Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-24394           August 30, 1968

JUANITO CARLOS, petitioner-appellant,
vs.
ANTONIO J. VILLEGAS, as Mayor, City of Manila and/or EULOGIO SAMIO, as Chief, Manila Fire
Department and/or MANUEL CUDIAMAT, as Treasurer, City of Manila, respondents-appellees.

Juanito Carlos for and in his behalf as petitioner-appellant.

Assistant City Fiscal Olimpio R. Navarro for respondents-appellees.

ANGELES, J.:

This is an appeal from the decision of the Court of First Instance of Manila dismissing the petition
for mandamus (Civil Case No. 53514) seeking to order the respondents to cause the City of Manila to pay
petitioner and other members of the Uniformed Force Division of the Manila Fire Department (MFD) for
overtime services rendered from January 1, 1962, up to the date when the petition was filed January 4, 1963;
to enforce immediately the 40-Hour a Week Work Law to petitioner and said other members of the MFD; and to
pay damages sustained by them as a consequence of the acts complained of.  1äwphï1.ñët

The facts of the case are set forth in the stipulation of facts submitted by the parties in the lower court, to wit: .

1. Under Sec. 15 of the Revised Charter of the City of Manila (Rep. Act 409, as amended), "there shall
be a chief of the Fire Department, ... who shall have the management and control of all matters relating
to the administration of said department, and the organization, government, discipline, and disposition
of fire forces; ... [Emphasis supplied]

2. Pursuant to the foregoing provision, from September 16, 1957, to the present, the petitioner and
other members of the Uniformed Force Division of the Manila Fire Department have been required and
ordered by the Chief of the Manila Fire Department, upon approval of the City Mayor, the
Commissioner of the Civil Service and the Office of the President, to be 24 hours on duty and 24 hours
off duty, alternately; that is, a member of the MFD Uniformed Force Division reports to his station at
8:00 o'clock in the morning and continues on duty until 8:00 o'clock of the following morning for 24
hours; he is then off duty for the next 24 hours immediately thereafter; this schedule continuous
throughout the days of the week regardless of Saturdays, Sundays and holidays; for an average of
eighty-four (84) hours a week the firemen stay at the station and while there, their duties are to clean
and maintain the station, fire engines or apparatuses and equipment to respond to fire and to perform
other duties required by ordinances and laws; during the 24 hours' stay in the station, unless they are
out working to fight and extinguish fires, the firemen are given time to rest from 12:00 noon to 4:00
o'clock in the afternoon, and time to sleep from 9:00 o'clock in the evening to 6:00 o'clock the following
morning.

3. On July 10, 1957, the Chief of the Manila Fire Department requested the Office of the President for
authority, in the interest of the service, for the members of the Uniformed Force Division and of the Fire
Alarm and Radio Division of the department to render service without overtime pay beyond the 40-hour-
5-day a week requirement of the law.

4. On December 9, 1962, a petition was addressed to the Mayor, City of Manila, through the Chief, Fire
Department, Manila, claiming payment for overtime services rendered effective January 1, 1962 and
demanding the enforcement of the 40-hour a week work law with respect to the Uniformed Force
 Division of the Manila Fire Department, and the reply thereto was that services rendered beyond a
regular period fixed by R.A. No. 1880 will not entitle the employee to overtime pay as a matter of legal
right, citing Opinion No. 218, Series of 1957, of the Secretary of Justice.

5. On December 26, 1962, petitioner addressed a petition to His Excellency, the President of the
Philippines, petitioning also the latter to order the City of Manila to pay petitioner and other members of
the MFD Uniformed Force Division for overtime services rendered during 1962 and caused to be
enforced the 40-hour a week law and there was no favorable reply. "6. The parties herein reserve the
right to submit additional evidence should a necessity therefor arise. "
1äwphï1.ñët

No additional evidence was submitted thereafter, and upon the foregoing stipulation of facts and the law
applicable thereon, the lower court dismissed the petition.

The issue for adjudication is whether the petitioner-appellant and other firemen similarly situated are entitled to
collect overtime pay for overtime services rendered by them since January 1, 1962.

The provisions of law that resolve the issue are neither those of Republic Act 1880, otherwise known as the
Forty Hour Week Work Law, nor Commonwealth Act 444, the Eight-Hour Labor Law, as suggested by the
petitioner-appellant, but the following sections of the Revised Administrative Code, to wit: .

SEC. 566. Extension of hours and requirement of overtime work. — When the interests of the public
service so require, the head of any Department, Bureau, or Office may extend the daily hours of labor,
in what manner so ever fixed, for any or all of the employees under him, and may likewise require any
or all of them to do overtime work not only on work days but also on holidays.".

SEC. 259. Inhibition against payment of extra compensation. — In the absence of special provision,
persons regularly and permanently appointed under the Civil Service Law or whose salary, wages or
emoluments are fixed by law or regulation shall not, for any service rendered or labor done by them on
holidays or for other overtime work, receive or be paid any additional compensation; nor, in the
absence of special provision, shall any officer or employee in an branch of the Government service
receive additional compensation on account of the discharge of duties pertaining to the position of
another or for the performance of any public service whatever, whether such service is rendered
voluntarily or exacted of him under authority of law." .

The petitioner-appellant contends that the above-quoted portions of the Revised Administrative Code have
been repealed by the provisions of Commonwealth Act 444, in so far as the provisions of the former are
inconsistent with the latter. The contention is erroneous. This Court has explicitly declared 1 that the Eight-Hour
Labor Law was not intended to apply to civil service employees who are still governed by the above provisions
of the Revised Administrative Code. As there appears to be no debate over the employment of petitioner-
appellant and the other firemen similarly situated as falling under the civil service, they being employees of the
City of Manila, a municipal corporation, in its governmental capacity, We perceive no reason to deviate from
said ruling. And as We hold that the above sections of the Revised Administrative Code are still legally in force,
it necessarily follows that Rule XV, section 3 of the Civil Service Rules, a similar provision promulgated
pursuant to that of Section 16(e) of the Civil Service Act of 1959 (Republic Act No. 2260) is likewise applicable
to petitioner-appellant. Said provision reads:.

SEC. 3. When the nature of the duties to be performed or the interest of the public service so requires,
the head of any Department or agency may extend the daily hours of work specified for any or all the
employees under him, and such extension shall be without additional compensation unless otherwise
provided by law. Office and employees may be required by the head of the Department or agency to
work on Saturdays, Sundays and public holidays also, without additional compensation unless
otherwise specifically authorized by law.

It needs no lengthy explanation that the nature of work of a fireman requires him to be always on the alert to
respond to fire alarms which may occur at any time of the day, for the exigency of the service necessitates a
round-the-clock observance of his duties, which situation excepts him from the applicability of Section 562 of
the Revised Administrative Code, as amended by Republic Act 18809 the Forty-Hour a Week Work Law, which
provides, in part: . 1äwphï1.ñët

Such hours, except for schools, courts, hospitals and health clinics or where the exigencies of service
so require, shall be as prescribed in the Civil Service Rules and as otherwise from time to time
disposed in temporary executive orders in the discretion of the President of the Philippines but shall be
eight (8) hours a day, for five (5) days a week or a total of forty (40) hours a week, exclusive of the time
for lunch. [Emphasis supplied].

Parallel to the instant case are the circumstances obtaining in Department of Public Services Labor Union vs.
CIR, et al.,2 where this Court held that in view of the exigency of the service, garbage collectors in Manila are
not entitled to the benefits of the Forty-Hour a Week Work Law.

In the light of the foregoing, the conclusion is inevitable that the petitioner-appellant and other firemen of his
situation are not entitled to overtime pay and to the coverage of the said Forty-Hour a Week Work Law.

Parenthetically, a side issue has come up in this appeal during its pendency, and that is whether or not the City
Fiscal of Manila should continue his appearance for the respondents-appellees, despite the creation of the
office and subsequent appointment of a City Legal Officer of Manila, pursuant to Republic Act 5185, known as
the Decentralization Act of 1967, to take charge of civil cases concerning the City. We believe this is not the
proper forum to first pass upon the question since the motion for withdrawal of appearance filed by the City
Fiscal and the opposition thereto put at issue the validity of an ordinance 3 passed by the City Council of Manila
which is alleged to be in conflict with the said Decentralization Act. Anyway, the said motion for withdrawal of
appearance was filed only on May 19, 1968, long after August 18, 1965, when the case had been rested for
resolution and when there was no more need for further representation in behalf of the parties.

IN VIEW OF THE FOREGOING, the decision appealed from is hereby affirmed. For equitable considerations,
no costs. 
1äwphï1.ñët

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez. Castro and Fernando, JJ., concur.
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 75039 January 28, 1988

FRANKLIN BAKER COMPANY OF THE PHILIPPINES, petitioner,

vs.
HONORABLE CRESENCIO B. TRAJANO, DIRECTOR OF BUREAU OF LABOR RELATIONS, FRANKLIN
BAKER BROTHERHOOD ASSOCIATION (TECHNICAL AND OFFICE EMPLOYEES)-ASSOCIATION OF
TRADE UNIONS (ATU), respondents.

PARAS, J.:

This is a petition for certiorari seeking the annulment of. (a) the Order of Mediator-Arbiter Conchita J. Martinez of the Ministry of Labor and Employment,
Davao City, dated September 17, 1984 in LRD Case No. R-22 MED-ROXI-UR-28-84 entitled "In Re: Petition for Certification Election Among the Office and
Technical Employees of Franklin Baker Company of the Philippines, Davao Plant at Coronan, Sta. Cruz, Davao del Sur, Franklin Baker Company of the
Philippines, Davao Plant, Employer, Franklin Baker Brotherhood Association (Technical and Office Employees)-Association of Trade Unions (ATU)," insofar
as it includes the managerial employees (inspectors, foremen and supervisors) in the certification election; (b) the Order of April 7, 1986 of Director
Cresencio B. Trajano, also of the MOLE, dismissing the appeal of aforesaid Order of September 17, 1985 for lack of merit; and (c) the Order of June 6,
1986 of said Director denying reconsideration of his Order of April 7, 1986 and affirming the same in toto (Rollo, p. 90).

In brief, the undisputed facts of this case are as follows:

On April 23, 1984, private respondent Franklin Baker Brotherhood Association-(ATU) filed a petition for
certification election among the office and technical employees of petitioner company with the Ministry of Labor
and Employment, Regional Office No. XI, Davao City, docketed as LRD No. R-22, MED-ROXI-UR-2884.
Among other things, it alleges that Franklin Baker Company of the Phils. Davao Plant, had in its employ
approximately ninety (90) regular technical and office employees, which group is separate and distinct from the
regular rank and file employees and is excluded from the coverage of existing Collective Bargaining
Agreement.

Petitioner company did not object to the holding of such an election but manifested that out of the ninety (90)
employees sought to be represented by the respondent union, seventy four (74) are managerial employees
while two (2) others are confidential employees, hence, must be excluded from the certification election and
from the bargaining unit that may result from such election (Rollo, p. 3).

Hearings were held and thereafter, the parties agreed to file their respective memoranda. Likewise, petitioner
filed a reply to private respondent's Memorandum (Rollo, p. 4).

Subsequently, on September 17, 1984, Med-Arbiter Conchita J. Martinez issued an order, the dispositive part
of which reads:

Accordingly, the petition is hereby granted and a certification election among the office and
technical employees of Franklin Baker Company of the Philippines, Davao Plant is ordered
within twenty (20) days from receipt hereof. The choices shall be the following:

1. Franklin Baker Brotherhood Association-(ATU)

2. No Union
 The representation officer assigned shall call the parties for a pre-election conference at least
five (5) days before the date of the election to thresh out the mechanics of the election, the
finalization of the list of voters, the posting of notices and other relevant matters.

The company's latest payroll shall be the basis for determining the office and technical workers
qualified to vote.

SO ORDERED. (Rollo, pp. 47-48).

From the aforequoted order petitioner Company appealed to the Bureau of Labor Relations, docketed as BLR
Case No. A-22884, praying that the appealed order be set aside and another be issued declaring the seventy
four (74) inspectors, foremen and supervisors as managerial employees.

During the pendency of the appeal, sixty one (61) of the employees involved, filed a Motion to Withdraw the
petition for certification election praying therein for their exclusion from the Bargaining Unit and for a categorical
declaration that they are managerial employees, as they are performing managerial functions (Rollo, p. 4).

On April 7, 1986, public respondent Bureau of Labor Relations Cresencio B. Trajano issued a Resolution
affirming the order dated September 17, 1984, the dispositive part of which reads:

WHEREFORE, the appealed Order dated September 17, 1985 is hereby affirmed and the
appeal dismissed for lack of merit. Let the certification election among the office and technical
employees of Franklin Baker Company of the Philippines proceed without delay.

The latest payrolls of the company shall be used as basis of determining the list of eligible
voters. (Rollo, p. 77),

Petitioner company sought the reconsideration of the aforequoted resolution but its motion was denied by
Director Cresencio B. Trajano in his order dated June 6, 1986, the dispositive part of which reads:

WHEREFORE, the appeal of respondent company is, dismissed for lack of merit and the
Bureau's Resolution dated April 1986 affirmed in toto.

Let, therefore, the pertinent papers of this case be immediately forwarded to the Office of origin
for the conduct of the certification election. (Rollo, p. 90).

Hence, this petition.

In the resolution of July 30, 1986, the Second Division of this Court without giving due course to the petition
required the respondents to file their comment (Rollo, p. 91). On August 28, 1986, public respondent filed its
comment (Rollo, pp. 99 to 102). Likewise private respondent filed its comment on September 5, 1986 (Rollo,
pp. 104 to 107).

In the resolution of September 8, 1986, petitioner was required to file its reply to public respondent's comment
(Rollo, p. 119) which reply was filed on September 18, 1986 (Rollo, pp. 122-127).

On October 20, 1986, this Court resolved to give due course to the petition and required the parties to file their
respective Memoranda (Rollo, p. 133). In compliance with said resolution, petitioner and private respondent
filed their Memoranda on December 8, 1986 and December 29, 1986, respectively (Rollo, pp. 183-187). On the
other hand, public respondent filed with this Court a manifestation (Rollo, p. 153) to the effect that it is adopting
as its memorandum its comment dated August 18, 1986 (Rollo, p. 99) which manifestation was noted by this
Court in its resolution dated November 26, 1986 (Rollo, p. 155).

The lone assignment of error raised by petitioner states:

 Public respondent acted with grave abuse of discretion amounting to lack of jurisdiction when
he ruled that the 76 employees subject of this petition are not managerial employees
(inspectors, foremen, supervisors and the like) and therefore, may participate in the certification
election among the office and technical employees. Such ruling is contrary to jurisprudence and
to the factual evidence presented by petitioner which was not rebutted by private respondent
union and is therefore patently baseless.

From this assigned error two questions are raised by petitioner, namely: (1) whether or not subject employees
are managerial employees under the purview of the Labor Code and its Implementing Rules; and (2) whether
the Director of the Bureau of Labor Relations acted with abuse of discretion in affirming the order of Mediator-
Arbiter Conchita J. Martinez.

There is no question that there are in the DAVAO Plant of petitioner company approximately 90 regular
technical and office employees which form a unit, separate and distinct from the regular rank and file
employees and are excluded from the coverage of existing Collective Bargaining Agreement; that said group of
employees organized themselves as Franklin Baker Brotherhood Association (technical and office employees)
and affiliated with the local chapter of the Association of trade Unions (ATU), a legitimate labor organization
with Registration Permit No. 8745 (Fed) LC and with office located at the 3rd Floor of Antwell Bldg., Sta. Ana,
Davao City; that petitioner company did not object to the holding of such certification, but only sought the
exclusion of inspectors, foremen and supervisors, members of Franklin Baker Brotherhood Association
(technical and office employees) numbering 76 from the certification election on the ground that they are
managerial employees.

A managerial employee is defined as one "who is vested with powers or prerogatives to lay down and execute
management policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline
employees, or to effectively recommend such managerial actions." (Reynolds Phil. Corp. v. Eslava, 137 SCRA
[1985], citing Section 212 (K), Labor Code.

Also pertinent thereto is Section 1 (M) of the Implementing Rules and Regulations, which is practically a
restatement of the above provision of law.

To sustain its posture, that the inspectors, foreman and supervisors numbering 76 are managerial employees,
petitioner painstakingly demonstrates that subject employees indeed participate in the formulation and
execution of company policies and regulations as to the conduct of work in the plant, exercised the power to
hire, suspend or dismiss subordinate employees and effectively recommend such action, by citing concrete
cases, among which are: (1) Mr. Ponciano Viola, a wet process inspector, who while in the performance of his
duty, found Mr. Enrique Asuncion, a trimmer "forging", falsifying and simulating a company time card
(timesheet) resulting in payroll padding, immediately recommended the dismissal of said erring employee,
resulting in the latter's discharge. (Employer's Memo, Rollo, p.18); (2) Mr. Manuel Alipio, an opening inspector,
recommended for suspension Nut Operator Ephraim Dumayos who was caught in the act of surreptitiously
transferring to a co-worker's bin some whole nuts which act constitutes a violation of company policy; (3) Mr.
Sofronio Abangan, a line inspector, censured and thereafter recommended the suspension of Mr. Romeo
Fullante, for being remiss in the proper and accurate counting of nuts; (4) Binleader Dionisio Agtang was
required to explain his inefficiency of Mr. Saturnino Bangkas, Bin Loading Inspector; (5) for disobeying the
orders of Bin Loading Inspector Mauricio Lumanog's order, Macario Mante, Eduardo Adaptor, Rodolfo Irene
and George Rellanos were all recommended for suspension which culminated in an investigation conducted by
Lumanog's higher bosses (Ibid., p. 20).

It has also been shown that subject employees have the power to hire, as evidenced by the hiring of Rolando
Asis, Roy Layson, Arcadio Gaudicos and Felix Arciaga, upon the recommendation of Opening Inspector
Serafin Suelo, Processing Inspector Leonardo Velez and Laureano C. Lim, Opening Inspector (Ibid., p. 21).

It will be noted, however, that in the performance of their duties and functions and in the exercise of their
recommendatory powers, subject employees may only recommend, as the ultimate power to hire, fire or
suspend as the case may be, rests upon the plant personnel manager.
The test of "supervisory" or "managerial status" depends on whether a person possesses authority to act in the
interest of his employer in the matter specified in Article 212 (k) of the Labor Code and Section 1 (m) of its
Implementing Rules and whether such authority is not merely routinary or clerical in nature, but requires the
use of independent judgment. Thus, where such recommendatory powers as in the case at bar, are subject to
evaluation, review and final action by the department heads and other higher executives of the company, the
same, although present, are not effective and not an exercise of independent judgment as required by law
(National Warehousing Corp. v. CIR, 7 SCRA 602-603 [1963]).

Furthermore, in line with the ruling of this Court, subject employees are not managerial employees because as
borne by the records, they do not participate in policy making but are given ready policies to execute and
standard practices to observe, thus having little freedom of action (National Waterworks and Sewerage
Authority v. NWSA Consolidated, L-18938, 11 SCRA 766 [1964]).

Petitioner's contention that the Director of the Bureau of Labor Relations acted with abuse of discretion
amounting to lack of jurisdiction in holding that the 76 employees are not managerial employees and must be
included in the certification election has no basis in fact and in law. Neither is its contention that the use of the
word's "and/or" categorically shows that performance of the functions enumerated in the law qualifies an
employee as a managerial employee.

It is well settled that the findings of fact of the Ministry of Labor and National Labor Relations Commission are
entitled to great respect, unless the findings of fact and the conclusions made therefrom, are not supported by
substantial evidence, or when there is grave abuse of discretion committed by said public official (Kapisanan ng
Manggagawa sa Camara Shoes, 2nd Heirs of Santos Camara, et al., 111 SCRA 477 [1982]; International
hardwood and Veneer Co. of the Philippines v. Leonardo, 117 SCRA 967 [1982]; Pan-Phil-Life, Inc. v. NLRC,
114 SCRA 866 [1982]; Pepsi-Cola Labor Union-BF LUTUPAS Local Chapter N-896 v. NLRC, 114 SCRA 930
[1982]; Egyptair v. NLRC, 148 SCRA 125 [1987]; RJL Martinez Fishing Corp. v. NLRC, G.R. Nos. 63550-51,
127 SCRA 455 [1984]; and Reyes v. Phil. Duplicators, G.R. No. 54996, 109 SCRA 489 [1981]).

By "grave abuse of discretion" is meant, such capricious and whimsical exercise of judgment as is equivalent to
lack of jurisdiction. The abuse of discretion must be grave as where the power is exercised in an arbitrary or
despotic manner by reason of passion or personal hostility and must be so patent and gross as to amount to an
evasion of positive duty or to a virtual refusal to perform the duty enjoined by or to act at all in contemplation of
law (G.R. No. 59880, George Arguelles [Hda. Emma Arguelles v. Romeo Yang, etc.], September 11, 1987).

Moreover, this Court has ruled that findings of administrative agencies which have acquired expertise, like the
Labor Ministry, are accorded respect and finality (Special Events and Central Shipping Office Workers Union v.
San Miguel Corp., 122 SCRA 557 [1983] and that the remedy of certiorari does not lie in the absence of any
showing of abuse or misuse of power properly vested in the Ministry of Labor and Employment (Buiser v.
Leogardo, Jr., 131 SCRA 151 [1984]).

After a careful review of the records, no plausible reason could be found to disturb the findings of fact and the
conclusions of law of the Ministry of Labor.

Even if We regard the employees concerned as "managerial employees," they can still join the union of the
rank and file employees. They cannot however form their own exclusive union as "managerial employees"
(Bulletin Publishing Corporation v. Sanchez, 144 SCRA 628).

PREMISES CONSIDERED, the petition is DISMISSED, and the assailed resolution and orders are AFFIRMED.

SO ORDERED.

Teehankee, C.J., Narvasa, Cruz and Gancayco, JJ., concur.

 Republic of the Philippines
SUPREME COURT
Baguio City

FIRST DIVISION

G.R. No. 119205 April 15, 1998

SIME DARBY PILIPINAS, INC. petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION (2ND DIVISION) and SIME DARBY SALARIED
EMPLOYEES ASSOCIATION (ALU-TUCP), respondents.

BELLOSILLO, J.:

Is the act of management in revising the work schedule of its employees and discarding their paid lunch break
constitutive of unfair labor practice?

Sime Darby Pilipinas, Inc., petitioner, is engaged in the manufacture of automotive tires, tubes and other rubber
products. Sime Darby Salaried Employees Association (ALU-TUCP), private respondent, is an association of
monthly salaried employees of petitioner at its Marikina factory. Prior to the present controversy, all company
factory workers in Marikina including members of private respondent union worked from 7:45 a.m. to 3:45 p.m.
with a 30-minute paid "on call" lunch break.

On 14 August 1992 petitioner issued a memorandum to all factory-based employees advising all its monthly
salaried employees in its Marikina Tire Plant, except those in the Warehouse and Quality Assurance
Department working on shifts, a change in work schedule effective 14 September 1992 thus —

TO: ALL FACTORY-BASED EMPLOYEES

RE: NEW WORK SCHEDULE

Effective Monday, September 14, 1992, the new work schedule of the factory office will be as follows:

7:45 A.M. — 4:45 P.M. (Monday to Friday)

7:45 A.M. — 11:45 A.M. (Saturday).

Coffee break time will be ten minutes only anytime between:

9:30 A.M. — 10:30 A.M. and

2:30 P.M. — 3:30 P.M.

Lunch break will be between:

 12:00 NN — 1:00 P.M. (Monday to Friday).

Excluded from the above schedule are the Warehouse and QA employees who are on shifting. Their
work and break time schedules will be maintained as it is now. 1

Since private respondent felt affected adversely by the change in the work schedule and discontinuance of the
30-minute paid "on call" lunch break, it filed on behalf of its members a complaint with the Labor Arbiter for
unfair labor practice, discrimination and evasion of liability pursuant to the resolution of this Court in Sime
Darby International Tire Co., Inc. v. NLRC.  However, the Labor Arbiter dismissed the complaint on the ground
2

that the change in the work schedule and the elimination of the 30-minute paid lunch break of the factory
workers constituted a valid exercise of management prerogative and that the new work schedule, break time
and one-hour lunch break did not have the effect of diminishing the benefits granted to factory workers as the
working time did not exceed eight (8) hours.

The Labor Arbiter further held that the factory workers would be unjustly enriched if they continued to be paid
during their lunch break even if they were no longer "on call" or required to work during the break. He also ruled
that the decision in the earlier Sime Darby case  was not applicable to the instant case because the former
3

involved discrimination of certain employees who were not paid for their 30-minute lunch break while the rest of
the factory workers were paid; hence, this Court ordered that the discriminated employees be similarly paid the
additional compensation for their lunch break.

Private respondent appealed to respondent National Labor Relations Commission (NLRC) which sustained the
Labor Arbiter and dismissed the appeal.  However, upon motion for reconsideration by private respondent, the
4

NLRC, this time with two (2) new commissioners replacing those who earlier retired, reversed its earlier
decision of 20 April 1994 as well as the decision of the Labor Arbiter.  The NLRC considered the decision of
5

this Court in the Sime Darby case of 1990 as the law of the case wherein petitioner was ordered to pay "the
money value of these covered employees deprived of lunch and/or working time breaks." The public
respondent declared that the new work schedule deprived the employees of the benefits of a time-honored
company practice of providing its employees a 30-minute paid lunch break resulting in an unjust diminution of
company privileges prohibited by Art. 100 of the Labor Code, as amended. Hence, this petition alleging that
public respondent committed grave abuse of discretion amounting to lack or excess of jurisdiction: (a) in ruling
that petitioner committed unfair labor practice in the implementation of the change in the work schedule of its
employees from 7:45 a.m. — 3:45 p.m. to 7:45 a.m. — 4:45 p.m. with one-hour lunch break from 12:00 nn to
1:00 p.m.; (b) in holding that there was diminution of benefits when the 30-minute paid lunch break was
eliminated; (c) in failing to consider that in the earlier Sime Darby case affirming the decision of the NLRC,
petitioner was authorized to discontinue the practice of having a 30-minute paid lunch break should it decide to
do so; and, (d) in ignoring petitioner's inherent management prerogative of determining and fixing the work
schedule of its employees which is expressly recognized in the collective bargaining agreement between
petitioner and private respondent.

The Office of the Solicitor General filed in a lieu of comment a manifestation and motion recommending that the
petitioner be granted, alleging that the 14 August 1992 memorandum which contained the new work schedule
was not discriminatory of the union members nor did it constitute unfair labor practice on the part of petitioner.

We agree, hence, we sustain petitioner. The right to fix the work schedules of the employees rests principally
on their employer. In the instant case petitioner, as the employer, cites as reason for the adjustment the
efficient conduct of its business operations and its improved production.  It rationalizes that while the old work
6

schedule included a 30-minute paid lunch break, the employees could be called upon to do jobs during that
period as they were "on call." Even if denominated as lunch break, this period could very well be considered as
working time because the factory employees were required to work if necessary and were paid accordingly for
working. With the new work schedule, the employees are now given a one-hour lunch break without any
interruption from their employer. For a full one-hour undisturbed lunch break, the employees can freely and
effectively use this hour not only for eating but also for their rest and comfort which are conducive to more
efficiency and better performance in their work. Since the employees are no longer required to work during this
one-hour lunch break, there is no more need for them to be compensated for this period. We agree with the
Labor Arbiter that the new work schedule fully complies with the daily work period of eight (8) hours without
violating the Labor Code.  Besides, the new schedule applies to all employees in the factory similarly situated
7

whether they are union members or not. 8

Consequently, it was grave abuse of discretion for public respondent to equate the earlier Sime Darby
case  with the facts obtaining in this case. That ruling in the former case is not applicable here. The issue in that
9

case involved the matter of granting lunch breaks to certain employees while depriving the other employees of
such breaks. This Court affirmed in that case the NLRC's finding that such act of management was
discriminatory and constituted unfair labor practice.

The case before us does not pertain to any controversy involving discrimination of employees but only the
issue of whether the change of work schedule, which management deems necessary to increase production,
constitutes unfair labor practice. As shown by the records, the change effected by management with regard to
working time is made to apply to all factory employees engaged in the same line of work whether or not they
are members of private respondent union. Hence, it cannot be said that the new scheme adopted by
management prejudices the right of private respondent to self-organization.

Every business enterprise endeavors to increase its profits. In the process, it may devise means to attain that
goal. Even as the law is solicitous of the welfare of the employees, it must also protect the right of an employer
to exercise what are clearly management prerogatives.  Thus, management is free to regulate, according to its
10

own discretion and judgment, all aspects of employment, including hiring, work assignments, working methods,
time, place and manner of work, processes to be followed, supervision of workers, working regulations, transfer
of employees, work supervision, lay off of workers and discipline, dismissal and recall of workers.  Further,
11

management retains the prerogative, whenever exigencies of the service so require, to change the working
hours of its employees. So long as such prerogative is exercised in good faith for the advancement of the
employer's interest and not for the purpose of defeating or circumventing the rights of the employees under
special laws or under valid agreements, this Court will uphold such exercise. 12

While the Constitution is committed to the policy of social justice and the protection of the working class, it
should not be supposed that every dispute will be automatically decided in favor of labor. Management also
has rights which, as such, are entitled to respect and enforcement in the interest of simple fair play. Although
this Court has inclined more often than not toward the worker and has upheld his cause in his conflicts with the
employer, such favoritism has not blinded the Court to the rule that justice is in every case for the deserving, to
be dispensed in the light of the established facts and the applicable law and doctrine. 13

WHEREFORE, the Petition is GRANTED. The Resolution of the National Labor Relations Commission dated
29 November 1994 is SET ASIDE and the decision of the Labor Arbiter dated 26 November 1993 dismissing
the complaint against petitioner for unfair labor practice is AFFIRMED.

SO ORDERED.

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

 FIRST DIVISION

[G.R. No. L-63122. February 20, 1984.]

UNIVERSITY OF PANGASINAN FACULTY UNION, Petitioner, v. UNIVERSITY OF

PANGASINAN And NATIONAL LABOR RELATIONS COMMISSION, Respondents.

Tanopo, Serafico, Juanitez & Callanta Law Office and Hermogenes S. Decano for Petitioner.

The Solicitor General for Respondents.

DECISION

GUTIERREZ, JR., J.:

This is a petition for review on certiorari pursuant to Rule 65 of the Rules of Court to annul and to set
aside the decision of respondent National Labor Relations Commission (NLRC) dated October 25,
1982, dismissing the appeal of petitioner in NLRC Case No. RBI-47-82, entitled "University of
Pangasinan Faculty Union, complainant, versus University of Pangasinan, Respondent." chanrobles
law library : red

Petitioner is a labor union composed of faculty members of the respondent University of Pangasinan,
an educational institution duly organized and existing by virtue of the laws of the Philippines.

On December 18, 1981, the petitioner, through its President, Miss Consuelo Abad, filed a complaint
against the private respondent with the Arbitration Branch of the NLRC, Dagupan District Office,
Dagupan City. The complaint seeks: (a) the payment of Emergency Cost of Living Allowances
(ECOLA) for November 7 to December 5, 1981, a semestral break; (b) salary increases from the sixty
(60%) percent of the incremental proceeds of increased tuition fees; and (c) payment of salaries for
suspended extra loads.

The petitioner’s members are full-time professors, instructors, and teachers of respondent University.
The teachers in the college level teach for a normal duration of ten (10) months a school year, divided
into two (2) semesters of five (5) months each, excluding the two (2) months summer vacation.
These teachers are paid their salaries on a regular monthly basis.

In November and December, 1981, the petitioner’s members were fully paid their regular monthly
salaries. However, from November 7 to December 5, during the semestral break, they were not paid
their ECOLA. The private respondent claims that the teachers are not entitled thereto because the
semestral break is not an integral part of the school year and there being no actual services rendered
by the teachers during said period, the principle of "No work, no pay" applies.
During the same school year (1981-1982), the private respondent was authorized by the Ministry of
Education and Culture to collect, as it did collect, from its students a fifteen (15%) percent increase of
tuition fees. Petitioner’s members demanded a salary increase effective the first semester of said
schoolyear to be taken from the sixty (60%) percent incremental proceeds of the increased tuition
fees. Private respondent refused, compelling the petitioner to include said demand in the complaint
filed in the case at bar. While the complaint was pending in the arbitration branch, the private
respondent granted an across-the-board salary increase of 5.86%. Nonetheless, the petitioner is still
pursuing full distribution of the 60% of the incremental proceeds as mandated by the Presidential
Decree No. 451.

Aside from their regular loads, some of petitioner’s members were given extra loads to handle during
the same 1981-1982 schoolyear. Some of them had extra loads to teach on September 21, 1981, but
they were unable to teach as classes in all levels throughout the country were suspended, although
said days was proclaimed by the President of the Philippines as a working holiday. Those with extra
loads to teach on said day claimed they were not paid their salaries for those loads, but the private
respondent claims otherwise.

The issue to be resolved in the case at bar are the following:chanrob1es virtual 1aw library

"WHETHER OR NOT PETITIONER’S MEMBERS ARE ENTITLED TO ECOLA DURING THE SEMESTRAL
BREAK FROM NOVEMBER 7 TO DECEMBER 5, 1981 OF THE 1981-82 SCHOOL YEAR.

II

"WHETHER OR NOT 60% OF THE INCREMENTAL PROCEEDS OF INCREASED TUITION FEES SHALL BE
DEVOTED EXCLUSIVELY TO SALARY INCREASE,

III

"WHETHER OR NOT ALLEGED PAYMENT OF SALARIES FOR EXTRA LOADS ON SEPTEMBER 21, 1981
WAS PROVEN BY SUBSTANTIAL EVIDENCE."

Anent the first issue, the various Presidential Decrees on ECOLAs to wit: PD’s 1614, 1634, 1678 and
1713, provide on "Allowances of Fulltime Employees . . ." that "Employees shall be paid in full the
required monthly allowance regardless of the number of their regular working days if they incur no
absences during the month. If they incur absences without pay, the amounts corresponding to the
absences may be deducted from the monthly allowance . . ." ; and on "Leave of Absence Without
Pay", that "All covered employees shall be entitled to the allowance provided herein when they are on
leave of absence with pay."

It is beyond dispute that the petitioner’s members are full-time employees receiving their monthly
salaries irrespective of the number of working days or teaching hours in a month. However, they find
themselves in a most peculiar situation whereby they are forced to go on leave during semestral
breaks. These semestral breaks are in the nature of work interruptions beyond the employees’
control. The duration of the semestral break varies from year to year dependent on a variety of
circumstances affecting at times only the private respondent but at other times all educational
institutions in the country. As such, these breaks cannot be considered as absences within the
meaning of the law for which deductions may be made from monthly allowances. The "No work, no
pay" principle does not apply in the instant case. The petitioner’s members received their regular
salaries during this period. It is clear from the aforequoted provision of law that it contemplates a "no
work" situation where the employees voluntarily absent themselves. Petitioners, in the case at bar,
certainly do not, ad voluntatem, absent themselves during semestral breaks. Rather, they are
constrained to take mandatory leave from work. For this they cannot be faulted nor can they be
begrudged that which is due them under the law. To a certain extent, the private respondent can
specify dates when no classes would be held. Surely, it was not the intention of the framers of the law
to allow employers to withhold employee benefits by the simple expedient of unilaterally imposing "no
work" days and consequently avoiding compliance with the mandate of the law for those
days.chanrobles.com.ph : virtual law library

Respondent’s contention that "the fact of receiving a salary alone should not be the basis of receiving
ECOLA", is, likewise, without merit. Particular attention is brought to the Implementing Rules and
Regulations of Wage Order No. 1 to wit.

SECTION 5. Allowance for Unworked Days. —

"a) All covered employees whether paid on a monthly or daily basis shall be entitled to their daily
living allowance when they are paid their basic wage." library

x       x       x

This provision, at once refutes the above contention. It is evident that the intention of the law is to
grant ECOLA upon the payment of basic wages. Hence, we have the principle of "No pay, no ECOLA"
the converse of which finds application in the case at bar. Petitioners cannot be considered to be on
leave without pay so as not to be entitled to ECOLA, for, as earlier stated, the petitioners were paid
their wages in full for the months of November and December of 1981, notwithstanding the
intervening semestral break. This, in itself, is a tacit recognition of the rather unusual state of affairs
in which teachers find themselves. Although said to be on forced leave, professors and teachers are,
nevertheless, burdened with the task of working during a period of time supposedly available for rest
and private matters. There are papers to correct, students to evaluate, deadlines to meet, and
periods within which to submit grading reports. Although they may be considered by the respondent
to be on leave, the semestral break could not be used effectively for the teacher’s own purposes for
the nature of a teacher’s job imposes upon him further duties which must be done during the said
period of time. Learning is a never ending process. Teachers and professors must keep abreast of
developments all the time. Teachers cannot also wait for the opening of the next semester to begin
their work. Arduous preparation is necessary for the delicate task of educating our children. Teaching
involves not only an application of skill and an imparting of knowledge, but a responsibility which
entails self dedication and sacrifice. The task of teaching ends not with the perceptible efforts of the
petitioner’s members but goes beyond the classroom: a continuum where only the visible labor is
relieved by academic intermissions. It would be most unfair for the private respondent to consider
these teachers as employees on leave without pay to suit its purposes and, yet, in the meantime,
continue availing of their services as they prepare for the next semester or complete all of the last
semester’s requirements. Furthermore, we may also by analogy apply the principle enunciated in the
Omnibus Rules Implementing the Labor Code to wit:

Sec. 4. Principles in Determining Hours Worked. — The following general principles shall govern in
determining whether the time spent by an employee is considered hours worked for purposes of this
Rule:chanrob1es virtual 1aw library

x       x       x

"(d) The time during which an employee is inactive by reason of interruptions in his work beyond his
control shall be considered time either if the imminence of the resumption of work requires the
employee’s presence at the place of work or if the interval is too brief to be utilized effectively and
gainfully in the employee’s own interest." (Emphasis supplied).

The petitioner’s members in the case at bar, are exactly in such a situation. The semestral break
scheduled is an interruption beyond petitioner’s control and it cannot be used "effectively nor gainfully
in the employee’s interest’. Thus, the semestral break may also be considered as "hours worked." For
this, the teachers are paid regular salaries and, for this, they should be entitled to ECOLA. Not only do
the teachers continue to work during this short recess but much less do they cease to live for which
the cost of living allowance is intended. The legal principles of "No work, no pay; No pay, no ECOLA"
must necessarily give way to the purpose of the law to augment the income of employees to enable
them to cope with the harsh living conditions brought about by inflation; and to protect employees
and their wages against the ravages brought by these conditions. Significantly, it is the commitment
of the State to protect labor and to provide means by which the difficulties faced by the working force
may best be alleviated. To submit to the respondents’ interpretation of the no work, no pay policy is
to defeat this noble purpose. The Constitution and the law mandate otherwise.

With regard to the second issue, we are called upon to interpret and apply Section 3 of Presidential
Decree 451 to wit:

SEC. 3. Limitations. — The increase in tuition or other school fees or other charges as well as the new
fees or charges authorized under the next preceding section shall be subject to the following
conditions:

"(a) That no increase in tuition or other school fees or charges shall be approved unless sixty (60%)
per centum of the proceeds is allocated for increase in salaries or wages of the members of the
faculty and all other employees of the school concerned, and the balance for institutional
development, student assistance and extension services, and return to investments: Provided, That in
no case shall the return to investments exceed twelve (12%) per centum of the incremental
proceeds; . . ."cralaw virtua1aw library

x       x       x

This Court had the occasion to rule squarely on this point in the very recent case entitled, University
of the East v. University of the East Faculty Association, 117 SCRA 554. We held that:

"In effect, the problem posed before Us is whether or not the reference in Section 3(a) to ‘increase in
salaries or wages of the faculty and all other employees of the schools concerned’ as the first purpose
to which the incremental proceeds from authorized increases to tuition fees may be devoted, may be
construed to include allowances and benefits. In the negative, which is the position of respondents, it
would follow that such allowances must be taken in resources of the school not derived from tuition
fees.

"Without delving into the factual issue of whether or not there could be any such other resources, We
note that among the items of second purpose stated in provision in question is return in investment.
And the law provides only for a maximum, not a minimum. In other words, the schools may get a
return to investment of not more than 12%, but if circumstances warrant, there is no minimum fixed
by law which they should get.

"On this predicate, We are of the considered view that, if the school happen to have no other
resources to grant allowances and benefits, either mandated by law or secured by collective
bargaining, such allowances and benefits should be charged against the return to investments
referred to in the second purpose stated in Section 3(a) of P.D. 451."

Private respondent argues that the above interpretation "disregarded the intention and spirit of the
law" which intention is clear from the "whereas" clauses as follows:

"It is imperative that private educational institutions upgrade classroom instruction . . . provide salary
and or wage increases and other benefits . . ."
Respondent further contends that PD 451 was issued to alleviate the sad plight of private schools,
their personnel and all those directly or indirectly on school income as the decree was aimed —

". . . to upgrade classroom instruction by improving their facilities and bring competent teachers in all
levels of education, provide salary and or wage increases and other benefits to their teaching,
administrative, and other personnel to keep up with the increasing cost of living." (Emphasis supplied)

Respondent overlooks the elemental principle of statutory construction that the general statements in
the whereas clauses cannot prevail over the specific or particular statements in the law itself which
define or limit the purposes of the legislation or proscribe certain acts. True, the whereas clauses of
PD 451 provide for salary and or wage increase and other benefits, however, the same do not
delineate the source of such funds and it is only in Section 3 which provides for the limitations
wherein the intention of the framers of the law is clearly outlined. The law is clear. The sixty (60%)
percent incremental proceeds from the tuition increase are to be devoted entirely to wage or salary
increases which means increases in basic salary. The law cannot be construed to include allowances
which are benefits over and above the basic salaries of the employees. To charge such benefits to the
60% incremental proceeds would be to reduce the increase in basic salary provided by law, an
increase intended also to help the teachers and other workers tide themselves and their families over
these difficult economic times.

This Court is not guilty of usurpation of legislative functions as claimed by the respondents. We
expressed the opinion in the University of the East case that benefits mandated by law and collective
bargaining may be charged to the 12% return on investments within the 40% incremental proceeds
of tuition increase. As admitted by respondent, we merely made this statement as a suggestion in
answer to the respondent’s query as to where then, under the law, can such benefits be charged. We
were merely interpreting the meaning of the law within the confines of its provisions. The law
provides that 60% should go to wage increases and 40% to institutional developments, student
assistance, extension services, and return on investments (ROI). Under the law, the last item ROI has
flexibility sufficient to accommodate other purposes of the law and the needs of the university. ROI is
not set aside for any one purpose of the university such as profits or returns on investments. The
amount may be used to comply with other duties and obligations imposed by law which the university
exercising managerial prerogatives finds cannot under present circumstances, be funded by other
revenue sources. It may be applied to any other collateral purpose of the university or invested
elsewhere. Hence, the framers of the law intended this portion of the increases in tuition fees to be a
general fund to cover up for the university’s miscellaneous expenses and, precisely, for this reason, it
was not so delimited. Besides, ROI is a return or profit over and above the operating expenditures of
the university, and still, over and above the profits it may have had prior to the tuition increase. The
earning capacities of private educational institutions are not dependent on the increases in tuition fees
allowed by P.D. 451. Accommodation of the allowances required by law require wise and prudent
management of all the university resources together with the incremental proceeds of tuition
increases. Cognizance should be taken of the fact that the private respondent had, before PD 451,
managed to grant all allowances required by law. It cannot now claim that it could not afford the
same, considering that additional funds are even granted them by the law in question. We find no
compelling reason, therefore, to deviate from our previous ruling in the University of the East case
even as we take the second hard look at the decision requested by the private Respondent. This case
was decided in 1982 when PDs 1614, 1634, 1678, and 1713 which are also the various Presidential
Decrees on ECOLA were already in force. PD 451 was interpreted in the light of these subsequent
legislations which bear upon but do not modify nor amend, the same. We need not go beyond the
ruling in the University of the East case.

Coming now to the third issue, the respondents are of the considered view that as evidenced by the
payrolls submitted by them during the period September 16 to September 30, 1981, the faculty
members have been paid for the extra loads. We agree with the respondents that this issue involves a
question of fact properly within the competence of the respondent NLRC to pass upon. The findings of
fact of the respondent Commission are binding on this Court there being no indication of their being
unsubstantiated by evidence. We find no grave abuse in the findings of respondent NLRC on this
matter to warrant reversal. Assuming arguendo, however, that the petitioners have not been paid for
these extra loads, they are not entitled to payment following the principles of "No work, no pay." This
time, the rule applies. Involved herein is a matter different from the payment of ECOLA under the first
issue. We are now concerned with extra, not regular loads for which the petitioners are paid regular
salaries every month regardless of the number of working days or hours in such a month. Extra loads
should be paid for only when actually performed by the employee. Compensation is based, therefore,
on actual work done and on the number of hours and days spent over and beyond their regular hours
of duty. Since there was no work on September 21, 1981, it would now be unfair to grant petitioner’s
demand for extra wages on that day.
Finally, disposing of the respondent’s charge of petitioner’s lack of legal capacity to sue, suffice it to
say that this question can no longer be raised initially on appeal or certiorari. It is quite belated for
the private respondent to question the personality of the petitioner after it had dealt with it as a party
in the proceedings below. Furthermore, it was not disputed that the petitioner is a duly registered
labor organization and as such has the legal capacity to sue and be sued. Registration grants it the
rights of a legitimate labor organization and recognition by the respondent University is not necessary
for it to institute this action in behalf of its members to protect their interests and obtain relief from
grievances. The issues raised by the petitioner do not involve pure money claims but are more
intricately intertwined with conditions of employment.

WHEREFORE the petition for certiorari is hereby GRANTED. The private respondent is ordered to pay
its regular fulltime teachers/employees emergency cost of living allowances for the semestral break
from November 7 to December 5, 1981 and the undistributed balance of the sixty (60%) percent
incremental proceeds from tuition increases for the same schoolyear as outlined above. The
respondent Commission is sustained insofar as it DENIED the payment of salaries for the suspended
extra loads on September 21, 1981.

SO ORDERED.

Teehankee, Melencio-Herrera, Plana and Relova, JJ., concur.

 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

GR No. L-1309 July 26, 1948

THE SHELL COMPANY OF PHILIPPINE ISLANDS, LIMITED, appellant,

v.
NATIONAL LABOR UNION, appealed.

Messrs. Ross, Selph, Carrascoso and Janda on behalf of the appellant.

Messrs. Paguia and Villanueva on behalf of the respondent.

BRIONES, J .:

Acting on a petition from the labor entity called "National Labor Union," the Court of Industrial Relations has
issued a decision in which, among other things, the oil firm "The Shell Company of Philippine Islands, Limited"
is obliged to pay to its workers who work at night (from sunset until it rises the next day) an additional
compensation of 50% on their regular wages if they worked during the day. It seems that the Comania needs
the night service of a certain number of workers, since the planes coming from abroad tend to land and take off
at night, making it necessary to carry out tasks at night for the supply of gasoline and lubricants, and for other
necessities.certiorari for us to revoke.

The appellant company alleges and argues that not only is there no legal provision that empowers the Court of
Industrial Relations to order the payment of additional compensation to workers who work at night, but, on the
contrary, Commonwealth law No. 444 It exempts the employer from such an obligation since the said law
provides for the cases in which the payment of "overtime" (additional compensation) is compulsory, and such
cases do not include night work.

For its part, the challenged labor union maintains that the power in dispute is part of the broad and effective
powers that Commonwealth Law No. 103 - the charter of the Industrial Relations Tribunal - grants to said
court; and that the Commonwealth Law No. 444 that is invoked does not have any application to the present
case, since it is necessarily limited in scope, referring specifically and exclusively to the maximum daily
workday allowed in industrial establishments - the 8 hours.

Our conclusion is that the challenged labor union is right on their part. For a clear and thorough elucidation of
the points discussed, we consider it advisable, even at the risk of lengthening this presentation, to transcribe
the pertinent legal provisions that are articles 1, 4 and 13 of Commonwealth Law No. 103. Here:
 SECTION 1. The Judge: his appointment, qualifications, compensation, tenure. - There is hereby
created a Court of Industrial Relations, which shall have jurisdiction over the entire Philippines, to
consider, investigate, decide, and settle any question, matter, controversy or dispute arising between,
and / or affecting, employers and employees or laborers , and landlords and tenants or farm-laborers,
and regulate the relation between them, subject to, and in accordance with, the provisions of this Act.
The Court shall keep a record of all its proceedings and shall be presided over by a Judge to be
appointed by the President of the Philippines with the consent of the Commission on Appointments of
the National Assembly. The Judge of the Court shall hold office during good behavior until he reaches
the age of seventy years, or becomes incapacitated to discharge the duties of his office.  His
qualifications shall be the same as those provided in the Constitution for members of the Supreme
Court and he shall receive an annual compensation of ten thousand pesos and shall be entitled to
traveling expenses and per diems when performing official duties outside of the City of Manila. The
Department of Justice shall have executive supervision over the Court.

SEC. 4. Strikes and lockouts. - The Court shall take cognizance for purpose of prevention, arbitration,
decision and settlement, of any industrial or agricultural dispute causing or likely to cause a strike or
lockout, arising form differences as regards wages, shares or compensation, hours of labor or
conditions of tenancy or employment, between employers and employees or laborers and between
landlords and tenants or farm-laborers, provided that the number of employees, laborers or tenants or
farm-laborers involved exceeds thirty, and such industrial or agricultural dispute is submitted to the
Court by the Secretary of Labor, or by any or both of the parties to the controversy and certified by the
Secretary of Labor as existing and proper to be dealt with by the Court for the sake of public interest.  In
all such cases, the Secretary of Labor or the party or parties submitting the disputes, shall clearly and
specifically state in writing the questions to be decided. Upon the submission of such a controversy or
question by the Secretary of Labor, his intervention therein as authorized by law, shall cease.

The Court shall, before hearing the dispute and in the course of such hearing, endeavor to reconcile the
parties and induce them to settle the dispute by amicable agreement. If any agreement as to the whole
or any part of the dispute is arrived at by the parties, a memorandum of its terms shall be made in
writing, signed and acknowledged by the parties thereto before the Judge of the Court or any official
acting in his behalf and authorized to administer oaths or acknowledgments, or, before a notary
public. The memorandum shall be filed in the office of the Clerk of the Court, and, unless otherwise
ordered by the Court, shall, as between the parties to the agreement, have the same effect as, and be
deemed to be, a decision or award .

SEC. 13. Character of the award . - In making an award, order or decision, under the provisions of
section four of this Act, the Court shall not be restricted to the specific relief claimed or demands made
by the parties to the industrial or agricultural dispute, but may include in the award , order or decision
any matter or determination which my be deemed necessary or expedient for the purpose of setting the
dispute or of preventing further industrial or agricultural disputes.

The following is evident from the transcribed provisions: (a) that when a dispute arises between the principal
and the employee or worker, vgr. Regarding wages, the Industrial Relations Court has jurisdiction over the
entire territory of the Philippines to consider, investigate and resolve said dispute, setting the wages it deems
fair and reasonable; (b) that for the purposes of prevention, arbitration, decision and settlement, the same
Industrial Relations Tribunal also has jurisdiction to hear any dispute - industrial or agricultural - resulting from
any differences regarding wages, participation or compensation, hours of work job, conditions of employment
or partnership between employers and employees or workers and between owners and landowners or
agricultural workers prior to the fulfillment of certain requirements and conditions, when it is seen that said
dispute causes or may cause a strike; (c) that in the exercise of its powers specified above, the Court of
Industrial Relations is not limited, when deciding the dispute, to grant the remedy or remedies requested by the
parties to the dispute, but may include in the order or decision any matter or determination for the purpose of
settling the dispute or preventing further industrial or agricultural controversies.

In the case at hand there is undoubtedly an industrial disposition. While the company, the Shell company, is not
willing to pay its night workers higher wages than the outbound workers, the "NationalLabor Union", to which
the Shell workers are affiliated, demands other types of wages for the service. night - 50% more.  This is the
dispute, the industrial litigation. Now, what has the Court of Industrial Relations done, after submitting the
conflict to its jurisdiction? Well, precisely what is mandated by the aforementioned Commonwealth Law No.
103, organic charter of its creation and operation, namely: consider, investigate and prosecute the dispute, later
resolving it in the sense in which it has been resolved, that is, remunerating the work at night with 50% more
than day wages. And this is perfectly legal both within the scope of Article 1 of the aforementioned Law No.
103, which empowers the Court of Industrial Relations to decide any dispute over wages and compensation in
the manner it deems reasonable and convenient, as well as within the framework of Article 4 of the same law
that authorizes said court to prosecute and decide any lawsuit or industrial or agricultural controversy
determines the outbreak of a strike or tends to cause it. Still further: what was done by the Industrial Relations
Court in the present case is also legal within the framework of article 13 of the same law No. 103, article that,
as seen, not only empowers said court to grant the remedy that They collect the parts, but even go further, that
is, to grant remedies not expressly requested,

It is evident that with these broad powers the State has proposed to equip the Industrial Relations Tribunal to
the maximum of utility and efficiency, making it not a mere academic agency, but truly active, dynamic and
efficient - in a word, the official machinery. par excellence in the formidable and thorny task of resolving
industrial and agricultural conflicts of a certain kind, thus preventing and avoiding those stoppages and strikes
that so afflict and damage not only companies and workers, but, in general, all community. In his concurring
opinion rendered in the authoritative case of Ang Tibay against the Industrial Relations Tribunal  1 (RG No.
46496), Judge Laurel has very correctly expressed the fundamental idea that underlines the creation of said
court, with the following pronouncement:

In Commonwealth Act No. 103, and by it, our government no longer performs the role of mere mediator
or intervenor but that of supreme arbiter . (Italics are ours.).

The appellant argues, however, that although it is true that in the event of a dispute the Industrial Relations
Court has, by virtue of its organic law, the power to set wages, such power is not absolute, but is subject to
certain restrictions and cuttings, provided in the law commonly known by law on the eight-hour workday,
Commonwealth Law No. 444, the pertinent articles of which are fully transacted below:

SECTION 1. The legal working day for any person employed by another shall be of not more than eight
hours daily. When the work is not continuous, the time during which the laborer is not working and can
leave his working place and can rest completely shall not be counted.

SEC. 3. Work may be performed beyond eight hours a day in case of actual or impending emergencies
caused by serious accidents, fire, flood, typhoon, earthquake, epidemic, or other disaster or calamity in
order to prevent loss to life and property or imminent danger to public safety; or in case urgent work to
be performed on the machines, equipment, or installations in order to avoid a serious loss which the
employer would otherwise suffer, or some other just cause of a similar nature;  but in all such cases the
laborers and employees shall be entitled to receive compensation for the overtime work performed at
the same rate as their regular wages or salary, plus at least twenty-five per centum additional.

In case of national emergency the government is empowered to establish rules and regulations for the
operation of the plants and factories and to determine the wages to be paid the laborers.

SEC. 4. No person, firm, or corporation, business establishment or place or center of labor shall compel
an employee or laborer to work during Sundays and legal holidays, unless he is paid an additional sum
of at least twenty-five per centum of his regular remuneration: Provided however , That this prohibition
shall not apply to public utilities performing some public service such as supplying gas, electricity,
power, water, or providing means of transportation or communication.

As you wish - argue the appellant's lawyers - that these articles specify the cases in which the payment of extra
or additional compensation is authorized and they are only, namely: (a) in case of "overtime" or work in excess
of the regular hours for imperative reasons of urgency due to a disaster or accident, or to avoid losses or repair
them; (b) in case of work on Sundays and holidays; (c) in an emergency, and there is nothing to do with night
work; therefore the order in question is illegal, as it is not authorized by law. "In the absence - the lawyers of the
appellant emphasize - legislation authorizing the payment of extra compensation for work done at
night,Expressio unius est exclusio alterius . Where, as in the case at bar, statute expressly specifies the cases
where payment of extra compensation may be demanded, extra compensation may be allowed in those cases
only, and in no others. The provisions of the Commonwealth Act No. 444 cannot be enlarged by implication or
otherwise. Expressum facit cessare tacitum .

The argument is wrong. Law No. 444 is not applicable to this case, it being evident that it has a specific
purpose, namely: (a) to set the maximum working day at 8 hours; (b) indicate certain exceptional cases in
which work can be authorized outside of said shift; (c) provide a bonus, which should not be less than 25% of
the regular salary, for "overtime" or work in excess of 8 hours.

In the case of Manila Electric, applicant-appellant, v. The Public Utilities Employees' Association, 2Such
restriction becomes an exception to the general power of the court to fix, in cases of dispute, the wages and
compensation that employers must pay to employees and workers; And since said article 4 refers only to salary
or compensation for work during Sundays and official holidays, it is obvious that it cannot refer to salary or
additional compensation for work outside of the eight-hour shift that is generally carried out from the beginning.
morning hours to late afternoon, as one thing is to work on Sundays and public holidays, and quite another
thing is to work at night or outside the eight-hour shift on weekdays. Applying the legal maximum " the wages
and compensation that employers must pay to employees and workers; And since said article 4 refers only to
salary or compensation for work during Sundays and official holidays, it is obvious that it cannot refer to salary
or additional compensation for work outside of the eight-hour shift that is generally carried out from the
beginning. morning hours to late afternoon, as one thing is to work on Sundays and public holidays, and quite
another thing is to work at night or outside the eight-hour shift on weekdays. Applying the legal maximum " the
wages and compensation that employers must pay to employees and workers; And since said article 4 refers
only to salary or compensation for work during Sundays and official holidays, it is obvious that it cannot refer to
salary or additional compensation for work outside of the eight-hour shift that is generally carried out from the
beginning. morning hours to late afternoon, as one thing is to work on Sundays and public holidays, and quite
another thing is to work at night or outside the eight-hour shift on weekdays. Applying the legal maximum " And
since said article 4 refers only to salary or compensation for work during Sundays and official holidays, it is
obvious that it cannot refer to salary or additional compensation for work outside of the eight-hour shift that is
generally carried out from the beginning. morning hours to late afternoon, as one thing is to work on Sundays
and public holidays, and quite another thing is to work at night or outside the eight-hour shift on
weekdays. Applying the legal maximum " And since said article 4 refers only to salary or compensation for work
during Sundays and official holidays, it is obvious that it cannot refer to salary or additional compensation for
work outside of the eight-hour shift that is generally carried out from the beginning. morning hours to late
afternoon, as one thing is to work on Sundays and public holidays, and quite another thing is to work at night or
outside the eight-hour shift on weekdays. Applying the legal maximum " and another very different thing is to
work at night or outside of the eight-hour shift on weekdays. Applying the legal maximum " and another very
different thing is to work at night or outside of the eight-hour shift on weekdays. Applying the legal maximum
"expressio unius est exclusio alterius , "it can be argued, without fear of being wrong, that a law that provides a
specific exception to its general provisions, such as additional compensation for work on Sundays and official
holidays, excludes any other, such as compensation additional for night work on weekdays. "Another case in
which this maxim may almost invariably by followed is that of statute which makes certain specific exceptions to
its general provisions. Here we may safely assume that all other exceptions were intended to be excluded.
"(Wabash R. Co. vs. United States, 178 Fed., 5, 101 CCA 133; Cella Commision Co. vs. Bohlinger, 147 Fed.,
419; 78 CCA 467; Kunkalman vs. Gibson, 171 Ind., 503; 84 NE 985; Hering vs. Clement, 133 App. Div., 293;
117 NY, Supp. 747.).

The night work that the Shell company demands of its workers is not really an "overtime", in the sense in which
this word is used in Le No. 444, but it is a full day of work, also 8 hours: that, instead of being done during the
day, it is done at night. In other words, the night work in question here is not only an excess, prolongation or
"overtime" of the regular day work, but is another type of work, absolutely independent of the daytime
shift. That is why there are two shifts: the shift of workers who work during the day; and the shift of those who
work at night. So it is not surprising that the legislator has not included this type of work among the "overtime"
cases indicated in the aforementioned Law No. 444.

The question that, in our opinion, must be determined is whether among the general powers of the Court of
Industrial Relations that are admitted without a deputy, is to consider the night shift as a full working day ; to
estimate it as more burdensomethat the day shift; and consequently, that of providing and ordering that they be
paid 50% more than the regular daytime wages. Our answer is affirmative: all this is included in the general
powers of the Court of Industrial Relations. If this court has, in cases of dispute, the power to fix the wages it
deems fair and reasonable for day work, there is no reason why it should not have the same power with
respect to night wages; one is as much work as the other. And with respect to the appreciation that night work
is heavier and more expensive than day work and, therefore, deserves higher remuneration, there is no reason
to revoke or alter it either. There is no possible argument against the universal fact that regular, normal and
ordinary work is daytime, and that night work is very exceptional and justified only for certain imperatively
unavoidable reasons. For a reason humanity has always worked during the day.

Reasons of hygiene, medicine, morals, culture, sociology, establish together that night work has many
drawbacks, and when there is no choice but to do it, it is only fair that it be remunerated better than usual to
compensate for certain point to the worker for such inconveniences. There is no doubt that night work not only
affects the worker's health in the long run, but also deprives him of certain things that make life relatively
pleasant, such as, for example, complete and uninterrupted rest and certain moments of relaxation , leisure or
spiritual and cultural expansion that you could have when finishing work in the afternoon and during the first
hours of the night. It is said that the worker can rest during the day after having worked all night; But can rest
during the day give the body that tonic and complete repairing effect that only natural rest at night can
provide? It is also said that some prefer to work at night in our scorching weather, thus avoiding the heat of the
day. We fear, however, that this is better discussed than practiced. We believe that since time immemorial the
universal rule is that man works at night more out of irremediable necessity than out of pleasant convenience.

To the vulgar, universal opinion, we must add the expert opinion, the specialist criterion.  The opinion of the
writers and experts militates decisively in favor of the thesis that night work is harder and more onerous than
day work, considering it with marked reluctance and consequently compelling capitalist management to
establish a higher scale. of wages as an incentive to workers to accept it . Several authorities could be cited,
but in order not to extend this presentation too much, we opted to transcribe only a few, namely:

. . . Then, it must be remembered that it is distinctly unphysiological to turn the night into day and
deprive the body of the beneficial effects of sunshine. The human organism revolts against this
procedure. Added to artificial lighting are reversed and unnatural times of eating, resting, and
sleeping. Much of the inferiority of nightwork can doubtless be traced to the failure of the workers to
secure proper rest and sleep, by day. Because of inability or the lack of opportunity to sleep,
nightworkers often spend their days in performing domestic duties, joining the family in the midday
meal, 'tinkering about the place', watching the baseball game, attending the theater or taking a ride in
the car. It is not strange that nightworkers tend to be less efficient than dayworkers and lose more
time. . . (The Management of Labor Relations,

Nightwork. - Nightwork has gained a measure of prominence in the modern industrial system in
connection with continuous industries, that is, industries in which the nature of the processes makes it
necessary to keep machinery and equipment in constant operation. Even in continuous industries the
tendency is definitely in the direction of FOUR shifts of 6 hours each, with provision for an automatic
change of shift for all workers at stated intervals. Some discussion has taken place with regard to the
lengths of the period any workers should be allowed to remain on the night shift. A weekly change of
shifts is common, specially where three or four shifts are in operation; in other cases the change is
made fortnightly or monthly; in still other instances, no alternation is provided for, the workers remaining
on day - or nightwork permanently,

There is a sharp difference of opinion concerning the relative merits of these systems.  Advocates of the
weekly change of shifts contend that the strain of nightwork and the difficulty of getting adequate sleep
during the day make it unwise for workers to remain on the "graveyard" shift for more than a week at a
time. Opponents urge that repeated changes make it more difficult to settle down to either kind of shift
and that after the first week nightwork becomes less trying while the ability to sleep by day
increases. Workers themselves react in various ways to the different systems. This much, however, is
certain: Few persons react favorably to nightwork, whether the shift be continuous or
alternating. Outside of continuous industries, nightwork can scarcely be justified, and, even in these,

Nightwork cannot be regarded as desirable, either from the point of view of the employer or of the wage
earner. It is uneconomical unless overhead costs are unusually heavy. Frequently the scale of wages is
higher as an inducement to employees to accept employment on the night shift, and the rate of
production is generally lower. (Management of Labor Relations, by Watkins & Dodd, pp. 522-524;
emphasis ours.)

. . . The lack of sunlight tends to produce anemia and tuberculosis and to predispose to other
ills. Nightwork brings increased liability to eyestrain and accident. Serious moral dangers are also likely
to result from the necessity of traveling the streets alone at night, and from the interference with normal
home life. From an economic point of view, moreover, the investigations showed that nightwork was
unprofitable, being inferior to day work both in quality and in quantity. Wherever it had been abolished,
in the long run the efficiency both of the management and of the workers was raised. Furthermore, it
was found that nightwork laws are a valuable aid in enforcing acts fixing the maximum period of
employment. (Principles of Labor Legislation, by Commons and Andrews, 4th Revised Edition, p. 142.)

Special regulation of nightwork for adult men is a comparatively recent development. Some European
countries have adopted laws placing special limitations on hours of nightwork for men, and others
prohibit such work except in continuous processes. (Principles of Labor legislation, 4th Revised Edition
by Common & Andrews, p. 147.)

Nightwork has almost invariably been looked upon with disfavor by students of the problem because of
the excessive strain involved, especially for women and young persons, the large amount of lost time
consequent upon exhaustion of the workers, the additional strain and responsibility upon the executive
staff , the tendency of excessively fatigued workers to "keep going" on artificial stimulants, the general
curtailment of time for rest, leisure, and cultural improvement, and the fact that night workers, although
precluded to an extent from the activities of day life, do attempt to enter into these activities, with
resultant impairment of physical well-being. It is not contended, of course, that nightwork could be
abolished in the continuous-process industries, but it is possible to put such industries upon a three- or
four-shifts basis, and to prohibit nightwork for women and children. (Labor's Progress and Problems,
Vol. I, p. 464, by Professors Millis and Montgomery.)

Nightwork. - Civilized peoples are beginning to recognize the fact that except in cases of necessity or in
periods of great emergency, nightwork is socially undesirable. Under our modern industrial system,
however, nightwork has greatly aided the production of commodities, and has offered a significant
method of cutting down the ever-increasing overhead costs of industry. This result has led employers to
believe that such work is necessary and profitable. Here again one meets a conflict of economic and
social interests. Under these circumstances it is necessary to discover whether nightwork has
deleterious effects upon the health of laborers and tends to reduce the ultimate supply of efficient
labor. If it can proved that nightwork affects adversely both the quality and quantity of productive
labor, its discontinuance will undoubtedly be sanctioned by employers. From a social point of view,
even a relatively high degree of efficiency in night operations must be forfeited if it is purchased with
rapid exhaustion of the health and energy of the workers. From an economic point of view, nightwork
may be necessary if the employer is to meet the demand for his product, or if he is to maintain his
market in the face of increasing competition or mounting variable production costs.

Industrial experience has shown that the possession of extra-ordinary physical strength and self-control
facilitates the reversal of the ordinary routine of day work and night rest, with the little or no unfavorable
effect on health and efficiency. Unusual vitality and self-control, however, are not common
possessions. It has been found that the most serious obstacle to a reversal of the routine is the lack of
self-discipline. Many night workers enter into the numerous activities of day life that preclude sleep, and
 continue to attempt to do their work at night. Evidence gathered by the British Health of Munition
Workers' Committee places permanent night workers, whether judged on the basis of output or loss of
time, in a very unfavorable positions as compared with day workers.

Systems of nightwork differ. There is the continuous system, in which employees labor by night and do
not attend the establishment at all by day, and the discontinuous system, in which the workers change
to the day turn at regular intervals, usually every other week. There are, of course, minor variations in
these systems, depending upon the nature of the industry and the wishes of management. Such bodies
as the British Health Munition Workers' Committee have given us valuable conclusions concerning the
effect of nightwork. Continuous nightwork is definitely less productive than the discontinuous
system. The output of the continuous day shift does not make up for this loss in production.

There is, moreover, a marked difference between the rates of output of night and day shifts on the
discontinuous plan. In each case investigated the inferiority of night labor was definitely
established. This inferiority is evidently the result of the night worker's failure to secure proper amounts
of sleep and rest during the day. The system of continuous shifts, especially for women, is regarded by
all investigators as undesirable. Women on continuous nightwork are likely to perform domestic duties,
and this added strain undoubtedly accounts for the poorer results of their industrial activities.

The case against nightwork, then, may be said to rest upon several grounds. In the first place, there are
the remotely injurious effects of permanent nightwork manifested in the later years of the worker's
life. Of more immediate importance to the average worker is the disarrangement of his social life,
including the recreational activities of his leisure hours and the ordinary associations of normal family
relations. From an economic point of view, nightwork is to be discouraged because of its adverse effect
upon efficiency and output. A moral argument against nightwork in the case of women is that the night
shift forces the workers to go to and from the factory in darkness. Recent experiences of industrial
nations have added much to the evidence against the continuation of nightwork, except in extraordinary
circumstances and unavoidable emergencies. The immediate prohibition of nightwork for all laborers is
hardly practicable; its discontinuance in the case of women employees is unquestionably
desirable. 'The night was made for rest and sleep and not for work' is a common saying among wage-
earning people, and many of them dream of an industrial order in which there will be no night
shift. (Labor Problems, 3rd Edition, pp. 325-328, by Watkins & Dodd.).

On the merits of the foregoing, the petition for certiorari filed is denied and the judgment of the Industrial Claims
Court is confirmed, with costs borne by the appellant. So ordered.

Paras, Pres. Interim, Feria, Pablo, Perfecto, Bengzon, Padilla and Tuason, MM., Are satisfied.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 111988 October 14, 1994

ASSOCIATED LABOR UNIONS (ALU)-TUCP in behalf of its members at AMS FARMING

CORPORATION, petitioner,
vs.
VOLUNTARY ARBITRATOR ROSALINA LETRONDO-MONTEJO and AMS FARMING
CORPORATION, respondent.

Seno, Mendoza and Associates for petitioner.

Castro, Enriquez, Carpio, Guillen and Associates for private respondents.

MENDOZA, J.:

This is a petition for certiorari to set aside the decision dated July 19, 1993 of public respondent Voluntary
Arbitrator Rosalina Letrondo-Montejo insofar as it dismissed the claim of petitioner's members for holiday pay
for December 4, 1992, which had been declared a special day for the holding of Sangguniang Kabataan
election.

The facts are as follows:

On December 27, 1990, petitioner Associated Labor Unions (ALU-TUCP and private respondent AMS Farming
Corporation entered into a five-year Collective Bargaining Agreement beginning November 1, 1990 and
ending midnight of October 31, 1995. The CBA covers the regular daily-paid rank-and-file employees of private
respondent AMS Farming Corp. at Sampao, Kapalong, Davao del Norte and Magatos, Asuncion, Davao del
Norte.

Art. VII, sec 3. of the CBA provides:

New Year, Maundy Thursday, Good Friday, Araw ng Kagitingan, 1st of May, 12th of June, Araw
ng Dabaw, 4th of July, Last Sunday of August, 1st November, 30th of November, 25th of
December, 30th of December and the days designated by law for holding referendum and
 local/national election shall be considered paid regular holidays. Consequently, they shall
receive their basic pay even if they do not work on those days. Any employee required to work
on these holidays shall be paid at last TWO HUNDRED PERCENT (200%) of his daily wage.
Covered employees performing overtime work on these days shall be entitled to another
THIRTY PERCENT (30%) overtime pay. It is understood however, that any covered employee
who shall be absent for more than one day immediately preceding the paid holiday shall not be
entitled to the holiday pay.

The President of the Philippines declared December 4, 1992 a "special day" for the holding of election for
Sangguniang Kabataan (SK) throughout the nation. Employees covered by the CBA subsequently filed claims
for the payment to them of holiday pay for that day. Private respondent, however, refused their claims on the
ground that December 4, 1992 was not a regular holiday within the contemplation of the CBA.

The matter was eventually submitted to voluntary arbitration. At the conference held on February 19, 1993, the
parties agreed, among others things, to submit the following issue:

Is the Sangguniang Kabataan Election Day considered a regular holiday for purpose of said
Section 3, Article VII of the CBA?

In connection with this issue, they agreed that the Sangguniang Kabataan Election Day was a holiday as
decreed by the President of the Philippines.

The parties presented position papers and thereafter submitted the case for resolution.

On July 19, 1993, public respondent rendered an "Award"  in which, while holding employees who had become
1

regular employees on November 1, 1990 entitled to salary increases under the CBA, nonetheless dismissed
their claim for holiday pay for December 4, 1992 on the ground that the Sangguniang Kabataan election "by
any stretch of the imagination cannot be considered as a local election within the meaning of CBA because not
all people can vote in the said election but only qualified youths." According to the Voluntary Arbitrator, "A 'local
election' is generally understood to mean the election by the people of their local leaders like the governors,
mayors, members of the provincial and municipal councils, and barangay officials. And when a local election is
held, the day is declared a non-working holiday. This is our experience in local and national elections. In the
case of the Sangguniang Kabataan (SK) elections, it was a working holiday. Except for the qualified youthful
voters, not everybody noticed said election as not everyone voted in the said election."

Hence, this petition, the only issue in which is whether the election for the Sangguniang Kabataan on
December 4, 1992 was a "local/national election" within the contemplation of Art. VII, sec. 3 of the CBA so as to
entitle petitioner's members, who are employed at the AMS Farming Corp. to the payment of holiday pay for
that day.

We hold that it is and that, in denying petitioner's claim, respondent Voluntary Arbitrator denied members of
petitioner union substantial justice as a result of her erroneous interpretation of the CBA, thereby justifying
judicial review.
2

First. The Sangguniang Kabataan (SK) is part of the local government structure. The Local Government Code
(Rep. Act. No. 7160) creates in every barangay a Sangguniang Kabataan composed of a chairman, seven (7)
members, a secretary and a treasurer.  The chairman and the seven members are elected by the Katipunan ng
3

Kabataan, which is composed of citizens of the Philippines residing in the barangay for at least six (6) months,
who are between the ages of 15 and 21 and who are registered as members.  The chairman of the SK is an ex
4

officio member of the Sangguniang Baranggay with the same powers duties, functions and privileges as the
regular members of the Sangguniang Barangay.  The President of the Pederasyon ng mga Sangguniang
5

Kabataan, which is imposed of the SK chairmen of the sangguniang kabataan of the barangays in the province,
city, or municipality, is an ex officio member of the Sangguniang Panlalawigan, Sangguniang Panlungsod, and
Sangguniang Bayan. 6
Hence, as the Solicitor General points out, the election for members of the SK may properly be considered a
"local election" within the meaning of Art. VII, sec 3 of the CBA and the day on which it is held to be a holiday,
thereby entitling petitioners members at the AMS Farming Corp. to the payment of holiday on such day.

Second. The Voluntary Arbitrator held, however, that the election for members of the SK cannot be considered
a local election as the election for Governors , Vice Governors, Mayors and Vice Mayors and the various local
legislative assemblies (sanggunians) because the SK election is participated in only by the youth who are
between the ages of 15 and 21 and for this reason the day is not a nonworking holiday.

To begin with, it is not true that December 4, 1992 was not a nonworking holiday. It was a nonworking holiday
and this was announced in the media.  In Proclamation No. 118 dated December 2, 1992 President Ramos
7

declared the day as "a special day through the country on the occasion of the Sangguniang Kabataan
Elections" and enjoined all "local government units through their respective Chief Local Executives [to] extend
all possible assistance and support to ensure the smooth conduct of the general elections."

A "special day" is a "special day", as provided by the Administrative Code of 1987.  On the other hand, the term
8

"general elections" means, in the context of SK elections, the regular elections for members of the SK, as
distinguished from the special elections for such officers.
9

Moreover, the fact that only those between 15 and 21 take part in the election for members of the SK does not
make such election any less a regular local election. The Constitution provides, for example, for the sectoral
representatives in the House of Representatives of, among others, women and youth.   Only voters belonging
10

to the relevant sectors can take part in the election of their representatives. Yet it cannot be denied that such
election is a regular national election and the day set for its holding, a holiday.

Third. Indeed, the CBA provision in question merely reiterates the provision on paid holidays. Thus, the Labor
Code provides:

Art. 94. Right to holiday pay. — (a) Every worker shall be paid his regular daily wage during
regular holidays except in retail and service establishments regularly employing less than ten
(10) workers;

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

(c) As used in this Article, "holiday" includes: New Years Day, Maundy Thursday, Good Friday,
the ninth of April, the first of May, the twelfth of June, the fourth of July, the thirtieth of
November, the twenty-fifth and the thirtieth of December, and the day designated by law for
holding a general election.

As already explained, the phrase "general election" means regular local and national elections.

Consequently, whether in the context of the CBA or the Labor Code, December 4, 1992 was a holiday for
which holiday pay should be paid by respondent employer.

WHEREFORE, the decision dated July 19, 1993 of public respondent Rosalina Letrondo-Montejo, insofar as it
dismissed petitioner's claim for holiday pay, is SET ASIDE and private respondent is ORDERED to pay
petitioner's members their regular holiday pay for December 4, 1992 in accordance with Art. VII, sec. 3 of the
Collective Bargaining Agreement.

SO ORDERED.

Narvasa, C.J., Padilla, Regalado and Puno, JJ., concur.

 SECOND DIVISION

G.R. No. 114734             March 31, 2000

VIVIAN Y. IMBUIDO, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, INTERNATIONAL INFORMATION SERVICES, INC. and
GABRIEL LIBRANDO, respondents.

BUENA, J.:

This special civil action for certiorari seeks to set aside the Decision of the National Labor Relations
1 

Commission (NLRC) promulgated on September 27, 1993 and its Order dated January 11, 1994, which denied
petitioner's motion for reconsideration.

Petitioner was employed as a data encoder by private respondent International Information Services, Inc., a
domestic corporation engaged in the business of data encoding and keypunching, from August 26, 1988 until
October 18, 1991 when her services were terminated. From August 26, 1988 until October 18, 1991, petitioner
entered into thirteen (13) separate employment contracts with private respondent, each contract lasting only far
a period of three (3) months. Aside from the basic hourly rate, specific job contract number and period of
employment, each contract contains the following terms and conditions:

a. This Contract is for a specific project/job contract only and shall be effective for the period covered as
above-mentioned unless sooner terminated when the job contract is completed earlier or withdrawn by
client, or when employee is dismissed for just and lawful causes provided by law. The happening of any
of these events will automatically terminate this contract of employment.
 b. Subject shall abide with the Company's rules and regulations for its employees attached herein to
form an integral part hereof.

c. The nature of your job may require you to render overtime work with pay so as not to disrupt the
Company's commitment of scheduled delivery dates made on said job contract. 2

In September 1991, petitioner and twelve (12) other, employees of private respondent allegedly agreed to the
filing of a petition for certification election involving the rank-and-file employees of private respondent. Thus, on
3 

October 8, 1991, Lakas Manggagawa sa Pilipinas (LAKAS) filed a petition for certification election with the
Bureau of Labor Relations (BLR), docketed as NCR-OD-M-9110-128. 4

Subsequently, on October 18, 1991, petitioner received a termination letter from Edna Kasilag, Administrative
Officer of private respondent, allegedly "due to low volume of work." 5

Thus, on May 25, 1992, petitioner filed a complaint for illegal dismissal with prayer for service incentive leave
pay and 13th month differential pay, with the National Labor Relations Commission, National Capital Region,
Arbitration Branch, docketed as NLRC-NCR Case No. 05-02912-92. 6

In her position paper dated August 3, 1992 and filed before labor arbiter Raul T. Aquino, petitioner alleged that
her employment was terminated not due to the alleged low volume of work but because she "signed a petition
for certification election among the rank and file employees of respondents," thus charging private respondent
with committing unfair labor practices. Petitioner further complained of non-payment of service incentive leave
benefits and underpayment of 13th month pay.7

On the other hand, private respondent, in its position paper filed on July 16, 1992, maintained that it had valid
reasons to terminate petitioner's employment and disclaimed any knowledge of the existence or formation of a
union among its rank-and-file employees at the time petitioner's services were terminated. 8 Private respondent
stressed that its business ". . . relies heavily on companies availing of its services. Its retention by client
companies with particular emphasis on data encoding is on a project to project basis," 9 usually lasting for a
period of "two (2) to five (5) months." Private respondent further argued that petitioner's employment was for a
"specific project with a specified period of engagement." According to private respondent, ". . . the certainty of
the expiration of complainant's engagement has been determined at the time of their (sic) engagement (until 27
November 1991) or when the project is earlier completed or when the client withdraws," as provided in the
contract.  "The happening of the second event [completion of the project] has materialized, thus, her contract
10 

of employment is deemed terminated per the Brent School ruling."  Finally, private respondent averred that
11 

petitioner's "claims for non-payment of overtime time (sic) and service incentive leave [pay] are without factual
and legal basis." 
12

In a decision dated August 25, 1992, labor arbiter Raul T. Aquino, ruled in favor of petitioner, and accordingly
ordered her reinstatement without loss of seniority rights and privileges, and the payment of backwages and
service incentive leave pay. The dispositive part of the said decision reads:

WHEREFORE, responsive to the foregoing, judgment is hereby rendered ordering respondents to

immediately reinstate complainant [petitioner herein] as a regular employee to her former position
without loss of seniority rights and privileges and to pay backwages from the time of dismissal up to the
date of this decision, the same to continue until complainant ['s] [petitioner herein] actual reinstatement
from (sic) the service. Respondents are likewise ordered to pay complainant [petitioner herein] service
incentive leave pay computed as follows:

Backwages:

10/18/91 - 8/25/92 = 10.23 mos.

P118.00 x 26 x 10.23 mos. = P31, 385.64

 Service Incentive Leave Pay

1989 = P89.00 x 5 days = P445.00

1990 = 106 x 5 days = P530.00

1991 = 118 x 5 days = P590.00

P 1,565.00

Total P 32,950.64
==========

SO ORDERED.  13

In his decision, the labor arbiter found petitioner to be a regular employee, ruling that "[e]ven if herein
complainant [petitioner herein] had been obstensively (sic) hired for a fixed period or for a specific undertaking,
she should be considered as [a] regular employee of the respondents in conformity with the provisions (sic) laid
down under Article 280 of the Labor Code,"  after finding that ". . . [i]t is crystal clear that herein complainant
14 

[petitioner herein] performed a job which are (sic) usually necessary or desirable in the usual business of
respondent [s]."  The labor arbiter further denounced ". . . the purpose behind the series of contracts which
15 

respondents required complainant to execute as a condition of employment was to evade the true intent and
spirit of the labor laws for the workingmen . . . ."  Furthermore, the labor arbiter concluded that petitioner was
16 

illegally dismissed because the alleged reason for her termination, that is, low volume of work, is "not among
the just causes for termination recognized by law,"  hence, he ordered her immediate reinstatement without
17 

loss of seniority rights and with full backwages. With regard to the service incentive leave pay, the labor arbiter
decided ". . . to grant the same for failure of the respondents to fully controvert said claims."   Lastly, the labor
18 

arbiter rejected petitioner's claim for 13th month pay ". . . since complainant [petitioner herein] failed to fully
substantiate and argued (sic) the same."  19

On appeal, the NLRC reversed the decision of the labor arbiter in a decision  promulgated on September 27,
20 

1993, the dispositive part of which reads:

WHEREFORE, the appealed decision is hereby set aside. The complaint for illegal dismissal is hereby
dismissed for being without merit. Complainant's [petitioner herein] claim for service incentive leave pay
is hereby remanded for further arbitration.

SO ORDERED.  21

The NLRC ruled that "[t]here is no question that the complainant [petitioner herein], viewed in relation to said
Article 280 of the [Labor] Code, is a regular employee judging from the function and/or work for which she was
hired. . . . But this does not necessarily mean that the complainant [petitioner herein] has to be guaranteed a
tenurial security beyond the period for which she was hired."  The NLRC held that ". . . the complainant
22 

[petitioner herein], while hired as a regular worker, is statutorily guaranteed, in her tenurial security, only up to
the time the specific project for which she was hired is completed."  Hence, the NLRC concluded that "[w]ith
23 

the specific project "at RCBC 014" admittedly completed, the complainant [petitioner herein] has therefore no
valid basis in charging illegal dismissal for her concomittant (sic) dislocation." 
24

In an Order dated January 11, 1994, the NLRC denied petitioner's motion for reconsideration.  25

In this petition for certiorari, petitioner, for and in her behalf, argues that (1) the public respondent "committed
grave abuse of discretion when it ignored the findings of Labor Arbiter Raul Aquino based on the evidence
presented directly before him, and when it made findings of fact that are contrary to or not supported by
evidence,"  (2) "[p]etitioner was a "regular employee," NOT a "project employee" as found by public
26 

respondent NLRC,"  (3) "[t]he termination of petition (sic) was tainted with unfair labor practice,"  and (4) the
27  28 

public respondent "committed grave abuse of discretion in remanding the awarded service incentive leave pay
for further arbitration."  29

The petition is impressed with merit.

We agree with the findings of the NLRC that petitioner is a project employee. The principal test for determining
whether an employee is a project employee or a regular employee is whether the project employee was
assigned to carry out a specific project or undertaking, the duration and scope of which were specified at the
time the employee was engaged for that project.  A project employee is one whose employment has been
30 

fixed for a specific project or undertaking, the completion or termination of which has been determined at the
time of the engagement of the employee or where the work or service to be performed is seasonal in nature
and the employment is for the duration of the season. 31 In the instant case, petitioner was engaged to perform
activities which were usually necessary or desirable in the usual business or trade of the employer, as
admittedly, petitioner worked as a data encoder for private respondent, a corporation engaged in the business
of data encoding and keypunching, and her employment was fixed for a specific project or undertaking the
completion or termination of which had been determined at the time of her engagement, as may be observed
from the series of employment contracts  between petitioner and private respondent, all of which contained a
32 

designation of the specific job contract and a specific period of employment. 1âwphi1.nêt

However, even as we concur with the NLRC's findings that petitioner is a project employee, we have reached a
different conclusion. In the recent case of Maraguinot, Jr. vs. NLRC,  we held that "[a] project employee or a
33 

member of a work pool may acquire the status of a regular employee when the following concur:

1) There is a continuous rehiring of project employees even after [the] cessation of a

project; 34 and

2) The tasks performed by the alleged "project employee" are vital, necessary and
indispensable to the usual business or trade of the employer. 35

The evidence on record reveals that petitioner was employed by private respondent as a data encoder,
performing activities which are usually necessary or desirable in the usual business or trade of her employer,
continuously for a period of more than three (3) years, from August 26, 1988 to October 18, 1991  and 36 

contracted for a total of thirteen (13) successive projects. We have previously ruled that "[h]owever, the length
of time during which the employee was continuously re-hired is not controlling, but merely serves as a badge of
regular employment."  Based on the foregoing, we conclude that petitioner has attained the status of a regular
37 

employee of private respondent.

At this point, we reiterate with emphasis that:

x x x           x x x          x x x

At this time, we wish to allay any fears that this decision unduly burdens an employer by imposing a
duty to re-hire a project employee even after completion of the project for which he was hired. The
import of this decision is not to impose a positive and sweeping obligation upon the employer to re-hire
project employees. What this decision merely accomplishes is a judicial recognition of the employment
status of a project or work pool employee in accordance with what is fait accompli, i.e., the continuous
re-hiring by the employer of project or work pool employees who perform tasks necessary or desirable
to the employer's usual business or trade. Let it not be said that this decision "coddles" labor, for
as Lao  has ruled, project or work pool employees who have gained the status of regular employees
38 

are subject to the "no work-no pay" principle, to repeat:

A work pool may exist although the workers in the pool do not receive salaries and are free to seek
other employment during temporary breaks in the business, provided that the worker shall be available
 when called to report for a project. Although primarily applicable to regular seasonal workers, this set-
up can likewise be applied to project workers insofar as the effect of temporary cessation of work is
concerned. This is beneficial to both the employer and employee for it prevents the unjust situation of
"coddling labor at the expense of capital" and at the same time enables the workers to attain the status
of regular employees.

The Court's ruling here is meant precisely to give life to the constitutional policy of strengthening the
labor sector, but, we stress, not at the expense of management. Lest it be misunderstood, this ruling
does not mean that simply because an employee is a project or work pool employee even outside the
construction industry, he is deemed, ipso jure, a regular employee. All that we hold today is that once a
project or work pool employee has been: (1) continuously, as opposed to intermittently, re-hired by the
same employer for the same tasks or nature of tasks; and (2) these tasks are vital, necessary and
indispensable to the usual business or trade of the employer, then the employee must be deemed a
regular employee, pursuant to Article 280 of the Labor Code and jurisprudence. To rule otherwise
would allow circumvention of labor laws in industries not falling within the ambit of Policy Instruction
No. Policy Department Order No. 19, hence allowing the prevention of acquisition of tenurial security by
project or work pool employees who have already gained the status of regular employees by the
employer's conduct.  (emphasis supplied)
39 

Being a regular employee, petitioner is entitled to security of tenure and could only be dismissed for a just or
authorized cause, as provided in Article 279 of the Labor Code, as amended:

Art. 279. Security of Tenure - In cases of regular employment, the employer shall not terminate the
services of an employee except for a just cause or when authorized by this Title. An employee who is
unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other
privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was withheld from him up to the time of his actual
reinstatement.

The alleged causes of petitioner's dismissal (low volume of work and belatedly, completion of project) are not
valid causes for dismissal under Articles 282 and 283 of the Labor Code. Thus, petitioner is entitled to
reinstatement without loss of seniority rights and other privileges, and to her full backwages, inclusive of
allowances, and to her other benefits or their monetary equivalent computed from the time her compensation
was withheld from her up to the time of her actual reinstatement. However, complying with the principles of
"suspension of work" and "no work, no pay" between the end of one project and the start of a new one, in
computing petitioner's backwages, the amounts corresponding to what could have been earned during the
periods from the date petitioner was dismissed until her reinstatement when private respondent was not
undertaking any project, should be deducted. 1âwphi1

With regard to petitioner's claim for service incentive leave pay, we agree with the labor arbiter that petitioner is
entitled to service incentive leave pay, as provided in Article 95 of the Labor Code, which reads:

Art. 95 - Right to service incentive leave -

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

x x x           x x x          x x x

Having already worked for more than three (3) years at the time of her unwarranted dismissal,
petitioner is undoubtedly entitled to service incentive leave benefits, computed from 1989 until the date
of her actual reinstatement. As we ruled in the recent case of Fernandez vs. NLRC,  "[s]ince a service
40 

incentive leave is clearly demandable after one year of service - whether continuous or broken - or its
equivalent period, and it is one of the "benefits" which would have accrued if an employee was not
 otherwise illegally dismissed, it is fair and legal that its computation should be up to the date of
reinstatement as provided under Section [Article] 279 of the Labor Code, as amended, which reads:

Art. 279. Security of Tenure. - An employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary equivalent computed from the time his
compensation is withheld from him up to the time of his actual reinstatement." (emphasis supplied).

WHEREFORE, the instant petition is GRANTED. The assailed decision of the National Labor Relations
Commission in NLRC NCR CA No. 003845-92 dated September 27, 1993, as well as its Order dated January
11, 1994, are hereby ANNULLED and SET ASIDE for having been rendered with grave abuse of discretion,
and the decision of the Labor Arbiter in NLRC NCR Case No. 05-02912-92 is REINSTATED with
MODIFICATION as above-stated, with regard to computation of back wages and service incentive leave pay. 1âwphi1.nêt

SO ORDERED.

Bellosillo, Mendoza, Quisumbing and De Leon, Jr., JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 117460 January 6, 1997

REPUBLIC PLANTERS BANK now known as PNB-REPUBLIC BANK, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and ANTONIO G. SANTOS, respondents.

BELLOSILLO, J.:

ANTONIO G. SANTOS was employed by Republic Planters Bank, now known as PNB-Republic Bank (PNB-
RB), for thirty-one (31) years and fifteen (15) days occupying various positions. At the time of his retirement on
31 May 1990 he was a Department Manager with a monthly salary of P8,965.00 and accumulated leave credits
of two hundred and seventy-two (272) days. He received a gratuity pay of P434,468.52 out of which
P20,615.62 was deducted for taxes due.

Santos filed the instant suit for underpayment of gratuity pay, non-payment of accumulated sick and vacation
leaves, mid-year and year-end bonuses, financial assistance, at the same time claiming damages and
attorney's fees.

The Labor Arbiter found for complainant Santos and this finding was affirmed by the National Labor Relations
Commission (NLRC) on appeal.

PNB-RB alleges in this petition that the resolution of NLRC is contrary to the evidence and existing
jurisprudence; that NLRC gravely abused its discretion when it upheld the order of the Labor Arbiter awarding
P661,210.63 to Santos; and, that the award to Santos of mid-year and year-end bonuses, moral and exemplary
damages and attorney's fees has no legal basis. Petitioner argues that Santos is not entitled to the award as he
signed a Release, Waiver and Quitclaim therefor when he received his gratuity pay of P434,468.52.

We are not unaware that a quitclaim by an employee in favor of his employer amounts to a valid and binding
compromise agreement between them.   An agreement voluntarily entered into which represents a reasonable
1

settlement is binding on the parties and may not later be disowned simply because of a change of mind.  2

On the other hand, we are not also unmindful of the principle that quitclaims are ineffective to bar recovery for
the full measure of the worker's rights   and that acceptance thereof does not amount to estoppel.   Generally,
3 4

quitclaims by laborers are frowned upon as contrary to public policy.   And the fact that the consideration given
5

in exchange thereof was very much less than the amount claimed renders the quitclaim null and void.    In the6

instant case, the total amount claimed by Santos is P908,022.65 of which only P434,468.52 was received by
him. Considering that the Release, Waiver and Quitclaim was signed by Santos under protest as found by the
Labor Arbiter and the NLRC, and the difference between the amount claimed and that paid cannot in any way
be considered negligible, we deem it proper to recompute and determine the exact amount of the retirement
benefits due private respondent. We perceive the waiver under the facts of the case to dangerously encroach
on the entrenched domain of public policy.

Petitioner invokes Periquet v. National Labor Relations Commission   to thwart private respondent's claim.
7

Unfortunately, the case does not provide the desired relief. In Periquet, the consideration for the quitclaim was
found to be credible and reasonable. In the case before us, we are unable to make such finding for the
difference involved is considerably big and substantial. The total of the claim is P908,022.65. Deducting
therefrom the amount of P434,468.52 already received by respondent Santos leaves a difference of
P473,554.13 which is even more than what he had been given.

PNB-RB avers that the NLRC gravely abused its discretion when it computed the gratuity pay of Santos at
P661,210.63 based on the salary rate of the next higher rank on the theory that he acquired a vested right over
it pursuant to the 1971-1973 Collective Bargaining Agreement (CBA). Petitioner posits that as the CBA had
long expired it could no longer be used as basis in computing the gratuity pay of its retiring officers; instead, the
computation should be based on the practice and policy of the bank effective at the time of the employee's
retirement.

We cannot agree. Not so long ago we resolved exactly the same issues in  Republic Planters Bank v. National
Labor Relations Commissions   which, coincidentally, emanated from a similar set of facts. In that case,
8

Macario de Guzman resigned from PNB-RB on 3 June 1985. The following day he filed a complaint with the
Department of Labor and Employment for underpayment of gratuity pay, underpayment of unused leaves and
non-payment of accrued leave credits. De Guzman bewailed the erroneous computation of his gratuity pay and
the cash value of his accumulated leave credits, and maintained that it should have been based on the
provisions of the 1971-1973 CBA instead of the 1982-1985 CBA entered into between PNB-RB and its rank-
and-file employees. In finding for de Guzman we ruled —

Prior to private respondent's resignation, there were other managerial employees who resigned
and/or retired from petitioner's employ who received their corresponding gratuity benefits and
the cash value of their accumulated leave credits pursuant to the provisions of the old CBA of
1971-73 despite its expiration in 1976. Among them were Simplicio Manalo and Miguel
Calimbas who resigned on 15 March 1977 and 15 July 1978, respectively. With such a practice
and policy, petitioner cannot refuse to pay private respondent his gratuity benefits under the old
CBA. Under Section 14(a), Rule 1 of the Rules and Regulations Implementing Book VI of the
Labor Code, it is provided:

Sec. 14. Retirement Benefits. — (a) An employee who is retired pursuant to a

bonafide retirement plan or in accordance with the applicable individual or
collective agreement or established employer policy shall be entitled to all the
retirement benefits provided therein . . . — (Emphasis supplied).
 The foregoing provision explicitly states that a company practice or policy is a labor standard in
determining the retirement benefits of its employees.

The petitioner's theory that the computation of the benefits of private respondent should be
based on the 1982-85 CBA which was the one enforced at the time of his resignation is
untenable. Said CBA was entered into by petitioner with its rank-and-file employees. Private
respondent is a managerial employee who, by express provision of law, is excepted from the
coverage of the aforesaid contract. Private respondent was not a party thereto and could not be
bound thereby.

Since no new CBA had been entered into between the managerial employees and petitioner
upon the expiration of the said 1971-73 CBA, private respondent has acquired a vested right to
the said established policy of petitioner in applying the 1971-73 CBA to retiring or resigning
executives of managerial employees. Such right cannot be curtailed or diminished.  9

We maintain the same dictum in the case before us. PNB-RB insists on disowning any practice or policy of
granting gratuity pay to its retiring officers based on the salary rate of the next higher rank. It admitted however
that it granted gratuity pay on the basis of the salary rate of the next higher rank but only in the case of
Simplicio Manalo. As to other instances when it granted gratuity pay based on the salary rate of the next higher
rank, PNB-RB explains that those were not voluntarily done but were in lawful compliance with court orders.

PNB-RB asserts that our findings in the Republic Planters Bank v. National Labor Relations
Commission   were definitely erroneous as they were contrary to law and the facts of the case. Thus, the error
10

should not be perpetuated.  11

A punctilious perusal of the records leads us to the same conclusion, i.e., that PNB-RB has adopted the policy
of granting gratuity benefits to its retiring officers based on the salary rate of the next higher rank. It continued
to adopt this practice even after the expiration of the 1971-1973 CBA. The grant was consistent and deliberate
although petitioner knew fully well that it was not required to give the benefits after the expiration of the 1971-
1973 CBA. Under these circumstances, the granting of the gratuity pay on the basis of the salary rate of the
rank next higher may be deemed to have ripened into company practice or policy which can no longer be
peremptorily withdrawn.   Any benefit and supplement being enjoyed by the employees cannot be reduced,
12

diminished, discontinued or eliminated by the employer by virtue of Sec. 10 of the Rules and Regulations
Implementing P.D. No. 851 and Art. 100 of the Labor Code which prohibit the diminution or elimination by the
employer of the employees' existing benefits.   Leave credits should likewise be computed based on the
13

upgraded salary rate, i.e., the salary rate of the next higher rank in conformity with the provisions of the 1971-
1973 CBA which in part read —

Sec. 14. The Bank agrees to grant to each regular supervisor employee upon his retirement,
resignation or separation without cause after July 1, 1969, the following benefits:

a) Gratuity pay equivalent to one (1) month salary plus the corresponding living allowance of the
rank next higher than the rank of such supervisor at the time of his retirement, resignation or
separation without cause, for every year of service in the Bank, provided that the said
supervisor has at least five (5) years of continuous service with the Bank.

b) The cash equivalent of the accumulated sick and vacation leaves since the time of his initial
employment with the Bank.  14

Under this section, only the gratuity pay is expressly entitled to be computed based on the salary rate of the
rank next higher. This however should not be interpreted in isolation. In this instance, it may be worth to look
into the reasons which motivated the parties to enter into the above agreement. The conversion of leave credits
into their cash equivalent is aimed primarily to encourage workers to work continuously and with dedication for
the company. Companies offer incentives, such as the conversion of the accumulated leave credits into their
cash equivalent, to lure employees to stay with the company. Leave credits are normally converted into their
cash equivalent based on the last prevailing salary received by the employee. Considering all these, the
accumulated leave credits should be converted based on the upgraded salary of the retiree, which is the salary
rate of the rank next higher.

PNB-RB avers that it has sufficiently established that the salary of an officer is pegged to a minimum or
maximum depending on his performance appraisal in accordance with the Executive Compensation Salary
Structure   (ECSS) effective 1 May 1987. Since Santos' latest performance rating was only satisfactory, his
15

gratuity pay should be based on the minimum and not on the maximum amount of the rate of the salary of the
rank next higher. In this regard, we quote with approval the Comment of the Solicitor General that —

Nothing in the provisions of the 1971 CBA from which emanated the one rank higher policy
indicates a minimum or maximum range of the next higher rank. Instead, what is provided is an
unqualified one rank higher concept. Petitioner is, therefore, precluded from drawing a
distinction where none has been stated in the contract. Besides, assuming that an ambiguity
does exist, the same must be resolved in the light of Article 1702 of the Civil Code that: In case
of doubt, the labor legislation and all labor contracts shall be construed in favor of the safety
and decent living for the laborer. Such should be liberally construed in favor of the persons
intended to be benefited thereby.

Moreover, petitioner, by invoking the salary structure and criteria for promotion as basis for
determining the amount of gratuity has confused the two distinct concepts of gratuity and salary.
Gratuity pay, unlike salary, is paid to the beneficiary for the past services or favor rendered
purely out of the generosity of the giver or grantor. Gratuity, therefore, is not intended to pay a
worker for actual services rendered or for actual performance. It is a money benefit or bounty
given to the worker, the purpose of which is to reward employees who have rendered
satisfactory service to the company. Salary, on the other hand, is a part of labor standard law
based on the actual amount of work rendered or the number of days worked over the period of
years. Hence, petitioner's attempt to apply the salary structure to determine gratuity would
eradicate the very essence of a gratuity award, and make it partake of the character of a wage
or salary given on the basis of actual work or performance. Such
was never the intendment of the law and would run counter to essential social justice.  16

Additionally, computing the gratuity pay based on the performance rating of the retiring officer is a practice that
is very likely susceptible to abuse as he will be placed at the mercy of the members of the performance
appraisal committee.

Petitioner argues that the claim of Santos for bonuses corresponding to the years 1985, 1986 and mid-year of
1987 has already prescribed. This is correct. Article 291 of the Labor Code states in part —

All money claims arising from employer-employee relations accruing during the effectivity of this
Code shall be filed within three (3) years from the time the cause of action accrued; otherwise
they shall be forever barred.

Since Santos filed his complaint only on 12 July 1990, his claim for 1985 (mid-year and year-end), 1986 (mid-
year and year-end), and 1987 (mid-year) bonuses already prescribed. As regards bonuses for 1987 (year-end),
1988 (mid-year and year-end), 1989 (mid-year and year-end), and 1990 (mid-year), we agree with petitioner
that these should be based on the existing salary rate at the time of their accrual. The record shows however
that in 1988 Santos was found guilty of an administrative charge. Hence, in consonance with existing company
policy, the 1988 (mid-year and year-end) bonus should be forfeited in favor of the Bank.  17

As regards the award of moral and exemplary damages, as well as attorney's fees, we quote with approval the
Comment of private respondent thus—

On the matter of moral and exemplary damages, the same is a must considering that petitioner
is guilty of bad faith by its continued refusal to pay his claims despite the final rulings of the
 Supreme Court in similar other cases earlier cited. By refusing to abide by the doctrinal
pronouncements of the Highest Tribunal, petitioner has shown to be anti-labor. This stubborn
attitude is not only contemptible but also contrary to morals, good customs and public policy.
Regardless of its own thinking on the issues presented vis-a-vis the judicial pronouncements
already made, petitioner is duty-bound to respect the Supreme Court decisions which have
become part of the law of the land.

Consequently, private respondent had suffered mental anguish and sleepless nights and
therefore, should be entitled to moral damages. And to serve as example for the public good so
that others similarly inclined could be dissuaded from adopting the same detestable practice,
petitioner should also be sanctioned in the form of exemplary damages.

In addition, petitioner had continuously and openly declared that it will continuously deny the
existence of said policy as it was based on erroneous assumption of facts, and private
respondent is not at all surprised that petitioner has been throwing all kinds of blockade or
obstacle, so as to stop a snowball application of the Supreme Court decision. Such act of the
petitioner of arrogantly defying a well-laid down jurisprudence on the issue at hand (resulted) to
the great prejudice of private respondent's interest. The delay on the part of the petitioner to
rectify its error and grant private respondent what is really due him must have certainly caused
undue damages on the part of the latter. Such defiant attitude does not really set good example
on how one should abide by the decision of the highest tribunal of the land.

xxx xxx xxx

Private respondent has been dragged into this case because petitioner refuses and arrogantly
defies the doctrine of stare decisis that had long set in, compelling private respondent to litigate.
In this regard, private respondent's award for attorney's fees is proper. 18

ACCORDINGLY, the 30 June 1993 Decision of the Labor Arbiter and the 30 August 1994 Resolution of the
National Labor Relations Commission are AFFIRMED with the modification that petitioner PNB-REPUBLIC
BANK is ordered to pay private respondent Antonio G. Santos the amount of P423,661.00, less the applicable
taxes, computed as follows:

Basic gratuity Day:

Applicable monthly rate (P15,840.00)

x length of service (31 years and
15 days) =

P15,840.00 x 31 years P491,040.00

P15,840.00 x 15/251 days 946.00
—————

P491,986.00

Leave credits:

P15,840 x 272 x 12/251 205,983.00

Accrued Bonuses:

1987-year-end only P1,300.00  19

1988-forfeited (due adm. case)

1989-mid year/year-end 11,380.00  20
 1990-mid-year only 8,965.00  21

———————

21,645.00
—————
P719,614.00

Less: Gratuity already received 434,468.00

————
Balance P285,146.00
Add: Moral damages 50,000.00
Exemplary damages 50,000.00
Attorney's fees 38,515.00
————

Total P423,661.00
=========

SO ORDERED.

Padilla, Vitug, Kapunan and Hermosisima, Jr., JJ., concur.

Republic of the Philippines

SUPREME COURT
Baguio City

FIRST DIVISION

G.R. No. 118506 April 18, 1997

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

KAPUNAN, J.:

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

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

Petitioner Norma Mabeza contends that around the first week of May, 1991, she and her co-employees at the
Hotel Supreme in Baguio City were asked by the hotel's management to sign an instrument attesting to the
latter's compliance with minimum wage and other labor standard provisions of law.   The instrument provides: 
1 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.   According to her, respondent strongly chided her for refusing to proceed to the City Prosecutor's
4

Office to attest to the affidavit.   She thereafter reluctantly filed a leave of absence from her job which was
5

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"   and that she actually abandoned her work. He maintained that there was no basis for the
6

money claims for underpayment and other benefits as these were paid in the form of facilities to petitioner and
the hotel's other employee.   Pointing to the Affidavit of May 7, 1991, the private respondent asserted that his
7

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   — affirming the Labor Arbiter's
10

decision. The resolution substantially incorporated the findings of the Labor Arbiter.   Unsatisfied, petitioner
11

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.   Appended to his
15

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;   and 2) the presence of overt acts signifying the
16

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,   which is patently not the
18

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,   has stated that:
20

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"    which distinctly makes it an unfair
24

labor practice "to dismiss, discharge or otherwise prejudice or discriminate against an employee for having
given or being about to give testimony"   under the Labor Code. For in not giving positive testimony in favor of
25

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.   Granting that meals and lodging were provided and indeed constituted facilities, such
26

facilities could not be deducted without the employer complying first with certain legal requirements. Without
satisfying these requirements, the employer simply cannot deduct the value from the employee's ages. First,
proof must be shown that such facilities are customarily furnished by the trade. Second, the provision of
deductible facilities must be voluntarily accepted in writing by the employee. Finally, facilities must be charged
at fair and reasonable value.  27

These requirements were not met in the instant case. Private respondent "failed to present any company policy
or guideline to show that the meal and lodging . . . (are) part of the salary;"   he failed to provide proof of the
28

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.   Considering, therefore, that hotel workers are required to work different shifts and are
31

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,   petitioner is entitled to full backwages from the
33

time of her illegal dismissal up to the date of promulgation of this decision without qualification or deduction.

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

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

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

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

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

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

4) Full backwages, without qualification or deduction, from the date of petitioner's illegal dismissal up to the
date of promulgation of this decision pursuant to our ruling in Bustamante vs. NLRC.  34
5) P1,000.00.

ORDERED.

Padilla, Bellosillo and Vitug, JJ., concur.

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

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-12444             February 28, 1963

STATES MARINE CORPORATION and ROYAL LINE, INC., petitioners,

vs.
CEBU SEAMEN'S ASSOCIATION, INC., respondent.

Pedro B. Uy Calderon for petitioners.

Gaudioso C. Villagonzalo for respondent.

PAREDES, J.:

Petitioners States Marine Corporation and Royal Line, Inc. were engaged in the business of marine coastwise
transportation, employing therein several steamships of Philippine registry. They had a collective bargaining
contract with the respondent Cebu Seamen's Association, Inc. On September 12, 1952, the respondent union
filed with the Court of Industrial Relations (CIR), a petition (Case No. 740-V) against the States Marine
Corporation, later amended on May 4, 1953, by including as party respondent, the petitioner Royal Line, Inc.
The Union alleged that the officers and men working on board the petitioners' vessels have not been paid their
sick leave, vacation leave and overtime pay; that the petitioners threatened or coerced them to accept a
reduction of salaries, observed by other shipowners; that after the Minimum Wage Law had taken effect, the
petitioners required their employees on board their vessels, to pay the sum of P.40 for every meal, while the
masters and officers were not required to pay their meals and that because Captain Carlos Asensi had refused
to yield to the general reduction of salaries, the petitioners dismissed said captain who now claims for
reinstatement and the payment of back wages from December 25, 1952, at the rate of P540.00, monthly.

The petitioners' shipping companies, answering, averred that very much below 30 of the men and officers in
their employ were members of the respondent union; that the work on board a vessel is one of comparative
ease; that petitioners have suffered financial losses in the operation of their vessels and that there is no law
which provides for the payment of sick leave or vacation leave to employees or workers of private firms; that as
regards the claim for overtime pay, the petitioners have always observed the provisions of Comm. Act No. 444,
(Eight-Hour Labor Law), notwithstanding the fact that it does not apply to those who provide means of
transportation; that the shipowners and operators in Cebu were paying the salaries of their officers and men,
depending upon the margin of profits they could realize and other factors or circumstances of the business; that
in enacting Rep. Act No. 602 (Minimum Wage Law), the Congress had in mind that the amount of P.40 per
meal, furnished the employees should be deducted from the daily wages; that Captain Asensi was not
dismissed for alleged union activities, but with the expiration of the terms of the contract between said officer
and the petitioners, his services were terminated.

A decision was rendered on February 21, 1957 in favor of the respondent union. The motion for reconsideration
thereof, having been denied, the companies filed the present writ of certiorari, to resolve legal question
involved. Always bearing in mind the deep-rooted principle that the factual findings of the Court of Industrial
Relations should not be disturbed, if supported by substantial evidence, the different issues are taken up, in the
order they are raised in the brief for the petitioners.

1. First assignment of error. — The respondent court erred in holding that it had jurisdiction over case
No. 740-V, notwithstanding the fact that those who had dispute with the petitioners, were less than
thirty (30) in number.

The CIR made a finding that at the time of the filing of the petition in case No. 740-V,
respondent Union had more than thirty members actually working with the companies, and the
court declared itself with jurisdiction to take cognizance of the case. Against this order, the
herein petitioners did not file a motion for reconsideration or a petition for certiorari. The finding
of fact made by the CIR became final and conclusive, which We are not now authorized to alter
or modify. It is axiomatic that once the CIR had acquired jurisdiction over a case, it continues to
have that jurisdiction, until the case is terminated (Manila Hotel Emp. Association v. Manila
Hotel Company, et al., 40 O.G. No. 6, p. 3027). It was abundantly shown that there were 56
members who signed Exhibits A, A-I to A-8, and that 103 members of the Union are listed in
Exhibits B, B-1 to B-35, F, F-1 and K-2 to K-3. So that at the time of the filing of the petition, the
respondent union had a total membership of 159, working with the herein petitioners, who were
presumed interested in or would be benefited by the outcome of the case (NAMARCO v. CIR,
L-17804, Jan. 1963). Annex D, (Order of the CIR, dated March 8, 1954), likewise belies the
contention of herein petitioner in this regard. The fact that only 7 claimed for overtime pay and
only 7 witnesses testified, does not warrant the conclusion that the employees who had some
dispute with the present petitioners were less than 30. The ruling of the CIR, with respect to the
question of jurisdiction is, therefore, correct.

2. Second assignment of error. — The CIR erred in holding, that inasmuch as in the shipping articles,
the herein petitioners have bound themselves to supply the crew with provisions and with such "daily
subsistence as shall be mutually agreed upon" between the master and the crew, no deductions for
meals could be made by the aforesaid petitioners from their wages or salaries.

3. Third assignment of error. — The CIR erred in holding that inasmuch as with regard to meals
furnished to crew members of a vessel, section 3(f) of Act No. 602 is the general rule, which section 19
 thereof is the exception, the cost of said meals may not be legally deducted from the wages or salaries
of the aforesaid crew members by the herein petitioners.

4. Fourth assignment of error. — The CIR erred in declaring that the deduction for costs of meals from
the wages or salaries after August 4, 1951, is illegal and same should be reimbursed to the employee
concerned, in spite of said section 3, par. (f) of Act No. 602.

It was shown by substantial evidence, that since the beginning of the operation of the petitioner's business, all
the crew of their vessels have been signing "shipping articles" in which are stated opposite their names, the
salaries or wages they would receive. All seamen, whether members of the crew or deck officers or engineers,
have been furnished free meals by the ship owners or operators. All the shipping articles signed by the master
and the crew members, contained, among others, a stipulation, that "in consideration of which services to be
duly performed, the said master hereby agrees to pay to the said crew, as wages, the sums against their
names respectively expressed in the contract; and to supply them with provisions as provided herein ..." (Sec.
8, par. [b], shipping articles), and during the duration of the contract "the master of the vessel will provide each
member of the crew such daily subsistence as shall be mutually agreed daily upon between said master and
crew; or, in lieu of such subsistence the crew may reserve the right to demand at the time of execution of these
articles that adequate daily rations be furnished each member of the crew." (Sec. 8, par. [e], shipping articles).
It is, therefore, apparent that, aside from the payment of the respective salaries or wages, set opposite the
names of the crew members, the petitioners bound themselves to supply the crew with ship's provisions, daily
subsistence or daily rations, which include food.

This was the situation before August 4, 1951, when the Minimum Wage Law became effective. After this date,
however, the companies began deducting the cost of meals from the wages or salaries of crew members; but
no such deductions were made from the salaries of the deck officers and engineers in all the boats of the
petitioners. Under the existing laws, therefore, the query converges on the legality of such deductions. While
the petitioners herein contend that the deductions are legal and should not be reimbursed to the respondent
union, the latter, however, claims that same are illegal and reimbursement should be made.

Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and approved by this
Honorable Court, without prejudice to the parties adducing other evidence to prove their case not covered by
this stipulation of facts. 
1äwphï1.ñët

We hold that such deductions are not authorized. In the coastwise business of transportation of passengers
and freight, the men who compose the complement of a vessel are provided with free meals by the shipowners,
operators or agents, because they hold on to their work and duties, regardless of "the stress and strain
concomitant of a bad weather, unmindful of the dangers that lurk ahead in the midst of the high seas."

Section 3, par. f, of the Minimum Wage Law, (R.A. No. 602), provides as follows —

(f) Until and unless investigations by the Secretary of Labor on his initiative or on petition of any
interested party result in a different determination of the fair and reasonable value, the  furnishing of
meals shall be valued at not more than thirty centavos per meal for agricultural employees and not
more than forty centavos for any other employees covered by this Act, and the furnishing of housing
shall be valued at not more than twenty centavos daily for agricultural workers and not more than forty
centavos daily for other employees covered by this Act.

Petitioners maintain, in view of the above provisions, that in fixing the minimum wage of employees, Congress
took into account the meals furnished by employers and that in fixing the rate of forty centavos per meal, the
lawmakers had in mind that the latter amount should be deducted from the daily wage, otherwise, no rate for
meals should have been provided.

However, section 19, same law, states —

 SEC. 19. Relations to other labor laws and practices.— Nothing in this Act shall deprive an employee of
the right to seek fair wages, shorter working hours and better working conditions nor justify an
employer in violating any other labor law applicable to his employees, in reducing the wage now paid to
any of his employees in excess of the minimum wage established under this Act, or in reducing
supplements furnished on the date of enactment.

At first blush, it would appear that there exists a contradiction between the provisions of section 3(f) and section
19 of Rep. Act No. 602; but from a careful examination of the same, it is evident that Section 3(f) constitutes the
general rule, while section 19 is the exception. In other words, if there are no supplements given, within the
meaning and contemplation of section 19, but merely facilities, section 3(f) governs. There is no conflict; the
two provisions could, as they should be harmonized. And even if there is such a conflict, the respondent CIR
should resolve the same in favor of the safety and decent living laborers (Art. 1702, new Civil Code)..

It is argued that the food or meals given to the deck officers, marine engineers and unlicensed crew members
in question, were mere "facilities" which should be deducted from wages, and not "supplements" which,
according to said section 19, should not be deducted from such wages, because it is provided therein: "Nothing
in this Act shall deprive an employee of the right to such fair wage ... or in reducing supplements furnished on
the date of enactment." In the case of Atok-Big Wedge Assn. v. Atok-Big Wedge Co., L-7349, July 19, 1955; 51
O.G. 3432, the two terms are defined as follows —

"Supplements", therefore, constitute extra remuneration or special privileges or benefits given to or

received by the laborers over and above their ordinary earnings or wages. "Facilities", on the other
hand, are items of expense necessary for the laborer's and his family's existence and subsistence so
that by express provision of law (Sec. 2[g]), they form part of the wage and when furnished by the
employer are deductible therefrom, since if they are not so furnished, the laborer would spend and pay
for them just the same.

In short, the benefit or privilege given to the employee which constitutes an extra remuneration above and over
his basic or ordinary earning or wage, is supplement; and when said benefit or privilege is part of the laborers'
basic wages, it is a facility. The criterion is not so much with the kind of the benefit or item (food, lodging, bonus
or sick leave) given, but its purpose. Considering, therefore, as definitely found by the respondent court that the
meals were freely given to crew members prior to August 4, 1951, while they were on the high seas "not as part
of their wages but as a necessary matter in the maintenance of the health and efficiency of the crew personnel
during the voyage", the deductions therein made for the meals given after August 4, 1951, should be returned
to them, and the operator of the coastwise vessels affected should continue giving the same benefit..

In the case of Cebu Autobus Company v. United Cebu Autobus Employees Assn., L-9742, Oct. 27, 1955, the
company used to pay to its drivers and conductors, who were assigned outside of the City limits, aside from
their regular salary, a certain percentage of their daily wage, as allowance for food. Upon the effectivity of the
Minimum Wage Law, however, that privilege was stopped by the company. The order CIR to the company to
continue granting this privilege, was upheld by this Court.

The shipping companies argue that the furnishing of meals to the crew before the effectivity of Rep. Act No.
602, is of no moment, because such circumstance was already taken into consideration by Congress, when it
stated that "wage" includes the fair and reasonable value of boards customarily furnished by the employer to
the employees. If We are to follow the theory of the herein petitioners, then a crew member, who used to
receive a monthly wage of P100.00, before August 4, 1951, with no deduction for meals, after said date, would
receive only P86.00 monthly (after deducting the cost of his meals at P.40 per meal), which would be very
much less than the P122.00 monthly minimum wage, fixed in accordance with the Minimum Wage Law. Instead
of benefiting him, the law will adversely affect said crew member. Such interpretation does not conform with the
avowed intention of Congress in enacting the said law.

One should not overlook a fact fully established, that only unlicensed crew members were made to pay for their
meals or food, while the deck officers and marine engineers receiving higher pay and provided with better
victuals, were not. This pictures in no uncertain terms, a great and unjust discrimination obtaining in the present
case (Pambujan Sur United Mine Workers v. CIR, et al., L-7177, May 31, 1955).
Fifth, Sixth and Seventh assignments of error.— The CIR erred in holding that Severino Pepito, a boatsman,
had rendered overtime work, notwithstanding the provisions of section 1, of C.A. No. 444; in basing its finding
ofthe alleged overtime, on the uncorroborated testimony of said Severino Pepito; and in ordering the herein
petitioners to pay him. Severino Pepito was found by the CIR to have worked overtime and had not been paid
for such services. Severino Pepito categorically stated that he worked during the late hours of the evening and
during the early hours of the day when the boat docks and unloads. Aside from the above, he did other jobs
such as removing rusts and cleaning the vessel, which overtime work totalled to 6 hours a day, and of which he
has not been paid as yet. This statement was not rebutted by the petitioners. Nobody working with him on the
same boat "M/V Adriana" contrawise. The testimonies of boatswains of other vessels(M/V Iruna and M/V
Princesa), are incompetent and unreliable. And considering the established fact that the work of Severino
Pepito was continuous, and during the time he was not working, he could not leave and could not completely
rest, because of the place and nature of his work, the provisions of sec. 1, of Comm. Act No. 444, which states
"When the work is not continuous, the time during which the laborer is not working and can leave his working
place and can rest completely shall not be counted", find no application in his case.

8. Eighth assignment of error.— The CIR erred in ordering petitioners to reinstate Capt. Carlos Asensi to his
former position, considering the fact that said officer had been employed since January 9, 1953, as captain of a
vessel belonging to another shipping firm in the City of Cebu.

The CIR held —

Finding that the claims of Captain Carlos Asensi for back salaries from the time of his alleged lay-off on
March 20, 1952, is not supported by the evidence on record, the same is hereby dismissed.
Considering, however, that Captain Asensi had been laid-off for a long time and that his failure to report
for work is not sufficient cause for his absolute dismissal, respondents are hereby ordered to reinstate
him to his former job without back salary but under the same terms and conditions of employment
existing prior to his lay-off, without loss of seniority and other benefits already acquired by him prior to
March 20, 1952. This Court is empowered to reduce the punishment meted out to an erring employee
(Standard Vacuum Oil Co., Inc. v. Katipunan Labor Union, G.R. No. L-9666, Jan. 30, 1957). This step
taken is in consonance with section 12 of Comm. Act 103, as amended." (p. 16, Decision, Annex 'G').

The ruling is in conformity with the evidence, law and equity.

Ninth and Tenth assignments of error. — The CIR erred in denying a duly verified motion for new trial, and in
overruling petitioner's motion for reconsideration.

The motion for new trial, supported by an affidavit, states that the movants have a good and valid defense and
the same is based on three orders of the WAS (Wage Administration Service), dated November 6, 1956. It is
alleged that they would inevitably affect the defense of the petitioners. The motion for new trial is without merit.
Having the said wage Orders in their possession, while the case was pending decision, it was not explained
why the proper move was not taken to introduce them before the decision was promulgated. The said wage
orders, dealing as they do, with the evaluation of meals and facilities, are irrelevant to the present issue, it
having been found and held that the meals or food in question are not facilities but supplements. The original
petition in the CIR having been filed on Sept. 12, 1952, the WAS could have intervened in the manner provided
by law to express its views on the matter. At any rate, the admission of the three wage orders have not altered
the decision reached in this case.

IN VIEW HEREOF, the petition is dismissed, with costs against the petitioners.

Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Barrera, Dizon, Regala and
Makalintal, JJ., concur.
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 112963 July 20, 1999

PHILIPPINE WIRELESS INC. (Pocketbell) and/or JOSE LUIS SANTIAGO, petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION and GOLDWIN LUCILA, respondents.

 PARDO, J.:

This petition for certiorari is to set aside the decision of the National Labor Relations Commission   on the
1

ground that it was rendered with grave abuse of its discretion. The dispositive portion of the decision reads as
follows:

WHEREFORE, finding the appeal to be meritorious the decision appealed from is hereby
REVERSED AND SET ASIDE and a new one ENTERED, declaring that the complainant has
been constructively dismissed and ordering the respondent to pay him backn wages from his
dismissal on December 28, 1990 up to the date of the promulgation of this Resolution. And in
 lieu of reinstatement, respondent is likewise hereby ordered to pay complainant his separation
pay at the rate of one (1) month pay for every year of service. 1âwphi1.nêt

No Cost.

SO ORDERED.

(s/t) EDNA BONITO-PEREZ

Presiding Commissioner 2

The facts are as follows:

On January 8, 1976, petitioner Philippine Wireless Inc. hired respondent Doldwin Lucila as operator/encoder.
On January 7, 1979, he was promoted as Head Technical and Maintenance Department of the Engineering
Department. On September 11, 1987, he was promoted as Supervisor, Technical Services of the same
department. On October 1, 1990, he was again promoted as Superintendent, Project Management.

On December 28, 1990, he tendered his resignation.

On December 3, 1991, he filed with the Arbitration Branch, National Labor Relations Commission, a complaint
for illegal/constructive dismissal. He alleged that he was constructively dismissed inasmuch as his promotion
from Supervisor, Technical Services to Superintendent, Project Management is demeaning, illusory and
humiliating. The basis of his allegation was the fact that he was not give any secretary, assistant and/or
subordinates.

On June 29, 1992, Labor Arbiter Benigno Villarente Jr, rendered a decision declaring that respondent actually
resigned and dismissed the complaint for lack of merit.  3

On June 15, 1993, public respondent NLRC reversed the findings of the labor arbiter, and ordered
respondent's reinstatement with back wages or separation pay.

On August 27, 1993 petitioners filed a motion for reconsideration which the National Labor Relations
Commission denied for lack of merit in a resolution dated November 16, 1993.

Hence, this petition.

At issue is whether or not petitioner was constructively dismissed from the petitioner's employment.

We find the petition meritorious.

The Court has held that constructive dismissal is "an involuntary resignation resorted to when continued
employment is rendered impossible, unreasonable or unlikely; when there is a demotion in rank and/or a
diminution in pay; or when a clear discrimination, insensibility or disdain by an employer becomes unbearable
to the employee.   In this particular case, respondent voluntarily resigned from his employment. He was not
4

pressured into resigning.

Voluntary resignation is defined as the act of an employee who "finds himself in a situation where he believes
that personal reasons cannot be sacrificed in favor of the exigency of the service and he has no other choice
but to disassociate himself from his employment." 5

Respondent considered his transfer/promotion as a demotion due to the fact that he had no support staff to
assist him in his work and whom he could supervise. There is no demotion where there is no reduction in
position, rank or salary as a result of such transfer.   In fact, respondent Goldwin Lucila was promoted three (3)
6

times from the time he was hired until his resignation from work.1âwphi1.nêt

WHEREFORE, the petition is hereby GRANTED. The questioned decision of the National Labor Relations
Commission, dated June 15, 1993, is SET ASIDE. The decision of the Labor Arbiter dated June 29, 1992, is
REINSTATED and AFFIRMED.

No costs.

SO ORDERED.

Davide, Jr., C.J., Melo, Kapunan and Ynares-Santiago, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 154503             February 29, 2008

UNIWIDE SALES WAREHOUSE CLUB and VIVIAN M. APDUHAN, petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION and AMALIA P. KAWADA, respondents.

DECISION

AUSTRIA-MARTINEZ, J.:

Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court filed by Uniwide
Sales Warehouse Club (Uniwide) and Vivian M. Apduhan (Apduhan) seeking to annul the Decision 1 dated
November 23, 2001 and the Resolution 2 dated July 23, 2002 of the Court of Appeals (CA) in CA-G.R. SP No.
64581.
The facts of the case:

Amalia P. Kawada (private respondent) started her employment with Uniwide sometime in 1981 as a saleslady.
Over the years, private respondent worked herself within Uniwide's corporate ladder until she attained the rank
of Full Assistant Store Manager with a monthly compensation of P13,000.00 in 1995.

As a Full Assistant Store Manager, private respondent's primary function was to manage and oversee the
operation of the Fashion and Personal Care, GSR Toys, and Home Furnishing Departments of Uniwide, to
ensure its continuous profitability as well as to see to it that the established company policies and procedures
were properly complied with and implemented in her departments. 3

Sometime in 1998, Uniwide received reports from the other employees regarding some problems in the
departments managed by the private respondent. 4 Thus, on March 15, 1998, Uniwide, through Store Manager
Apduhan, issued a Memorandum addressed to the private respondent summarizing the various reported
incidents signifying unsatisfactory performance on the latter's part which include the commingling of good and
damaged items, sale of a voluminous quantity of damaged toys and ready-to-wear items at unreasonable
prices, and failure to submit inventory reports. Uniwide asked private respondent for concrete plans on how she
can effectively perform her job.5 In a letter6 dated March 23, 1998, private respondent answered all the
allegations contained in the March 15, 1998 Memorandum.

Unsatisfied, Apduhan sent another Memorandum 7 dated March 30, 1998 to private respondent where Apduhan
claimed that the answers given by the private respondent in her March 23, 1998 letter were all hypothetical and
did not answer directly the allegations attributed to her. 8 Apduhan elaborated the incidents contained in the
March 15, 1998 Memorandum.

On June 30, 1998, Apduhan sent another Memorandum 9 seeking from the private respondent an explanation
regarding the incidents reported by Uniwide employees and security personnel for alleged irregularities
committed by the private respondent such as allowing the entry of unauthorized persons inside a restricted
area during non-office hours, falsification of or inducing another employee to falsify personnel or company
records, sleeping and allowing a non-employee to sleep inside the private office, unauthorized search and
bringing out of company records, purchase of damaged home furnishing items without the approval from
superior, taking advantage of buying damaged items in large quantity, alteration of approval slips for the
purchase of damaged items and abandonment of work. 10 In a letter11 dated July 9, 1998, private respondent
answered the allegations made against her.

On July 27, 1998, private respondent sought medical help from the company physician, Dr. Marivelle C.
Zambrano (Dr. Zambrano), due to complaints of dizziness. 12 Finding private respondent to be suffering from
hypertension, Dr. Zambrano advised her to take five days sick leave. 13

On July 30, 1998, private respondent was able to obtain from Dr. Zambrano a certificate of fitness to
work,14 which she presented to Apduhan the following day. 15 It turned out that Dr. Zambrano inadvertently wrote
"Menia," the surname of the company nurse, in the medical certificate instead of private respondent's
surname.16 Thereafter, private respondent claims that Apduhan shouted at her and prevented her from
resuming work because she was not the person referred to in the medical certificate. 17 After private respondent
left Apduhan's office, a certain Evelyn Maigue, Apduhan's assistant, approached the private respondent to get
the certification so that it may be photocopied. When she refused to give the certification, private respondent
claims that Apduhan once again shouted at her which caused her hypertension to recur and eventually caused
her to collapse. Private respondent's head hit the edge of the table before she fell down on the ground for
which she suffered contusions at the back of her head, as evidenced by the medical certificate 18 issued by Dr.
George K. C. Cheu of the Chinese General Hospital & Medical Center. 19

On August 1, 1998, private respondent reported the confrontation between her and Apduhan to the Central
Police District.20 Likewise, private respondent was able to obtain from Dr. Zambrano the corrected
certification21 together with the clarification that the name "Amalia Menia" written on the July 30, 1998
certification referred to Amalia Kawada.22
Thereafter, counsel for private respondent sent a letter 23 dated August 1, 1998 to Apduhan stating that the
latter's alleged continued harassment and vexation against private respondent created a hostile work
environment which had become life threatening, and that they had no alternative but to bring the matter to the
proper forum.24

On August 2, 1998, Apduhan issued a Memorandum, 25 received on the same day by Edgardo Kawada, the
husband of private respondent, advising the latter of a hearing scheduled on August 12, 1998 to be held at the
Uniwide Office in Quirino Highway, and warning her that failure to appear shall constitute as waiver and the
case shall be submitted for decision based on available papers and evidence. 26

On August 3, 1998, private respondent filed a case for illegal dismissal before the Labor Arbiter (LA). 27

Counsel for private respondent sent a letter 28 dated August 8, 1998 to Apduhan claiming that the August 2,
1998 Memorandum was a mere afterthought, in an attempt to justify private respondent's dismissal; and that on
August 3, 1998, private respondent had already filed charges against Uniwide and Apduhan (petitioners).

On August 8, 1998, Apduhan sent a letter addressed to private respondent, which the latter received on even
date, advising private respondent to report for work, as she had been absent since August 1, 1998; and
warning her that upon her failure to do so, she shall be considered to have abandoned her job. 29

On September 1, 1998, Apduhan issued a Memorandum 30 stating that since private respondent was unable to
attend the scheduled August 12, 1998 hearing, the case was evaluated on the basis of the evidence on record;
and enumerating the pieces of evidence of the irregularities and violations of company rules committed by
private respondent, the latter's defenses and the corresponding findings by Uniwide. Portions of the
Memorandum read:

VIOLATIONS:

1. Allowing entry of Unauthorized person inside a Restricted Area during non-office hours (night-time)

xxxx

FINDINGS:

Towards these evidence, Ms. A. Kawada only raised questions as to the propriety of the entries on the
logbook, but the offense itself was not even denied categorically by the employee concerned. Hence,
the fact remains that the employee concerned indeed allowed the entries of Mr. Ed Kawada on different
occasions. The Security personnel when asked why they did not report those incidents immediately,
answered: They hesitated to report them because they were afraid as the employee concerned is a
manager, whom they thought knows better then them.

*Violation - No. 9 Type C, Code of Discipline*

2. Falsification of or Inducing another employee to falsify personnel or company records.

xxxx

FINDINGS:

In her answer, Ms. A. Kawada again only questioned the propriety of the entries on the logbook, but
there were clear indications that the violation was indeed committed as shown by the abovestated
pieces of evidence.
The testimonies by the witnesses' are very explicit of what really transpired, specifically security guard
Dennis Venancio, who just performs his duty of reporting any unusual incident that occurred within his
jurisdiction. The fact that they failed to report it at an earlier time, in understandable, since they were
hesitant, that the manager might get back at them, or simply because of their respect for Ms. A.
Kawada, as a Manager.

*Violation - No. 8 Type F, Code of Discipline*

3. Sleeping during overnight work last August 17, 1997.

xxxx

FINDINGS:

Based on the records and reports submitted, there is no doubt that the concerned employee committed
such an offense. The witnesses stated their testimonies only in accordance with what they have seen
and witnessed during those stated periods.

*Violation - No. 7 Type D, Code of Discipline*

4. Unauthorized Search, Bringing Out and taking of Company Records, March 18, 1998 and March 20,
1998.

xxxx

FINDINGS:

It is established that 15 approval slips were taken by the employee concerned, however, only 11
approval slips were surrendered or returned.

*Violation - No. 1 Type F, Code of Discipline*

5. Purchases of Dented or Sub-standard items of Home Furnishing without approval from authorized
Supervisor, February 3, 1998.

xxxx

FINDINGS:

Towards this accusation subject employee countered that she only asked Ms. Melanie Laag why she
was not able to sign said approval slip but not for the purpose of letting her sign it. By this, it only
means that indeed the said approval slip does not contain the necessary approval prior to the
purchase. This could be related to the other charge against the subject employee on unauthorized
search and bringing out of company records, for based on the circumstances there was such a search
conducted to look for and retrieve approval slips of subject employee, as there are really approval slips
of subject employee which does not bear the necessary approval. The search must have been probably
made to cover up and/or suppress such evidence against her.

6. Altering Approval slips dated January 17, 1998.

a) #1 original quantity - 7 pieces changed to 2 pieces - amount was altered from Php14.00 to Php10.00.

b) #2 erasures on the number of quantity whether 15, 5 or 7 pieces.

xxxx

FINDINGS:

Towards this accusation Ms. A. Kawada submitted no plausible explanation, indicating that said
employee concerned might have really committed the acts complained of.

Violation of Company Rules on the proper procedure in selling of dented merchandise.

7. Making Reservations of Dented Items - January to February 1998.

xxxx

FINDINGS:

There was no direct explanation submitted by Ms. A. Kawada on this. Thus, it becomes clear that Ms.
Kawada had violated the company rule on No Reservation.

8. Conduct unbecoming of a manager in cornering and/or bringing large quantity of damaged items
(toys, furniture, RTW, appliances and Home Furnishing items), causing demoralization among the store
crew and tainting management's image to its personnel.

xxxx

FINDINGS:

The report that were submitted by the witnesses proved that Ms. Kawada made those purchases of
dented or sub-standard items that were under her assigned area, without regard for the rest of the
employees who wanted to buy also, thus, using and taking advantage of her position, to the detriment
of the other employees and painting a bad image of the company's managers.

9. Abandonment of work or absence for five (5) consecutive days without prior notice from any
authorized company officer or higher authority.

FINDINGS:

Despite notice for subject employee to report to work or else be considered as having abandoned her
job, it appears that subject employee continuously failed to report for work without any explanation.

*Violation - No. 2, Sec. A*

Based on all the foregoing it seems clear and convincing, that you have indeed committed the
violations imputed on you. The aforementioned violations per se deserves termination as a penalty, not
to mention that they also constitute willful breach of the trust reposed on you as a manager.  Thus, we
have no other alternative but to terminate your service with the Company, effective September
1, 1998, on the grounds of violations of Company Rules, Abandonment of Work and loss of trust
and confidence.

You are hereby directed to surrender all other documents and papers pertaining to your job, which you
may have acquired and have come into your possession as a result of your employment with the
company.

Please be guided. thank you.31 (Emphasis supplied)

On March 9, 1999 the LA32 dismissed the complaint for lack of merit. 33 Private respondent appealed the LA's
decision to the National Labor Relations Commission (NLRC).

In its Decision34 dated December 27, 2000, the NLRC ruled in favor of private respondent, reversing the LA, to
wit:

WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE. Complainant is
declared constructively dismissed by respondents. Respondents Uniwide Sales Warehouse Club and
Vivian Apduhan are jointly and severally ordered to pay complainant the following sums:

Separation Pay:

November 1981 -July 3, 1998

P13,000.00 x 16.8 yrs. = P218,400.00

Backwages:

July 31, 1998-up to the present

Moral Damages = P100,000.00

Exemplary Damages P100,000.00

Attorney's fees computed at ten percent (10%) of the total award.

SO ORDERED. 35

According to the NLRC, private respondent was subjected to inhuman and anti-social treatment oppressive to
labor. Private respondent received successive memoranda from Apduhan accusing the former of different
infractions, some of which offenses complainant was informed of only a year after the alleged commission.
Further, Apduhan's ill will and motive to edge private respondent out of her employ was displayed by
Apduhan's stubborn refusal to allow private respondent to continue her work on the flimsy excuse that the
medical certificate did not bear her correct surname, while Apduhan knew for a fact that the same could not
have referred to another person but to private respondent. 36

Also, the NLRC observed that private respondent was not afforded due process by petitioners because the
former was not given an opportunity to a fair hearing in that the investigation was conducted after private
respondent had been constructively dismissed; and that there was no point for private respondent to still attend
the investigation set on August 12, 1998 after her constructive dismissal on July 31, 1998 and after she had
already filed her complaint.

Feeling aggrieved, petitioners appealed the NLRC Decision to the CA. In the assailed Decision 37 dated
November 23, 2001, the CA affirmed in toto the NLRC Decision.

Hence, the present petition. 38

The sole issue raised before the Court is:

WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY ERRED IN SUSTAINING THE NLRC'S
FINDING THAT PRIVATE RESPONDENT WAS CONSTRUCTIVELY DISMISSED. 39

It is a well-settled rule that the jurisdiction of the Supreme Court in petitions for review on  certiorari under Rule
45 of the Rules of Court is limited to reviewing errors of law, not of fact. 40 The Court is not a trier of facts. In the
exercise of its power of review, the findings of fact of the CA are conclusive and binding and consequently, it is
not the Court's function to analyze or weigh evidence all over again. 41

The foregoing rule, however, is not absolute. The Court, in Dusit Hotel Nikko v. National Union of Workers in
Hotel, Restaurant and Allied Industries (NUWHRAIN),42 held that the factual findings of the NLRC as affirmed
by the CA, are accorded high respect and finality unless the factual findings and conclusions of the LA clash
with those of the NLRC and the CA in which case the Court will have to review the records and the arguments
of the parties to resolve the factual issues and render substantial justice to the parties. 43

The present case is clouded by conflict of factual perceptions. Consequently, the Court is constrained to review
the factual findings of the CA which contravene the findings of facts of the LA.

The Court's Ruling

The petition is meritorious. After a thorough examination of the conflicting positions of the parties, the Court
finds the records bereft of evidence to substantiate the conclusions of the NLRC and the CA that private
respondent was constructively dismissed from employment.

Case law defines constructive dismissal as a cessation of work because continued employment is rendered
impossible, unreasonable or unlikely; when there is a demotion in rank or diminution in pay or both; or when a
clear discrimination, insensibility, or disdain by an employer becomes unbearable to the employee. 44

The test of constructive dismissal is whether a reasonable person in the employee's position would have felt
compelled to give up his position under the circumstances. 45 It is an act amounting to dismissal but made to
appear as if it were not. In fact, the employee who is constructively dismissed may be allowed to keep on
coming to work. Constructive dismissal is therefore a dismissal in disguise. The law recognizes and resolves
this situation in favor of employees in order to protect their rights and interests from the coercive acts of the
employer.46

In the present case, private respondent claims that from the months of February to June 1998, she had been
subjected to constant harassment, ridicule and inhumane treatment by Apduhan, with the hope that the latter
can get the private respondent to resign. 47 The harassment allegedly came in the form of successive
memoranda which private respondent would receive almost every week, enumerating a litany of offenses and
maligning her reputation and spreading rumors among the employees that private respondent shall be
dismissed soon.48 The last straw of the imputed harassment was the July 31, 1998 incident wherein private
respondent's life was put in danger when she lost consciousness due to hypertension as a result of Apduhan's
alleged hostility and shouting.49

The Court finds that private respondent's allegation of harassment is a specious statement which contains
nothing but empty imputation of a fact that could hardly be given any evidentiary weight by this Court. 50 Private
respondent's bare allegations of constructive dismissal, when uncorroborated by the evidence on record,
cannot be given credence.51

The sending of several memoranda addressed to a managerial or supervisory employee concerning various
violations of company rules and regulations, committed on different occasions, are not unusual. The alleged
February to June 1998 series of memoranda given by petitioners to private respondent asking the latter to
explain the alleged irregular acts should not be construed as a form of harassment but merely an exercise of
management's prerogative to discipline its employees.

The right to impose disciplinary sanctions upon an employee for just and valid cause, as well as the authority to
determine the existence of said cause in accordance with the norms of due process, pertains in the first place
to the employer.52 Precisely, petitioners gave private respondent successive memoranda so as to give the latter
an opportunity to controvert the charges against her. Clearly, the memoranda are not forms of harassment, but
petitioners' compliance with the requirements of due process.
The July 31, 1998 confrontation where Apduhan allegedly shouted at private respondent which caused the
latter's hypertension to recur and eventually caused her to collapse cannot by itself support a finding of
constructive dismissal by the NLRC and the CA. Even if true, the act of Apduhan in shouting at private
respondent was an isolated outburst on the part of Apduhan that did not show a clear discrimination or
insensibility that would render the working condition of private respondent unbearable.

Moreover, the finding of the NLRC that Apduhan knew for a fact that the certification presented by private
respondent referred to the latter and not to another person is a mere conjecture. There is no evidence to
sustain the same. This Court has consistently held that litigations cannot be properly resolved by suppositions,
deductions, or even presumptions, with no basis in evidence, for the truth must have to be determined by the
hard rules of admissibility and proof. 53

Self-serving and unsubstantiated declarations are insufficient to establish a case before quasi-judicial bodies.
Well-entrenched is the rule that the quantum of evidence required to establish a fact in quasi-judicial bodies is
substantial evidence. Substantial evidence is such amount of relevant evidence which a reasonable mind might
accept as adequate to support a conclusion, even if other equally reasonable minds might opine otherwise. 54

On petitioners' claim of abandonment by private respondent, well-settled is the rule that to constitute
abandonment of work, two elements must concur: (1) the employee must have failed to report for work or must
have been absent without valid or justifiable reason, and (2) there must have been a clear intention on the part
of the employee to sever the employer-employee relationship manifested by some overt act. The employer has
the burden of proof to show the employee's deliberate and unjustified refusal to resume his employment
without any intention of returning. Mere absence is not sufficient. There must be an unequivocal intent on the
part of the employee to discontinue his employment. 55

Private respondent's failure to report for work despite the August 8, 1998 letter sent by Apduhan to private
respondent advising the latter to report for work is not sufficient to constitute abandonment. It is a settled rule
that failure to report for work after a notice to return to work has been served does not necessarily constitute
abandonment.56

Private respondent mistakenly believed that the successive memoranda sent to her from March 1998 to June
1998 constituted discrimination, insensibility or disdain which was tantamount to constructive dismissal. Thus,
private respondent filed a case for constructive dismissal against petitioners and consequently stopped
reporting for work.

In the case of Lemery Savings & Loan Bank v. National Labor Relations Commission, 57 the Court held:

It is true that the Constitution has placed a high regard for the welfare of the labor sector. However,
social and compassionate justice does not contemplate a situation whereby the management stands to
suffer for certain misconceptions created in the mind of an employee. x x x

Nevertheless, the mistaken belief on the part of the employee should not lead to a drastic
conclusion that he has chosen to abandon his work. x x x We cannot readily infer abandonment
even if, sometime during the pendency of this case, he refused to heed the warning given him by
petitioner Dimailig while believing that he was dismissed through no fault of his. 58 (Emphasis supplied)

The Court finds that petitioners were not able to establish that private respondent deliberately refused to
continue her employment without justifiable reason. To repeat, the Court will not make a drastic conclusion that
private respondent chose to abandon her work on the basis of her mistaken belief that she had been
constructively dismissed by Uniwide.

Nonetheless, the Court agrees with the findings of the LA that the termination of private respondent was
grounded on the existence of just cause under Article 282 (c) of the Labor Code 59 or willful breach by the
employee of the trust reposed on him by his employer or a duly authorized representative. 60
Private respondent occupies a managerial position. As a managerial employee, mere existence of a basis for
believing that such employee has breached the trust of his employer would suffice for his dismissal. 61

In Caoile v. National Labor Relations Commission, 62 the Court distinguished the treatment of managerial
employees from that of rank-and-file personnel, insofar as the application of the loss of trust and confidence is
concerned. The Court held:

Thus, with respect to rank-and-file personnel, loss of trust and confidence as ground for valid dismissal
requires proof of involvement in the alleged events in question, and that mere uncorroborated
assertions and accusations by the employer will not be sufficient. 63 But, as regards a managerial
employee, mere existence of a basis for believing that such employee has breached the trust of
his employer would suffice for his dismissal. Hence, in the case of managerial employees, proof
beyond reasonable doubt is not required, it being sufficient that there is some basis for such
loss of confidence, such as when the employer has reasonable ground to believe that the
employee concerned is responsible for the purported misconduct, and the nature of his
participation therein renders him unworthy of trust and confidence demanded by his
position.64 (Emphasis supplied).

In order to give private respondent an opportunity to explain the several violations of company rules she
allegedly committed, private respondent was given several memoranda, to which she initially responded. Also,
to give private respondent an opportunity to be heard, defend herself, confront the witnesses against her as
well as to present her own evidence, Apduhan scheduled a hearing on August 12, 1998, notice of which was
sent on August 2, 1998 and duly received by private respondent's husband on the same day. 65 This fact alone
would have indicated to private respondent that there was no intention on the part of petitioners to effect her
constructive dismissal. However, private respondent opted to file the complaint for illegal dismissal the next
day; and not to attend the scheduled hearing on August 12, 1998. Thus, petitioners were justified to decide the
case on the basis of the records at hand. 66

The irregularities and offenses committed by private respondent, corroborated by the various pieces of
evidence supporting such charges, i.e. records, reports and testimonies of Uniwide employees, 67 in the mind of
the Court, constitute substantial evidence that private respondent is in fact responsible for the alleged charges.

To disprove the charges against her, private respondent presented a letter 68 dated July 29, 1998 from a former
Uniwide employee, Luisa Astrologo (Astrologo), stating that the latter was urged by her manager, a certain
Ralph Galang, to testify against private respondent for improper behavior concerning the "dented product for
which private respondent is abusing her power of reserving and picking the best product she can afford to
dispatch."69 The letter, however, does not state that the charges Astrologo imputed to private respondent were
false. The letter merely states that Astrologo "does not see anything wrong about the matter." 70 Moreover, in
her Memorandum,71 filed with the Court, private respondent merely cited inconsistencies in the reports
regarding the charges imputed to her without denying the said allegations.

It is true that private respondent had risen from the ranks, from being a saleslady in 1981 to a Full Assistant
Store Manager in 1995. She worked for Uniwide for almost 17 years with a clean bill of record. However, these
facts are not sufficient to overcome the findings of petitioners that the private respondent is guilty of the
charges imputed to her.

Finally, the NLRC and the CA erred in finding that private respondent was denied due process. Private
respondent claims that she lost the opportunity to be heard when she was constructively dismissed on July 31,
1998,72 and that it was only after she filed a complaint for illegal dismissal with the NLRC on August 3,
1998 that petitioners notified the private respondent of the investigation which will be conducted on August 12,
1998 concerning her alleged offenses. The Memorandum dated August 2, 199873 completely demolishes such
claims. It shows on its face that private respondent received the Memorandum on August 2, 1998, a day before
she filed the complaint for illegal dismissal against petitioners; and that private respondent was notified that the
hearing was scheduled on August 12, 1998 and explicitly warned her that her failure to appear thereat shall
mean a waiver to be heard, and the case shall then be submitted for decision based on available papers and
evidence.
In reality, private respondent, as found earlier was not terminated on July 31, 1998. There was no constructive
dismissal. Again, the successive memoranda presented by private respondent and the alleged July 31, 1998
shouting incident are not sufficient to establish her claim of harassment.

However, as to the September 1, 1998 Memorandum where the private complainant was dismissed for loss of
trust and confidence, the Court finds the notice of the scheduled August 12, 1998 hearing sufficient compliance
with the due process requirement.

The essence of due process is simply an opportunity to be heard, or as applied to administrative proceedings,
a fair and reasonable opportunity to explain one's side. 74 It is not the denial of the right to be heard but denial of
the opportunity to be heard that constitutes violation of due process of law. 75 In the instant case, private
respondent was again notified of the August 12, 1998 hearing through a letter 76 dated August 8, 1998 which
was received by private respondent herself. 77 Clearly, private respondent was given an opportunity to be heard.
However, private respondent chose not to attend the scheduled hearing because of her mistaken belief that
she had already been constructively dismissed.

At this point, the Court agrees with and adopts the findings of the LA in his Decision: 78

We cannot, with due respect, subscribe to complainant's [herein private respondent] position for it
simply lacks evidence and that all that there is to it is seemingly a general allegation. We examined the
record and as we have done it we find no acts or incidents constituting complainant's alleged
"constructive dismissal". On the contrary, what is generally existing thereat is that complainant was
dismissed by the respondents [Uniwide and Apduhan] for an array of violations consisting of, but not
limited to the following: allowing entry of unauthorized personnel inside a company restricted area;
falsification of or inducing another employee to falsify personnel or company records; sleeping during
overnight work; unauthorized search and bringing out of company records; unauthorized purchase of
damaged items; alteration of approval slips for the purchase of damaged items; unduly reserving and
buying of damaged items; and abandonment of work.

In fact, as it even appears the "constructive dismissal" allegedly committed on complainant

looks simply an excuse to avoid and/or evade the investigation and consequences of the
violations imputed against her while employed and/or acting as respondent's assistant store
manager. As shown on an earlier setting on the investigation of her case, she filed a sick leave, thus
causing the hearing/investigation to be rescheduled. Again, upon rescheduling, complainant despite
notice failed to appear or did not appear, this time coming up with the excuse that she had been
already "constructively dismissed". This evasive attitude of her more than enough supports the
impression that complainant could be guilty or is guilty of the charges against her and believes that she
might not be able to defend herself. This is even bolstered by the information that complainant called on
several of the witnesses against her, simply to influence them and their testimonies. x x x Thus, viewed
the foregoing finding, we opined that complainant could not have been "constructively
dismissed."79 (Emphasis supplied)

It should be remembered that the Philippine Constitution, while inexorably committed towards the protection of
the working class from exploitation and unfair treatment, nevertheless mandates the policy of social justice so
as to strike a balance between an avowed predilection for labor, on the one hand, and the maintenance of legal
rights of capital, the proverbial hen that lays the golden egg, on the other. Indeed, we should not be unmindful
of the legal norm that justice is in every case for the deserving, to be dispensed with in light of established
facts, the applicable law, and existing jurisprudence. 80

WHEREFORE, the instant petition is GRANTED. The Decision dated November 23, 2001 and Resolution
dated July 23, 2002 of the Court of Appeals in CA-G.R. SP No. 64581 together with the Decision dated
December 27, 2000 of the National Labor Relations Commission are REVERSED and SET ASIDE. The
complaint of private respondent Amalia P. Kawada is DISMISSED.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 101761. March 24, 1993

NATIONAL SUGAR REFINERIES CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS

COMMISSION and NBSR SUPERVISORY UNION, (PACIWU) TUCP, respondents.

Jose Mario C. Bunag for petitioner.

The Solicitor General and the Chief Legal Officer, NLRC, for public respondent.
Zoilo V. de la Cruz for private respondent.

DECISION

REGALADO, J.:

The main issue presented for resolution in this original petition for certiorari is whether supervisory employees,
as defined in Article 212 (m), Book V of the Labor Code, should be considered as officers or members of the
managerial staff under Article 82, Book III of the same Code, and hence are not entitled to overtime rest day
and holiday pay.

Petitioner National Sugar Refineries Corporation (NASUREFCO), a corporation which is fully owned and
controlled by the Government, operates three (3) sugar refineries located at Bukidnon, Iloilo and Batangas. The
Batangas refinery was privatized on April 11, 1992 pursuant to Proclamation No. 50. 1 Private respondent
union represents the former supervisors of the NASUREFCO Batangas Sugar Refinery, namely, the Technical
Assistant to the Refinery Operations Manager, Shift Sugar Warehouse Supervisor, Senior Financial/Budget
Analyst, General Accountant, Cost Accountant, Sugar Accountant, Junior Financial/Budget Analyst, Shift Boiler
Supervisor,, Shift Operations Chemist, Shift Electrical Supervisor, General Services Supervisor,
Instrumentation Supervisor, Community Development Officer, Employment and Training Supervisor, Assistant
Safety and Security Officer, Head and Personnel Services, Head Nurse, Property Warehouse Supervisor,
Head of Inventory Control Section, Shift Process Supervisor, Day Maintenance Supervisor and Motorpool
Supervisor.

On June 1, 1988, petitioner implemented a Job Evaluation (JE) Program affecting all employees, from rank-
and-file to department heads. The JE Program was designed to rationalized the duties and functions of all
positions, reestablish levels of responsibility, and recognize both wage and operational structures. Jobs were
ranked according to effort, responsibility, training and working conditions and relative worth of the job. As a
result, all positions were re-evaluated, and all employees including the members of respondent union were
granted salary adjustments and increases in benefits commensurate to their actual duties and functions.

We glean from the records that for about ten years prior to the JE Program, the members of respondent union
were treated in the same manner as rank-and file employees. As such, they used to be paid overtime, rest day
and holiday pay pursuant to the provisions of Articles 87, 93 and 94 of the Labor Code as amended. With the
implementation of the JE Program, the following adjustments were made: (1) the members of respondent union
were re-classified under levels S-5 to S-8 which are considered managerial staff for purposes of compensation
and benefits; (2) there was an increase in basic pay of the average of 50% of their basic pay prior to the JE
Program, with the union members now enjoying a wide gap (P1,269.00 per month) in basic pay compared to
the highest paid rank-and-file employee; (3) longevity pay was increased on top of alignment adjustments; (4)
they were entitled to increased company COLA of P225.00 per month; (5) there was a grant of P100.00
allowance for rest day/holiday work.

On May 11, 1990, petitioner NASUREFCO recognized herein respondent union, which was organized pursuant
to Republic Act NO. 6715 allowing supervisory employees to form their own unions, as the bargaining
representative of all the supervisory employees at the NASUREFCO Batangas Sugar Refinery.

Two years after the implementation of the JE Program, specifically on June 20, 1990, the members of herein
respondent union filed a complainant with the executive labor arbiter for non-payment of overtime, rest day and
holiday pay allegedly in violation of Article 100 of the Labor Code.

On January 7, 1991, Executive Labor Arbiter Antonio C. Pido rendered a decision 2 disposing as follows:

"WHEREFORE, premises considered, respondent National Sugar refineries Corporation is hereby directed to
—
1. pay the individual members of complainant union the usual overtime pay, rest day pay and holiday pay
enjoyed by them instead of the P100.00 special allowance which was implemented on June 11, 1988; and

2. pay the individual members of complainant union the difference in money value between the P100.00 special
allowance and the overtime pay, rest day pay and holiday pay that they ought to have received from June 1,
1988.

All other claims are hereby dismissed for lack of merit.

SO ORDERED."

In finding for the members therein respondent union, the labor ruled that the along span of time during which
the benefits were being paid to the supervisors has accused the payment thereof to ripen into contractual
obligation; at the complainants cannot be estopped from questioning the validity of the new compensation
package despite the fact that they have been receiving the benefits therefrom, considering that respondent
union was formed only a year after the implementation of the Job Evaluation Program, hence there was no way
for the individual supervisors to express their collective response thereto prior to the formation of the union; and
the comparative computations presented by the private respondent union showed that the P100.00 special
allowance given NASUREFCO fell short of what the supervisors ought to receive had the overtime pay rest day
pay and holiday pay not been discontinued, which arrangement, therefore, amounted to a diminution of
benefits.

On appeal, in a decision promulgated on July 19, 1991 by its Third Division, respondent National Labor
Relations Commission (NLRC) affirmed the decision of the labor arbiter on the ground that the members of
respondent union are not managerial employees, as defined under Article 212 (m) of the Labor Code and,
therefore, they are entitled to overtime, rest day and holiday pay. Respondent NLRC declared that these
supervisory employees are merely exercising recommendatory powers subject to the evaluation, review and
final action by their department heads; their responsibilities do not require the exercise of discretion and
independent judgment; they do not participate in the formulation of management policies nor in the hiring or
firing of employees; and their main function is to carry out the ready policies and plans of the corporation. 3
Reconsideration of said decision was denied in a resolution of public respondent dated August 30, 1991. 4

Hence this petition for certiorari, with petitioner NASUREFCO asseverating that public respondent commission
committed a grave abuse of discretion in refusing to recognized the fact that the members of respondent union
are members of the managerial staff who are not entitled to overtime, rest day and holiday pay; and in making
petitioner assume the "double burden" of giving the benefits due to rank-and-file employees together with those
due to supervisors under the JE Program.

We find creditable merit in the petition and that the extraordinary writ of certiorari shall accordingly issue.

The primordial issue to be resolved herein is whether the members of respondent union are entitled to
overtime, rest day and holiday pay. Before this can be resolved, however it must of necessity be ascertained
first whether or not the union members, as supervisory employees, are to be considered as officers or
members of the managerial staff who are exempt from the coverage of Article 82 of the Labor Code.

It is not disputed that the members of respondent union are supervisory employees, as defined employees, as
defined under Article 212(m), Book V of the Labor Code on Labor Relations, which reads:

"(m) 'Managerial employee' is one who is vested with powers or prerogatives to lay down and execute
management policies and/or to hire, transfer, suspend, lay-off, recall, discharged, assign or discipline
employees. Supervisory employees are those who, in the interest of the employer effectively recommend such
managerial actions if the exercise of such authority is not merely routinary or clerical in nature but requires the
use of independent judgment. All employees not falling within any of those above definitions are considered
rank-and-file employees of this Book."
Respondent NLRC, in holding that the union members are entitled to overtime, rest day and holiday pay, and in
ruling that the latter are not managerial employees, adopted the definition stated in the aforequoted statutory
provision.

Petitioner, however, avers that for purposes of determining whether or not the members of respondent union
are entitled to overtime, rest day and holiday pay, said employees should be considered as "officers or
members of the managerial staff" as defined under Article 82, Book III of the Labor Code on "Working
Conditions and Rest Periods" and amplified in Section 2, Rule I, Book III of the Rules to Implement the Labor
Code, to wit:

"Art. 82 Coverage. — The provisions of this title shall apply to employees in all establishments and
undertakings whether for profit or not, but not to government employees, managerial employees, field
personnel, members of the family of the employer who are dependent on him for support, domestic helpers,
persons in the personal service of another, and workers who are paid by results as determined by the
Secretary of Labor in Appropriate regulations.

"As used herein, 'managerial employees' refer to those whose primary duty consists of the management of the
establishment in which they are employed or of a department or subdivision thereof, and to other officers or
members of the managerial staff." (Emphasis supplied.)

xxx xxx xxx

'Sec. 2. Exemption. — The provisions of this rule shall not apply to the following persons if they qualify for
exemption under the condition set forth herein:

xxx xxx xxx

(b) Managerial employees, if they meet all of the following conditions, namely:

(1) Their primary duty consists of the management of the establishment in which they are employed or of a
department or subdivision thereof:

(2) They customarily and regularly direct the work of two or more employees therein:

(3) They have the authority to hire or fire other employees of lower rank; or their suggestions and
recommendations as to the hiring and firing and as to the promotion or any other change of status of other
employees are given particular weight.

(c) Officers or members of a managerial staff if they perform the following duties and responsibilities:

(1) The primary duty consists of the performance of work directly related to management policies of their
employer;

(2) Customarily and regularly exercise discretion and independent judgment;

(3) (i) Regularly and directly assist a proprietor or a managerial employee whose primary duty consists of the
management of the establishment in which he is employed or subdivision thereof; or (ii) execute under general
supervision work along specialized or technical lines requiring special training, experience, or knowledge; or (iii)
execute under general supervision special assignments and tasks; and

(4) Who do not devote more 20 percent of their hours worked in a work-week to activities which are not directly
and closely related to the performance of the work described in paragraphs (1), (2), and above."
It is the submission of petitioner that while the members of respondent union, as supervisors, may not be
occupying managerial positions, they are clearly officers or members of the managerial staff because they
meet all the conditions prescribed by law and, hence, they are not entitled to overtime, rest day and supervisory
employees under Article 212 (m) should be made to apply only to the provisions on Labor Relations, while the
right of said employees to the questioned benefits should be considered in the light of the meaning of a
managerial employee and of the officers or members of the managerial staff, as contemplated under Article 82
of the Code and Section 2, Rule I Book III of the implementing rules. In other words, for purposes of forming
and joining unions, certification elections, collective bargaining, and so forth, the union members are
supervisory employees. In terms of working conditions and rest periods and entitlement to the questioned
benefits, however, they are officers or members of the managerial staff, hence they are not entitled thereto.

While the Constitution is committed to the policy of social justice and the protection of the working class, it
should not be supposed that every labor dispute will be automatically decided in favor of labor. Management
also has its own rights which, as such, are entitled to respect and enforcement in the interest of simple fair play.
Out of its concern for those with less privileges in life, this Court has inclined more often than not toward the
worker and upheld his cause in his conflicts with the employer. Such favoritism, however, has not blinded us to
the rule that justice is in every case for the deserving, to be dispensed in the light of the established facts and
the applicable law and doctrine. 5

This is one such case where we are inclined to tip the scales of justice in favor of the employer.

The question whether a given employee is exempt from the benefits of the law is a factual one dependent on
the circumstances of the particular case, In determining whether an employee is within the terms of the
statutes, the criterion is the character of the work performed, rather than the title of the employee's position. 6

Consequently, while generally this Court is not supposed to review the factual findings of respondent
commission, substantial justice and the peculiar circumstances obtaining herein mandate a deviation from the
rule.

A cursory perusal of the Job Value Contribution Statements 7 of the union members will readily show that these
supervisory employees are under the direct supervision of their respective department superintendents and
that generally they assist the latter in planning, organizing, staffing, directing, controlling communicating and in
making decisions in attaining the company's set goals and objectives. These supervisory employees are
likewise responsible for the effective and efficient operation of their respective departments. More specifically,
their duties and functions include, among others, the following operations whereby the employee:

1) assists the department superintendent in the following:

a) planning of systems and procedures relative to department activities;

b) organizing and scheduling of work activities of the department, which includes employee shifting scheduled
and manning complement;

c) decision making by providing relevant information data and other inputs;

d) attaining the company's set goals and objectives by giving his full support;

e) selecting the appropriate man to handle the job in the department; and

f) preparing annual departmental budget;

2) observes, follows and implements company policies at all times and recommends disciplinary action on
erring subordinates;
3) trains and guides subordinates on how to assume responsibilities and become more productive;

4) conducts semi-annual performance evaluation of his subordinates and recommends necessary action for
their development/advancement;

5) represents the superintendent or the department when appointed and authorized by the former;

6) coordinates and communicates with other inter and intra department supervisors when necessary;

7) recommends disciplinary actions/promotions;

8) recommends measures to improve work methods, equipment performance, quality of service and working
conditions;

9) sees to it that safety rules and regulations and procedure and are implemented and followed by all
NASUREFCO employees, recommends revisions or modifications to said rules when deemed necessary, and
initiates and prepares reports for any observed abnormality within the refinery;

10) supervises the activities of all personnel under him and goes to it that instructions to subordinates are
properly implemented; and

11) performs other related tasks as may be assigned by his immediate superior.

From the foregoing, it is apparent that the members of respondent union discharge duties and responsibilities
which ineluctably qualify them as officers or members of the managerial staff, as defined in Section 2, Rule I
Book III of the aforestated Rules to Implement the Labor Code, viz.: (1) their primary duty consists of the
performance of work directly related to management policies of their employer; (2) they customarily and
regularly exercise discretion and independent judgment; (3) they regularly and directly assist the managerial
employee whose primary duty consist of the management of a department of the establishment in which they
are employed (4) they execute, under general supervision, work along specialized or technical lines requiring
special training, experience, or knowledge; (5) they execute, under general supervision, special assignments
and tasks; and (6) they do not devote more than 20% of their hours worked in a work-week to activities which
are not directly and clearly related to the performance of their work hereinbefore described.

Under the facts obtaining in this case, we are constrained to agree with petitioner that the union members
should be considered as officers and members of the managerial staff and are, therefore, exempt from the
coverage of Article 82. Perforce, they are not entitled to overtime, rest day and holiday.

The distinction made by respondent NLRC on the basis of whether or not the union members are managerial
employees, to determine the latter's entitlement to the questioned benefits, is misplaced and inappropriate. It is
admitted that these union members are supervisory employees and this is one instance where the
nomenclatures or titles of their jobs conform with the nature of their functions. Hence, to distinguish them from
a managerial employee, as defined either under Articles 82 or 212 (m) of the Labor Code, is puerile and in
efficacious. The controversy actually involved here seeks a determination of whether or not these supervisory
employees ought to be considered as officers or members of the managerial staff. The distinction, therefore,
should have been made along that line and its corresponding conceptual criteria.

II. We likewise no not subscribe to the finding of the labor arbiter that the payment of the questioned benefits to
the union members has ripened into a contractual obligation.

A. Prior to the JE Program, the union members, while being supervisors, received benefits similar to the rank-
and-file employees such as overtime, rest day and holiday pay, simply because they were treated in the same
manner as rank-and-file employees, and their basic pay was nearly on the same level as those of the latter,
aside from the fact that their specific functions and duties then as supervisors had not been properly defined
and delineated from those of the rank-and-file. Such fact is apparent from the clarification made by petitioner in
its motion for reconsideration 8 filed with respondent commission in NLRC Case No. CA No. I-000058, dated
August 16, 1991, wherein, it lucidly explained:

"But, complainants no longer occupy the same positions they held before the JE Program. Those positions
formerly classified as 'supervisory' and found after the JE Program to be rank-and-file were classified correctly
and continue to receive overtime, holiday and restday pay. As to them, the practice subsists.

"However, those whose duties confirmed them to be supervisory, were re-evaluated, their duties re-defined and
in most cases their organizational positions re-designated to confirm their superior rank and duties. Thus, after
the JE program, complainants cannot be said to occupy the same positions." 9

It bears mention that this positional submission was never refuted nor controverted by respondent union in any
of its pleadings filed before herein public respondent or with this Court. Hence, it can be safely concluded
therefrom that the members of respondent union were paid the questioned benefits for the reason that, at that
time, they were rightfully entitled thereto. Prior to the JE Program, they could not be categorically classified as
members or officers of the managerial staff considering that they were then treated merely on the same level
as rank-and-file. Consequently, the payment thereof could not be construed as constitutive of voluntary
employer practice, which cannot be now be unilaterally withdrawn by petitioner. To be considered as such, it
should have been practiced over a long period of time, and must be shown to have been consistent and
deliberate. 10

The test or rationale of this rule on long practice requires an indubitable showing that the employer agreed to
continue giving the benefits knowingly fully well that said employees are not covered by the law requiring
payment thereof. 11 In the case at bar, respondent union failed to sufficiently establish that petitioner has been
motivated or is wont to give these benefits out of pure generosity.

B. It remains undisputed that the implementation of the JE Program, the members of private respondent union
were re-classified under levels S-5 S-8 which were considered under the program as managerial staff purposes
of compensation and benefits, that they occupied re-evaluated positions, and that their basic pay was
increased by an average of 50% of their basic salary prior to the JE Program. In other words, after the JE
Program there was an ascent in position, rank and salary. This in essence is a promotion which is defined as
the advancement from one position to another with an increase in duties and responsibilities as authorized by
law, and usually accompanied by an increase in salary. 12

Quintessentially, with the promotion of the union members, they are no longer entitled to the benefits which
attach and pertain exclusively to their positions. Entitlement to the benefits provided for by law requires prior
compliance with the conditions set forth therein. With the promotion of the members of respondent union, they
occupied positions which no longer met the requirements imposed by law. Their assumption of these positions
removed them from the coverage of the law, ergo, their exemption therefrom.

As correctly pointed out by petitioner, if the union members really wanted to continue receiving the benefits
which attach to their former positions, there was nothing to prevent them from refusing to accept their
promotions and their corresponding benefits. As the sating goes by, they cannot have their cake and eat it too
or, as petitioner suggests, they could not, as a simple matter of law and fairness, get the best of both worlds at
the expense of NASUREFCO.

Promotion of its employees is one of the jurisprudentially-recognized exclusive prerogatives of management,

provided it is done in good faith. In the case at bar, private respondent union has miserably failed to convince
this Court that the petitioner acted implementing the JE Program. There is no showing that the JE Program was
intended to circumvent the law and deprive the members of respondent union of the benefits they used to
receive.

Not so long ago, on this particular score, we had the occasion to hold that:
". . . it is the prerogative of the management to regulate, according to its discretion and judgment, all aspects of
employment. This flows from the established rule that labor law does not authorize the substitution of the
judgment of the employer in the conduct of its business. Such management prerogative may be availed of
without fear of any liability so long as it is exercised in good faith for the advancement of the employer's interest
and not for the purpose of defeating on circumventing the rights of employees under special laws or valid
agreement and are not exercised in a malicious, harsh, oppressive, vindictive or wanton manner or out of
malice or spite." 13

WHEREFORE, the impugned decision and resolution of respondent National Labor Relations Commission
promulgated on July 19, 1991 and August 30, 1991, respectively, are hereby ANNULLED and SET ASIDE for
having been rendered and adopted with grave abuse of discretion, and the basic complaint of private
respondent union is DISMISSED.

Narvasa, C . J ., Padilla, Nocon and Campos, Jr., JJ., concur.

 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 127598 January 27, 1999

MANILA ELECTRIC COMPANY, petitioner,

vs.
THE HONORABLE SECRETARY OF LABOR LEONARDO QUISUMBING AND MERALCO EMPLOYEES
AND WORKERS ASSOCIATION (MEWA), respondents.

MARTINEZ, J.:

In this petition for certiorari, the Manila Electric Company (MERALCO) seeks to annul the orders of the
Secretary of Labor dated August 19, 1996 and December 28, 1996, wherein the Secretary required MERALCO
and its rank and file union — the Meralco Workers Association (MEWA) — to execute a collective bargaining
agreement (CBA) for the remainder of the parties' 1992-1997 CBA cycle, and to incorporate in this new CBA
the Secretary's dispositions on the disputed economic and non-economic issues.

MEWA is the duly recognized labor organization of the rank-and-file employees of MERALCO.

On September 7, 1995, MEWA informed MERALCO of its intention to re-negotiate the terms and conditions of
their existing 1992-1997 Collective Bargaining Agreement (CBA) covering the remaining period of two years
starting from December 1, 1995 to November 30, 1997.   MERALCO signified its willingness to re-negotiate
1

through its letter dated October 17, 1995  and formed a CBA negotiating panel for the purpose. On November
2

10, 1995, MEWA submitted its proposal  to MERALCO, which, in turn, presented a counter-proposal.
3

Thereafter, collective bargaining negotiations proceeded. However, despite the series of meetings between the
negotiating panels of MERALCO and MEWA, the parties failed to arrive at "terms and conditions acceptable to
both of them."

On April 23, 1996, MEWA filed a Notice of Strike with the National Capital Region Branch of the National
Conciliation and Mediation Board (NCMB) of the Department of Labor and Employment (DOLE) which was
docketed as NCMB-NCR-NS-04-152-96, on the grounds of bargaining deadlock and unfair labor practices. The
NCMB then conducted a series of conciliation meetings but the parties failed to reach an amicable settlement.
Faced with the imminence of a strike, MERALCO on May 2, 1996, filed an Urgent Petition  with the Department
4

of Labor and Employment which was docketed as OS-AJ No. 0503[1]96 praying that the Secretary assume
jurisdiction over the labor dispute and to enjoin the striking employees to go back to work.

The Labor Secretary granted the petition through its Order  of May 8, 1996, the dispositive portion of which
5

reads:

WHEREFORE, premises considered, this Office now assumes jurisdiction over the labor
dispute obtaining between the parties pursuant to Article 263(g) of the Labor Code. Accordingly,
the parties are here enjoined from committing any act that may exacerbate the situation. To
speed up the resolution of the dispute, the parties are also directed to submit their respective
Position Papers within ten (10) days from receipt.

Undersecretary Jose M. Espanol, Jr. is deputized to conduct conciliation conferences between

the parties to bridge their differences and eventually hammer out a solution that is mutually
acceptable. He shall be assisted by the Legal Service.

SO ORDERED.
Thereafter, the parties submitted their respective memoranda and on August 19, 1996, the Secretary resolved
the labor dispute through an Order,  containing the following awards:
6

ECONOMIC DEMANDS

Wage increase — P2,300.00 for the first year covering the period from
December 1, 1995 to November 30, 1996

— P2,200.00 for the second year covering the

period December 1, 1996 to November 30, 1997.

Red Circle Rate (RCR) Allowance — all RCR allowances (promotional increases that go
beyond the maximum range of a job classification salary) shall be integrated into the basic
salary of employees effective December 1, 1995.

Longevity Allowance — the integration of the longevity allowance into the basic wage is denied;
the present policy is maintained.

Longevity Increase — the present longevity bonus is maintained but the bonus shall be
incorporated into the new CBA.

Sick Leave — MEWA's demand for upgrading is denied; the company's present policy is
maintained. However, those who have not used the sick leave benefit during a particular year
shall be entitled to a one-day sick leave incentive.

Sick leave reserve — the present reserve of 25 days shall be reduced to 15 days; the employee
has the option either to convert the excess of 10 days to cash or let it remain as long as he
wants. In case he opts to let it remain, he may later on convert it into cash at his retirement or
separation.

Vacation Leave — MEWA's demand for upgrading denied & the company's present policy is
maintained which must be incorporated into the new CBA but scheduled vacation leave may be
rounded off to one full day at a time in case of a benefit involving a fraction of a day;

Union Leave — of MEWA's officers, directors or stewards assigned to perform

union duties or legitimate union activity is increased from 30 to 40 Mondays per
month.

Maternity, Paternity and Funeral leaves — the existing policy is to be maintained and must be
incorporated in the new CBA unless a new law granting paternity leave benefit is enacted which
is superior to what the company has already granted.

Birthday Leave — union's demand is granted. If birthday falls on the employee's rest day or on
a non-working holiday, the worker shall be entitled to go on leave with pay on the next working
day.

Group Hospitalization & Surgical Insurance Plan (GHSIP) and Health Maintenance Plan (HMP)
— present policy is maintained insofar as the cost sharing is concerned — 70% for the
Company and 30% for MEWA.

Health Maintenance Plan (HMP) for dependents — subsidized dependents increased from
three to five dependents.
Longevity Bonus — is increased from P140.00 to P200.00 for even year of service to be
received by the employee after serving the Company for 5 years.

Christmas Bonus and Special Christmas Grant — MEWA's demand of one month salary as
Christmas Bonus two month's salary as Special Christmas Grant is granted and to be
incorporated in the new CBA.

Midyear Bonus — one month's pay to be included in the CBA.

Anniversary Bonus — union's demand is denied.

Christmas Gift Certificate — company has the discretion as to whether it will give it to its
employees.

Retirement Benefits:

a. Full retirement-present policy is maintained;

b. one cavan of rice per month is granted to retirees;

c. special retirement leave and allowance-present policy is

maintained;

d. HMP coverage for retirees — HMP coverage is granted to

retirees who have not reached the age of 70, with MERALCO
subsidizing 100% of the monthly premium; those over 70 are
entitled to not more than 30 days of hospitalization at the J.F.
Cotton Hospital with the company shouldering the entire cost.

e. HMP coverage for retiree's dependents is denied.

f. Monthly pension of P3,000.00 for each retiree is denied.

g. Death benefit for retiree's beneficiaries is denied.

Optional retirement — union's demand is denied; present policy is maintained;

employee is eligible for optional retirement if he has rendered at least 18 years
of service.

Dental, Medical and Hospitalization Benefits — grant of all the allowable medical, surgical,
dental and annual physical examination benefits, including free medicine whenever the same is
not available at the JFCH.

Resignation benefits — union's demand is denied.

Night work — union demand is denied but present policy must be incorporated in CBA.

Shortswing — work in another shift within the same day shall be considered as the employee's
work for the following day and the employee shall be given additional four (4) hours straight
time and the applicable excess time premium if he works beyond 8 hours in the other shift.

High Voltage allowance — is increased from P45.00 to P55.00 to be given to any employee
authorized by the Safety Division to perform work on or near energized bare lines & bus
including stockman drivers & crane operators and other crew members on ground.
High Pole Allowance — is increased from P30.00 to P40.00 to be given to those authorized to
climb poles up to at least 60 ft. from the ground. Members of the team including stockman
drivers, crane operators and other crew members on the ground, are entitled to this benefit.

Towing Allowance — where stockmen drive tow trailers with long poles and equipment on
board, they shall be entitled to a towing allowance of P20.00 whether they perform the job on
regular shift or on overtime.

Employee's Cooperative — a loan of P3 M seed money is granted to the proposed

establishment of a cooperative, payable in twenty (20) years starting one year from the start of
operations.

Holdup Allowance — the union demand is denied; the present policy shall be maintained.

Meal and Lodging Allowance — shall be increased effective December 1, 1995 as follows:

Breakfast — from P25.00 to P35.00

Lunch — from P35.00 to P45.00

Dinner — from P35.00 to P45.00

Lodging — from P135.00 to P180.00 a night in all MERALCO franchise areas.

Payroll Treatment for Accident while on Duty — an employee shall be paid his salary and
allowance if any is due plus average excess time for the past 12 months from the time of the
accident up to the time of full recovery and placing of the employee back to normal duty or an
allowance of P2,000.00, whichever is higher.

Housing and Equity Assistance Loan — is increased to P60,000.00; those who have already
availed of the privilege shall be allowed to get the difference.

Benefits for Collectors:

a. Company shall reduce proportionately the quota and monthly

average product level (MAPL) in terms of equivalent bill
assignment when an employee is on sick leave and paid
vacation leave.

b. When required to work on Saturdays, Sundays and holidays,

an employee shall receive P60.00 lunch allowance and
applicable transportation allowance as determined by the
Company and shall also receive an additional compensation to
one day fixed portion in addition to lunch and transportation
allowance.

c. The collector shall be entitled to an incentive pay of P25.00 for

every delinquent account disconnected.

d. When a collector voluntarily performs other work on regular

shift or overtime, he shall be entitled to remuneration based on
his computed hourly compensation and the reimbursement of
actually incurred transportation expenses.
 e. Collectors shall be provided with bobcat belt bags every year.

f. Collector's cash bond shall be deposited under his capital

contribution to MESALA.

g. Collectors quota and MAPL shall be proportionately reduced

during typhoons, floods, earthquakes and other similar force
majeure events when it is impossible for a collector to perform
collection work.

Political Demands:

a. Scope of the collective bargaining unit — the collective

bargaining unit shall be composed of all regular rank-and-file
employees hired by the company in all its offices and operative
centers throughout its franchise area and those it may employ by
reason of expansion, reorganization or as a result of operational
exigencies.

b. Union recognition and security —

i. The union shall be recognized by the Company

as sole and exclusive bargaining representative
of the rank-and-file employees included in the
bargaining unit. The Company shall agree to
meet only with Union officers and its authorized
representatives on all matters involving the Union
and all issues arising from the implementation
and interpretation of the new CBA.

ii. The union shall meet with the newly

regularized employees for a period not to exceed
four (4) hours, on company time, to acquaint the
new regular employees of the rights, duties and
benefits of Union membership.

iii. The right of all rank-and-file employees to join

the union shall be recognized in accordance with
the maintenance of membership principle as a
form of union security.

c. Transfer of assignment and job security —

i. No transfer of an employee from one position

to another shall be made if motivated by
considerations of sex, race, creed, political and
religious belief, seniority or union activity.

ii. If the transfer is due to the reorganization or

decentralization, the distance from the
employee's residence shall be considered unless
the transfer is accepted by the employee. If the
transfer is extremely necessary, the transfer shall
be made within the offices in the same district.
 iii. Personnel hired through agencies or
contractors to perform the work done by covered
employees shall not exceed one month. If
extension is necessary the union shall be
informed. But the Company shall not
permanently contract out regular or permanent
positions that are necessary in the normal
operation of the Company.

d. Check off Union Dues — where the union increases its dues
as approved by the Board of Directors, the Company shall check
off such increase from the salaries of union members after the
union submits check off authorizations signed by the majority of
the members. The Company shall honor only those individual
authorizations signed by the majority of the union members and
collectively submitted by the union to the Company's Salary
Administration.

e. Payroll Reinstatement — shall be in accordance with Article

223, p. 3 of the Labor Code.

f. Union Representation in Committees — the union is allowed to

participate in policy formulation and in the decision-making
process on matters affecting their rights and welfare, particularly
in the Uniform Committee, the Safety Committee and other
committees that may be formed in the future.

Signing Bonus — P4,000.00 per member of the bargaining unit for the conclusion of the CBA.

Existing benefits already granted by the Company but which are not expressly or impliedly
repealed in the new agreement shall remain subsisting and shall be included in the new
agreement to be signed by the parties effective December 1, 1995.

On August 30, 1996, MERALCO filed a motion for reconsideration  alleging that the Secretary of Labor
7

committed grave abuse of discretion amounting to lack or excess of jurisdiction:

1. in awarding to MEWA a package that would cost at least P1.142 billion, a

package that is grossly excessive and exorbitant, would not be affordable to
MERALCO and would imperil its viability as a public utility affected with national
interest.

2. in ordering the grant of a P4,500.00 wage increase, as well as a new and

improved fringe benefits, under the remaining two (2) years of the CBA for the-
rank-and-file employees.

3. in ordering the "incorporation into the CBA of all existing employee benefits,
on the one hand, and those that MERALCO has unilaterally granted to its
employees by virtue of voluntary company policy or practice, on the other hand."

4. in granting certain "political demands" presented by the union.

5. in ordering the CBA to be "effective December 1995" instead of August 19,

1996 when he resolved the dispute.
MERALCO filed a supplement to the motion for reconsideration on September 18, 1995, alleging that the
Secretary of Labor did not properly appreciate the effect of the awarded wages and benefits on MERALCO's
financial viability.

MEWA likewise filed a motion asking the Secretary of Labor to reconsider its Order on the wage increase,
leaves, decentralized filing of paternity and maternity leaves, bonuses, retirement benefits, optional retirement,
medical, dental and hospitalization benefits, short swing and payroll treatment. On its political demands, MEWA
asked the Secretary to rule on its proposal to institute a Code of Discipline for its members and the union's
representation in the administration of the Pension Fund.

On December 28, 1996, the Secretary issued an Order  resolving the parties' separate motions, the
8

modifications of the August 19, 1996 Order being highlighted hereunder:

1) Effectivity of Agreement — December 1, 1995 to November 30, 1997.

Economic Demands

2) Wage Increase:

First year — P2,200.00 per month;

Second year — P2,200.00 per month.

3) Integration of Red Circle Rate (RCR) and Longevity Allowance into Basic Salary — the RCR
allowance shall be integrated into the basic salary of employees as of August 19, 1996 (the
date of the disputed Order).

4) Longevity Bonus — P170 per year of service starting from 10 years of continuous service.

5) Vacation Leave — The status quo shall be maintained as to the number of vacation leave

but employees' scheduled vacation may be taken one day at a time in the manner that this has
been provided in the supervisory CBA.

6) Sick Leave Reserve — is reduced to 15 days, with any excess payable at the end of the
year. The employee has the option to avail of this cash conversion or to accumulate his sick
leave credits up to 25 days for conversion to cash at retirement or separation from the service.

7) Birthday Leave — the grant of a day off when an employee's birthday falls on a non-working
day is deleted.

8) Retirement Benefits for Retirees — The benefits granted shall be effective on August 19,
1996, the date of the disputed order up to November 30, 1997, which is the date the CBA
expires and shall apply to those who are members of the bargaining unit at the time the award
is made.

One sack of rice per quarter of the year shall be given to those retiring between
August 19, 1996 and November 30, 1997.

On HMP Coverage for Retirees — The parties "maintain the status quo, that is,
with the Company complying with the present arrangement and the obligations
to retirees as is."
9) Medical, Dental and Hospitalization Benefits — The cost of medicine unavailable at the J.F.
Cotton Hospital shall be in accordance with MERALCO's Memorandum dated September 14,
1976.

10) GHSIP and HMP for Dependents — The number of dependents to be subsidized shall be
reduced from 5 to 4 provided that their premiums are proportionately increased.

11) Employees' Cooperative — The original award of P3 million pesos as seed money for the
proposed Cooperative is reduced to P1.5 million pesos.

12) Shortswing — the original award is deleted.

13) Payroll Treatment for Accident on Duty — Company ordered to continue its present practice
on payroll treatment for accident on duty without need to pay the excess time the Union
demanded.

Political Demands:

14) Scope of the collective bargaining unit — The bargaining unit shall be composed of all rank
and file employees hired by the Company in accordance with the original Order.

15) Union recognition and security — The incorporation of a closed shop form of union security
in the CBA; the Company is prohibited from entertaining individuals or groups of individuals only
on matters that are exclusively within the domain of the union; the Company shall furnish the
Union with a complete list of newly regularized employees within a week from regularization so
that the Union can meet these employees on the Union's and the employee's own time.

16) Transfer of assignment and job security — Transfer is a prerogative of the Company but the
transfer must be for a valid business reason, made in good faith and must be reasonably
exercised. The CBA shall provide that "No transfer of an employee from one position to
another, without the employee's written consent, shall be made if motivated by considerations
of sea, race, creed, political and religious belief, age or union activity.

17) Contracting Out — The Company has the prerogative to contract out services provided that
this move is based on valid business reasons in accordance with law, is made in good faith, is
reasonably exercised and, provided further that if the contracting out involves more than six
months, the Union must be consulted before its implementation.

18) Check off of union dues

In any increase of union dues or contributions for mandatory activities, the union
must submit to the Company a copy of its board resolution increasing the union
dues or authorizing such contributions;

If a board resolution is submitted, the Company shall deduct union dues from all
union members after a majority of the union members have submitted their
individual written authorizations. Only those check-off authorization submitted by
the union shall be honored by the Company.

With respect to special assessments, attorney's fees, negotiation fees or any

other extraordinary fees individual authorization shall be necessary before the
company may so deduct the same.
 19) Union Representation in Committees — The union is granted representation in the Safety
Committee, the Uniform Committee and other committees of a similar nature and purpose
involving personnel welfare, rights and benefits as well as duties.

Dissatisfied, petitioner filed this petition contending that the Secretary of Labor gravely abused his discretion:

1) . . . in awarding wage increases of P2,200.00 for 1996 and P2,200 for 1997.

2) . . . in awarding the following economic benefits:

a. Two months Christmas bonus;

b. Rice Subsidy and retirement benefits for retirees;

c. Loan for the employees' cooperative;

d. Social benefits such as GHSIP and HMP for dependents,

employees' cooperative and housing equity assistance loan;

e. Signing bonus;

f. Integration of the Red Circle Rate Allowance.

g. Sick leave reserve of 15 days

h. The 40-day union leave;

i. High pole/high voltage and towing allowance; and

j. Benefits for collectors

3) . . . in expanding the scope of the bargaining unit to all regular rank and file
employees hired by the company in all its offices and operating centers and
those it may employ by reason of expansion, reorganization or as a result of
operational exigencies;

4) . . . in ordering for a closed shop when his original order for a maintenance of
membership arrangement was not questioned by the parties;

5) . . . in ordering that Meralco should consult the union before any contracting
out for more than six months;

6) . . . in decreeing that the union be allowed to have representation in policy

and decision making into matters affecting "personnel welfare, rights and
benefits as well as duties;"

7) . . . in ruling for the inclusion of all terms and conditions of employment in the
collective bargaining agreement;

8) . . . in exercising discretion in determining the retroactivity of the CBA;

Both MEWA and the Solicitor General, on behalf of the Secretary of Labor, filed their comments to the petition.
While the case was also set for oral argument on Feb. 10, 1997, this hearing was cancelled due to MERALCO
not having received the comment of the opposing parties. The parties were instead required to submit written
memoranda, which they did. Subsequently, both petitioner and private respondent MEWA also filed replies to
the opposing parties' Memoranda, all of which We took into account in the resolution of this case.

The union disputes the allegation of MERALCO that the Secretary abused his discretion in issuing the assailed
orders arguing that he acted within the scope of the powers granted him by law and by the Constitution. The
union contends that any judicial review is limited to an examination of the Secretary's decision-
making/discretion — exercising process to determine if this process was attended by some capricious or
whimsical act that constitutes "grave abuse"; in the absence of such abuse, his findings — considering that he
has both jurisdiction and expertise to make them — are valid.

The union's position is anchored on two premises:

First, no reviewable abuse of discretion could have attended the Secretary's arbitral award because the
Secretary complied with constitutional norms in rendering the disputed award. The union posits that the
yardstick for comparison and for the determination of the validity of the Secretary's actions should be the
specific standards laid down by the Constitution itself. To the union, these standards include the State policy on
the promotion of workers' welfare,  the principle of distributive justice,   the right of the State to regulate the use
9 10

of property,   the obligation of the State to protect workers, both organized and unorganized, and insure their
11

enjoyment of "humane conditions of work" and a "living wage," and the right of labor to a just share in the fruits
of production.  12

Second, no reversible abuse of discretion attended the Secretary's decision because the Secretary took all the
relevant evidence into account, judiciously weighed them, and rendered a decision based on the facts and law.
Also, the arbitral award should not be reversed given the Secretary's expertise in his field and the general rule
that findings of fact based on such expertise is generally binding on this Court.

To put matters in proper perspective, we go back to basic principles. The Secretary of Labor's statutory power
under Art. 263 (g) of the Labor Code to assume jurisdiction over a labor dispute in an industry indispensable to
the national interest, and, to render an award on compulsory arbitration, does not exempt the exercise of this
power from the judicial review that Sec. 1, Art. 8 of the Constitution mandates. This constitutional provision
states:

Judicial power includes the duty of the courts of justice to settle actual
controversies involving rights which are legally demandable and
enforceable, and to determine whether or not there has been a grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of any branch
or instrumentality of the government.

Under this constitutional mandate, every legal power of the Secretary of Labor under the Labor Code, or, for
that matter, any act of the Executive, that is attended by grave abuse of discretion is subject to review by this
Court in an appropriate proceeding. To be sure, the existence of an executive power alone — whether granted
by statute or by the Constitution — cannot exempt the executive action from judicial oversight, interference or
reversal when grave abuse of discretion is, or is alleged to be, present. This is particularly true when
constitutional norms are cited as the applicable yardsticks since this Court is the final interpreter of the meaning
and intent of the Constitution. 13

The extent of judicial review over the Secretary of Labor's arbitral award is not limited to a determination of
grave abuse in the manner of the secretary's exercise of his statutory powers. This Court is entitled to, and
must — in the exercise of its judicial power — review the substance of the Secretary's award when grave
abuse of discretion is alleged to exist in the award, i.e., in the appreciation of and the conclusions the Secretary
drew from the evidence presented.

The natural and ever present limitation on the Secretary's acts is, of course, the Constitution. And we recognize
that indeed the constitutional provisions the union cited are State policies on labor and social justice that can
serve as standards in assessing the validity of a Secretary of Labor's actions. However, we note that these
provisions do not provide clear, precise and objective standards of conduct that lend themselves to easy
application. We likewise recognize that the Constitution is not a lopsided document that only recognizes the
interests of the working man; it too protects the interests of the property owner and employer as well.  14

For these reasons — and more importantly because a ruling on the breadth and scope of the suggested
constitutional yardsticks is not absolutely necessary in the disposition of this case — we shall not use these
yardsticks in accordance with the time-honored practice of avoiding constitutional interpretations when a
decision can be reached using non-constitutional standards. We have repeatedly held that one of the essential
requisites for a successful judicial inquiry into constitutional questions is that the resolution of the constitutional
question must be necessary in deciding the case.  15

In this case we believe that the more appropriate and available standard — and one does not require a
constitutional interpretation — is simply the standard of reasonableness. In layman's terms, reasonableness
implies the absence of arbitrariness;   in legal parlance, this translates into the exercise of proper discretion
16

and to the observance of due process. Thus, the question we have to answer in deciding this case is whether
the Secretary's actions have been reasonable in light of the parties positions and the evidence they presented.

MEWA's second premise — i.e., that the Secretary duly considered the evidence presented — is the main
issue that we shall discuss at length below. Additionally, MEWA implied that we should take great care before
reading an abuse of discretion on the part of the Secretary because of his expertise on labor issues and
because his findings of fact deserve the highest respect from this Court.

This Court has recognized the Secretary of Labor's distinct expertise in the study and settlement of labor
disputes falling under his power of compulsory arbitration.   It is also well-settled that factual findings of labor
17

administrative officials, if supported by substantial evidence, are entitled not only to great respect but even to
finality.   We, therefore, have no difficulty in accepting the union's caveat on how to handle a Secretary of
18

Labor's arbitral award.

But at the same time, we also recognize the possibility that abuse of discretion may attend the exercise of the
Secretary's arbitral functions; his findings in an arbitration case are usually based on position papers and their
supporting documents (as they are in the present case), and not on the thorough examination of the parties'
contending claims that may be present in a court trial and in the face-to-face adversarial process that better
insures the proper presentation and appreciation of evidence.   There may also be grave abuse of discretion
19

where the board, tribunal or officer exercising judicial function fails to consider evidence adduced by the
present.   Given the parties' positions on the justiciability of the issues before us, the question we have to
20

answer is one that goes into the substance of the Secretary's disputed orders: Did the Secretary properly
consider and appreciate the evidence presented before him?

We find, based on our consideration of the parties' positions and the evidence on record, that the Secretary of
Labor disregarded and misappreciated evidence, particularly with respect to the wage award. The Secretary of
Labor apparently also acted arbitrarily and even whimsically in considering a number of legal points; even the
Solicitor General himself considered that the Secretary gravely abused his discretion on at least three major
points: (a) on the signing bonus issue; (b) on the inclusion of confidential employees in the rank and file
bargaining unit, and (c) in mandating a union security "closed-shop" regime in the bargaining unit.

We begin with a discussion on the wages issue. The focal point in the consideration of the wage award is the
projected net income for 1996 which became the basis for the 1996 wage award, which in turn — by
extrapolation — became the basis for the (2nd Year) 1997 award. MERALCO projected that the net operating
income for 1996 was 14.7% above the 1999 level or a total net operating income of 4.171 Billion, while the
union placed the 1996 net operating income at 5.795 Billion.

MERALCO based its projection on the increase of the income for the first 6 months of 1996 over the same
period in 1995. The union, on the other hand, projected that the 1996 income would increase by 29% to 35%
because the "consumption of electric power is at its highest during the last two quarters with the advent of the
Yuletide season." The union likewise relied heavily on a newspaper report citing an estimate by an all Asia
capital financial analyst that the net operating income would amount to 5.795 Billion.  21

Based essentially on these considerations, the Secretary made the following computations and ordered his
disputed wage award:

Projected net operating

income for 1996 5,795,000,000
Principals and interests 1,426,571,703
Dividends at 1995 rate 1,636,949,000
Net Amount left with the Company 2,729,479,297
Add: Tax credit equivalent to 35% of labor 231,804,940
cost
Company's net operating income 2,961,284,237

For 1997, the projected income is P7,613,612 which can easily absorb the incremental increase
of P2,200 per month or a total of P4,500 during the last year of the CBA period.

x x x           x x x          x x x

An overriding aim is to estimate the amount that is left with the Company after the awarded
wages and benefits and the company's customary obligations are paid. This amount can be the
source of an item not found in the above computations but which the Company must provide
for, that is — the amount the company can use for expansion.

Considering the expansion plans stated in the Company's Supplement that calls for capital
expenditures of 6 billion, 6.263 billion and 5.802 billion for 1996, 1997 and 1998
respectively, We conclude that our original award of P2,300 per month for the first year and
P2,200 for the second year will still leave much by way of retained income that can be used for
expansion."   (Emphasis ours.)
22

We find after considering the records that the Secretary gravely abused his discretion in making this wage
award because he disregarded evidence on record. Where he considered MERALCO's evidence at all, he
apparently misappreciated this evidence in favor of claims that do not have evidentiary support. To our mind,
the MERALCO projection had every reason to be reliable because it mas based on actual and undisputed
figures for the first six months of 1996.   On the other hand, the union projection was based on a speculation of
23

Yuletide consumption that the union failed to substantiate. In fact, as against the union's unsubstantiated
Yuletide consumption claim, MERALCO adduced evidence in the form of historical consumption data showing
that a lengthy consumption does not tend to rise during the Christmas period.   Additionally, the All-Asia Capital
24

Report was nothing more than a newspaper report that did not show any specific breakdown or computations.
While the union claimed that its cited figure is based on MERALCO's 10-year income stream,   no data or
25

computation of this 10-year stream appear in the record.

While the Secretary is not expected to accept the company-offered figures wholesale in determining a wage
award, we find it a grave abuse of discretion to completely disregard data that is based on actual and
undisputed record of financial performance in favor of the third-hand and unfounded claims the Secretary
eventually relied upon. At the very least, the Secretary should have properly justified his disregard of the
company figures. The Secretary should have also reasonably insured that the figure that served as the starting
point for his computation had some substantial basis.

Both parties extensely discussed the factors that the decision maker should consider in making a wage award.
While We do not seek to enumerate in this decision the factors that should affect wage determination, we must
emphasize that a collective bargaining dispute such as this one requires due consideration and proper
balancing of the interests of the parties to the dispute and of those who might be affected by the dispute. To our
mind, the best way in approaching this task holistically is to consider the available objective facts, including,
where applicable, factors such as the bargaining history of the company, the trends and amounts of arbitrated
and agreed wage awards and the company's previous CBAs, and industry trends in general. As a rule,
affordability or capacity to pay should be taken into account but cannot be the sole yardstick in determining the
wage award, especially in a public utility like MERALCO. In considering a public utility, the decision maker must
always take into account the "public interest" aspects of the case; MERALCO's income and the amount of
money available for operating expenses — including labor costs — are subject to State regulation. We must
also keep in mind that high operating costs will certainly and eventually be passed on to the consuming public
as MERALCO has bluntly warned in its pleadings.

We take note of the "middle ground" approach employed by the Secretary in this case which. we do not
necessarily find to be the best method of resolving a wage dispute. Merely finding the midway point between
the demands of the company and the union, and "splitting the difference" is a simplistic solution that fails to
recognize that the parties may already be at the limits of the wage levels they can afford. It may lead to the
danger too that neither of the parties will engage in principled bargaining; the company may keep its position
artificially low while the union presents an artificially high position, on the fear that a "Solomonic" solution
cannot be avoided. Thus, rather than encourage agreement, a "middle ground approach" instead promotes a
"play safe" attitude that leads to more deadlocks than to successfully negotiated CBAs.

After considering the various factors the parties cited, we believe that the interests of both labor and
management are best served by a wage increase of P1,900.00 per month for the first year and another
P1,900.00 per month for the second year of the two-year CBA term. Our reason for this is that these increases
sufficiently protects the interest of the worker as they are roughly 15% of the monthly average salary of
P11,600.00.   They likewise sufficiently consider the employer's costs and its overall wage structure, while at
26

the same time, being within the range that will not disrupt the wage trends in Philippine industries.

The record shows that MERALCO, throughout its long years of existence, was never remiss in its obligation
towards its employees. In fact, as a manifestation of its strong commitment to the promotion of the welfare and
well-being of its employees, it has consistently improved their compensation package. For instance, MERALCO
has granted salary increases   through the collective bargaining agreement the amount of which since 1980 for
27

both rank-and-file and supervisory employees were as follows:

AMOUNT OF CBA INCREASES DIFFERENCE

CBA RANK-AND- SUPERVISORY AMOUNT PERCENT
COVERAGE FILE
1980 230 342.5 112.5 48.91%
1981 210 322.5 112.5 53.57
1982 200 312.5 112.5 56.25
TOTAL 640 977.5 337.5 52.73
1983 320 432.5 112.5 35.16
1984 350 462.5 112.5 32.14
1985 370 482.5 112.5 30.41
TOTAL 1,040.00 1,377.50 337.5 32.45
1986 860 972.5 112.5 13.08
1987 640 752.5 112.5 17.58
1988 600 712.5 112.5 18.75
TOTAL 2,100.00 2,437.50 337.5 16.07
1989 1,100.00 1,212.50 112.5 10.23
1990 1,200.00 1,312.50 112.5 9.38
 1991 1,300.00 1,412.50 112.5 8.65
TOTAL 3,600.00 3,937.50 337.5 9.38
1992 1,400.00 1,742.50 342.5 24.46
1993 1,350.00 1,682.50 332.5 24.63
1994 1,150.00 1,442.50 292.5 25.43
TOTAL 3,900.00 4,867.50 967.5 24.81

 Based on the above-quoted table, specifically under the column "RANK-AND-FILE," it is easily discernible that
the total wage increase of P3,800.00 for 1996 to 1997 which we are granting in the instant case is significantly
higher than the total increases given in 1992 to 1994, or a span of three (3) years, which is only P3,900.00 a
month. Thus, the Secretary's grant of P2,200.00 monthly wage increase in the assailed order is unreasonably
high a burden for MERALCO to shoulder.

We now go to the economic issues.

1. CHRISTMAS BONUS

MERALCO questions the Secretary's award of "Christmas bonuses" on the ground that what it had given its
employees were special bonuses to mark or celebrate "special occasions," such as when the Asia Money
Magazine recognized MERALCO as the "best managed company in Asia." These grants were given on or
about Christmas time, and the timing of the grant apparently led the Secretary to the conclusion that what were
given were Christmas bonuses given by way of a "company practice" on top of the legally required 13th month
pay.

The Secretary in granting the two-month bonus, considered the following factual finding, to wit:

We note that each of the grant mentioned in the commonly adopted table of
grants has a special description. Christmas bonuses were given in 1988 and
1989. However, the amounts of bonuses given differed. In 1988, it was P1,500.
In 1989, it was 1/2 month salary. The use of "Christmas bonus" title stopped
after 1989. In 1990, what was given was a "cash gift" of 1/2 month's salary. The
grants thereafter bore different titles and were for varying amounts. Significantly,
the Company explained the reason for the 1995 bonuses and this explanation
was not substantially contradicted by the Union.

What comes out from all these is that while the Company has consistently give
some amount by way of bonuses since 1988, these awards were not given
uniformly as Christmas bonuses or special Christmas grants although they may
have been given at or about Christmas time.

x x x           x x x          x x x

The Company is not therefore correct in its position that there is no established
practice of giving Christmas bonuses that has ripened to the status of being a
term and condition of employment. Regardless of its nomenclature and purpose,
the act of giving this bonus in the spirit of Christmas has ripened into a
Company practice.  28

It is MERALCO's position that the Secretary erred when he recognized that there was an "established practice"
of giving a two-month Christmas bonus based on the fact that bonuses were given on or about Christmas time.
It points out that the "established practice" attributed to MERALCO was neither for a considerable period of
time nor identical in either amount or purpose. The purpose and title of the grants were never the same except
for the Christmas bonuses of 1988 and 1989, and were not in the same amounts.
We do not agree.

As a rule, a bonus is not a demandable and enforceable obligation;   it may nevertheless be granted on
29

equitable considerations   as when the giving of such bonus has been the company's long and regular
30

practice.   To be considered a "regular practice," the giving of the bonus should have been done over a long
31

period of time, and must be shown to have been consistent and deliberate.   Thus we have ruled in National
32

Sugar Refineries Corporation vs. NLRC:  33

The test or rationale of this rule on long practice requires an indubitable showing that the
employer agreed to continue giving the benefits knowing fully well that said employees are not
covered by the law requiring payment thereof.

In the case at bar, the record shows that MERALCO, aside from complying with the regular 13th month bonus,
has further been giving its employees an additional Christmas bonus at the tail-end of the year since 1988.
While the special bonuses differed in amount and bore different titles, it can not be denied that these were
given voluntarily and continuously on or about Christmas time. The considerable length of time MERALCO has
been giving the special grants to its employees indicates a unilateral and voluntary act on its part, to continue
giving said benefits knowing that such act was not required by law.

Indeed, a company practice favorable to the employees has been established and the payments made by
MERALCO pursuant thereto ripened into benefits enjoyed by the employees. Consequently, the giving of the
special bonus can no longer be withdrawn by the company as this would amount to a diminution of the
employee's existing benefits.  34

We can not, however, affirm the Secretary's award of a two-month special Christmas bonus to the employees
since there was no recognized company practice of giving a two-month special grant. The two-month special
bonus was given only in 1995 in recognition of the employees prompt and efficient response during the
calamities. Instead, a one-month special bonus, We believe, is sufficient, this being merely a generous act on
the part of MERALCO.

2. RICE SUBSIDY and RETIREMENT BENEFITS for RETIREES

It appears that the Secretary of Labor originally ordered the increase of the retirement pay, rice subsidy and
medical benefits of MERALCO retirees. This ruling was reconsidered based on the position that retirees are no
longer employees of the company and therefore are no longer bargaining members who can benefit from a
compulsory arbitration award. The Secretary, however, ruled that all members of the bargaining unit who retire
between August 19, 1996 and November 30, 1997 (i.e., the term of the disputed CBA under the Secretary's
disputed orders) are entitled to receive an additional rice subsidy.

The question squarely brought in this petition is whether the Secretary can issue an order that binds the
retirement fund. The company alleges that a separate and independent trust fund is the source of retirement
benefits for MERALCO retirees, while the union maintains that MERALCO controls these funds and may
therefore be compelled to improve this benefit in an arbitral award.

The issue requires a finding of fact on the legal personality of the retirement fund. In the absence of any
evidence on record indicating the nature of the retirement fund's legal personality, we rule that the issue should
be remanded to the Secretary for reception of evidence as whether or not the MERALCO retirement fund is a
separate and independent trust fund. The existence of a separate and independent juridical entity which
controls an irrevocable retirement trust fund means that these retirement funds are beyond the scope of
collective bargaining: they are administered by an entity not a party to the collective bargaining and the funds
may not be touched without the trustee's conformity.

On the other hand, MERALCO control over these funds means that MERALCO may be compelled in the
compulsory arbitration of a CBA deadlock where it is the employer, to improve retirement benefits since
retirement is a term or condition of employment that is a mandatory subject of bargaining.
3. EMPLOYEES' COOPERATIVE

The Secretary's disputed ruling requires MERALCO to provide the employees covered by the bargaining unit
with a loan of 1.5 Million as seed money for the employees formation of a cooperative under the Cooperative
Law, R.A. 6938. We see nothing in this law — whether expressed or implied — that requires employers to
provide funds, by loan or otherwise, that employees can use to form a cooperative. The formation of a
cooperative is a purely voluntary act under this law, and no party in any context or relationship is required by
law to set up a cooperative or to provide the funds therefor. In the absence of such legal requirement, the
Secretary has no basis to order the grant of a 1.5 million loan to MERALCO employees for the formation of a
cooperative. Furthermore, we do not see the formation of an employees cooperative, in the absence of an
agreement by the collective bargaining parties that this is a bargainable term or condition of employment, to be
a term or condition of employment that can be imposed on the parties on compulsory arbitration.

4. GHSIP, HMP BENEFITS FOR DEPENDENTS and HOUSING EQUITY LOAN

MERALCO contends that it is not bound to bargain on these benefits because these do not relate to "wages,
hours of work and other terms and conditions of employment" hence, the denial of these demands cannot
result in a bargaining impasse.

The GHSIP, HMP benefits for dependents and the housing equity loan have been the subject of bargaining and
arbitral awards in the past. We do not see any reason why MERALCO should not now bargain on these
benefits. Thus, we agree with the Secretary's ruling:

. . . Additionally and more importantly, GHSIP and HMP, aside from being
contributory plans, have been the subject of previous rulings from this Office as
bargainable matters. At this point, we cannot do any less and must recognize
that GHSIP and HMP are matters where the union can demand and negotiate
for improvements within the framework of the collective bargaining system.  35

Moreover, MERALCO have long been extending these benefits to the employees and their dependents that
they now become part of the terms and conditions of employment. In fact, MERALCO even pledged to continue
giving these benefits. Hence, these benefits should be incorporated in the new CBA.

With regard to the increase of the housing equity grant, we find P60,000.00 reasonable considering the
prevailing economic crisis.

5. SIGNING BONUS

On the signing bonus issue, we agree with the positions commonly taken by MERALCO and by the Office of
the Solicitor General that the signing bonus is a grant motivated by the goodwill generated when a CBA is
successfully negotiated and signed between the employer and the union. In the present case, this goodwill
does not exist. In the words of the Solicitor General:

When negotiations for the last two years of the 1992-1997 CBA broke down and
the parties sought the assistance of the NCMB, but which failed to reconcile
their differences, and when petitioner MERALCO bluntly invoked the jurisdiction
of the Secretary of Labor in the resolution of the labor dispute, whatever
goodwill existed between petitioner MERALCO and respondent union
disappeared. . . . . 
36

In contractual terms, a signing bonus is justified by and is the consideration paid for the goodwill that existed in
the negotiations that culminated in the signing of a CBA. Without the goodwill, the payment of a signing bonus
cannot be justified and any order for such payment, to our mind, constitutes grave abuse of discretion. This is
more so where the signing bonus is in the not insignificant total amount of P16 Million.
6. RED-CIRCLE-RATE ALLOWANCE

An RCR allowance is an amount, not included in the basic salary, that is granted by the company to an
employee who is promoted to a higher position grade but whose actual basic salary at the time of the
promotion already exceeds the maximum salary for the position to which he or she is promoted. As an
allowance, it applies only to specific individuals whose salary levels are unique with respect to their new and
higher positions. It is for these reasons that MERALCO prays that it be allowed to maintain the RCR allowance
as a separate benefit and not be integrated in the basic salary.

The integration of the RCR allowance in the basic salary of the employees had consistently been raised in the
past CBAs (1989 and 1992) and in those cases, the Secretary decreed the integration of the RCR allowance in
the basic salary. We do not see any reason why it should not be included in the present CBA. In fact, in the
1995 CBA between MERALCO and the supervisory union (FLAMES), the integration of the RCR allowance
was recognized. Thus, Sec. 4 of the CBA provides:

All Red-Circle-date Allowance as of December 1, 1995 shall be integrated in the

basic salary of the covered employees who as of such date are receiving such
allowance. Thereafter, the company rules on RCR allowance shall continue to
be observed/applied.  37

For purposes of uniformity, we affirm the Secretary's order on the integration of the RCR allowance in the basic
salary of the employees.

7. SICK LEAVE RESERVE OF 15 DAYS

MERALCO assails the Secretary's reduction of the sick leave reserve benefit from 25 days to 15 days,
contending that the sick leave reserve of 15 days has reached the lowest safe level that should be maintained
to give employees sufficient buffer in the event they fall ill.

We find no compelling reason to deviate from the Secretary's ruling that the sick leave reserve is reduced to 15
days, with any excess convertible to cash at the end of the year. The employee has the option to avail of this
cash conversion or to accumulate his sick leave credits up to 25 days for conversion to cash at his retirement
or separation from the service. This arrangement is, in fact, beneficial to MERALCO. The latter admits that "the
diminution of this reserve does not seriously affect MERALCO because whatever is in reserve are sick leave
credits that are payable to the employee upon separation from service. In fact, it may be to MERALCO's
financial interest to pay these leave credits now under present salary levels than pay them at future higher
salary levels. 
38

8. 40-DAY UNION LEAVE

MERALCO objects to the demanded increase in union leave because the union leave granted to the union is
already substantial. It argues that the union has not demonstrated any real need for additional union leave.

The thirty (30) days union leave granted by the Secretary, to our mind, constitute sufficient time within which
the union can carry out its union activities such as but not limited to the election of union officers, selection or
election of appropriate bargaining agents, conduct referendum on union matters and other union-related
matters in furtherance of union objectives. Furthermore, the union already enjoys a special union leave with
pay for union authorized representatives to attend work education seminars, meetings, conventions and
conferences where union representation is required or necessary, and Paid-Time-off for union officers,
stewards and representatives for purpose of handling or processing grievances.

9. HIGH VOLTAGE/HIGH POLE/TOWING ALLOWANCE

MERALCO argues that there is no justification for the increase of these allowances. The personnel concerned
will not receive any additional risk during the life of the current CBA that would justify the increase demanded
by the union. In the absence of such risk, then these personnel deserve only the same salary increase that all
other members of the bargaining unit will get as a result of the disputed CBA. MERALCO likewise assails the
grant of the high voltage/high pole allowance to members of the team who are not exposed to the high
voltage/high pole risks. The risks that justify the higher salary and the added allowance are personal to those
who are exposed to those risks. They are not granted to a team because some members of the team are not
exposed to the given risks.

The increase in the high-voltage allowance (from P45.00 to P55.00), high-pole allowance (from P30.00 to
P40.00), and towing allowance is justified considering the heavy risk the employees concerned are exposed to.
The high-voltage allowance is granted to an employee who is authorized by the company to actually perform
work on or near energized bare lines and bus, while the high-pole allowance is given to those authorized to
climb poles on a height of at least 60 feet from the ground to work thereat. The towing allowance, on the other
hand, is granted to the stockman drivers who tow trailers with long poles and equipment on board. Based on
the nature of the job of these concerned employees, it is imperative to give them these additional allowances
for taking additional risks. These increases are not even commensurate to the danger the employees
concerned are subjected to. Besides, no increase has been given by the company since 1992.  39

We do not, however, subscribe to the Secretary's order granting these allowances to the members of the team
who are not exposed to the given risks. The reason is obvious no risk, no pay. To award them the said
allowances would be manifestly unfair for the company and even to those who are exposed to the risks, as well
as to the other members of the bargaining unit who do not receive the said allowances.

10. BENEFITS FOR COLLECTORS

MERALCO opposes the Secretary's grant of benefits for collectors on the ground that this is grossly
unreasonable both in scope and on the premise it is founded.

We have considered the arguments of the opposing parties regarding these benefits and find the Secretary's
ruling on the (a) lunch allowance; (b) disconnection fee for delinquent accounts; (c) voluntary performance of
other work at the instance of the Company; (d) bobcat belt bags; and (e) reduction of quota and MAPL during
typhoons and other force majeure events, reasonable considering the risks taken by the company personnel
involved, the nature of the employees' functions and responsibilities and the prevailing standard of living. We
do not however subscribe to the Secretary's award on the following:

(a) Reduction of quota and MAPL when the collector is on sick leave because
the previous CBA has already provided for a reduction of this demand. There is
no need to further reduce this.

(b) Deposit of cash bond at MESALA because this is no longer necessary in

view of the fact that collectors are no longer required to post a bond.

We shall now resolve the non-economic issues.

1. SCOPE OF THE BARGAINING UNIT

The Secretary's ruling on this issue states that:

a. Scope of the collective bargaining unit. The union is demanding that the
collective bargaining unit shall be composed of all regular rank and file
employees hired by the company in all its offices and operating centers through
its franchise and those it may employ by reason of expansion, reorganization or
as a result of operational exigencies. The law is that only managerial employees
are excluded from any collective bargaining unit and supervisors are now
allowed to form their own union (Art. 254 of the Labor Code as amended by
R.A. 6715 ). We grant the union demand.
Both MERALCO and the Office of the Solicitor General dispute this ruling because it disregards the rule. We
have established on the exclusion of confidential employees from the rank and file bargaining unit.

In Pier 8 Arrastre vs. Confesor and General Maritime and Stevedores Union,   we ruled that: 40

Put another way, the confidential employee does not share in the same
"community of interest" that might otherwise make him eligible to join his rank
and file co-workers, precisely because of a conflict in those interests.

Thus, in Metrolab Industries vs. Roldan-Confesor,   We ruled:

41

. . . that the Secretary's order should exclude the confidential employees from
the regular rank and file employees qualified to become members of the MEWA
bargaining unit.

From the foregoing disquisition, it is clear that employees holding a confidential position are prohibited from
joining the union of the rank and file employees.

2. ISSUE OF UNION SECURITY

The Secretary in his Order of August 19, 1996,   ruled that:

42

b. Union recognition and security. The Union is proposing that it be recognized

by the Company as sole and exclusive bargaining representative of the rank
and file employees included in the bargaining unit for the purpose of collective
bargaining regarding rates of pay, wages, hours of work and other terms and
conditions of employment. For this reason, the Company shall agree to meet
only with the Union officers and its authorized representatives on all matters
involving the Union as an organization and all issues arising from the
implementation and interpretation of the new CBA. Towards this end, the
Company shall not entertain any individual or group of individuals on matters
within the exclusive domain of the Union.

Additionally, the Union is demanding that the right of all rank and file employees
to join the Union shall be recognized by the Company. Accordingly, all rank and
file employees shall join the Union.

x x x           x x x          x x x

These demands are fairly reasonable. We grant the same in accordance with
the maintenance of membership principle as a form of union security.

The Secretary reconsidered this portion of his original order when he said in his December 28, 1996 order that:

. . . . When we decreed that all rank and file employees shall join the Union, we
were actually decreeing the incorporation of a closed shop form of union
security in the CBA between the parties. In Ferrer v. NLRC, 224 SCRA 410, the
Supreme Court ruled that a CBA provision for a closed shop is a valid form of
union security and is not a restriction on the right or freedom of association
guaranteed by the Constitution, citing Lirag v. Blanco, 109 SCRA 87.

MERALCO objected to this ruling on the grounds that: (a) it was never questioned by the parties; (b) there is no
evidence presented that would justify the restriction on employee's union membership; and (c) the Secretary
cannot rule on the union security demand because this is not a mandatory subject for collective bargaining
agreement.

We agree with MERALCO's contention.

An examination of the records of the case shows that the union did not ask for a closed shop security regime;
the Secretary in the first instance expressly stated that a maintenance of membership clause should govern;
neither MERALCO nor MEWA raised the issue of union security in their respective motions for reconsideration
of the Secretary's first disputed order; and that despite the parties clear acceptance of the Secretary's first
ruling, the Secretary motu proprio reconsidered his maintenance of membership ruling in favor of the more
stringent union shop regime.

Under these circumstances, it is indubitably clear that the Secretary gravely abused his discretion when he
ordered a union shop in his order of December 28, 1996. The distinctions between a maintenance of
membership regime from a closed shop and their consequences in the relationship between the union and the
company are well established and need no further elaboration.

Consequently, We rule that the maintenance of membership regime should govern at MERALCO in
accordance with the Secretary's order of August 19, 1996 which neither party disputed.

3. THE CONTRACTING OUT ISSUE

This issue is limited to the validity of the requirement that the union be consulted before the implementation of
any contracting out that would last for 6 months or more. Proceeding from our ruling in San Miguel Employees
Union-PTGWO vs. Bersamira,   (where we recognized that contracting out of work is a proprietary right of the
43

employer in the exercise of an inherent management prerogative) the issue we see is whether the Secretary's
consultation requirement is reasonable or unduly restrictive of the company's management prerogative. We
note that the Secretary himself has considered that management should not be hampered in the operations of
its business when he said that:

We feel that the limitations imposed by the union advocates are too specific and
may not be applicable to the situations that the company and the union may
face in the future. To our mind, the greater risk with this type of limitation is that
it will tend to curtail rather than allow the business growth that the company and
the union must aspire for. Hence, we are for the general limitations we have
stated above because they will allow a calibrated response to specific future
situations the company and the union may face.  44

Additionally, We recognize that contracting out is not unlimited; rather, it is a prerogative that management
enjoys subject to well-defined legal limitations. As we have previously held, the company can determine in its
best business judgment whether it should contract out the performance of some of its work for as long as the
employer is motivated by good faith, and the contracting out must not have been resorted to circumvent the law
or must not have been the result of malicious or arbitrary action.   The Labor Code and its implementing rules
45

also contain specific rules governing contracting out (Department or Labor Order No. 10, May 30, 1997,
Sections 1-25).

Given these realities, we recognize that a balance already exists in the parties' relationship with respect to
contracting out; MERALCO has its legally defined and protected management prerogatives while workers are
guaranteed their own protection through specific labor provisions and the recognition of limits to the exercise of
management prerogatives. From these premises, we can only conclude that the Secretary's added requirement
only introduces an imbalance in the parties' collective bargaining relationship on a matter that the law already
sufficiently regulates. Hence, we rule that the Secretary's added requirement, being unreasonable, restrictive
and potentially disruptive should be struck down.

4. UNION REPRESENTATION IN COMMITTEES

As regards this issue, We quote with approval the holding of the Secretary in his Order of December 28, 1996,
to wit:

We see no convincing reason to modify our original Order on union

representation in committees. It reiterates what the Article 211 (A)(g) of the
Labor Code provides: "To ensure the participation of workers in decision and
policy-making processes affecting their rights, duties and welfare. Denying this
opportunity to the Union is to lay the claim that only management has the
monopoly of ideas that may improve management strategies in enhancing the
Company's growth. What every company should remember is that there might
be one among the Union members who may offer productive and viable ideas
on expanding the Company's business horizons. The Union's participation in
such committees might just be the opportune time for dormant ideas to come
forward. So, the Company must welcome this development (see also PAL v.
NLRC, et. al., G.R. 85985, August 13, 1995). It must be understood, however,
that the committees referred to here are the Safety Committee, the Uniform
Committee and other committees of a similar nature and purpose involving
personnel welfare, rights and benefits as well as duties."

We do not find merit in MERALCO's contention that the above-quoted ruling of the Secretary is an intrusion into
the management prerogatives of MERALCO. It is worthwhile to note that all the Union demands and what the
Secretary's order granted is that the Union be allowed to participate in policy formulation and decision-making
process on matters affecting the Union members' rights, duties and welfare as required in Article 211 (A) (g) of
the Labor Code. And this can only be done when the Union is allowed to have representatives in the Safety
Committee, Uniform Committee and other committees of a similar nature. Certainly, such participation by the
Union in the said committees is not in the nature of a co-management control of the business of MERALCO.
What is granted by the Secretary is participation and representation. Thus, there is no impairment of
management prerogatives.

5. INCLUSION OF ALL TERMS AND CONDITIONS IN THE CBA

MERALCO also decries the Secretary's ruling in both the assailed Orders that —

All other benefits being enjoyed by the Company's employees but which are not
expressly or impliedly repealed in this new agreement shall remain subsisting
and shall likewise be included in the new collective bargaining agreement to be
signed by the parties effective December 1, 1995. 46

claiming that the above-quoted ruling intruded into the employer's freedom to contract by ordering the inclusion
in the new CBA all other benefits presently enjoyed by the employees even if they are not incorporated in the
new CBA. This matter of inclusion, MERALCO argues, was never discussed and agreed upon in the
negotiations; nor presented as issues before the Secretary; nor were part of the previous CBA's between the
parties.

We agree with MERALCO.

The Secretary acted in excess of the discretion allowed him by law when he ordered the inclusion of benefits,
terms and conditions that the law and the parties did not intend to be reflected in their CBA.

To avoid the possible problems that the disputed orders may bring, we are constrained to rule that only the
terms and conditions already existing in the current CBA and was granted by the Secretary (subject to the
modifications decreed in this decision) should be incorporated in the CBA, and that the Secretary's disputed
orders should accordingly be modified.

6. RETROACTIVITY OF THE CBA

Finally, MERALCO also assails the Secretary's order that the effectivity of the new CBA shall retroact to
December 1, 1995, the date of the commencement of the last two years of the effectivity of the existing CBA.
This retroactive date, MERALCO argues, is contrary to the ruling of this Court in Pier 8 Arrastre and
Stevedoring Services, Inc. vs. Roldan-Confessor   which mandates that the effective date of the new CBA
47

should be the date the Secretary of Labor has resolved the labor dispute.

On the other hand, MEWA supports the ruling of the Secretary on the theory that he has plenary power and
discretion to fix the date of effectivity of his arbitral award citing our ruling in St. Lakes Medical Center, Inc. vs.
Torres.   MEWA also contends that if the arbitral award takes effect on the date of the Secretary Labor's ruling
48

on the parties' motion for reconsideration (i.e., on December 28, 1996), an anomaly situation will result when
CBA would be more than the 5-year term mandated by Article 253-A of the Labor Code.

However, neither party took into account the factors necessary for a proper resolution of this aspect.  Pier 8, for
instance, does not involve a mid-term negotiation similar to this case, while St. Lukes does not take the "hold
over" principle into account, i.e., the rule that although a CBA has expired, it continues to have legal effects as
between the parties until a new CBA has been entered into.  49

Art. 253-A serves as the guide in determining when the effectivity of the CBA at bar is to take effect. It provides
that the representation aspect of the CBA is to be for a term of 5 years, while

. . . [A]ll other provisions of the Collective Bargaining Agreement shall be re-

negotiated not later than 3 years after its execution. Any agreement on such
other provision of the Collective Bargaining Agreement entered into within 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 such agreement is entered into beyond 6 months, the
parties shall agree on the duration of the effectivity thereof. . . . .

Under these terms, it is clear that the 5-year term requirement is specific to the representation aspect. What the
law additionally requires is that a CBA must be re-negotiated within 3 years "after its execution." It is in this re-
negotiation that gives rise to the present CBA deadlock.

If no agreement is reached within 6 months from the expiry date of the 3 years that follow the CBA execution,
the law expressly gives the parties — not anybody else — the discretion to fix the effectivity of the agreement.

Significantly, the law does not specifically cover the situation where 6 months have elapsed but no agreement
has been reached with respect to effectivity. In this eventuality, we hold that any provision of law should then
apply for the law abhors a vacuum.  50

One such provision is the principle of hold over, i.e., that in the absence of a new CBA, the parties must
maintain the status quo and must continue in full force and effect the terms and conditions of the existing
agreement until a new agreement is reached.   In this manner, the law prevents the existence of a gap in the
51

relationship between the collective bargaining parties. Another legal principle that should apply is that in the
absence of an agreement between the parties, then, an arbitrated CBA takes on the nature of any judicial or
quasi-judicial award; it operates and may be executed only respectively unless there are legal justifications for
its retroactive application.

Consequently, we find no sufficient legal ground on the other justification for the retroactive application of the
disputed CBA, and therefore hold that the CBA should be effective for a term of 2 years counted from
December 28, 1996 (the date of the Secretary of Labor's disputed order on the parties' motion for
reconsideration) up to December 27, 1999.

WHEREFORE, the petition is granted and the orders of public respondent Secretary of Labor dated August 19,
1996 and December 28, 1996 are set aside to the extent set forth above. The parties are directed to execute a
Collective Bargaining Agreement incorporating the terms and conditions contained in the unaffected portion is
of the Secretary of Labor's orders of August 19, 1996 and December 28, 1996, and the modifications set forth
above. The retirement fund issue is remanded to the Secretary of Labor for reception of evidence and
determination of the legal personality of the MERALCO retirement fund. 1âwphi1.nêt

SO ORDERED.

Davide, Jr., C.J., Melo, Kapunan and Pardo, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 131247 January 25, 1999

PRUBANKERS ASSOCIATION, petitioner,
vs.
PRUDENTIAL BANK & TRUST COMPANY, respondent.

PANGANIBAN, J.:

Wage distortion presupposes an increase in the compensation of the lower ranks in an office hierarchy wirhout
a corresponding raise for higher-tiered employees in the same region of the country, resulting in the elimination
or the severe diminution of the distinction between the two groups. Such distortion does not arise when a wage
order gives employees in one branch of a bank higher compensation than that given to their counterparts in
other regions occupying the same pay scale, who are not covered by said wage order. In short, the
implementation of wage orders in one region but not in others does not in itself necessarily result in wage
distortion.

The Case

Before us is a Petition for Review on Certiorari, challenging the November 6, 1997 Decision   of the Court of
1

Appeals in CA-GR SP No. 42525. The dispositive portion of the challenged Decision reads:

WHEREFORE, the petition is GRANTED. The assailed decision of the Voluntary Arbitration
Committee dated June 18, 1996 is hereby REVERSED and SET ASIDE for having been issued
with grave abuse of discretion tantamount to lack of or excess of jurisdiction, and a new
judgment is rendered finding that no wage distortion resulted from the petitioner's separate and
regional implementation of Wage Order No. VII-03 at its Cebu, Mabolo and P. del Rosario.

The June 18, 1996 Decision of the Voluntary Arbitration Commitee,   which the Court of Appeals reversed and
2

set aside, disposed as follows:

WHEREFORE, it is hereby ruled that the Bank's separate and regional implementation of Wage
Order No. VII-03 at its Cebu, Mabolo and P. del Rosario branches created a wage distortion in
the Bank nationwide which should be resolved in accordance with Art. 124 of the Labor Code.  3
 The Facts

The facts of the case are summarized by the Court of Appeals thus:

On November 18, 1993, the Regional Tripartite Wages and Productivity Board of Region V
issued Wage Order No. RB 05-03 which provided for a Cost of Living Allowance (COLA) to
workers in the private sector who ha[d] rendered service for at least three (3) months before its
effectivity, and for the same period [t]hereafter, in the following categories: SEVENTEEN
PESOS AND FIFTY CENTAVOS (P17.50) in the cities of Naga and Legaspi; FIFTEEN PESOS
AND FIFTY CENTAVOS (P15.50) in the municipalities of Tabaco, Daraga, Pili and the city of
Iriga; and TEN PESOS (P10.00) for all other areas in the Bicol Region.

Subsequently on November 23, 1993, the Regional Tripartite Wages and Productivity Board of
Region VII issued Wage Order No. RB VII-03, which directed the integration of the COLA
mandated pursuant to Wage Order No. RO VII-02-A into the basic pay of all workers. It also
established an increase in the minimum wage rates for all workers and and employees in the
private sector as follows: by Ten Pesos (P10.00) in the cities of Cebu, Mandaue and Lapulapu;
Five Pesos (P5.00) in the municipalities of Compostela, Liloan, Consolacion, Cordova, Talisay,
Minglanilla, Naga and the cities of Davao, Toledo, Dumaguete, Bais, Canlaon and Tagbilaran.

The petitioner then granted a COLA of P17.50 to its employees at its Naga Branch, the only
branch covered by Wage Order No. RB 5-03, and integrated the P150.00 per month COLA into
the basic pay of its rank-and-file employees at its Cebu, Mabolo and P. del Rosario branches,
the branches covered by Wage Order No. RB VII-03.

On June 7, 1994, respondent Prubankers Association wrote the petitioner requesting that the
Labor Management Committee be immediately convened to discuss and resolve the alleged
wage distortion created in the salary structure upon the implementation of the said wage orders.
Respondent Association then demanded in the Labor Management Committee meetings that
the petitioner extend the application of the wage orders to its employees outside Regions V and
VII, claiming that the regional implementation of the said orders created a wage distortion in the
wage rates of petitioner's employees nationwide. As the grievance could not be settled in the
said meetings, the parties agreed to submit the matter to voluntary arbitration. The Arbitration
Committee formed for that purpose was composed of the following: public respondent Froilan
M. Bacungan as Chairman, with Attys. Domingo T. Anonuevo and Emerico O. de Guzman as
members. The issue presented before the Committee was whether or not the bank's separate
and regional implementation of Wage Order No. 5-03 at its Naga Branch and Wage Order No.
VII-03 at its Cebu, Mabolo and P. del Rosario branches, created a wage distortion in the bank
nationwide.

The Arbitration Committee on June 18, 1996 rendered questioned decision.  4

Ruling of the Court of Appeals

In ruling that there was no wage distortion, the Court of Appeals held that the variance in the salary rates of
employees in different regions of the country was justified by RA 6727. It noted that "the underlying
considerations in issuing the wage orders are diverse, based on the distinctive situations and needs existing in
each region. Hence, there is no basis to apply the salary increases imposed by Wage Order No. VII-03 to
employees outside of Region VII." Furthermore, the Court of Appeals ruled that "the distinctions between each
employee group in the region are maintained, as all employees were granted an increase in minimum wage
rate. 
5

The Issues

In its Memorandum, petitioner raises the following issues: 

6
 I

Whether or not the Court of Appeals departed from the usual course of judicial procedure when
it disregarded the factual findings of the Voluntary Arbitration Committee as to the existence of
wage distortion.

II

Whether or not the Court of Appeals committed grave error in law when it ruled that wage
distortion exists only within a region and not nationwide.

III

Whether or not the Court of Appeals erred in implying that the term "establishment" as used in
Article 125 of the Labor Code refers to the regional branches of the bank and not to the bank as
a whole.

The main issue is whether or not a wage distortion resulted from respondent's implementation of the aforecited
Wage Orders. As a preliminary matter, we shall also take up the question of forum-shopping.

The Court's Ruling

The petition is devoid of merit. 

7

Preliminary Issue: Forum-Shopping

Respondent asks for the dismissal of the petition because petitioner allegedly engaged in forum-shopping. It
maintains that petitioner failed to comply with Section 2 of Rule 42 of the Rules of Court, which requires that
parties must certify under oath that they have not commenced any other action involving the same issues in the
Supreme Court, the Court of Appeals, or different divisions thereof, or any other tribunal or agency; if there is
such other action or proceeding, they must state the status of the same; and if they should thereafter learn that
a similar action or proceeding has been filed or is pending before the said courts, they should promptly inform
the aforesaid courts or any other tribunal or agency within five days therefrom. Specifically, petitioner accuses
respondent of failing to inform this Court of the pendency of NCMB-NCR-RVA-O4-012-97 entitled "In Re:
Voluntary Arbitration between Prudential Bank and Prubankers Association" (hereafter referred to as "voluntary
arbitration case"), an action involving issues allegedly similar to those raised in the present controversy.

In its Reply, petitioner effectively admits that the voluntary arbitration case was already pending when it filed
the present petition. However, it claims no violation of the rule against forum-shopping, because there is no
identity of causes of action and issues between the two cases.

We sustain the respondent. The rule on forum-shopping was first included in Section 17 of the Interim Rules
and Guidelines issued by this Court on January 11, 1983, which imposed a sanction in this wise: "A violation of
the rule shall constitute contempt of court and shall be a cause for the summary dismissal of both petitions,
without prejudice to the taking of appropriate action against the counsel or party concerned." Thereafter, the
Court restated the rule in Revised Circular No. 28-91 and Administrative Circular No. 04-94. Ultimately, the rule
was embodied in the 1997 amendments to the Rules of Court.

As explained by this Court in First Philippine International Bank v. Court of Appeals,   forum-shopping exists
8

where the elements of litis pendentia are present, and where a final judgment in one case will amount to res
judicata in the other. Thus, there is forum-shopping when, between an action pending before this Court and
another one, there exist: "a) identity of parties, or at least such parties as represent the same interests in both
actions, b) identity of rights asserted and relief prayed for, the relief being founded on the same facts, and c)
the identity of the two preceding particulars is such that any judgement rendered in the other action, will,
regardless of which party is successful amount to res judicata in the action under consideration; said requisites
also constitutive of the requisites for auter action pendant or lis pendens."   Another case elucidates the
9

consequence of forum-shopping: "[W]here a litigant sues the same party against whom another action or
actions for the alleged violation of the same right and the enforcement of the same relief is/are still pending, the
defense of litis pendentia in one case is a bar to the others; and, a final judgment in one would constitute res
judicata and thus would cause the dismissal of the rest."  10

The voluntary arbitration case involved the issue of whether the adoption by the Bank of regionalized hiring
rates was valid and binding. On the other hand, the issue now on hand revolves around the existence of a
wage distortion arising from the Bank's separate and regional implementation of the two Wage Orders in the
affected branches. A closer look would show that, indeed, the requisites of forum-shopping are present.

First, there is identity of parties. Both cases are between the Bank and the Association acting on behalf of all its
members. Second, although the respective issues and reliefs prayed for in the two cases are stated differently,
both actions boil down to one single issue: the validity of the Bank's regionalization of its wage structure based
on RA 6727. Even if the voluntary arbitration case calls for striking, down the Bank's regionalized hiring scheme
while the instant petition calls for the correction of the alleged wage distortion caused by the regional
implementation of Wage Order No. VII-03, the ultimate relief prayed for in both cases is the maintenance of the
Bank's national wage structure. Hence, the final disposition of one would constitute res judicata in the other.
Thus, forum-shopping is deemed to exist and, on this basis, the summary dismissal of both actions is indeed
warranted.

Nonetheless, we deem it appropriate to pass upon the main issue on its merit in view of its importance.

Main Issue: Wage Distortion

The statutory definition of wage distortion is found in Article 124 of the Labor Code, as amended by Republic
Act No. 6727, which reads:

Art. 124. Standards/Criteria for Minimum Wage Fixing — . . .

As used herein, a wage distortion shall mean a situation where an increase in prescribed wage
results in the elimination of severe contraction of intentional quantitative differences in wage or
salary rates between and among employee groups in an establishment as to effectively
obliterate the distinctions embodied in such wage structure based on skills, length of service, or
other logical bases of differentiation.

Elaborating on this statutory definition, this Court ruled: "Wage distortion presupposes a classification of
positions and ranking of these positions at various levels. One visualizes a hierarchy of positions with
corresponding ranks basically in terms of wages and other emoluments. Where a significant change occurs at
the lowest level of positions in terms of basic wage without a corresponding change in the other level in the
hierarchy of positions, negating as a result thereof the distinction between one level of position from the next
higher level, and resulting in a parity between the lowest level and the next higher level or rank, between new
entrants and old hires, there exists a wage distortion. . . . . The concept of a wage distortion assumes an
existing grouping or classification of employees which establishes distinctions among such employees on some
relevant or legitimate basis. This classification is reflected in a differing wage rate for each of the existing
classes of employees"  11

Wage distortion involves four elements:

1. An existing hierarchy of positions with corresponding salary rates

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

3. The elimination of the distinction between the two levels

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

In the present case, it is clear that no wage distortion resulted when respondent implemented the subject Wage
Orders in the covered branches. In the said branches, there was an increase in the salary rates of all pay
classes. Furthermore, the hierarchy of positions based on skills, lengh of service and other logical bases of
differentiation was preserved. In other words, the quantitative difference in compensation between different pay
classes remained the same in all branches in the affected region. Put differently, the distinction between Pay
Class 1 and Pay Class 2, for example, was not eliminated as a result of the implementation of the two Wage
Orders in the said region. Hence, it cannot be said that there was a wage distortion.

Petitioner argues that a wage distortion exists, because the implementation of the two Wage Orders has
resulted in the discrepancy in the compensation of employees of similar pay classification in different regions.
Hence, petitioner maintains that, as a result of the two Wage Orders, the employees in the affected regions
have higher compensation than their counterparts of the same level in other regions. Several tables are
presented by petitioner to illustrate that the employees in the regions covered by the Wage Orders are
receiving more than their counterparts in the same pay scale in other regions.

The Court is not persuaded. A wage parity between employees in different rungs, is not at issue here, but
a wage disparity between employees in the same rung but located in different regions of the country.

Contrary to petitioner's postulation, a disparity in wages between employees holding similar positions but in
different regions does not constitute wage distortion as contemplated by law. As previously enunciated, it is the
hierarchy of positions and the disparity of their corresponding wages and other emoluments that are sought to
be preserved by the concept of wage distortion. Put differently, a wage distortion arises when a wage order
engenders wage parity between employees in different rungs of the organizational ladder of the same
establishment. It bears emphasis that wage distortion involves a parity in the salary rates of different pay
classes which, as a result, eliminates the distinction between the different ranks in the same region.

Different Regional Wages

Mandated by RA 6727

Petitioner's claim of wage distortion must also be denied for one other reason. The difference in wages
between employees in the same pay scale in different regions is not the mischief sought to be banished by the
law. In fact, Republic Act No. 6727 (the Wage Rationalization Act), recognizes "existing regional disparities in
the cost of living." Section 2 of said law provides:

Sec 2. It is hereby declared the policy of the State to rationalize the fixing of minimum wages
and to promote productivity-improvement and gain-sharing measures to ensure a decent
standard of living for the workers and their families; to guarantee the rights of labor to its just
share in the fruits of production; to enhance employment generation in the countryside through
industry dispersal; and to allow business and industry reasonable returns on investment,
expansion and growth.

The State shall promote collective bargaining as the primary mode of settling wages and other
terms and conditions of employment; and whenever necessary, the minimum wage rates shall
be adjusted in a fair and equitable manner, considering existing regional disparities in the cost
of living and other socio-economic factors and the national economic and social development
plans.

RA 6727 also amended Article 124 of the Labor Code, thus:

Art. 124. Standards/Criteria for Minimum Wage Fixing. — The regional minimum wages to be
established by the Regional Board shall be as nearly adequate as is economically feasible to
maintain the minimum standards of living necessary for the health, efficiency and general well-
 being of the employees within the frame work of the national economic and social development
program. In the determination of such regional minimum wages, the Regional Board shall,
among other relevant factors, consider the following:

a. The demand for living wages;

b. Wage adjustment vis-a-vis the consumer price index;
c. The cost of living and changes or increases therein;
d. The needs of workers and their families;
e. The need to induce industries to invest in the countryside;
f. Improvements in standards of living;
g. The prevailing wage levels;
h. Fair return of the capital invested and capacity to pay of employers;

I. Effects on employment generation and family income; and

II. The equitable distribution of income and wealth along the imperatives of social and economic
development.

From the above-quoted rationale of the law, as well as the criteria enumerated, a disparity in wages between
employees with similar positions in different regions is necessarily expected. In insisting that the employees of
the same pay class in different regions should receive the same compensation, petitioner has apparently
misunderstood both the meaning of wage distortion and the intent of the law to regionalize wage rates.

It must be understood that varying in each region of the country are controlling factors such as the cost of
living; supply and demand of basic goods, services and necessities; and the purchasing power of the peso.
Other considerations underscore the necessity of the law. Wages in some areas may be increased in order to
prevent migration to the National Capital Region and, hence, to decongest the metropolis. Therefore, what the
petitioner herein bewails is precisely what the law provides in order to achieve its purpose.

Petitioner claims that it "does not insist that the Regional Wage Boards created pursuant to RA 6727 do not
have the authority to issue wage orders based on the distinctive situations and needs existing in each region.
So also, . . . it does not insist that the [B]ank should not implement regional wage orders. Neither does it seek
to penalize the Bank for following Wage Order VII-03. . . . What it simply argues is that it is wrong for the Bank
to peremptorily abandon a national wage structure and replace the same with a regionalized structure in
violation of the principle of equal pay for equal work. And, it is wrong to say that its act of abandoning its
national wage structure is mandated by law."

As already discussed above, we cannot sustain this argument. Petitioner contradicts itself in not objecting, on
the one hand, to the right of the regional wage boards to impose a regionalized wage scheme; while insisting,
on the other hand, on a national wage structure for the whole Bank. To reiterate, a uniform national wage
structure is antithetical to the purpose of RA 6727.

The objective of the law also explains the wage disparity in the example cited by petitioner: Armae Librero,
though only in Pay Class 4 in Mabolo, was, as a result of the Wage Order, receiving more than Bella Cristobal,
who was already in Pay Class 5 in Subic.   RA 6727 recognizes that there are different needs for the different
12

situations in different regions of the country. The fact that a person is receiving more in one region does not
necessarily mean that he or she is better off than a person receiving less in another region. We must consider,
among others, such factors as cost of living, fulfillment of national economic goals, and standard of living. In
any event, this Court, in its decisions, merely enforces the law. It has no power to pass upon its wisdom or
propriety.

Equal Pay for Equal Work

Petitioner also avers that the implementation of the Wage Order in only one region violates the equal-pay-for-
equal-work principle. This is not correct. At the risk of being repetitive, we stress that RA 6727 mandates that
wages in every region must be set by the particular wage board of that region, based on the prevailing situation
therein. Necessarily, the wages in different regions will not be uniform. Thus, under RA 6727, the minimum
wage in Region 1 may be different from that in Region 13, because the socioeconomic conditions in the two
regions are different.

Meaning of "Establishment"

Petitioner further contends that the Court of Appeals erred in interpreting the meaning of "establishment" in
relation to wage distortion. It quotes the RA 6727 Implementing Rules, specifically Section 13 thereof which
speaks of "workers working in branches or agencies of establishments in or outside the National Capital
Region." Petitioner infers from this that the regional offices of the Bank do not themselves constitute, but are
simply branches of, the establishment which is the whole bank. In effect, petitioner argues that wage distortion
covers the pay scales even of employees in different regions, and not only those of employees in the same
region or branch. We disagree.

Sec. 13 provides that the "minimum wage rates of workers working in branches or agencies of establishments
in or outside the National Capital Region shall be those applicable in the place where they are sanctioned" The
last part of the sentence was omitted by petitioner in its argument. Given the entire phrase, it is clear that the
statutory provision does not support petitioner's view that "establishment" includes all branches and offices in
different regions.

Further negating petitioner's theory is NWPC Guideline No. 1 (S. 1992) entitled "Revised Guidelines on
Exemption From Compliance With the Prescribed Wage/Cost of Living Allowance Increases Granted by the
Regional Tripartite Wages and Productivity Board," which states that "establishment" "refers to an economic
unit which engages in one or predominantly one kind of economic activity with a single fixed location."

Management Practice

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

WHEREFORE, the petition is DENIED and the assailed Decision is AFFIRMED. Costs against petitioner. 1âwphi1.nêt

SO ORDERED.

Romero, Vitug, Purisima and Gonzaga-Reyes, JJ., concur.

 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-24632            October 26, 1968

LEXAL LABORATORIES and/or JOSE ANGELES, Manager, petitioners,

vs.
NATIONAL CHEMICAL INDUSTRIES WORKERS UNION-PAFLU (Lexal Laboratories Chapter) and THE
COURT OF INDUSTRIAL RELATIONS, respondents.

Matias, Liboro & Benitez for petitioners.

F. M. de los Reyes for respondents.

SANCHEZ, J.:

Condensed, the question before us is this: Are per diems included in backpay? This problem came about
because of the implementation of the decision of the Court of Industrial Relations (CIR) of June 29,
19631 directing petitioner Lexal Laboratories (Lexal) to reinstate Guillermo Ponseca, a dismissed employee, to
his former position "with full back wages from the day of his dismissal up to the time he is actually reinstated
without loss of his seniority rights and of such other rights and privileges enjoyed by him prior to his lay-off."

CIR, confirming the report of its Chief Examiner and Economist, ruled in its order of February 16, 1965 that
Ponseca was entitled to back wages from November 5, 1958 when he ceased reporting for work, to November
24, 1963 a day prior to his reinstatement on November 25, 1963; and that for the number of days that he was
supposed to be in Manila, he was to earn P4.50 a day, and during the periods when he should have been in
the provinces, P4.50 a day plus a per diem of P4.00 or a total of P8.50 daily. This order was subsequently
modified by CIR's resolution of May 22, 1965 which directed the deduction of P5,000.00 previously paid
Ponseca under the judgment and P610.00 which Ponseca earned from other sources during his lay-off.

Petitioners vigorously objected to the inclusion of the P4.00 per diem in the computation of Ponseca's back
wages because the latter "did not actually spend for his meals and lodgings for he was all the time in Manila,
his station." CIR brushed this contention aside. Whereupon, petitioners appealed to this Court from the order of
February 16, 1965 and the resolution of May 22, 1965. 2
1. Our attention has not been drawn to a rule of law or jurisprudence which holds that  per diems are integral
parts of regular wages or salaries. Neither is it suggested in the record that per diems formed part of the terms
of employment between petitioners and respondent union (of which Ponseca is a member), or with Ponseca
himself for that matter. Nor was pronouncement made either in the original decision or in the questioned order
and resolution of CIR that per diems are part of back wages. CIR simply hit upon the idea that per
diems should be paid as part of the back wages because they were "paid to him regularly."

Per diem, the dictionary definition tells us, is "a daily allowance" given "for each day he (an officer or employee)
was away from his home base". 3 It would seem to us that per diem is intended to cover the cost of lodging and
subsistence of officers and employees when the latter are on duty outside of their permanent station. 4 Lexal
concedes that whenever its employee, Guillermo Ponseca, was out of Manila, he was allowed a per diem of
P4.00 broken down as follows: P1.00 for breakfast; P1.00 for lunch; P1.00 for dinner; and P1.00 for lodging.
Ponseca — during the period involved — did not leave Manila. Therefore, he spent nothing for meals and
lodging outside of Manila. Because he spent nothing, there is nothing to be reimbursed. Since per diems are in
the nature of reimbursement, Ponseca should not be entitled to per diems.

Besides, back wages are what an employee has lost "in the way of wages" due to his dismissal. So that,
because Ponseca earned P4.50 a day, "then that is the amount which he lost daily by reason of his
dismissal, nothing more nothing less:"5

We, accordingly, rule that CIR erred in including per diems in the back wages due and payable to Guillermo
Ponseca.

2. The rest is a matter of mathematical computation but first to the facts. The union's evidence is that since the
last part of October, 1958 Ponseca had been reporting everyday to the bodega of respondents. 6 Anyway, prior
to Ponseca's dismissal, he worked daily either in Manila or in the provinces. 7

But the order of February 15, 1965 credits Ponseca with 1,856 days for the period from November 5, 1958 to
November 24, 1963. We checked the accuracy of this figure. We found that there should only be 1,846 days
from November 5, 1958 to November 24, 1963, viz:

November 5, 1958 to December 31, 1958 57 days

January 1, 1959 to December 31, 1959 365 days

January 1, 1960 to December 31, 1960 366 days

January 1, 1961 to December 31, 1961 365 days

January 1, 1962 to December 31, 1962 365 days

January 1, 1963 to November 24, 1963 328 days

TOTAL 1,846 days

This brings us to the total amount due from

Lexa1 to Guillermo Ponseca, as follows: .
1,846 days      x      P8,307.00
P4.50

Less:        Advance P5,000.00

payment

Earnings from other P610.00    P5,610.008

sources

NET BACKPAY P2,697.00 .

For the foregoing reasons, the order of February 16, 1965, and the resolution of May 22, 1965, both of the
Court of Industrial Relations, in its Case No. 2002-ULP, entitled "National Chemical Industries Workers Union-
PAFLU (Lexal Laboratories Chapter), Complainant, versus Lexal Laboratories and Jose Angeles, its Manager,
Respondents", are hereby modified; and

Judgment is hereby rendered ordering petitioner Lexal Laboratories to pay Guillermo Ponseca, by way of net
backpay, the sum of P2,697.00.

No costs. So ordered. Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Castro, Angeles, Fernando and
Capistrano, JJ., concur. Zaldivar, J., is on leave.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 88168 August 30, 1990

TRADERS ROYAL BANK, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION & TRADERS ROYAL BANK EMPLOYEES
UNION, respondents.

San Juan, Gonzalez, San Agustin & Sinense for petitioner.

E.N.A. Cruz, Enfero & Associates for private respondent.

GRIÑO-AQUINO, J.:

This petition for certiorari seeks to nullify or set aside the decision dated September 2, 1988 of the National Labor Relations Commission, which found the
petitioner, Traders Royal Bank (or TRB), guilty of diminution of benefits due the private respondents and ordered it to pay the said employees' claims for
differentials in their holiday, mid-year, and year-end bonuses.

On November 18, 1986, the Union, through its president, filed a letter-complaint against TRB with the
Conciliation Division of the Bureau of Labor Relations claiming that:

First, the management of TRB per memo dated October 10, 1986 paid the employees their
HOLIDAY PAY, but has withheld from the Union the basis of their computation.

Second, the computation in question, has allegedly decreased the daily salary rate of the
employees. This diminution of existing benefits has decreased our overtime rate and has
affected the employees' take home pay.

Third, the diminution of benefits being enjoyed by the employees since time immemorial, e.g.
mid-year bonus, from two (2) months gross pay to two (2) months basic and year-end bonus
from three (3) months gross to only two (2) months.
 Fourth, the refusal by management to recall active union members from the branches which
were being transferred without prior notice, solely at the instance of the branch manager. (p.
26, Rollo.)

In its answer to the union's complaint, TRB pointed out that the NLRC, not the Bureau of Labor Relations, had
jurisdiction over the money claims of the employees.

On March 24, 1987, the Secretary of Labor certified the complaint to the NLRC for resolution of the following
issues raised by the complainants:

l) The Management of TRB per memo dated October 10, 1986 paid the employees their holiday
pay but has withheld from the union the basis of their computation.

2) The computation in question has allegedly decreased the daily salary rate of the employees.
This diminution of existing benefits has decreased our overtime rate and has affected the
employees' take home pay.

3) The diminution of benefits being enjoyed by the employees since the (sic) immemorial, e.g.
mid-year bonus, from two (2) months gross pay to two (2) months basic and year-end bonus
from three (3) months gross to only two (2) months.

4) The refusal by management to recall active union members from the branches which were
being transferred without prior notice, solely at the instance of the branch, manager. (p.
28, Rollo.)

In the meantime, the parties who had been negotiating for a collective bargaining agreement, agreed on the
terms of the CBA, to wit:

1. The whole of the bonuses given in previous years is not demandable, i.e., there is no
diminution, as to be liable for a differential, if the bonus given is less than that in previous years.

2. Since only two months bonus is guaranteed, only to that extent are bonuses deemed part of
regular compensation.

3. As regards the third and fourth bonuses, they are entirely dependent on the income of the
bank, and not demandable as part of compensation. (pp. 67-68, Rollo.)

Despite the terms of the CBA, however, the union insisted on pursuing the case, arguing that the CBA would
apply prospectively only to claims arising after its effectivity.

Petitioner, on the other hand, insisted that it had paid the employees holiday pay. The practice of giving them
bonuses at year's end, would depend on how profitable the operation of the bank had been. Generally, the
bonus given was two (2) months basic mid-year and two (2) months gross end-year.

On September 2, 1988, the NLRC rendered a decision in favor of the employees, the dispositive portion of
which reads:

WHEREFORE, judgment is hereby rendered in favor of the petitioner and ordering respondent
bank to pay petitioner members-employees the following:

1. Holiday differential for the period covering l983-1986 as embodied in Resolution No. 4984-
1986 of respondent's Board of Directors but to start from November 11, 1983 and using the
Divisor 251 days in determining the daily rate of the employees;
 2. Mid-year bonus differential representing the difference between two (2) months gross pay
and two (2) months basic pay and end-year bonus differential of one (1) month gross pay for
1986.

The claim for holiday differential for the period earlier than November 11, 1983 is hereby
dismissed, the same having prescribed.

Likewise, the charge of unfair labor practice against the respondent company is hereby
dismissed for lack of merit. (pp. 72-73, Rollo.)

A motion for reconsideration was filed by TRB but it was denied. Hence, this petition for certiorari.

There is merit in the petitioner's contention that the NLRC gravely abused its discretion in ordering it to pay
mid-year/year-end bonus differential for 1986 to its employees.

A bonus is "a gratuity or act of liberality of the giver which the recipient has no right to demand as a matter of
right" (Aragon vs. Cebu Portland Cement Co., 61 O.G. 4597). "It is something given in addition to what is
ordinarily received by or strictly due the recipient." The granting of a bonus is basically a management
prerogative which cannot be forced upon the employer "who may not be obliged to assume the onerous burden
of granting bonuses or other benefits aside from the employee's basic salaries or wages" . . . (Kamaya Point
Hotel vs. National Labor Relations Commission, Federation of Free Workers and Nemia Quiambao, G.R. No.
75289, August 31, 1989).

It is clear from the above-cited rulings that the petitioner may not be obliged to pay bonuses to its employees.
The matter of giving them bonuses over and above their lawful salaries and allowances is entirely dependent
on the profits, if any, realized by the Bank from its operations during the past year.

From 1979-1985, the bonuses were less because the income of the Bank had decreased. In 1986, the income
of the Bank was only 20.2 million pesos, but the Bank still gave out the usual two (2) months basic mid-year
and two months gross year-end bonuses. The petitioner pointed out, however, that the Bank weakened
considerably after 1986 on account of political developments in the country. Suspected to be a Marcos-owned
or controlled bank, it was placed under sequestration by the present administration and is now managed by the
Presidential Commission on Good Government (PCGG).

In the light of these submissions of the petitioner, the contention of the Union that the granting of bonuses to
the employees had ripened into a company practice that may not be adjusted to the prevailing financial
condition of the Bank has no legal and moral bases. Its fiscal condition having declined, the Bank may not be
forced to distribute bonuses which it can no longer afford to pay and, in effect, be penalized for its past
generosity to its employees.

Private respondent's contention, that the decrease in the midyear and year-end bonuses constituted a
diminution of the employees' salaries, is not correct, for bonuses are not part of labor standards in the same
class as salaries, cost of living allowances, holiday pay, and leave benefits, which are provided by the Labor
Code.

WHEREFORE, the petition for certiorari is granted. The decision of the National Labor Relations Commission is
modified by deleting the award of bonus differentials to the employees for 1986. In other respects, the decision
is affirmed. Costs against the respondent union.

SO ORDERED.

Narvasa (Chairman), Cruz, Gancayco and Medialdea, JJ., concur.

 THIRD DIVISION

G.R. No. 148372               June 27, 2005

CLARION PRINTING HOUSE, INC., and EULOGIO YUTINGCO, petitioners,

vs.
THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION (Third Division) and MICHELLE
MICLAT, respondents.

DECISION

CARPIO-MORALES, J.:

Respondent Michelle Miclat (Miclat) was employed on April 21, 1997 on a probationary basis as marketing
assistant with a monthly salary of ₱6,500.00 by petitioner Clarion Printing House (CLARION) owned by its co-
petitioner Eulogio Yutingco. At the time of her employment, she was not informed of the standards that would
qualify her as a regular employee.

On September 16, 1997, the EYCO Group of Companies of which CLARION formed part filed with the
Securities and Exchange Commission (SEC) a "Petition for the Declaration of Suspension of Payment,
Formation and Appointment of Rehabilitation Receiver/ Committee, Approval of Rehabilitation Plan with
Alternative Prayer for Liquidation and Dissolution of Corporation" 1 the pertinent allegations of which read:

xxx

5. The situation was that since all these companies were sister companies and were operating under a
unified and centralized management team, the financial requirements of one company would normally
be backed up or supported by one of the available fundings from the other companies.
 6. The expansion exhausted the cash availability of Nikon, NKI, and 2000 because those fundings were
absorbed by the requirements of NPI and EYCO Properties, Inc. which were placed on real estate
investments. However, at the time that those investments and expansions were made, there was no
cause for alarm because the market situation was very bright and very promising, hence, the decision
of the management to implement the expansion.

7. The situation resulted in the cash position being spread thin. However, despite the thin cash
positioning, the management still was very positive and saw a very viable proposition since the
expansion and the additional investments would result in a bigger real estate base which would be very
credible collateral for further expansions. It was envisioned that in the end, there would be bigger cash
procurement which would result in greater volume of production, profitability and other good results
based on the expectations and projections of the team itself.

8. Unfortunately, factors beyond the control and anticipation of the management came into play  which
caught the petitioners flat-footed, such as:

a) The glut in the real estate market which has resulted in the bubble economy for the real

estate demand which right now has resulted in a severe slow down in the sales of properties;

b) The economic interplay consisting of the inflation and the erratic changes in the peso-
dollar exchange rate which precipitated a soaring banking interest.

c) Labor problems that has precipitated adverse company effect on the media and in the
financial circuit.

d) Liberalization of the industry (GATT) which has resulted in flooding the market with

imported goods;

e) Other related adverse matters.

9. The inability of the EYCO Group of Companies to meet the obligations as they fall due on the
schedule agreed with the bank has now become a stark reality. The situation therefore is that since the
obligations would not be met within the scheduled due date, complications and problems would
definitely arise that would impair and  affect the operations of the entire conglomerate comprising the
EYCO Group of Companies.

xxx

12. By virtue of this development, there is a need for suspension of all accounts o[r] obligations incurred
by the petitioners in their separate and combined capacities in the meantime that they are working for
the rehabilitation of the companies that would eventually redound to the benefit of these creditors.

13. The foregoing notwithstanding, however, the present combined financial condition of the petitioners
clearly indicates that their assets are more than enough to pay off the credits.

x x x (Emphasis and underscoring supplied) 2

On September 19, 1997, the SEC issued an Order 3 the pertinent portions of which read:

It appearing that the petition is sufficient in form and substance, the corporate petitioners’ prayer for the
creation of management or receivership committee and creditors’ approval of the proposed Rehabilitation Plan
is hereby set for hearing on October 22, 1997 at 2:00 o’clock in the afternoon at the SICD, SEC Bldg., EDSA,
Greenhills, Mandaluyong City.
xxx

Finally, the petitioners are hereby enjoined from disposing any and all of their properties in any manner,
whatsoever, except in the ordinary course of business and from making any payment outside of the legitimate
business expenses during the pendency of the proceedings and as a consequence of the filing of the Petition,
all actions, claims and proceedings against herein petitioners pending before any court, tribunal, office board
and/or commission are deemed SUSPENDED until further orders from this Hearing Panel pursuant to the
rulings of the Supreme Court in the cases of RCBC v. IAC et al., 213 SCRA 830 and BPI v. CA, 229 SCRA
223. (Underscoring supplied)

And on September 30, 1997, the SEC issued an Order 4 approving the creation of an interim receiver for the
EYCO Group of Companies.

On October 10, 1997, the EYCO Group of Companies issued to its employees the following Memorandum: 5

This is to formally announce the entry of the Interim Receiver Group  represented by SGV from today until
October 22, 1997 or until further formal notice from the SEC.

This interim receiver group’s function is to make sure that all assets of the company are secured and
accounted for both for the protection of us and our creditors.

Their function will involve familiarization with the different processes and controls in our organization & keeping
physical track of our assets like inventories and machineries.

Anything that would be required from you would need to be in writing and duly approved by the top
management in order for us to maintain a clear line.

We trust that this temporary inconvenience will benefit all of us in the spirit of goodwill. Let’s extend our full
cooperation to them.

Thank you. (Underscoring supplied)

On October 22, 1997, the Assistant Personnel Manager of CLARION informed Miclat by telephone that her
employment contract had been terminated effective October 23, 1997. No reason was given for the termination.

The following day or on October 23, 1997, on reporting for work, Miclat was informed by the General Sales
Manager that her termination was part of CLARION’s cost-cutting measures.

On November 17, 1997, Miclat filed a complaint 6 for illegal dismissal against CLARION and Yutingco
(petitioners) before the National Labor Relations Commission (NLRC).

In the meantime, or on January 7, 1998, the EYCO Group of Companies issued a Memorandum 7 addressed to
company managers advising them of "a temporary partial shutdown of some operations of the Company"
commencing on January 12, 1998 up to February 28, 1998:

In view of the numerous external factors such as slowdown in business and consumer demand  and consistent
with Art. 286 of the Revised Labor Code of the Philippines, we are constrained to go on a temporary partial
shutdown of some operations of the Company.

To implement this measure, please submit to my office through your local HRAD the list of those whom you will
require to report for work and their specific schedules. Upon revalidation and approval of this list, all those not
in the list will not receive any pay nor will it be credited against their VL.

Please submit the listing no later than the morning of Friday, January 09, 1998.
Shutdown shall commence on January 12, 1998 up to February 28, 1998, unless otherwise recalled at an
earlier date.

Implementation of th[ese] directives will be done through your HRAD departments. (Underscoring supplied)

In her Position Paper8 dated March 3, 1998 filed before the labor arbiter, Miclat claimed that she was never
informed of the standards which would qualify her as a regular employee. She asserted, however, that she
qualified as a regular employee since her immediate supervisor even submitted a written recommendation in
her favor before she was terminated without just or authorized cause.

Respecting the alleged financial losses cited by petitioners as basis for her termination, Miclat disputed the
same, she contending that as marketing assistant tasked to receive sales calls, produce sales reports and
conduct market surveys, a credible assessment on production and sales showed otherwise.

In any event, Miclat claimed that assuming that her termination was necessary, the manner in which it was
carried out was illegal, no written notice thereof having been served on her, and she merely learned of it only a
day before it became effective.

Additionally, Miclat claimed that she did not receive separation pay, 13th month pay and salaries for October
21, 22 and 23, 1997.

On the other hand, petitioners claimed that they could not be faulted for retrenching some of its employees
including Miclat, they drawing attention to the EYCO Group of Companies’ being placed under receivership,
notice of which was sent to its supervisors and rank and file employees via a Memorandum of July 21, 1997;
that in the same memorandum, the EYCO Group of Companies advised them of a scheme for voluntary
separation from employment with payment of severance pay; and that CLARION was only adopting the "LAST
IN, FIRST OUT PRINCIPLE" when it terminated Miclat who was relatively new in the company.

Contending that Miclat’s termination was made with due process, petitioners referred to the EYCO Group of
Companies’ abovesaid July 21, 1997 Memorandum which, so they claimed, substantially complied with the
notice requirement, it having been issued more than one month before Miclat was terminated on October 23,
1997.

By Decision9 of November 23, 1998, the labor arbiter found that Miclat was illegally dismissed and directed her
reinstatement. The dispositive portion of the decision reads:

WHEREFORE, in view of the foregoing premises, judgment is hereby rendered ordering the respondent
to reinstate complainant to her former or equivalent position without loss of seniority rights and benefits
and to pay her backwages, from the time of dismissal to actual reinstatement, proportionate 13th month
pay and two (2) days salary computed as follows:

a.1) Backwages – 10/23/97 to 11/30/98

₱6,500.00 x 13.25 months = ₱86,125.00

a.2) Proportionate 13th month pay

1/12 of ₱86,125 = 7,177.08

b) 13th month pay - 1997

=₱6,500 x 9.75 months/12 = 5,281.25

 c) Two days salary

=₱6,500/26 x 2 days = 500.00

TOTAL ₱ 99,083.33

(Emphasis and underscoring supplied).

Before the National Labor Relations Commission (NLRC) to which petitioners appealed, they argued that: 10

1. [CLARION] was placed under receivership thereby evidencing the fact that it sustained business
losses to warrant the termination of [Miclat] from her employment.

2. The dismissal of [Miclat] from her employment having been effected in accordance with the law and
in good faith, [Miclat] does not deserve to be reinstated and paid backwages, 13th month pay and two
(2) days salary.

And petitioners pointed out that CLARION had expressed its decision to shutdown its operations by
Memorandum11 of January 7, 1998 to its company managers.

Appended to petitioners’ appeal before the NLRC were photocopies of their balance sheets from 1997 to
November 1998 which they claimed to "unanimously show that x x x [petitioner] company experienced
business reverses which were made the basis x x x in retrenching x x x." 12

By Resolution13 of June 17, 1999, the NLRC affirmed the labor arbiter’s decision. The pertinent portion of the
NLRC Resolution reads:

There are three (3) valid requisites for valid retrenchment: (1) the retrenchment is necessary to prevent losses
and such losses are proven; (2) written notices to the employees and to the Department of Labor and
Employment at least one (1) month prior to the intended date of retrenchment; and (3) payment of separation
pay equivalent to one (1) month pay or at least ½ month pay for every year of service, whichever is higher. The
two notices are mandatory. If the notice to the workers is later than the notices sent to DOLE, the date of
termination should be at least one month from the date of notice to the workers.

In Lopez Sugar Corporation v. Federation of Free Workers Philippine Labor Union Association (PLUA-
NACUSIP) and National Labor Relations Commission, the Supreme Court had the occasion to set forth four
standards which would justify retrenchment, being, firstly, - the losses expected should be substantial and not
merely de minimis in extent. If the loss purportedly sought to be forestalled by retrenchment is clearly shown to
be insubstantial and inconsequential in character, the bona fide nature of the retrenchment would appear to be
seriously in question; secondly, - the substantial loss apprehended must be reasonably imminent, as such
imminence can be perceived objectively and in good faith by the employer. There should, in other words, be a
certain degree of urgency for the retrenchment, which is after all a drastic course with serious consequences
for the livelihood of the employees retired or otherwise laid-off; thirdly, - because of the consequential nature of
retrenchment, it must be reasonably necessary and likely to effectively prevent the expected losses. The
employer should have taken other measures prior or parallel to retrenchment to forestall losses, i.e., cut other
cost than labor costs; and lastly, - the alleged losses if already realized and the expected imminent losses
sought to be forestalled, must be proven by sufficient and convincing evidence.

The records show that these requirements were not substantially complied with. And proofs presented by
respondents-appellants were short of being sufficient and convincing to justify valid retrenchment. Their
position must therefore fail. The reason is simple. Evidences on record presented fall short of the requirement
of substantial, sufficient and convincing evidence to persuade this Commission to declare the validity of
retrenchment espoused by respondents-appellants. The petition before the Securit[ies] and Exchange
Commission for suspension of payment does not prove anything to come within the bounds of justifying
retrenchment. In fact, the petition itself lends credence to the fact that retrenchment was not actually reinstated
under the circumstances prevailing when it stated, "The foregoing notwithstanding, however, the present
combined financial condition of the petitioners clearly indicates that their assets are more than enough to pay
off the credits." Verily, reading further into the petition, We are not ready to disregard the fact that the petition
merely seeks to suspend payments  of their obligation from creditor banks and other financing institutions, and
not because of imminent substantial financial loss. On this account, We take note of paragraph 7 of the petition
which stated: "The situation resulted in cash position being spread thin. However, despite the thin cash
positioning, the management was very positive and saw a very viable proposition since the expansion and the
additional investments would result in a bigger real estate base which would be a very credible collateral for
further expansions. It was envisioned that in the end, there would a bigger cash procurement which would
result in greater volume of production, profitability and other good results based on the expectations and
projections of the team itself." Admittedly, this does not create a picture of retrenchable business atmosphere
pursuant to Article 283 of the Labor Code.

We cannot disregard the fact that respondent-appellants failed in almost all of the criteria set by law and
jurisprudence in justifying valid retrenchment. The two (2) mandatory notices were violated. The supposed
notice to the DOLE (Annex "4," List of Employees on Shutdown) is of no moment, the same having no bearing
in this case. Herein complainant-appellee was not even listed therein and the date of receipt by DOLE, that is,
January 18, 1999, was way out of time in relation to this case. And no proof was adduced to evidence cost
cutting measures, to say the least. Nor was there proof shown that separation pay had been awarded to
complainant-appellee.

WHEREFORE, premises considered, and finding no grave abuse of discretion on the findings of Labor Arbiter
Nieves V. De Castro, the appeal is DENIED for lack of merit.

The decision appealed from is AFFIRMED in toto. (Italics in the original; underscoring supplied; citations
omitted)

Petitioners’ Motion for Reconsideration of the NLRC resolution having been denied by Resolution 14 of July 29,
1999, petitioners filed a petition for certiorari15 before the Court of Appeals (CA) raising the following arguments:

1. PETITIONER CLARION WAS PLACED UNDER RECEIVERSHIP THEREBY EVIDENCING THE

FACT THAT IT SUSTAINED BUSINESS LOSSES TO WARRANT THE TERMINATION OF PRIVATE
RESPONDENT MICLAT FROM HER EMPLOYMENT.

2. THE DISMISSAL OF PRIVATE RESPONDENT MICLAT FROM HER EMPLOYMENT HAVING

BEEN EFFECTED IN ACCORDANCE WITH THE LAW AND IN GOOD FAITH, PRIVATE
RESPONDENT DOES NOT DESERVE TO BE REINSTATED AND PAID BACKWAGES, 13th MONTH
PAY AND TWO (2) DAYS SALARY. (Underscoring supplied)

By Decision16 of November 24, 2000, the CA sustained the resolutions of the NLRC in this wise:

In the instant case, Clarion failed to prove its ground for retrenchment as well as compliance with the
mandated procedure of furnishing the employee and the Department of Labor and Employment (hereafter,
DOLE) with one (1) month written notice and payment of separation pay to the employee.  Clarion’s failure to
discharge its burden of proof is evident from the following instances:

First, Clarion presented no evidence whatsoever before the Labor Arbiter. To prove serious business
losses, Clarion presented its 1997 and 1998 financial statements and the SEC Order for the Creation of
an Interim Receiver, for the  first time on appeal before the NLRC. The Supreme Court has
consistently disallowed such practice unless the party making the belated submission of evidence had
satisfactorily explained the delay. In the instant case, said financial statements are not admissible in
evidence due to Clarion’s failure to explain the delay.
 Second, even if such financial statements were admitted in evidence, they would not alter the outcome
of the case as statements have weak probative value. The required method of proof in such case is the
presentation of financial statements prepared by independent auditors and not merely by company
accountants. Again, petitioner failed in this regard.

Third, even audited financial statements are not enough. The employer must present the statement for
the year immediately preceding the year the employee was retrenched, which Clarion failed to do in the
instant case, to prove not only the fact of business losses but more importantly, the fact that such
losses were substantial, continuing and without immediate prospect of abatement. Hence, neither the
NLRC nor the courts must blindly accept such audited financial statements. They must examine and
make inferences from the data presented to establish business losses. Furthermore, they must be
cautioned by the fact that "sliding incomes" or decreasing gross revenues alone are not necessarily
business losses within the meaning of Art. 283 since in the nature of things, the possibility of incurring
losses is constantly present in business operations.

Last, even if business losses were indeed sufficiently proven, the employer must still prove that
retrenchment was resorted to only after less drastic measures  such as the reduction of both
management and rank-and-file bonuses and salaries, going on reduced time, improving manufacturing
efficiency, reduction of marketing and advertising costs, faster collection of customer accounts,
reduction of raw materials investment and others, have been tried and found wanting. Again,  petitioner
failed to prove the exhaustion of less drastic measures short of retrenchment as it had failed with the
other requisites.

It is interesting to note that Miclat started as a probationary employee on 21 April 1997. There being no

stipulation to the contrary, her probation period had a duration of six (6) months from her date of employment.
Thus, after the end of the probation period on 22 October 1997, she became a regular employee as of 23
October 1997 since she was allowed to work after the end of said period . It is also clear that her probationary
employment was not terminated at the end of the probation period on the ground that the employee failed to
qualify in accordance with reasonable standards made known to her at the time of engagement.

However, 23 October 1997 was also the day of Miclat’s termination from employment on the ground of
retrenchment. Thus, we have a bizarre situation when the first day of an employee’s regular employment was
also the day of her termination. However, this is entirely possible, as had in fact happened in the instant case,
where the employer’s basis for termination is Art. 288, instead of Art. 281 of the Labor Code. If petitioner
terminated Miclat with Art. 281 in mind, it would have been too late to present such theory at this stage and it
would have been equally devastating for petitioner had it done so because no evidence exists to show that
Miclat failed to qualify with petitioner’s standards for regularization. Failure to discharge its burden of proof
would still be petitioner’s undoing.

Whichever way We examine the case, the conclusion is the same – Miclat was illegally dismissed.
Consequently, reinstatement without loss of seniority rights and full backwages from date of dismissal on 23
October 1997 until actual reinstatement is in order.

WHEREFORE, the instant petition is hereby DISMISSED and the 29 July 1999 and 7 June 1999 resolutions of
the NLRC are SUSTAINED. (Emphasis and underscoring supplied)

By Resolution17 of May 23, 2001, the CA denied petitioner’s motion for reconsideration of the decision.

Hence, the present petition for review on certiorari, petitioners contending that:

WITH ALL DUE RESPECT, THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN SUSTAINING
THE ASSAILED DECISIONS OF HONORABLE PUBLIC RESPONDENT COMMISSION:

A. HOLDING THAT PRIVATE RESPONDENT MICLAT WAS ILLEGALLY DISMISSED; and

 B. ORDERING THE REINSTATEMENT OF PRIVATE RESPONDENT MICLAT TO HER FORMER OR
EQUIVALENT POSITION WITHOUT LOSS OF SENIORITY RIGHTS AND BENEFITS AND PAYMENT
OF BACKWAGES, 1[3]th MONTH PAY AND TWO (2) DAYS SALARY.18

Petitioners argue that the conclusion of the CA that no sufficient proof of financial losses on the part of
CLARION was adduced is patently erroneous, given the serious business reverses it had gravely suffered as
reflected in its financial statements/balance sheets, thereby leaving as its only option the retrenchment of its
employees including Miclat.19

Petitioners further argue that when a company is under receivership and a receiver is appointed to take control
of its management and corporate affairs, one of the evident reasons is to prevent further losses of said
company and protect its remaining assets from being dissipated; and that the submission of financial
reports/statements prepared by independent auditors had been rendered moot and academic, the company
having shutdown its operations and having been placed under receivership by the SEC due to its inability to
pay or comply with its obligations. 20

Respecting the CA’s holding that the financial statements CLARION submitted for the first time on
appeal before the NLRC are inadmissible in evidence due to its failure to explain the delay in the submission
thereof, petitioners lament the CA’s failure to consider that technical rules on evidence prevailing in the courts
are not controlling in proceedings before the NLRC which may consider evidence such as documents and
affidavits submitted by the parties for the first time on appeal. 21

As to the CA’s holding that CLARION failed to prove the exhaustion of less drastic measures short of
retrenching, petitioners advance that prior to the termination of Miclat, CLARION, together with the other
companies under the EYCO Group of Companies, was placed under receivership during which drastic
measures to continue business operations of the company and eventually rehabilitate itself were
implemented.22

Denying Miclat’s entitlement to backwages, petitioners proffer that her dismissal rested upon a valid and
authorized cause. And petitioners assail as grossly erroneous the award of 13th month pay to Miclat, she not
having sought it and, therefore, there was no jurisdiction to award the same. 23

The petition is partly meritorious.

Contrary to the CA’s ruling, petitioners could present evidence for the first time on appeal to the NLRC. It is
well-settled that the NLRC is not precluded from receiving evidence, even for the first time on appeal, because
technical rules of procedure are not binding in labor cases.

The settled rule is that the NLRC is not precluded from receiving evidence on appeal as technical rules of
evidence are not binding in labor cases. In fact, labor officials are mandated by the Labor Code to use every
and all reasonable means to ascertain the facts in each case speedily and objectively, without regard to
technicalities of law or procedure, all in the interest of due process. Thus, in Lawin Security Services v. NLRC,
and Bristol Laboratories Employees’ Association-DFA v. NLRC, we held that even if the evidence was not
submitted to the labor arbiter, the fact that it was duly introduced on appeal to the NLRC is enough basis for the
latter to be more judicious in admitting the same, instead of falling back on the mere technicality that said
evidence can no longer be considered on appeal. Certainly, the first course of action would be more consistent
with equity and the basic notions of fairness. (Italics in the original; citations omitted) 24

It is likewise well-settled that for retrenchment to be justified, any claim of actual or potential business losses
must satisfy the following standards: (1) the losses are substantial and not de minimis; (2) the losses are actual
or reasonably imminent; (3) the retrenchment is reasonably necessary and is likely to be effective in preventing
expected losses; and (4) the alleged losses, if already incurred, or the expected imminent losses sought to be
forestalled, are proven by sufficient and convincing evidence.25 And it is the employer who has the onus of
proving the presence of these standards.
Sections 5 and 6 of Presidential Decree No. 902-A (P.D. 902-A) ("reorganization of the securities and
exchange commission with additional powers and placing said agency under the administrative supervision of
the office of the president"),26 as amended, read:

SEC. 5 In addition to the regulatory and adjudicative functions of THE SECURITIES AND EXCHANGE
COMMISSION over corporations, partnerships and other forms of associations registered with it as expressly
granted under existing laws and decrees, it shall have original and exclusive jurisdiction to hear and decide
cases involving:

xxx

(d) Petitions of corporations, partnerships or associations declared in the state of suspension of

payments in cases where the corporation, partnership or association possesses sufficient property to
cover all debts but foresees the impossibility of meeting them when they respectively fall due or in
cases where the corporation, partnership, association has no sufficient assets to cover its liabilities,
but is under the management of a Rehabilitation Receiver or Management Committee created pursuant
to this Decree.

SEC. 6. In order to effectively exercise such jurisdiction, the Commission shall possess the following powers:

xxx

(c) To appoint one or more receivers of the property, real and personal, which is the subject of the action
pending before the Commission in accordance with the provisions of the Rules of Court in such other cases
whenever necessary in order to preserve the rights of the parties-litigants and/or protect the interest of the
investing public and creditors: Provided, however, That the Commission may in appropriate cases,
appoint a rehabilitation receiver  of corporations, partnerships or other associations not supervised or
regulated by other government agencies who shall have, in addition to powers of the regular receiver
under the provisions of the Rules of Court, such functions and powers as are provided for in the
succeeding paragraph (d) hereof: x x x

(d) To create and appoint a management committee, board or body upon petition or motu propio to undertake
the management of corporations, partnership or other associations not supervised or regulated by other
government agencies in appropriate cases when there is imminent danger of dissipation, loss, wastage or
destruction of assets or other properties or paralization of business operations of such corporations or
entities which may be prejudicial to the interest of minority stockholders, parties-litigants of the
general public: x x x (Emphasis and underscoring supplied).

From the above-quoted provisions of P.D. No. 902-A, as amended, the appointment of a receiver or
management committee by the SEC presupposes a finding that, inter alia, a company possesses sufficient
property to cover all its debts but "foresees the impossibility of meeting them when they respectively fall due"
and "there is imminent danger of dissipation, loss, wastage or destruction of assets of other properties or
paralization of business operations."

That the SEC, mandated by law to have regulatory functions over corporations, partnerships or
associations,27 appointed an interim receiver for the EYCO Group of Companies on its petition in light of, as
quoted above, the therein enumerated "factors beyond the control and anticipation of the management"
rendering it unable to meet its obligation as they fall due, and thus resulting to "complications and problems . . .
to arise that would impair and affect [its] operations . . ." shows that CLARION, together with the other member-
companies of the EYCO Group of Companies, was suffering business reverses justifying, among other things,
the retrenchment of its employees.

This Court in fact takes judicial notice of the Decision 28 of the Court of Appeals dated June 11, 2000 in CA-G.R.
SP No. 55208, "Nikon Industrial Corp., Nikolite Industrial Corp., et al. [including CLARION], otherwise known
as the EYCO Group of Companies v. Philippine National Bank, Solidbank Corporation, et al., collectively
known and referred as the ‘Consortium of Creditor Banks,’" which was elevated to this Court via Petition
for Certiorari and docketed as G.R. No. 145977, but which petition this Court dismissed by Resolution dated
May 3, 2005:

Considering the joint manifestation and motion to dismiss of petitioners and respondents dated February 24,
2003, stating that the parties have reached a final and comprehensive settlement  of all the claims and
counterclaims subject matter of the case and accordingly, agreed to the dismissal of the petition for certiorari,
the Court Resolved to DISMISS the petition for certiorari (Underscoring supplied).

The parties in G.R. No. 145977 having sought, and this Court having granted, the dismissal of the appeal of the
therein petitioners including CLARION, the CA decision which affirmed in toto the September 14, 1999 Order of
the SEC, the dispositive portion of which SEC Order reads:

WHEREFORE, premises considered, the appeal is as it is hereby, granted and the Order dated 18 December
1998 is set aside. The Petition to be Declared in State of Suspension of payments is hereby  disapproved and
the SAC Plan terminated. Consequently, all committee, conservator/ receivers created pursuant to said Order
are dissolved and discharged and all acts and orders issued therein are vacated.

The Commission, likewise, orders the liquidation and dissolution of the appellee corporations. The case
is hereby remanded to the hearing panel below for that purpose. x x x (Emphasis and underscoring supplied),
has now become final and executory. Ergo, the SEC’s disapproval of the EYCO Group of Companies’ "Petition
for the Declaration of Suspension of Payment . . ." and the order for the liquidation and dissolution of these
companies including CLARION, must be deemed to have been unassailed.

That judicial notice can be taken of the above-said case of Nikon Industrial Corp. et al. v. PNB et al., there
should be no doubt.

As provided in Section 1, Rule 129 of the Rules of Court:

SECTION 1. Judicial notice, when mandatory. – A court shall take judicial notice, without the introduction of
evidence, of the existence and territorial extent of states, their political history, forms of government and
symbols of nationality, the law of nations, the admiralty and maritime courts of the world and their seals, the
political constitution and history of the Philippines, the official acts of the legislative, executive
and judicial departments of the Philippines, the laws of nature, the measure of time, and the geographical
divisions. (Emphasis and underscoring supplied)

which Mr. Justice Edgardo L. Paras interpreted as follows:

A court will take judicial notice of its own acts and records in the same case, of facts established in prior
proceedings in the same case, of the authenticity of its own records of another case between the same parties,
of the files of related cases in the same court, and of public records on file in the same court . In addition
judicial notice will be taken of the record, pleadings or judgment of a case in another court between the same
parties or involving one of the same parties, as well as of the record of another case between different parties
in the same court. Judicial notice will also be taken of court personnel. (Emphasis and underscoring supplied) 29

In fine, CLARION’s claim that at the time it terminated Miclat it was experiencing business reverses gains more
light from the SEC’s disapproval of the EYCO Group of Companies’ petition to be declared in state of
suspension of payment, filed before Miclat’s termination, and of the SEC’s consequent order for the group of
companies’ dissolution and liquidation.

This Court’s finding that Miclat’s termination was justified notwithstanding, since at the time she was hired on
probationary basis she was not informed of the standards that would qualify her as a regular employee, under
Section 6, Rule I of the Implementing Rules of Book VI of the Labor Code which reads:
SEC. 6. Probationary employment. There is probationary employment where the employee, upon his
engagement, is made to undergo a trial period during which the employer determines his fitness to qualify for
regular employment, based on reasonable standards made known to him at the time of engagement.

"Probationary employment shall be governed by the following rules:

xxx

(d) In all cases of probationary employment, the employer shall make known to the employee the
standards under which he will qualify as a regular employee at the time of his engagement. Where no
standards are made known to the employee at that time, he shall be deemed a regular employee " (Emphasis
and underscoring supplied), she was deemed to have been hired from day one as a regular employee. 30

CLARION, however, failed to comply with the notice requirement provided for in Article 283 of the Labor Code,
to wit:

ART. 283. CLOSURE OF ESTABLISHMENT AND REDUCTION OF PERSONNEL. – The employer may also
terminate the employment of any employee due to the installation of labor saving devices,
redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or
undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a
written notice on the worker and the Ministry of Labor and Employment at least one (1) month before
the intended date thereof. x x x (Emphasis and underscoring supplied)

This Court thus deems it proper to award the amount equivalent to Miclat’s one (1) month salary of ₱6,500.00
as nominal damages to deter employers from future violations of the statutory due process rights of
employees.31

Since Article 283 of the Labor Code also provides that "[i]n case of retrenchment to prevent losses, . . . the
separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of
service, whichever is higher. . . , [a] fraction of at least six (6) months [being] considered one (1) whole year,"
this Court holds that Miclat is entitled to separation pay equivalent to one (1) month salary.

As to Miclat’s entitlement to 13th month pay, paragraph 6 of the Revised Guidelines on the 13th Month Pay
Law provides:

6. 13th Month Pay of Resigned or Separated Employee

An employee x x x whose services were terminated any time before the time for payment of the 13th month pay
is entitled to this monetary benefit in proportion to the length of time he worked during the calendar year up to
the time of his resignation or termination from the service. Thus if he worked only from January up to
September his proportionate 13th month pay shall be equivalent to 1/12 of his total basic salary he earned
during that period.

xxx

Having worked at CLARION for six months, Miclat’s 13th month pay should be computed as follows:

(Monthly Salary x 6 ) / 12 = Proportionate 13th month pay

(₱6,500.00 x 6) / 12 = ₱3,250.00

With the appointment of a management receiver in September 1997, however, all claims and proceedings
against CLARION, including labor claims,32 were deemed suspended during the existence of the
receivership.33 The labor arbiter, the NLRC, as well as the CA should not have proceeded to resolve
respondent’s complaint for illegal dismissal and should instead have directed respondent to lodge her claim
before the then duly-appointed receiver of CLARION. To still require respondent, however, at this time to refile
her labor claim against CLARION under the peculiar circumstances of the case — that 8 years have lapsed
since her termination and that all the arguments and defenses of both parties were already ventilated before
the labor arbiter, NLRC and the CA; and that CLARION is already in the course of liquidation — this Court
deems it most expedient and advantageous for both parties that CLARION’s liability be determined with finality,
instead of still requiring respondent to lodge her claim at this time before the liquidators of CLARION which
would just entail a mere reiteration of what has been already argued and pleaded. Furthermore, it would be in
the best interest of the other creditors of CLARION that claims against the company be finally settled and
determined so as to further expedite the liquidation proceedings. For the lesser number of claims to be proved,
the sooner the claims of all creditors of CLARION are processed and settled.

WHEREFORE, the Court of Appeals November 24, 2000 Decision, together with its May 23, 2001 Resolution,
is SET ASIDE and another rendered declaring the legality of the dismissal of respondent, Michelle Miclat.
Petitioners are ORDERED, however, to PAY her the following in accordance with the foregoing discussions:

1) ₱6,500.00 as nominal damages for non-compliance with statutory due process;

2) ₱6,500.00 as separation pay; and

3) ₱3,250.00 as 13th month pay.

Let a copy of this Decision be furnished the SEC Hearing Panel charged with the liquidation and dissolution of
petitioner corporation for inclusion, in the list of claims of its creditors, respondent Michelle Miclat’s claims, to be
satisfied in accordance with Article 110 of the Labor Code in relation to the Civil Code provisions on
Concurrence and Preference of Credits.

Costs against petitioners.

SO ORDERED.

Panganiban, (Chairman), Sandoval-Gutierrez, Corona, and Garcia, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 90445 October 2, 1990

UST FACULTY UNION, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION AND UNIVERSITY OF SANTO TOMAS, INC., respondents.

Eduardo J. Mariño, Jr. for petitioner.

Abad, Leaño & Associates for private respondent.

CORTÉS, J.:

The controversy, from which the case arose, has to do with the payment of the 13th month pay.
An understanding of the incidents that led to the filing of the instant petition is necessary to resolve the basic
issue raised.

To settle a labor dispute regarding the share of the faculty members in the increase in tuition fees under
Presidential Decree No. 451, the University of Santo Tomas and the UST Faculty Union, represented by Dean
(now Justice) Andres Narvasa and Professor (later, Court of Appeals Justice) Cecilio Pe, respectively, entered
into an agreement on March 25, 1985, which provided inter alia:

1.0. Under this Agreement and the Collective Bargaining Agreement that the parties shall
eventually execute, UST shall grant to all its faculty members the additional benefits specified in
the succeeding paragraphs hereof, over and above the benefits currently enjoyed by the said
faculty members, which additional benefits shall amount in the aggregate to P35,000,000.00,
divided and receivable over a period of three (3) years, within School Years 1985-1986, 1986-
1987, and 1987-1988, it being explicitly understood and stipulated by both parties hereto that
UST's total commitments under and by virtue of this Agreement and the Collective Bargaining
Agreement to be hereafter executed, cannot and shall not exceed nor be less than the amount
of P35,000,000.00.

2.0. For School Year 1985-1986, UST shall grant the following:

xxx xxx xxx

2.3. Christmas gift of P2,000.00 each to all full-time faculty members — i.e., those with an
average assignment of at least 15 units in the current school year — provided that they have
been employed for at least 12 months as of December 1, 1985; and of P1,000.00 each to all
part-time faculty members — i.e., those with an average teaching assignment of less than 15
units in the current school year — or faculty members employed for less than 12 months as of
December 1, 1985;

xxx xxx xxx

3.0. For School Year 1986-1987 and 1987-1988, UST shall grant a salary increase of not less
than 10% in each year under the conditions set forth in paragraph 2.1 (see Annex A) and the
same amount of benefits set out in paragraphs 2.2 to 2.5, inclusive.

xxx xxx xxx

6.0. If at the end of School Year 1987-1988 there should be any unspent balance of the
aggregate of P35,000,000.00, such unspent balance shall be distributed proportionately to all
faculty members.

xxx xxx xxx

[Rollo, pp. 64-65.]

UST had not been previously paying its faculty members 13th month pay. Presidential Decree No. 851, which
took effect on December 16, 1975 provides:

Sec. 1. All employers are hereby required to pay all their employees receiving a basic salary of
not more than P1,000 a month, regardless of the nature of the employment, a 13th month pay
not later than December 24 of every year.

Sec. 2. Employers already paying their employees a 13th month pay or its equivalent are not
covered by this Decree.
 Thus, since the faculty members of UST were receiving salaries greater than P1,000.00 a month, UST
was not required to pay them any 13th month pay.

On August 13, 1986, President Aquino issued Memorandum Order No. 28 which provided: "Section 1 of
Presidential Decree No. 851 is hereby modified to the extent that all emloyers are hereby required to pay all
their rank-and-file employees a 13th month pay not later than December 24 of every year."

Thus starting with the year 1986 the UST was required by law to pay its faculty members the 13th month pay.
At the same time the faculty expected compliance with the Agreement of March 25, 1985 to pay Christmas gifts
of P2,000.00 for full-time faculty members and P1,000.00 for part-time faculty members. It was because of this
that the controversy arose.

On December 3, 1986, Prof. Pe wrote a letter to the rector of the university expressing the faculty members'
apprehensions regarding reports "that the 13th month pay is being reduced by deducting therefrom the amount
of the said Christmas gift."

The rector replied the next day, December 4, 1986, by attaching a memorandum of its legal counsel which
concluded that "the Christmas bonus already paid to the employees shall be credited as compliance with the
13th month pay."

On December 9, 1986, Prof. Pe wrote the rector another letter expressing the union's disagreement with the
university legal counsel's opinion and reiterating its position that the Christmas gift is not a bonus and should
be paid in addition to the 13th month pay. The letter further stated:

It will be recalled that when you and Fr. Fermin and I — in the presence of Alex Tagaro — met
at the Quezon City Sports Club in March, 1985 and discussed possible settlement of our then
existing labor dispute in the University, it was readily agreed that the University would pay the
faculty members the aggregate amount of P35 million demanded by the Union. It was only
thereafter that we proceeded, in a subsequent meeting held in the same place, to take up the
matter of allocation, that is, how the sum of P35 million would be paid and what form. As finally
agreed, the payment in cash would be made over a period of three (3) years in the form of
salary increases, increase of contribution to the Retirement Fund, Christmas gift, hospitalization
benefits, and educational benefits. All this embodied in our Agreement dated March 25, 1985
which is part and parcel (Annex "A") of our CBA dated May 17, 1986. So clear was our
agreement that the University's obligation was to pay the faculty members the total amount of
P35 million — no more, no less — (see par. 1.0 of the March 25 Agreement) that it is expressly
and explicitly stipulated therein that at the end of School Year 1987-88 there should be any
unspent balance of the aggregate P35,000,000.00, such unspent balance shall be distributed
proportionately to all faculty members. (See par. 6.0) The allocation was not intended to affect
in any way the obligation of the University to pay P35 million, no part of which should therefore
be considered as a bonus. [Rollo, p. 92.]

When UST did not heed the union's demand, the latter filed a complaint with the arbitration branch of the NLRC
on December 10, 1986 seeking to compel UST to pay the faculty members the full amount of their 13th month
pay and not to deduct therefrom the P2,000.00 or P1,000.00 given as Christmas gift.

On January 4, 1989, the Labor Arbiter rendered a decision dismissing the union's complaint. The arbiter ruled
that the Christmas gift may be considered an equivalent of the 13th month pay pursuant to the rules
implementing P.D. No. 851.

The union appealed to the NLRC. In a decision dated August 23, 1989, the NLRC dismissed the appeal and
affirmed the arbiter's decision. The union moved for reconsideration but this was denied on September 29,
1989.
But the issue was ventilated not only before the NLRC. Individual faculty members filed complaints before the
Grievance Adjudication Committee created pursuant to the CBA. In a unanimous decision dated March 27,
1987, the Committee ruled "that the P2,000/1,000 provided for in Sec. 2.3 of Annex "A" of the CBA is not a
Christmas Bonus creditable to the 13th month pay but part of the P35 million which in the Compromise
Agreement (Annex "A" of CBA) was agreed upon by the Faculty Union and the respondent University as a
settlement of all existing claims of the Union." [Rollo, p. 86.] The decision was signed by Justice Eduardo P.
Caguioa and Dean Minerva A. Gonzales, representing the university, and Atty. Eduardo J. Marino, Jr. and Prof.
Ma. Melvyn P. Alamis, representing the union. Although its representatives signed the committee decision,
UST refused to accept the judgment.

These are the incidents that led to the filing of the instant petition. After comments were filed by private and
public respondents, and petitioner filed a reply, the petition was given due course on February 27, 1990 and the
parties were required to file their memoranda. After the parties complied, the case was deemed submitted.

The leading case on the 13th month pay is National Federation of Sugar Workers (NFSW) v. Ovejera, G.R. No.
59743, May 31, 1982, 114 SCRA 354, an en banc decision. In concluding that "Christmas bonus," "milling
bonus" and "amelioration bonus," the yearly total of which exceeds one month salary, may be considered as an
"equivalent" of the 13th month pay under the rules implementing P.D. No. 851, the Court said:

The evident intention of the law, as revealed by the law itself, was to grant an additional income
in the form of a 13th month pay to employees not already receiving the same. Otherwise put,
the intention was to grant some relief — not to all workers — but only to the unfortunate ones
not actually paid a 13th month salary or what amounts to it, by whatever name called; but it was
not envisioned that a double burden would be imposed on the employer already paying his
employees a 13th month pay or its equivalent — whether out of pure generosity or on the basis
of a binding agreement and, in the latter case, regardless of the conditional character of the
grant (such as making the payment dependent on profit), so long as there is actual payment.
Otherwise, what was conceived to be a 13th month salary would in effect become a 14th or
possibly 15th month pay.

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

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

The term "its equivalent" . . . shall include Christmas bonus, mid-year bonus,

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

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

Pragmatic considerations also weigh heavily in favor of crediting both voluntary and contractual
bonuses for the purpose of determining liability for the 13th month pay. To require employers
(already giving their employees a 13th month salary or its equivalent) to give a second 13th
month pay would be unfair and productive of undesirable results. To the employer who had
acceded and is already bound to give bonuses to his employees, the additional burden of a
13th month pay would amount to a penalty for his munificence of liberality. The probable
reaction of one so circumstanced would be to withdraw the bonuses or resist further voluntary
 grants for fear that if and when a law is passed giving the same benefits, his prior concessions
might not be given due credit; and this negative attitude would have an adverse impact on the
employees. [At pp. 369-370.]

Then, in Dole Philippines, Inc. v. Leogardo, Jr., G.R. No. 60018, October 23, 1982, 117 SCRA 938, the Court,
using the holding in National Federation of Sugar Workers (NFSW) as yardstick, said:

Tested against this norm, it becomes clear that the year-end productivity bonus granted by
petitioner to private respondents pursuant to their CBA is, in legal contemplation, an integral
part of their 13th month pay, notwithstanding its conditional nature. When, therefore, petitioner,
in order to comply with the mandate of PD No. 851, credited the year-end productivity bonus as
part of the 13th month pay and adopted the procedure of paying only the difference between
said bonus and the 1/12th of the worker's yearly basic salary, it acted well within the letter and
spirit of the law and its implementing rules. For in the event that "an employer pays less than
one-twelfth of the employees' basic salary, all that said employer is required to do under the law
is to pay the difference.

To hold otherwise would be to impose an unreasonable and undue burden upon those
employers who had demonstrated their sensitivity and concern for the welfare of their
employees. A contrary stance would indeed create an absurd situation whereby an employer
who started giving his employees the 13th month pay only because of the unmistakable force of
the law would be in a far better position than another who, by his own magnanimity or by mutual
agreement, had long been extending to his employees the benefits contemplated under PD No.
851, by whatever nomenclature these benefits have come to be known. Indeed, PD No. 851, a
legislation benevolent in its purpose, never intended to bring about such oppressive situation.
[At pp. 943-944.]

In Brokenshire Memorial Hospital, Inc. v. NLRC, G.R. No. 69741, August 19, 1986, 143 SCRA 564, the Court,
applying the rulings in National Federation of Sugar Workers (NFSW) and Dole, held that an employer can not
be made to bear the double burden of giving both 13th month pay and Christmas bonus.

In providing for a 13th month pay, P.D. No. 851 intended to uniformly provide low-paid employees
with additional income. This is clear from the preamble to the decree which states:

WHEREAS, it is necessary to further protect the level of real wages from the ravage of world-
wide inflation;

WHEREAS, there has been no increase in the legal minimum wage rates since 1970;

WHEREAS, the Christmas season is an opportune time for society to show its concern for the
plight of the working masses so they may properly celebrate Christmas and New Year.

The law wanted to uniformly provide low-paid employees with additional income because on the
average their salaries for twelve (12) months were grossly inadequate to meet the expenses for day-to-
day subsistence. This additional income took the form of an extra month's salary to be given in
December.

Thus, where such additional income, whether granted by the employer voluntarily or agreed upon by the
employer and the employees in a CBA, or its equivalent is already given by the employer, whether in
December or in some other date, the 13th month pay need not be given. If, on the other hand, an amount less
than that required by law is given, the employer has only to pay his employees the deficiency. In both
instances, the purpose of the law is met. The modification introduced by Memorandum Order No. 28 did not
substantially alter the purpose of the law but expands the coverage of the 13th month pay, now to uniformly
provide all rank-and-file employees additional income.
Clearly, from the discussions in National Federation of Sugar Workers (NFSW), Dole and Brokenshire, what
the law wants to prevent is the imposition of a "double burden" upon the employer who is already paying the
equivalent of a 13th month pay. The law exempts from the payment of the 13th month pay employers who are
already giving its equivalent. Otherwise the goal of uniformly providing employees with additional income will
not be met. Another inequity will result; while most employees will be paid thirteen (13) months salary, some,
by virtue of P.D. No. 851, will be receiving salary for fourteen (14) months.

The imposition of a "double burden" does not obtain in the present case even if UST pays both the 13th month
pay and the Christmas gift of P2,000.00 or P1,000.00. The Christmas gift is part of the lump sum of P35M
which the school has obliged itself to pay the faculty members in full settlement of their share in the increase of
tuition fees pursuant to P.D. No. 451. It is not a bonus, incentive or additional income. Neither is the giving of
the Christmas gift an act of liberality on the part of the university. The Christmas gift was partial payment,
according to a schedule agreed upon by UST and the faculty union, of the university's outstanding obligation to
the faculty members for their share in the increase in tuition fees under P.D. No. 451. Once the university has
fully paid the P35M to the faculty members within the time frame and in the forms specified in the agreement,
its obligation to pay a Christmas gift of P2,000.00 or P1,000.00, as part of the P35M compromise package,
ceases. UST would then have to comply only with P.D. No. 851 as amended by Memorandum Order No. 28 by
paying the 13th month pay.

The Christmas gift is clearly not an "equivalent" of the 13th month pay under the rules implementing P.D. No.
851. It is not akin to a "Christmas bonus," "mid-year bonus," "profit-sharing payments" or "other cash bonuses."
[Sec 3.]

[A] bonus is an amount granted and paid to an employee for his industry and loyalty which
contributed to the success of employer's business and made possible the realization of profits.
It is an act of generosity of the employer . . . It is also granted by an enlightened employer to
spur the employee to greater efforts for the success of the business and realization of bigger
profits. [Philippine Education Co., Inc. v. Court of Industrial Relations, 92 Phil. 381, 385 (1952)].

The Christmas gift cannot therefore be compared to the "Christmas bonus," "milling bonus," and "amelioration
bonus" in National Federation of Sugar Workers (NFSW), the "year-end productivity bonus" in Dole, and the
"Christmas bonus" in Brokenshire which were actually forms of incentives and additional income for the
employees. Neither is it in the same category as the fixed "transportation allowance" ruled as a form of bonus
equivalent to the 13th month pay in FEU Employees Labor Union v. FEU, G.R. Nos. 69224-5, December 18,
1987, 156 SCRA 629 (consolidated with Cebu Institute of Technology v. Ople, G.R. No. 58870, December 18,
1987, 156 SCRA 629, the lead case under which FEU is indexed.)

We are not saying that these cases are no longer good law. What we are saying is that the facts and
circumstances in the case now before us are at variance with those in the aforecited cases and, hence, do not
call for a disposition similar to that in said cases.

This is not the first time that the Court has ruled in this fashion. In United CMC Textile Workers Union
v. Valenzuela, G.R. No. 70763, April 30, 1987, 149 SCRA 424, we ruled that an employer still has to give the
13th month pay under P.D. No. 851 on top of the Christmas bonus in graduated amounts, based on length of
service, provided in the CBA. In said case, the Court distilled from the facts and circumstances the conclusion
that the purpose of the bonus was to reward employees for their length of service, a purpose different from that
in P.D. No. 851 which seeks to uniformly provide low-paid employees additional income.

To recapitulate, under P.D. No. 851, as amended by Memorandum Order No. 28, and the March 25, 1985
agreement, UST has to pay its faculty members both the 13th month pay and the Christmas gift of P2,000.00
or P1,000.00 for the years 1986 and 1987. Payment of the Christmas gift provided in the March 25, 1985
agreement cannot be credited as partial compliance with P.D. No. 851, as amended. Consequently, we find
that the NLRC gravely abused its discretion when it affirmed the dismissal of the union's complaint.
WHEREFORE, the petition is GRANTED and the decision of the NLRC dated August 23, 1989 and its
resolution dated September 29, 1989 are SET ASIDE. UST is DIRECTED to pay its faculty members 13th
month pay in accordance with P.D. No. 851, as amended by Memorandum Order No. 28, and the Christmas
gift under the Agreement dated March 25, 1985 for the years 1986 and 1987.

SO ORDERED.

Fernan, C.J., Melencio-Herrera, Gutierrez, Jr., Cruz, Feliciano, Gancayco, Bidin, Sarmiento, Griño-Aquino,
Medialdea and Regalado, JJ., concur.

Narvasa, J., took no part.

Paras, J., is on leave.

Padilla, J., took no part.

FIRST DIVISION

G.R. No. 154985             August 24, 2004

KAR ASIA, INC. and/or CELESTINO S. BARETTO, petitioners,

vs.
MARIO CORONA, RICKY HEPGANO, JOHNNY COLLADOS, CONSTANTINO LAGARAS, RANEL
BALANSAG, ARNOLD AVILA, PETER ARCENAL, ARNOLD CABAHUG, BERNARD BETE, RUPERTO
RESTAURO, WILLY CRUZ, RANDY BASNILLO, ARMAN BASTE, ERNESTO ESPINA, PATRICIO
AGUDELA, IRENEO BANGOY, PALERMO AUTENTICO, GEORGE TAGAYTAY, BENITO MATUGAS, and
WILFREDO ESPINA, respondents.
 DECISION

YNARES-SANTIAGO, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the February 28, 2002
Decision of the Court of Appeals in CA-G.R. SP No. 57972, and its August 9, 2002 Resolution denying
1  2 

petitioners’ motion for reconsideration.

The undisputed facts are as follows:

Respondents, regular employees of petitioner KAR ASIA, Inc., an automotive dealer in Davao City, filed on
September 24, 1997 a complaint for underpayment of wages and attorney’s fees before Branch XI, Regional
3 

Arbitration Branch of Davao City. They claimed that they were not paid their cost of living allowance (COLA), as
mandated by the Regional Tripartite and Wages Productivity Board (RTWPB) XI Wage Order No. 3, for the
months of December 1993 and December 1994, and prayed that petitioner be ordered to pay the same with
1% interest per month, as well as attorney’s fees equivalent to 10% of the total monetary award.

Petitioner company and its president Celestino Barretto countered that the complaint was false and malicious;
that respondents had already been paid their COLA for the said periods; and that respondents scared off
potential customers and caused a substantial reduction in the income of the petitioner company estimated at,
more or less, P1,000,000.00 when they picketed and put up streamers with insulting and derogatory slogans.
Petitioners presented in evidence the payrolls for December 1993 and December 1994 showing that the
respondents acknowledged in writing the receipt of their COLA, and the affidavits of Ermina Daray and Cristina
Arana, cashiers of KAR ASIA, refuting respondents’ claim that they were made to sign blank pieces of paper.

On August 31, 1998, the Labor Arbiter rendered a decision in favor of petitioners, the dispositive portion of
which reads:

WHEREFORE, judgment is hereby rendered:

1. Ordering the complainants jointly and severally to pay respondents the sum of P50,000.00
representing attorney’s fee of respondents;

2. Ordering complainants jointly and severally to pay respondent Celestino S. Barretto the sum of
P150,000.00 in concept of moral damages;

3. Ordering the complainants jointly and severally to pay respondents the sum of P5,000.00 as litigation
expenses.

SO ORDERED. 4

Respondents appealed to the NLRC, which affirmed the decision of the Labor Arbiter but deleted the award of
moral damages, attorney’s fees, and litigation expenses for lack of sufficient basis in a Resolution dated August
5 

23, 1999.

Respondents filed a petition for certiorari with the Court of Appeals, which reversed the decision of the NLRC
and ordered petitioner company to pay the respondents the P25.00 per day COLA for the period December 1
to 31, 1994, plus interest thereon at the rate of 1% per month computed from the time the same was withheld
from respondents up to the time they were actually paid the respective sums due them.

In support of its decision, the appellate court stated: 6

As aforesaid, the claim for the December 01 to 31, 1993 COLA had already prescribed at the time the
complaint for underpayment was filed with the labor arbiter. However, there appears to be insufficient evidence
in the records to justify a finding that COLA for the period December 01 to 31, 1994 had already been paid. The
December 01 to 15 and 16 to 31, 1994 payroll adduced as evidence of payment does not meet the "substantial
evidence" test. The same does not bear the signatures of the respondent company’s employees
acknowledging receipt of the same amount. Moreover, the same was signed by Ermina I. Daray, the paymaster
and private respondent Celestino S. Barretto, the president cum C.E.O. of respondent company and the same
was not covered by any affidavit of either signatory that the required COLA had already been actually paid, the
payroll presented being merely the copy approved for payment, and not the copy disclosing actual payment.

Hence this petition for review based on the following grounds:

1. IN ITS ASSAILED DECISION, THE HONORABLE COURT OF APPEALS MADE A

MISAPPREHENSION OF FACTS AND IT PREMISED ITS FINDING OF FACT ON A SUPPOSED
ABSENCE OF EVIDENCE BUT THIS IS CONTRADICTED BY THE EVIDENCE ON RECORD
CONSIDERING THAT:

a. THE PRESIDENT AND CEO EXECUTED THE POSITION PAPER UNDER OATH WHERE

THE PAYROLL EVIDENCING PAYMENT OF THE DECEMBER 1994 COLA, WHICH HE
ALSO SIGNED, WAS ANNEXED AND ATTACHED, HENCE THERE WAS NO NEED FOR HIM
TO MAKE A SEPARATE AFFIDAVIT;

b. THE PAYMASTER CERTIFIED IN EACH PAGE OF THE PAYROLL THAT SHE

HAD ACTUALLY PAID THE AMOUNTS TO THE PERSONS LISTED IN THE DECEMBER
1994 PAYROLL THAT INCLUDED HEREIN RESPONDENTS. HENCE, THE PAYROLL IS
NOT MERELY AN APPROVAL FOR PAYMENT BUT IS AN EVIDENCE
THAT ACTUAL PAYMENT WAS MADE.

c. THE LABOR ARBITER CONDUCTED A CLARIFICATORY HEARING WHEREIN THE

CASHIERS OF PETITIONER, ONE OF WHOM WAS THE PAYMASTER REFERRED TO
ABOVE, CONFIRMED THAT THEY HAVE ACTUALLY PAID THE RESPONDENTS THEIR
ALLEGED UNPAID COLA.

2. THE HONORABLE COURT OF APPEALS EXCEEDED THE LIMITS OF ITS POWER TO REVIEW
THE ACTS OF THE LABOR ARBITER AND THE NLRC BY NOT CONFINING ITSELF IN
DETERMINING WHETHER THE SAID QUASI-JUDICIAL BODIES LACKED OR ACTED IN EXCESS
OF JURISDICTION OR COMMITTED GRAVE ABUSE OF DISCRETION BUT PROCEEDED TO
INQUIRE ON THE CORRECTNESS OF THE EVALUATION OF EVIDENCE BY THE SAID AGENCIES
WHICH IS BEYOND THE OFFICE OF AN EXTRAORDINARY WRIT OF CERTIORARI. 7

In support of the first assigned error, petitioners argue that the factual findings of the Court of Appeals are in
conflict with the evidence on record and those of the Labor Arbiter and the NLRC. They contend that the
proceedings and pleadings before the Labor Arbiter and the NLRC showed that the respondents have
abandoned their claim for non-payment of the December 1994 COLA. They insist that in their position paper
and Memorandum on Appeal, the respondents only demanded the payment of the December 1993 COLA but
not the December 1994 COLA. They further insist that there is sufficient evidence that the respondents had
already been paid their COLA.

Anent the second assigned error, petitioners argue that the respondents having filed a petition
for certiorari under Rule 65 of the Rules of Court, the Court of Appeals should have limited the exercise of its
judicial review to issues of want of jurisdiction and/or grave abuse of discretion on the part of the Labor Arbiter
and the NLRC, instead of evaluating the correctness and sufficiency of the evidence upon which the labor
tribunals based their decisions.

The issue is simple: whether or not the petitioner company paid the respondents the COLA for December 1993
and December 1994 as mandated by RTWPB XI Wage Order No. 3.
We find merit in the petition.

A close scrutiny of the payroll for the December 1993 COLA readily disclose the signatures of the respondents
8 

opposite their printed names and the numeric value of P654.00. Respondents’ averment that the petitioner
company harassed them into signing the said payroll without giving them its cash equivalent cannot be given
credence. Their self-serving and unsubstantiated declarations cannot overturn the evidentiary weight of the
signatures. The allegations of harassment are inadmissible as self-serving statements and therefore cannot be
repositories of truth. He who asserts not he who denies must prove; unfortunately, the respondents miserably
failed to discharge this burden. We also agree with the observation of the Labor Arbiter that in 1993 there was
no labor dispute since the labor unrest took place only in the later part of 1997. Hence, there was no reason for
management to harass its employees.

More importantly, the unreasonable length of time in pursuing respondents’ claim for the December 1993
COLA militates against its grant. Article 291 of the Labor Code requires that all money claims arising from
employer-employee relations shall be filed within 3 years from the time that the cause of action accrued;
otherwise they shall be barred forever. In the present case, the respondents filed the complaint for
underpayment of wage on September 24, 1997. Thus, the action for the payment of the December 1993 COLA
has already prescribed.

With respect to the December 1994 COLA, we find that the respondents alleged its non-payment only in the
complaint. Subsequent pleadings reveal that they opted to pursue their demand only for December 1993 COLA
and forego that of the December 1994. Even assuming that the neglect by the respondents in asserting their
claim for the December 1994 COLA does not amount to an abandonment on the ground that they should not
be deprived of their rightful monetary claims if they were so entitled, still the paucity of evidence to substantiate
their bare assertions negates such an award.

The payrolls for December 1 to 15, 1994 and December 16 to 31, 1994 indicate an allowance of P327.00 for
9 

each period, or a total of P654.00 for the entire month. However, a casual observation of the payroll for the
December 1993 COLA will also show that the respondents signed for the amount of P654.00. Also, the
allowances appearing in the two separate payslips for December 1 to 15, 1994 and December 16 to 31, 1994
10 

sum up to a total of P654.00. Although the numeric figures in the December 1994 payroll and the payslips for
the same period were denominated merely as allowances while those in the December 1993 payroll were
specifically identified as COLA, the fact that they add up to the same figure, i.e., P654.00, is not a coincidence.
Whether designated merely as an allowance or COLA, it is unmistakable that they all represent the cost of
living allowance for the given periods under RTWPB XI Wage Order No. 3.

Moreover, the affidavits of Ermina Daray and Cristita Arana, whose verity we find no reason to suspect,
confirmed the truthfulness of the entries in the payrolls and affirmed the receipt by the respondents of their full
compensation. Entries in the payroll, being entries in the course of business, enjoy the presumption of
regularity under Rule 130, Section 43 of the Rules of Court. It is therefore incumbent upon the respondents to
adduce clear and convincing evidence in support of their claim. Unfortunately, respondents’ naked assertions
without proof in corroboration will not suffice to overcome the disputable presumption.

In disputing the probative value of the payrolls for December 1994, the appellate court observed that the same
contain only the signatures of Ermina Daray and Celestino Barreto, the paymaster and the president,
respectively. It further opined that the payrolls presented were only copies of the approved payment, and not
copies disclosing actual payment.

The December 1994 payrolls contain a computation of the amounts payable to the employees for the given
11 

period, including a breakdown of the allowances and deductions on the amount due, but the signatures of the
respondents are conspicuously missing. Ideally, the signatures of the respondents should appear in the payroll
as evidence of actual payment. However, the absence of such signatures does not necessarily lead to the
conclusion that the December 1994 COLA was not received. It appears that the payslips for the same period
12 

bear the signatures of the respondents plus a certification that they received the full compensation for the
services rendered. While ordinarily a payslip is only a statement of the gross monthly income of the employee,
his signature therein coupled by an acknowledgement of full compensation alter the legal complexion of the
document. The payslip becomes a substantial proof of actual payment. Moreover, there is no hard-and-fast rule
requiring that the employee’s signature in the payroll is the only acceptable proof of payment. By implication,
the respondents, in signing the payslips with their acknowledgement of full compensation, unqualifiedly
admitted the receipt thereof, including the COLA for December 1994. The Court of Appeals erred when it
placed undue reliance on the unsigned payrolls and disregarded the signed payslips.

Factual findings by quasi-judicial agencies, such as the National Labor Relations Commission, which have
acquired expertise because their jurisdiction is confined to specific matters, are generally accorded not only
respect but even finality.
13

WHEREFORE, based on the foregoing, the petition is GRANTED. The February 28, 2002 decision of the Court
of Appeals in CA-G.R. SP No. 57972 is REVERSED and SET ASIDE. The Decision of the NLRC dated August
23, 1999 dismissing respondents’ claims of unpaid COLA for December 1993 and December 1994, and
deleting the awards for moral damages, attorney’s fees and litigation expenses for lack of sufficient basis, is
AFFIRMED.

No pronouncement as to costs.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Quisumbing, and Azcuna, JJ., concur.

Carpio, J., on official leave.

Republic of the Philippines

SUPREME COURT

SECOND DIVISION

G.R. No. 140495. April 15, 2005

G & M (Phils.), Inc., Petitioners,

vs.
EPIFANIO CRUZ, Respondents.
 DECISION

AUSTRIA-MARTINEZ, J.:

The well-entrenched rule, especially in labor cases, is that findings of fact of quasi-judicial bodies, like the
National Labor Relations Commission (NLRC), are accorded with respect, even finality, if supported by
substantial evidence. Particularly when passed upon and upheld by the Court of Appeals, they are binding and
conclusive upon the Supreme Court and will not normally be disturbed. 1

The Court finds no reason in this case to depart from such doctrine.

Petitioner G & M (Phils.), Inc. recruited respondent Cruz as trailer driver for its foreign principal, Salim Al Yami
Est., for a period of two years, and with a stipulated monthly salary of US$625, starting June 6, 1990.
Respondent alleged that when he arrived in the Kingdom of Saudi Arabia, he was made to sign an employment
contract in blank and his salary was reduced to SR604.00. Seven months into employment, his employer
deported him on December 28, 1990. According to respondent, the cause for his dismissal was his complaint
for sub-human working conditions, non-payment of wages and overtime pay, salary deduction and change of
employer. Hence, he filed with the Labor Arbiter an Affidavit/Complaint against petitioner for illegal dismissal,
underpayment and non-payment of wages, and refund of transportation expenses. Respondent claims that he
was only paid in an amount equivalent to five months salary and he did not receive his salary for the last two
months. Respondent submitted a copy of his pay slip showing the amount of SR604.00 as his basic salary. 2

Petitioner contends that respondent abandoned his job when he joined an illegal strike and refused to report for
work, constituting a breach of his employment contract and a valid cause for termination of employment.
Petitioner also claims that the pay slip submitted by respondent is inadmissible because the original copy was
not presented and that its existence, due execution, genuineness and authenticity were not established. 3

The Labor Arbiter found merit in petitioner’s claim that respondent abandoned his job, but nevertheless granted
respondent’s claim for underpayment of wages and two months unpaid salary. The dispositive portion of the
Labor Arbiter’s decision reads:

WHEREFORE, premises considered, the charge of illegal dismissal is hereby denied for lack of merit.
However, respondent G & M (Phils.), Inc., is hereby ordered to pay within ten (10) days from receipt hereof,
herein complainant Epifanio Cruz, the sums of ₱77,455.00 to be adjusted as earlier stated, and US$1,250.00
or its peso equivalent at the time of payment.

SO ORDERED. 4

On partial appeal to the NLRC, the same was dismissed per Resolution dated June 10, 1998, with the following
dispositive portion:

WHEREFORE, the appeal is Dismissed for lack of merit. Respondent G & M (Phils.) Inc., and Salim Al Yami
Est., are hereby ordered jointly and severally liable to pay complainant Epifanio Cruz the Philippine Peso
equivalent at the time of actual payment of the following sums:

a) THREE THOUSAND ONE HUNDRED TWENTY FIVE US DOLLARS (US$3,125.00) less THREE
THOUSAND TWENTY SAUDI RIYALS (SR3,020.000) representing salary differentials for five months; and

b) ONE THOUSAND TWO HUNDRED FIFTY US DOLLARS (US$1,250.00) representing unpaid salaries for
two (2) months.

Other dispositions of the appealed Decision stand AFFIRMED.

SO ORDERED. 5
Petitioner filed a special civil action for certiorari in the Court of Appeals, docketed as CA-G.R. SP No. 49729,
but it was dismissed for lack of merit.
6

Hence, this petition for review on certiorari under Rule 45 of the Rules of Court, based on the following
grounds:

THE COURT OF APPEALS FAILED TO CONSIDER THE FACT THAT WITH THE RESPONDENT’S
ADMISSION OF RECEIPT OF THE PAYMENTS OF HIS SALARIES ALTHOUGH ALLEGEDLY SHORT OF
WHAT WAS STIPULATED IN HIS CONTRACT - THE "BURDEN OF EVIDENCE" IS NOW SHIFTED UPON
HIM TO SHOW CONCRETE PROOF THAT INDEED HE WAS SHORT-CHANGED OF HIS SALARIES.

CONTRARY TO THE COURT OF APPEAL’S [sic] CONCLUSION, THE "PAYROLL ISSUE" IS OF GREAT
IMPORTANCE IN THE DETERMINATION OF THE ISSUES IN THE CASE AT BAR INASMUCH AS IT IS THE
RESPONDENT WHO HAS THE BURDEN OF PRESENTING EVIDENCE OF SHORT PAYMENT AFTER
HAVING ADMITTED TO HAVE RECEIVED CERTAIN AMOUNTS FOR HIS SALARIES. 7

This petition mainly involves factual issues, i.e., whether or not there is evidence on record to support the
findings of the Labor Arbiter, the NLRC and the Court of Appeals that respondent is entitled to the payment of
salary differential and unpaid wages. This calls for a re-examination of the evidence, which the Court cannot
entertain. As stated earlier, factual findings of labor officials, who are deemed to have acquired expertise in
matters within their respective jurisdiction, are generally accorded not only respect but even finality, and bind
the Court when supported by substantial evidence. It is not the Court’s function to assess and evaluate the
evidence all over again, particularly where the findings of both the Arbiter and the Court of Appeals concur. 8

Nevertheless, even if the Court delves into the issues posed by petitioner, there is still no reason to grant the
petition.

It was the finding of the Court of Appeals that it is the burden of petitioner to prove that the salaries paid by its
foreign principal complied with the contractual stipulations of their agency-worker agreement. Since petitioner
failed to discharge such burden, then it was correct for the NLRC to rely on respondent’s claim of
underpayment. 9

The Court of Appeals also ruled that since the positive testimony of respondent, as creditor, is sufficient to
prove non-payment even without the indefinite testimony of petitioner, as debtor, then the payroll (pay slip),
presented by respondent to prove that he only received the amount of SR604.00 as basic monthly salary, is
immaterial.10

Petitioner, however, insists that since respondent already admitted that his employer paid him, albeit short of
what was stipulated upon, then petitioner has no more obligation to show that respondent was paid, and it now
rests upon respondent to prove underpayment, and the pay slip submitted by respondent, which is of
"questionable authenticity," is not enough to prove the same. 11

The rule is that the burden of proving payment of monetary claims rests on the employer, in this case, herein
12 

petitioner, it being the employment agency or recruitment entity, and agent of the foreign principal, Salim Al
Yami Est., which recruited respondent. In Jimenez vs. NLRC, which involves a claim for unpaid
13  14 

wages/commissions, separation pay and damages against an employer, the Court ruled that where a person is
sued for a debt admits that the debt was originally owed, and pleads payment in whole or in part, it is
incumbent upon him to prove such payment. This is based on the principle of evidence that each party must
prove his affirmative allegations. Since petitioner asserts that respondent has already been fully paid of his
stipulated salary, the burden is upon petitioner to prove such fact of full payment.

In this case, while respondent may have admitted that he has actually been paid the amount of SR604.00 as
monthly salary, it does not discharge petitioner from proving full payment of the stipulated monthly salary of
US$625.00 based on the Agency-Worker Agreement. Respondent’s admission that some payments have been
made does not change the burden of proof. Petitioner still has the burden of establishing payments beyond
those admitted by respondent. 15

Thus, it was stated in the Jimenez case that:

As a general rule, one who pleads payment has the burden of proving it. Even where the plaintiff must allege
non-payment, the general rule is that the burden rests on the defendant to prove payment, rather than on the
plaintiff to prove non-payment. The debtor has the burden of showing with legal certainty that the obligation has
been discharged by payment.

When the existence of a debt is fully established by the evidence contained in the record, the burden of proving
that it has been extinguished by payment devolves upon the debtor who offers such a defense to the claim of
the creditor. Where the debtor introduces some evidence of payment, the burden of going forward with the
evidence - as distinct from the general burden of proof - shifts to the creditor, who is then under a duty of
producing some evidence to show non-payment.

Petitioner merely denied respondent’s claim of underpayment. It did not present any controverting evidence to
prove full payment. Hence, the findings of the Labor Arbiter, the NLRC and the Court of Appeals that
respondent was not fully paid of his wages stand.

The positive testimony of a creditor may be sufficient of itself to show non-payment, even when met by
indefinite testimony of the debtor. Similarly, the testimony of the debtor may also be sufficient to show payment,
but, where his testimony is contradicted by the other party or by a disinterested witness, the issue may be
determined against the debtor since he has the burden of proof. The testimony of the debtor creating merely an
inference of payment will not be regarded as conclusive on that issue.

Hence, for failure to present evidence to prove payment, petitioners defaulted in their defense and in effect
admitted the allegations of private respondents. 16

With regard to the admissibility of the pay slips, both the Labor Arbiter and the NLRC found that it was
admissible as evidence. As a general rule, the Court is not duty-bound to delve into the accuracy of the NLRC’s
factual findings in the absence of a clear showing that these were arbitrary and bereft of any rational basis. In
17 

the present case, petitioner failed to demonstrate any arbitrariness or lack of rational basis on the part of the
NLRC. 18

Article 221 of the Labor Code provides that proceedings before the NLRC are not covered by the technical
rules of evidence and procedure. The probative value of the copy of the pay slips is aptly justified by the NLRC,
as follows:

… the payslips are original duplicates of computerized payslips issued by the employer, Salim Al Yami
Est., to its workers which contain entries such as pay date, employee’s I.D. number, employee name, category,
basic rate, overtime hours and other relevant information, including an itemization of earnings (basic pay,
overtime pay, meal allowance for the period covered) and deductions. The fact that the payslips are not
authenticated will not militate against complainant’s claim, considering that in presenting the payslips,
complainant has established the fact of underpayment, and the burden has shifted to the respondent to prove
that complainant was totally compensated for actual services rendered. (Emphasis supplied)
19 

WHEREFORE, the petition is DENIED for lack merit.

SO ORDERED. Puno, (Chairman), Callejo, Sr., Tinga, and Chico-Nazario, JJ., concur.

Republic of the Philippines

SUPREME COURT

SECOND DIVISION
G.R. No. 155207. April 29, 2005

WILHELMINA S. OROZCO, Petitioners,
vs.
THE FIFTH DIVISION OF THE HONORABLE COURT OF APPEALS, PHILIPPINE DAILY INQUIRER, AND
LETICIA JIMENEZ MAGSANOC, Respondents.

RESOLUTION

TINGA, J.:

Ostensibly, the question raised in this present petition is of general interest to students of law¾whether a
newspaper columnist is an employee of the newspaper which publishes the columns. However, for failure to file
the appeal bond required by law, the Court is impelled to defer the settlement of the above issue until the
jurisdictional requirement has been duly complied with.

This Petition for Review under Rule 45 of the Rules of Court assails the Resolution of the Court of Appeals
1 

Fifth Division denying the Motion for Reconsideration filed by Wilhelmina Orozco (Orozco) and the Decision of2 

the same division in CA-G.R. SP No. 50970, the dispositive portion of which provides:

WHEREFORE, based on the foregoing, the petition is hereby GRANTED. The assailed decision of the public
respondent NLRC affirming the decision of the Labor Arbiter that private respondent Wilhelmina Orozco is an
employee of petitioner PDI is hereby SET ASIDE. Private respondent Orozco’s complaint is hereby
DISMISSED for lack of merit.

SO ORDERED. 3

The above ruling of the Court of Appeals reversed the Decision of the National Labor Relations Commission
4 

(NLRC) which affirmed the Decision of the Labor Arbiter, the decretal portion of which stated:
5  6 

WHEREFORE, judgment is hereby rendered, finding complainant to be an employee of respondent company;

ordering respondent company to reinstate her to her former or equivalent position, with backwages.

Respondent company is also ordered to pay her 13th month pay and service incentive leave pay.

Other claims are hereby dismissed for lack of merit.

SO ORDERED. 7

This case arose out of the complaint filed by Orozco against private respondents Philippine Daily Inquirer (PDI)
and Leticia Jimenez-Magsanoc (Magsanoc), the editor-in-chief of the PDI at that time, for illegal dismissal,
underpayment, non-payment of allowance, separation pay, retirement pay, service incentive leave pay, 13th
month pay, moral and exemplary damages, discrimination in pay and for attorney’s fees with the Arbitration
8 

Branch of the NLRC on 1 June 1993. 9

Based on the records of this case, Orozco was engaged as a columnist by PDI on 8 March 1990. She penned
the column "Feminist Reflections" which appeared in the Lifestyle Section under the editorship of Lolita T.
Logarta.10

Orozco worked by submitting weekly columns with a per article wage of Two Hundred Fifty Pesos (₱250.00)
which was later increased to Three hundred Pesos (₱300.00). 11
In June 1991, Magsanoc as editor-in-chief of PDI discussed how to improve the Lifestyle section of the
newspaper with the Lifestyle editor. They agreed to cut down the number of columnists and for this reason, PDI
decided to drop or terminate Orozco’s column in November 1992. 12

Orozco’s column thus appeared in PDI for the last time on 7 November 1992. Upon inquiry at the office of
Magsanoc as to why her column was stopped, the secretary told Orozco that it was Eugenia Apostol (Apostol),
the chairperson of PDI, who had decided to stop her column. 13

Apostol was out of the country at that time so Orozco waited until February 1993 to talk to her. In a telephone
conversation with Orozco, Apostol stated that she had been told by Magsanoc that there were too many
columnists in the Lifestyle Section.14

Aggrieved at the stoppage of her column, Orozco filed the instant case against private respondents before the
NLRC. The PDI raised as primary defense the claim that Orozco was not an employee of the newspaper.
However, in a Decision dated 29 October 1993, Labor Arbiter Arthur L. Amansec ruled that Orozco had been
illegally dismissed, after concluding that Orozco had indeed been an employee of the PDI.

The PDI, through counsel, received a copy of the Labor Arbiter’s Decision on 16 December 1993. It timely filed
15 

a Notice and Memorandum dated 24 December 1993, but it did not lodge a cash or surety bond in the amount
equivalent to the monetary award in the judgment appealed from. PDI adverted to such failure on its part before
the NLRC but justified the same on the ground that the Decision of the Labor Arbiter did not fix any amount but
merely stated that Orozco was entitled to backwages.

The NLRC dismissed the appeal in its Decision dated 23 August 1994. In this Decision, it made note of the
failure of PDI to perfect the appeal by filing the cash or surety bond. Nonetheless, the NLRC ventured to delve
on the merits, and thereupon, affirmed the finding of the Labor Arbiter that Orozco was an employee of PDI.

Private respondents elevated the case to the Supreme Court by way of the special civil action of certiorari.
Pursuant to the ruling in St. Martin Funeral Homes v. NLRC, this Court referred the case to the Court of
16 

Appeals.

On 11 July 2002, the Court of Appeals reversed the decision of the NLRC by holding that Orozco is not an
employee of PDI. The reversal was grounded on factual premises, the appellate court concluding that the
NLRC had misappreciated the facts and rendered a ruling wanting in substantial evidence. It thereby dismissed
Orozco’s complaint for lack of merit. The Court of Appeals likewise dismissed Orozco’s motion for
reconsideration on 11 September 2002. Hence, this petition.

In her Memorandum, Orozco posits that the Court of Appeals should have dismissed outright the private
respondent’s petition for certiorari for their failure to file a cash bond or a surety bond as provided for in Article
223 of the Labor Code.

In support of the argument, Orozco contends that a grievous error tantamount to grave abuse of discretion was
committed by the Court of Appeals when it failed to appreciate the observation of the NLRC that private
respondents did not perfect their appeal as they did not deposit on time any cash or surety bond in compliance
with the provision of Art. 223 of the Labor Code when they filed an appeal of the Labor Arbiter’s decision at the
NLRC. Orozco argues that the posting of the cash or surety bond is mandatory and must be made by the
employer within the reglementary period of ten (10) days from receipt of the Labor Arbiter’s decision so as to
perfect his appeal. Failing to do so, the employer loses the right to appeal, and the Labor Arbiter’s decision
becomes final and executory, regardless of whether or not the NLRC declares it so, by operation of law. 17

The NLRC in its decision concluded that it had no jurisdiction over PDI’s appeal but proceeded nonetheless to
discuss the merits of the case. On the other hand, the Court of Appeals made no mention at all of the
jurisdictional defect, whether in its recital of facts or discussion of the arguments.
The novelty of the argument on the merits aside, it is essential not to lose sight of the jurisdictional issue, as it
determines whether or not an appeal had indeed been perfected.

The provisions of the Labor Code are quite clear cut on the matter. The relevant portion of Article 223 states:

ART. 223. Appeal. - Decisions, awards or orders of the Labor Arbiter are final and executory unless appealed
to the Commission by any or both parties within ten (10) calendar days from receipt of such decisions, awards,
or orders. . .

In case of a judgment involving a monetary award, an appeal by the employer may be perfected only upon
the posting of a cash or surety bond issued by a reputable bonding company duly accredited by the
Commission in the amount equivalent to the monetary award in the judgment appealed from. (emphasis
supplied)

By explicit provision of law, an appeal is perfected only upon the posting of a cash or surety bond. The reason
behind the imposition of this requirement is not difficult to divine. As the Court said in  Viron Garments Mftg.,
Co., Inc. v. NLRC: 18

The requirement that the employer post a cash or surety bond to perfect its/his appeal is apparently intended to
assure the workers that if they prevail in the case, they will receive the money judgment in their favor upon the
dismissal of the employer's appeal. It was intended to discourage employers from using an appeal to delay, or
even evade, their obligation to satisfy their employees' just and lawful claims. 19

But while the posting of a cash or surety bond is jurisdictional and is a condition sine qua non to the perfection
of an appeal, there is a plethora of jurisprudence recognizing exceptional instances wherein the Court relaxed
the bond requirement as a condition for posting the appeal.

In Olacao v. NLRC for example, the NLRC had discovered that the separation pay awarded by the Labor
20 

Arbiter had already been paid by the employer. Since a modification of the Labor Arbiter’s Decision was the
only way to forestall the grant of separation pay twice, the NLRC allowed the appeal perfected only on the
twelfth (12th) day. In Cosico, Jr. v. NLRC, the employer timely posted the bond based on the monetary award
21  22 

for back wages and thirteenth month pay, but excluding the exorbitant award for moral and exemplary
damages. The Court ruled that there was substantial compliance, owing to the fact that the NLRC had since
excluded the award of damages from the computation of the surety bond. And in Star Angel Handicraft v.
23 

NLRC, the Court noted that a motion for reduction of the appeal bond had been filed within the reglementary
24 

period, and that the appeal should not be deemed perfected until the NLRC has acted on the motion and the
appellant has filed the bond as fixed by the NLRC. 25

In YBL v. NLRC, the appeal was interposed by the employers on 11 September 1989, or only six (6) days from
26 

the effectivity of the Interim Rules on Appeals which incorporated for the first time the appeal bond requirement
imposed by Republic Act No. 6715, an amendatory law to the Labor Code. The Court therein considered the
apparent fact that neither the counsel for the employer nor that for the employee was already aware of the then
new requirement requiring the posting of a bond on appeal. The same justification was cited with approval by
27 

the Court in Blancaflor v. NLRC, and the same circumstance is likewise apparent in Rada v. NLRC.
28  29

In the case of Taberrah v. NLRC, the Court made note of the fact that the assailed decision of the Labor
30 

Arbiter concerned did not contain a computation of the monetary award due the employees, a circumstance
which is likewise present in this case. In said case, the Court stated,

As a rule, compliance with the requirements for the perfection of an appeal within the reglamentary period is
mandatory and jurisdictional. However, in National Federation of Labor Unions v. Ladrido as well as in several
other cases, this Court relaxed the requirement of the posting of an appeal bond within the reglementary period
as a condition for perfecting the appeal. This is in line with the principle that substantial justice is better served
by allowing the appeal to be resolved on the merits rather than dismissing it based on a technicality. 31
The judgment of the Labor Arbiter in this case merely stated that petitioner was entitled to backwages, 13th
month pay and service incentive leave pay without however including a computation of the alleged amounts. As
the private respondents asserted in their motion for reconsideration anent the NLRC decision:

III. NO BOND WAS FILED BECAUSE OF THE VAGUENESS OF THE AWARD

The award as contained in the appealed 29 October 1993 decision did not state the exact amount to be
awarded. In particular, while it may be assumed, as stated in the decision subject of this motion, the award be
based on the ₱300.00 per column/article basis, this is not clear in the decision which likewise mentioned an
award for thirteenth (13th) month pay and service incentive leave pay. Noteworthy is the fact that the
complainant, not being an employee, was not being paid a fixed salary. Hence, herein respondents-appellants
requested in their memorandum on appeal that the Commission fixes (sic) the amount of the bond , if it finds the
same necessary in exceptional cases like the present case, to wit:

"xxx Respondents-appellants however manifest that they are able and willing to post a bond that this
Commission may fix if the latter finds it necessary." (Notice and Memorandum on Appeal dated 24 December
1993, p. 7). (Emphasis in the original)
32 

In the case of NFLU v. Ladrido III, this Court postulated that "private respondents cannot be expected to post
33 

such appeal bond equivalent to the amount of the monetary award when the amount thereof was not included
in the decision of the labor arbiter." The computation of the amount awarded to petitioner not having been
34 

clearly stated in the decision of the labor arbiter, private respondents had no basis for determining the amount
of the bond to be posted.

Thus, while the requirements for perfecting an appeal must be strictly followed as they are considered
indispensable interdictions against needless delays and for orderly discharge of judicial business, the law does
35 

admit of exceptions when warranted by the circumstances. Technicality should not be allowed to stand in the
way of equitably and completely resolving the rights and obligations of the parties. But while this Court may
36 

relax the observance of reglementary periods and technical rules to achieve substantial justice, it is not
37 

prepared to give due course to this petition and make a pronouncement on the weighty issue obtaining in this
case until the law has been duly complied with and the requisite appeal bond duly paid by private respondents.

WHEREFORE, without giving due course to the petition, the Labor Arbiter is hereby ordered to clarify the
amount of the award due the petitioner. Private respondents are ordered to post the requisite bond in
accordance with Article 223 of the Labor Code, whereupon, the petition will be given due course. No
pronouncement as to costs.

SO ORDERED.

Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Chico-Nazario, JJ., concur.

 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 178827               March 4, 2009

JEROMIE D. ESCASINAS and EVAN RIGOR SINGCO, Petitioners,

vs.
SHANGRI-LA'S MACTAN ISLAND RESORT and DR. JESSICA J.R. PEPITO, Respondents.

DECISION

CARPIO MORALES, J.:

Registered nurses Jeromie D. Escasinas and Evan Rigor Singco (petitioners) were engaged in 1999 and 1996,
respectively, by Dr. Jessica Joyce R. Pepito (respondent doctor) to work in her clinic at respondent Shangri-la’s
Mactan Island Resort (Shangri-la) in Cebu of which she was a retained physician.

In late 2002, petitioners filed with the National Labor Relations Commission (NLRC) Regional Arbitration
Branch No. VII (NLRC-RAB No. VII) a complaint 1 for regularization, underpayment of wages, non-payment of
holiday pay, night shift differential and 13th month pay differential against respondents, claiming that they are
regular employees of Shangri-la. The case was docketed as RAB Case No. 07-11-2089-02.

Shangri-la claimed, however, that petitioners were not its employees but of respondent doctor whom it retained
via Memorandum of Agreement (MOA)2 pursuant to Article 157 of the Labor Code, as amended.

Respondent doctor for her part claimed that petitioners were already working for the previous retained
physicians of Shangri-la before she was retained by Shangri-la; and that she maintained petitioners’ services
upon their request.

By Decision3 of May 6, 2003, Labor Arbiter Ernesto F. Carreon declared petitioners to be regular employees of
Shangri-la. The Arbiter thus ordered Shangri-la to grant them the wages and benefits due them as regular
employees from the time their services were engaged.

In finding petitioners to be regular employees of Shangri-la, the Arbiter noted that they usually perform work
which is necessary and desirable to Shangri-la’s business; that they observe clinic hours and render services
only to Shangri-la’s guests and employees; that payment for their salaries were recommended to Shangri-la’s
Human Resource Department (HRD); that respondent doctor was Shangri-la’s "in-house" physician, hence,
also an employee; and that the MOA between Shangri-la and respondent doctor was an "insidious mechanism
in order to circumvent [the doctor’s] tenurial security and that of the employees under her."

Shangri-la and respondent doctor appealed to the NLRC. Petitioners appealed too, but only with respect to the
non-award to them of some of the benefits they were claiming.

By Decision4 dated March 31, 2005, the NLRC granted Shangri-la’s and respondent doctor’s appeal and
dismissed petitioners’ complaint for lack of merit, it finding that no employer-employee relationship exists
between petitioner and Shangri-la. In so deciding, the NLRC held that the Arbiter erred in interpreting Article
157 in relation to Article 280 of the Labor Code, as what is required under Article 157 is that the employer
should provide the services of medical personnel to its employees, but nowhere in said article is a provision
that nurses are required to be employed; that contrary to the finding of the Arbiter, even if Article 280 states that
if a worker performs work usually necessary or desirable in the business of the employer, he cannot be
automatically deemed a regular employee; and that the MOA amply shows that respondent doctor was in fact
engaged by Shangri-la on a retainer basis, under which she could hire her own nurses and other clinic
personnel.

Brushing aside petitioners’ contention that since their application for employment was addressed to Shangri-la,
it was really Shangri-la which hired them and not respondent doctor, the NLRC noted that the applications for
employment were made by persons who are not parties to the case and were not shown to have been actually
hired by Shangri-la.

On the issue of payment of wages, the NLRC held that the fact that, for some months, payment of petitioners’
wages were recommended by Shangri-la’s HRD did not prove that it was Shangri-la which pays their wages. It
thus credited respondent doctor’s explanation that the recommendations for payment were based on the
billings she prepared for salaries of additional nurses during Shangri-la’s peak months of operation, in
accordance with the retainership agreement, the guests’ payments for medical services having been paid
directly to Shanrgi-la.

Petitioners thereupon brought the case to the Court of Appeals which, by Decision 5 of May 22, 2007, affirmed
the NLRC Decision that no employer-employee relationship exists between Shangri-la and petitioners. The
appellate court concluded that all aspects of the employment of petitioners being under the supervision and
control of respondent doctor and since Shangri-la is not principally engaged in the business of providing
medical or healthcare services, petitioners could not be regarded as regular employees of Shangri-la.

Petitioners’ motion for reconsideration having been denied by Resolution 6 of July 10, 2007, they interposed the
present recourse.

Petitioners insist that under Article 157 of the Labor Code, Shangri-la is required to hire a full-time registered
nurse, apart from a physician, hence, their engagement should be deemed as regular employment, the
provisions of the MOA notwithstanding; and that the MOA is contrary to public policy as it circumvents tenurial
security and, therefore, should be struck down as being void ab initio. At most, they argue, the MOA is a mere
job contract.

And petitioners maintain that respondent doctor is a labor-only contractor for she has no license or business
permit and no business name registration, which is contrary to the requirements under Sec. 19 and 20 of the
Implementing Rules and Regulations of the Labor Code on sub-contracting.

Petitioners add that respondent doctor cannot be a legitimate independent contractor, lacking as she does in
substantial capital, the clinic having been set-up and already operational when she took over as retained
physician; that respondent doctor has no control over how the clinic is being run, as shown by the different
orders issued by officers of Shangri-la forbidding her from receiving cash payments and several purchase
orders for medicines and supplies which were coursed thru Shangri-la’s Purchasing Manager, circumstances
indubitably showing that she is not an independent contractor but a mere agent of Shangri-la.

In its Comment,7 Shangri-la questions the Special Powers of Attorneys (SPAs) appended to the petition for
being inadequate. On the merits, it prays for the disallowance of the petition, contending that it raises factual
issues, such as the validity of the MOA, which were never raised during the proceedings before the Arbiter,
albeit passed upon by him in his Decision; that Article 157 of the Labor Code does not make it mandatory for a
covered establishment to employ health personnel; that the services of nurses is not germane nor
indispensable to its operations; and that respondent doctor is a legitimate individual independent contractor
who has the power to hire, fire and supervise the work of the nurses under her.

The resolution of the case hinges, in the main, on the correct interpretation of Art. 157 vis a vis Art. 280 and the
provisions on permissible job contracting of the Labor Code, as amended.

The Court holds that, contrary to petitioners’ postulation, Art. 157 does not require the engagement of full-
time nurses as regular employees of a company employing not less than 50 workers. Thus, the Article
provides:
ART. 157. Emergency medical and dental services. – It shall be the duty of every employer to furnish his
employees in any locality with free medical and dental attendance and facilities consisting of:

(a) The services of a full-time registered nurse when the number of employees exceeds fifty (50) but
not more than two hundred (200) except when the employer does not maintain hazardous workplaces,
in which case the services of a graduate first-aider shall be provided for the protection of the workers,
where no registered nurse is available. The Secretary of Labor shall provide by appropriate regulations
the services that shall be required where the number of employees does not exceed fifty (50) and shall
determine by appropriate order hazardous workplaces for purposes of this Article;

(b) The services of a full-time registered nurse, a part-time physician and dentist, and an emergency
clinic, when the number of employees exceeds two hundred (200) but not more than three hundred
(300); and

(c) The services of a full-time physician, dentist and full-time registered nurse as well as a dental clinic,
and an infirmary or emergency hospital with one bed capacity for every one hundred (100) employees
when the number of employees exceeds three hundred (300).

In cases of hazardous workplaces, no employer shall engage the services of a physician or dentist who cannot
stay in the premises of the establishment for at least two (2) hours, in the case of those engaged on part-time
basis, and not less than eight (8) hours in the case of those employed on full-time basis. Where the undertaking
is nonhazardous in nature, the physician and dentist may be engaged on retained basis, subject to such
regulations as the Secretary of Labor may prescribe to insure immediate availability of medical and dental
treatment and attendance in case of emergency. (Emphasis and underscoring supplied)

Under the foregoing provision, Shangri-la, which employs more than 200 workers, is mandated to "furnish" its
employees with the services of a full-time registered nurse, a part-time physician and dentist, and an
emergency clinic which means that it should provide or make available such medical and allied services to its
employees, not necessarily to hire or employ a service provider. As held in Philippine Global Communications
vs. De Vera:8

x x x while it is true that the provision requires employers to engage the services of medical practitioners in
certain establishments depending on the number of their employees, nothing is there in the law which says that
medical practitioners so engaged be actually hired as employees, adding that the law, as written, only requires
the employer "to retain", not employ, a part-time physician who needed to stay in the premises of the non-
hazardous workplace for two (2) hours. (Emphasis and underscoring supplied) 1avvphi1

The term "full-time" in Art. 157 cannot be construed as referring to the type of employment of the person
engaged to provide the services, for Article 157 must not be read alongside Art. 280 9 in order to vest employer-
employee relationship on the employer and the person so engaged. So De Vera teaches:

x x x For, we take it that any agreement may provide that one party shall render services for and in behalf of
another, no matter how necessary for the latter’s business, even without being hired as an employee. This
set-up is precisely true in the case of an independent contractorship as well as in an agency agreement.
Indeed, Article 280 of the Labor Code, quoted by the appellate court, is not the yardstick for determining the
existence of an employment relationship. As it is, the provision merely distinguishes between two (2) kinds of
employees, i.e., regular and casual. x x x10 (Emphasis and underscoring supplied)

The phrase "services of a full-time registered nurse" should thus be taken to refer to the kind of services that
the nurse will render in the company’s premises and to its employees, not the manner of his engagement.

As to whether respondent doctor can be considered a legitimate independent contractor, the pertinent sections
of DOLE Department Order No. 10, series of 1997, illuminate:
Sec. 8. Job contracting. – There is job contracting permissible under the Code if the following conditions are
met:

(1) The contractor carries on an independent business and undertakes the contract work on his own
account under his own responsibility according to his own manner and method, free from the control
and direction of his employer or principal in all matters connected with the performance of the work
except as to the results thereof; and

(2) The contractor has substantial capital or investment in the form of tools, equipment, machineries,
work premises, and other materials which are necessary in the conduct of his business.

Sec. 9. Labor-only contracting. – (a) Any person who undertakes to supply workers to an employer shall be
deemed to be engaged in labor-only contracting where such person:

(1) Does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises and other materials; and

(2) The workers recruited and placed by such persons are performing activities which
are directly related to the principal business or operations of the employer in which
workers are habitually employed.

(b) Labor-only contracting as defined herein is hereby prohibited and the person acting as contractor
shall be considered merely as an agent or intermediary of the employer who shall be responsible to the
workers in the same manner and extent as if the latter were directly employed by him.

(c) For cases not falling under this Article, the Secretary of Labor shall determine through appropriate
orders whether or not the contracting out of labor is permissible in the light of the circumstances of each
case and after considering the operating needs of the employer and the rights of the workers involved.
In such case, he may prescribe conditions and restrictions to insure the protection and welfare of the
workers. (Emphasis supplied)

The existence of an independent and permissible contractor relationship is generally established by

considering the following determinants: whether the contractor is carrying on an independent business; the
nature and extent of the work; the skill required; the term and duration of the relationship; the right to assign the
performance of a specified piece of work; the control and supervision of the work to another; the employer's
power with respect to the hiring, firing and payment of the contractor's workers; the control of the premises; the
duty to supply the premises, tools, appliances, materials and labor; and the mode, manner and terms of
payment.11

On the other hand, existence of an employer- employee relationship is established by the presence of the
following determinants: (1) the selection and engagement of the workers; (2) power of dismissal; (3) the
payment of wages by whatever means; and (4) the power to control the worker's conduct, with the latter
assuming primacy in the overall consideration.12

Against the above-listed determinants, the Court holds that respondent doctor is a legitimate independent
contractor. That Shangri-la provides the clinic premises and medical supplies for use of its employees and
guests does not necessarily prove that respondent doctor lacks substantial capital and investment. Besides,
the maintenance of a clinic and provision of medical services to its employees is required under Art. 157, which
are not directly related to Shangri-la’s principal business – operation of hotels and restaurants.

As to payment of wages, respondent doctor is the one who underwrites the following: salaries, SSS
contributions and other benefits of the staff 13; group life, group personal accident insurance and life/death
insurance14 for the staff with minimum benefit payable at 12 times the employee’s last drawn salary, as well as
value added taxes and withholding taxes, sourced from her ₱60,000.00 monthly retainer fee and 70% share of
the service charges from Shangri-la’s guests who avail of the clinic services. It is unlikely that respondent
doctor would report petitioners as workers, pay their SSS premium as well as their wages if they were not
indeed her employees.15

With respect to the supervision and control of the nurses and clinic staff, it is not disputed that a document,
"Clinic Policies and Employee Manual" 16 claimed to have been prepared by respondent doctor exists, to which
petitioners gave their conformity 17 and in which they acknowledged their co-terminus employment status. It is
thus presumed that said document, and not the employee manual being followed by Shangri-la’s regular
workers, governs how they perform their respective tasks and responsibilities.

Contrary to petitioners’ contention, the various office directives issued by Shangri-la’s officers do not imply that
it is Shangri-la’s management and not respondent doctor who exercises control over them or that Shangri-la
has control over how the doctor and the nurses perform their work. The letter 18 addressed to respondent doctor
dated February 7, 2003 from a certain Tata L. Reyes giving instructions regarding the replenishment of
emergency kits is, at most, administrative in nature, related as it is to safety matters; while the letter 19 dated
May 17, 2004 from Shangri-la’s Assistant Financial Controller, Lotlot Dagat, forbidding the clinic from receiving
cash payments from the resort’s guests is a matter of financial policy in order to ensure proper sharing of the
proceeds, considering that Shangri-la and respondent doctor share in the guests’ payments for medical
services rendered. In fine, as Shangri-la does not control how the work should be performed by petitioners, it is
not petitioners’ employer.

WHEREFORE, the petition is hereby DENIED. The Decision of the Court of Appeals dated May 22, 2007 and
the Resolution dated July 10, 2007 are AFFIRMED.

SO ORDERED.

CONCHITA CARPIO MORALES

Associate Justice

WE CONCUR:

LEONARDO A. QUISUMBING
ANTONIO EDUARDO B. NACHURA*
Associate Justice
Associate Justice
Chairperson

ARTURO D. BRION DIOSDADO M. PERALTA**

Associate Justice Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Court’s Division.

LEONARDO A. QUISUMBING
Associate Justice
Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson’s Attestation, I certify that
the conclusions in the above decision had been reached in consultation before the case was assigned to the
writer of the opinion of the Court’s Division.
REYNATO S. PUNO
Chief Justice

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 94951             April 22, 1991

APEX MINING COMPANY, INC., petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and SINCLITICA CANDIDO, respondents.

Bernabe B. Alabastro for petitioner.

Angel Fernandez for private respondent.

GANCAYCO, J.:

Is the househelper in the staff houses of an industrial company a domestic helper or a regular employee of the
said firm? This is the novel issue raised in this petition.

Private respondent Sinclita Candida was employed by petitioner Apex Mining Company, Inc. on May 18, 1973
to perform laundry services at its staff house located at Masara, Maco, Davao del Norte. In the beginning, she
was paid on a piece rate basis. However, on January 17, 1982, she was paid on a monthly basis at P250.00 a
month which was ultimately increased to P575.00 a month.

On December 18, 1987, while she was attending to her assigned task and she was hanging her laundry, she
accidentally slipped and hit her back on a stone. She reported the accident to her immediate supervisor Mila de
la Rosa and to the personnel officer, Florendo D. Asirit. As a result of the accident she was not able to continue
with her work. She was permitted to go on leave for medication. De la Rosa offered her the amount of P
2,000.00 which was eventually increased to P5,000.00 to persuade her to quit her job, but she refused the offer
and preferred to return to work. Petitioner did not allow her to return to work and dismissed her on February 4,
1988.

On March 11, 1988, private respondent filed a request for assistance with the Department of Labor and
Employment. After the parties submitted their position papers as required by the labor arbiter assigned to the
case on August 24, 1988 the latter rendered a decision, the dispositive part of which reads as follows:

WHEREFORE, Conformably With The Foregoing, judgment is hereby rendered ordering the
respondent, Apex Mining Company, Inc., Masara, Davao del Norte, to pay the complainant, to wit:

1 Salary

Differential –– P16,289.20

2. Emergency Living
 Allowance –– 12,430.00

3. 13th Month Pay

Differential –– 1,322.32

4. Separation Pay

(One-month for

every year of

service [1973-19881) –– 25,119.30

or in the total of FIFTY FIVE THOUSAND ONE HUNDRED SIXTY ONE PESOS AND 42/100
(P55,161.42).

SO ORDERED. 1

Not satisfied therewith, petitioner appealed to the public respondent National Labor Relations Commission
(NLRC), wherein in due course a decision was rendered by the Fifth Division thereof on July 20, 1989
dismissing the appeal for lack of merit and affirming the appealed decision. A motion for reconsideration thereof
was denied in a resolution of the NLRC dated June 29, 1990.

Hence, the herein petition for review by certiorari, which appopriately should be a special civil action
for certiorari, and which in the interest of justice, is hereby treated as such.  The main thrust of the petition is
2

that private respondent should be treated as a mere househelper or domestic servant and not as a regular
employee of petitioner.

The petition is devoid of merit.

Under Rule XIII, Section l(b), Book 3 of the Labor Code, as amended, the terms "househelper" or "domestic
servant" are defined as follows:

The term "househelper" as used herein is synonymous to the term "domestic servant" and shall refer to
any person, whether male or female, who renders services in and about the employer's home and
which services are usually necessary or desirable for the maintenance and enjoyment thereof, and
ministers exclusively to the personal comfort and enjoyment of the employer's family. 3

The foregoing definition clearly contemplates such househelper or domestic servant who is employed in the
employer's home to minister exclusively to the personal comfort and enjoyment of the employer's family. Such
definition covers family drivers, domestic servants, laundry women, yayas, gardeners, houseboys and other
similar househelps.

The definition cannot be interpreted to include househelp or laundrywomen working in staffhouses of a

company, like petitioner who attends to the needs of the company's guest and other persons availing of said
facilities. By the same token, it cannot be considered to extend to then driver, houseboy, or gardener
exclusively working in the company, the staffhouses and its premises. They may not be considered as within
the meaning of a "househelper" or "domestic servant" as above-defined by law.

The criteria is the personal comfort and enjoyment of the family of the employer in the home of said employer.
While it may be true that the nature of the work of a househelper, domestic servant or laundrywoman in a home
or in a company staffhouse may be similar in nature, the difference in their circumstances is that in the former
instance they are actually serving the family while in the latter case, whether it is a corporation or a single
proprietorship engaged in business or industry or any other agricultural or similar pursuit, service is being
rendered in the staffhouses or within the premises of the business of the employer. In such instance, they are
employees of the company or employer in the business concerned entitled to the privileges of a regular
employee.

Petitioner contends that it is only when the househelper or domestic servant is assigned to certain aspects of
the business of the employer that such househelper or domestic servant may be considered as such as
employee. The Court finds no merit in making any such distinction. The mere fact that the househelper or
domestic servant is working within the premises of the business of the employer and in relation to or in
connection with its business, as in its staffhouses for its guest or even for its officers and employees, warrants
the conclusion that such househelper or domestic servant is and should be considered as a regular employee
of the employer and not as a mere family househelper or domestic servant as contemplated in Rule XIII,
Section l(b), Book 3 of the Labor Code, as amended.

Petitioner denies having illegally dismissed private respondent and maintains that respondent abandoned her
work.  This argument notwithstanding, there is enough evidence to show that because of an accident which
1âwphi1

took place while private respondent was performing her laundry services, she was not able to work and was
ultimately separated from the service. She is, therefore, entitled to appropriate relief as a regular employee of
petitioner. Inasmuch as private respondent appears not to be interested in returning to her work for valid
reasons, the payment of separation pay to her is in order.

WHEREFORE, the petition is DISMISSED and the appealed decision and resolution of public respondent
NLRC are hereby AFFIRMED. No pronouncement as to costs.

SO ORDERED.

Narvasa, Cruz, Griño-Aquino and Medialdea, JJ., concur.