO, REYNALDO T.
ASONG, RENE A. ASPERA, JOEL D. BALATERIA, JOSEPH D. BALATERIA,
JOSE JOLLEN BALLADOS, WILFREDO B. BASAS, EDWIN E. BEATINGO,
SONNY V. BERONDO, CHRISTOPHER D. BRIONES, MARLON D. BRIONES,
JOEL C. BOOC, ENRIQUE CABALIDA, DIOSCORO R. CAHINOD, ERNESTO P.
CAHINOD, RENANTE S. CAHINOD, RUDERICK R. CALIXTON, RONILO C.
CALVEZ, PANCHO CAETE, JUNNY CASTEL, JUDY S. CELESTE, ROMEO
CHUA, DANILO COBRA, ARMANDO C. DEDOYCO, JOEY R. DELA CRUZ, JOHN
D. DELFIN, RENELITO P. DEON, ARNEL C. DE PEDRO, ORLANDO DERDER,
CLIFFORD A. DESPI, RAMIE A. DESPI, SR., VICTOR A. DESPI, ROLANDO L.
DINGLE, ANTONIO D. DOLORFINO, LARRY DUMA-OP, NOEL DUMOL, CHITO L.
DUNGOG, RODERICK C. DUQUEZA, ROMMEL ESTREBOR, RIC E. GALPO,
MANSUETO GILLE, MAXIMO L. HILA-US, GERARDO J. JIMENEZ, ROBERTLY Y.
HOFILEA, ROBERTO HOFILEA, VICENTE INDENCIO, JONATHAN T.
INVENTOR, PETER PAUL T. INVENTOR, JOEBERT G. LAGARTO, RENATO
LAMINA, ALVIN LAS POBRES, ALBERT LAS POBRES, LEONARD
LEMONCHITO, JERRY LIM, JOSE COLLY S. LUCERO, ROBERTO E. MARTIL,
HERNANDO MATILLANO, VICENTE M. MATILLANO, TANNY C. MENDOZA,
WILLIAM P. NAVARRO, WILSON P. NAVARRO, LEO A. OLVIDO, ROBERTO G.
OTERO, BIENVENIDO C. PAROCHILIN, REYNALDO C. PAROCHILIN, RICKY
PALANOG, BERNIE O. PILLO, ALBERTO O. PILLO, JOE-MARIE S. PUGNA,
EDWIN G. RIBON, RAUL A. RUBIO, HENRY S. SAMILLANO, EDGAR SANTIAGO,
ROLAND B. SANTILLANA, ROLDAN V. SAYAM, JOSEPH S. SAYSON, RENE
SUARNABA, ELMAR TABLIGAN, JERRY D. TALITE, OSCAR TALITE,
WINIFREDO TALITE, CAMILO N. TEMPOROSA, JOSE TEMPOROSA, RANDY
TINGALA, TRISTAN A. TINGSON, ROGELIO TOMESA, DIONISE A. TORMIS,
ADELINO C. UNTAL, FELIX T. UNTAL, RONILO E. VISTA, JOAN C. VIYO and
JOSE JOFER C. VIYO and the COURT OF APPEALS, respondents.
DECISION
CARPIO-MORALES, J.:
Petitioner San Miguel Corporation (SMC), represented by its Assistant Vice President
and Visayas Area Manager for Aquaculture Operations Leopoldo S. Titular, and
Sunflower Multi-Purpose Cooperative (Sunflower), represented by the Chairman of its
Board of Directors Roy G. Asong, entered into a one-year Contract of

Services1 commencing on January 1, 1993, to be renewed on a month to month basis
until terminated by either party. The pertinent provisions of the contract read:
1. The cooperative agrees and undertakes to perform and/or provide for the
company, on a non-exclusive basis for a period of one year the following
services for the Bacolod Shrimp Processing Plant:
A. Messengerial/Janitorial
B. Shrimp Harvesting/Receiving
C. Sanitation/Washing/Cold Storage2
2. To carry out the undertaking specified in the immediately preceding
paragraph, the cooperative shall employ the necessary personnel and
provide adequate equipment, materials, tools and apparatus, to efficiently,
fully and speedily accomplish the work and services undertaken by the
cooperative. xxx
3. In consideration of the above undertaking the company expressly agrees
to pay the cooperative the following rates per activity:
A. Messengerial/Janitorial Monthly Fixed Service Charge of:
Nineteen Thousand Five Hundred Pesos Only (P19,500.00)
B. Harvesting/Shrimp Receiving. Piece rate of P0.34/kg. Or
P100.00 minimum per person/activity whichever is higher, with
provisions as follows:
P25.00 Fixed Fee per person
Additional meal allowance P15.00 every meal time in case harvest
duration exceeds one meal.
This will be pre-set every harvest based on harvest plan approved
by the Senior Buyer.
C. Sanitation/Washing and Cold Storage P125.00/person for 3
shifts.
One-half of the payment for all services rendered shall be payable

on the fifteenth and the other half, on the end of each month. The
cooperative shall pay taxes, fees, dues and other impositions that
shall become due as a result of this contract.
The cooperative shall have the entire charge, control and
supervision of the work and services herein agreed upon. xxx
4. There is no employer-employee relationship between the company and
the cooperative, or the cooperative and any of its members, or the company
and any members of the cooperative. The cooperative is an association of
self-employed members, an independent contractor, and an entrepreneur. It
is subject to the control and direction of the company only as to the result to
be accomplished by the work or services herein specified, and not as to the
work herein contracted. The cooperative and its members recognize that it is
taking a business risk in accepting a fixed service fee to provide the services
contracted for and its realization of profit or loss from its undertaking, in
relation to all its other undertakings, will depend on how efficiently it deploys
and fields its members and how they perform the work and manage its
operations.
5. The cooperative shall, whenever possible, maintain and keep under its
control the premises where the work under this contract shall be performed.
6. The cooperative shall have exclusive discretion in the selection,
engagement and discharge of its member-workers or otherwise in the
direction and control thereof. The determination of the wages, salaries and
compensation of the member-workers of the cooperative shall be within its
full control. It is further understood that the cooperative is an independent
contractor, and as such, the cooperative agrees to comply with all the
requirements of all pertinent laws and ordinances, rules and regulations.
Although it is understood and agreed between the parties hereto that the
cooperative, in the performance of its obligations, is subject to the control or
direction of the company merely as a (sic) result to be accomplished by the
work or services herein specified, and not as to the means and methods of
accomplishing such result, the cooperative hereby warrants that it will
perform such work or services in such manner as will be consistent with the
achievement of the result herein contracted for.
xxx
8. The cooperative undertakes to pay the wages or salaries of its memberworkers, as well as all benefits, premiums and protection in accordance with
the provisions of the labor code, cooperative code and other applicable laws
and decrees and the rules and regulations promulgated by competent

authorities, assuming all responsibility therefor.
The cooperative further undertakes to submit to the company within the first
ten (10) days of every month, a statement made, signed and sworn to by its
duly authorized representative before a notary public or other officer
authorized by law to administer oaths, to the effect that the cooperative has
paid all wages or salaries due to its employees or personnel for services
rendered by them during the month immediately preceding, including
overtime, if any, and that such payments were all in accordance with the
requirements of law.
xxx
12. Unless sooner terminated for the reasons stated in paragraph 9 this
contract shall be for a period of one (1) year commencing on January 1,
1993. Thereafter, this Contract will be deemed renewed on a month-tomonth basis until terminated by either party by sending a written notice to
the other at least thirty (30) days prior to the intended date of termination.
xxx3 (Underscoring supplied)
Pursuant to the contract, Sunflower engaged private respondents to, as they did,
render services at SMCs Bacolod Shrimp Processing Plant at Sta. Fe, Bacolod City.
The contract was deemed renewed by the parties every month after its expiration on
January 1, 1994 and private respondents continued to perform their tasks until
September 11, 1995.
In July 1995, private respondents filed a complaint before the NLRC, Regional
Arbitration Branch No. VI, Bacolod City, praying to be declared as regular employees
of SMC, with claims for recovery of all benefits and privileges enjoyed by SMC rank
and file employees.
Private respondents subsequently filed on September 25, 1995 an Amended
Complaint4 to include illegal dismissal as additional cause of action following SMCs
closure of its Bacolod Shrimp Processing Plant on September 15, 1995 5 which
resulted in the termination of their services.
SMC filed a Motion for Leave to File Attached Third Party Complaint6 dated
November 27, 1995 to implead Sunflower as Third Party Defendant which was, by
Order7 of December 11, 1995, granted by Labor Arbiter Ray Alan T. Drilon.
In the meantime, on September 30, 1996, SMC filed before the Regional Office at
Iloilo City of the Department of Labor and Employment (DOLE) a Notice of Closure 8 of
its aquaculture operations effective on even date, citing serious business losses.
By Decision of September 23, 1997, Labor Arbiter Drilon dismissed private
respondents complaint for lack of merit, ratiocinating as follows:
xxx The closure did affect the regular employees and workers of the Bacolod
Processing Plant, who were accordingly terminated following the legal requisites
prescribed by law. The closure, however, in so far as the complainants are
concerned, resulted in the termination of SMCs service contract with their
cooperative xxx9(Underscoring supplied)
Private respondents appealed to the NLRC.
We sustain the stand of the respondent SMC that it could properly exercise
its management prerogative to contract out the preparation and processing aspects of
its aquaculture operations. Judicial notice has already been taken regarding the
general practice adopted in government and private institutions and industries of
hiring independent contractors to perform special services. xxx
By Decision of December 29, 1998, the NLRC dismissed the appeal for lack of merit,
it finding that third party respondent Sunflower was an independent contractor in light
of its observation that "[i]n all the activities of private respondents, they were under
the actual direction, control and supervision of third party respondent Sunflower, as
well as the payment of wages, and power of dismissal."10
xxx
Indeed, the law allows job contracting. Job contracting is permissible under the Labor
Code under specific conditions and we do not see how this activity could not be
legally undertaken by an independent service cooperative like the third-party
respondent herein.
There is no basis to the demand for regularization simply on the theory that
complainants performed activities which are necessary and desirable in the business
of respondent. It has been held that the definition of regular employees as those who
perform activities which are necessary and desirable for the business of the employer
is not always determinative because any agreement may provide for one (1) party to
render services for and in behalf of another for a consideration even without being
hired as an employee.
The charge of the complainants that third-party respondent is a mere labor-only
contractor is a sweeping generalization and completely unsubstantiated. xxx In the
absence of clear and convincing evidence showing that third-party respondent acted
merely as a labor only contractor, we are firmly convinced of the legitimacy and the
integrity of its service contract with respondent SMC.
In the same vein, the closure of the Bacolod Shrimp Processing Plant was a
management decision purely dictated by economic factors which was (sic) mainly
serious business losses. The law recognizes the right of the employer to close his
business or cease his operations for bonafide reasons, as much as it recognizes the
right of the employer to terminate the employment of any employee due to closure or
cessation of business operations, unless the closing is for the purpose of
circumventing the provisions of the law on security of tenure. The decision of
respondent SMC to close its Bacolod Shrimp Processing Plant, due to serious
business losses which has (sic) clearly been established, is a management
prerogative which could hardly be interfered with.
Private respondents Motion for Reconsideration11 having been denied by the NLRC
for lack of merit by Resolution of September 10, 1999, they filed a petition for
certiorari12 before the Court of Appeals (CA).
Before the CA, SMC filed a Motion to Dismiss 13 private respondents petition for noncompliance with the Rules on Civil Procedure and failure to show grave abuse of
discretion on the part of the NLRC.
SMC subsequently filed its Comment14 to the petition on March 30, 2000.
By Decision of February 7, 2001, the appellate court reversed the NLRC decision
and accordingly found for private respondents, disposing as follows:
WHEREFORE, the petition is GRANTED. Accordingly, judgment is hereby
RENDERED: (1) REVERSING and SETTING ASIDE both the 29 December 1998
decision and 10 September 1999 resolution of the National Labor Relations
Commission (NLRC), Fourth Division, Cebu City in NLRC Case No. V-0361-97 as
well as the 23 September 1997 decision of the labor arbiter in RAB Case No. 06-0710316-95; (2) ORDERING the respondent, San Miguel Corporation, to GRANT
petitioners: (a) separation pay in accordance with the computation given to the
regular SMC employees working at its Bacolod Shrimp Processing Plant with full
backwages, inclusive of allowances and other benefits or their monetary equivalent,
from 11 September 1995, the time their actual compensation was withheld from them,
up to the time of the finality of this decision; (b) differentials pays (sic) effective as of
and from the time petitioners acquired regular employment status pursuant to the
disquisition mentioned above, and all such other and further benefits as provided by
applicable collective bargaining agreement(s) or other relations, or by law, beginning
such time up to their termination from employment on 11 September 1995; and
ORDERING
private
respondent
SMC
to
PAY
unto
the
petitioners attorneys fees equivalent to ten (10%) percent of the total award.
SO ORDERED.15 (Underscoring supplied)
Justifying its reversal of the findings of the labor arbiter and the NLRC, the appellate
court reasoned:
Although the terms of the non-exclusive contract of service between SMC and
[Sunflower] showed a clear intent to abstain from establishing an employer-employee
relationship between SMC and [Sunflower] or the latters members, the extent to
which the parties successfully realized this intent in the light of the applicable law is
the controlling factor in determining the real and actual relationship between or
among the parties.
xxx
With respect to the power to control petitioners conduct, it appears that petitioners
were under the direct control and supervision of SMC supervisors both as to the
manner they performed their functions and as to the end results thereof. It was only
after petitioners lodged a complaint to have their status declared as regular
employees of SMC that certain members of [Sunflower] began to countersign
petitioners daily time records to make it appear that they (petitioners) were under the
control and supervision of [Sunflower] team leaders (rollo, pp. 523-527). xxx
Even without these instances indicative of control by SMC over the petitioners, it is
safe to assume that SMC would never have allowed the petitioners to work within its
premises, using its own facilities, equipment and tools, alongside SMC employees
discharging similar or identical activities unless it exercised a substantial degree of
control and supervision over the petitioners not only as to the manner they performed
their functions but also as to the end results of such functions.
In addition, as shown earlier, petitioners, who worked inside the premises of SMC,
were under the control and supervision of SMC both as to the manner and method in
discharging their functions and as to the resultsthereof.
Besides, it should be taken into account that the activities undertaken by the
petitioners as cleaners, janitors, messengers and shrimp harvesters, packers and
handlers were directly related to the aquaculture business of SMC (See Guarin vs.
NLRC, 198 SCRA 267, 273). This is confirmed by the renewal of the service contract
from January 1993 to September 1995, a period of close to three (3) years.
Moreover, the petitioners here numbering ninety seven (97), by itself, is a
considerable workforce and raises the suspicion that the non-exclusive service
contract between SMC and [Sunflower] was "designed to evade the obligations
inherent in an employer-employee relationship" (See Rhone-Poulenc Agrochemicals
Philippines, Inc. vs. NLRC, 217 SCRA 249, 259).
Equally suspicious is the fact that the notary public who signed the by-laws of
[Sunflower] and its [Sunflower] retained counsel are both partners of the local
counsel of SMC (rollo, p. 9).
xxx
With these observations, no other logical conclusion can be reached except
that [Sunflower] acted as an agent of SMC, facilitating the manpower requirements of
the latter, the real employer of the petitioners. We simply cannot allow these two
entities through the convenience of a non-exclusive service contract to stipulate on
the existence of employer-employee relation. Such existence is a question of law
which cannot be made the subject of agreement to the detriment of the petitioners
(Tabas vs. California Manufacturing, Inc., 169 SCRA 497, 500).
xxx
xxx
xxx it becomes apparent that [Sunflower] and the petitioners do not qualify as
independent contractors.[Sunflower] and the petitioners did not have substantial
capital or investment in the form of tools, equipment, implements, work premises, et
cetera necessary to actually perform the service under their own account,
responsibility, and method. The only "work premises" maintained by [Sunflower] was
a small office within the confines of a small "carinderia" or refreshment parlor owned
by the mother of its chair, Roy Asong; the only equipment it owned was a typewriter
(rollo, pp. 525-525) and, the only assets it provided SMC were the bare bodies of its
members, the petitioners herein (rollo, p. 523).
There being a finding of "labor-only" contracting, liability must be shouldered either by

SMC or [Sunflower] or shared by both (See Tabas vs. California Manufacturing,
Inc., supra, p.
502).
SMC
however
should
be
heldsolely liable for
[Sunflower] became non-existent with the closure of the aquaculture business of
SMC.
Furthermore, since the closure of the aquaculture operations of SMC appears to be
valid, reinstatement is no longer feasible. Consistent with the pronouncement
in Bustamante, et al., vs. NLRC, G.R. No. 111651, 28 November 1996, petitioners are
thus entitled to separation pay (in the computation similar to those given to regular
SMC employees at its Bacolod Shrimp Processing Plant) "with full backwages,
inclusive of allowances and other benefits or their monetary equivalent, from the time
their actual compensation was withheld from them" up to the time of the finality of this
decision. This is without prejudice to differentials pays (sic) effective as of and from
the time petitioners acquired regular employment status pursuant to the discussion
mentioned above, and all such other and further benefits as provided by applicable
collective bargaining agreement(s) or other relations, or by law, beginning such time
up to their termination from employment on 11 September 1995.16 (Emphasis and
underscoring supplied)
SMCs Motion for Reconsideration17 having been denied for lack of merit by
Resolution of July 11, 2001, it comes before this Court via the present petition for
review on certiorari assigning to the CA the following errors:
I
THE COURT OF APPEALS GRAVELY ERRED IN GIVING DUE COURSE AND
GRANTING
RESPONDENTS
PATENTLY
DEFECTIVE
PETITION FOR
CERTIORARI. IN DOING SO, THE COURT OF APPEALS DEPARTED FROM THE
ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS.
II
THE COURT OF APPEALS GRAVELY ERRED IN RECOGNIZING ALL THE
RESPONDENTS AS COMPLAINANTS IN THE CASE BEFORE THE LABOR
ARBITER. IN DOING SO, THE COURT OF APPEALS DECIDED THIS CASE IN A
MANNER NOT IN ACCORD WITH LAW OR WITH THE APPLICABLE DECISIONS
OF THE SUPREME COURT.
III
THE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT RESPONDENTS
ARE EMPLOYEES OF SMC.
IV
THE COURT OF APPEALS GRAVELY ERRED IN NOT FINDNG (sic) THAT
RESPONDENTS ARE NOT ENTITLED TO ANY RELIEF. THE CLOSURE OF THE
BACOLOD SHRIMP PROCESSING PLANT WAS DUE TO SERIOUS BUSINESS
LOSSES.18 (Underscoring supplied)
SMC bewails the failure of the appellate court to outrightly dismiss the petition for
certiorari as only three out of the ninety seven named petitioners signed the
verification and certification against forum-shopping.
While the general rule is that the certificate of non-forum shopping must be signed by
all the plaintiffs or petitioners in a case and the signature of only one of them is
insufficient,19 this Court has stressed that the rules on forum shopping, which were
designed to promote and facilitate the orderly administration of justice, should not be
interpreted with such absolute literalness as to subvert its own ultimate and legitimate
objective.20 Strict compliance with the provisions regarding the certificate of non-forum
shopping merely underscores its mandatory nature in that the certification cannot be
altogether dispensed with or its requirements completely disregarded.21It does not,
however, thereby interdict substantial compliance with its provisions under justifiable
circumstances.22
Thus in the recent case of HLC Construction and Development Corporation v. Emily
Homes Subdivision Homeowners Association,23 this Court held:
Respondents (who were plaintiffs in the trial court) filed the complaint against
petitioners as a group, represented by their homeowners association president who
was likewise one of the plaintiffs, Mr. Samaon M. Buat.Respondents raised one cause
of action which was the breach of contractual obligations and payment of damages.
They shared a common interest in the subject matter of the case, being the aggrieved
residents of the poorly constructed and developed Emily Homes Subdivision. Due to
the collective nature of the case, there was no doubt that Mr. Samaon M. Buat could
validly sign the certificate of non-forum shopping in behalf of all his co-plaintiffs. In
cases therefore where it is highly impractical to require all the plaintiffs to sign the
certificate of non-forum shopping, it is sufficient, in order not to defeat the ends of
justice, for one of the plaintiffs, acting as representative, to sign the certificate
provided that xxx the plaintiffs share a common interest in the subject matter of
the case or filed the case as a "collective," raising only one common cause of
action or defense.24 (Emphasis and underscoring supplied)
Given the collective nature of the petition filed before the appellate court by herein
private respondents, raising one common cause of action against SMC, the execution
by private respondents Winifredo Talite, Renelito Deon and Jose Temporosa in behalf
of all the other private respondents of the certificate of non-forum shopping
constitutes substantial compliance with the Rules.25 That the three indeed
represented their co-petitioners before the appellate court is, as it correctly found,
"subsequently proven to be true as shown by the signatures of the majority of the
petitioners appearing in their memorandum filed before Us."26
Additionally, the merits of the substantive aspects of the case may also be deemed as
"special circumstance" or "compelling reason" to take cognizance of a petition
although the certification against forum shopping was not executed and signed by all
of the petitioners.27
SMC goes on to argue that the petition filed before the CA is fatally defective as it was
not accompanied by "copies of all pleadings and documents relevant and pertinent
thereto" in contravention of Section 1, Rule 65 of the Rules of Court.28
This Court is not persuaded. The records show that private respondents appended
the following documents to their petition before the appellate court: the September 23,
1997 Decision of the Labor Arbiter,29 their Notice of Appeal with Appeal
Memorandum dated October 16, 1997 filed before the NLRC, 30 the December 29,
1998NLRC D E C I S I O N,31 their Motion for Reconsideration dated March 26, 1999
filed with the NLRC32 and the September 10, 1999 NLRC Resolution.33
It bears stressing at any rate that it is the appellate court which ultimately determines
if the supporting documents are sufficient to make out a prima facie case.34 It discerns
whether on the basis of what have been submitted it could already judiciously
determine the merits of the petition.35 In the case at bar, the CA found that the petition
was adequately supported by relevant and pertinent documents.
At all events, this Court has allowed a liberal construction of the rule on the
accomplishment of a certificate of non-forum shopping in the following cases: (1)
where a rigid application will result in manifest failure or miscarriage of justice; (2)
where the interest of substantial justice will be served; (3) where the resolution of the
motion is addressed solely to the sound and judicious discretion of the court; and (4)
where the injustice to the adverse party is not commensurate with the degree of his
thoughtlessness in not complying with the procedure prescribed.36
Rules of procedure should indeed be viewed as mere tools designed to facilitate the
attainment of justice. Their strict and rigid application, which would result in
technicalities that tend to frustrate rather than promote substantial justice, must
always be eschewed.37
SMC further argues that the appellate court exceeded its jurisdiction in reversing the
decisions of the labor arbiter and the NLRC as "findings of facts of quasi-judicial
bodies like the NLRC are accorded great respect and finality," and that this principle
acquires greater weight and application in the case at bar as the labor arbiter and the
NLRC have the same factual findings.
The general rule, no doubt, is that findings of facts of an administrative agency which
has acquired expertise in the particular field of its endeavor are accorded great weight
on appeal.38 The rule is not absolute and admits of certain well-recognized
exceptions, however. Thus, when the findings of fact of the labor arbiter and the
NLRC are not supported by substantial evidence or their judgment was based on a
misapprehension of facts, the appellate court may make an independent evaluation of
the facts of the case.39
SMC further faults the appellate court in giving due course to private respondents
petition despite the fact that the complaint filed before the labor arbiter was signed
and verified only by private respondent Winifredo Talite; that private respondents
position paper40 was verified by only six41 out of the ninety seven complainants; and
that their Joint-Affidavit42 was executed only by twelve43 of the complainants.
Specifically with respect to the Joint-Affidavit of private respondents, SMC asserts
that it should not have been considered by the appellate court in establishing the
claims of those who did not sign the same, citing this Courts ruling in Southern
Cotabato Development and Construction, Inc. v. NLRC.44
SMCs position does not lie.
A perusal of the complaint shows that the ninety seven complainants were being
represented by their counsel of choice. Thus the first sentence of their complaint
alleges: "xxx complainants, by counsel and unto this Honorable Office respectfully
state xxx." And the complaint was signed by Atty. Jose Max S. Ortiz as "counsel for
the complainants." Following Section 6, Rule III of the 1990 Rules of Procedure of the
NLRC, now Section 7, Rule III of the 1999 NLRC Rules, Atty. Ortiz is presumed to be
properly authorized by private respondents in filing the complaint.
That the verification wherein it is manifested that private respondent Talite was one of
the complainants and was causing the preparation of the complaint "with the authority
of my co-complainants" indubitably shows that Talite was representing the rest of his
co-complainants in signing the verification in accordance with Section 7, Rule III of
the 1990 NLRC Rules, now Section 8, Rule 3 of the 1999 NLRC Rules, which states:
Section 7. Authority to bind party. Attorneys and other representatives of
parties shall have authority to bind their clients in all matters of procedure; but they
cannot, without a special power of attorney or express consent, enter into a
compromise agreement with the opposing party in full or partial discharge of a clients
claim. (Underscoring supplied)
As regards private respondents position paper which bore the signatures of only six
of them, appended to it was an Authority/Confirmation of Authority 45 signed by the
ninety one others conferring authority to their counsel "to file RAB Case No. 06-0710316-95, entitled Winifredo Talite et al. v. San Miguel Corporation presently pending
before the sala of Labor Arbiter Ray Alan Drilon at the NLRC Regional Arbitration
Branch No. VI in Bacolod City" and appointing him as their retained counsel to
represent them in the said case.
That there has been substantial compliance with the requirement on verification of
position papers under Section 3, Rule V of the 1990 NLRC Rules of Procedure 46 is
not difficult to appreciate in light of the provision of Section 7, Rule V of the 1990
NLRC Rules, now Section 9, Rule V of the 1999 NLRC Rules which reads:
Section 7. Nature of Proceedings. The proceedings before a Labor Arbiter shall be
non-litigious in nature. Subject to the requirements of due process, the technicalities
of law and procedure and the rules obtaining in the courts of law shall not strictly
apply thereto. The Labor Arbiter may avail himself of all reasonable means to
ascertain the facts of the controversy speedily, including ocular inspection and
examination of well-informed persons. (underscoring supplied)
As regards private respondents Joint-Affidavit which is being assailed in view of the
failure of some complainants to affix their signatures thereon, this Court quotes with
approval the appellate courts ratiocinations:
A perusal of the Southern Cotabato Development Case would reveal that movant did
not quote the whole text of paragraph 5 on page 865 of 280 SCRA. The whole
paragraph reads:
"Clearly then, as to those who opted to move for the dismissal of their complaints, or
did not submit their affidavits nor appear during trial and in whose favor no other
independent evidence was adduced, no award for back wages could have been
validly and properly made for want of factual basis. There is no showing at all that any
of the affidavits of the thirty-four (34) complainants were offered as evidence for those
who did not submit their affidavits, or that such affidavits had any bearing at all on the
rights and interest of the latter. In the same vein, private respondents position paper
was not of any help to these delinquent complainants.
The implication is that as long as the affidavits of the complainants were offered
as evidence for those who did not submit theirs, or the affidavits were material
and relevant to the rights and interest of the latter, such affidavits may be
sufficient to establish the claims of those who did not give their affidavits.
Here, a reading of the joint affidavit signed by twelve (12) of the ninety-seven (97)
complainants (petitioners herein) would readily reveal that the affidavit was offered as
evidence not only for the signatories therein but for all of the complainants. (These
ninety-seven (97) individuals were previously identified during the mandatory
conference as the only complainants in the proceedings before the labor arbiter)
Moreover, the affidavit touched on the common interest of all of the complainants as it
supported their claim of the existence of an employer-employee relationship between
them and respondent SMC. Thus, the said affidavit was enough to prove the claims of
the rest of the complainants.47 (Emphasis supplied, underscoring in the original)
In any event, SMC is reminded that the rules of evidence prevailing in courts of law or
equity do not control proceedings before the Labor Arbiter. So Article 221 of the Labor
Code enjoins:
ART. 221. Technical rules not binding and prior resort to amicable settlement.
In any proceeding before the Commission or any of the Labor Arbiters, the rules of
evidence prevailing in courts of law or equity shall not be controlling and it is the spirit
and intention of this Code that the Commission and its members and the Labor
Arbiters 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. xxx
As such, their application may be relaxed to serve the demands of substantial
justice.48
On the merits, the petition just the same fails.
SMC insists that private respondents are the employees of Sunflower, an
independent contractor. On the other hand, private respondents assert that Sunflower
is a labor-only contractor.
Article 106 of the Labor Code provides:
ART. 106. Contractor or subcontracting. Whenever an employer enters into a
contract with another person for the performance of the formers work, the employees
of the contractor and of the latters subcontractor, if any shall be paid in accordance
with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his
employees in accordance with this Code, the employer shall be jointly and severally
liable with his contractor or subcontractor to such employees to the extent of the work
performed under the contract, in the same manner and extent that he is liable to
employees directly employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or prohibit the
contracting out of labor to protect the rights of workers established under the Code. In
so prohibiting or restricting, he may make appropriate distinctions between labor-only
contracting and job contracting as well as differentiations within these types of
contracting and determine who among the parties involved shall be considered the
employer for purposes of this Code, to prevent any violation or circumvention of any
provision of this Code.
There is "labor-only" contracting where the person supplying workers to an employer

does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, and the workers recruited and placed by
such person are performing activities which are directly related to the principal
business of such employer. In such cases, the person or intermediary shall be
considered merely as an agent of the employer who shall be responsible to the
workers in the same manner and extent as if the latter were directly employed by him.
Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor Code, as
amended by Department Order No. 18, distinguishes between legitimate and laboronly contracting:
Section 3. Trilateral Relationship in Contracting Arrangements. In legitimate
contracting, there exists a trilateral relationship under which there is a contract for a
specific job, work or service between the principal and the contractor or
subcontractor, and a contract of employment between the contractor or subcontractor
and its workers. Hence, there are three parties involved in these arrangements, the
principal which decides to farm out a job or service to a contractor or subcontractor,
the contractor or subcontractor which has the capacity to independently undertake the
performance of the job, work or service, and the contractual workers engaged by the
contractor or subcontractor to accomplish the job, work or service.
Section 5. Prohibition against labor-only contracting. Labor-only contracting Sis
hereby declared prohibited. For this purpose, labor-only contracting shall refer to an
arrangement where the contractor or subcontractor merely recruits, supplies or places
workers to perform a job, work or service for a principal, and any of the following
elements are present:
i) The contractor or subcontractor does not have substantial capital or
investment which relates to the job, work or service to be performed and the
employees recruited, supplied or placed by such contractor or subcontractor
are performing activities which are directly related to the main business of
the principal, or
ii) The contractor does not exercise the right to control over the performance
of the work of the contractual employee.
The foregoing provisions shall be without prejudice to the application of Article 248 (c)
of the Labor Code, as amended.
"Substantial capital or investment" refers to capital stocks and subscribed
capitalization in the case of corporations, tools, equipment, implements, machineries
and work premises, actually and directly used by the contractor or subcontractor in
the performance or completion of the job, work or service contracted out.
The "right to control" shall refer to the right reserved to the person for whom the
services of the contractual workers are performed, to determine not only the end to be
achieved, but also the manner and means to be used in reaching that end.
The test to determine the existence of independent contractorship is whether one
claiming to be an independent contractor has contracted to do the work
according to his own methods and without being subject to the control of the
employer, except only as to the results of the work.49
In legitimate labor contracting, the law creates an employer-employee relationship for
a limited purpose, i.e., to ensure that the employees are paid their wages. The
principal employer becomes jointly and severally liable with the job contractor, only for
the payment of the employees wages whenever the contractor fails to pay the same.
Other than that, the principal employer is not responsible for any claim made by the
employees.50
In labor-only contracting, the statute creates an employer-employee relationship for a
comprehensive purpose: to prevent a circumvention of labor laws. The contractor is
considered merely an agent of the principal employer and the latter is responsible to
the employees of the labor-only contractor as if such employees had been directly
employed by the principal employer.51
The Contract of Services between SMC and Sunflower shows that the parties clearly
disavowed the existence of an employer-employee relationship between SMC and
private respondents. The language of a contract is not, however, determinative of the
parties relationship; rather it is the totality of the facts and surrounding circumstances
of the case.52 A party cannot dictate, by the mere expedient of a unilateral declaration
in a contract, the character of its business, i.e., whether as labor-only contractor or job
contractor, it being crucial that its character be measured in terms of and determined
by the criteria set by statute.53
SMC argues that Sunflower could not have been issued a certificate of registration as
a cooperative if it had no substantial capital.54
While indeed Sunflower was issued Certificate of Registration No. IL0-875 55 on
February 10, 1992 by the Cooperative Development Authority, this merely shows that
it had at least P2,000.00 in paid-up share capital as mandated by Section 5 of Article
1456 of Republic Act No. 6938, otherwise known as the Cooperative Code, which
amount cannot be considered substantial capitalization.
What appears is that Sunflower does not have substantial capitalization or investment
in the form of tools, equipment, machineries, work premises and other materials to
qualify it as an independent contractor.
On the other hand, it is gathered that the lot, building, machineries and all other
working tools utilized by private respondents in carrying out their tasks were owned
and provided by SMC. Consider the following uncontroverted allegations of private
respondents in the Joint Affidavit:
Stephen Palabrica, which fact shows that SMC exercised the power of control and
supervision over its employees.59 And control of the premises in which private
respondents worked was by SMC. These tend to disprove the independence of the
contractor.60
[Sunflower], during the existence of its service contract with respondent SMC, did not
own a single machinery, equipment, or working tool used in the processing plant.
Everything was owned and provided by respondent SMC. The lot, the building, and
working facilities are owned by respondent SMC. The machineries and equipments
(sic) like washer machine, oven or cooking machine, sizer machine, freezer, storage,
and chilling tanks, push carts, hydrolic (sic) jack, tables, and chairs were all owned by
respondent SMC. All the boxes, trays, molding pan used in the processing are also
owned by respondent SMC. The gloves and boots used by the complainants were
also owned by respondent SMC. Even the mops, electric floor cleaners, brush, hoose
(sic), soaps, floor waxes, chlorine, liquid stain removers, lysol and the like used by the
complainants assigned as cleaners were all owned and provided by respondent SMC.
More. Private respondents had been working in the aqua processing plant inside the
SMC compound alongside regular SMC shrimp processing workers performing
identical jobs under the same SMC supervisors.61 This circumstance is another
indicium of the existence of a labor-only contractorship.62
Simply stated, third-party respondent did not own even a small capital in the form of
tools, machineries, or facilities used in said prawn processing
xxx Nor do we believe MAERC to have an independent business. Not only was it set
up to specifically meet the pressing needs of SMC which was then having labor
problems in its segregation division, none of its workers was also ever assigned to
any other establishment, thus convincing us that it was created solely to service the
needs of SMC. Naturally, with the severance of relationship between MAERC and
SMC followed MAERCs cessation of operations, the loss of jobs for the whole
MAERC workforce and the resulting actions instituted by the workers. 65(Underscoring
supplied)
xxx
The alleged office of [Sunflower] is found within the confines of a small "carinderia" or
"refreshment" (sic) owned by the mother of the Cooperative Chairman Roy Asong.
xxx In said . . . office, the only equipment used and owned by [Sunflower] was a
typewriter. 57
And from the job description provided by SMC itself, the work assigned to private
respondents was directly relatedto the aquaculture operations of SMC. Undoubtedly,
the nature of the work performed by private respondents in shrimp harvesting,
receiving and packing formed an integral part of the shrimp processing operations of
SMC. As for janitorial and messengerial services, that they are considered directly
related to the principal business of the employer 58 has been jurisprudentially
recognized.
Furthermore, Sunflower did not carry on an independent business or undertake the
performance of its service contract according to its own manner and method, free
from the control and supervision of its principal, SMC, its apparent role having been
merely to recruit persons to work for SMC.
Thus, it is gathered from the evidence adduced by private respondents before the
labor arbiter that their daily time records were signed by SMC supervisors Ike
Puentebella, Joemel Haro, Joemari Raca, Erwin Tumonong, Edison Arguello, and
And as private respondents alleged in their Joint Affidavit which did not escape the
observation of the CA, no showing to the contrary having been proffered by SMC,
Sunflower did not cater to clients other than SMC, 63 and with the closure of SMCs
Bacolod Shrimp Processing Plant, Sunflower likewise ceased to exist. This Courts
ruling in San Miguel Corporation v. MAERC Integrated Services, Inc.64 is thus
instructive.
All the foregoing considerations affirm by more than substantial evidence the
existence of an employer-employee relationship between SMC and private
respondents.
Since private respondents who were engaged in shrimp processing performed tasks
usually necessary or desirable in the aquaculture business of SMC, they should be
deemed regular employees of the latter 66 and as such are entitled to all the benefits
and rights appurtenant to regular employment. 67 They should thus be awarded
differential pay corresponding to the difference between the wages and benefits given
them and those accorded SMCs other regular employees.1awphi1.zw+
Respecting the private respondents who were tasked with janitorial and messengerial
duties, this Court quotes with approval the appellate courts ruling thereon:
Those performing janitorial and messengerial services however acquired regular
status only after rendering one-year service pursuant to Article 280 of the Labor
Code. Although janitorial and messengerial services are considered directly related to
the aquaculture business of SMC, they are deemed unnecessary in the conduct of its
principal business; hence, the distinction (See Coca Cola Bottlers Phils., Inc. v.
NLRC, 307 SCRA 131, 136-137 and Philippine Bank of Communications v.
NLRC, supra, p. 359).68
The law of course provides for two kinds of regular employees, namely: (1) those who
are engaged to perform activities which are usually necessary or desirable in the
usual business or trade of the employer; and (2) those who have rendered at least
one year of service, whether continuous or broken, with respect to the activity in
which they are employed.69
As for those of private respondents who were engaged in janitorial and messengerial
tasks, they fall under the second category and are thus entitled to differential pay and
benefits extended to other SMC regular employees from the day immediately
following their first year of service.70
Regarding the closure of SMCs aquaculture operations and the consequent
termination of private respondents, Article 283 of the Labor Code provides:
ART. 283. Closure of establishment and reduction of personnel. The employer
may also terminate the employment of any employee due to the installation of labor
saving devices, redundancy, retrenchment to prevent losses or the closing or
cessation of operation of the establishment or undertaking unless the closing is for
the purpose of circumventing the provisions of this Title, by serving a written notice on
the workers and the Department of Labor and Employment at least one (1) month
before the intended date thereof. In case of termination due to the installation of labor
saving devices or redundancy, the worker affected thereby shall be entitled to a
separation pay equivalent to at least his 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 in cases of closures or cessation of operations of establishment or
undertaking not due to serious business losses or financial reverses, the separation
pay shall be equivalent to one (1) month pay or to 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. (Underscoring supplied)
For retrenchment to be considered valid the following substantial requirements must

be met: (a) the losses expected should be substantial and not merely de minimis in
extent; (b) the substantial losses apprehended must be reasonably imminent such as
can be perceived objectively and in good faith by the employer; (c) the retrenchment
must be reasonably necessary and likely to effectively prevent the expected losses;
and (d) the alleged losses, if already incurred, and the expected imminent losses
sought to be forestalled, must be proved by sufficient and convincing evidence.73
In the discharge of these requirements, it is the employer who has the onus, being in
the nature of an affirmative defense.74
Normally, the condition of business losses is shown by audited financial documents
like yearly balance sheets, profit and loss statements and annual income tax returns.
The financial statements must be prepared and signed by independent auditors failing
which they can be assailed as self-serving documents.75
In the case at bar, company losses were duly established by financial documents
audited by Joaquin Cunanan & Co. showing that the aquaculture operations of SMCs
Agribusiness Division accumulated losses amounting toP145,848,172.00 in 1992
resulting in the closure of its Calatrava Aquaculture Center in Negros
Occidental,P11,393,071.00 in 1993 and P80,325,608.00 in 1994 which led to the
closure of its San Fernando Shrimp Processing Plant in Pampanga and the Bacolod
Shrimp Processing Plant in 1995.
SMC has thus proven substantial business reverses justifying retrenchment of its
employees.
For termination due to retrenchment to be valid, however, the law requires that written
notices of the intended retrenchment be served by the employer on the worker and on
the DOLE at least one (1) month before the actual date of the retrenchment,76 in order
to give employees some time to prepare for the eventual loss of their jobs, as well as
to give DOLE the opportunity to ascertain the verity of the alleged cause of
termination.77
In the case at bar, a particular department under the SMC group of companies was
closed allegedly due to serious business reverses. This constitutes retrenchment by,
and not closure of, the enterprise or the company itself as SMC has not totally ceased
operations but is still very much an on-going and highly viable business concern.71
Private respondents, however, were merely verbally informed on September 10, 1995
by SMC Prawn Manager Ponciano Capay that effective the following day or on
September 11, 1995, they were no longer to report for work as SMC would be closing
its operations.78
Retrenchment is a management prerogative consistently recognized and affirmed by

this Court. It is, however, subject to faithful compliance with the substantive and
procedural requirements laid down by law and jurisprudence.72
Where the dismissal is based on an authorized cause under Article 283 of the Labor
Code but the employer failed to comply with the notice requirement, the sanction
should be stiff as the dismissal process was initiated by the employers exercise of his
management prerogative, as opposed to a dismissal based on a just cause under
Article 282 with the same procedural infirmity where the sanction to be imposed upon
the employer should be tempered as the dismissal process was, in effect, initiated by
an act imputable to the employee.79
In light of the factual circumstances of the case at bar, this Court awards P50,000.00
to each private respondent as nominal damages.
The grant of separation pay as an incidence of termination of employment due to
retrenchment to prevent losses is a statutory obligation on the part of the employer
and a demandable right on the part of the employee. Private respondents should thus
be awarded separation pay equivalent to at least one (1) month pay or to at least onehalf month pay for every year of service, whichever is higher, as mandated by Article
283 of the Labor Code or the separation pay awarded by SMC to other regular SMC
employees that were terminated as a result of the retrenchment, depending on which
is most beneficial to private respondents.
pay for every year of service, whichever is higher, as mandated by Article 283 of the
Labor Code or the separation pay awarded by SMC to other regular SMC employees
that were terminated as a result of the retrenchment, depending on which is most
beneficial to private respondents; and ten percent (10%) attorneys fees based on the
herein modified award.
Petitioner San Miguel Corporation is further ORDERED to pay each private
respondent the amount ofP50,000.00, representing nominal damages for noncompliance with statutory due process.
The award of backwages is DELETED.
SO ORDERED.
Considering that private respondents were not illegally dismissed, however, no

backwages need be awarded. It is well settled that backwages may be granted only
when there is a finding of illegal dismissal. 80 The appellate court thus erred in
awarding backwages to private respondents upon the authority of Bustamante v.
NLRC,81 what was involved in that case being one of illegal dismissal.
With respect to attorneys fees, in actions for recovery of wages or where an
employee was forced to litigate and thus incurred expenses to protect his rights and
interests,82 a maximum of ten percent (10%) of the total monetary award 83 by way of
attorneys fees is justifiable under Article 111 of the Labor Code, 84 Section 8, Rule VIII,
Book III of its Implementing Rules,85 and paragraph 7, Article 2208 of the Civil
Code.86 Although an express finding of facts and law is still necessary to prove the
merit of the award, there need not be any showing that the employer acted
maliciously or in bad faith when it withheld the wages. There need only be a showing
that the lawful wages were not paid accordingly, as in this case.87
Absent any evidence showing that Sunflower has been dissolved in accordance with
law, pursuant to Rule VIII-A, Section 1988 of the Omnibus Rules Implementing the
Labor Code, Sunflower is held solidarily liable with SMC for all the rightful claims of
private respondents.
WHEREFORE, the petition is DENIED. The assailed Decision dated February 7,
2001 and Resolution dated July 11, 2001 of the Court of Appeals are AFFIRMED with
MODIFICATION.
Petitioner San Miguel Corporation and Sunflower Multi-Purpose Cooperative are
hereby ORDERED to jointly and severally pay each private respondent differential
pay from the time they became regular employees up to the date of their termination;
separation pay equivalent to at least one (1) month pay or to at least one-half month
G.R. No. L-66598 December 19, 1986

PHILIPPINE
BANK
OF
COMMUNICATIONS, petitioner,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION, HONORABLE ARBITER
TEODORICO L. DOGELIO and RICARDO ORPIADA respondents.
Marcelino Lontok, Jr. for respondents.
FELICIANO, J.:
Petitioner Philippine Bank of Communications and the Corporate Executive Search
Inc. (CESI) entered into a letter agreement dated January 1976 under which (CESI)
undertook to provide "Tempo[rary] Services" to petitioner Consisting of the "temporary
services" of eleven (11) messengers. The contract period is described as being "from
January 1976." The petitioner in truth undertook to pay a "daily service rate of P18,
" on a per person basis.
Attached to the letter agreement was a "List of Messengers assigned at Philippine
Bank of Communications" which list included, as item No. 5 thereof, the name of
private respondent Ricardo Orpiada.
Ricardo Orpiada was thus assigned to work with the petitioner bank. As such, he
rendered services to the bank, within the premises of the bank and alongside other
people also rendering services to the bank. There was some question as to when
Ricardo Orpiada commenced rendering services to the bank. As noted above, the
letter agreement was dated January 1976. However, the position paper submitted by
(CESI) to the National Labor Relations Commission stated that (CESI) hired Ricardo
Orpiada on 25 June 1975 as a Tempo Service employee, and assigned him to work
with the petitioner bank "as evidenced by the appointment memo issued to him on 25
June 1975. " Be that as it may, on or about October 1976, the petitioner requested
(CESI) to withdraw Orpiada's assignment because, in the allegation of the bank,
Orpiada's services "were no longer needed."
On 29 October 1976, Orpiada instituted a complaint in the Department of Labor (now

Ministry of Labor and Employment) against the petitioner for illegal dismissal and
failure to pay the 13th month pay provided for in Presidential Decree No. 851. This
complaint was docketed as Case No. R04-1010184-76-E. After investigation, the
Office of the Regional Director, Regional Office No. IV of the Department of Labor,
issued an order dismissing Orpiada's complaint for failure of Mr. Orpiada to show the
existence of an employer-employee relationship between the bank and himself.
Despite the foregoing order, Orpiada succeeded in having his complaint certified for
compulsory arbitration in Case No. RB-IV-11187-77 entitled "Ricardo Orpiada,
complaint vs. Philippine Bank of Communications, respondent." During the
compulsory arbitration proceedings, CE SI was brought into the picture as an
additional respondent by the bank. Both the bank and (CESI) stoutly maintained that
(CESI) (and not the bank) was the employer of Orpiada.
On 12 September 1977, respondent Labor Arbiter Dogelio rendered a decision in
Case No. RB-IV-11187-77, the dispositive portion of which read as follows:
WHEREFORE, premises considered, respondent bank is hereby ordered to
reinstate complainant to the same or equivalent position with full back wages
and to pay the latter's 13th month pay for the year 1976.
On 26 October 1977, the bank appealed the decision of the Labor Arbiter to the
respondent NLRC. More than six years laterand the record is silent on why the
proceeding in the NLRC should have taken more than six years to resolve the NLRC
promulgated its decision affirming the award of the Labor Arbiter and stating as
follows:
WHEREFORE, except for the modification reducing the complainant's back
wages to two (2) years without qualification, the Decision appealed from is
hereby AFFIRMED in an other respects.
Accordingly, on 2 April 1984, the bank filed the present petition for certiorari with this
Court seeking to annul and set aside (a) the decision of respondent Labor Arbiter
Dogelio dated 12 September 1977 in Labor Case No. RB-IV-1118-77 and (b) the
decision of the NLRC promulgated on 29 December 1983 affirming with some
modifications the decision of the Labor Arbiter. This Court granted a temporary
restraining order on 11 April 1984. The main issue as litigated by the parties in this
case relates to whether or not an employer-employee relationship existed between
the petitioner bank and private respondent Ricardo Orpiada. The petitioner bank
maintains that no employer-employee relationship was established between itself and
Ricardo Orpiada and that Ricardo Orpiada was an employee of (CESI) and not of the
bank. The bank documents its position by pointing to the following provisions of its
letter agreement with CE SI
4) The power to control the putative employees' conduct, although the latter
is the most important element. ... (99 Phil. at 411- 412; Emphasis supplied)
1. The individual/s you i.e. (CESI) will assign to us i.e. petitioner) will be
subject to our acceptance and will observe work-days, hours, and methods
of work (sic); on the other hand, they will not be asked to perform job (sic)
not normally related to the position/s for which Tempo Services were
contracted.
In the present case, Orpiada was not previously selected by the bank. Rather,
Orpiada was assigned to work in the bank by (CESI) Orpiada could not have found
his way to the bank's offices had he not been first hired by (CESI) and later assigned
to work in the bank's offices. The selection of Orpiada by (CESI) was, however,
subject to the acceptance of the bank and the bank did accept him As will be seen
shortly, (CESI) had hired Orpiada from the outside world precisely for the purpose of
assigning or seconding him to the bank.
2. Such individuals will nevertheless remain your own employees and you
will therefore, retain all liabilities arising from the new Labor Code as
amended Social Security Act and other applicable Governmental decrees,
rules and regulations, provided that, on our part, we shaIl
a. Require your employers assigned to us to properly accomplish
your daily time record, to faithfully reflect all hours worked in our
behalf whether such work be within or beyond eight hours of any
day.
b. Notify you of any change in the work assignment or contract
period affecting any of your employers assigned to us within 24
hours, after such change is made.
(Emphasis supplied)
The above language of the agreement between the bank and CE SI is of course
relevant and important as manifesting an intent to refrain from constituting an
employer-employee relationship between the bank and the persons assigned or
seconded to the bank by (CESI) That extent to which the parties were successful in
realizing their intent is another matter, one that is dependent upon applicable law and
not merely upon the terms of their contract.
In the case of Viana vs. AI-Lagdan and Pica, 99 Phil. 408 (1956), this Court listed
certain factors to be taken into account in determining the existence of an employeremployee relationship. These factors are:
1) The selection and engagement of the putative employee;
2) The payment of wages;
3) The power of dismissal- and
With respect to the payment of Orpiada's wages, the bank remitted to CE SI amounts
corresponding to the "daily service rate" of Orpiada and the others similarly assigned
by (CESI) to the bank, and (CESI) paid to Orpiada and the others the wages
pertaining to to them. It is not clear from the record whether the amounts remitted to
(CESI) included some factor for CESIs fees; it seems safe to assume that (CESI) had
required some amount in excess of the wages paid by (CESI) to Orpiada and the
others to cover its own overhead expenses and provide some contribution to profit.
The bank alleged that Orpiada did not appear in its payroll and this allegation was not
denied by Orpiada. Indeed, the Labor Arbiter in Case No. R04-184-76-B found that
Orpiada was listed in the payroll of (CESI) with (CESI) deducting amounts
representing his Medicare and Social Security System premiums. A copy of the
(CESI) payroll was presented, strangely enough, by Orpiada himself to Regional
Office No. IV.
In respect of the power of dismissal we note that the bank requested (CESI) to
withdraw Orpiada's assignment and that (CESI) did, in fact, withdraw such
assignment. Upon such withdrawal from his assignment with the bank, Orpiada was
also terminated by (CESI) Indeed, it appears clear that Orpiada was hired by (CESI)
specifically for assignment with the bank and that upon his withdrawal from such
assignment upon request of the bank, Orpiada's employment with (CESI) was also
severed, until some other client of (CESI) showed up in the horizon to which Orpiada
could once more be assigned. In the position paper dated August 5, 1977 submitted
by (CESI) before the NLRC, (CESI) explained the relationship between itself and
Orpiada in lucid terms:
5. That as Petitioner herein was very well aware of from the very beginning,
he was hired by Corporate Executive Search, Inc. as a temporary employee
and as such, was being assigned to work with the latter's client Respondent
herein that the rationale behind his hiring was the existence of a service
contract between Corporate Executive Search Inc. and its client-company,
the Philippine Bank of Communications, the herein Respondent, and that
when this service contract was 0terminated, then the reason for his
employment with Corporate Executive Search, Inc., ceased to exist and that
therefore Corporate Executive Search Inc. had no alternative but to

discontinue his employment until another opportune time for his hiring would
present itself;
6. That Petitioner was not given his 13th-month pay under P.D. 851, because
Corporate Executive Search Inc. gave the 13th month pay for 1976 to its
employees in December 1976, and since the company had lost contact with
the Petitioner by reason of his having ceased to be connected with it as of
22 October 1976, he was not among those given the 13th-month pay.
(Emphasis supplied)
Turning to the power to control Orpiada's conduct, it should be noted immediately that
Orpiada performed his sections within the bank's premises, and not within the office
premises of (CESI) As such, Orpiada must have been subject to at least the same
control and supervision that the bank exercises over any other person physically
within its premises and rendering services to or for the bank, in other words, any
employee or staff member of the bank. It seems unreasonable to suppose that the
bank would have allowed Orpiada and the other persons assigned to the bank by CE
SI to remain within the bank's premises and there render services to the bank, without
subjecting them to a substantial measure of control and supervision, whether in
respect of the manner in which they discharged their functions, or in respect of the
end results of their functions or activities, or both.
Application of the above factors in the specific context of this case appears to yield
mixed results so far as concerns the existence of an employer- employer relationship
between the bank and Orpiada. The second ("payment of wages") and third ("power
of dismissal") factors suggest that the relevant relationship was that subsisting
between (CESI) and Orpiada, a relationship conceded by (CESI) to be one between
employer and employee. Upon the other hand, the first ("selection and engagement")
and fourth ("control of employee's conduct") factors indicate that some direct
relationship did exist between Orpiada and the bank and that such relationship may
be assimilated to employment. Perhaps the most important circumstance which
emerges from an examination of the facts of the tri-lateral relationship between the
bank, (CESI) and Orpiada is that the employer-employee relationship between (CESI)
and Orpiada was established precisely in anticipation of, and for the very purpose of
making possible, the secondment of Orpiada to the bank. It is therefore necessary to
confront the task of determining the appropriate characterization of the relationship
between the bank and (CESI) was that relationship one of employer and job
(independent) contractor or one of employer and "labor-only" contractor?
Articles 106 and 107 of the Labor Code of the Philippines (Presidential Decree No.
442, as amended) provides as follows:
ART. 106. Contractor or sub-contractor.Whenever an employer enters into

a contract with another person for the performance of the former's work, the
employees of the contractor and of the latter's subcontractor, if any, shall be
paid in accordance with the provisions in this Code.
In the event that the contractor or sub-contractor fails to pay the wages of his
employees in accordance with this Code, the employer shall be jointly and
severally liable with his contractor or sub-contructor to such employees to
the extent of the work performed under the contract in the same manner and
extent that he is liable to employees directly employed by him
The Secretary of Labor may, by appropriate regulations, restrict or prohibit
the contracting out of labor to protect the rights of workers established under
this Code. In so prohibiting or restricting, he may make appropriate
distinctions between labor-only contracting and job contracting as well as
differentiations within these types of contracting and determine who among
the parties involved shall be considered the employer for purposes of this
Code, to prevent any violation or circumvention of any provisions of this
Code.
There is "labor-only" contracting where the person supplying workers to an
employer does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises, among others, and the workers
recruited and placed by such person are performing activities which are
directly related to the principal business of such employer. In such cases,
the person or intermediary shall be considered merely as an agent of the
employer who shall be responsible to the workers in the same manner and
extent as if the latter were directly employed by him.
ART. 107. Indirect employer. The provisions of the immediately preceding
Article shall likewise apply to any person, part, nership association or
corporation which, not being an employer, contracts with an independent
contractor for the performance of any work, task, job or project. (Emphasis
supplied)
Under the general rule set out in the first and second paragraphs of Article 106, an
employer who enters into a contract with a contractor for the performance of work for
the employer, does not thereby create an employer-employes relationship between
himself and the employees of the contractor. Thus, the employees of the contractor
remain the contractor's employees and his alone. Nonetheless when a contractor fails
to pay the wages of his employees in accordance with the Labor Code, the employer
who contracted out the job to the contractor becomes jointly and severally liable with
his contractor to the employees of the latter "to the extent of the work performed
under the contract" as such employer were the employer of the contractor's
employees. The law itself, in other words, establishes an employer-employee

relationship between the employer and the job contractor's employees for a limited
purpose, i.e., in order to ensure that the latter get paid the wages due to them.
A similar situation obtains where there is "labor only" contracting. The "labor-only"
contractor-i.e "the person or intermediary" is considered "merely as an agent of the
employer. " The employer is made by the statute responsible to the employees of the
"labor only" contractor as if such employees had been directly employed by the
employer. Thus, where "labor only" contracting exists in a given case, the statute itself
implies or establishes an employer-employee relationship between the employer (the
owner of the project) and the employees of the "labor only" contractor, this time for
a comprehensive purpose: "employer for purposes of this Code, to prevent any
violation or circumvention of any provision of this Code. " The law in effect holds both
the employer and the "labor-only" contractor responsible to the latter's employees for
the more effective safeguarding of the employees' rights under the Labor Code.
In contrast, job contracting-contracting out a particular job to an independent

contractor is defined by the Implementing Rules as follows:
Sec. 8. Job contracting. There is job contracting permissible under the
Code if the following conditions are met:
(1) The contractor carries on an independent business and undertakes the
contract work on his own account under his own responsibility according to
his own manner and method free from the control and direction of his
employer or principal in all matters connected with the performance of the
work except as to the results thereof; and
(2) The contractor has substantial capital or investment in the form of tools,
equipment, machineries, work premises, and other materials which are
necessary in the conduct of his business. (Emphasis supplied)
Both the petitioner bank and (CESI) have insisted that (CESI) was not a "labor only"
contractor. Section 9 of Rule VIII of Book III entitled "Conditions of Employment," of
the Omnibus Rules Implementing the Labor Code provides as follows:
The bank and (CESI) urge that (CESI) is not properly regarded as a "labor-only"
contractor upon n the ground that (CESI) is possessed of substantial capital or
investment in the form of office equipment, tools and trained service personnel.
Sec. 9. Labor-only contracting. (a) Any person who undertakes to supply

workers to an employer shag be deemed to be engaged in labor-only
contracting where such person:
We are unable to agree with the bank and (CESI) on this score. The definition of
"labor-only" contracting in Rule VIII, Book III of the Implementing Rules must be read
in conjunction with the definition of job contracting given in Section 8 of the same
Rules. The undertaking given by CESI in favor of the bank was not the performance
of a specific job for instance, the carriage and delivery of documents and parcels to
the addresses thereof. There appear to be many companies today which perform this
discrete service, companies with their own personnel who pick up documents and
packages from the offices of a client or customer, and who deliver such materials
utilizing their own delivery vans or motorcycles to the addresses. In the present case,
the undertaking of (CESI) was toprovide its client-thebank-with a certain number of
persons able to carry out the work of messengers. Such undertaking of CESI was
complied with when the requisite number of persons were assigned or seconded to
the petitioner bank. Orpiada utilized the premises and office equipment of the bank
and not those of (CESI) Messengerial work-the delivery of documents to designated
persons whether within or without the bank premises is of course directly related to
the day-to-day operations of the bank. Section 9(2) quoted above does notrequire for
its applicability that the petitioner must be engaged in the delivery of items as a
distinct and separate line of business.
(1) Does not have substantial capital or investment in the form of

tools, equipment, machineries, work premises and other materials;
and
(2) The workers recruited and placed by such person are
performing activities which are to the principal business or
operations of the c workers are habitually employed,
(b) Labor-only contracting as defined herein is hereby prohibited and the
person acting as contractor shall be considered merely as an agent or
intermediary of the employer who shall be responsible to the workers in the
same manner and extent as if the latter were directly employed by him
(c) For cases not file under this Article, the Secretary of Labor shall
determine through appropriate orders whether or not the contracting out of
labor is permissible in the light of the circumstances of each case and after
considering the operating needs of the employer and the rights of the
workers involved. In such case, he may prescribe conditions and restrictions
to insure the protection and welfare of the workers. (Emphasis supplied)
Succinctly put, CESI is not a parcel delivery company: as its name indicates, it is a
recruitment and placement corporation placing bodies, as it were, in d ifferent client
companies for longer or shorter periods of time. It is this factor that, to our mind,
distinguishes this case from American President v. Clave et al, 114 SCRA 826 (1982)
if indeed distinguishing way is needed.
The bank urged that the letter agreement entered into with CESI was designed to
enable the bank to obtain the temporary services of people necessary to enable the
bank to cope with peak loads, to replace temporary workers who were out on
vacation or sick leave, and to handle specialized work. There is, of course, nothing
illegal about hiring persons to carry out "a specific project or undertaking the
completion or termination of which [was] determined at the time of the engagement of
[the] employee, or where the work or service to be performed is seasonal in nature
and the employment is for the duration of the season" (Article 281, Labor
Code).<re||an1w> The letter agreement itself, however, merely required (CESI) to
furnish the bank with eleven 11) messengers for " a contract period from January 19,
1976 ." The eleven (11) messengers were thus supposed to render "temporary"
services for an indefinite or unstated period of time. Ricardo Orpiada himself was
assigned to the bank's offices from 25 June 1975 and rendered services to the bank
until sometime in October 1976, or a period of about sixteen months. Under the Labor
Code, however, any employee who has rendered at least one year of service,
whether such service is continuous or not, shall be considered a regular employee
(Article 281, Second paragraph). Assuming, therefore, that Orpiada could properly be
regarded as a casual (as distinguished from a regular) employee of the bank, he
became entitled to be regarded as a regular employee of the bank as soon as he had
completed one year of service to the bank. Employers may not terminate the service
of a regular employee except for a just cause or when authorized under the Labor
Code (Article 280, Labor Code). It is not difficult to see that to uphold the contractual
arrangement between the bank and (CESI) would in effect be to permit employers to
avoid the necessity of hiring regular or permanent employees and to enable them to
keep their employees indefinitely on a temporary or casual status, thus to deny them
security of tenure in their jobs. Article 106 of the Labor Code is precisely designed to
prevent such a result.
We hold that, in the circumstances 'instances of this case, (CESI) was engaged in
"labor-only" or attracting vis-a-vis the petitioner and in respect c Ricardo Orpiada, and
that consequently, the petitioner bank is liable to Orpiada as if Orpiada had been
directly, employed not only by (CESI) but also by the bank. It may well be that the
bank may in turn proceed against (CESI) to obtain reimbursement of, or some
contribution to, the amounts which the bank will have to pay to Orpiada; but this it is
not necessary to determine here.
WHEREFORE, the petition for certiorari is DENIED and the decision promulgated on
29 December 1983 of the National Labor Relations Commission is AFFIRMED. The
Temporary Restraining Order issued by this Court on 11 April 1984 is hereby lifted.
Costs against petitioner.
SO ORDERED.
SECOND DIVISION
G.R. No. L-80680 January 26, 1989
DANILO B. TABAS, EDUARDO BONDOC, RAMON M. BRIONES, EDUARDO R.
ERISPE, JOEL MADRIAGA, ARTHUR M. ESPINO, AMARO BONA, FERDINAND
CRUZ, FEDERICO A. BELITA, ROBERTO P. ISLES, ELMER ARMADA, EDUARDO
UDOG, PETER TIANSING, MIGUELITA QUIAMBOA, NOMER MATAGA, VIOLY
ESTEBAN
and
LYDIA
ORTEGA, petitioners,
vs.
CALIFORNIA MANUFACTURING COMPANY, INC., LILY-VICTORIA A. AZARCON,
NATIONAL LABOR RELATIONS COMMISSION, and HON. EMERSON C.
TUMANON, respondents.
V.E. Del Rosario & Associates for respondent CMC.
The Solicitor General for public respondent.
Banzuela, Flores, Miralles, Raneses, Sy, Taquio and Associates for petitioners.
Mildred A. Ramos for respondent Lily Victoria A. Azarcon.
SARMIENTO, J.:
On July 21, 1986, July 23, 1986, and July 28, 1986, the petitioners petitioned the
National Labor Relations Commission for reinstatement and payment of various
benefits, including minimum wage, overtime pay, holiday pay, thirteen-month pay, and
emergency cost of living allowance pay, against the respondent, the California
Manufacturing Company. 1
On October 7, 1986, after the cases had been consolidated, the California
Manufacturing Company (California) filed a motion to dismiss as well as a position
paper denying the existence of an employer-employee relation between the
petitioners and the company and, consequently, any liability for payment of money
claims. 2 On motion of the petitioners, Livi Manpower Services, Inc. was impleaded as
a party-respondent.
It appears that the petitioners were, prior to their stint with California, employees of
Livi Manpower Services, Inc. (Livi), which subsequently assigned them to work as
"promotional merchandisers" 3 for the former firm pursuant to a manpower supply
agreement. Among other things, the agreement provided that California "has no
control or supervisions whatsoever over [Livi's] workers with respect to how they
accomplish their work or perform [Californias] obligation"; 4 the Livi "is an independent
contractor and nothing herein contained shall be construed as creating between
[California] and [Livi] . . . the relationship of principal[-]agent or
employer[-]employee'; 5 that "it is hereby agreed that it is the sole responsibility of
[Livi] to comply with all existing as well as future laws, rules and regulations pertinent
to employment of labor" 6 and that "[California] is free and harmless from any liability
arising from such laws or from any accident that may befall workers and employees of
[Livi] while in the performance of their duties for [California]. 7
It was further expressly stipulated that the assignment of workers to California shall
be on a "seasonal and contractual basis"; that "[c]ost of living allowance and the 10
legal holidays will be charged directly to [California] at cost "; and that "[p]ayroll for the
preceeding [sic] week [shall] be delivered by [Livi] at [California's] premises." 8
The petitioners were then made to sign employment contracts with durations of six
months, upon the expiration of which they signed new agreements with the same
period, and so on. Unlike regular California employees, who received not less than
P2,823.00 a month in addition to a host of fringe benefits and bonuses, they received
P38.56 plus P15.00 in allowance daily.
The petitioners now allege that they had become regular California employees and
demand, as a consequence whereof, similar benefits. They likewise claim that
pending further proceedings below, they were notified by California that they would
not be rehired. As a result, they filed an amended complaint charging California with
illegal dismissal.
California admits having refused to accept the petitioners back to work but deny
liability therefor for the reason that it is not, to begin with, the petitioners' employer
and that the "retrenchment" had been forced by business losses as well as expiration
of contracts. 9 It appears that thereafter, Livi re-absorbed them into its labor pool on a
"wait-in or standby" status. 10
Amid these factual antecedents, the Court finds the single most important issue to be:
Whether the petitioners are California's or Livi's employees.
The labor arbiter's decision, 11 a decision affirmed on appeal, 12 ruled against the
existence of any employer-employee relation between the petitioners and California
ostensibly in the light of the manpower supply contract, supra, and consequently,
against the latter's liability as and for the money claims demanded. In the same
breath, however, the labor arbiter absolved Livi from any obligation because the
"retrenchment" in question was allegedly "beyond its control ."

the firm, nevertheless, separation pay and attorney's fees.
13
He assessed against
We reverse.
The existence of an employer-employees relation is a question of law and being such,
it cannot be made the subject of agreement. Hence, the fact that the manpower
supply agreement between Livi and California had specifically designated the former
as the petitioners' employer and had absolved the latter from any liability as an
employer, will not erase either party's obligations as an employer, if an employeremployee relation otherwise exists between the workers and either firm. At any rate,
since the agreement was between Livi and California, they alone are bound by it, and
the petitioners cannot be made to suffer from its adverse consequences.
This Court has consistently ruled that the determination of whether or not there is an
employer-employee relation depends upon four standards: (1) the manner of
selection and engagement of the putative employee; (2) the mode of payment of
wages; (3) the presence or absence of a power of dismissal; and (4) the presence or
absence of a power to control the putative employee's conduct. 14 Of the four, the
right-of-control test has been held to be the decisive factor. 15
On the other hand, we have likewise held, based on Article 106 of the Labor Code,
hereinbelow reproduced:
ART. 106. Contractor or sub-contractor. Whenever an employee
enters into a contract with another person for the performance of
the former's work, the employees of the contractor and of the
latter's sub-contractor, if any, shall be paid in accordance with the
provisions of this Code.
In the event that the contractor or sub-contractor fails to pay wages
of his employees in accordance with this Code, the employer shall
be jointly and severally liable with his contractor or sub-contractor
to such employees to the extent of the work performed under the
contract, in the same manner and extent that he is liable to
employees directly employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or
prohibit the contracting out of labor to protect the rights of workers
established under this Code. In so prohibiting or restricting, he may
make appropriate distinctions between labor-only contracting and
job contracting as well as differentiations within these types of
contracting and determine who among the parties involved shall be
considered the employer for purposes of this Code, to prevent any

violation or circumvention of any provisions of this Code.
There is 'labor-only' contracting where the person supplying
workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries, work
premises, among others, and the workers recruited and placed by
such person are performing activities which are directly related to
the principal business of such employer. In such cases, the person
or intermediary shall be considered merely as an agent of the
employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by him.
that notwithstanding the absence of a direct employer-employee relationship between
the employer in whose favor work had been contracted out by a "labor-only"
contractor, and the employees, the former has the responsibility, together with the
"labor-only" contractor, for any valid labor claims, 16 by operation of law. The reason,
so we held, is that the "labor-only" contractor is considered "merely an agent of the
employer," 17 and liability must be shouldered by either one or shared by both. 18
There is no doubt that in the case at bar, Livi performs "manpower
services", 19 meaning to say, it contracts out labor in favor of clients. We hold that it is
one notwithstanding its vehement claims to the contrary, and notwithstanding the
provision of the contract that it is "an independent contractor." 20 The nature of one's
business is not determined by self-serving appellations one attaches thereto but by
the tests provided by statute and prevailing case law. 21 The bare fact that Livi
maintains a separate line of business does not extinguish the equal fact that it has
provided California with workers to pursue the latter's own business. In this
connection, we do not agree that the petitioners had been made to perform activities
'which
are
not
directly
related
to
the
general
business
of
manufacturing," 22 California's purported "principal operation activity. " 23 The
petitioner's had been charged with "merchandizing [sic] promotion or sale of the
products of [California] in the different sales outlets in Metro Manila including task and
occational [sic] price tagging," 24 an activity that is doubtless, an integral part of the
manufacturing business. It is not, then, as if Livi had served as its (California's)
promotions or sales arm or agent, or otherwise, rendered a piece of work it
(California) could not have itself done; Livi, as a placement agency, had simply
supplied it with the manpower necessary to carry out its (California's) merchandising
activities, using its (California's) premises and equipment. 25
Neither Livi nor California can therefore escape liability, that is, assuming one exists.
The fact that the petitioners have allegedly admitted being Livi's "direct
employees" 26 in their complaints is nothing conclusive. For one thing, the fact that the
petitioners were (are), will not absolve California since liability has been imposed by
legal operation. For another, and as we indicated, the relations of parties must be
judged from case to case and the decree of law, and not by declarations of parties.
The fact that the petitioners have been hired on a "temporary or seasonal" basis
merely is no argument either. As we held in Philippine Bank of Communications v.
NLRC, 27 a temporary or casual employee, under Article 218 of the Labor Code,
becomes regular after service of one year, unless he has been contracted for a
specific project. And we cannot say that merchandising is a specific project for the
obvious reason that it is an activity related to the day-to-day operations of California.
It would have been different, we believe, had Livi been discretely a promotions firm,
and that California had hired it to perform the latter's merchandising activities. For
then, Livi would have been truly the employer of its employees, and California, its
client. The client, in that case, would have been a mere patron, and not an employer.
The employees would not in that event be unlike waiters, who, although at the service
of customers, are not the latter's employees, but of the restaurant. As we pointed out
in the Philippine Bank of Communicationscase:
xxx xxx xxx
... The undertaking given by CESI in favor of the bank was not the
performance of a specific job for instance, the carriage and delivery
of documents and parcels to the addresses thereof. There appear
to be many companies today which perform this discrete service,
companies with their own personnel who pick up documents and
packages from the offices of a client or customer, and who deliver
such materials utilizing their own delivery vans or motorcycles to
the addressees. In the present case, the undertaking of CESI was
to provide its client the bank with a certain number of persons able
to carry out the work of messengers. Such undertaking of CESI
was complied with when the requisite number of persons were
assigned or seconded to the petitioner bank. Orpiada utilized the
premises and office equipment of the bank and not those of CESI.
Messengerial work the delivery of documents to designated
persons whether within or without the bank premises-is of course
directly related to the day-to-day operations of the bank. Section
9(2) quoted above does not require for its applicability that the
petitioner must be engaged in the delivery of items as a distinct and
separate line of business.
Succinctly put, CESI is not a parcel delivery company: as its name

indicates, it is a recruitment and placement corporation placing
bodies, as it were, in different client companies for longer or shorter
periods of time, ... 28
In the case at bar, Livi is admittedly an "independent contractor providing temporary
services of manpower to its client. " 29 When it thus provided California with
manpower, it supplied California with personnel, as if such personnel had been
directly hired by California. Hence, Article 106 of the Code applies.
The Court need not therefore consider whether it is Livi or California which exercises
control over the petitioner vis-a-vis the four barometers referred to earlier, since by
fiction of law, either or both shoulder responsibility.
It is not that by dismissing the terms and conditions of the manpower supply
agreement, we have, hence, considered it illegal. Under the Labor Code, genuine job
contracts are permissible, provided they are genuine job contracts. But, as we held
in Philippine Bank of Communications, supra, when such arrangements are resorted
to "in anticipation of, and for the very purpose of making possible, the
secondment" 30 of the employees from the true employer, the Court will be justified in
expressing its concern. For then that would compromise the rights of the workers,
especially their right to security of tenure.
This brings us to the question: What is the liability of either Livi or California?
The records show that the petitioners bad been given an initial six-month contract,
renewed for another six months. Accordingly, under Article 281 of the Code, they had
become regular employees-of-California-and had acquired a secure tenure. Hence,
they cannot be separated without due process of law.
California resists reinstatement on the ground, first, and as we Id, that the petitioners
are not its employees, and second, by reason of financial distress brought about by
"unfavorable political and economic atmosphere" 31"coupled by the February
Revolution." 32 As to the first objection, we reiterate that the petitioners are its
employees and who, by virtue of the required one-year length-of-service, have
acquired a regular status. As to the second, we are not convinced that California has
shown enough evidence, other than its bare say so, that it had in fact suffered serious
business reverses as a result alone of the prevailing political and economic climate.
We further find the attribution to the February Revolution as a cause for its alleged
losses to be gratuitous and without basis in fact.
California should be warned that retrenchment of workers, unless clearly warranted,
has serious consequences not only on the State's initiatives to maintain a stable
employment record for the country, but more so, on the workingman himself, amid an
environment that is desperately scarce in jobs. And, the National Labor Relations
Commission should have known better than to fall for such unwarranted excuses and
nebulous claims.
WHEREFORE, the petition is GRANTED. Judgment is hereby RENDERED: (1):
SETTING ASIDE the decision, dated March 20, 1987, and the resolution, dated
August 19, 1987; (2) ORDERING the respondent, the California Manufacturing
Company, to REINSTATE the petitioners with full status and rights of regular
employees; and (3) ORDERING the respondent, the California Manufacturing
Company, and the respondents, Livi Manpower Service, Inc. and/or Lily-Victoria
Azarcon, to PAY, jointly and severally, unto the petitioners: (a) backwages and
differential pays effective as and from the time they had acquired a regular status
under the second paragraph, of Section 281, of the Labor Code, but not to exceed
three (3) years, and (b) all such other and further benefits as may be provided by
existing collective bargaining agreement(s) or other relations, or by law, beginning
such time; and (4) ORDERING the private respondents to PAY unto the petitioners
attorney's fees equivalent to ten (10%) percent of all money claims hereby awarded,
in addition to those money claims. The private respondents are likewise ORDERED
to PAY the costs of this suit.
IT IS SO ORDERED.
SECOND DIVISION
This CONTRACT, entered into by and between:
G.R. No. L-37790 March 25, 1976
The MAFINCO TRADING CORPORATION, a domestic corporation

duly organized and existing under the laws of the Philippines, doing
business at Rm. 715 Equitable Bank Bldg., Juan Luna St., Manila,
under the style MAFINCO represented in this act by its General
Manager, SALVADOR C. PICA, duly authorized for the purpose and
hereinafter referred to as MAFINCO, and RODRIGO REPOMANTA,
married/single, of legal age, and a resident of 70-D Bo. Potrero,
MacArthur Highway, Malabon, Rizal hereinafter referred to as
PEDDLER, WITNESSETH:
MAFINCO
TRADING
CORPORATION, petitioner,
vs.
THE HON. BLAS F. OPLE, in his capacity as Secretary of Labor, The NATIONAL
LABOR RELATIONS COMMISSION RODRIGO REPOMANTA and REY
MORALDE, respondents.
Tanada, Sanchez, Tanada & Tanada for petitioner.
Jose T. Maghari for private respondents.
Solicitor General Estelito P. Mendoza for all other respondents.
WHEREAS, MAFINCO has been appointed as the exclusive

distributor of 'COSMOS' Soft Drink Products for and within the City
of Manila;
WHEREAS, the PEDDLER is desirous of buying and selling in
Manila the 'COSMOS' Soft Drink Products handled by MAFINCO;
AQUINO, J.:
Mafinco Trading Corporation (Mafinco for short) filed these special civil actions of
certiorari and prohibition in order to annul the decision of the Secretary of Labor dated
April 16, 1973. In that decision the Secretary reversed an order of the old National
Labor Relations Commission (NLRC) and held that the NLRC had jurisdiction over
the complaint lodged by the Federacion Obrera de la Industria Tabaquera y Otros
Trabajadores de Filipinas (FOITAF) against Mafinco for having dismissed Rodrigo
Repomanta and Rey Moralde (NLRC Case No. LR-086). The voluminous record
reveals the following facts:
Peddling contracts and their termination. On April 30, 1968 Cosmos Aerated Water
Factory, Inc., hereinafter called Cosmos, a firm based at Malabon, Rizal, appointed
Mafinco as its sole distributor of Cosmos soft drinks in Manila. On May 31, 1972
Rodrigo Repomanta and Mafinco executed a peddling contract whereby Repomanta
agreed to "buy and sell" Cosmos soft drinks. Rey Moralde entered into a similar
contract. The contracts were to remain in force for one year unless sooner terminated
by either party upon five days notice to the other. 1 The contract with Repomanta
reads as follows:
PEDDLING CONTRACT
NOW THEREFORE, for and in consideration of the foregoing

premises and the covenants and conditions hereinafter set forth,
the parties hereto has agreed as follows:
1. That in consideration of the competence of the PEDDLER and his ability to
promote mutual benefits for the parties hereto, MAFINCO shall provide the PEDDLER
with a delivery truck with which the latter shall exclusively peddle the soft drinks of the
former, under the terms set forth herein;
2. The PEDDLER himself shall, carefully and in strict observance to traffic regulations,
drive the truck furnished him by MAFINCO or should he employ a driver or helpers
such driver or helpers shall be his employees under his direction and responsibility
and not that of MAFINCO, and their compensation including salaries, wages,
overtime pay, separation pay, bonus or other remuneration and privileges shall be for
the PEDDLER'S own account; The PEDDLER shall likewise bind himself to comply
with the provisions of the Social Security Act and all the applicable labor laws in
relation to his employees;
3. The PEDDLER shall be responsible for any damage to property, death or injuries to
persons or damage to the truck used by him caused by his own acts or omission or
that of his driver and helpers;
KNOW ALL MEN BY THESE PRESENTS:
4. MAFINCO shall furnish the gasoline and oil to run the said truck in business trips,
bear the cost of maintenance and repairs of the said truck arising from ordinary wear
and tear;
By:
5. The PEDDLER shall secure at his own expense all necessary licenses and permits
required by law or ordinance and shall bear any and all expenses which may be
incurred by him in the sales of the soft drink products covered by the contract;
Peddler General Manager
6. All purchases by the PEDDLER shall be charged to him at a price of P2.52 per
case of 24 bottles, ex-warehouse; PROVIDED, However, that if the PEDDLER
purchases a total of not less than 250 cases a day, he shall be entitled further to a
Peddler's Discount of P11.00;
7. Upon the execution of this contract, the PEDDLER shall give a cash bond in the
amount of P1,500.00 against which MAFINCO shall charge the PEDDLER with any
unpaid account at the end of each day or with any damage to the truck of other
account which is properly chargeable to the PEDDLER; within 30 days after the
termination of this contract, the cash bond, after deducting proper charges, shall be
returned to the PEDDLER;
8. The PEDDLER shall liquidate and pay all his accounts to MAFINCO'S authorized
representative at the end of each day, and his failure to do so shall subject his cash
bond at once to answer for any unliquidated accounts;
9. This contract shall be effective up to May 31, 1973 and supersedes any or all other
previous contracts, if any, that may have been entered into between the parties;
However, either of the parties may terminate the same upon five (5) days prior notice
to the other;
10. Upon the. termination of this contract, unless the same is renewed, the delivery
truck and such other equipment furnished by MAFINCO to the PEDDLER shall be
returned by the latter in good order and workable condition, ordinary wear and tear
excepted, und shall promptly settle his outstanding account if any, with MAFINCO;
(Sgd.) RODRIGO REPOMANTA (Sgd.) SALVADOR C. PICA
(Witnesses and notarial acknowledgment are omitted)

On December 7, 1972 Mafinco, pursuant to section 9 of the contract, terminated the
same. The notice to Repomanta reads as follows:
Dear Mr. Repomanta:
This has reference to the Peddling Contract you executed with the
Mafinco Trading Corporation on May 31, 1972. Please be informed
that in accordance with the provisions of paragraph 9 of the said
peddling contract, we are hereby serving notice of termination
thereof effective on December 12, 1972.
Yours truly,
(Sgd.) SALVADOR C. PICA
General Manager
Complaints of Repomanta and Moralde and NLRCs dismissal thereof. Four days
later or on December 11, 1972 Repomanta and Moralde, through their union, the
FOITAF, filed a complaint with the NLRC, charging the general manager of Mafinco
with having violated Presidential Decree No. 21, issued on October 14, 1972, which
created the NLRC and which was intended "to promote industrial peace, maximize
productivity and secure social justice for all". The brief complaint reads as follows:
Hon. Amado Gat Inciong, Chairman
11. To assure performance by the PEDDLER of his obligation to his employees under
the Social Security Act, the applicable labor laws and for damages suffered by third
persons, PEDDLER shall furnish a performance bond of P1,000.00 in favor of
MAFINCO from a SURETY COMPANY acceptable to MAFINCO.
IN WITNESS WHEREOF, the parties hereto have signed this
instrument at the City of Manila, Philippines, this May 31, 1972.
National Labor Relations Commission

Phoenix Bldg., Intramuros,
Manila
Sir:
MAFINCO TRADING CORPORATION

Pursuant to the Presidential Decree No. 21, Sections 2 and 11, the
FOITAF files a complaint against SALVADOR C. PICA, General
Manager of MAFINCO TRADING CORP. located at Room 715,
Equitable Bank Bldg., Juan Luna, Manila, for terminating union
officials (sic), Mr. Rodrigo Refumanta and Mr. Rey Moralde, which
is a violation of the above mentioned decree.
Notice of termination is herewith attach (sic).
We anticipate your due attention and assistance.
Respectfully yours,
(Signed by National Secretary of FOITAF)
Mafinco filed a motion to dismiss the complaint on the ground that the NLRC had no
jurisdiction because Repomanta and Moralde were not its employees but were
independent contractors. It stressed that there was termination of the contract, not a
dismissal of an employee. In Repomanta's case, it pointed out that he was registered
with the Social Security System as an employer who, as a peddler, paid premiums for
his employees; that he secured the mayor's permit to do business and the
corresponding peddler's license and paid the privilege tax and that he obtained
workmen's compensation insurance for his own employees or helpers. It alleged that
Moralde was in the same situation as Repomanta.
Mafinco further alleged that the Bureau of Labor Relations denied the application of
peedlers for registration as a labor union because they were not employees but
employers in their own right of delivery helpers (Decision dated January 4, 1966 by
the Registrar of Labor Organizations in Registration Proceeding No. 4, In the Matter
of Cosmos Supervisors Association-PTGWO); that the Court of Industrial Relations in
Case No. 4399-ULP, Cosmos Supervisors' Association PTGWO vs. Manila
Cosmos Aerated Water Factory, Inc., held in its decision dated July 17, 1967 that the
peddlers were not employees of Cosmos, and that the Court of Appeals held in
Rapajon vs. Fong Kui and Figueras vs. Asierto, CA-G.R. No. 19477-R and 21397-R,
March 18, 1958 that the delivery helpers of the peddlers were not employees of
Cosmos, a ruling which this Court refused to review (L-14072-74, Rapajon vs. Fung
Kui, Resolution dated July 16, 1958).
The complaint was referred to a factfinder who in a lengthy report dated January 22,
1973 found, after "exhaustively and impartially" considering the contentions of the
parties, that the peddlers were employers or "independent businessmen', as held by
the Court of Industrial Relations and the Court of Appeals, and that that holding has
the force of res judicata. The factfinder recommended the dismissal of the complaint.
The old NLRC, composed of Amado G. Inciong, Diego P. Atienza and Ricardo O.
Castro, adopted that recommendation in its order dated February 2, 1973. That order,
which analyzes the peddling contract and reviews the court rulings on the matter, is
quoted below:
The question of whether peddling contracts of the kind entered into
between the parties give rise to an employer-employee relationship
is not new. Nor are the contracts themselves of recent vintage.
For at least twenty years respondent MAFINCO and its
predecessor and/or principal, the Manila-Cosmos Aerated Water
Factory, have entered into contracts with peddlers, under the terms
of which the latter buy from the former at a special price, and sell in
Manila, the former's soft drink products. The distributor provides the
peddler with a delivery truck with the distributor answering for the
cost of fuel and maintenance. If a peddler buys a certain number of
cases or more a day, he is entitled to a fixed amount of peddler's
discount.
The peddler himself drives the truck but if he engages a driver or
helpers, the latter are his employees and he assumes all the
responsibilities of an employer in relation to them. He also obtains
at his own expense all licenses and permits required by law of
salesmen.
The peddler clears his accounts with the distributor at the end of
each day, and unpaid accounts are charged against the cash
deposit or bond which he gives the distributor upon the execution of
the peddling contract. He answers for damages caused by him or
his employees to third persons.
Ruling upon this type of contracts, and the practices and
relationships that attended its implementation, the Court of Appeals,
in CA-G.R. No. 19477-R, said that it did not create a relationship of
employer and employee; that the peddlers under such contract
were not employees of the manufacturer or distributor, and
accordingly dismissed the complaints in the said case. (The
peddler-complainants in that case were claiming overtime pay and
damages, among others.) Elevated to the Supreme Court on review
(G.R.
Nos.
L-14072 to L-14074, 2 August 1958), the decision of the Court of
Appeals was in effect affirmed, for the petition for review was
dismissed by the Supreme Court 'for being factual and for lack of
merit!
The Court of Industrial Relations is of the same persuasion. After

inquiring extensively into substantially the same terms and
conditions of peddling contracts and the practices and relationships
that went into their implementation, the Court said in Case No.
4399ULP that the peddlers of the Manila-Cosmos Aerated Water
Factory were not employees of the latter.
These precedents apply squarely to the case at hand. The
complainants here have not shown that their peddling contracts
with the respondent differ in any substantial degree from those that
were at issue in the Court of Industrial Relations, the Court of
Appeals and the Supreme Court in the cases cited above. Indeed,
a comparison between the contracts involved in those cases and
those in the instant litigation do not show any difference that would
warrant a different conclusion than that reached by those courts. If
at all, the additional stipulations in the present contracts strengthen
the position that the complainant peddlers are independent
contractors or businessman, not employees of the respondent.
Nor has there been shown any substantial change in the old
practices of peddlers vis-a-vis the distributor or manufacturer. The
points raised by the complainants in their pleadings regarding these
practices were extensively discussed by the CIR in the ULP case
above referred to.
We are not prepared to depart from this rule of long standing. It is
the law of the case.
We therefore hold that the complainants in this case were not
employees of MAFINCO and Presidential Decree No. 21 does not I
apply to them.
Complainants' appeal and the Labor Secretary's decision that they were
employees of Mafinco. Complainants Repomanta and Moralde appealed to the
Secretary of Labor. They argued that the NLRC erred (1) in holding that they were
independent contractors and not employees; (2) in relying on the peddler's contract to
determine the existence of employer-employee relationship; (3) in anchoring its
decisions on precedents which have only persuasive force and which did not rule
squarely on the issue of employer-employee relationship, and (4) in dismissing their
complaint.
As stated at the outset, the Secretary in his decision reversed al the NLRC order. He
ruled that Repomanta and Moralde were employees of Mafinco and that,
consequently, the NLRC had jurisdiction over their complaint. The Secretary directed
the NLRC to hear the case on the merits.
The Secretary found that the complainants "were driver-salesmen of the company,
driving the trucks and distributing the products of the company" and that they were
not independent contractors because they had no capital of their own. That finding
was based on the following considerations:
(1) That the contracts are Identical; (2) that the complainants were
originally plant drivers' of the company; (3) that the complainants
had no capital of their own; (4) that their delivery trucks were
provided by the company; (5) that the use of the trucks were
'exclusively' for peddling the products of the company; (6) that they
were required to observe regulations; (7) that they were required to
drive the trucks; (8) that the company furnished the gasoline and oil
to run the said trucks in business trips; (9) that the company
shouldered the cost of maintenance and repair of the said trucks
arising from an ordinary wear and tear; (10) that the company
required them to secure the necessary licenses and permits; (11)
that the company prohibited them from selling the company's
products higher than the fixed price of the company; and (12) that
they and their helpers were paid on commission basis.
The Secretary relied on this Court's ruling that a person who possesses no capital or
money of his own to pay his obligations to his workers but relies-entirely upon the
contract price to be paid by the company, falls short of the requisites or conditions
necessary for an independent contractor (Mansal vs. Gocheco Lumber Co., 96 Phil.
941).
He observed that "behind the peddling cloak there was in fact employee-employer
relationship". He said:
While, generally, written employment contracts are held sufficient in
determining the nature of employment, such contracts, however,
cannot be always held conclusive where the actual circumstances
of employment indicate otherwise. For example, some employers,
in order to avoid or evade coverage of the Workmen's
Compensation Act, enter into pseudo contracts with their
employees who are named as 'employers' or 'independent
contractors'. Such 'written contracts as distinguished from oral
Agreements, purporting to make persons independent contractors,
no matter how 'adroitly framed', can be carefully scanned and the
real relationship ascertained' (Glielmi vs. Netherlands Dairy Co.,

254 N.Y. 60 (1930), Morabe & Inton, Workmen's Compensation Act.
p. 69).
The committee in its report dated September 17, 1973 arrived at the conclusion that
the relationship actually existing between Cosmos and Mafinco, on one hand, and the
peddlers of Cosmos products, on the other, is not one of employer and employee and
"that the peddlers are independent contractors".
If the Peddling Contract were carefully scanned, the conclusion

may be drawn that the contract is but a device and subterfuge to
evade coverage under the labor laws. There is more than meets
the eye in item 2 of the Peddling Contract which required the
peddlers to do that which the law intends the employer to have
done.
The committee after a perusal of the record of NLRC Case No. LR-086 interviewed
twenty peddlers, an officer of Cosmos and an officer of Mafinco. In the conduct of the
interviews it 44 observed judicious adherence to impartiality and openmindedness but
with a modicum of friendliness and much of informality". The report reads in part as
follows:
In fact, such contracts, as the one in question, exempting or tending

to exempt the employers from their legal obligations to their
workers are null and void under Sec. 7 of the Workmen's
Compensation Act, as amended, which states:
(1) Implications of the 'Agreement To Peddler Soft Drinks'. Of vital importance to

the mind of your committee is the fact that this Agreement entered into between
Cosmos and the Peddlers has, as its prefatory statement but before the enumeration
of its terms and conditions, the following:
Any contract, regulation or device of any sort intended to exempt

the employer from all or part of the liability created by this Act shall
be null and void.
That the Peddler has agreed to buy and sell the products of the
MANUFACTURER under the following conditions:
To rule otherwise would be to open the floodgate to employers in

this territory to evade liabilities to their workers by simply letting
contracts for the doing of their business. 'Such construction could
not only narrow the provisions of the Act, but would defeat its intent
and purposes in their entirety. (Andoyo vs. Manila Railroad
Co., supra).
The motion for the reconsideration of the decision was denied by the Secretary in his
order of July 16,1973.
The Committee's report that the peddlers are independent contractors. On July 25,
1973 Mafinco moved for the clarification of the decision by inquiring whether the
question of employee-employer relationship would be included in the hearing on the
merits.
Action on the said motion was deferred until the receipt of the report of the committee
created to study the status of peddlers of Cosmos products. On September 3, 1973the Secretary directed the committee composed of Ernesto Valencia, Vicente R.
Guzman and Eleo Cayapas to conduct an in-depth study of the actual relationship
existing between the Cosmos Bottling Co. and its peddlers.
Similarly, the 'Peddling Contract' entered into between Mafinco and

the Peddlers. contains peculiarly Identical wordings. viz:
WHEREAS, the PEDDLER is desirious of buying and selling in
Manila the 'COSMOS' Soft Drink Products handled by
MAFINCO:
It is immediately clear from the beginning that the relationship that
the parties would want to establish between them is one of buyer
and seller of the Cosmos Products. Moreover, this type of
Agreement or Contract has its roots since some twenty (20) years
earlier, with modifications only with respect to the factory price, the
amount of over prices or what the peddlers refer to as commission,
and the amount pertaining to the dealer's discount. which appear to
vary depending upon the market demands.
We are, however, tempted to argue, as did the Peddlers, that this
Agreement or Contract might have been contrived as a device to
evade responsibilities imposed upon Cosmos or Mafinco under our
labor laws as well as under other national or municipal laws.
Nevertheless, a close reading thereof will show a flaw in this line of
insistence, when we consider that this type of Agreement or
Contract has been substantially the same since the beginning of
this relationship. More than this, it has withstood the test of time by
pronouncements of the CIR in ULP Case No. 4399, Cosmos

Supervisors Association vs. Manila Cosmos Aerated Water Factory,
Inc.' July 17, 1967; by judicial review of the Court of Appeals in CAG.R. Nos. 19477-R, 19478-R and 21397-R, 'Eustaquio Repajon, et
al. vs. Manila Cosmos Aerated Water Factory, Inc.', promulgated on
March 18, 1958; and impliedly by resolution of the Supreme Court
in G.R. Nos. L-14072 to L-14074 when the Court of Appeals cases
were appealed to that Tribunal.
But the more basic and indeed forceful ratiocination in favor of the
validity of the Agreement or Contract which covenants that the
relationship between the Peddlers and Cosmos or Mafinco is one of
buyer and seller of the Cosmos Products on the part of the
Peddlers, and, therefore, one of an independent contractorship,
finds substantive support in our Civil Code which provides: (here
arts. 1370 and 1374 of the Civil Code regarding interpretation of
contracts are quoted).
For its adjective interpretation, our Rules of Court specifically
provides: (Here parol evidence rule in see. 7, Rule 130, Rules of
Court is quoted)
It must b restated at this point for purposes of emphasis that the
validity of the aforesaid Agreement or Contract has not been
seriously assailed by the parties. In fact, their rallying cause was
the Agreement or Contract itself. To strengthen these provisions of
the Civil Code and the Rules of Court, stabilized jurisprudence have
held that it is elementary rule of contract that the laws in force at the
time the contract was made must govern its interpretation and
application; that the terms of the contract, where unambiguous, are
conclusive, in the absence of averment and proof of mistake, the
question being, not what intention existed in the minds of the
parties, but what intention is expressed by the language used; that
interpretation of an agreement does not include its modifications or
the creation of a new or different one; that Courts cannot make for
the parties better agreements than they themselves have been
satisfied to make, or rewrite contracts because they operate harshly
or inequitably as to one of the parties; and that there is no right to
interpret an agreement as meaning something different from what
the parties intended as expressed by the language they saw fit to
employ.
xxx xxx xxx
(1) The selection and engagement of the employees.-Nothing in the Agreement to

Peddler Soft Drinks in the case of Cosmos and in the Peddling Contract in the case of
Mafinco, will reveal and we cannot logically infer therefrom, that the Peddlers were
engaged as employees of Cosmos or Mafinco. The selection of the Peddlers who will
buy and sell Cosmos products is left entirely between the parties; it is not the sole
prerogative of either one of the parties. There must be meeting of the minds in order
to consummate the Agreement or Contract and no evidence of coercion or imposition
of the will of one over the other is evident or apparent from the Peddlers' or
Managements' interviews had by the members of your Committee. This test,
therefore, cannot be invoked by the Peddlers in their attempt at presenting arguments
to the effect that they are employees of Cosmos or Mafinco. Upon the other hand, the
Agreement or Contract itself provides that the Peddlers can hire helpers and drivers
under their direction and responsibility, and to whom they shall be liable for payment
of 'salaries, wages, overtime pay, separation pay, bonus and other remuneration and
privileges.' As a matter of fact, drivers were employed by Mrs. Victoria Ariz and M.
Fong Kui, who are peddlers in their own right. This evidently shows the discretion
granted the peddlers to hire employees of their own.
(2) The payment of wages. On the basis of the clear terms of the Agreement or
Contract, no mention is made of the wages of the Peddlers; neither can an inference
be made that any salary or wage is given to Peddlers. In the interviews, however, with
the Peddlers, they vehemently take the position that the 'dealer's discount' which was
given to them at the rate of Pll.50 in excess of 200 cases of Cosmos products they
sell a day, constitutes their 'wages'. The term 'wages' as defined in Section 2 of the
Minimum Wage Law (Rep. Act No. 602, as amended) is as follows:
(g) '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 under a written or unwritten contract
of employement 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. ...
Section 10 (k) of the same law provides as follows:
(k) Notification of wage conditions. It shall be the duty of every employer to notify
his employees at the time of hiring of the wage conditions under which they are
employed, which shall include the following particulars:
(1) The rate of wages payable;
(2) The method of calculation of wages;
(3) The periodicity of wage payment; the day, the hour and pIace of payment; and
(4) Any change with respect to any of the foregoing items.
To the Committee's mind, all these requirements have not been
shown to exist in the relationship between the Peddlers and the
Cosmos or Mafinco. If it were true that the Pedders' 'dealer's
discount' is in the nature of wages, then they must be notifed fully of
the wage conditions. Moreover, such 'wages' must be paid to them
periodically at least once every two weeks or twice a month. (See
Par. (h) of See. 10 of Act No. 602, as amended). The absence of
such notification to the Peddlers and the lack of periodicity of such
payment in the manner and procedure contemplated in the
Minimum Wage Law destroy, quiet evidently, their allegation that
the 'dealer's discount' was their 'wage'. Take note that the 'dealer's
discount' was given only about a week after the end of the month,
and from the evidence submitted by Cosmos, it appears clearly that
the 'dealer's discount' varies from month to month. Thus, the
earnings of Mr. Salvador Abonales, who is a Peddler, from January
to August, 1973, amounted to P12,520.70, while that of Mr. Alberto
S. Garcia, for the same period, amounted to P13,633.42, and 4
their earnings every month vary decisively. This factor defeats
factually the insistence of the Peddlers that they are employees of
Cosmos or Mafinco.
Upon the other hand, the Peddlers' declarations reveal that the
wages of their helpers are taken from the overprice or what is
ordinarily termed as 'commission' of ten centavos (P0.10) per case
that they get-a factor which indicates that they are themselves
employers of their helpers. In addition, the Peddlers are reported as
Employers of these helpers with the Social Security System, and
that they also purchase workmen's compensation policies in their
names as Employers of their own helpers for purposes of
workmen's compensation insurance of their liabilities, which are all
in accordance with the terms and conditions of the Agreement or
Contract and indicative of an attribute of one who is an independent
merchant.
(3) The power of dismissal. In the case of 'Rodrigo Repomanta and Rey Moralde
vs. Mafinco Trading Corp.,' NLRC Case No. LR-086, which served as one of our
bases for this study, the complainants therein appear to have complained before the
National Labor Relations Commission for being allegedly illegally dismissed or that
their services were terminated without cause. A search of the alleged dismissal
however shows that the Identical letters both dated December 7, 1972 addressed to
the said complainants were not actually what complainants pictured them to be, but
the termination of the peddling in accordance with paragraph 9 of said Contract.
xxx xxx xxx
Thus, complainants' services were not terminated, only their
Peddling Contracts with Mafinco were. The power of dismissal is
not lodged with either Mafinco or Cosmos, for based on the
Agreement or Contract none whatsoever exists. Certainly, to
attribute a power of dismissal to Cosmos or Mafinco where none
exists is careless imprudence and a height of inaccuracy. This
power of dismissal by Cosmos or Mafinco is not countenanced in
the Agreement or Contract.
There is, however, an allegation by the Peddlers that the hiring and
firing of the helpers ultimately rest on Cosmos or Mafinco. This
allegation nevertheless, is controverted by Cosmos and Mafinco.
Nonetheless, we checked the basic document the Agreement or
Contract and we find that the hiring and, impliedly firing, we is a
prerogative of the Peddlers and not of Cosmos or Mafinco.
(4) The power to control the employee's conduct. From the interviews had by your
Committee with both the Peddlers and the representatives of Cosmos and Mafinco,
we gather that the following findings on the power of control are substantially correct:
(a) That the delivery trucks assigned to the Peddlers are available
to them early in the morning and are free to get them, which they
usually do between 5:30 A.M. to 6:30 A.M. There was no
compulsion on the part of the Peddlers to report for work at that
time, as in fact, they did not sign any time record. The practice of
getting the delivery trucks early in the morning is more beneficial to
the Peddlers than to Cosmos or Mafinco since they can finish the
peddling of Cosmos products much earlier and spend the rest of
the day at their own pleasure. The signing of the 'logbooks' is both
pertinent and necessary since the trucks used in the delivery of
Cosmos products are owned by Cosmos or Mafinco and are simply
utilized by Peddlers as a measure of convenience and for
advertising purposes. But peddlers are not precluded from getting

trucks of their own should they so desire.
(b) That liaison officers (supervisors) are assigned by Cosmos or
Mafinco in definite areas routes or zones, not so much of
supervision over Peddlers, since their areas, routes or zones were
already agreed upon or pre-arranged among them through the
Cosmos Peddlers Association, Inc. of which all Peddlers are
members, as principally for market analysis since soft drinks selling
is a highly competitive business, and also to inquire or check on
sales, and the result of which, report is made direct to the Office of
Cosmos or Mafinco.
(c) That the use of the uniform does not seem to be an imposition
by management of Cosmos or Mafinco upon the Peddlers, but a
voluntary arrangement among the Peddlers themselves. For, from
the documents submitted to this Committee, it appears that the
Cosmos Peddlers Association, in a meeting held on August 5,
1967, adopted a resolution to 'always wear their uniform while in
the performance of their sales work,' and in their meeting on
January 25, 1969, it adopted another resolution penalizing Peddlers
who failed to wear their uniform in the amount of P2.00 per
violation. Certainly, the resolutions of the Cosmos Peddlers
Association, an independent association of Peddlers and duly
registered with the Securities and Exchange Commission, and
possessing an entirely distinct existence, cannot be taken as
impositions from Cosmos or Mafinco.
(d) That the matter of turning in of sales of collection which, if found
short, is charged against the Peddler's cash bond, is to the mind of
the Committee, giving effect to the valid terms and conditions of the
Agreement or Contract, and also an ordinary business practice
which necessarily requires liquidation of the day's accounts. We do
not see any evidence of control on the part of Cosmos or Mafinco
over the activities, including the sales, of the Cosmos products by
the Peddlers themselves who are, apparently, left to their own
choices of routes, areas or zones as pre-arranged, with no definite,
much less supervised, time schedule.
(e) That in the matter of reprimand or discipline which the peddlers
attempt to project when they failed to report for work, your
Committee found no substantial evidence on this point. The
evidence shows that the peddlers are free to choose their time.
Obviously, any absence that they may incur means so much
reduction from their earnings. Thus, if their attention is incidentally

called on this matter it is for the observance of their agreements
which is present in any contractual relations.
As to the aspect of employer-employee relation, therefore, between
Cosmos or Mafinco and the Peddlers, your Committee does not
have sufficient basis to reasonably sustain the stand of the
Peddlers that there is such relationship.
(c) Attributes of an independent contractor. As a countercheck,
as it were, to the issue of employer-employee relationship your
committee has taken the task of testing such relationship against
the attributes of an independent contractor which, from the
interviews and documents submitted by the parties, appear to
exists on the part of the Peddlers. The earlier case of Andoyo vs.
Manila Railroad Co., G.R. No. 34722, promulgated on March 28,
1932, furnishes us the definition of an 'independent contractor.' Our
Supreme Court of pre-war composition, ruled:
An independent contractor is one who exercises independent
employment and contracts to do a piece of work according to his
own methods and without being subject to control of his employer
except as to the resuIt of thework. A person who has no capital or
money of his own to pay his laborers or to comply with his
obligations to them, who files no bond to answer for the fulfillment
of his contract with his employer, falls short of the requisites or
conditions necessary to classify him as independent contractor.
These requisites and conditions were reiterated in the postwar
cases of Philippine Manufacturing Co., Inc. vs. Geronimo, G. R. No.
L-6968, promulgated on November 29, 1954, and Koppel (Phil.),
Inc. vs. Darlucio et, al., G.R. No. L-14903, promulgated on August.
29, 1960. Analyzing the definition of 'independent contractor', the
following may be gathered from the relationship between the
Peddlers, on the one hand, and Cosmos or Mafinco, on the other:
(1) Peddlers contract to sell and buy Cosmos products from Cosmos or Mafinco, the
latter furnishing the delivery truck, but the former sell Cosmos products according to
their own methods, subject to the pre-arranged routes, areas and zones, and go back
to the Company compound to return the delivery truck and to make accounting of the
day's sales collection at any time in the morning or in the afternoon. Essentially,
control, if at all, extends only as to observance of traffic regulations which is inherent
in ownership of the delivery truck by Cosmos or Mafinco and the end result which is
the liquidation of the sales collection. Control over the details of the Peddlers' sales
activities seems to be farfetched in this case.
(2) Capital or money of the Peddlers to pay their own helpers is evidently within their
prerogative, although it appears that the wages of helpers are uniform at P6.00 per
trip. But can we safely say that the cash bond of Pl,500.00 by the Peddlers constitute
their capital? For big-time businessmen, this small amount may not be considered
capital, but when it is taken as a 'deposit on consignment' since the same answers for
any deficiencies that the Peddlers may incur during the day's sales collection, then it
can be taken to mean 'capital' within its signification that it allocates to every day
business dealing. The amount of capital, to us, is immaterial; it is the purpose for
which the same is deposited that is most significant.
(3) The Peddlers are required under the Agreement to Peddler Soft Drinks and
Peddling Contract to put up not only the cash bond of P1,500.00, but also a
performance bond of P1,000.00 as embodied in said Agreement to Peddler Soft
Drinks as follows:
(4) To assure performance by the PEDDLER of his obligation to his employees under
the Social Security Act, the applicable labor laws, and for damages suffered by third
persons PEDDLER shall furnish a performance bond of P1,000.00 in favor of the
MANUFACTURER from a surety Company acceptable to the MANUFACTURER.
And, in case Performance Bond within 30 days from the date of signing of this
Contract, such failure shall be sufficient ground for the MANUFACTURER to suspend
the business relationship with the Peddler until the Peddler complies with this
provision.
Again, to the mind of your Committee, the amount of the
Performance Bond is not so relevant and material as to the purpose
for which the same is executed- which is to assure performance of
the Peddlers' obligations as employer of his helpers. This is an
attribute of an independent contractor to which the Peddlers are
bound under the Agreement or Contract.
The instant petition; the issue and the ruling thereon. Mafinco filed the instant
actions on November 14, 1973. It prayed for a declaration that the Secretary of Labor
and the NLRC had no jurisdiction to entertain the complaints of Repomanta and
Moralde; that the Secretary's decision should be set aside, and that the NLRC and
the Secretary be enjoined from further proceeding in NLRC Case No. LR-086.
Parenthetically, it should be noted that under section 5 of Presidential Decree No. 21
the Secretary's decision "is appealable" to the President of the Philippines (Nation
Multi Service Labor Union vs. Agcaoili, L-39741, May 30, 1975, 64 SCRA 274).
However, under section 22 of the old NLRC regulations, an appeal to the President
should be made only "in national interest cases".
On the other hand, judicial review of the decision of an administrative agency or
official exercising quasi-judicial functions is proper in cases of lack of jurisdiction,
error of law, grave abuse of discretion, fraud or collusion or in case the administrative
action or resolution is "corrupt, arbitrary or capricious (San Miguel Corporation vs.
Secretary of Labor, L-39195, May 16, 1975, 64 SCRA 56; Commissioner of Customs
vs. Valencia, 100 Phil. 165; Villegas vs. Auditor General, L-21352, November 29,
1966, 18 SCRA 877, 891).
After the parties had submitted their illuminating memoranda, Mafinco filed a motion
in this Court for the dismissal of the complaint in the defunct NLRC on three grounds,
to wit: (1) that the NLRC had no jurisdiction over the case because Repomanta and
Moralde had not sought reinstatement or backwages; (2) that the employer's failure to
secure written clearance from the Secretary of Labor before dismissing an employee
might constitute a crime punishable under article 327 of the Labor Code and not mere
contempt, as contemplated in section 10 of Presidential Decree No. 21, and (3) that
the contempt provisions of that decree were abrogated by the Labor Code.
Mafinco in support of its motion for dismissal cited Quisaba vs. Sta. Ines-Melale
Veneer & Plywood, Inc., L-38088, August 30, 1974, 58 SCRA 771, where it was held
that the regular court, not the NLRC, has jurisdiction over an employee's action for
damages against his employer's act of demoting him.
(4) Peddlers are doing business for themselves since they took out
licenses in the City of Manila, and have paid their corresponding
professional or occupation tax to the Bureau of Internal Avenue.
This fact strengthens the Committee findings that the peddlers are
carrying on a business as independent merchants.
Respondent Repomanta and Moralde opposed that motion to dismiss. They Pointed
out that, inasmuch as their complaint is pending in the new NLRC, this Court cannot
dismiss it. They also observed that article 327 was eliminated from the Labor Code
which, as amended by Presidential Decrees Nos. 570-A, 626 and 643, contains only
292 articles. Article 327 was superseded by article 278 of the amended Code.
The Secretary in his resolution of October 18, 1973 ignored the committee's
conclusion. He clarified that the NLRC should determine whether the two
complainants were illegally dismissed and that the jurisdictional issue should not be
taken up anymore.
The truth is that Mafinco's motion merely adduced additional grounds to support its
stand that the Secretary of Labor had no jurisdiction over the complaint of Repomanta
and Moralde.
This case was not rendered moot by the Labor Code. Although the Code abolished
the old NLRC (Art. 289), it created a new NLRC (Art. 213) and provided that cases
pending before the old NLRC should be transferred to, and processed by, the
corresponding labor relations division or the new NLRC and should be decided in
accordance with Presidential Decree No. 21 and the rules and regulations adopted
thereunder (Art. 290. See Sec. 5, P.D. No. 626).
The issue is whether the dismissal of Repomanta and Moralde was within the
jurisdiction of the old NLRC. If, as held by the old NLRC, it had no jurisdiction over
their complaint because they were not employees of Mafinco but independent
contractors, then the Secretary of Labor had no jurisdiction to remand the case to the
NLRC for a hearing on the merits of the complaint.
Hence, the crucial issue is whether Repomanta and Moralde were employees of
Mafinco under the peddling contract already quoted. Is the contract an employment
contract or a contract to sell or distribute Cosmos products?
The question of whether an employer-employee relationship exists in a certain
situation has bedevilled the courts. Businessmen, with the aid of lawyers, have tried
to avoid the bringing about of an employer-employee relationship in some of their
enterprises because that juridical relation spawns obligations connected with
workmen's compensation, social security, medicare, minimum wage, termination pay
and unionism.
Presidential Decree No. 21 provides:
SEC. 2. The Commission shall have original and exclusive
jurisdiction over the following:
1) All matters involving employee-employer relations including all disputes and
grievances which may otherwise lead to strikes and lockouts under Republic Act No.
875;
xxx xxx xxx
SEC. 10. The President of the Philippines, on recommendation of
the Commission and the Secretary of Labor, may order the arrest
and detention of any person held in contempt by the Commission
for non-compliance and defiance of any subpoena, order or
decision duly issued by the Commission in accordance with this
Decree and its implementing rules and regulations and for any
violation of the provisions of this Decree.
SEC. 11. No employer may shut down his establishment or dismiss

or terminate the services of regular employees with at least one
year of service without the written clearance of the Secretary of ,
Labor.
The Solicitor General, as counsel for the old NLRC and the Secretary of Labor,
argues that the question of whether Repomanta and Morale are independent
contractors or employees is factual in character and cannot be resolved by merely
construing the peddling contracts; that other relevant facts aliunde or dehors the said
contracts should be taken into account, and that the contracts were a part of an
"intricate network of devices (of Mafinco and Cosmos) developed. and perfected
through the years to conceal the true nature of their relationship to their sales
agents".
Repomanta and Moralde contend that their peddling contracts were terminated
because of their activities in organizing a union among the peddlers. Annexed to their
memorandum is a joint affidavit of sixty-three sales agents of Cosmos products who
described therein the nature of their work, the organization of their union and the
dismissal of Repomanta and Moralde. Annexed to their answer is Resolution No. 921
of the Social Security Commission dated November 16, 1972 in SSS Case No. 602
wherein it was held that peddlers and their helpers were employees of Cosmos.
Like the Solicitor General, Repomanta and Moralde harp on the argument that the
peddling contracts were a scheme to camouflage an employer-employee relationship
and thus evade the coverage of labor laws.
The parties in their pleadings and memoranda injected conflicting factual allegations
to support their diametrically opposite contentions. From the factual angle, the case
has become highly controversial.
In a certiorari and prohibition case, like the instant case, only legal issues affecting
the jurisdiction of the tribunal, board or officer involved may be resolved on the basis
of undisputed facts. Sections 1, 2 and 3, Rule 65 of the Rules of Court require that in
the verified petition for certiorari, mandamus and prohibition the petitioner should
allege "facts with certainty".
In this case the facts have become uncertain. Controversial evidentiary facts have
been alleged. What is certain and indubitable is that a notarized peddling contract
was executed.
This Court is not a trier of facts. It would be difficult, if not anomalous, to decide the
jurisdictional issue on the basis of the parties' contradictory factual submissions. The
record has become voluminous because of their efforts to persuade this Court to
accept their discordant factual statements.
Pro hac vice the issue of whether Repomanta and Moralde were employees of
Mafinco or were independent contractors should be resolved mainly in the light of
their peddling contracts. A different approach would lead this Court astray into the
field of factual controversy where its legal pronouncements would not rest on solid
grounds.
A restatement of the provisions of the peddling contract is necessary in order to find
out whether under that instrument Repomanta and Moralde were independent
contractors or mere employees of Mafinco.
Under the peddling contract, Mafinco would provide the peddler with a delivery truck
to be used in the distribution of Cosmos soft drinks (Par. 1). Should the peddler
employ a driver and helpers, he would be responsible for their compensation and
social security contributions and he should comply with applicable labor laws "in
relation to his employees" (Par. 2).
The peddler would be responsible for any damage to persons or property or to the
truck caused by his own acts or omissions or those of his driver and helpers (Par. 3).
Mafinco would bear the cost of gasoline and maintenance of the truck (Par. 4). The
peddler would secure at his own expense the necessary licenses and permits and
bear the expenses to be incurred in the sale of Cosmos products (Par. 5).
The soft drinks would be charged to the peddler at P2.52 per case of 24 bottles, exwarehouse. Should he purchase at least 250 cases a day, he would be entitled to a
peddler's discount of eleven pesos (Par. 6). The peddler would post a cash bond in
the sum of P1,500 to answer for his obligations to Mafinco (Par. 7) and another cash
bond of P1,000 to answer for his obligations to his employees (Par. 11). He should
liquidate his accounts at the end of each day (Par. 8). The contract would be effective
up to May 31, 1973. Either party might terminate it upon five days' prior notice to the
other (Par. 9).
We hold that under their peddling contracts Repomanta and Moralde were not
employees of Mafinco but were independent contractors as found by the NLRC and
its fact-finder and by the committee appointed by the Secretary of Labor to look into
the status of Cosmos and Mafinco peddlers. They were distributors of Cosmos soft
drinks with their own capital and employees. Ordinarily, an employee or a mere
peddler does not execute a formal contract of employment. He is simply hired and he
works under the direction and control of the employer.
Repomanta and Moralde voluntarily executed with Mafinco formal peddling contracts
which indicate the manner in which they would sell Cosmos soft drinks. That
Circumstance signifies that they were acting as independent businessmen. They
were to sign or not to sign that contract. If they did not want to sell Cosmos products
under the conditions defined in that contract; they were free to reject it.
But having signed it, they were bound by its stipulations and the consequences
thereof under existing labor laws. One such stipulation is the right of the parties to
terminate the contract upon five days' prior notice (Par. 9). Whether the termination in
this case was an unwarranted dismissal of an employee, as contended by
Repomanta and Moralde, is a point that cannot be resolved without submission of
evidence. Using the contract itself as the sole criterion, the termination should
perforce be characterized as simply the exercise of a right freely stipulated upon by
the parties.
"In determining the existence of employer-employee relationship, the following
elements are generally considered, namely: (1) the selection and engagement of the
control the employees' conduct-although the latter is the most important element"
(Viana vs. Al-Lagadan and Piga, 99 Phil. 408, 411, citing 35 Am. Jur. 445).
On the other hand, an independent contractor is "one who exercises independent
employment and contracts to do a piece of work according to his own methods and
without being subject to control of his employer except as to the result of the work"
(Mansal vs. P.P. Gocheco Lumber Co., supra).
Among the factors to be considered are whether the contractor is
carrying on an independent business; whether the work is part of
the employer's general business; the nature and extent of the work;
the skill required; the term and duration of the relationship; the right
to assign the performance of the work to another; the power to
terminate the relationship; the existence of a contract for the
performance of a specified piece of work; the control and
supervision of the work; the employer's powers and duties with
respect to the hiring, firing, and payment of the contractor's
servants; the control of the premises; the duty to supply the
premises, tools, appliances, material and labor; and the mode,
manner, and terms of payment. (56 C.J.S. 46).
Those tests to determine the existence of an employer-employee relationship or
whether the person doing a particular work for another is an independent contractor
cannot be satisfactorily applied in the instant case. It should be obvious by now that
the instant case is a penumbral, sui generis case lying on the shadowy borderline that
separates an employee from an independent contractor.
In determining whether the relationship is that of employer and employee or whether
one is an independent contractor, "each case must be determined on its own facts
and all the features of the relationship are to be considered" (56 C.J.S. 45). We are
convinced that on the basis of the peddling contract, no employer-employee
relationship was created. Hence, the old NLRC had no jurisdiction over the
termination of the peddling contract.
However, this ruling is without prejudice to the right of Repomanta and Moralde and
the other peddlers to sue in the proper Court of First Instance and to ask for a
reformation of the instrument evidencing the contract or for its annulment or to secure
a declaration that, disregarding the peddling contract, the actual juridical relationship
between them and Mafinco or Cosmos is that of employer and employee. In that
action a fulldress trial may be held and the parties may introduce the evidence
necessary to sustain their respective contentions.
Paragphrasing the dictum in the Quisaba case, supra, if Mafinco and Cosmos had
acted oppressively towards their peddlers, as contemplated in article 1701 of the Civil
Code, then they should file the proper action for damages in the regular courts.
Where there is a right, there is a remedy (Ubi jus, ubi remedium).
WHEREFORE, the decision, order and resolution of the Secretary of Labor in NLRC
Case No. LR-086 dated April 16, July 16 and October 18, 1973, respectively, are set
aside and the order of the NLRC dated February 2, 1973, dismissing the case for lack
of jurisdiction, is affirmed. No costs.
SO ORDERED.
FIRST DIVISION
G.R. No. 84484 November 15, 1989
INSULAR
LIFE
ASSURANCE
CO.,
vs.
NATIONAL LABOR RELATIONS COMMISSION and
respondents.
LTD., petitioner,
MELECIO
BASIAO,
Tirol & Tirol for petitioner.

Enojas, Defensor & Teodosio Cabado Law Offices for private respondent.
NARVASA, J.:
On July 2, 1968, Insular Life Assurance Co., Ltd. (hereinafter simply called the
Company) and Melecio T. Basiao entered into a contract 1 by which:
1. Basiao was "authorized to solicit within the Philippines

applications for insurance policies and annuities in accordance with
the existing rules and regulations" of the Company;
2. he would receive "compensation, in the form of commissions ...
as provided in the Schedule of Commissions" of the contract to
"constitute a part of the consideration of ... (said) agreement;" and
3. the "rules in ... (the Company's) Rate Book and its Agent's
Manual, as well as all its circulars ... and those which may from
time to time be promulgated by it, ..." were made part of said
contract.
The contract also contained, among others, provisions governing the relations of the
parties, the duties of the Agent, the acts prohibited to him, and the modes of
termination of the agreement, viz.:
RELATION WITH THE COMPANY. The Agent shall be free to
exercise his own judgment as to time, place and means of soliciting
insurance. Nothing herein contained shall therefore be construed to
create the relationship of employee and employer between the
Agent and the Company. However, the Agent shall observe and
conform to all rules and regulations which the Company may from
time to time prescribe.
ILLEGAL AND UNETHICAL PRACTICES. The Agent is prohibited
from giving, directly or indirectly, rebates in any form, or from
making any misrepresentation or over-selling, and, in general, from
doing or committing acts prohibited in the Agent's Manual and in
circulars of the Office of the Insurance Commissioner.
TERMINATION. The Company may terminate the contract at will,
without any previous notice to the Agent, for or on account of ...
(explicitly specified causes). ...
Either party may terminate this contract by giving to the other notice
in writing to that effect. It shall become ipso facto cancelled if the
Insurance Commissioner should revoke a Certificate of Authority
previously issued or should the Agent fail to renew his existing
Certificate of Authority upon its expiration. The Agent shall not have
any right to any commission on renewal of premiums that may be
paid after the termination of this agreement for any cause
whatsoever, except when the termination is due to disability or
death in line of service. As to commission corresponding to any
balance of the first year's premiums remaining unpaid at the

termination of this agreement, the Agent shall be entitled to it if the
balance of the first year premium is paid, less actual cost of
collection, unless the termination is due to a violation of this
contract, involving criminal liability or breach of trust.
ASSIGNMENT. No Assignment of the Agency herein created or of
commissions or other compensations shall be valid without the prior
consent in writing of the Company. ...
Some four years later, in April 1972, the parties entered into another contract an
Agency Manager's Contract and to implement his end of it Basiao organized an
agency or office to which he gave the name M. Basiao and Associates, while
concurrently fulfilling his commitments under the first contract with the Company. 2
In May, 1979, the Company terminated the Agency Manager's Contract. After vainly
seeking a reconsideration, Basiao sued the Company in a civil action and this, he was
later to claim, prompted the latter to terminate also his engagement under the first
contract and to stop payment of his commissions starting April 1, 1980. 3
Basiao thereafter filed with the then Ministry of Labor a complaint 4 against the
Company and its president. Without contesting the termination of the first contract,
the complaint sought to recover commissions allegedly unpaid thereunder, plus
attorney's fees. The respondents disputed the Ministry's jurisdiction over Basiao's
claim, asserting that he was not the Company's employee, but an independent
contractor and that the Company had no obligation to him for unpaid commissions
under the terms and conditions of his contract. 5
The Labor Arbiter to whom the case was assigned found for Basiao. He ruled that the
underwriting agreement had established an employer-employee relationship between
him and the Company, and this conferred jurisdiction on the Ministry of Labor to
adjudicate his claim. Said official's decision directed payment of his unpaid
commissions "... equivalent to the balance of the first year's premium remaining
unpaid, at the time of his termination, of all the insurance policies solicited by ... (him)
in favor of the respondent company ..." plus 10% attorney's fees. 6
This decision was, on appeal by the Company, affirmed by the National Labor
Relations Commission. 7 Hence, the present petition for certiorari and prohibition.
The chief issue here is one of jurisdiction: whether, as Basiao asserts, he had
become the Company's employee by virtue of the contract invoked by him, thereby
placing his claim for unpaid commissions within the original and exclusive jurisdiction
of the Labor Arbiter under the provisions of Section 217 of the Labor Code, 8 or,
contrarily, as the Company would have it, that under said contract Basiao's status was
that of an independent contractor whose claim was thus cognizable, not by the Labor
Arbiter in a labor case, but by the regular courts in an ordinary civil action.
The Company's thesis, that no employer-employee relation in the legal and generally
accepted sense existed between it and Basiao, is drawn from the terms of the
contract they had entered into, which, either expressly or by necessary implication,
made Basiao the master of his own time and selling methods, left to his judgment the
time, place and means of soliciting insurance, set no accomplishment quotas and
compensated him on the basis of results obtained. He was not bound to observe any
schedule of working hours or report to any regular station; he could seek and work on
his prospects anywhere and at anytime he chose to, and was free to adopt the selling
methods he deemed most effective.
Without denying that the above were indeed the expressed implicit conditions of
Basiao's contract with the Company, the respondents contend that they do not
constitute the decisive determinant of the nature of his engagement, invoking
precedents to the effect that the critical feature distinguishing the status of an
employee from that of an independent contractor is control, that is, whether or not the
party who engages the services of another has the power to control the latter's
conduct in rendering such services. Pursuing the argument, the respondents draw
attention to the provisions of Basiao's contract obliging him to "... observe and
conform to all rules and regulations which the Company may from time to time
prescribe ...," as well as to the fact that the Company prescribed the qualifications of
applicants for insurance, processed their applications and determined the amounts of
insurance cover to be issued as indicative of the control, which made Basiao, in legal
contemplation, an employee of the Company. 9
It is true that the "control test" expressed in the following pronouncement of the Court
in the 1956 case of Viana vs. Alejo Al-Lagadan 10
... In determining the existence of employer-employee relationship,
the following elements are generally considered, namely: (1) the
employees' conduct although the latter is the most important
element (35 Am. Jur. 445). ...
has been followed and applied in later cases, some fairly recent. 11 Indeed, it is
without question a valid test of the character of a contract or agreement to render
service. It should, however, be obvious that not every form of control that the hiring
party reserves to himself over the conduct of the party hired in relation to the services
rendered may be accorded the effect of establishing an employer-employee
relationship between them in the legal or technical sense of the term. A line must be
drawn somewhere, if the recognized distinction between an employee and an
individual contractor is not to vanish altogether. Realistically, it would be a rare

contract of service that gives untrammelled freedom to the party hired and eschews
any intervention whatsoever in his performance of the engagement.
Logically, the line should be drawn between rules that merely serve as guidelines
towards the achievement of the mutually desired result without dictating the means or
methods to be employed in attaining it, and those that control or fix the methodology
and bind or restrict the party hired to the use of such means. The first, which aim only
to promote the result, create no employer-employee relationship unlike the second,
which address both the result and the means used to achieve it. The distinction
acquires particular relevance in the case of an enterprise affected with public interest,
as is the business of insurance, and is on that account subject to regulation by the
State with respect, not only to the relations between insurer and insured but also to
the internal affairs of the insurance company. 12 Rules and regulations governing the
conduct of the business are provided for in the Insurance Code and enforced by the
Insurance Commissioner. It is, therefore, usual and expected for an insurance
company to promulgate a set of rules to guide its commission agents in selling its
policies that they may not run afoul of the law and what it requires or prohibits. Of
such a character are the rules which prescribe the qualifications of persons who may
be insured, subject insurance applications to processing and approval by the
Company, and also reserve to the Company the determination of the premiums to be
paid and the schedules of payment. None of these really invades the agent's
contractual prerogative to adopt his own selling methods or to sell insurance at his
own time and convenience, hence cannot justifiably be said to establish an employeremployee relationship between him and the company.
There is no dearth of authority holding persons similarly placed as respondent Basiao
to be independent contractors, instead of employees of the parties for whom they
worked. In Mafinco Trading Corporation vs. Ople,13 the Court ruled that a person
engaged to sell soft drinks for another, using a truck supplied by the latter, but with
the right to employ his own workers, sell according to his own methods subject only to
prearranged routes, observing no working hours fixed by the other party and obliged
to secure his own licenses and defray his own selling expenses, all in consideration of
a peddler's discount given by the other party for at least 250 cases of soft drinks sold
daily, was not an employee but an independent contractor.
In Investment Planning Corporation of the Philippines us. Social Security System 14 a
case almost on all fours with the present one, this Court held that there was no
employer-employee relationship between a commission agent and an investment
company, but that the former was an independent contractor where said agent and
others similarly placed were: (a) paid compensation in the form of commissions based
on percentages of their sales, any balance of commissions earned being payable to
their legal representatives in the event of death or registration; (b) required to put up
performance bonds; (c) subject to a set of rules and regulations governing the
performance of their duties under the agreement with the company and termination of
their services for certain causes; (d) not required to report for work at any time, nor to
devote their time exclusively to working for the company nor to submit a record of
their activities, and who, finally, shouldered their own selling and transportation
expenses.
More recently, in Sara vs. NLRC, 15 it was held that one who had been engaged by a
rice miller to buy and sell rice and palay without compensation except a certain
percentage of what he was able to buy or sell, did work at his own pleasure without
any supervision or control on the part of his principal and relied on his own resources
in the performance of his work, was a plain commission agent, an independent
contractor and not an employee.
The respondents limit themselves to pointing out that Basiao's contract with the
Company bound him to observe and conform to such rules and regulations as the
latter might from time to time prescribe. No showing has been made that any such
rules or regulations were in fact promulgated, much less that any rules existed or
were issued which effectively controlled or restricted his choice of methods or the
methods themselves of selling insurance. Absent such showing, the Court will not
speculate that any exceptions or qualifications were imposed on the express
provision of the contract leaving Basiao "... free to exercise his own judgment as to
the time, place and means of soliciting insurance."
The Labor Arbiter's decision makes reference to Basiao's claim of having been
connected with the Company for twenty-five years. Whatever this is meant to imply,
the obvious reply would be that what is germane here is Basiao's status under the
contract of July 2, 1968, not the length of his relationship with the Company.
The Court, therefore, rules that under the contract invoked by him, Basiao was not an
employee of the petitioner, but a commission agent, an independent contractor whose
claim for unpaid commissions should have been litigated in an ordinary civil action.
The Labor Arbiter erred in taking cognizance of, and adjudicating, said claim, being
without jurisdiction to do so, as did the respondent NLRC in affirming the Arbiter's
decision. This conclusion renders it unnecessary and premature to consider Basiao's
claim for commissions on its merits.
WHEREFORE, the appealed Resolution of the National Labor Relations Commission
is set aside, and that complaint of private respondent Melecio T. Basiao in RAB Case
No. VI-0010-83 is dismissed. No pronouncement as to costs.
SO ORDERED.
HIRD DIVISION
G.R. Nos. 102633-35 January 19, 1993

RHONE-POULENC
AGROCHEMICALS
PHILIPPINES,
INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, URCISIO A. ORAIN, and
PAULINO G. ROMAN, respondents.
Francis V. Sobrevinas and Divinagracia S. San Juan for petitioner.
GUTIERREZ, JR., J.:

Petitioner Rhone-Poulenc Agrochemicals Philippines, Inc. (Rhone-Poulenc for brevity)
assails the finding by the National Labor Relations Commission (NLRC) that
Contemporary Services, Inc. (CSI), a supplier of janitorial services, is a labor-only
contractor.
The petitioner is a domestic corporation engaged in the manufacture of agrochemicals. Its business operations involve the formulation, production, distribution
and sale in the local market of its agro-chemical products.
On January 1, 1988, as a consequence of the sale by Union Carbide, Inc. of all its
agricultural-chemical divisions worldwide in favor of Rhone-Poulenc Agrochemie,
France, the petitioner's mother corporation, the petitioner acquired from Union
Carbide Philippines Far East, Inc. (Union Carbide for short) the latter's agro-chemical
formulation plant in Namayan, Mandaluyong, Metro Manila.
Rhone-Poulenc and Union Carbide agreed on a three-month transition period for the
turnover of the Namayan plant to the former. Hence, from January 1 to March 31,
1988, both Union Carbide and Rhone-Poulenc shared and operated the same
facilities.
In 1987, prior to the sale, Union Carbide had entered into a contract with CSI for the
latter's supply of janitorial services. During the transition period, Union Carbide
continued to avail itself of CSI's janitorial services. Thus, petitioner Rhone-Poulenc
found itself sharing the Namayan plant with Union Carbide while the factory was
being serviced and maintained by janitors supplied by CSI.
Midway through the transition period, Union Carbide instructed CSI to reduce the
number of janitors working at the plant from eight (8) to seven (7). Private respondent
Paulino Roman, one of the janitors, was recalled by CSI on February 15, l988 for
reassignment. However, Roman refused to acknowledge receipt of the recall
memorandum.
On March 9, 1988, Union Carbide formally notified CSI of the termination of their
janitorial service agreement, effective April 1, 1988, citing as reason the global buyout by Rhone-Poulenc, Agrochemie, France of Union Carbides Inc.'s agro-chemical
business. CSI thereafter issued a memorandum dated March 20, 1988 to the seven
remaining janitors assigned to the Namayan plant, including respondent Urcisio
Orain, recalling and advising them to report to the CSI office for reassignment. Like
Roman, the janitors refused to acknowledge receipt of the recall memorandum.
Meanwhile, in anticipation of the March 31, 1988 pull-out by Union Carbide, the
petitioner started screening proposals by prospective service contractors. RhonePoulenc likewise invited CSI to submit to its Bidding Committee a cost quotation of its
janitorial services. However, another contractor, the Marilag Business and Industrial
Services, Inc. passed the bidding committee's standards and obtained the janitorial
services contract.
On April 1, 1988, the eight janitors reported for work at the Namayan plant but were
refused admission and were told that another group of janitors had replaced them.
These janitors then filed separate complaints for illegal dismissal, payment of 13th
month salary, service leave and overtime pay against Union Carbide, Rhone-Poulenc
and CSI. These cases were consolidated by order of Labor Arbiter Manuel Asuncion
dated May 23, 1988.
Trial on the merits ensued wherein the labor arbiter conducted full-blown hearings on
factual issues. After the cases were submitted for decision, six of the original
complainants tendered their resignations to CSI in consideration of the latter's
settlement of all their claims. Hence, only the claims of respondents Roman and
Orain remained unsettled.
On November 8, 1989, Labor Arbiter Asuncion ruled that CSI is a legitimate service
contractor and that Roman and Orain were employees of CSI. The dispositive portion
of the labor arbiter's decision is quoted below:
WHEREFORE, the respondent CSI is ordered to pay the
complainants Orain and Roman their separation pays computed at
one-half of their salaries for every year of service. The rest of the
claims are dismissed for lack of merit.
The respondents UCFEI and RPAPI were (sic) absolved from any
liability it being shown that they were not the employers of the
complainants. (Rollo, p. 52).
Respondents Roman and Orain appealed the decision to the NLRC. In a resolution
dated March 13, 1991, the NLRC reversed the labor arbiter's ruling, found that CSI
was a mere agent of Union Carbide and Rhone-Poulenc and held that RhonePoulenc was guilty of illegal dismissal. Respondent NLRC cited the case of Guarin v.
NLRC, 178 SCRA 267 (1987), which according to it "involves circumstances similar, if
not identical, to the circumstances obtaining in the case at bar."
In that case, Novelty Philippines, Inc., a domestic corporation engaged in garment
manufacturing, entered into a contract with Lipercon Services, Inc., a service
contractor. The agreement provided, among others, that there was no employeremployee relationship between Novelty and the workers assigned by Lipercon to the
former, and that Lipercon shall have exclusive discretion in the selection, engagement
and discharge of its employees and shall have full control over said employees. The
one hundred twenty (120) petitioners in Guarin were hired by Lipercon and assigned
to Novelty as helpers, janitors, firemen and mechanics until the termination by Novelty
of the service agreement resulting in their dismissal. They sued both Novelty and
Lipercon for illegal dismissal.
The labor arbiter adjudged that the petitioners were regular employees of Novelty and
declared their dismissal illegal. The NLRC reversed this decision and declared that
Lipercon was an independent contractor and that the petitioners were its employees.
The Court, in a petition for certiorari, upheld the labor arbiter's decision and ruled:
The jobs assigned to the petitioners as mechanics, janitors,
gardeners, firemen and grasscutters were directly related to the
business of Novelty as a garment manufacturer. In the case of
Philippine Bank of Communications v. NLRC, 146 SCRA 347, we
ruled that the work of a messenger is directly related to a bank's
operations. In its Comment, Novelty contends that the services
which are directly related to manufacturing garments are sewing,
textile cutting, designs, dyeing, quality control, personnel,
administration, accounting, finance, customs, delivery and similar
activities; and that allegedly, "[i]t is only by stretching the
imagination that one may conclude that the services of janitors,
janitresses, firemen, grasscutters, mechanics and helpers are
directly related to the business of manufacturing garments" (p.
78, Rollo). Not so, for the work of gardeners in maintaining clean
and well-kept grounds around the factory, mechanics to keep the
machines functioning properly, and firemen to look out for fires, are
directly related to the daily operations of a garment factory. That

fact is confirmed by Novelty's rehiring the workers or renewing the
contract with Lipercon every year from 1983 to 1986, a period of
three (3) years. (Guarin v. National Labor Relations Commission,
178 SCRA 267, at p. 273).
Applying the Guarin ruling to the case at bar, the NLRC pronounced:
It is in the light of the foregoing that we are constrained to rule, and
so hold, that respondent CSI is a mere agent of respondent UCFEI
and RPAPI who, in the context of the aforecited pronouncement of
the Supreme Court, were the real employers of the complainants.
Consequently, respondent RPAPI's (the successor-in-interest by
sale of respondent UCFEI) refusal to take in the complainants (after
admittedly absorbing or utilizing their services during the transition
period from 04 January to 31 March 1988) on the ground that it
already had engaged the services of another service contractor,
constitutes an illegal dismissal plain and simple.
For while it is true that there is no law requiring that a purchaser
should absorb the employees of the selling company (Central
Azucarera del Davao v. CA, 137 SCRA 295); and unless expressly
assumed, labor contracts are not enforceable against a transferee
of an enterprise (Fernando v. Angat Labor Union, 5 SCRA 249; and
Visayan Trans. Co. v. Java, 93 Phil. 962), it is equally true that
employees absorbed by the successor-employers enjoy continuity
of employment status (Cruz v. PAFLU, 42 SCRA 68; PAFLU v. CIR,
4 SCRA 457; Guerrero's Transport Services v. Blaylocks , 30 June
1976, 71 SCRA 621; and Sumandi v. Leogardo, et al., G.R. No.
67635, 17 Jan. 1985).
As we have stated earlier, respondent RPAPI admits in its
opposition to the appeal (p. 4) that it made use of the services of
the complainants during its transition period from 04 January to 31
March 1983. Said act of utilizing, temporarily though, the services
of the complainants (which, in a way, attests to the necessity or
desirability of the complainants' service to the operation of the
respondent's business) constitutes an absorption that gave them
the right to be retained. Its refusal to readmit the complainants
constitutes an illegal dismissal.
Under these conditions, the mandate to reinstate the complainants
should, therefore, be addressed to the respondent RPAPI and not
to the respondent CSI, a "labor only" contractor, nor to the UCFEI
which had ceased to be the employer of the complainants because

of the sale of its business. (Rollo, pp. 39-40).
The NLRC then ordered the petitioner to reinstate respondents Roman and Orain and
to pay one year backwages, or to grant them separation pay if reinstatement was not
feasible. As to the respondents' claim for 13th month pay, incentive leave and
overtime pay, these were dismissed by the NLRC for lack of sufficient factual basis.
Rhone-Poulenc filed a motion for reconsideration which was denied by the public
respondent in its resolution of September 11, 199l. Hence, this petition for certiorari.
On December 2, 1991, the Court resolved to issue a temporary restraining order
enjoining the NLRC from enforcing and/or carrying out its resolutions dated March 13,
1991 and September 11, 1991. (Rollo, pp. 54-56)
Petitioner Rhone-Poulenc maintains that it is CSI, and not Union Carbide and RhonePoulenc, as successor, which is the actual employer of the respondent janitors.
Rhone-Poulenc insists that, contrary to the NLRC's findings, CSI is a legitimate
independent contractor providing janitorial services to a wide range of clientele
including Union Carbide. Moreover, the petitioner avers that it was grave abuse of
discretion on the part of the public respondent to conclude that Rhone-Poutlenc
absorbed Roman and Orain into its workforce.
The issues to be resolved in this petition are:
(1) Whether or not the janitors were employees of Union Carbide;
(2) Whether or not CSI is a labor-only contractor; and
(3) Whether or not petitioner Rhone-Poulenc absorbed the janitors
into its workforce.
In determining the existence of employer-employee relationship, the following
elements are generally considered, namely: (1) the selection and engagement of
employees (2) the payment of wages; (3) the power of dismissal; and (4) the power to
control the employee's conduct although the latter is the most important element.
(See Ecal V. NLRC, 195 SCRA 224 [1991]; Singer Sewing Machine Company v.
Drilon, 193 SCRA 270 [1991]; Brotherhood Labor Unity Movement in the Philippines
v. Zamora, 147 SCRA 49 [1986]; Social Security System v. Court of Appeals, 39
SCRA 629 [1971]; Viaa v. Al-Lagadan and Piga, 99 Phil. 408 [1956]).
Where the employer-employee relationship has been ascertained, the employer
becomes bound by the statutory requirements pertaining, though not limited, to terms
and
conditions
of
employment,
labor
relations
and
post-employment. But the law has likewise provided for situations where, although the
application of the aforementioned four-fold test will not establish an employeremployee relationship, a person or employer who contracts with another for the
performance of the former's work or of any work, nevertheless becomes liable to the
employees of the contractor. Articles 106, 107 and 109 of the Labor Code provide:
Art. 106. Contractor or subcontractor Whenever an employer
enters into a contract with another person for the performance of
the former's work, the employees of the contractor and of the
latter's subcontractor, if any, shall be paid in accordance with the
provisions of this Code.
In the event that the contractor or subcontractor fails to pay the
wages of his employees in accordance with this Code, the
employer shall be jointly and severally liable with his contractor or
subcontractor to such employees to the extent of the work
performed under the contract, in the same manner and extent that
he is liable to employees directly employed by him.
xxx xxx xxx
There is labor-only contracting where the person supplying workers
to an employer does not have substantial capital or investment, in
the form of tools, equipment, machineries, work premises, among
others and the workers recruited and placed by such persons, are
performing activities which are directly related to the principal
business of such employer. In such cases, the person or
intermediary shall be considered merely as an agent of the
employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by him.
Art. 107. Indirect employer. The provisions of the immediately
preceding Article shall likewise apply to any person, partnership,
association or corporation which, not being an employer, contracts
with an independent contractor for the performance of any work,
task, job or project.
Art. 109. Solidary liability The provisions of existing laws to the
contrary notwithstanding, every employer or indirect employer shall
be held responsible with his contractor or subcontractor for any
violation of any provision of this Code. For purposes of determining
the extent of their civil liability under this Chapter, they shall be
considered as direct employers.
The import Of the foregoing provisions was enunciated in the case of Philippine Bank
of Communications v. National Labor Relations Commission, 146 SCRA 347 (1986):
Under the general rule set out in the first and second paragraphs of
Article 106, an employer who enter's into a contract with a
contractor for the performance of work for the employer, does not
thereby create an employer-employee relationship between himself
and the employees of the contractor. Thus, the employees of the
contractor remain the contractor's employees and his alone.
Nonetheless, when a contractor fails to pay the wages of his
employees in accordance with the Labor Code, the employer who
contracted out the job to the contractor becomes jointly and
severally liable with his contractor to the employees of the latter "to
the extent of work performed under the contract" as if such
employer were the employer of the contractor's employees. The law
itself, in other words, establishes an employer-employee
relationship between the employer and the job contractor's
employees for a limited purpose, i.e., in order to ensure that the
latter get paid the wages due to them.
A similar situation obtains where there is "labor only" contracting.
The "labor-only" contractor i.e."the person or intermediary" is
considered "merely as an agent of the employer." The employer is
made by the statute responsible to the employees of the "labor
only" contractor as if such employees had been directly employed
by the employer. Thus, where "labor only" contracting exists in a
given case, the statute itself implies or establishes an employeremployee relationship between the employer (the owner of the
project) and the employees of the "labor only" contractor, this time
for acomprehensive purpose: "employer for purposes of this
Code, to prevent any violation or circumvention of any provision of
this Code." The law in effect holds both the employer and the "labor
only" contractor responsible to the latter's employees for the more
effective safeguarding of the employees' rights under the Labor
Code. (at p. 356; emphasis supplied)
And in determining whether a contractor is engaged in labor-only contracting or in job
contracting, reference may be made to Sections 8 and 9 of the Implementing Rules,
which provide:
Sec. 8. Job contracting. There is job contracting permissible
under the Code if the following conditions are met:
(1) The contractor carries on an independent business and

undertakes the contract work on his own account under his own
responsibility according to his own manner and method, free from
the control and direction of his employer or principal in all matters
connected with the performance of the work except as to the results
thereof; and
(2) The contractor has substantial capital or investment in the form
of tools, equipment, machineries, work premises, and other
materials which are necessary in the conduct of his business.
Sec. 9. Labor-only contracting. (a) Any person who undertakes
to supply workers to an employer shall be deemed to be engaged
in labor-only contracting where such person;
(1) Does not have substantial capital or investment in the form of
tools, equipment, machineries, work premises and other materials;
and
(2) The workers recruited and placed by such person are
performing activities which are directly related to the principal
business or operations of the employer in which workers are
habitually employed.
(b) Labor-only contracting as defined herein is hereby prohibited
and the person acting as contractor shall be considered merely as
an agent or intermediary of the employer who shall be responsible
to the workers in the same manner and extent as if the latter were
directly employed by him.
xxx xxx xxx
Applying the foregoing principles to the case at bar, the Court is constrained to rule
for the petitioner.
There is no employer-employee relationship between Union Carbide and the
respondent janitors. The respondents themselves admitted that they were selected
and hired by CSI and were assigned to Union Carbide. CSI likewise acknowledged
that the two janitors were its employees. The janitors drew their salaries from CSI and
not from Union Carbide. CSI exercised control over these janitors through Richard
Barroga, also a CSI employee, who gave orders and instructions to CSI janitors
assigned to the Namayan plant. Moreover, CSI had the power to assign its janitors to
various clients and to pull out, as it had done in a number of occasions, any of its
janitors working at Union Carbide.
As to whether CSI is engaged in labor-only contracting or in job contracting, applying

the test prescribed by the Labor Code and the implementing rules, we find sufficient
basis from the records to conclude that CSI is engaged in job contracting. As correctly
declared by the labor arbiter:
Moreover, CSI is a legitimate service contractor. It is registered as
one and doing business as such with a number of known
companies in the country. It has a contract with UCFEI to assign
janitorial and ground services to the latter for a fee. The
complainants' work were basically janitorial and gardening chores.
The tools of their trade were supplied by CSI. Of course, we are
aware of the complainants' claim that they were made to do chores
which are production jobs. Yet, there is no showing of regularity or
permanence of such assignment. Those occasional errands cannot
be considered as genuine control of UCFEI over the complainants.
(Rollo, pp. 51-52)
Moreover, in Kimberly Independent Labor Union v. Drilon, 185 SCRA 190 [1990], the
Court took judicial notice of the general practice adopted in several government and
private institutions and industries of hiring a janitorial service on an independent
contractor basis.
It must be stressed that the janitorial service agreement between Union Carbide and
CSI binds only the two, and not petitioner Rhone-Poulenc. As new owner, RhonePoulenc had every right to choose its own service contractor.
Respondent NLRC relied heavily on the ruling in Guarin, supra, in deducing that CSI
was a labor-only contractor. The facts in Guarin, however, are different from those
obtaining in the present case. In Guarin, the contractor failed to prove that it had
substantial capital or investment in the form of tools, equipment, machineries, work
premises and other materials. In the case at bar, it has been established that CSI, the
contractor, owns and maintains its own office; that it owns office equipment such as,
but not limited to, typewriters, calculators, xerox machines, mimeographing machines,
airconditioning units and transportation vehicles; and that it furnishes its janitors the
cleaning equipment such as carpet vacuums and polishing machines. Moreover, the
petitioners inGuarin, who were assigned as helpers, janitors, firemen and mechanics,
numbered one hundred twenty (120) in all which, by itself, amounts to a considerable
workforce and gives rise to the suspicion that the service agreement between Novelty
and Lipercon was designed to evade the obligations inherent in an employeremployee relationship. In contrasts there were only eight (8) janitors supplied by CSI
to Union Carbide.
Even on the supposition that the janitors were, indeed, employees of Union Carbide
or that CSI is a labor-only contractor, thus making Union Carbide a direct employer of
these janitors, petitioner Rhone-Poulenc, as purchaser of Union Carbide's business is
not compelled to absorb these janitors into its workforce. An innocent transferee of a
business establishment has no liability to the employees of the transferor to continue
employing them. (Central Azucarera del Davao v. Court of Appeals, 137 SCRA 295
[1985]).
The NLRC, however, concluded that since Rhone-Poulenc made use of the services
of the janitors during the three-month transition period, then said act of utilizing their
services constitutes absorption of the janitors into the petitioner's workforce which
gives them the right to be retained. This ratiocination is not correct. The public
respondent failed to consider the fact that during the three-month transition period
prior to Union Carbide's turnover of the facilities, the service contract between Union
Carbide and CSI was still in force. Whatever benefit the petitioner derived from the
continuous availment by Union Carbide of the services of CSI's janitors was merely
incidental. The NLRC also overlooked the fact that it was still Union Carbide who paid
CSI for the services of these janitors. Also, even prior to the expiration of the
transition period, the petitioner, in anticipation of the pullout of Union Carbide and its
hired service agencies, started screening its own service contractors. Under these
circumstances, the petitioner may not be deemed to have absorbed the respondent
janitors as its own employees.
WHEREFORE, the resolutions of the respondent National Labor Relations
Commission dated March 13, 1991 and September 11, 1991 are SET ASIDE. The
decision of the labor arbiter dated November 8, 1989 is hereby REINSTATED.
The temporary restraining order issued by this Court on December 2, 1991 is made
PERMANENT.
SO ORDERED.
These two substantial differences, taken together, are sufficient to remove the present
case from the ambit of the Guarin ruling.
FIRST DIVISION
G.R. No. 124055
June 8, 2000
ROLANDO E. ESCARIO, NESTOR ANDRES, CESAR AMPER, LORETO

BALDEMOR, EDUARDO BOLONIA, ROMEO E. BOLONIA, ANICETO CADESIM,
JOEL CATAPANG, NESTOR DELA CRUZ, EDUARDO DUNGO ESCARIO REY,
ELIZALDE ESTASIO, CAROLINO M. FABIAN, RENATO JANER, EMER B.
LIQUIGAN, ALEJANDRO MABAWAD, FERNANDO M. MAGTIBAY, DOMINADOR
B. MALLILLIN, NOEL B. MANILA, VIRGILIO A. MANIO, ROMEO M. MENDOZA,
TIMOTEO NOTARION, FREDERICK RAMOS, JOSEPH REYES, JESSIE SEVILLA,
NOEL STO. DOMINGO, DODJIE TAJONERA, JOSELITO TIONLOC, ARNEL
UMALI, MAURLIE C. VIBAR, ROLANDO ZALDUA, RODOLFO TUAZON,
TEODORO LUGADA, MAURING MANUEL, MARCIANO VERGARA, JR.,
ARMANDO IBASCO, CAYETANO IBASCO, LEONILO MEDINA, JOSELITO ODO,
MELCHOR BUELA, GOMER GOMEZ, HENRY PONCE, RAMON ORTIZ, JR.,
ANTONIO MIJARES, JR., MARIO DIZER, REYNANTE PEJO, ARNALDO RAFAEL,
NELSON BERUELA, AUGUSTO RAMOS, RODOLFO VALENTIN, ANTONIO
CACAM, VERNON VELASQUEZ, NORMAN VALLO, ALEJANDRO ORTIZ,
ROSANO VALLO, ANDREW ESPINOSA, EDGAR CABARDO, FIDELES REYES,
EDGARDO FRANCISCO, FERNANDO VILLARUEL, LEOPOLDO OLEGARIO,
OSCAR SORIANO, GARY RELOS, DANTE IRANZO, RONALDO BACOLOR,
RONALD ESGUERA, VICTOR ALVAREZ, JOSE MARCELO, DANTE
ESTRELLADO, MELQUIADES ANGELES, GREGORIO TALABONG, ALBERT
BALAO, ALBERT CANLAS, CAMILO VELASCO, PONTINO CHRISTOPHER,
WELFREDO RAMOS, REYNALDO RODRIGUEZ, RAZ GARIZALDE, MIGUEL
TUAZON, ROBERTO SANTOS, AND RICARDO MORTEL, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, CALIFORNIA MANUFACTURING
CO. INC. AND DONNA LOUISE ADVERTISING AND MARKETING ASSOCIATES
INCORPORATED, respondents.
DECISION
KAPUNAN, J.:
Before this Court is a petition for certiorari under Rule 65, which seeks to annul and
set aside the decision, promulgated on 10 May 1995, of the National Labor Relations
Commission (NLRC). The assailed decision reversed the decision of the Labor
Arbiter, and ruled that the petitioners are employees of Donna Louise Advertising and
Marketing Associates, Inc. and ordered the reinstatement of petitioners and the
payment of backwages.
Private respondent California Marketing Co. Inc. (CMC) is a domestic corporation

principally engaged in the manufacturing of food products and distribution of such
products to wholesalers and retailers. Private respondent Donna Louise Advertising
and Marketing Associates, Inc. (D.L. Admark) is a duly registered promotional firm.
Petitioners worked as merchandisers for the products of CMC. Their services were
terminated on 16 March 1992.
The parties presented conflicting versions of the facts.
Petitioners allege that they were employed by CMC as merchandisers. Among the
tasks assigned to them were the withdrawing of stocks from the warehouse, the fixing
of prices, price-tagging, displaying of merchandise, and the inventory of stocks.
These were done under the control, management and supervision of CMC. The
materials and equipment necessary in the performance of their job, such as price
markers, gun taggers, toys, pentel pen, streamers and posters were provided by
CMC. Their salaries were being paid by CMC. According to petitioners, the hiring,
control and supervision of the workers and the payment of salaries, were all coursed
by CMC through its agent D.L. Admark in order for CMC to avoid its liability under the
law.
On 7 February 1992, petitioners filed a case against CMC before the Labor Arbiter for
the regularization of their employment status. During the pendency of the case before
the Labor Arbiter, D.L. Admark sent to petitioners notice of termination of their
employment effective 16 March 1992. Hence, their complaint was amended so as to
include illegal dismissal as cause of action. Thereafter, twenty-seven more persons
joined as complainants. CMC filed a motion to implead as party-defendant D. L.
Admark and at the same time the latter filed a motion to intervene. Both motions were
granted.
CMC, on the other hand, denied the existence of an employer-employee relationship
between petitioner and itself. Rather, CMC contended that it is D.L. Admark who is
the employer of the petitioners. While CMC is engaged in the manufacturing of food
products and distribution of such to wholesalers and retailers, it is not allowed by law
to engage in retail or direct sales to end consumers. It, however, hired independent
job contractors such as D.L. Admark, to provide the necessary promotional activities
for its product lines.
For its part, D.L. Admark asserted that it is the employer of the petitioners. Its primary
purpose is to carry on the business of advertising, promotion and publicity, the sales
and merchandising of goods and services and conduct survey and opinion polls. As
an independent contractor it serves several clients among which include Purefoods,
Corona Supply, Firstbrand, Splash Cosmetics and herein private respondent

California Marketing.
Petitioners filed a motion for reconsideration but the same was denied by the NLRC
for lack of merit. 4
On 29 July 1994, the Labor Arbiter rendered a decision finding that petitioners are the
employees of CMC as they were engaged in activities that are necessary and
desirable in the usual business or trade of CMC.1 In justifying its ruling, the Labor
Arbiter cited the case of Tabas vs. CMC which, likewise, involved private respondent
CMC. In the Tabas case, this Court ruled that therein petitioner merchandisers were
employees of CMC, to wit:
Hence, this petition.
There is no doubt that in the case at bar, Livi performs "manpower services," meaning
to say, it contracts out labor in favor of clients. We hold that it is one not withstanding
its vehement claims to the contrary and notwithstanding its vehement claims to the
contrary, and notwithstanding the provision of the contract that it is "an independent
contractor." The nature of ones business is not determined by self-serving
appellations one attaches thereto but by the tests provided by statute and prevailing
case law. The bare fact that Livi maintains a separate line of business does not
extinguish the equal fact that it has provided California with workers to pursue the
latters own business. In this connection, we do not agree that the petitioner has been
made to perform activities "which are not directly related to the general business of
manufacturing," Californias purported "principal operation activity. The petitioners had
been charged with merchandising [sic] promotion or sale of the products of
[California] in the different sales outlets in Metro Manila including task and occational
[sic] price tagging," an activity that is doubtless, an integral part of the manufacturing
business. It is not, then, as if Livi had served as its (Californias) promotions or sales
arm or agent, or otherwise rendered a piece of work it (California) could not itself
have done; Livi as a placement agency, had simply supplied it with manpower
necessary to carry out its (Californias) merchandising activities, using its (Californias)
premises and equipment.2
In the main, the issue brought to fore is whether petitioners are employees of CMC or
D.L. Admark. In resolving this, it is necessary to determine whether D.L. Admark is a
labor-only contractor or an independent contractor.
Petitioners are of the position that D.L. Admark is a labor-only contractor and cites
this Courts ruling in the case of Tabas, which they claim is applicable to the case at
bar for the following reasons:
1. The petitioners are merchandisers and the petitioners in the Tabas case
are also merchandisers who have the same nature of work.
2. The respondent in this case is California Manufacturing Co. Inc. while
respondent in the Tabas case is the same California Manufacturing Co. Inc.
3. The agency in the Tabas case is Livi Manpower Services. In this case,
there are at least, three (3) agencies namely: the same Livi Manpower
Services; the Rank Manpower Services and D.L. Admark whose
participation is to give and pay the salaries of the petitioners and that the
money came from the respondent CMC as in the Tabas case.lawphi1
4. The supervision, management and/or control rest upon respondent
California Manufacturing Co. Inc. as found by the Honorable Labor Arbiter
which is also, true in the Tabas Case.5
On appeal, the NLRC set aside the decision of the Labor Arbiter. It ruled that no
employer-employee relationship existed between the petitioners and CMC. It,
likewise, held that D.L. Admark is a legitimate independent contractor, hence, the
employer of the petitioners. Finding no valid grounds existed for the dismissal of the
petitioners by D.L. Admark, it ordered their reinstatement. The dispositive portion of
the decision reads:
We cannot sustain the petition.
WHEREFORE, premises considered, the appealed judgment is modified. Intervenor

DL ADMARK is ordered to reinstate the eighty one (81) complainants mentioned in
the appealed decision to their former positions with backwages from March 16, 1992
until they are actually reinstated. The award of attorneys fees equivalent to ten (10%)
of the award is deleted for lack of basis.3
It would have been different, we believe, had Livi been discretely a promotions firm,
and that California had hired it to perform the latters merchandising activities. For
then, Livi would have been truly the employer of its employees and California, its
client. x x x.6
Petitioners reliance on the Tabas case is misplaced. In said case, we ruled that
therein contractor Livi Manpower Services was a mere placement agency and had
simply supplied herein petitioner with the manpower necessary to carry out the
companys merchandising activity. We, however, further stated that :
In other words, CMC can validly farm out its merchandising activities to a legitimate
independent contractor.
There is labor-only contracting when the contractor or sub-contractor merely recruits,

supplies or places workers to perform a job, work or service for a principal. In laboronly contracting, the following elements are present:
(a) The person supplying workers to an employer does not have substantial
capital or investment in the form of tools, equipment, machineries, work
premises, among others; and
(b) The workers recruited and placed by such person are performing
activities which are directly related to the principal business of the
employer. 7
In contrast, there is permissible job contracting when a principal agrees to put out or
farm out with a contractor or a subcontractor the performance or completion of a
specific job, work or service within a definite or predetermined period, regardless of
whether such job or work or service is to be performed or completed within or outside
the premises of the principal. In this arrangement, the following conditions must
concur:
(a)....The contractor carries on a distinct and independent business and
undertakes the contract work on his account under his own responsibility
according to his own manner and method, free from the control and direction
of his employer or principal in all matters connected with the performance of
his work except as to the results thereof; and
(b)....The contractor has substantial capital or investment in the form of tools,
equipment, machineries (sic), work premises, and other materials which are
necessary in the conduct of his business.8
In the recent case of Alexander Vinoya vs. NLRC et al., 9 this Court ruled that in order
to be considered an independent contractor it is not enough to show substantial
capitalization or investment in the form of tools, equipment, machinery and work
premises. In addition, the following factors need be considered: (a) whether the
contractor is carrying on an independent business; (b) the nature and extent of the
work; (c) the skill required; (d) the term and duration of the relationship; (e) the right to
assign the performance of specified pieces of work; (f) the control and supervision of
the workers; (g) the power of the employer with respect to the hiring, firing and
payment of workers of the contractor; (h) the control of the premises; (i) the duty to
supply premises, tools, appliances, materials, and labor; and (j) the mode, manner
and terms of payment.10
Based on the foregoing criterion, we find that D.L. Admark is a legitimate independent
contractor.
Among the circumstances that tend to establish the status of D.L. Admark as a
legitimate job contractor are:
1) The SEC registration certificate of D.L. Admark states that it is a firm
engaged in promotional, advertising, marketing and merchandising activities.
2) The service contract between CMC and D.L. Admark clearly provides that
the agreement is for the supply of sales promoting merchandising services
rather than one of manpower placement.11
3) D.L. Admark was actually engaged in several activities, such as
advertising, publication, promotions, marketing and merchandising. It had
several merchandising contracts with companies like Purefoods, Corona
Supply, Nabisco Biscuits, and Licron. It was likewise engaged in the
publication business as evidenced by it magazine the "Phenomenon."12
4) It had its own capital assets to carry out its promotion business. It then
had current assets amounting to P6 million and is therefore a highly
capitalized venture.13 It had an authorized capital stock of P500,000.00. It
owned several motor vehicles and other tools, materials and equipment to
service its clients. It paid rentals of P30,020 for the office space it occupied.
Moreover, by applying the four-fold test used in determining employer-employee
relationship, the status of D.L. Admark as the true employer of petitioners is further
established. The elements of this test are (1) the selection and engagement of
control the employees conduct.14
As regards the first element, petitioners themselves admitted that they were selected
and hired by D.L. Admark.15
As to the second element, the NLRC noted that D.L. Admark was able to present in
evidence the payroll of petitioners, sample SSS contribution forms filed and submitted
by D.L. Admark to the SSS, and the application for employment by R. de los Reyes,
all tending to show that D.L. Admark was paying for the petitioners salaries. In
contrast, petitioners did not submit an iota of evidence that it was CMC who paid for
their salaries. The fact that the agreement between CMC and D.L. Admark contains
the billing rate and cost breakdown of payment for core merchandisers and
coordinators does not in any way establish that it was CMC who was paying for their
salaries. As correctly pointed out by both CMC16 and the Office of the Solicitor
General,17 such cost breakdown is a standard content of service contracts designed
to insure that under the contract, employees of the job contractor will receive benefits
mandated by law.
Neither did the petitioners prove the existence of the third element. Again petitioners
admitted that it was D.L. Admark who terminated their employment.18
To prove the fourth and most important element of control, petitioners presented the
memoranda of CMCs sales and promotions manager. The Labor Arbiter found that
these memos "indubitably show that the complainants were under the supervision
and control of the CMC people."19 However, as correctly pointed out by the NLRC, a
careful scrutiny of the documents adverted to, will reveal that nothing therein would
remotely suggest that CMC was supervising and controlling the work of the
petitioners:
x x x The memorandums (Exhibit "B") were addressed to the store or grocery owners
telling them about the forthcoming sales promotions of CMC products. While in one of
the memorandums a statement is made that "our merchandisers and demonstrators
will be assigned to pack the premium with your stocks in the shelves x x x, yet it does
not necessarily mean to refer to the complainants, as they claim, since CMC has also
regular merchandisers and demonstrators. It would be different if in the
memorandums were sent or given to the complainants and their duties or roles in the
said sales campaign are therein defined. It is also noted that in one of the
memorandums it was addressed to: "All regular merchandisers/demonstrators." x x x
we are not convinced that the documents sufficiently prove employer-employee
relationship between complainants and respondents CMC.20
were addressed either to the store owners or "regular" merchandisers and

demonstrators of CMC. Thus, petitioners, who filed a complaint for regularization
against respondent CMC, thereby, conceding that they are not regular employees of
the latter, cannot validly claim to be the ones referred to in said memos.21
Having proven the existence of an employer-employee relationship between D.L.
Admark and petitioners, it is no longer relevant to determine whether the activities
performed by the latter are necessary or desirable to the usual business or trade of
CMC.
On the issue of illegal dismissal, we agree with the findings of the NLRC that D.L.
Admark "admits having dismissed the petitioners for allegedly disowning and rejecting
them as their employer." Undoubtedly, the reason given is not just cause to terminate
petitioners.22 D.L. Admarks belated claim that the petitioners were not terminated but
simply did not report to work23 is not supported by the evidence on record. Moreover,
there is no showing that due process was afforded the petitioners.
IN VIEW OF THE FOREGOING, finding no grave abuse of discretion on the part of
the National Labor Relations Commission, the assailed decision is AFFIRMED in toto.
SO ORDERED.
The Office of the Solicitor General, likewise, notes that the documents fail to show
anything that would remotely suggest control and supervision exercised by CMC over
petitioners on the matter on how they should perform their work. The memoranda

Arts. 97-102

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Arts. 97-102

Uploaded by

Copyright:

Available Formats

FIRST DIVISION

ARTICLE XIV Retirement Gratuity

G.R. No. L-50999 March 23, 1990

Section l(a)-Any employee, who is separated from employment due

JOSE SONGCO, ROMEO CIPRES, and AMANCIO MANUEL, petitioners,

Art. 284. Reduction of personnel. The termination of employment

The antecedent facts are as follows:

LABOR LAW I CASES (Arts.97-102) |1

RESPONSIVE TO THE FOREGOING, respondent should be as it is hereby,

LABOR LAW I CASES (Arts.97-102) |2

recompense or consideration made to a person for his pains or industry in another

LABOR LAW I CASES (Arts.97-102) |3

LABOR LAW I CASES (Arts.97-102) |4

G.R. No. L-72654-61 January 22, 1990

fish-catch at midsea to the prejudice of private respondent. Petitioners denied the

LABOR LAW I CASES (Arts.97-102) |5

Hence, the instant petition.

appears as an allegation in private respondent's position paper, there is nothing in the

February 28, 1963

STATES MARINE CORPORATION and ROYAL

supplements furnished on the date of enactment." In the case of Atok-Big Wedge

LABOR LAW I CASES (Arts.97-102) |12

G.R. No. 55159 December 22, 1989

xxx xxx xxx

LABOR LAW I CASES (Arts.97-102) |13

xxx xxx xxx

WHEREFORE, the Decision appealed from should be as it is hereby affirmed in

IN VIEW OF ALL THE FOREGOING, it is our considered opinion that there is

SO ORDERED. [Decision of Labor Arbiter, p. 12; Rollo, p. 97].

LABOR LAW I CASES (Arts.97-102) |16

INTERNATIONAL SCHOOL ALLIANCE OF EDUCATORS (ISAE), petitioner,

A foreign-hire would necessarily have to uproot himself from his home

Then DOLE Secretary Leonardo A. Quisumbing subsequently denied petitioner's

Superintendent of the School has the discretion to recruit and hire

To our mind, these provisions demonstrate the parties' recognition of the

Employment and Occupation 16 all embody the general principle against

The foregoing provisions impregnably institutionalize in this jurisdiction the long

LABOR LAW I CASES (Arts.97-102) |19

WHEREFORE, the petition is GIVEN DUE COURSE. The petition is hereby

In this case, we find the point-of-hire classification employed by respondent School to

LABOR LAW I CASES (Arts.97-102) |21

JUANA T. VDA. DE RACHO, plaintiff-appellee,

On October 5, 1960, decedent died intestate at Ilagan. Plaintiff then filed on

On December 6, 1994, a decision5 was rendered by the Labor Arbiter dismissing

LABOR LAW I CASES (Arts.97-102) |24

LABOR LAW I CASES (Arts.97-102) |25

LABOR LAW I CASES (Arts.97-102) |27

The facts are as follows:

Petitioner Davao Integrated Port Stevedoring Services (petitioner-company) and

Hours of Service Per Vacation Sick Leave

xxx xxx xxx

751 825 6 days 6 days

LABOR LAW I CASES (Arts.97-102) |29

LABOR LAW I CASES (Arts.97-102) |30

in issuing the award (decision). Moreover, his interpretation of Sections 1 and 3,

LABOR LAW I CASES (Arts.97-102) |32

NESTL PHILIPPINES, INC., petitioner,

Section 16 of the Rules on P.D. 1123 similarly prohibits diminution of benefits. It

LABOR LAW I CASES (Arts.97-102) |38

LABOR LAW I CASES (Arts.97-102) |39

Petitioner Reynaldo Tiangco:

LABOR LAW I CASES (Arts.97-102) |40

LABOR LAW I CASES (Arts.97-102) |41

2. Ordering respondents-appellees to pay complainants-appellants their back