THIRD DIVISION

[G.R. No. 121927. April 22, 1998]

ANTONIO W. IRAN (doing business under the name and style of Tones Iran Enterprises), petitioner, vs. NATIONAL LABOR
RELATIONS COMMISSION (Fourth Division), GODOFREDO O. PETRALBA, MORENO CADALSO, PEPITO TECSON, APOLINARIO
GOTHONG GEMINA, JESUS BANDILAO, EDWIN MARTIN, CELSO LABIAGA, DIOSDADO GONZALGO, FERNANDO M. COLINA,
respondents.

DECISION

ROMERO, J.:

Whether or not commissions are included in determining compliance with the minimum wage requirement is the
principal issue presented in this petition.

Petitioner Antonio Iran is engaged in softdrinks merchandising and distribution in Mandaue City, Cebu, employing truck
drivers who double as salesmen, truck helpers, and non-field personnel in pursuit thereof. Petitioner hired private
respondents Godofredo Petralba, Moreno Cadalso, Celso Labiaga and Fernando Colina as drivers/salesmen while private
respondents Pepito Tecson, Apolinario Gimena, Jesus Bandilao, Edwin Martin and Diosdado Gonzalgo were hired as truck
helpers. Drivers/salesmen drove petitioners delivery trucks and promoted, sold and delivered softdrinks to various outlets
in Mandaue City. The truck helpers assisted in the delivery of softdrinks to the different outlets covered by the
driver/salesmen.

As part of their compensation, the driver/salesmen and truck helpers of petitioner received commissions per case of
softdrinks sold at the following rates:

SALESMEN:

Ten Centavos (P0.10) per case of Regular softdrinks.

Twelve Centavos (P0.12) per case of Family Size softdrinks.

TRUCK HELPERS:

Eight Centavos (P0.08) per case of Regular softdrinks.

Ten Centavos (P0.10) per case of Family Size softdrinks.

Sometime in June 1991, petitioner, while conducting an audit of his operations, discovered cash shortages and
irregularities allegedly committed by private respondents. Pending the investigation of irregularities and settlement of the
cash shortages, petitioner required private respondents to report for work everyday. They were not allowed, however, to
go on their respective routes. A few days thereafter, despite aforesaid order, private respondents stopped reporting for
work, prompting petitioner to conclude that the former had abandoned their employment. Consequently, petitioner
terminated their services. He also filed on November 7, 1991, a complaint for estafa against private respondents.

On the other hand, private respondents, on December 5, 1991, filed complaints against petitioner for illegal dismissal,
illegal deduction, underpayment of wages, premium pay for holiday and rest day, holiday pay, service incentive leave pay,
13th month pay, allowances, separation pay, recovery of cash bond, damages and attorneys fees. Said complaints were
consolidated and docketed as Rab VII-12-1791-91, RAB VII-12-1825-91 and RAB VII-12-1826-91, and assigned to Labor
Arbiter Ernesto F. Carreon.

The labor arbiter found that petitioner had validly terminated private respondents, there being just cause for the latters
dismissal. Nevertheless, he also ruled that petitioner had not complied with minimum wage requirements in
compensating private respondents, and had failed to pay private respondents their 13th month pay. The labor arbiter,
thus, rendered a decision on February 18, 1993, the dispositive portion of which reads:

WHEREFORE, premises considered, judgment is hereby rendered ordering the respondent Antonio W. Iran to pay the
complainants the following:

1. Celso Labiaga P10,033.10

2. Godofredo Petralba 1,250.00

3. Fernando Colina 11,753.10

4. Moreno Cadalso 11,753.10

5. Diosdado Gonzalgo 7,159.04

6. Apolinario Gimena 8,312.24

7. Jesus Bandilao 14,729.50

8. Pepito Tecson 9,126.55

---------------

74,116.63

Attorneys Fees (10%)

of the gross award 7,411.66

-------------

GRAND TOTAL AWARD P81,528.29

========

The other claims are dismissed for lack of merit.

SO ORDERED.[1]

Both parties seasonably appealed to the NLRC, with petitioner contesting the labor arbiters refusal to include the
commissions he paid to private respondents in determining compliance with the minimum wage requirement. He also
presented, for the first time on appeal, vouchers denominated as 13th month pay signed by private respondents, as proof
that petitioner had already paid the latter their 13th month pay. Private respondents, on the other hand, contested the
findings of the labor arbiter holding that they had not been illegally dismissed, as well as mathematical errors in
computing Jesus Bandilaos wage differentials. The NLRC, in its decision of December 21, 1994, affirmed the validity of
private respondents dismissal, but found that said dismissal did not comply with the procedural requirements for
dismissing employees. Furthermore, it corrected the labor arbiters award of wage differentials to Jesus Bandilao. The
dispositive portion of said decision reads:

WHEREFORE, premises considered, the decision is hereby MODIFIED in that complainant Jesus Bandilaos computation for
wage differential is corrected from P154.00 to P4,550.00. In addition to all the monetary claim (sic) originally awarded by
the Labor Arbiter a quo, P1,000.00 is hereby granted to each complainants (sic)as indemnity fee for failure of respondents
to observe procedural due process.

SO ORDERED.[2]

Petitioners motion for reconsideration of said decision was denied on July 31, 1995, prompting him to elevate this case to
this Court, raising the following issues:
1. THE HONORABLE COMMISSION ACTED WITH GRAVE ABUSE OF DISCRETION AND CONTRARY TO LAW AND
JURISPRUDENCE IN AFFIRMING THE DECISION OF THE LABOR ARBITER A QUO EXCLUDING THE COMMISSIONS RECEIVED
BY THE PRIVATE RESPONDENTS IN COMPUTING THEIR WAGES;

2. THE HONORABLE COMMISSION ACTED WITH GRAVE ABUSE OF DISCRETION IN FINDING PETITIONER GUILTY OF
PROCEDURAL LAPSES IN TERMINATING PRIVATE RESPONDENTS AND IN AWARDING EACH OF THE LATTER P1,000.00 AS
INDEMNITY FEE;

3. THE HONORABLE COMMISSION GRAVELY ERRED IN NOT CREDITING THE ADVANCE AMOUNT RECEIVED BY THE PRIVATE
RESPONDENTS AS PART OF THEIR 13TH MONTH PAY.

The petition is impressed with merit.

The NLRC, in denying petitioners claim that commissions be included in determining compliance with the minimum wage
ratiocinated thus:

Respondent (petitioner herein) insist assiduously that the commission should be included in the computation of actual
wages per agreement. We will not fall prey to this fallacious argument. An employee should receive the minimum wage as
mandated by law and that the attainment of the minimum wage should not be dependent on the commission earned by
an employee. A commission is an incentive for an employee to work harder for a better production that will benefit both
the employer and the employee. To include the commission in the computation of wage in order to comply with labor
standard laws is to negate the practice that a commission is granted after an employee has already earned the minimum
wage or even beyond it.[3]

This holding is unsupported by law and jurisprudence. Article 97(f) of the Labor Code defines wage as follows:

Art. 97(f) Wage paid to any employee shall mean the remuneration or earnings, however designated, capable of being
expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis, or other method
of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of
employment for work done or to be done, or for services rendered or to be rendered and includes the fair and reasonable
value, as determined by the Secretary of Labor, of board, lodging, or other facilities customarily furnished by the
employer to the employee.

x x x x x x x x x. (Emphasis supplied)

This definition explicitly includes commissions as part of wages. While commissions are, indeed, incentives or forms of
encouragement to inspire employees to put a little more industry on the jobs particularly assigned to them, still these
commissions are direct remunerations for services rendered. In fact, commissions have been defined as the recompense,
compensation or reward of an agent, salesman, executor, trustee, receiver, factor, broker or bailee, when the same is
calculated as a percentage on the amount of his transactions or on the profit to the principal. The nature of the work of a
salesman and the reason for such type of remuneration for services rendered demonstrate clearly that commissions are
part of a salesmans wage or salary.[4]
Thus, the commissions earned by private respondents in selling softdrinks constitute part of the compensation or
remuneration paid to drivers/salesmen and truck helpers for serving as such, and hence, must be considered part of the
wages paid them.

The NLRC asserts that the inclusion of commissions in the computation of wages would negate the practice of granting
commissions only after an employee has earned the minimum wage or over. While such a practice does exist, the
universality and prevalence of such a practice is questionable at best. In truth, this Court has taken judicial notice of the
fact that some salesmen do not receive any basic salary but depend entirely on commissions and allowances or
commissions alone, although an employer-employee relationship exists.[5] Undoubtedly, this salary structure is intended
for the benefit of the corporation establishing such, 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 the corporation.[6]

Likewise, there is no law mandating that commissions be paid only after the minimum wage has been paid to the
employee. Verily, the establishment of a minimum wage only sets a floor below which an employees remuneration
cannot fall, not that commissions are excluded from wages in determining compliance with the minimum wage law. This
conclusion is bolstered by Philippine Agricultural Commercial and Industrial Workers Union vs. NLRC,[7] where this Court
acknowledged that drivers and conductors who are compensated purely on a commission basis are automatically entitled
to the basic minimum pay mandated by law should said commissions be less than their basic minimum for eight hours
work. It can, thus, be inferred that were said commissions equal to or even exceed the minimum wage, the employer
need not pay, in addition, the basic minimum pay prescribed by law. It follows then that commissions are included in
determining compliance with minimum wage requirements.

With regard to the second issue, it is settled that in terminating employees, the employer must furnish the worker with
two written notices before the latter can be legally terminated: (a) a notice which apprises the employee of the particular
acts or omissions for which his dismissal is sought, and (b) the subsequent notice which informs the employee of the
employers decision to dismiss him.[8] (Italics ours) Petitioner asseverates that no procedural lapses were committed by
him in terminating private respondents. In his own words:

when irregularities were discovered, that is, when the misappropriation of several thousands of pesos was found out, the
petitioner instructed private respondents to report back for work and settle their accountabilities but the latter never
reported for work. This instruction by the petitioner to report back for work and settle their accountabilities served as
notices to private respondents for the latter to explain or account for the missing funds held in trust by them before they
disappeared.[9]

Petitioner considers this return-to-work order as equivalent to the first notice apprising the employee of the particular
acts or omissions for which his dismissal is sought. But by petitioners own admission, private respondents were never told
in said notice that their dismissal was being sought, only that they should settle their accountabilities. In petitioners
incriminating words:

It should be emphasized here that at the time the misappropriation was discovered and subsequently thereafter, the
petitioners first concern was not effecting the dismissal of private respondents but the recovery of the misappropriated
funds thus the latter were advised to report back to work.[10]
As above-stated, the first notice should inform the employee that his dismissal is being sought. Its absence in the present
case makes the termination of private respondents defective, for which petitioner must be sanctioned for his non-
compliance with the requirements of or for failure to observe due process.[11] The twin requirements of notice and
hearing constitute the essential elements of due process, and neither of these elements can be disregarded without
running afoul of the constitutional guarantee. Not being mere technicalities but the very essence of due process, to which
every employee is entitled so as to ensure that the employers prerogative to dismiss is not exercised arbitrarily,[12] these
requisites must be complied with strictly.

Petitioner makes much capital of private respondents failure to report to work, construing the same as abandonment
which thus authorized the latters dismissal. As correctly pointed out by the NLRC, to which the Solicitor General agreed,
Section 2 of Book V, Rule XIV of the Omnibus Rules Implementing the Labor Code requires that in cases of abandonment
of work, notice should be sent to the workers last known address. If indeed private respondents had abandoned their
jobs, it was incumbent upon petitioner to comply with this requirement. This, petitioner failed to do, entitling
respondents to nominal damages in the amount of P5,000.00 each, in accordance with recent jurisprudence,[13] to
vindicate or recognize their right to procedural due process which was violated by petitioner.

Lastly, petitioner argues that the NLRC gravely erred when it disregarded the vouchers presented by the former as proof
of his payment of 13th month pay to private respondents. While admitting that said vouchers covered only a ten-day
period, petitioner argues that the same should be credited as amounts received by private respondents as part of their
13th month pay, Section 3(e) of the Rules and Regulations Implementing P.D. No. 851 providing that the employer shall
pay the difference when he pays less than 1/12th of the employees basic salary.[14]

While it is true that the vouchers evidencing payments of 13th month pay were submitted only on appeal, it would have
been more in keeping with the directive of Article 221[15] of the Labor Code for the NLRC to have taken the same into
account.[16] Time and again, we have allowed evidence to be submitted on appeal, emphasizing that, in labor cases,
technical rules of evidence are not binding.[17] Labor officials should use every and all reasonable means to ascertain the
facts in each case speedily and objectively, without regard to technicalities of law or procedure.[18]

It must also be borne in mind that the intent of P.D. No. 851 is the granting of additional income in the form of 13th
month pay to employees not as yet receiving the same and not that a double burden should be imposed on the employer
who is already paying his employees a 13th month pay or its equivalent.[19] An employer who pays less than 1/12th of
the employees basic salary as their 13th month pay is only required to pay the difference.[20]

The foregoing notwithstanding, the vouchers presented by petitioner covers only a particular year. It does not cover
amounts for other years claimed by private respondents. It cannot be presumed that the same amounts were given on
said years. Hence, petitioner is entitled to credit only the amounts paid for the particular year covered by said vouchers.

WHEREFORE, in view of the foregoing, the decision of the NLRC dated July 31, 1995, insofar as it excludes the
commissions received by private respondents in the determination of petitioners compliance with the minimum wage
law, as well as its exclusion of the particular amounts received by private respondents as part of their 13th month pay is
REVERSED and SET ASIDE. This case is REMANDED to the Labor Arbiter for a recomputation of the alleged deficiencies. For
non-observance of procedural due process in effecting the dismissal of private respondents, said decision is MODIFIED by
increasing the award of nominal damages to private respondents from P1,000.00 to P5,000.00 each. No costs.
SO ORDERED.

Narvasa, C.J., (Chairman), Kapunan, and Purisima, JJ., concur.

[1] Rollo, p. 40-41.

[2] Ibid., p. 45.

[3] Id., p. 32.

[4] Philippine Duplicators, Inc. vs. NLRC, 227 SCRA 747 (1993).

[5] Songco vs. NLRC, 183 SCRA 610 (1990).

[6] Supra, Note 4.

[7] 247 SCRA 256 (1995).

[8] Malaya Shipping vs. NLRC, G.R. No. 121698, March 26, 1998.

[9] Rollo, p. 18-19.

[10] Ibid., p. 19.

[11] Sebuguero vs. NLRC, 248 SCRA 532 (1995).

[12] Supra, Note 8.

[13] Better Buildings, Inc. vs. NLRC, G.R. No. 109714, December 15, 1997; see also Note 8.

[14] Section 3(e) 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 1/12th 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-
monetray benefits. Where an employer pays less than 1/12th of the employees basic salary, the employer shall pay the
difference.

[15] Art. 221. Technical rules not binding and prior resort to amicable development. 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 and procedure, all in the interest of due process.

x x x x x x x x x.

[16] Columbia Development Corporation vs. Minister of Labor and Employment, 146 SCRA 421 (1986).

[17] Bristol Laboratories Employees Association vs. NLRC, 187 SCRA 118 (1990); PT&T vs. NLRC, 183 SCRA 451 (1990);
Haverton Shipping Ltd. vs. NLRC, 135 SCRA 685 (1985).

[18] De Ocampo vs. NLRC, 213 SCRA 653 (1992).

[19] NFSW vs. Ovejera, 114 SCRA 354 (1982).

[20] Dole Philippines vs. Leogardo, Jr., 117 SCRA 938 (1982).

Antonio W. Iran v. NLRC

(G.R. No. 121927 April 22, 1998)

III. Labor Standards

Wages

Commissions

PRINCIPLE:

Commissions are included in determining compliance with the minimum wage requirement.

FACTS:

Petitioner Antonio Iran is engaged in softdrinks merchandising and distribution in Mandaue City, Cebu, employing truck
drivers who double as salesmen, truck helpers, and non-field personnel in pursuit thereof.
Petitioner hired private respondents Godofredo Petralba, Moreno Cadalso, Celso Labiaga and Fernando Colina as
drivers/salesmen while private respondents Pepito Tecson, Apolinario Gimena, Jesus Bandilao, Edwin Martin and Diosdado
Gonzalgo were hired as truck helpers.
Drivers/salesmen drove petitioner’s delivery trucks and promoted, sold and delivered softdrinks to various outlets in Mandaue
City. The truck helpers assisted in the delivery of softdrinks to the different outlets covered by the driver/salesmen.
As part of their compensation, the driver/salesmen and truck helpers of petitioner received commissions per case of
softdrinks sold at the following rates:
SALESMEN:

Ten Centavos (P0.10) per case of Regular softdrinks.

Twelve Centavos (P0.12) per case of Family Size softdrinks.
TRUCK HELPERS:

Eight Centavos (P0.08) per case of Regular softdrinks.

Ten Centavos (P0.10) per case of Family Size softdrinks.

Sometime in June 1991, petitioner, while conducting an audit of his operations, discovered cash shortages and irregularities
allegedly committed by private respondents. Pending the investigation of irregularities and settlement of the cash shortages,
petitioner required private respondents to report for work everyday. They were not allowed, however, to go on their respective
routes. A few days thereafter, despite aforesaid order, private respondents stopped reporting for work, prompting petitioner to
conclude that the former had abandoned their employment. Consequently, petitioner terminated their services. He also filed
on November 7, 1991, a complaint for estafa against private respondents.
On the other hand, private respondents filed complaints against petitioner for illegal dismissal, illegal deduction, underpayment
of wages, premium pay for holiday and rest day, holiday pay, service incentive leave pay, 13th month pay, allowances,
separation pay, recovery of cash bond, damages and attorney’s fees.
The labor arbiter found that petitioner had validly terminated private respondents, there being just cause for the latter’s
dismissal. Nevertheless, he also ruled that petitioner had not complied with minimum wage requirements in compensating
private respondents, and had failed to pay private respondents their 13th month pay.
The NLRC, in its decision of December 21, 1994, affirmed the validity of private respondents dismissal, but found that said
dismissal did not comply with the procedural requirements for dismissing employees. Furthermore, it corrected the labor
arbiters award of wage differentials to Jesus Bandilao.

ISSUE:

Whether or not commissions are included in determining compliance with the minimum wage requirement.

RULING:

Yes. The petition is impressed with merit.

Article 97(f) of the Labor Code defines wage as follows:

Art. 97(f) Wage paid to any employee shall mean the remuneration or earnings, however designated, capable
of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission
basis, or other method of calculating the same, which is payable by an employer to an employee under a
written or unwritten contract of employment for work done or to be done, or for services rendered or to be
rendered and includes the fair and reasonable value, as determined by the Secretary of Labor, of board,
lodging, or other facilities customarily furnished by the employer to the employee.

While commissions are, indeed, incentives or forms of encouragement to inspire employees to put a little more
industry on the jobs particularly assigned to them, still these commissions are direct remunerations for services
rendered. In fact, commissions have been defined as the recompense, compensation or reward of an agent,
salesman, executor, trustee, receiver, factor, broker or bailee, when the same is calculated as a percentage on the
amount of his transactions or on the profit to the principal. The nature of the work of a salesman and the reason for
such type of remuneration for services rendered demonstrate clearly that commissions are part of a salesmans wage
or salary.
Thus, the commissions earned by private respondents in selling softdrinks constitute part of the compensation or
remuneration paid to drivers/salesmen and truck helpers for serving as such, and hence, must be considered part of
the wages paid them.
Likewise, there is no law mandating that commissions be paid only after the minimum wage has been paid to the employee.
Verily, the establishment of a minimum wage only sets a floor below which an employees remuneration cannot fall,
not that commissions are excluded from wages in determining compliance with the minimum wage law.
WHEREFORE, in view of the foregoing, the decision of the NLRC dated July 31, 1995, insofar as it excludes the
commissions received by private respondents in the determination of petitioners compliance with the minimum wage law, as
well as its exclusion of the particular amounts received by private respondents as part of their 13th month pay is REVERSED
and SET ASIDE. This case is REMANDED to the Labor Arbiter for a recomputation of the alleged deficiencies. For non-
observance of procedural due process in effecting the dismissal of private respondents, said decision is MODIFIED by
increasing the award of nominal damages to private respondents from P1,000.00 to P5,000.00 each. No costs.

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Republic of the Philippines

SUPREME COURT

Manila

THIRD DIVISION

G.R. No. 116008 July 11, 1995

METRO TRANSIT ORGANIZATION, INC., petitioner,

vs.

THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION, Second Division; EDNA BONTO-PEREZ, Presiding
Commissioner; DOMINGO H. ZAPANTA, Commissioner; ROGELIO I. RAYAZA, Commissioner; and THE SUPERVISORY
EMPLOYEES ASSOCIATION OF METRO (SEAM), respondents.

FELICIANO, J.:
In this Petition for Certiorari, petitioner Metro Transit Organization, Inc. ("Metro") asks us to set aside the Decision and
Resolution of the National Labor Relations Commission ("NLRC") dated 30 March and 22 June 1994 respectively in NLRC-
NCR-CA No. 000042-92 ordering it to pay its supervisory employees amounts representing (i) a demanded wage increase
based on company practice and (ii) a correction or adjustment of an underpayment of an annual wage increase granted
in the collective bargaining agreement (CBA) between Metro and herein private respondent Supervisory Employees
Association Metro ("SEAM").

Petitioner Metro is the operator and manager of the Light Railway Transit System in Metro Manila. It employs close to
1,000 rank-and-file and over 200 supervisory employees. Private respondent SEAM is a union composed of supervisory
employees of petitioner Metro. In May 1989, SEAM was certified as the sole bargaining unit for the supervisory
employees of Metro.

On 1 December 1989, the first collective bargaining agreement between petitioner Metro and private respondent SEAM
took effect.1 Prior to December 1989, Metro had a CBA only with its rank-and-file employees. During the period when
no CBA governed the terms and conditions of employment between Metro and its supervisory employees, whenever
rank-and-file employees were paid a statutorily mandated salary increase, supervisory employees were, as a matter of
practice, also paid the same amount plus P50.00.

On 17 April 1989, Metro paid its rank-and-file employees a salary increase of P500.00 per month in accordance with the
terms of their CBA.2 Metro, however, did not extend a corresponding salary increase to its supervisory employees.

On 1 December 1989, Metro, in compliance with its CBA with SEAM, paid its supervisory employees a salary increase of
P800.00 per month.

On 17 April 1990, Metro paid its rank-and-file and supervisory employees a P600.00 monthly increase. The payment thus
made to rank-and-file employees was in compliance with the second year salary increase provided in their CBA. On the
other hand, the P600.00 per month paid to supervisory employees was advanced from their second year salary increase,
provided in their CBA, of P1,000.00 per month effective 1 December 1990. On 1 December 1990, Metro paid its
supervisory employees the remaining balance of P400.00 per month in addition to the P600.00 a month it had earlier
started to pay.

The third year salary increases due rank-and-file and supervisory employees were paid on 17 April and 1 December
1991, respectively, as scheduled in their corresponding CBAs.

On 24 March 1992, private respondent SEAM filed a Notice of Strike before the National Conciliation and Mediation
Board ("NCMB") charging petitioner Metro with (a) discrimination in terms of wages; (b) underpayment of salary
increase per CBA for 1990 and/or adjustment of salaries for correction of disparity/inequity in pay with rank-and-file
employees and (c) harassment and demotion of union officers. Conciliation and mediation efforts before the NCMB
failed.

On 23 June 1992, acting on a petition filed by Metro, the Secretary of Labor assumed jurisdiction over the labor dispute
and certified the same to public respondent NLRC for same compulsory arbitration.

On 30 March 1994, the NLRC rendered its decision the dispositive portion of which reads:

WHEREFORE, the Company is hereby ordered to pay the amount of P550.00 per month wage increase effective April 17,
1989 and onwards to each supervisory employee and likewise pay the sum of P600.00 per month representing
underpayment in the correction of inequities in pay or underpayment of CBA wage increase effective December 1, 1990
and onwards.

The charge of harassment and demotion was dismissed for "lack of basis."

On 22 June 1994, NLRC denied the motion for reconsideration filed by Metro.

The instant Petition for Certiorari was filed on 14 July 1994 accompanied by a prayer for issuance of a temporary
restraining order to enjoin public respondents from enforcing their award.

On 31 August 1994, the Court, after an oral hearing, issued a Resolution encouraging petitioner Metro and private
respondent SEAM to vigorously and earnestly exercise their best efforts to reach an amicable and mutually acceptable
settlement of their claims and counterclaims. In the meantime, the disputants were to maintain the status quo, in
particular, private respondent SEAM and public respondent NLRC were to refrain from seeking and granting,
respectively, the issuance of a writ of execution in respect of the decision of the NLRC.

On 29 and 30 September 1994, petitioner Metro and private respondent SEAM respectively informed the Court that
their efforts amicably to settle their dispute had failed. Cognizant of (a) the huge disparity between the financial
capability of Metro and the amount awarded to SEAM,3 (b) the essential public services being rendered by the parties
and (c) in the interest of avoiding any disruption of these basic services, the Court reiterated its Order of 31 August 1994
enjoining respondents SEAM and the NLRC from seeking and granting a writ of execution until further orders from this
Court.

The principal issues, to the mind of the Court, are: (a) whether or not a wage distortion existed in respect of the salaries
of the rank-and-file and supervisory employees of petitioner Metro; and (b) assuming a wage distortion existed, whether
or not it has been corrected by petitioner Metro in accordance with law.4

Private respondent SEAM vigorously asserts that an already existing wage distortion in respect of the salaries of rank-
and-file and supervisory employees was aggravated when Metro, on 17 April 1989, paid its rank-and-file employees their
CBA-stipulated P500.00 increase but did not grant a corresponding increase (and a premium) to its supervisory
employees. Furthermore, the advance by Metro of the P600.00 on 17 April 1990 only "artificially" reduced the existing
distortion. The advance was, according to SEAM, extended merely to give the appearance of a reduction of the existing
distortion in pay between the rank-and-file and supervisory employees. On 1 December 1990, when supervisory
employees were paid the balance of P400.00 the distortion existing prior to 17 April 1990 was reinstated. Finally, SEAM
claims, on top of the salary increases granted to supervisory employees by their CBA, they should be paid the increase
corresponding to the P500.00 increase given rank-and-file employees not only for 1989 but also onwards.

Upon the other hand, petitioner Metro firmly maintains that its practice of giving higher increases to supervisory
employees whenever rank-and-file employees were given increases, should not be regarded as compulsory. The grant of
a corresponding increase to supervisory employees is a prerogative or discretionary act of generosity by management
considering there is no law or company policy mandating it. Moreover, SEAM is estopped, Metro asserts, from claiming
such an increase. Despite its awareness of the P500.00 increase paid to rank-and-file employees (pursuant to their CBA)
on 17 April 1989, SEAM did not negotiate in SEAM's own CBA for the retroactive payment or pushing forward the
effectivity date of its first increase of P800.00 to 17 April 1989. Finally, the demanded P550.00 wage increase should be
deemed, according to Metro, included in the P800.00 salary increase paid supervisory employees on 1 December 1989.

In respect of the issue of underpayment, petitioner Metro denies that it underpaid its supervisory employees. Metro
maintains (a) that the first increase of P800.00 effective 1 December 1989 as provided in its CBA with SEAM is higher
than the P500.00 increase paid its rank-and-file employees; (b) that assuming arguendo a distortion in pay still existed,
the same was corrected when the majority of the supervisory employees, in a referendum, voted to accept the advance
payment of P600.00 out of the scheduled CBA increase of P1,000.00 effective 1 December 1990; (c) it was actually SEAM
who had proposed the advance payment of P600.00 from their scheduled second year increase of P1,000.00; (d) SEAM
had further agreed that, come 1 December 1990, only the balance of P400.00 would have to be paid to supervisory
employees; and (e) payment by Metro of the balance of P400.00 on 1 December 1990 was merely its compliance with
the scheduled second year increase aligned with Metro's subsequent agreement with SEAM to advance the effectivity
date of the first P600.00.

In its Comment, the Office of the Solicitor General argues, rather cursorily, that public respondent NLRC did not commit
any grave abuse of discretion and that its findings of fact must be accorded respect and finality.

In respect of the issue of existence of a wage distortion, the Court finds and so holds that a wage distortion did occur
when the salaries of rank-and-file employees were increased by P500.00 per month on 17 April 1989 as stipulated in
their CBA and no corresponding increase was paid to the supervisory employees. This fact was admitted by Atty. Virgilio
C. Abejo, counsel for petitioner Metro, during the oral hearing and Metro is bound by that admission.5

In addition, Atty. Abejo explained that his client, as a matter of practice, granted its supervisory employees a salary
increase (and a premium) whenever it paid its rank-and-file employees a salary increase.6

The defense of management prerogative or discretion invoked by petitioner Metro in asserting that it is not obligated to
grant supervisory employees a salary increase whenever rank-and-file employee are granted an increase is, in this case,
unavailing.

Basically, Metro's argument is that such increase was merely a bonus given to supervisory employees. 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 something given in addition to what is ordinarily received by
or strictly due to the

recipient. 7

The general rule is that a bonus is a gratuity or an act of liberality which the recipient has no right to demand as a matter
of right.8 A bonus, however, is a demandable or enforceable obligation when it is made part of the wage or salary or
compensation of the employee.9 Whether or not a bonus forms part of wages depends upon the circumstances and
conditions for its payment. If it is 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 if a certain level of productivity is achieved, it can not be considered
part of the wage. Where it is not payable to all but only to some employees and only when their labor becomes more
efficient or more productive, it is only an inducement for efficiency, a prize therefor, not a part of the wage. 10

In the case at bar, the increase of P550.00 sought by private respondent SEAM was neither an inducement nor was it
contingent on (a) the success of the business of petitioner Metro; or (b) the increased production or work output of the
company or (c) the realization of profits. The demand for this increase was based on a company practice, admitted by
Metro, of granting a salary increase (and a premium) to supervisory employees whenever rank-and-file employees were
granted a salary increase. That those increases were precisely designed to correct or minimize the wage distortion
effects of increases given to rank-and-file employees (under their CBA or under Wage Orders), highlights the fact that
those increases were part of the wage structure of supervisory employees. The demanded increase therefore is not a
bonus that is generally not demandable as a matter of right. The demanded increase, in this instance, is an enforceable
obligation so far as the supervisory employees of Metro are concerned.
We conclude that the supervisory employees, who then (i.e., on 17 April 1989) had, unlike the rank-and-file employees,
no CBA governing the terms and conditions of their employment, had the right to rely on the company practice of
unilaterally correcting the wage distortion effects of a salary increase given to the rank-and-file employees, by giving the
supervisory employees a corresponding salary increase plus a premium. For reasons, however, shortly to be stated in
the disposition of the second issue, we hold that the P550.00 increase is demandable by SEAM only in respect of the
period beginning 17 April 1989 and ending on 30 November 1989.

It is true enough that, in the present case, the wage distortion to be corrected by the award of P550.00 increase for
supervisory employees beginning 17 April 1989, was due to the time gap between the effectivity date (17 April 1989) of
the increase of P500.00 per month given to rank-and-file employees under their CBA and the effectivity date (1
December 1989) of the P800.00 increase given to supervisory employees under their own CBA. It is also true that had
the P800.00 increase to supervisory employees been made retroactive to 17 April 1989 by an appropriate synchronizing
provision in the Metro-SEAM CBA, no wage distortion would have arisen. The fact, however, remains that Metro and
SEAM did not agree upon such remedy in their CBA and that the CBA increase given to rank-and-file employees did
produce a distortion effect by obliterating or drastically reducing the previous gap between the salary rates of rank-and-
file and supervisory employees. The point to be stressed is that considering the prior practice of petitioner Metro, its
supervisory employees had the right to expect rectification of that distortion.

II

We turn to the issue of whether the wage distortion referred to above was effectively rectified by petitioner Metro in
accordance with law.

This issue arises because, as already noted, the NLRC in its 30 March 1994 Decision decreed that Metro shall pay the
"P550.00 per month wage increase effective April 17, 1989 and onwards" and similarly ordered the payment of P600.00
per month which it found to have been underpaid "effective December 1, 1990 and onwards."

It is helpful to recall the general principles laid down in National Federation of Labor v. National Labor Relations
Commission, 11 where the Court discussed at some length the relatively obscure concept of wage distortion. Those
principles may be summarily stated in the following manner:

(a) The concept of wage distortion assumes an existing grouping or classification of employees which establishes
distinctions among such employees on some relevant or legitimate basis. This classification is reflected in a deferring
wage rate for each of the existing classes of employees.

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

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

In the present case, the Court must confront the task of determining whether the CBA forged by Metro and SEAM had,
along with the award of P550.00 per month from 17 April 1989 to 1 December 1989, referred to in Part I above,
adequately corrected the wage distortion.

After careful examination of the provisions of the CBA between Metro and SEAM, in particular the provisions relating to
anniversary salary increases every 1 December beginning 1989 to 1991, we believe and so hold that together with the
increase of P550.00 referred to in Part I above, those provisions will have adequately rectified the wage distortion which
arose in respect of rank-and-file and supervisory employees.

The CBA of supervisory employees granted them an aggregate monthly increase of P2,800.00 over three (3) years:

Table I

CBA

Effectivity

Increase

Date

Amount

Year I

1-Dec-89

P800.00

Year II

1-Dec-90

P1,000.00

Year III
1-Dec-91

P1,000.00

Upon the other hand, the CBA of the rank-and-file employees granted them monthly increases totalling P1,850.00 also
over three (3) years:

Table II

CBA

Effectivity

Amount

Increase

Date

Year I

17-Apr-89

P500.00

Year II

17-Apr-90

P600.00

Year III

17-Apr-91
P750.00

After all the above listed salary increases had become effective, the last being on 1 December 1991, supervisory
employees as a group were receiving P950.00 more per month than rank-and-file employees as a group. Adding to this
figure the amount of P550.00 per month which we in Part I (supra) have held petitioner Metro must pay, the increase in
pay of supervisory employees would be P1,500.00 more per month than the increases in pay of rank-and-file employees:

Table III

CBA

Effectivity

Wage Increase

Wage Increase

Gap

Increase

Date

Rank and File

Supervisory

(PHP)

Employees

Employees

(PHP)

(PHP)
Year I

4/17/89

550.00 12

550.00

50

12/1/89

0.00

800.00

850

Year II

4/17/90

600.00 13

600.00

850

12/1/90

0.00
400.00

1250

Year III

4/17/91

750.00

550.00

500

12/1/91

0.00

1,000.00

1500

We consider the difference of P1,500.00 per month a significant differential that clearly distinguishes, on the basis of
pay scales, a rank-and-file employee from a supervisory employee.

Applying the above increases to the actual salaries being received by rank-and-file and supervisory employees of Metro,
we find that indeed the distortion caused by the CBA-stipulated wage increase granted rank-and-file employees on 17
April 1989 was rectified by 1 December 1991.

The record before us does not include the actual amounts of the rank-and-file and supervisory employees' salaries. In its
position paper before the NCMB, however, private respondent SEAM stated:

The highest salary of some rank-and-file employees at present (before adding the CBA increase) is P4,790.00 which is
higher that some supervisors with [a] salary of P3,980.00. 14
Taking the above SEAM figures and adding to them the respective CBA-stipulated increases to the salary of the highest
paid rank-and-file employee and to the lowest paid supervisory employee, plus the P550.00 in wage already held due to
all supervisory employees as of 17 April 1989, we find that the salary of the lowest paid supervisory employee was, by 1
December 1991, P690.00 more than the salary of the highest paid rank-and-file employee:

Table IV

CBA

Effectivity

Wage of

Wage of

Gap

Increase

Date

Rank and

Supervisory

(PHP)

File Employees

Employees

(PHP)

(PHP)

4,790.00
3980.00

(810.00) 15

Year I

4/17/89

5,290.00

4,530.00 16

(760.00) 17

12/1/89

5,290.00

5330.00

40.00

Year II

4/17/90

5,890.00

5,930.00 18

40.00

12/1/90

5,890.00
6330.00

440.00

Year III

4/17/91

6,640.00

6330.00

(310.00) 19

12/1/91

6640.00

7,330.00

690.00

The difference in monthly wage scales of P690.00 clearly and substantially distinguishes, on the basis of pay, a rank-and-
file employee from a supervisory employee. 20 Since the above computation utilizes the salaries of highest paid rank-
and-file employee and the lowest paid supervisory employee, figures supplied by SEAM, the differential of P690.00
represents merely the minimum difference or gap that was restored or established once implementation of the salary
increases due to supervisory employees was completed on 1 December 1991. That differential would, of course, be
significantly greater for average rank-and-file employees receiving a salary less than P4,790.00 and for average
supervisory employees receiving a salary greater than P3,980.00.

We turn to the related issue of whether the first year salary increase of P800.00 per month given to supervisory
employees under their CBA covered or took the place of the P550.00 increase we ruled is due them in Part I (supra) by
virtue of the previous unilateral practice of Metro.

Metro maintains that the P800.00 monthly salary increase paid to supervisory employees starting on 1 December 1989,
should be deemed to cover or include the P550.00 in wage increase demanded by SEAM and held by us to be due to
SEAM from 17 April 1989 to 1 December 1989. In other words, Metro argues that the wage distortion should be
regarded as cured by the CBA-mandated increase of P800.00 starting 1 December 1989.
We note that the CBA of Metro and SEAM did not contain any provision stipulating that the P550.00 monthly increase
would be credited against the P800.00 increase. There was no crediting provision apparently because the P550.00
monthly increase had not been provided for in the CBA with SEAM. Even so, we agree with petitioner Metro's position.
The issue of whether increases in wages essential for correcting wage distortions may be credited against CBA-
mandated increases, is not an issue of first impression. In National Federation of Labor v. National Labor Relations
Commission, 21 the Court rejected the argument of the NLRC that wage increases resulting from collective bargaining
negotiations should not be regarded as constituting compliance with the direction to correct wage distortions arising
from the effectivity of Wage Orders. In National Federation of Labor, the Court, after quoting the following excerpt from
Apex Mining Company, Inc. v. National Labor Relations Commission 22

It is important to note that the creditability provisions of Wage Orders Nos. 5 and 6 (as well as the parallel provisions in
Wage Orders Nos. 2, 3 and 4) are grounded in an important public policy. The public policy may be seen to be the
encouragement of employers to grant wage and allowance increases to their employees higher than the minimum rates
of increases prescribed by statute or administrative regulation. To obliterate the creditability provisions in Wage Orders
through interpretation or otherwise, and to compel employers simply to add legislated increases in salaries or
allowances without regard to what is already being paid, would be to penalize employers who grant their workers more
than the statutorily prescribed minimum rates of increases. Clearly, this would be counter-productive so far as securing
the interests of labor is concerned. The creditability provisions in the Wage Orders prevent the penalizing of employers
who are industry leaders and who do not wait for statutorily prescribed increases in salary or allowances and pay their
workers more than what the law or regulations require. 23 (Emphasis partly in the original and partly supplied)

said:

We believe that the same public policy requires recognition and validation, as it were, of wage increases given by
employers either unilaterally or as a result of collective bargaining negotiations, in the effort to correct wage distortions.
24 (Emphasis supplied)

In the instant case, the CBA-stipulated increase of P800.00 a month was intended as the countervailing increase for
supervisory employees, the rank-and-file employees having already received their own increase approximately eight (8)
months earlier. In other words, the wage distortion in the present case arose not because of a government-decreed
increase in minimum wages or because Metro simply refused to treat its supervisory employees, differently from its
rank-and-file workers, but rather because of a failure to synchronize the CBA-stipulated increases for rank-and-file and
for supervisory employees. Moreover, as more than once pointed out above, the P800.00 monthly increase given to
supervisory employees should be taken in conjunction with the P550.00 month increase already awarded to supervisory
employees under Part I above. When these are taken together, the wage distortion which occurred on 17 April 1989 was
completely and permanently corrected. There is no legal basis for requiring Metro to pay not only the P800.00 month
increase, but also, on top thereof, the P550.00 monthly increase to supervisory employees, after 1 December 1989 and
forever after.

From the foregoing, we conclude that beginning 1 December 1989, by the grant of the award of P550.00 to supervisory
employees in Part I (supra) and by the operation of the Metro-SEAM CBA, the wage distortion which occurred on 17
April 1989 had been corrected. By 1 December 1991, a substantial gap or differential had been re-established between
the salaries of the rank-and-file and supervisory employees of petitioner Metro. It was, therefore, grievous abuse of
discretion for the NLRC to disregard such rectification and to rule that petitioner Metro was liable to its supervisory
employees for P550.00 monthly increase beyond 1 December 1989 and "onwards." That distortion, as already pointed
out, lasted only from 17 April 1989 up to 30 November 1989, since the following day, 1 December 1989, the CBA of
Metro and SEAM went into effect.

Similarly, we believe that the NLRC committed a grave abuse of discretion in requiring Metro to pay the sum of P600.00
per month from 1 December 1990 and onwards, i.e., forever after. It will be recalled that Metro, upon request of SEAM,
had agreed that of the P1,000.00 monthly increase originally scheduled to be effective under the CBA on 1 December
1990, P600.00 would take effect instead on 17 April 1990. Metro agreed to do so precisely to remedy the distortion that
would otherwise have resulted (see Tables III and IV, supra) and so, starting 17 April 1990, supervisory employees
received a monthly increase of P600.00; and starting 1 December 1990, they started receiving an additional P400.00 or
the total stipulated CBA increase of P1,000.00 per month.

Again, for the same reasons set out earlier, we consider that these additional payments of P600.00 per month to
supervisory employees from 17 April 1990 up to 1 December 1990 should be deemed included in the P1,000.00 monthly
increase effective from 1 December 1990 and onwards. Compelling Metro to pay, starting 1 December 1990, not only
the P1,000.00 per month increase stipulated in the CBA but also an additional P600.00 per month, amounts to allowing
unjust enrichment of supervisory employees at the expense of their employer Metro.

Finally, the Court is aware of the existence of a job evaluation study prepared by Resources Consultants International,
aimed at re-examining the wage structure of rank-and-file and supervisory employees of Metro. 25 The decision we
promulgate today is without prejudice to higher wages which rank-and-file and supervisory employees may be receiving
by virtue of implementation of such report.

ACCORDINGLY, for all the foregoing, the Petition for Certiorari is hereby GRANTED DUE COURSE, and the Decision and
Resolution of the NLRC dated 30 March and 22 June 1994, respectively, in NLRC-NCR-CA No. 000042-92 are hereby SET
ASIDE. In place thereof, another Decision is hereby RENDERED requiring petitioner Metro Transit Organization, Inc. to
pay to each of its supervisory employees the amount of Five Hundred Fifty Pesos (P550.00) for each month or fraction of
a month, embraced within the period from 17 April 1989 to 1 December 1989, plus legal interest (six percent [6%] per
annum) thereon computed from the various dates in 1989 when such amount should have been paid during the
aforementioned period. This Decision shall be without prejudice to any increase of wages already being enjoyed by
supervisory employees at the time of promulgation hereof.

No pronouncement as to costs.

SO ORDERED.

Romero, Melo, Vitug and Francisco, JJ., concur.

Footnotes

1 Executed on 4 December 1990 but made effective as of 1 December 1989. See Rollo, p. 158.

2 Executed on 20 June 1990 but made effective as of 17 April 1989. See Rollo, p. 158.

3 The award of public respondent NLRC effectively imposed on petitioner Metro, whose assets amount to roughly
Four Million Pesos (P4M), a liability of approximately Twenty Eight Million Pesos (P28M). (TSN, 31 August 1994, pp.

6-7)

4 A footnote on terminology: We here use the term "distortion" where one or both of the parties have frequently
used the words "disparity" and "inequity." It should be noted that "wage distortion" sets in when the normal differential
between the wage rates of rank-and-file and the rates of supervisory employees is drastically reduced or eliminated by
granting to the former a wage increase that is denied to the latter group of employees. Thus, as a factual matter,
distortion occurs where the disparity disappears; upon the other hand, the wage distortion is corrected where the
previous historical or at least a substantial differential between the wage rates for rank-and-file employees, on the one
hand, and the rates for supervisory employees, on the other hand, is restored. (See National Federation of Labor v.
National Labor Relations Board, et al., 234 SCRA 311 [1994])

In the present opinion, we have sought technical accuracy by avoiding the word "inequity" and using only the term
"wage distortion" while bearing in mind that that is precisely what one or the other party has in mind when they refer to
"wage disparity" or "inequity."

5 See Section 23, Rule 138 of the Rules of Court and Acenas v. Sison, 8 SCRA 711 (1963). The pertinent testimony
of Atty. Abejo reads:

Justice Feliciano (Chairman)

Q: In point of [fact], Mr. Counselor, was there or was there no wage distortion during that period?

Atty. Abejo:

A: There was a wage distortion, Your Honor, as of May 18, 1989. But Metro had hoped to take care of this by
negotiation with the Supervisors' Union. [So] in the meantime, it did not grant the FIVE HUNDRED (P500.00) PESOS plus
FIFTY (P50.00) PESOS, Your Honor. (Emphasis supplied; TSN, G.R. No. 116008, 31 August 1994, pp. 16-17)

"May 18, 1989" should actually be "17 April 1989" the date when the rank-and-file employees of petitioner Metro were
paid their CBA stipulated salary increase. (TSN, G.R. No. 116008, 31 August 1994, pp. 19-20, 29-30)

6 The pertinent testimony of Atty. Abejo reads:

Atty. Abejo:

May it please the Honorable Tribunal.

xxx xxx xxx

Your Honors, the factual background of this case is, more or less, not disputed. . . .

xxx xxx xxx

Sometime in 1986, a Collective Bargaining Agreement (CBA) was forged between the rank-and-file employees and Metro
Transit Organization, Inc. wherein the rank-and-file employees were granted salary increases. That was, again, renewed
in 1987.
At that time, Your Honors, only the rank-and-file employees had a Collective Bargaining Agreement (CBA). The
supervisors numbering about TWO HUNDRED (200) did not have a CBA. Therefore, everytime there was a mandated
increase of the rank-and-file employees, management, in order to prevent [a] distortion of pay, would grant the same to
the supervisors plus the premium of FIFTY (P50.00) PESOS." (Emphasis supplied; TSN, G.R. No. 116008, 31 August 1994,
pp. 12-14)

7 Traders Royal Bank v. National Labor Relations Commission, 189 SCRA 274 (1990) and Luzon Stevedoring Corp. v.
Court of Industrial Relations, 15 SCRA 660 (1965).

8 Traders Royal Bank v. National Labor Relations Commission, supra; Luzon Stevedoring Corp. v. Court of Industrial
Relations supra; see also Kamaya Point Hotel v. National Labor Relations Commission, 177 SCRA 160 (1989).

9 Luzon Stevedoring Corp. v. Court of Industrial Relations, supra.

10 Philippine Duplicators, Inc. v. National Labor Relations Commission, G.R. No. 110068, February 15, 1995; Atok-
Big Wedge Mining Co., Inc. v. Atok-Big Wedge Mutual Benefit Association, 92 Phil. 755 (1953); Claparols v. Court of
Industrial Relations, 65 SCRA 613 (1975).

11 234 SCRA 311 (1994).

12 Amount reflects the P550.00 due supervisory employees under Part I, supra.

13 Amount reflects the P600.00 advanced by petitioner Metro taken from the P1,000.00 increase granted by the
CBA of supervisory employees in Year II effective 1 December 1990.

14 Rollo, p. 80.

15 Amounts in parentheses indicate negative gaps. It should be noted that these negative figures arise only
because we are here taking the extreme case cited by SEAM (the highest paid rank-and-file employee vis-a-vis the
lowest paid supervisory employee) to illustrate the point relevant in the instant case. That point is: that even in respect
of the extreme cases raised by SEAM, the wage distortion was effectively corrected by 1 December 1991, the effective
date of the last anniversary increase under SEAM's CBA.

The extreme case raised by SEAM appears to involve, not the legal issue concerning wage distortion here dealt with, but
perhaps some other problem not presently before this Court.

16 Amount reflects the Five Hundred Fifty Pesos (P550.00) due supervisory employee under Part I, supra.

17 See note 15.

18 Amount reflects the Six Hundred Pesos (P600.00) advanced by petitioner Metro taken from the One Thousand
Pesos (P1,000.00) increase granted by the CBA in Year II.

19 See note 15.

20 The Court notes the statement made by private respondent SEAM that a salary differential of P200.00 is already
a significant gap. Position Paper for SEAM (NCMB) dated 12 December 1989, Rollo, p. 81.

21 234 SCRA 311 (1994).

22 206 SCRA 497 (1992).

23 234 SCRA at 322-323.

24 234 SCRA at 323.

25 National Labor Relations Commission Decision, Annex "B" to the Petition, Rollo, pp. 35-36.

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Republic of the Philippines

SUPREME COURT

Manila
SECOND DIVISION

G.R. No. 111744 September 8, 1995

LOURDES G. MARCOS, ALEJANDRO T. ANDRADA, BALTAZARA J. LOPEZ AND VILMA L. CRUZ, petitioners,

vs.

NATIONAL LABOR RELATIONS COMMISSION and INSULAR LIFE ASSURANCE CO., LTD., respondents.

REGALADO, J.:

This petition for certiorari seeks the nullification of the decision1 of the National Labor Relations Commission (NLRC)
promulgated on May 31, 1992 in NLRC NCR CA No. 004120-92, and its resolution dated August 27, 1993 denying
petitioner's motion for reconsideration thereof. The said decision set aside on appeal, the decision of Labor Arbiter Alex
Arcadio Lopez ordering private respondent to pay petitioners their service awards, anniversary bonus and prorated
performance bonus in the amount of P144,579.00 and 10% attorney's fees in the amount of P14,457.90.2

First, the undisputed facts.

Petitioners were regular employees of private respondent Insular Life Assurance Co:, Ltd., but they were dismissed on
November 1, 1990 when their positions were declared redundant. A special redundancy benefit was paid to them, which
included payment of accrued vacation leave and fifty percent (50%) of unused current sick leave, special redundancy
benefit, equivalent to three (3) months salary for every year of service; and additional cash benefits, in lieu of other
benefits provided by the company or required by law.3

Before the termination of their services, petitioner Marcos had been in the employ of private respondent for more than
twenty (20) years, from August 26, ]970; petitioner Andrada, more than twenty-five (25) years, from July 26, 1965;
petitioner Lopez, exactly thirty (30) years, from October 31, 1960; and petitioner Cruz, more than twenty (20) years, from
March 1, 1970.4

Petitioners, particularly Baltazara J. Lopez, sent a letter dated October 23, 1990 to respondent company questioning the
redundancy package, She claimed that they should receive their respective service awards and other prorated bonuses
which they had earned at the time they were dismissed. In addition, Lopez argued that "the cash service awards have
already been budgeted in a fund distinct and apart from redundancy fund.5

Thereafter, private respondent required petitioners to execute a "Release and Quitclaim,"6 and petitioners complied but
with a written protest reiterating their previous demand that they were nonetheless entitled to receive their service
awards.
On March 21, 1991, petitioners inquired from the Legal Service of the Department of Labor and Employment7 whether
respondent corporation could legally refuse the payment of their service awards as mandated in their Employee's
Manual.

About three months later the labor department issued its opinion, with pertinent authorities, responding to petitioners'
query as follows:

xxx xxx xxx

This Department believes that your query presents several issues. These shall be addressed point by point, thus:

First, the Department deems the service award to be part of the benefits of the employees of Insular Life. Company
policies and practices are fertile sources of employee's rights. These must be applied uniformly as interpretation cannot
vary from one employee to another. . . .

xxx xxx xxx

While it may be argued that the above-cited case applies only to retirement benefits, we find solace in the cases of
Liberation Steamship Co., Inc. vs. CIR and National Development Company vs. Unlicensed Crew members of Three Dons
vessels (23 SCRA 1105) where the Supreme Court held that a gratuity or bonus, by reason of its long and regular
concession indicating company practice, may become regarded as part of regular compensation and thus demandable.

xxx xxx xxx

Second, the award is earned at the pertinent anniversary date. At this time, entitlement to the award becomes vested.
The anniversary date is the only crucial determining factor. Since the award accrues on that date, it is of no moment that
the entitled employee is separated from service (for whatever cause) before the awards are physically handed out.

xxx xxx xxx

Third, even if the award has not accrued — as when an employee is separated from service because of redundancy before
the applicable 5th year anniversary, the material benefits of the award must be given, prorated, by Insular Life. This is
especially true (in) redundancy, wherein he/she had no control.

xxx xxx xxx

Fourth, the fact that you were required to sign "Release and Quitclaim" does not affect your right to the material benefits
of the service award. . . .8

Meanwhile, in the same year, private respondent celebrated its 80th anniversary wherein the management approved the
grant of an anniversary bonus equivalent to one (1) month salary only to permanent and probationary employees as of
November 15, 1990.9

On March 26, 1991, respondent company announced the grant of performance bonus to both rank and file employees
and supervisory specialist grade and managerial staff equivalent to two (2) months salary and 2.75 basic salary,
respectively, as of December 30, 1990. The performance bonus, however, would be given only to permanent employees
as of March 30, 1991. 10

Despite the aforequoted opinion of the Department of Labor and Employment, private respondent refused to pay
petitioners service awards. This prompted the latter to file a consolidated complaint, which was assigned to NLRC Labor
Arbiter Lopez, for payment of their service awards, including performance and anniversary bonuses.

In their complaint, petitioners contended that they are likewise entitled to the performance and anniversary bonuses
because, at the time the performance bonus was announced to be given, they were only short of two (2) months service
to be entitled to the full amount thereof as they had already served the company for ten (10) months prior to the
declaration of the grant of said benefit. Also, they lacked only fifteen (15) days to be entitled to the full amount of the
anniversary bonus when it was announced to be given to employees as of November 15, 1990.

In a decision dated October 8, 1992, the labor arbiter ordered respondent company to pay petitioners their service
awards, anniversary bonuses and prorated performance bonuses, including ten percent (10%) thereof as attorney's fees.

Respondent company appealed to public respondent NLRC claiming grave abuse of discretion committed by the labor
arbiter in holding it liable to pay said service award, performance and anniversary bonuses, and in not finding that
petitioners were estopped from claiming the same as said benefits had already been given to them.

In setting aside the decision of the labor arbiter, respondent NLRC upheld the validity of the quitclaim document executed
by petitioners. For this conclusion, it rationalized that "(c)ertainly, before complainants signed the quitclaim and release,
they are aware of the nature of such document. In fact, they never assailed the genuineness and due execution of the
same. Hence, we can safely say that they were not placed under duress or were compelled by means of force to sign the
document." 11

Furthermore, the NLRC held that "(n)either was there any unwritten agreement between complainants and respondent
upon separation, which entitled the former to other renumerations or benefits. On the contrary, they voluntarily
accepted the redundancy benefit package, otherwise, they would not have been separated from employment." 12

Hence, this petition wherein it is postulated that the basic issue is whether or not respondent NLRC committed reversible
error or grave abuse of discretion in affirming the validity of the "Release and Quitclaim" and, consequently, that
petitioners are not entitled to payment of service awards and other bonuses. 13 The Solicitor General public respondent
NLRC and private respondent company duly filed their respective comments. 14
In their petition, petitioners stress that they have actually devoted much, if not all, of their employable life with private
respondent; that given their length of service, their loyalty to the latter is easily demonstrable; and that the same length
of service had rendered slim, if not eliminated, their chances of getting employed somewhere else." 15

On the other hand, respondent company reiterates its basic contention that the consideration for the settlement of
petitioners' claim is credible and reasonable, more than satisfies the legal requirement therefor, and that petitioners, in
executing the release and quitclaim, did so voluntarily and with full knowledge of the consequences thereof. 16

The petition being meritorious, we find for petitioners.

Under prevailing jurisprudence, the fact that an employee has signed a satisfaction receipt for his claims does not
necessarily result in the waiver thereof. The law does not consider as valid any agreement whereby a worker agrees to
receive less compensation than what he is entitled to recover. A deed of release or quitclaim cannot bar an employee
from demanding benefits to which he is legally entitled. 17

We have heretofore explained that the reason why quitclaims commonly frowned upon as contrary to public policy, and
why they are held to be ineffective to bar claims for the full measure of the workers' legal rights, is the fact that the
employer and the employee obviously do not stand on the same footing. The employer drove the employee to the wall.
The latter must have harsh necessities of life. He thus found himself in no position to resist money proffered. His, then, is
a case of adherence, not of choice. One thing sure, however, is that petitioners did not relent on their claim. They pressed
it. They are deemed not have waived any of their rights. Renuntiatio non praesumitur. 18

Along this line, we have more trenchantly declared that quitclaims and/or complete releases executed by the employees
do not estop them from pursuing their claims arising from unfair labor practices of the employer. The basic reason for this
is that such quitclaims and/or complete releases are against public policy and, therefore, null and void. The acceptance of
termination does not divest a laborer of the right to prosecute his employer for unfair labor practice acts. 19 While there
maybe possible exceptions to this holding, we do not perceive any in the case at bar.

Furthermore, in the instant case, it is an undisputed fact that when petitioners signed the instrument of release and
quitclaim, they made a written manifestation reserving their right to demand the payment of their service awards. 20 The
element of total voluntariness in executing that instrument is negated by the fact that they expressly stated therein their
claim for the service awards, a manifestation equivalent to a protest and a disavowal of any waiver thereof.

As earlier stated, petitioners even sought the opinion of the Department of Labor and Employment to determine where
and how they stood in the controversy. This act only shows their adamant desire to obtain their service awards and to
underscore their disagreement with the "Release and Quitclaim" they were virtually forced to sign in order to receive
their separation pay.

We have pointed out in Veloso, et al., vs. Department of Labor and Employment, et al.,21 that:
While rights may be waived, the same must not be contrary to law, public order, public policy, morals or good customs or
prejudicial to a third person with a right recognized by law.

Article 6 of the Civil Code renders a quitclaim agreement void ab initio where the quitclaim obligates the workers
concerned to forego their benefits while at the same time exempting the employer from any liability that it may choose to
reject. This runs counter to Art. 22 of the Civil Code which provides that no one shall be unjustly enriched at the expense
of another.

We agree with the further observations of the Solicitor General who, in recommending the setting aside of the decision of
respondent NLRC, called attention to the fact that "contrary to private respondent's contention, the "additional"
redundancy package does not and could not have covered the payment of the service awards, performance and
anniversary bonuses since the private respondent company has initially maintained the position that petitioners are not
legally entitled to the same. . . . Surprisingly, in a sudden turnabout, private respondent now claims . . . that the subject
awards and bonuses are integrated in the redundancy package. It is evident, therefore, that private respondent has not
truly consolidated the payment of the subject awards and bonuses in the redundancy package paid to the petitioners. 22

We are likewise in accord with the findings of the labor arbiter that petitioners are indeed entitled to receive service
awards and other benefits, thus:

Since each of the complainants have rendered services to respondent in multiple(s) of five years prior to their separation
from employment, respondent should be paid their service awards for 1990.

We are not impressed with the contention of the respondent that service award is a bonus and therefore is an act of
gratuity which the complainants have no right to demand. Service awards are governed by respondent's employee's
manual and (are) therefore contractual in nature.

On the matter of anniversary and performance bonuses, it is not disputed that it is respondent's practice to give an
anniversary bonus every five years from its incorporation; that pursuant to this practice, respondent declared an
anniversary bonus for its 80th Anniversary in 1990; that per terms of this declaration, only the employees of respondent
as of 15 November 1990 will be given the bonus; and that complainants were separated from respondent only 25 days
before :the respondent's anniversary. On the other hand, it is also (not) disputed that respondent regularly gives
performance bonuses; that for its commendable performance in 1990, respondent declared a performance bonus; that
per terms of this declaration, only permanent employees of respondent as of March 30, 1991 will be given this bonus; and
that complainants were employees of respondents for the first 10 months of 1990.

We cannot see any cogent reason why an anniversary bonus which respondent gives only once in every five years were
given to all employees of respondent as of 15 November 1990 (pro rata even to probationary employees; Annex 9) and
not to complainants who have rendered service to respondent for most of the five year cycle. This is also true in the case
of performance bonus which were given to permanent employees of respondent as of 30 March 1991 and not to
employees who have been connected with respondent for most of 1990 but were separated prior to 30 March 1991.

We believe that the prerogative of the employer to determine who among its employee shall be entitled to receive
bonuses which are, as a matter of practice, given periodically cannot be exercised arbitrarily. 23 (Emphasis and
corrections in parentheses supplied.)
The grant of service awards in favor of petitioners is more importantly underscored in the precedent case of Insular Life
Assurance Co., Ltd., et al. vs. NLRC, et al., 24 where this Court ruled that "as to the service award differentials claimed by
some respondent union members, the company policy shall likewise prevail, the same being based on the employment
contracts or collective bargaining agreements between the parties. As the petitioners had explained, pursuant to their
policies on the matter, the service award differential is given at the end of the year to an employee who has completed
years of service divisible by 5.

A bonus is not a gift or gratuity, but is paid for some services or consideration and is in addition to what would ordinarily
be given. 25 The term "bonus" as used in employment contracts, also conveys an idea of something which is gratuitous, or
which may be claimed to be gratuitous, over and above the prescribed wage which the employer agrees to pay.

While there is a conflict of opinion as to the validity of an agreement to pay additional sums for the performance of that
which the promisee is already under obligation to perform, so as to give the latter the right to enforce such promise after
performance, the authorities hold that if one enters into a contract of employment under an agreement that he shall be
paid a certain salary by the week or some other stated period and, in addition, a bonus, in case he serves for a specified
length of time, there is no reason for refusing to enforce the promise to pay the bonus, if the employee has served during
the stipulated time, on the ground that it was a promise of a mere gratuity.

This is true if the contract contemplates a continuance of the employment for a definite term, and the promise of the
bonus is made at the time the contract is entered into. If no time is fixed for the duration of the contract of employment,
but the employee enters upon or continues in service under an offer of a bonus if he remains therein for a certain time,
his service, in case he remains for the required time, constitutes an acceptance of the offer of the employer to pay the
bonus and, after that acceptance, the offer cannot be withdrawn, but can be enforced by the employee. 26

The weight of authority in American jurisprudence, with which we are persuaded to agree, is that after the acceptance of
a promise by an employer to pay the bonus, the same cannot be withdrawn, but may be enforced by the employee. 27
However, in the case at bar, equity demands that the performance and anniversary bonuses should be prorated to the
number of months that petitioners actually served respondent company in the year 1990. This observation should be
taken into account in the computation of the amounts to be awarded to petitioners.

WHEREFORE, the assailed decision and resolution of respondent National Labor Relations Commission are hereby SET
ASIDE and the decision of Labor Arbiter Alex Arcadio Lopez is REINSTATED.

SO ORDERED.

Narvasa, C.J., Puno, Mendoza and Francisco, JJ., concur.

Footnotes

1 Rollo, 42; per Commissioner Rogelio I. Rayala, with Commissioners Edna Bonto-Perez and Domingo H. Zapanta,
concurring.
2 Ibid., 53; id.

3 Ibid., 43, 237-239.

4 Petition, 3; Rollo, 4.

5 Ibid., 4; id., 5.

6 Rollo, 5.

7 Ibid., 6.

8 Ibid., 7-8.

9 Ibid., 93.

10 Ibid., 43-44

11 Ibid., 50-51.

12 Ibid., 51.

13 Ibid., 18.

14 Ibid., 88, 145, and 65.

15 Ibid., 32.

16 Memorandum of Private Respondent, 13-14; Rollo, 226-227.

17 Fuentes vs. NLRC, et al., G.R. No. 76835, November 24, 1988, 167 SCRA 767; see also Garcia vs. NLRC, et al., G.R.
No. 67825, September 4, 1987, 153 SCRA 639.
18 Lopez Sugar Corporation vs. Federation of Free Workers, Philippine Labor Union Association (PLUA-NACUSIP), et
al, G.R. Nos. 75700-01, August 30, 1990, 189 SCRA 179, quoting from Cariño, et al., vs. Agricultural Credit and Cooperative
Financing Administration, et al., L-19808, September 29, 1966, 18 SCRA 183.

19 Armed Forces of the Philippine Mutual Benefit Association, Inc. vs. Armed Forces of the Philippine Mutual Benefit
Association, Inc. Employees' Union (AFP-MBAI-EU), et al., L-39145, May 17, 1980, 97 SCRA 715.

20 Rollo, 5.

21 G.R. No. 87297, August 5, 1991, 200 SCRA 201.

22 Rollo, 123.

23 Ibid., 46-48.

24 G.R. No. 74191, December 21, 1987, 156 SCRA 740.

25 Kenicott vs. Wayne County, 16 Wall. (U.S.) 452, 21 L. Ed. 319.

26 35 Am. Jur. Master and Servant, Section 71, 501-502.

27 Roberts vs. Mays Mills, 184 NC 406, 114 SE 530, 28 ALR 338; Scott vs. J. F. Duthie & Co, 125 Wash 470, 216 P 853,
28 ALR 328; Zwolanek vs. Baker Mfg. Co. 150 Wis 517, 137 NW 769, 44 LRA (NS) 1214, Ann Cas 1914A, 793.

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Marcos, et. al. vs. NLRC AND Insular Life Assurance (1995)

FACTS:

Petitioners herein have served respondent Insular for more than 20 years in multiples of five (20-30 years). They were
terminated due to redundancy and thus were given special redundancy benefits. But they were denied their service
awards which was set apart from the redundancy fund. They were made to sign a quit claim, which they complied, but
they still submitted a letter of protest. They inquired from the DOLE-LS on the validity of the denial of their service awards,
to which DOLE decided in their favour. The service awards were part of the Employee’s Manual and were therefore
company policies. The award was earned on the anniversary date. Even if the employees were separated from service
before the anniversary date, they were still entitled to the material benefits of the award.

However, respondent still refused to pay this. On its 80th anniversary, the company approved an anniversary equivalent
of one-month salary to its employees. The petitioners alleged that they were entitled to this.

The LA ruled in petitioners’ favour, but NLRC reversed this, upholding the validity of the quitclaim they signed voluntarily.

ISSUE:

W/N the quitclaim was invalid and if so, petitioners would be entitled to their service award.

HELD:

Release and Quitclaim INVALID, petitioners were ENTITLED to the service awards.

A deed of release or quitclaim cannot bar an employee from demanding payment to which he is entitled. Quitclaims are
against public policy and are therefore null and void. The Court does not believe that petitioners signed the Release and
Quitclaim voluntarily, as the subsequent submission of a letter of protest and the inquiry before the NLRC contradicted
their willingness to execute the quitclaim.

The special redundancy package could not have covered the service awards, and respondent’s actions estopped it from
claiming such. Service awards are not bonuses. They are stated in the Employees Manual, which is contractual in nature
therefor the law between the parties. It is company policy and has been in practice by the company.

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Republic of the Philippines

SUPREME COURT

Manila

FIRST DIVISION
G.R. No. 114250 April 5, 1995

DOMINICO C. CONGSON, petitioner,

vs.

NATIONAL LABOR RELATIONS COMMISSION, NOE BARGO, ROGER HIMENO, RAYMUNDO BADAGOS, PATRICIO SALVADOR,
SR., NEHIL BARGO, JOEL MENDOZA, and EMMANUEL CALIXIHAN, respondents.

PADILLA, J.:

Petitioner Dominico C. Congson seeks the nullification of the decision rendered by the National Labor Relations
Commission in Case No. NLRC CA M-000681-921 dated 28 May 1993 and its resolution dated 28 January 1994, denying
petitioner's motion for reconsideration..

In the challenged decision*, the NLRC affirmed in toto Labor Arbiter Arturo Aponesto's decision dated 27 September
1991, holding thus:

WHEREFORE, the appealed decision is hereby AFFIRMED IN TOTO and the instant appeal is DISMISSED for lack of merit.

SO ORDERED.2

Petitioner is the registered owner of Southern Fishing Industry. Private respondents were hired on various dates 3 by
petition'er as regular piece-rate workers. They were uniformly paid at a rate of P1.00 per tuna weighing thirty (30) to
eighty (80) kilos per movement, that is — from the fishing boats down to petitioner's storage plant at a load/unload cycle
of work until the tuna catch reached its final shipment/destination. They did the work of unloading tuna from fishing
boats to truck haulers; unloading them again at petitioner's cold storage plant for filing, storing, cleaning, and
maintenance; and finally loading the processed tuna for shipment. They worked seven (7) days a week.

During the first week of June 1990, petitioner notified his workers of his proposal to reduce the rate-per-tuna movement
due to the scarcity of tuna. Private respondents resisted petitioner's proposed rate reduction. When they reported for
work the next day, they were informed that they had been replaced by a new set of workers, When they requested for a
dialogue with the management, they were instructed to wait for further notice. They waited for the notice of dialogue for
a full week but in vain.

On 15 June 1990, private respondents filed a case against petitioner before the NLRC Sub-Regional Arbitration Branch No.
XI in General Santos City, docketed as Case No. RAB-11-06-50165-90 for underpayment of wages (non-compliance with
Rep. Act Nos. 6640 and 6727) and non-payment of overtime pay, 13th month pay, holiday pay, rest day pay, and five (5)-
day service incentive leave pay; and for constructive dismissal. With respect to their monetary claims, private respondents
charged petitioner with violation of the minimum wage law, alleging that with petitioner's rates and the scarcity of tuna
catches, private respondents' average monthly earnings each did not exceed ONE THOUSAND PESOS (P1,000.00).

Accusing petitioner of constructive dismissal, private respondents claimed that petitioner refused to give them work
assignments and replaced them with new workers when they showed resistance to the petitioner's proposed reduction of
the rate-per-tuna movement.

On 2 July 1990, private respondents filed another case against petitioner, docketed as Case No. RAB; 11-07-50179-90
containing an additional claim for separation pay should their complaint for constructive dismissal be upheld.

The two (2) cases were consolidated. Conciliation conferences were scheduled. On 24 July 1990, however, Labor Arbiter
Aponesto directed the parties to submit their respective position papers within twenty (20) days from receipt of the
directive, since no amicable settlement was reached in conciliation between the parties.

On 22 August 1990, private respondents filed their position paper reiterating the charges in their complaint for
constructive dismissal, attaching thereto a Bill of Particulars containing the computations of their monetary claims.
Petitioner, instead of filing his position paper, sought, through counsel, an extension of time within which to file his
position paper.

On 20 September 1991, petitioner filed his position paper wherein he claimed that the only issue for resolution was
private respondents' monetary claims, and that there was no constructive dismissal. Petitioner further argued that private
respondents were not dismissed but rather, they abandoned their work after learning of petitioner's proposal to reduce
tuna movement rates because of the scarcity of tuna, and that, it took private respondents one (1) month to return to
work, but they could no longer be accommodated as petitioner had already hired their replacements after private
respondents failed to heed petitioner's repeated demands for them to return to work. Upon said premises, petitioner
contended that private respondents were not entitled to separation pay.

On 27 September. 1991, Labor Arbiter Aponesto rendered a decision, with the following disposition:

WHEREFORE, finding that complainants Noe Bargo, Roger Himeno, Raymundo Badagos, Patricio Salvador; Sr., Negil Barge,
Joel Mendoza and Emmanuel Calixihan were (constructively) dismissed from employment without just or unauthorized
cause hence illegal, respondents Southern Fishing Industry and Mr. Dominico Congson are hereby directed to pay, jointly
and severally, their respective separation pay and monetary claims for salary differentials, 13th month pay and service
incentive leave pay, as computed above, in the total sum of FIVE HUNDRED TWO THOUSAND EIGHT HUNDRED SIXTY FIVE
(P502,865.00) PESOS.

The claims for overtime pay, holiday pay and rest day pay are, however, dismissed for lack of factual basis and for reasons
aforecited.

SO ORDERED. 4
In holding petitioner guilty of constructive dismissal, Labor Arbiter Aponesto made the following findings:

After a careful evaluation of the foregoing facts, proofs, evidence, arguments and counter-arguments adduced by the
parties we find that complainants were summarily dismissed from employment t on the first week of June, 1990, when
respondent Dominico Congson arbitrarily replaced them with another group of laborers to do the work of complainants.
This was brought about by their reluctance or resistance to accept a new lower rate proposed by respondent the day
before. The advise to wait for further notice' was indeed a confirmation that complainants were dismissed as underscored
by the fact that such notice never came even until this date. Having been constructively and illegally dismissed
complainants are therefore entitled to their prayer for separation pay. Their length of service 10 years and 6 years,
respectively(supra), which respondent dismally failed to controvert or refute, shall be the basis of our computation, thus:

N. Bargo

(P2,670 x 10)

P26,700

R. Himeno

(P2,670 x 10)

26,700

R. Badayos

(P2,670 x 10)

26,700

4
P. Salvador, Jr.

(P2,670 x 6)

16,020

Negil Bargo

(P2,670 x 10)

26,700

J. Mendoza

(P2,670 x 6)

16,020

E. Calixihan

(P2,670 x 6)

16,020

————
Total

P154,860 5

Except for private respondents' claim for overtime pay, holiday pay, and rest day pay which were dismissed, Labor Arbiter
Aponesto granted the monetary claims of private respondents, in this wise:

We likewise grant the monetary claims of complainants for wage differentials, 13th month pay and service incentive leave
pay payment of or exemption from which respondents failed to show. Hence, given the 3-year period covered by their
monetary claims, i.e. from June, 1987 to June, 1990 the monetary awards due complainants are as follows:

Name

Wage

13th

SIL

Total

Diff'l.

Mon. Pay

Noe Bargo

42,120

6,510.00

1,085

P49,715.00
R. Himeno

42,120

6,510.00

1,085

49,715.00

R. Badagos

42,120

6,510.00

1,085

49,715.00

P. Salvador

42,120

6,510.00

1,085

49,715.00

N. Bargo
42,120

6,510.00

1,085

49,715.00

J. Mendoza

42,120

6,510.00

1,085

49,715.00

Calixihan.

42,120

6,510.00

1,085

49,715.00

—————

Total

P348,005.00
xxx xxx xxx

Pertaining to salary differentials respondent failed to adduce any evidence or document at all to show that under their
peculiar arrangements complainants were receiving compensation at par or above the then existing minimum wage; this,
despite more than sufficient time afforded. Consequently, we have no other alternative but to give credence to
complainants' assertion that their average income (each) did not exceed P1,000.00 a month (Annex "B") complainants'
position paper), thus the differentials.6

On the other hand, Labor Arbiter Aponesto made short shrift of petitioner's defense by ruling that:

We cannot give credence to the allegations or defenses put up by respondents: As stated, one of the principal claims of
complainants is the payment of their separation pay which was specifically prayed by complainants when they filed the
second case on July 2, 1990; this claim is likewise included in their Bill of particulars (Annex "C" complainants' position
paper). We cannot sustain respondents' theory of abandonment. Record shows that shortly after complainants were
constructively dismissed on the first week of June, 1990 they immediately filed the instant case for constructive dismissal
on June 15,1990. There is also no showing of a deliberate refusal on their part to resume work. Moreover, respondents
dismally failed to substantiate their general allegation that "repeated demands" were made upon complainants to return
to work.7

On appeal by petitioner, respondent NLRC found petitioner guilty of illegal dismissal. Holding that petitioner failed to
substantiate his contention that private respondents abandoned their work, respondent NLRC ruled that petitioner
replaced private respondents with a new set of workers without just cause and the required notice and hearing.
Respondent NLRC therefore affirmed Labor Arbiter Aponesto's findings and monetary awards. Petitioner's motion for
reconsideration and supplemental motion for reconsideration were denied for lack of merit in the challenged resolution
dated 28 January 1994.

Hence, the present recourse by petitioner.

Petitioner imputes grave abuse of discretion to respondent NLRC in completely disregarding his motion for
reconsideration and supplemental motion for reconsideration. He contends that said motions for reconsideration raised
substantial issues which respondent NLRC failed to consider and resolve.

Petitioner's motion for reconsideration and supplemental motion for reconsideration raised only two (2) issues: a) the
accuracy of Labor Arbiter Aponesto's computations in arriving at the monetary awards representing salary differentials;
and b) the propriety or correctness of Labor Arbiter Aponesto's grant of separation pay to private respondents.

Petitioner takes issue with the manner Labor Arbiter Aponesto computed private respondents wage differentials. In his
supplemental motion for reconsideration, petitioner argued, thus:

In the Decision rendered, the Arbiter awarded wage differential on the premise that complainants monthly average
income is only P1, 000.00 as alleged in their position paper. This is erroneous. Here is why:
Herein complainants were employed by respondents on a load-unload cycle of hauling "bariles" from the fishing boats to
the truck hauler of the respondents; then from the truck hauler down to the cold storage; the herein complainants were
paid P 1.00 per movement t; that is, from the fishing boat to the cold storage, the herein complainants actually received
the amount of P2.00, one (1) peso per movement; that there are two (2) movements from the fishing boat to the cold
storage, hence complainants are actually receiving P2.00 per piece of tuna. The Arbiter must have been on the impression
that there is only one (1) movement from the fishing boat to the cold storage. This is erroneous.

That finally, when the tuna is ready for export, the same is to be transferred from the cold storage to the ocean going
vessel berthed at respondents wharf at Talisay, General Santos City, this time herein complainants are paid P3.00 per
piece of tuna from the cold storage to the ocean going vessel as shown in the herewith attached Annexes.

In fine, all in all, there are three (3)movements from the time the tuna is unloaded from the fishing boat to the fish car
then to the cold storage; and, finally from the cold storage to the vessel.

In addition to the amount of P1.00 per 'bariles' per movement herein complainants get the intestines and liver of the tuna
as part of their salary. That for every tuna delivered, herein complainants extract at least three (3) kilos of intestines and
liver. That the minimum prevailing price of tuna intestine and liver in 1986 to 1990 range from P15.00 to P20.00/kilo. The
value of the tuna intestine and liver should be computed in arriving at the daily wage of herein complainants because the
very essence of the agreement between complainants and respondent is: complainants shall be paid only P1.00 per tuna
per movement BUT the intestines and liver of the tuna delivered shall go to the herein complainants. It should be noted
that tuna intestines and liver are easily disposed of in any public market. Complainants themselves would not have agreed
and would not have served respondent that long period of time if they are only paid P1.00 per tuna movement. What
they are after, in truth and in fact is the tuna intestines and liver which they can easily convert into cash.8

Quite clearly, petitioner admits that the P1.00-per-tuna movement is the actual wage rate applied to private respondents
as expressly agreed upon by both parties. Petitioner further admits that private respondents, per their request, were
entitled to retrieve the tuna intestines and liver as part of their compensation. Finally, petitioner does not refute Labor
Arbiter Aponesto when the latter fixed private respondents' individual monthly wage at P2,670 computed at the
mandatory daily wage of P89.00.

However, it is the contention of petitioner that notwithstanding the fact that private respondents' actual cash wage fell
below the minimum wage fixed by law, respondent NLRC should have considered as forming a substantial part of private
respondents' total wages the cash value of the tuna liver and intestines private respondents were entitled to retrieve.
Petitioner therefore argues that the combined value of private respondents' cash wage and the monetary value of the
tuna liver and intestines clearly exceeded the minimum wage fixed by law.

Petitioner's foregoing arguments do not impress us.

The Labor Code expressly provides:

Article 102. Forms of Payment. —No. employer shall pay the wages of an employee by means of, promissory notes,
vouchers, coupons, tokens tickets, chits, or any object other than legal tender, even when expressly requested by the
employee.

Payment of wages by check or money order shall be allowed when such manner of payment is customary on the date of
effectivity of this Code, or is necessary as specified in appropriate regulations to be issued by the Secretary of Labor or as
stipulated in a collective bargaining agreement. (Emphasis supplied)

Undoubtedly, petitioner's practice of paying the private respondents the minimum wage by means of legal tender
combined with tuna liver and intestines runs counter to the above cited provision of the Labor Code. The fact that said
method of paying the minimum wage was not only agreed upon by both parties in the employment agreement but even
expressly requested by private respondents, does not shield petitioner. Article 102 of the Labor Code is clear. Wages shall
be paid only by means of legal tender. The only instance when an employer is permitted to pay wages informs other than
legal tender, that is, by checks or money order, is when the circumstances prescribed in the second paragraph of Article
102 are present.

We therefore find no grave abuse of discretion on the part of respondent NLRC in upholding Labor Arbiter Aponesto's
award of salary differentials.

With respect to the issue concerning the propriety or correctness of the grant of separation pay to private respondents,
petitioner contends that; assuming arguendo that Labor Arbiter Aponesto's findings were proper as to private
respondents' illegal dismissal, his decision did not state the reason why instead of reinstatement, separation pay has to be
awarded to private respondents. Petitioner submits that under existing laws and jurisprudence, whenever there is a
finding of illegal dismissal, the available and logical remedy is reinstatement. As a permissible exception to the general
rule, separation pay may be awarded to the employee in lieu of reinstatement, by reason of strained relationship
between the employer and employee. Since there was no finding or even allegation of strained relationship between
.petitioner and private respondents, respondent NLRC should have deleted, according to petitioner, the award of
separation pay in Labor Arbiter Aponesto's decision.

We find petitioner's ratiocination on the impropriety of the award of separation pay to private respondents to be
specious. Petitioner seeks to defeat the award of separation pay, in lieu of reinstatement, on the pretext that inasmuch as
the existence of strained relationship — as a permissible exception to an axiomatic order of reinstatement in cases of
illegal dismissal — was not adequately established, Labor Arbiter Aponesto should not have entertained at all private
respondents' claim for separation pay.

A careful scrutiny of the records of the case at bench, however, readily discloses the existence of strained relationship
between the petitioner and private respondents.

Firstly, petitioner consistently refused to re-admit private respondents in his establishment. Petitioner even replaced
private respondents with a new set of workers to perform the tasks of private respondents; Moreover, although
petitioner ostensibly argued in his supplemental motion for reconsideration that reinstatement should have been the
proper remedy in the case at bench on his premise that the existence of strained relationship was not adequately
established, yet petitioner never sincerely intended to effect the actual reinstatement of private respondents. For if
petitioner were to pursue further the entire logic of his argument, the prayer in his supplemental motion for
reconsideration should have contained not just the mere deletion of the award of separation pay, but precisely, the
reinstatement of private respondents. Quite obviously then, notwithstanding petitioner's argument for reinstatement he
was only interested in the deletion of the award of separation pay to private respondents.

In the case of Felix Esmalin vs. National Labor Relations Commission (3rd Division) and CARE Philippines,9 we held that
strained relationship is fairly established if the records of the case showed consistent refusal of the employer to accept
the dismissed employee, to wit:

From the records of the case it can be discerned that reinstatement is no longer viable in view of the strained relations
between petitioner-employee (Felix Esmalin) and private respondent employer (CARE Philippines). This is very evident
from the vehement and consistent stand of CARE Philippines in refusing to accept back petitioner Esmalin. Instead,
petitioner should be awarded separation pay as an alternative for reinstatement.

And secondly, private respondents themselves, from the very start, had already indicated their aversion to their continued
employment in petitioner's establishment. The very filing of their second case before Labor.

Arbiter Aponesto (RAB-1 1-07-90179-90) specifically for separation pay is conclusive of private respondents' intention to
sever their working ties with petitioner.

In the case of Arturo Lagniton, Sr. vs. National Labor Relations Commission, et a1., 10 we ruled that the refusal of the
dismissed employee to be re-admitted is constitutive of strained relations, thus:

It appears that relations between the petitioner and the complainants have been so strained that the complainants are no
longer willing to be reinstated. As such reinstatement would only exacerbate the animosities that have developed
between the parties, the public respondents were correct in ordering instead the grant of separation pay to the dismissed
employees in the interest of industrial peace.

We therefore find no grave abuse of discretion on the part of respondent NLRC in upholding Labor Arbiter Aponesto,'s
grant of private respondents' prayer for separation pay in lieu of reinstatement.

WHEREFORE, premises considered, the petition is hereby DISMISSED. The challenged decision of respondent NLRC dated
28 May 1993 is hereby AFFIRMED.

Davide, Jr., Bellosillo, Quiason and Kapunan, JJ., concur.

Footnotes
1 A consolidation of Cases No. RAB-11-06-50165-90 and No. RAB-11-07-90179-90 both entitled TUPAS In Behalf of
its Members: Noe Bargo and Six (6) Others v. Southern Fishing Industries/Dominico Congson

* Penned by Hon. Commissioner Oscar Abella, with the concurrence of Hon. Commssioners Leon Gonzaga, Jr., and
Musib Buat.

2 Rollo, p. 34.

3 Noe and Nehil Bargo, Roger Himeno and Badagos, in 1980; Patricio Salvador, Sr., Joel Mendoza and Emmanuel
Calixihan, in 1984.

4 Rollo, pp. 72-73.

5 Rollo, pp. 69-70.

6 Rollo, pp. 70-72

7 Rollo, pp. 71-728

8 Rollo, pp. 41-42

9 G.R. No. 67880, 15 September 1989, 177 SCRA 537, 549

10 G.R. No. 86339, 5 February 1993, 218 SCRA 456, 459-460.

The Lawphil Project - Arellano Law Foundation

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Resources AUSL ExclusiveDominico Congson vs. National Labor Relations Commissions

243 SCRA 260 (1995)

Facts: Petitioner is the registered owner of Southern Fishing Industry. Private respondents were hired on various dates 3
by petitioner as regular piece-rate workers. They were uniformly paid at a rate of P1.00 per tuna weighing thirty (30) to
eighty (80) kilos per movement. They worked seven (7) days a week.

During the first week of June 1990, petitioner notified his workers of his proposal to reduce the rate-per-tuna movement
due to the scarcity of tuna. Private respondents resisted petitioner's proposed rate reduction. When they reported for
work the next day, they were informed that they had been replaced by a new set of workers.

On June 1990, private respondents filed a case against petitioner before the NLRC for underpayment of wages (non-
compliance with Rep. Act Nos. 6640 and 6727) and non-payment of overtime pay, 13th month pay, holiday pay, rest day
pay, and five (5)-day service incentive leave pay; and for constructive dismissal. With respect to their monetary claims,
private respondents charged petitioner with violation of the minimum wage law, alleging that with petitioner's rates and
the scarcity of tuna catches, private respondents' average monthly earnings each did not exceed ONE THOUSAND PESOS
(P1,000.00).

In addition to the amount of P1.00 per 'bariles' per movement herein complainants get the intestines and liver of the tuna
as part of their salary. That for every tuna delivered, herein complainants extract at least three (3) kilos of intestines and
liver. That the minimum prevailing price of tuna intestine and liver in 1986 to 1990 range from P15.00 to P20.00/kilo. The
value of the tuna intestine and liver should be computed in arriving at the daily wage of herein complainants because the
very essence of the agreement between complainants and respondent is: complainants shall be paid only P1.00 per tuna
per movement BUT the intestines and liver of the tuna delivered shall go to the herein complainants. It should be noted
that tuna intestines and liver are easily disposed of in any public market. What they are after, in truth and in fact is the
tuna intestines and liver which they can easily convert into cash."

Quite clearly, petitioner admits that the P1.00-per-tuna movement is the actual wage rate applied to private respondents
as expressly agreed upon by both parties. Petitioner further admits that private respondents were entitled to retrieve the
tuna intestines and liver as part of their compensation. Finally, petitioner does not refute Labor Arbiter when the latter
fixed private respondents' individual monthly wage at P2,670 computed at the mandatory daily wage of P89.00. Petitioner
therefore argues that the combined value of private respondents' cash wage and the monetary value of the tuna liver and
intestines clearly exceeded the minimum wage fixed by law.

Issue: Whether or not the means of payment of the wage is valid.

Ruling: The Court does not agree with the petitioner. The Labor Code expressly provides:

"Article 102. Forms of Payment. — No employer shall pay the wages of an employee by means of, promissory notes
vouchers, coupons, tokens, tickets, chits, or any object other than legal tender, even when expressly requested by the
employee. Payment of wages by check or money order shall be allowed when such manner of payment is customary on
the date of effectivity of this Code, or is necessary because as specified in appropriate regulations to be issued by the
Secretary of Labor or as stipulated in a collective bargaining agreement."

Undoubtedly, petitioner's practice of paying the private respondents the minimum wage by means of legal tender
combined with tuna liver and intestines runs counter to the abovecited provision of the Labor Code. The fact that said
method of paying the minimum wage was not only agreed upon by both parties in the employment agreement but even
expressly requested by private respondents, does not shield petitioner. Article 102 of the Labor Code is clear. Wages shall
be paid only by means of legal tender. The only instance when an employer is permitted to pay wages in forms other than
legal tender, that is, by checks or money order, is when the circumstances prescribed in the second paragraph of Article
102 are present.

FIRST DIVISION

[G.R. No. 118506. April 18, 1997]

NORMA MABEZA, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, PETER NG/HOTEL SUPREME, respondents.

DECISION

KAPUNAN, J.:

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

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

Petitioner Norma Mabeza contends that around the first week of May, 1991, she and her co-employees at the Hotel
Supreme in Baguio City were asked by the hotel's management to sign an instrument attesting to the latter's compliance
with minimum wage and other labor standard provisions of law.[1] The instrument provides:[2]

JOINT AFFIDAVIT

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

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

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

3. That we are all (8) employees in the hotel and assigned in each respective shifts;
4. That we have no complaints against the management of the Hotel Supreme as we are paid accordingly and that we are
treated well.

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

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

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

SYLVIA IGAMA HERMINIGILDO AQUINO EVELYN OGOY

(Sgd) (Sgd.) (Sgd.)

MACARIA JUGUETA ADELAIDA NONOG NORMA MABEZA

(Sgd) (Sgd.)

JONATHAN PICART JOSE DIZON

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

Asst. City Prosecutor

Petitioner signed the affidavit but refused to go to the City Prosecutor's Office to swear to the veracity and contents of
the affidavit as instructed by management. The affidavit was nevertheless submitted on the same day to the Regional
Office of the Department of Labor and Employment in Baguio City.

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

After she refused to proceed to the City Prosecutor's Office - on the same day the affidavit was submitted to the
Cordillera Regional Office of DOLE - petitioner avers that she was ordered by the hotel management to turn over the keys
to her living quarters and to remove her belongings from the hotel premises.[4] According to her, respondent strongly
chided her for refusing to proceed to the City Prosecutor's Office to attest to the affidavit.[5] She thereafter reluctantly
filed a leave of absence from her job which was denied by management. When she attempted to return to work on May
10, 1991, the hotel's cashier, Margarita Choy, informed her that she should not report to work and, instead, continue with
her unofficial leave of absence. Consequently, on May 13, 1991, three days after her attempt to return to work, petitioner
filed a complaint for illegal dismissal before the Arbitration Branch of the National Labor Relations Commission - CAR
Baguio City. In addition to her complaint for illegal dismissal, she alleged underpayment of wages, non-payment of holiday
pay, service incentive leave pay, 13th month pay, night differential and other benefits. The complaint was docketed as
NLRC Case No. RAB-CAR-05-0198-91 and assigned to Labor Arbiter Felipe P. Pati.

Responding to the allegations made in support of petitioner's complaint for illegal dismissal, private respondent Peter Ng
alleged before Labor Arbiter Pati that petitioner "surreptitiously left (her job) without notice to the management"[6] and
that she actually abandoned her work. He maintained that there was no basis for the money claims for underpayment
and other benefits as these were paid in the form of facilities to petitioner and the hotel's other employees.[7] Pointing to
the Affidavit of May 7, 1991, the private respondent asserted that his employees actually have no problems with
management. In a supplemental answer submitted eleven (11) months after the original complaint for illegal dismissal
was filed, private respondent raised a new ground, loss of confidence, which was supported by a criminal complaint for
Qualified Theft he filed before the prosecutor's office of the City of Baguio against petitioner on July 4, 1991.[8]

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

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

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

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

On April 28, 1994, respondent NLRC promulgated its assailed Resolution[10] affirming the Labor Arbiter's decision. The
resolution substantially incorporated the findings of the Labor Arbiter.[11] Unsatisfied, petitioner instituted the instant
special civil action for certiorari under Rule 65 of the Rules of Court on the following grounds:[12]

1. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION COMMITTED A PATENT AND
PALPABLE ERROR AMOUNTING TO GRAVE ABUSE OF DISCRETION IN ITS FAILURE TO CONSIDER THAT THE ALLEGED LOSS
OF CONFIDENCE IS A FALSE CAUSE AND AN AFTERTHOUGHT ON THE PART OF THE RESPONDENT-EMPLOYER TO JUSTIFY,
ALBEIT ILLEGALLY, THE DISMISSAL OF THE COMPLAINANT FROM HER EMPLOYMENT;

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

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

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

We agree.

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

In the case at bar, the private respondent initially claimed that petitioner abandoned her job when she failed to return to
work on May 8, 1991. Additionally, in order to strengthen his contention that there existed sufficient cause for the
termination of petitioner, he belatedly included a complaint for loss of confidence, supporting this with charges that
petitioner had stolen a blanket, a bedsheet and two towels from the hotel.[15] Appended to his last complaint was a suit
for qualified theft filed with the Baguio City prosecutor's office.

From the evidence on record, it is crystal clear that the circumstances upon which private respondent anchored his claim
that petitioner "abandoned" her job were not enough to constitute just cause to sanction the termination of her services
under Article 283 of the Labor Code. For abandonment to arise, there must be concurrence of two things: 1) lack of
intention to work;[16] and 2) the presence of overt acts signifying the employee's intention not to work.[17]

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

Furthermore, while absence from work for a prolonged period may suggest abandonment in certain instances, mere
absence of one or two days would not be enough to sustain such a claim. The overt act (absence) ought to unerringly
point to the fact that the employee has no intention to return to work,[18] which is patently not the case here. In fact,
several days after she had been advised to take an informal leave, petitioner tried to resume working with the hotel, to no
avail. It was only after she had been repeatedly rebuffed that she filed a case for illegal dismissal. These acts militate
against the private respondent's claim that petitioner abandoned her job. As the Solicitor General in his manifestation
observed:

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

Loss of confidence as a just cause for dismissal was never intended to provide employers with a blank check for
terminating their employees. Such a vague, all-encompassing pretext as loss of confidence, if unqualifiedly given the seal
of approval by this Court, could readily reduce to barren form the words of the constitutional guarantee of security of
tenure. Having this in mind, loss of confidence should ideally apply only to cases involving employees occupying positions
of trust and confidence or to those situations where the employee is routinely charged with the care and custody of the
employer's money or property. To the first class belong managerial employees, i.e., those vested with the powers or
prerogatives to lay down management policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or
discipline employees or effectively recommend such managerial actions; and to the second class belong cashiers,
auditors, property custodians, etc., or those who, in the normal and routine exercise of their functions, regularly handle
significant amounts of money or property. Evidently, an ordinary chambermaid who has to sign out for linen and other
hotel property from the property custodian each day and who has to account for each and every towel or bedsheet
utilized by the hotel's guests at the end of her shift would not fall under any of these two classes of employees for which
loss of confidence, if ably supported by evidence, would normally apply. Illustrating this distinction, this Court, in Marina
Port Services, Inc. vs. NLRC,[20] has stated that:

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

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

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

More importantly, we have repeatedly held that loss of confidence should not be simulated in order to justify what would
otherwise be, under the provisions of law, an illegal dismissal. "It should not be used as a subterfuge for causes which are
illegal, improper and unjustified. It must be genuine, not a mere afterthought to justify an earlier action taken in bad
faith."[22]

In the case at bar, the suspicious delay in private respondent's filing of qualified theft charges against petitioner long after
the latter exposed the hotel's scheme (to avoid its obligations as employer under the Labor Code) by her act of filing
illegal dismissal charges against the private respondent would hardly warrant serious consideration of loss of confidence
as a valid ground for dismissal. Notably, the Solicitor General has himself taken a position opposite the public respondent
and has observed that:
If petitioner had really committed the acts charged against her by private respondents (stealing supplies of respondent
hotel), private respondents should have confronted her before dismissing her on that ground. Private respondents did not
do so. In fact, private respondent Ng did not raise the matter when petitioner went to see him on May 9, 1991, and
handed him her application for leave. It took private respondents 52 days or up to July 4, 1991 before finally deciding to
file a criminal complaint against petitioner, in an obvious attempt to build a case against her.

The manipulations of private respondents should not be countenanced.[23]

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

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

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

The pivotal question in any case where unfair labor practice on the part of the employer is alleged is whether or not the
employer has exerted pressure, in the form of restraint, interference or coercion, against his employee's right to institute
concerted action for better terms and conditions of employment. Without doubt, the act of compelling employees to sign
an instrument indicating that the employer observed labor standards provisions of law when he might have not, together
with the act of terminating or coercing those who refuse to cooperate with the employer's scheme constitutes unfair
labor practice. The first act clearly preempts the right of the hotel's workers to seek better terms and conditions of
employment through concerted action.

We agree with the Solicitor General's observation in his manifestation that "[t]his actuation... is analogous to the situation
envisaged in paragraph (f) of Article 248 of the Labor Code"[24] which distinctly makes it an unfair labor practice "to
dismiss, discharge or otherwise prejudice or discriminate against an employee for having given or being about to give
testimony"[25] under the Labor Code. For in not giving positive testimony in favor of her employer, petitioner had
reserved not only her right to dispute the claim and proffer evidence in support thereof but also to work for better terms
and conditions of employment.

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

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

Labor Arbiter Pati accepted hook, line and sinker the private respondent's bare claim that the reason the monetary
benefits received by petitioner between 1981 to 1987 were less than minimum wage was because petitioner did not
factor in the meals, lodging, electric consumption and water she received during the period in her computations.[26]
Granting that meals and lodging were provided and indeed constituted facilities, such facilities could not be deducted
without the employer complying first with certain legal requirements. Without satisfying these requirements, the
employer simply cannot deduct the value from the employee's wages. First, proof must be shown that such facilities are
customarily furnished by the trade. Second, the provision of deductible facilities must be voluntarily accepted in writing
by the employee. Finally, facilities must be charged at fair and reasonable value.[27]

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

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

More significantly, the food and lodging, or the electricity and water consumed by the petitioner were not facilities but
supplements. A benefit or privilege granted to an employee for the convenience of the employer is not a facility. The
criterion in making a distinction between the two not so much lies in the kind (food, lodging) but the purpose.[31]
Considering, therefore, that hotel workers are required to work different shifts and are expected to be available at various
odd hours, their ready availability is a necessary matter in the operations of a small hotel, such as the private respondent's
hotel.

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

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

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

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

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

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

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

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

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

2) Service incentive leave pay; night differential pay and 13th month pay for the same period;

3) Separation pay equal to one month's salary for every year of petitioner's continuous service with the private
respondent starting with her job at the Belfront Hotel;

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

5) P1.000.00.

SO ORDERED.

Padilla, Bellosillo and Vitug, JJ., concur.

Hermosisima, Jr., J., on leave.

[1] Rollo, p. 5. Petitioner was employed by the private respondent originally at his Belfront Hotel but was later pulled out
for work at the Hotel Supreme, owned by the former.

[2] Id., at 6.

[3] Rollo, p. 6.

[4] Id., at 24.

[5] Rollo, p. 7.

[6] Id., at 31.

[7] Id., at 23-24.

[8] Rollo, p. 22.

[9] Id., at 24.

[10] Id., at 30-36.

[11] Ibid.

[12] Rollo, p. 4.

[13] Id., at 64-83.

[14] Polymedic General Hospital vs. NLRC, 134 SCRA 420, 424 (1985); Molave Tours Corporation vs. NLRC, 250 SCRA 325,
329 (1995).
[15] Rollo, p. 32.

[16] Dagupan Bus Co., Inc. vs. NLRC, 191 SCRA 328 (1990).

[17] Asphalt and Cement Pavers, Inc. vs. Leogardo, Jr., 162 SCRA 312 (1988).

[18] Flexo Manufacturing Corporation vs. NLRC, 135 SCRA 145 (1985).

[19] Rollo, p. 72.

[20] 193 SCRA 420, 426 (1991).

[21] Ibid.

[22] General Bank and Trust Co. vs. Court of Appeals, 135 SCRA 569, 578 (1985).

[23] Rollo, p. 73.

[24] Rollo, p. 78.

[25] Labor Code, art. 248 (f).

[26] Rollo, p. 26

[27] Labor Code, art. 97 (f).

[28] Rollo, p. 80.

[29] Ibid.

[30] Rollo, p. 80.

[31] States Marine Corporation vs. Cebu Seamen's Association, Inc., 7 SCRA 294, 301 (1963).
[32] Omnibus Rules Implementing the Labor Code, Book VII, Rule II, sec. 1.

[33] G.R. No. 111651, November 28, 1996.

[34] Ibid.

Norma Mabeza was an employee hired by Hotel Supreme in Baguio City. In 1991, an inspection was made by the
Department of Labor and Employment (DOLE) at Hotel Supreme and the DOLE inspectors discovered several violations by
the hotel management. Immediately, the owner of the hotel, Peter Ng, directed his employees to execute an affidavit
which would purport that they have no complaints whatsoever against Hotel Supreme. Mabeza signed the affidavit but
she refused to certify it with the prosecutor’s office. Later, when she reported to work, she was not allowed to take her
shift. She then asked for a leave but was not granted yet she’s not being allowed to work. In May 1991, she then sued
Peter Ng for illegal dismissal. Peter Ng, in his defense, said that Mabeza abandoned her work. In July 1991, Peter Ng also
filed a criminal complaint against Mabeza as he alleged that she had stolen a blanket and some other stuff from the hotel.
Peter Ng went on to amend his reply in the labor case to make it appear that the reason why he dismissed Mabeza was
because of his loss of confidence by reason of the theft allegedly committed by Mabeza. The labor arbiter who handled
the case, a certain Felipe Pati, ruled in favor of Peter Ng.

ISSUE: Whether or not there is abandonment in the case at bar. Whether or not loss of confidence as ground for dismissal
applies in the case at bar.

HELD: No. The side of Peter Ng is bereft of merit so is the decision of the Labor Arbiter which was unfortunately affirmed
by the NLRC.

Abandonment

Abandonment is not present. Mabeza returned several times to inquire about the status of her work or her employment
status. She even asked for a leave but was not granted. Her asking for leave is a clear indication that she has no intention
to abandon her work with the hotel. Even the employer knows that his purported reason of dismissing her due to
abandonment will not fly so he amended his reply to indicate that it is actually “loss of confidence” that led to Mabeza’s
dismissal.

Loss of Confidence

It is true that loss of confidence is a valid ground to dismiss an employee. But this is ideally only applied to workers whose
positions require a certain level or degree of trust particularly those who are members of the managerial staff. Evidently,
an ordinary chambermaid who has to sign out for linen and other hotel property from the property custodian each day
and who has to account for each and every towel or bedsheet utilized by the hotel’s guests at the end of her shift would
not fall under any of these two classes of employees for which loss of confidence, if ably supported by evidence, would
normally apply. Further, the suspicious filing by Peter Ng of a criminal case against Mabeza long after she initiated her
labor complaint against him hardly warrants serious consideration of loss of confidence as a ground of Mabeza’s dismiss
Today is Friday, October 05, 2018 home

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Republic of the Philippines

SUPREME COURT

Manila

SECOND DIVISION

G.R. No. 111722 May 27, 1997

ALPHA INVESTIGATION AND SECURITY AGENCY, INC. (AISA), petitioner,

vs.

NATIONAL LABOR RELATIONS COMMISSION, THIRD DIVISION, and WILLIAM GALIMBA, NESTOR LOLOQUISEN, NESTOR
IBUYAT, CARLITO CASTRO, JOSE PERDIDO, FELIPE TOLENTINO, LEONARDO IBUYAT, FELINO CULANNAY RONIE NINO,
ROMAN NALUNDASAN, JAIME FONTANILLA, WILFRED BUTAY, JOSE ACIO, EDISON VALDEZ, CRESENCIO AGRES, RODRIGO
LUIS, MARIO SUGUI, BENEDICTO SUGUI, ROGER RAMBAUD, respondents.

ROMERO, J.:

May the principal of a security service agreement be held jointly and severally liable with the contractor for non-payment
of the minimum wage?

The facts are undisputed.

Petitioner Alpha Investigation and Agency, Inc. (AISA) is a private corporation engaged in the business of providing
security services to its clients, one of whom is the Don Mariano Marcos State University (DMMSU).

Private respondents were hired as security guards by AISA. on February 16, 1990. Five months later, 43 security guards
filed before the Regional Office of the Department of Labor and Employment (DOLE) a complaint against AISA for non-
compliance with the current minimum wage order. After 24 of the original complainants filed a motion for the exclusion
from the case, the remaining 19 security guards filed their individual amended complaints impleading DMMSU as party-
respondent.

Private respondents have been receiving a monthly salary of P900.00 although the security service agreement between
AISA and DMMSU 1 provided a monthly pay of P1,200.00 for each security guard. AISA made representations with
DMMSU for an increase in the contract rates of the security guards to enable them to pay the mandated minimum wage
rates without compromising its administrative and operational expenses. DMMSU, however, replied that, being a
government corporation, it cannot grant said request due to budgetary constraints.

On August 17, 1992, Labor Arbiter Emiliano T. de Asis rendered a decision, the dispositive portion of which reads as
follows:

RESPONSIVE TO THE FOREGOING, judgment is hereby rendered:

a) Ordering the respondent Alpha Investigation and Security Agency and Mariano Marcos State University to pay
each complainant the amount of FORTY ONE THOUSAND FOUR HUNDRED FIFTY NINE PESOS AND FIFTY ONE CENTAVOS
(P41,459.51) representing salary differential for the period from February 16 September 30, 1991, or the total amount of
P787,730.69 as follows:

1. Nestor Loloquisen P41,459.51

2. Nestor Ibuyat 41,459.51

3. Jose Acio 41,459.51

4. Cresencio Agres 41,459.51

5. Wilfred Butay 41,459.51

6. Carlito Castro 41,459.51

7. Federico Calunnay 41,459.51

8. Jaime Fontanilla 41,459.51

9. William Galimba 41,459.51

10. Leonardo Ibuyat 41,459.51

11. Rodrigo Luis 41,459.51

12. Roman Nalundasan 41,459.51

13. Ronnie Nino 41,459.51

14. Jose Perdido 41,459.51

15. Roger Rambaud 41,459.51

16. Benedicto Sugui 41,459.51

17. Mario Sugui 41,459.51

18. Felipe Tolentino 41,459.51

19. Edison Valdez 41,459.51

—————

P787,730.69

b) Dismissing the claims for 13th month pay for failure to substantiate the same.

c) Claims of complainants who filed their motion for reconsideration are hereby dismissed.

SO ORDERED. 2

AISA and DMMSU interposed separate appeals. The NLRC, on May 7, 1993, rendered a decision affirming the solidary
liability of AISA and DMMSU and remanding the records of the case to the arbitration branch of origin for computation of
the salary differentials awarded by the Labor Arbiter.

Only AISA filed a motion for reconsideration, which was denied by the NLRC on July 1, 1993, for lack of merit.
The judgment against DMMSU, finding it jointly and severally liable with AISA for the payment of increase in wages,
became final and executory after it failed to file a petition for certiorari with this Court within a reasonable time.
"Although Rule 65 does not specify any period for the filing of a petition for certiorari and mandamus, it must,
nevertheless, be filed within a reasonable time. In certiorari cases, the definitive rule now is that such reasonable time is
within three months from the commission of the complained act." 3

In this petition, AISA alleges that payment of the wage increases under the current minimum wage order should be borne
exclusively by DMMSU, pursuant to Section 6 of Republic Act 6727 (RA 6727) 4 which reads as follows:

Sec. 6. — In the case of contracts for construction projects and for security, janitorial and similar services, the prescribed
increases in the wage rates of the workers shall be borne by the principals or clients of the construction/service
contractors and the contract shall be deemed amended accordingly. In the event, however, that the principal or client
fails to pay the prescribed wage rates, the construction/service contractor shall be jointly and severally liable with his
principal or client.

It further contends that Articles 106, 107 and 109 of the Labor Code generally refer to the failure of the contractor or sub-
contractor to pay wages in accordance with the Labor Code with a mandate that failure to pay such wages would make
the employer and contractor jointly and severally liable for such payment. AISA insists that the matter involved in the case
at bar hinges on wage differentials or wage increases, as prescribed in the aforequoted Section 6 of RA 6727, and not
wages in general, as provided by the Labor Code.

This interpretation is not acceptable. It is a cardinal rule in statutory construction that in interpreting the meaning and
scope of a term used in the law, a careful review of the whole law involved, as well as the intendment of the law, must be
made. 5 In fact, legislative intent must be ascertained from a consideration of the statute as a whole, and not of an
isolated part or a particular provision alone. 6

AISA's solidary liability for the amounts due the security guards finds support in Articles 106, 107 and 109 of the Labor
Code, to wit:

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 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 the 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. . . .

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 sub-contractor for any violation of any provision of this
Code. For purposes of determining the extent of their civil liability under the Chapter, they shall be considered as direct
employers.

The joint and several liability of the contractor and the principal is mandated by the Labor Code to ensure compliance
with its provisions, including the statutory minimum wage. 7 The contractor is made liable by virtue of his status as direct
employer, while the principal becomes the indirect employer of the former's employees for the purpose of paying their
wages in the event of failure of the contractor to pay them. This gives the workers ample protection consonant with the
labor and social justice provisions of the 1987 Constitution. 8

In the case at bar, it is not disputed that private respondents are the employees of AISA. Neither is there any question
that they were assigned to guard the premises of DMMSU pursuant to the latter's security service agreement with AISA
and that these two entities paid their wage increases.

It is to be borne in mind that wage orders, being statutory and mandatory, cannot be waived. AISA cannot escape liability
since the law provides for the joint and solidary liability of the principal and the contractor to protect the laborers. 9 Thus,
the Court held in the case of Eagle Security v. NLRC: 10

The solidary liability of PTSI and EAGLE, however, does not preclude the right of reimbursement from his co-debtor by the
one who paid (See Article 1217, Civil Code). It is with respect to this right of reimbursement that petitioners can find
support in the aforecited contractual stipulation and Wage Order provision.

The Wage Orders are explicit that payment of the increases are "to be borne" by the principal or client. "To be borne",
however, does not mean that the principal, PTSI in this case, would directly pay the security guards the wage and
allowance increases because there is no privity of contract between them. The security guards' contractual relationship is
with their immediate employer, EAGLE. As an employer, EAGLE is tasked, among others, with the payment of their wages.
(See Article VII Sec. 3 of the Contract for Security Services, supra and Bautista v. Inciong, G.R. No. 52824, March 16, 1988,
158 SCRA 556).

Premises considered, the security guards' immediate recourse for the payment of the increases is with their direct
employer, EAGLE. However, in order for the security agency to comply with the new wage and allowance rates it has to
pay the security guards, the Wage Order made specific provision to amend existing contracts for security services by
allowing the adjustments of the consideration paid by the principal to the security agency concerned. What the Wage
Orders require, therefore, is the amendment of the contract as to the consideration to cover the service contractor's
payment of the increases mandated. In the end, therefore, ultimate liability for the payment of the increases rests with
the principal. (Emphasis supplied).

Section 6 of RA 6727 merely provides that in case of wage increases resulting in a salary differential, the liability of the
principal and contractor shall be joint and several. The same liability attaches under Articles 106, 107 and 109 of the Labor
Code, which refer to the prevailing standard minimum wage.
The Court finds that the NLRC acted correctly in holding petitioner jointly and severally liable with DMMSU for the
payment of the wage increases to private respondents. Accordingly, no grave abuse of discretion may be attributed to the
NLRC in arriving at the impugned decision.

WHEREFORE, premises considered, the petition is DISMISSED for lack of merit and the assailed resolution is AFFIRMED.
Costs against petitioner.

SO ORDERED.

Regalado, Puno, Mendoza and Torres, Jr., JJ., concur.

Footnotes

1 Dated January 1, 1990. The clause on the contract price was modified after one year, and again, in July 1991.

2 Rollo, pp. 27-28.

3 Cruz v. Court of Appeals, 252 SCRA 599 (1996).

4 Otherwise known as "The Wage Rationalization Act."

5 Chang Rung Fa v. Gianzon, 97 Phil. 913 (1955).

6 Aboitiz Shipping Corporation, et al., v. City of Cebu, et al., 13 SCRA 449 (1965).

7 Article 99, Labor Code.

8 Eagle Security Agency, Inc. v. NLRC, 173 SCRA 479 (1989).

9 Philippine Fisheries Development Authority v. NLRC, 213 SCRA 621 (1992).

10 173 SCRA 479 (1989).

The Lawphil Project - Arellano Law Foundation

Constitution Statutes Executive Issuances Judicial Issuances Other Issuances Jurisprudence International Legal
Resources AUSL ExclusiveAlpha Investigation and Security Agency vs NLRC

G.R. No. 111722

Case Digest

By: G-one T. Paisones

Facts:

On August 17, 1992, Labor Arbiter Emiliano T. de Asis rendered a decision that the respondent Alpha Investigation and
Security Agency and Mariano Marcos State University to pay each complainant the amount of P41,459.51 representing
salary differential for the period from February 16, 1990 to September 30, 1991, or the total amount of P787,730.69 to
the nineteen (19) respondents.

AISA and DMMSU interposed separate appeals. The NLRC, on May 7, 1993, rendered a decision affirming the solidary
liability of AISA and DMMSU and remanding the records of the case to the arbitration branch of origin for computation of
the salary differential awarded by the Labor Arbiter.

Only AISA filed a motion for reconsideration, which was denied by the NLRC on July 1, 1993, for lack of merit.

In this petition, AISA alleges that payment of the wage increases under the current minimum wage order should be borne
exclusively by DMMSU, pursuant to Section 6 of Republic Act 6727 (RA 6727) which reads as follows:

"Sec. 6. In the case of contracts for construction projects and for security, janitorial and similar services, the prescribed
increases in the wage rates of the workers shall be borne by the principals or clients of the construction/service
contractors and the contract shall be deemed amended accordingly. In the event, however, that the principal or client
fails to pay the prescribed wage rates, the construction/service contractor shall be jointly and severally liable with his
principal or client."

It further contends that Articles 106, 107 and 109 of the Labor Code generally refer to the failure of the contractor or sub-
contractor to pay wages in accordance with the Labor Code with a mandate that failure to pay such wages would make
the employer and contractor jointly and severally liable for such payment. AISA insists that the matter involved in the case
at bar hinges on wage differentials or wages increases, as prescribed in the aforequoted Section 6 of RA 6727, and not
wages in general, as provided by the Labor Code.

Issue:

Whether or not Articles 106, 107 and 109 of the Labor Code generally refer to the failure of the contractor or sub-
contractor to pay wages involve only on wage differentials or wages increases (and not wages in general)?
Held:

This interpretation is not acceptable. It is a cardinal rule in statutory construction that in interpreting the meaning and
scope of a term used in the law, a careful review of the whole law involved, as well as the intendment of the law, must be
made. In fact, legislative intent must be ascertained from a consideration of the statute as a whole, and not of an isolated
part or aparticular provision alone.

AISA's solidary liability for the amounts due the security guards finds support in Articles 106, 107 and 109 of the Labor
Code.

The joint and several liability of the contractor and the principal is mandated by the Labor Code to ensure compliance
with its provisions, including the statutory minimum wage. The contractor is made liable by virtue of his status as direct
employer, while the principal becomes the indirect employer of the former's employees for the purpose of paying their
wages in the event of failure of the contractor to pay them. This gives the workers ample protection consonant with the
labor and social justice provisions of the 1987 Constitution.

sa Setyembre 20, 2017SECOND DIVISION

[G.R. No. 111809. May 5, 1997]

MINDANAO TERMINAL AND BROKERAGE SERVICE, INC., petitioner, vs. HON. MA. NIEVES ROLDAN-CONFESOR, in her
capacity as Secretary of Labor and Employment, and ASSOCIATED LABOR UNIONS (ALU-TUCP), respondents.

DECISION

MENDOZA, J.:

This is a petition for certiorari to set aside the order of respondent Honorable Secretary of Labor and Employment,
declaring (1) wage increases granted by petitioner to its employees not creditable as compliance by the company with
future mandated wage increases, and (2) the increases to be retroactive, in the case of the fourth year wage increase, to
August 1, 1992 to be implemented until July 31, 1993 and, in the case of the fifth year wage increase, to August 1, 1993 to
be implemented until the expiration of the CBA on July 31, 1994.

Petitioner Mindanao Terminal and Brokerage Service, Inc., (hereafter referred to as the Company) and respondent
Associated Labor Unions, (hereafter referred to as the Union) entered into a collective bargaining agreement for a period
of five (5) years, starting on August 1, 1989 and ending July 31, 1994.

On the third year of the CBA on August 1, 1992, the Company and the Union met to renegotiate the provisions of the CBA
for the fourth and fifth years. The parties, however, failed to resolve some of their differences, as a result of which a
deadlock developed.
On November 12, 1992, a formal notice of deadlock was sent to the Company on the following issues: wages, vacation
leave, sick leave, hospitalization, optional retirement, 13th month pay and signing bonus.

On November 18, 1992, the Company announced a cost-cutting or retrenchment program.

Charging unfair labor practice and citing the deadlock in the negotiations, the Union filed, on December 3, 1992, a notice
of strike with the National Conciliation and Mediation Board (NCMB).

On December 18, 1992, as a result of a conference called by the NCMB, the Union and the Company went back to the
bargaining table and agreed on the following provisions:

a. Wage Increase (Article V, Section 2, CBA) - P3.00/day for the fourth year of the CBA and P3.00/day for the fifth year of
the CBA;

b. Vacation and Sick Leaves (Article VII, Section 1(c), CBA) - 1,100 hours of aggregate service instead of the existing 1,500
hours within a year to be entitled to leave benefits but subject to reversion to the previous CBA if majority of the gangs
average eight (8) vessels a month;

c. Hospitalization (Article VIII, Section 1, CBA) - Maximum aggregate of 1,100 hours instead of the 1,500 hours and up to
be entitled to the benefit of P2,500.00 with the lower brackets adjusted accordingly but subject to reversion to the
previous CBA if majority of the gangs average eight (8) vessels a month;

d. 13th Month Pay (Article XIII, Section 1, CBA) - Average of six (6) vessels instead of the existing eight (8) vessels to be
entitled to eleven (11) days basic pay but subject to reversion to the previous CBA if majority of the gangs average eight
(8) vessels a month;

e. Signing bonus; and

f. Seniority.

The agreement left only one issue for resolution of the parties, namely, retirement. Even this issue was soon settled as
the parties met before the NCMB on January 14, 1993 and then agreed on an improved Optional Retirement Clause by
giving the employees the option to retire after rendering eighteen (18) years of service instead of the previous twenty
(20) years, and granting the employees retirement benefits equivalent to sixteen (16) days for every year of service. Thus,
as the Med-Arbiter noted in the record of the January 14, 1993 conference, the issues raised by the notice of strike had
been settled and said notice is thus terminated.
But no sooner had he stated this than the Company claimed that the wage increases which it had agreed to give to the
employees should be creditable as compliance with future mandated wage increases. In addition, it maintained that such
increases should not be retroactive.

Reacting to this development, the Union again filed a Notice of Strike on January 28, 1993, with the NCMB. On March 7,
1993, the Union staged a strike.

The NCMB tried to settle the issues of creditability and retroactivity, calling for this purpose a conciliation conference on
March 9, 1993. As conciliation proved futile, the Company petitioned respondent Secretary of Labor and Employment
(hereafter Secretary of Labor) to assume jurisdiction over the dispute. On March 10, 1993, respondent assumed
jurisdiction over the dispute and ordered the parties to submit their respective position papers on the two unresolved
issues.

After submission by the parties of their position papers, the Secretary of Labor issued an Order dated May 14, 1993,
ordering the Company and the Union to incorporate into their existing collective bargaining agreement all improvements
reached by them in the course of renegotiations. The Secretary of Labor held that the wage increases for the fourth and
fifth years of the CBA were not to be credited as compliance with future mandated increases. In addition, the fourth year
wage increase was to be retroactive to August 1992 and was to be implemented until July 31, 1993, while the fifth year
wage increase was to take effect on August 1, 1993 until the expiration of the CBA.[1]

On May 31, 1993, the Company sought reconsideration of the May 14, 1993 order. The motion was denied for lack of
merit by the Secretary of Labor in a resolution dated July 7, 1993. Hence, this petition for certiorari, alleging grave abuse
of discretion on the part of respondent Secretary of Labor.

The petitioner contends that respondent erred in making the fourth year wage increase retroactive to August 1, 1992. It
denies the power of the Secretary of Labor to decree retroaction of the wage increases, as the respondent herself had
stated in her order subject of this petition, that it had been more than six (6) months since the expiration of the third
anniversary of the CBA and, therefore, the automatic renewal clause of Art. 253-A of the Labor Code had no application.
Although petitioner originally opposed giving retroactive effect to their agreement, it subsequently modified its stand and
agreed that the fourth year wage increase and the other provisions of the CBA be made retroactive to the date the
Secretary of Labor assumed jurisdiction of the dispute on March 10, 1993.

The petition is without merit. Art. 253-A of the Labor Code reads:

Terms of a collective bargaining agreement. - Any Collective Bargaining Agreement that the parties may enter into shall,
insofar as the representation aspect is concerned, be for a term of five (5) years. No petition questioning the majority
status of the incumbent bargaining agent shall be entertained and no certification election shall be conducted by the
Department of Labor and Employment outside of the sixty-day period immediately before the date of expiry of such five
year term of the Collective Bargaining Agreement. All other provisions of the Collective Bargaining Agreement shall be
renegotiated not later than three (3) years after its execution. Any agreement on such other provisions of the Collective
Bargaining Agreement entered into within six (6) months from the date of expiry of the term of such other provisions as
fixed in such Collective Bargaining Agreement, shall retroact to the day immediately following such date. If any such
agreement is entered into beyond six months, the parties shall agree on the duration of retroactivity thereof. In case of a
deadlock in the renegotiation of the collective bargaining agreement, the parties may exercise their rights under this
Code.
The respondent indeed stated in her order of May 14, 1993 that this case is clearly beyond the scope of the automatic
renewal clause,[2] but she also stated in the same order that the parties have reached an agreement on all the
renegotiated provisions of the CBA on January 14, 1993, i.e., within six (6) months of the expiration of the third year of the
CBA.

The signing of the CBA is not determinative of the question whether the agreement was entered into within six months
from the date of expiry of the term of such other provisions as fixed in such collective bargaining agreement within the
contemplation of Art. 253-A.

As already stated, on November 12, 1992, the Union sent the Company a notice of deadlock in view of their inability to
reconcile their positions on the main issues,[3] particularly on wages. The Union filed a notice of strike. However, on
December 18, 1992, in a conference called by the NCMB, the Union and the Company agreed on a number of provisions
of the CBA, including the provision on wage increase,[4] leaving only the issue of retirement to be threshed out. In time,
this, too, was settled, so that in his record of the January 14, 1993 conference, the Med-Arbiter noted that the issues
raised by the notice of strike had been settled and said notice is thus terminated. It would therefore seem that at that
point, there was already a meeting of the minds of the parties, which was before the February 1993 end of the six-month
period provided in Art. 253-A.

The fact that no agreement was then signed is of no moment. Art. 253-A refers merely to an agreement which, according
to Blacks Law Dictionary is a coming together of minds; the coming together in accord of two minds on a given
proposition.[5] This is similar to Art. 1305 of the Civil Codes definition of contract as a meeting of minds between two
persons.

The two terms, agreement and contract, are indeed similar, although the former is broader than the latter because an
agreement may not have all the elements of a contract. As in the case of contracts, however, agreements may be oral or
written.[6] Hence, even without any written evidence of the Collective Bargaining Agreement made by the parties, a valid
agreement existed in this case from the moment the minds of the parties met on all matters they set out to discuss. As
Art. 1315 of the Civil Code states:

Contracts are perfected by mere consent, and from that moment, the parties are bound not only to the fulfillment of
what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping
with good faith, usage and law.

The Secretary of Labor found that as early as January 14, 1993, well within the six (6) month period provided by law, the
Company and the Union have perfected their agreement.[7] The claim of petitioner to the contrary notwithstanding, this
is a finding of an administrative agency which, in the absence of evidence to the contrary, must be affirmed.

Moreover, the order of the Secretary of Labor may be considered in the nature of an arbitral award, pursuant to Art.
263(g) of the Labor Code, and, therefore, binding on the parties. After all, the Secretary of Labor assumed jurisdiction
over the dispute because petitioner asked the Secretary of Labor to do so after the NCMB failed to make the parties come
to an agreement. It is also conceded that the industry in which the petitioner is engaged is vital to the national interest. As
stated in the Order issued by the Secretary of Labor on March 10, 1993:[8]
The services being provided by the Company evidently reflect their indispensability to the normal operations of the Davao
City Pier where millions of crates and boxes of goods are loaded and unloaded monthly. The current disruption, therefore,
of the Companys services, if allowed to continue, will cause serious prejudice and damages to the agricultural exporters,
the cargo handlers, the vessel owners, the foreign buyers of agricultural products and the entire business sector in the
area. These considerations and the disputes implications on the national economy warrant the intervention by this Office
to exercise its power under Article 263(g) of the Labor Code, as amended.

In St. Lukes Medical Center, Inc. v. Torres,[9] a deadlock also developed during the CBA negotiations between
management and the union. The Secretary of Labor assumed jurisdiction and ordered the retroaction of their CBA to the
date of expiration of the previous CBA. As in this case, it was alleged that the Secretary of Labor gravely abused his
discretion in making his award retroactive. In dismissing this contention this Court held:

Therefore, in the absence of a specific provision of law prohibiting retroactivity of the effectivity of arbitral awards issued
by the Secretary of Labor pursuant to Article 263(g) of the Labor Code, such as herein involved, public respondent is
deemed vested with plenary and discretionary powers to determine the effectivity thereof.

This case is controlled by the ruling in that case.

With respect to the issue of the creditability of the fourth and fifth year wage increases, the Court takes cognizance of the
fact that the question was raised by the Company only when the six-month period was almost over and all that was left to
be done by the parties was to sign their agreement. Before that, the Company did not qualify its position. It should have
known that crediting of wage increases in the CBA as compliance with future mandated increases is the exception rather
than the rule. For the general rule is that such increases are over and above any increase that may be granted by law or
wage order. As held in Meycauayan College v. Drilon:[10]

Increments to the laborers financial gratification, be they in the form of salary increases or changes in the salary scale are
aimed at one thing - improvement of the economic predicament of the laborers. As such they should be viewed in the
light of the States avowed policy to protect labor. Thus, having entered into an agreement with its employees, an
employer may not be allowed to renege on its obligation under a collective bargaining agreement should, at the same
time, the law grant the employees the same or better terms and conditions of employment. Employee benefits derived
from law are exclusive of benefits arrived at through negotiation and agreement unless otherwise provided by the
agreement itself or by law.

For making a belated issue of creditability, petitioner is correctly said to have delay[ed] the agreement beyond the six (6)
month period so as to minimize its expenses to the detriment of its workers and its conduct to smack of bad faith and [to
run counter] to the good faith required in Collective Bargaining.[11] If petitioner wanted to be given credit for the wage
increases in the event of future mandated wage increases, it should have expressly stated its reservation during the early
part of the CBA negotiations.

WHEREFORE, the instant petition is hereby DISMISSED for lack of merit.

SO ORDERED.
Regalado, (Chairman), Romero, Puno, and Torres, Jr., JJ., concur.

[1] Rollo, p. 28.

[2] Id., p. 25.

[3] Respondents Comment, p. 2; Rollo, p. 103.

[4] Ibid.

[5] Blacks Law Dictionary 62 (5th ed., 1979).

[6] Royal Lines, Inc. v. Court of Appeals, 143 SCRA 609 (1986).

[7] Respondents Comment, p. 8; Rollo, p. 109.

[8] Rollo, p. 53.

[9] 223 SCRA 779 (1993).

[10] 185 SCRA 50 (1990).

[11] Respondents Comment, p. 9.

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Republic of the Philippines

SUPREME COURT

Manila

THIRD DIVISION

G.R. No. 97175 May 18, 1993

DEVELOPMENT BANK OF THE PHILIPPINES, petitioner,

vs.

NLRC and NATIONAL MINES AND ALLIED WORKERS UNION, respondents.

Chief Legal Counsel, Development Bank of the Philippines for petitioner.

Padilla & Associates Law Office for respondent.

MELO, J.:

Before us is a petition to set aside the NLRC Decision dated November 28, 1990 (Annex "C", p. 41, Rollo), disposing as
follows:

WHEREFORE, PREMISES CONSIDERED, the appealed decision is hereby set aside and a new judgment is entered, holding
the Development Bank of the Philippines liable to the complainants for their separation pay to the extent of the proceed
of the foreclosure sale, subject to the liquidation or bankruptcy proceeding that may be instituted against Midland
Cement Corporation. (pp. 47-48, Rollo).

Herein private respondent labor union filed on January 10, 1986, a complaint, the allegations of which were paraphrased
by the NLRC in this wise:

. . . that the individual complainants were all employees of respondent Midland Cement Corporation who were
terminated from employment on or about July 30, 1981 by reason of the termination of the business operations of the
Construction and Development Corporation of the Philippines (CDCP) now PNCC, which was brought about by the
expiration of the lease contract between Midland Cement Corporation and CDCP; that at the time of the separation from
the service [of] the individual complainants, the complainant union was the certified sole and exclusive bargaining agent;
that as a consequence of said termination, the complainant union filed with the then Ministry of Labor and Employment
an opposition to the application for clearance to terminate their services filed by CDCP, the lessee of the cement plant
owned by Midland Cement Corporation; that on April 27, 1983, the Ministry of Labor and Employment thru then Deputy
Minister Vicente Leogardo, Jr., ordered applicant CDCP to pay the 175 affected employees separation pay equivalent to
one-half (1/2) month salary for every year of service; that the employees were paid only based on their length of service
with CDCP from August 1, 1975 up to July 30, 1981; the said employees were not paid (with) their separation pay when
they were employees of respondent Midland Cement Corporation; that later, respondent DBP foreclosed and assumed
ownership over the cement plant, including land, buildings, machinery, etc., of Midland Cement Corporation; that the
individual complainants are claiming separation benefits covering the period from date of hiring up to July 31, 1975 when
CDCP took over the operations of Midland Cement Corporation by virtue of lease contract. (pp. 43-44, Rollo).

After hearing, the Labor Arbiter rendered a decision on January 5, 1990 (Annex "A", p. 26, Rollo), finding DBP jointly and
severally liable with Midland Cement for the payment of the separation pay, as follows:

WHEREFORE, judgment is hereby rendered giving due course to the complaint thereby ordering the respondents DBP and
Midland Cement Corporation jointly and severally liable for the separation pay of the affected members of the
complainant union.

It appearing that as published in the morning dailies lately that the assets of Midland Cement Corporation are now being
offered for sale through public bidding by the Asset Privatization Trust, (APT) let copies of this decision be served upon
said APT to protect the interest of the herein complainants. (pp. 30-31, Rollo)

DBP appealed, contending that its acquisition of the mortgaged assets of Midland through foreclosure sale did not make it
the owner of the defunct Midland Cement, and that the doctrine of successor-employee is not applicable in this case,
since DBP did not continue the business operations of Midland. The NLRC, while finding merit in DBP's contention,
nonetheless held DBP liable since respondent's claim "constitutes a first preference with respect to the proceeds of the
foreclosure sale" as provided in Article 110 of the Labor Code:

Art. 110. Worker preference in case of bankruptcy. — In the event of bankruptcy or liquidation of an employer's business,
his workers shall enjoy first preference as regards their wages and other monetary claims, any provisions of law to the
contrary notwithstanding. Such unpaid wages and monetary claims shall be paid in full before claims of the government
and other creditors may be paid. (p. 46, Rollo)

Following the denial of its motion for reconsideration, DBP filed the instant petition.

DBP correctly points out that its mortgage lien should not be classified as a preferred credit. The issue raised was settled
in Republic v. Peralta (150 SCRA 37 [1987]) and reinforced in DBP v. NLRC (183 SCRA 328 [1990]) wherein we held because
of its impact on the entire system of credit, Article 110 of the Labor Code cannot be viewed in isolation but must be read
in relation to the Civil Code scheme on classification and preference of credits. Thus,

4. A distinction should be made between a preference of credit or a lien. A preference applies only to claims which
do not attach to specific properties, A lien creates a charge on a particular property. The right of first preference as
regards unpaid wages recognized by Article 110 does not constitute a lien on the property of the insolvent debtor in favor
of workers. It is but a preference of credit in their favor, a preference in application. It is a method adopted to determine
and specify the order in which credits should be paid in the final distribution of the proceeds of the insolvent's assets. It is
a right to a first preference in the discharge of the funds of the judgment debtor.
In the words of Republic vs. Peralta, supra:

Article 110 of the Labor Code does not purport to create a lien in favor of workers or employees for unpaid wages either
upon all of the properties or upon any particular property owned by their employer. Claims for unpaid wages do not
therefore fall at all within the category of specially preferred claims established under Articles 2241 and 2242 of the Civil
Code, except to the extent that such claims for unpaid wages are already covered by Article 2241, number 6: claims for
laborer wages, on the goods manufactured or the work done, or by Article 2242, number 3: "claims of laborers and other
workers engaged in construction, reconstruction or repair of buildings, canals and other works, upon said buildings, canals
and other works." To the extent that claims for unpaid wages fall outside the scope of Article 2241, number 6 and Article
2242, number 3, they would come within the ambit of the category of ordinary preferred credits under Article 2244.

6. The DBP anchors its claim on a mortgage credit. A mortgage directly and immediately subjects the property upon
which it is imposed, whoever the possessor may be, to the fulfillment of the obligation for whose security it was
constituted (Article 2176, Civil Code). It creates a real right which is enforceable against the whole world. It is a lien on an
identified immovable property, which a preference is not. A recorded mortgage credit is a special preferred credit under
Article 2242 (5) of the Civil Code on classification of credits. The preference given by Article 110, when not falling within
Article 2241 (6) and Article 2242 (3) of the Civil Code and not attached to any specific property, is an ordinary preferred
credit although its impact is to move it from second priority to first priority in the order of preference established by
Article 2244 of the Civil Code. (Republic vs. Peralta, supra.)

xxx xxx xxx

In fine, the right to preference given to workers under Article 110 of the Labor Code cannot exist in any effective way
prior to the time of its presentation in distribution proceedings. It will find application when, in proceedings such as
insolvency, such unpaid wages shall be paid in full before the "claims of the Government and other creditors" may be
paid. . . . (DBP vs, NLRC, supra; pp. 337-339.)

The NLRC, therefore, erred in holding DBP liable "to the extent of the proceeds of the foreclosure sale." And making such
liability dependent on a bankruptcy or liquidation proceedings is really beside the point, for these proceedings are
relevant only to preferred credits, which is not the situation in the case at bar. To equate DBP's mortgage lien with a
preferred credit would be to render inutile the protective mantle of the mortgage in DBP's favor and thus in the process
wreak havoc to commercial transactions.

WHEREFORE, the petition is GRANTED. The decision of the NLRC dated November 28, 1990 and the Resolution of
February 1, 1991 are hereby SET ASIDE, and a new judgment is entered absolving Development Bank of the Philippines of
any and all liabilities to private respondent and its members.

No special pronouncement is made as to costs.

SO ORDERED.
Feliciano, Bidin, Davide, Jr. and Romero, JJ., concur.

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Republic of the Philippines

SUPREME COURT

Manila

SECOND DIVISION

G.R. No. 81415 June 6, 1990

A.N. BOLINAO, JR., JUAN A. AGSALON, JR., ZOSIMO L. CARREON AND REYNOLD P. DANNUG, petitioners,

vs.

HON. MANUEL S. PADOLINA, PHELPS DODGE (PHILS.) INC., BANK OF AMERICA, AND DEPUTY SHERIFF CARLOS G. MAOG,
respondents.

A.N. Bolinao, Jr. for petitioners.

Mina & Associates for respondents.

Agcaoili & Associates for respondent BA.

PARAS, J.:

This is a petition for certiorari with preliminary injunction which seeks to reverse and to set aside the order of the
Regional Trial Court of Pasig, Metro Manila, dated January 5, 1988 in Civil Case No. 50936 entitled "Phelps Dodge (Phils.)
Inc. v. Sabena Mining Corporation" denying the motion to intervene and dismissing the third party claim filed by herein
petitioners.

As gathered from the records, the facts of the case are as follows:

Petitioners A.N. Bolinao, Jr., Reynold P. Dannug, Juan A. Agsalon, Jr. and Zosimo L. Carreon were all former employees of
Sabena Mining Corporation, which had a copper and gold project in operation, located in New Bataan, Davao del Norte. In
1982 and 1983 they were laid off without being recalled (Rollo, Petition, pp. 3-4).

In September, 1983, petitioners filed a formal complaint for collection of unpaid salaries, unused accrued vacation and
sick leave benefits, 13th month pay and separation pay before the National Labor Relations Commission (NLRC) against
Sabena Mining Corporation and Development Bank of the Philippines docketed as NCR Case No. 9-4178-83 (Rollo,
Petition, p. 5).

On May 29,1984, a compromise agreement was entered into by the parties, wherein petitioners were to be paid on a
staggered basis the collective amount of P385,583.95 (Rollo, Petition, Annex "A, pp. 22-24). The company faithfully
complied with the scheduled payments only up to March, 1985 because it ceased operations effective April 1, 1985. With
this development, petitioners moved for the issuance of a writ of execution in June, 1985 (Rollo, Petition, p. 6).

In an order dated June 21, 1985, the Labor Arbiter issued a writ of execution against the company to collect the balance
of P311,580.14 (Rollo, Annex "B", pp. 25-26). On June 27, 1985 Deputy Sheriff Antonio P. Soriano garnished the remaining
amount of P150,279.64 in the savings account of the company at the Development Bank of the Philippines (DBP) (Rollo,
Annex "B-1 ", p. 27). However, the same amount was previously garnished by two creditors of the company; namely, Bank
of America and Phelps Dodge (Phils.), Inc. Bank of America garnished the amount in April, 1982 in Civil Case No. 45452
(Rollo, Petition , pp. 4-5 while Phelps Dodge garnished the amount in June, 1984 in Civil Case No. 50936 (Rollo, Petition, p.
5). Both cases were filed in different branches of the Regional Trial Court in Pasig (Ibid.)

In an order dated September 30, 1987, the respondent court directed the DBP to release to its Deputy Sheriff, herein
respondent Carlos G. Maog, the amount of P150,279.64 declaring that the writ of preliminary attachment made by Bank
of America thru Deputy Sheriff Norberto Doblado in Civil Case No. 45452 by the Pasig Regional Trial Court cannot prevail
over the garnishment pursuant to a writ of execution issued in Civil Case No. 50936 in favor of respondent Phelps Dodge
(Phils.) Inc., for failure of Bank of America to prosecute its hen (Rollo, Petition, Annex "C", pp. 29-31).
The order came to the attention of the petitioners who then filed a "Motion to Intervene and to Lift Order of September
30, 1987" on October 13, 1987 and a third party claim with the deputy sheriff on October 19, 1987 (Rollo, Annex "D', p.
32-36; Annex "D-1 ", pp. 38-42).

DBP did not interpose any objection to the motion to intervene and the third party claim (Reno, Annex "E', pp. 44-45). But
respondent Phelps Dodge, Phils., Inc. opposed said Motion to Intervene/Third Party Claim, on the ground among others:

xxx xxx xxx

b) That the rights of preference and first lien of petitioners, as former employees of Sabena Mining Corporation, as
provided for in Art. 110 of the Labor Code and Art. 2244 of the Civil Code, are operative only in insolvency court and in a
bankruptcy case; (Rollo, Annex "F", pp. 47-53; Annex "F-1", pp. 54-57).

Petitioners filed their reply to the opposition and at the same time filed a motion to resolve the third party claim (Rollo,
Annex "G, pp. 58-62; Annex "G-1", pp. 63- 67).

On January 5, 1988 the respondent court issued an order denying the motion to intervene and dismissing the third party
claim, declaring that the garnishment made by its Deputy Sheriff in favor of respondent Phelps Dodge, Phils., Inc. superior
to the rights of petitioners (Rollo. Annex "I", pp. 70-77).

Hence, the petition.

The Second Division of this Court in its resolution dated August 10, 1989, gave due course to the petition (Rollo, Petition,
pp. 2-19; Resolution, p. 309)

The main thrust in this petition is whether or not petitioners enjoy preferential right or claim over the funds of Sabena
Mining Corporation as provided for under the provisions of Article 110 of the New Labor Code, as amended, and Section
10, Rule VIII, Book III of the Implementing Rules and Regulations of the Labor Code.

The petitioners contend that under Article 110 and its implementing rules; and regulations of the Labor Code, the claims
of the laborers for unpaid wages and other monetary benefits due them for services rendered prior to bankruptcy enjoy
first preference in the satisfaction of credits against a bankrupt company.

On the other hand, the respondent maintains that the rights of preference and first lien of petitioners, as former
employees of Sabena Mining Corporation, under aforesaid law and rules, are operative only in an insolvency court and in
a bankrupt case.

The petition is without merit.

It is quite clear from the provisions of Article 110 of the Labor Code and Section 10, Rule VIII, Book H of the Revised Rules
and Regulations Implementing the Labor Code, that a declaration of bankruptcy or a judicial liquidation must be present
before the worker's preference may be enforced. Thus, it was held that Article 110 of the Labor Code and its
implementing rule cannot be invoked absent a formal declaration of bankruptcy or a liquidation order (Development Bank
of the Philippines v. Labor Arbiter, G.R. Nos. 78261-62, March 8, 1989). (Emphasis supplied)

In the case at bar, there was no showing of any insolvency proceeding or declaration of bankruptcy or judicial liquidation
that was being filed by Sabena Mining Corporation. It is only an extra-judicial foreclosure that was being enunciated as
when DBP extra-judicially foreclosed the assets of Sabena Mining Corporation. Conversely, to hold that Article 110 is also
applicable in extra-judicial proceedings would be putting the worker in a better position than the State which could only
assert its own prior preference in case of ajudicial proceeding. Article 110 must not be viewed in isolation and must
always be reckoned with the provisions of the Civil Code (DBP v. Labor Arbiter, supra).

Quite recently, the rule enunciated in Republic v. Peralta (150 SCRA 37 [1987]) reads:

Article 110 of the Labor Code, in determining the reach of its terms, cannot be viewed in isolation. Rather, Article 110
must be read in relation to the provisions of the Civil Code concerning the classification, concurrence and preference of
credits, which provisions find particular application in insolvency proceedings where the claims of all creditors, preferred
or non-preferred, may be adjudicated in a binding manner. ...

The reason behind the necessity for a judicial proceeding or a proceeding in rem before the concurrence and preference
of credits may be appealed is to bind all interested persons whether known to the parties or not. The claims of all credits
whether preferred or non preferred, the Identification of the preferred ones and the totality of the employer's assets
should be brought into the picture. There can then be an authoritative, fair and binding adjudication instead of the piece
meal settlement which would result from the questioned decision in this case 1 (DBP v. Labor Arbiter, supra).

PREMISES CONSIDERED, the petition is hereby DISMISSED for lack of merit and the questioned Order dated January 5,
1988 issued by the respondent court is hereby AFFIRMED.

SO ORDERED.

Melencio-Herrera (Chairperson) and Regalado, JJ., concur.

Separate Opinions
SARMIENTO, J., dissenting:

I reiterate my dissent in Development Bank of the Philippines vs. National Labor Relations Commission. 1 I also adopt Mr.
Justice Teodoro Padilla's dissent therein, insofar as he holds that under Article 110 of the Labor Code, as amended, by
Republic Act No. 671 5, workers enjoy "absolute preference" 2 as and for unpaid wages and other monetary claims, over
and above taxes due to the government and claims of creditors, and subject to no prior declaration of bankruptcy or
judicial order of liquidation. I find his opinion to be not only accord with the explicit language of Republic Act No. 6715,
but, as I held in my own dissent, consistent with the express decree of the Constitution affording full protection to labor. 3

While I agree that prior to its amendment, Article 110 was couched in arguable terms, 4 that is, a declaration of
insolvency was necessary before labor may claim preference. Republic Act No. 6715 has laid the debate to rest. The very
language of the Act:

SECTION 1. Article 110 of Presidential Decree No. 442, as amended, otherwise known as the Labor Code of the
Philippines, is hereby further amended to read as follows:

ART. 110. Worker Preference in case of bankruptcy. — In the event of bankruptcy or liquidation of an employer's
business, bis workers shall enjoy first preference as regards their unpaid wages and other monetary claims, any provision
of law to the contrary notwithstanding. Such unpaid wages and monetary claims shall be paid in full before the claims of
the Government and other creditors may be paid.5

convinces this writer that the Congressional intent was precisely to settle the argument-in favor of absolute worker
preference.

Indeed, to say that the amendment of Article 110 by Republic Act No. 6715 wrought no change, and the Article should be
read as it was read prior to amendment:

Article 110. Workers preference in case of bankruptcy. — In the event of bankruptcy or liquidation of an employer's
business, his workers shall enjoy first preference as regards wages due them for services rendered during the period prior
to the bankruptcy or liquidation, any provision of law to the contrary notwithstanding. Unpaid wages shall be paid in full
before other creditors may establish any claim to a share in the assets of the employer. 6

is to say that the legislature engaged in an exercise in futility, a proposition I am not prepared to accept. Clearly, the
legislative will, in working the amendment, was to change the law-it could not have been for any other purpose-and I do
not believe that the Supreme Court is empowered to override the intent of the lawmakers.
Once more, constitutional policy is to give full protection to labor. It also means exactly what it says-labor above capital.
The Charter is evidently not neutral, it is partial to the workingman. I am afraid that with the holding my brethren will
leave in this case, the working class would find itself at the receiving end.

Padilla, J.

Separate Opinions

SARMIENTO, J., dissenting:

I reiterate my dissent in Development Bank of the Philippines vs. National Labor Relations Commission. 1 I also adopt Mr.
Justice Teodoro Padilla's dissent therein, insofar as he holds that under Article 110 of the Labor Code, as amended, by
Republic Act No. 671 5, workers enjoy "absolute preference" 2 as and for unpaid wages and other monetary claims, over
and above taxes due to the government and claims of creditors, and subject to no prior declaration of bankruptcy or
judicial order of liquidation. I find his opinion to be not only accord with the explicit language of Republic Act No. 6715,
but, as I held in my own dissent, consistent with the express decree of the Constitution affording full protection to labor. 3

While I agree that prior to its amendment, Article 110 was couched in arguable terms, 4 that is, a declaration of
insolvency was necessary before labor may claim preference. Republic Act No. 6715 has laid the debate to rest. The very
language of the Act:

SECTION 1. Article 110 of Presidential Decree No. 442, as amended, otherwise known as the Labor Code of the
Philippines, is hereby further amended to read as follows:

ART. 110. Worker Preference in case of bankruptcy. — In the event of bankruptcy or liquidation of an employer's
business, bis workers shall enjoy first preference as regards their unpaid wages and other monetary claims, any provision
of law to the contrary notwithstanding. Such unpaid wages and monetary claims shall be paid in full before the claims of
the Government and other creditors may be paid.5

convinces this writer that the Congressional intent was precisely to settle the argument-in favor of absolute worker
preference.

Indeed, to say that the amendment of Article 110 by Republic Act No. 6715 wrought no change, and the Article should be
read as it was read prior to amendment:
Article 110. Workers preference in case of bankruptcy. — In the event of bankruptcy or liquidation of an employer's
business, his workers shall enjoy first preference as regards wages due them for services rendered during the period prior
to the bankruptcy or liquidation, any provision of law to the contrary notwithstanding. Unpaid wages shall be paid in full
before other creditors may establish any claim to a share in the assets of the employer. 6

is to say that the legislature engaged in an exercise in futility, a proposition I am not prepared to accept. Clearly, the
legislative will, in working the amendment, was to change the law-it could not have been for any other purpose-and I do
not believe that the Supreme Court is empowered to override the intent of the lawmakers.

Once more, constitutional policy is to give full protection to labor. It also means exactly what it says-labor above capital.
The Charter is evidently not neutral, it is partial to the workingman. I am afraid that with the holding my brethren will
leave in this case, the working class would find itself at the receiving end.

Padilla, J.

Footnotes

1 This was also the doctrine in the case of Development Bank of the Philippines versus National Labor Relations
Commission, Labor Arbiter Isabel P. Ortiquerra, and Labor Alliance For National Development, G.R. Nos. 82763-64,
Promulgated on March 19, 1990.

Sarmiento, J., Dissenting

1 G.R. Nos. 82763-64, March 19, 1990.

2 Supra, Padilla, J., Dissenting, 4.

3 CONST., art. XIII, sm. 3.

4 In his dissent in Development Bank v. National Labor Relations Commission, supra, Mr. Justice Isagani Cruz, reiterating
his dissent in Republic v. Peralta, No. L-56568, May 20, 1987, 150 SCRA 37, insists that worker preference a nonetheless
absolute under article 110, whether in its original or amended form.

5 Rep. Act No. 6715, sec. 1.

6 LABOR CODE, art. 110, prior to amendment.

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SECOND DIVISION

[G.R. No. 128399. January 15, 1998]

CAGAYAN SUGAR MILLING COMPANY, petitioner, vs. SECRETARY OF LABOR AND EMPLOYMENT, DIRECTOR RICARDO S.
MARTINEZ, SR., and CARSUMCO EMPLOYEES UNION, respondents.

DECISION

PUNO, J.:

In this petition for certiorari, petitioner CAGAYAN SUGAR MILLING COMPANY (CARSUMCO) impugns the October 8, 1996
Decision of the Secretary of Labor, dismissing its appeal and upholding the Order of Regional Director Ricardo S. Martinez,
Sr. finding petitioner guilty of violating Regional Wage Order No. RO2-02.

The facts: On November 16, 1993, Regional Wage Order No. RO2-02[1] was issued by the Regional Tripartite Wage and
Productivity Board, Regional Office No. II of the Department of Labor and Employment (DOLE). It provided, inter alia, that:

"Section 1. Upon effectivity of this Wage Order, the statutory minimum wage rates applicable to workers and employees
in the private sector in Region II shall be increased as follows:

xxx

1.2 P14.00 per day .... Cagayan

x x x"

On September 12 and 13, 1994, labor inspectors from the DOLE Regional Office examined the books of petitioner to
determine its compliance with the wage order. They found that petitioner violated the wage order as it did not implement
an across the board increase in the salary of its employees.
At the hearing at the DOLE Regional Office for the alleged violation, petitioner maintained that it complied with Wage
Order No. RO2-02 as it paid the mandated increase in the minimum wage.

In an Order dated December 16, 1994, public respondent Regional Director Ricardo S. Martinez, Sr. ruled that petitioner
violated Wage Order RO2-02 by failing to implement an across the board increase in the salary of its employees. He
ordered petitioner to pay the deficiency in the salary of its employees in the total amount of P555,133.41.

On January 6, 1995, petitioner appealed to public respondent Labor Secretary Leonardo A. Quisumbing. On the same
date, the Regional Wage Board issued Wage Order No. RO2-02-A,[2] amending the earlier wage order, thus:

"Section 1. Section 1 of Wage Order No. RO2-02 shall now read as, "Upon effectivity of this Wage Order, the workers and
employees in the private sector in Region 2 shall receive an across the board wage increase as follows:

xxx

1.2 P14.00 per day .... Cagayan

xxx

"Section 2. This amendment is curative in nature and shall retroact to the date of the effectivity of Wage Order No. RO2-
02."

On October 8, 1996, the Secretary of Labor dismissed petitioner's appeal and affirmed the Order of Regional Director
Martinez, Sr. Petitioner's motion for reconsideration was likewise denied.[3]

On February 12, 1997, private respondent CARSUMCO EMPLOYEES UNION moved for execution of the December 16,
1994 Order. Regional Director Martinez, Sr. granted the motion and issued the writ of execution. On March 4, 1997,
petitioner moved for reconsideration to set aside the writ of execution. On March 5, the DOLE regional sheriff served on
petitioner a notice of garnishment of its account with the Far East Bank and Trust Company. On March 10, the sheriff
seized petitioner's dump truck and scheduled its public sale on March 20, 1997.

Hence, this petition, with a prayer for the issuance of a temporary restraining order (TRO).

On April 3, 1997, this Court issued a TRO enjoining respondents from enforcing the writ of execution.[4] On July 16, upon
petitioner's motion, we amended the TRO by also enjoining respondents from enforcing the Decision of the Secretary of
Labor and conducting further proceedings until further orders from this Court.[5]
In the case at bar, petitioner contends that:

WAGE ORDER RO2-02 IS NULL AND VOID FOR HAVING BEEN ISSUED IN VIOLATION OF THE PROCEDURE PROVIDED BY
LAW AND IN VIOLATION OF PETITIONER'S RIGHT TO DUE PROCESS OF LAW.

II

WAGE ORDER NO. RO2-02 CLEARLY PROVIDED FOR THE FIXING OF A STATUTORY MINIMUM WAGE RATE AND NOT AN
ACROSS THE BOARD INCREASE IN WAGES.

III

THE DECISION OF THE SECRETARY OF LABOR AND EMPLOYMENT IS NULL AND VOID FOR LACK OF ANY LEGAL BASIS.

The petition has merit.

Wage Order No. RO2-02, passed on November 16, 1993, provided for an increase in the statutory minimum wage rates
for Region II. More than a year later, or on January 6, 1995, the Regional Board passed Wage Order RO2-02-A amending
the earlier wage order and providing instead for an across the board increase in wages of employees in Region II,
retroactive to the date of effectivity of Wage Order RO2-02.

Petitioner assails the validity of Wage Order RO2-02-A on the ground that it was passed without the required public
consultation and newspaper publication. Thus, petitioner claims that public respondent Labor Secretary Quisumbing
abused his discretion in upholding the validity of said wage order.

We agree.

Article 123 of the Labor Code provides:

"ART. 123. Wage Order. -- Whenever conditions in the region so warrant, the Regional Board shall investigate and study
all pertinent facts, and, based on the standards and criteria herein prescribed, shall proceed to determine whether a
Wage Order should be issued. Any such Wage Order shall take effect after fifteen (15) days from its complete publication
in at least one (1) newspaper of general circulation in the region.

"In the performance of its wage-determining functions, the Regional Board shall conduct public hearings/consultations,
giving notices to employees' and employers' groups and other interested parties.
x x x"

The record shows that there was no prior public consultation or hearings and newspaper publication insofar as Wage
Order No. RO2-02-A is concerned. In fact, these allegations were not denied by public respondents in their Comment.
Public respondents' position is that there was no need to comply with the legal requirements of consultation and
newspaper publication as Wage Order No. RO2-02-A merely clarified the ambiguous provision of the original wage order.

We are not persuaded.

To begin with, there was no ambiguity in the provision of Wage Order RO2-02 as it provided in clear and categorical terms
for an increase in statutory minimum wage of workers in the region. Hence, the subsequent passage of RO2-02-A
providing instead for an across the board increase in wages did not clarify the earlier Order but amended the same. In
truth, it changed the essence of the original Order. In passing RO2-02-A without going through the process of public
consultation and hearings, the Regional Board deprived petitioner and other employers of due process as they were not
given the opportunity to ventilate their positions regarding the proposed wage increase. In wage-fixing, factors such as
fair return of capital invested, the need to induce industries to invest in the countryside and the capacity of employers to
pay are, among others, taken into consideration.[6] Hence, our legislators provide for the creation of Regional Tripartite
Boards composed of representatives from the government, the workers and the employers to determine the appropriate
wage rates per region to ensure that all sides are heard. For the same reason, Article 123 of the Labor Code also provides
that in the performance of their wage-determining functions, the Regional Board shall conduct public hearings and
consultations, giving notices to interested parties. Moreover, it mandates that the Wage Order shall take effect only after
publication in a newspaper of general circulation in the region. It is a fundamental rule, borne out of a sense of fairness,
that the public is first notified of a law or wage order before it can be held liable for violation thereof. In the case at bar, it
is indisputable that there was no public consultation or hearing conducted prior to the passage of RO2-02-A. Neither was
it published in a newspaper of general circulation as attested in the February 3, 1995 minutes of the meeting of the
Regional Wage Board that the non-publication was by consensus of all the board members.[7] Hence, RO2-02-A must be
struck down for violation of Article 123 of the Labor Code.

Considering that RO2-02-A is invalid, the next issue to settle is whether petitioner could be held liable under the original
wage order, RO2-02.

Public respondents insist that despite the wording of Wage Order RO2-02 providing for a statutory increase in minimum
wage, the real intention of the Regional Board was to provide for an across the board increase. Hence, they urge that
petitioner is liable for merely providing an increase in the statutory minimum wage rates of its employees.

The contention is absurd. Petitioner clearly complied with Wage Order RO2-02 which provided for an increase in statutory
minimum wage rates for employees in Region II. It is not just to expect petitioner to interpret Wage RO2-02 to mean that
it granted an across the board increase as such interpretation is not sustained by its text. Indeed, the Regional Wage
Board had to amend Wage Order RO2-02 to clarify this alleged intent.

In sum, we hold that RO2-02-A is invalid for lack of public consultations and hearings and non-publication in a newspaper
of general circulation, in violation of Article 123 of the Labor Code. We likewise find that public respondent Secretary of
Labor committed grave abuse of discretion in upholding the findings of Regional Director Ricardo S. Martinez, Sr. that
petitioner violated Wage Order RO2-02.
IN VIEW WHEREOF, the petition is GRANTED. The Decision of the Secretary of Labor, dated October 8, 1996, is set aside
for lack of merit.

SO ORDERED.

Regalado, (Chairman), Mendoza, and Martinez, JJ.,

[1] Annex "A", Petition; Rollo, pp, 25-26.

[2] Rollo, pp. 27-28.

[3] See Order dated November 24, 1996; Rollo, pp. 43-45.

[4] Rollo, pp. 63-64.

[5] See Resolution; Rollo, pp. 103-104

[6] Article 124 (h), Labor Code.

[7] See Decision of former Labor Secretary Jose Brillantes in the consolidated appeals of Cagayan Colleges of Tuguegarao
and St. Louis College of Tuguegarao, Inc. (NWPC Case Nos. 95-003 and 95-004) regarding the non-publication of RO2-02-
A; Rollo, at p. 33.