WAGES

GAA VS COURT OF APPEALS,

140 SCRA 304

FACTS: Europhil Industries filed an action for damages against Gaa, a building administrator, for having perpetrated
certain acts that Europhil Industries considered a trespass upon its rights, namely, cutting of its electricity, and removing
its name from the building directory and gate passes of its officials and employees. The court rendered judgment against
Gaa and a writ of garnishment was issued pursuant thereto, garnishing Gaa’s salary, commission and/or remuneration.

Thereafter, Gaa filed a motion to lift said garnishment on the ground that her "salaries, commission and/or remuneration"
are exempted from execution under Article 1708 of the New Civil Code. Said Motion was denied as well as its MR.

On a petition for certiorari before the CA, the latter dismissed the petition and held that petitioner is not a mere laborer
as contemplated under Article 1708 as the term laborer does not apply to one who holds a managerial or supervisory
position like that of petitioner, but only to those "laborers occupying the lower strata.

ISSUE: Whether or not salaries may be garnished. [YES]

HELD: Yes. Article 1708 of the Civil Code reads:

The laborer’s wage shall not be subject to execution or attachment, except for debts incurred for food, shelter, clothing

and medical attendance.

Gaa’s functions as El Grande Hotel’s manager include “responsible for planning, directing, controlling, and coordinating

the activities of all housekeeping personnel; ensure the cleanliness, maintenance and orderliness of all guest rooms,

function rooms, public areas, and the surroundings of the hotel.” Gaa is a responsibly placed employee and not a mere

laborer. As such, Gaa is not receiving a laborer’s wage. She is receiving salary.

In its broadest sense, the word “laborer” includes everyone who performs any kind of mental or physical labor, but as

commonly and customarily used and understood, it only applies to one engaged in some form of manual or physical labor.

That is the sense in which the courts generally apply the term as applied in exemption acts, since persons of that class

usually look to the reward of a day’s labor for immediate or present support and so are more in need of the exemption than

are other.

Article 1708 used the word “wages” and not “salary” in relation to “laborer” when it declared what are to be exempted

from attachment and execution. The term “wages” as distinguished from “salary,” applies to the compensation for manual

labor, skilled or unskilled, paid at stated times, and measured by the day, week, month, or season, while “salary” denotes a

higher degree of employment, or a superior grade of services, and implies a position of office: by contrast, the term

“wages” indicates considerable pay for a lower and less responsible character of employment, while “salary” is suggestive

of a larger and more important service.

Only wages, according to the law, are exempt from execution. Salaries may be subject to execution.
 ATOK BIG WEDGE MINING CORP. V ATOK BIG WEDGE MUTUAL BENEFIT ASSOCIATION,
91 PHIL 294

FACTS: On 04 September 1950, the Atok-Big Wedge Mutual Benefit Association, a labor union, demanded from the
Atok-Big Wedge Mining Company, among others, an increase of 50 centavos in the daily wage. In the course of
conciliatory measures, some of the demands were granted and the others, including the daily wage increase, rejected. The
Court fixed, effective from the date of the demand, the minimum wage at 2.65 pesos with rice ration and 3.20 without rice
ration, denying deduction from the minimum wage, the value of housing facilities furnished by Atok to its employees and
efficiency bonus. Respondent subsequently presented an urgent petition for authority to cease its operations and lay-off
employees due to heavy losses, increased taxes, high cost of materials, negligible quantity of ore deposits, and the
enforcement of the Minimum Wage Law, the continued operation of the company would lead to its immediate bankruptcy
and collapse.

Instead of hearing the petition, the Court convened the parties for voluntary conciliation and mediation and thereafter,
the parties reached an agreement valuing the facilities that will form part of the wages and to be charged in full or
partially by Respondent against laborer or employee in the exigencies of operation. The labor union argues that to allow
the deduction of facilities appearing in the Agreement would be contrary to the mandate of Section 19 of the Minimum
Wage Law, which states that an employer is not justified in reducing supplements furnished on the date of enactment.

ISSUE: Whether or not facilities come within the term “supplements”. [NO]

RULING:: NO. The meaning of the term "supplements" has been fixed by the Code of Rules and Regulations promulgated
by the Wage Administration Office to implement the Minimum Wage Law (Ch. 1, [c]), as: extra renumeration or benefits
received by wage earners from their employees and include but are not restricted to pay for vacation and holidays not
worked; paid sick leave or maternity leave; overtime rate in excess of what is required by law; sick, pension, retirement,
and death benefits; profit-sharing; family allowances; Christmas, war risk and cost-of-living bonuses; or other bonuses
other than those paid as a reward for extra output or time spent on the job.

"Supplements", therefore, constitute extra renumeration 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 the 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. It is thus clear that the facilities mentioned in the agreement of
October 29, 1952 do not come within the term "supplements" as used in Art. 19 of the Minimum Wage Law.
 MABEZA V NLRC.
G.R. NO. 118506, APRIL 18, 1997

FACTS: 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.

Mabeza 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.

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.

She thereafter reluctantly filed a leave of absence from her job which was denied by management. When she attempted to
return to work on May 10, 1991, the hotel’s cashier, Margarita Choy, informed her that she should not report to work and,
instead, continue with her unofficial leave of absence. Consequently, on May 13, 1991, three days after her attempt to
return to work, petitioner filed a complaint for illegal dismissal before the Arbitration Branch of the National Labor
Relations Commission — CAR Baguio City. In addition to her complaint for illegal dismissal, she alleged underpayment
of wages, non-payment of holiday pay, service incentive leave pay, 13th month pay, night differential and other benefits.

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 money claims for underpayment and other benefits as these were paid in
the form of facilities to petitioner and the hotel’s other employee.

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.

LA dismissed Mabeza’s complaint on the ground of loss of condifence. NLRC affirmed LA’s decision. Mabeza alleged that
the NLRC 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.

ISSUE: Whether or not Mabeza was underpaid of her wages [YES]

RULING: 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 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.
Requirements:
1. Proof must be shown that such facilities are customarily furnished by the trade.
2. The provision of deductible facilities must be voluntarily accepted in writing by the
employee.
3. Facilities must be charged at fair and reasonable value.
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 employee’s
written authorization; and, he failed to show how he arrived at the valuations.

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.”

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 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.
 OUR HAUS REALTY DEVELOPMENT CORP. V PARIAN,
G.R. NO. 204651, AUG. 6, 2014

FACTS: Respondents were all laborers working for petitioner Our Haus Realty Development Corporation, a company
engaged in the construction business.

Sometime in May 2010, Our Haus experienced financial distress. To alleviate its condition, Our Haus suspended some of
its construction projects and asked the affected workers, including the respondents, to take vacation leaves.

Eventually, respondents were asked to report back to work but instead of doing so, they filed a complaint for
underpayment of their daily wages with the LA. They claimed that except for Tenedoro, their wages were below the
prescribed minimum rates.

Our Haus argued that the respondents’ wages complied with the law’s minimum requirement. In determining the total
amount of the respondents’ daily wages, the petitioner considered the value of the benefits that respondents also enjoy --
their subsidized meals and their free lodging. Our Haus also rejected the respondents’ other monetary claims for lack of
proof that they were entitled to it.

On the other hand, respondents argued that the value of their meals should not be considered in determining their wages’
total amount since the requirements set under Sec. 4 of DOLE Memorandum Circular No. 2 were not complied with. The
respondents pointed out that Our Haus never presented any proof that they agreed in writing to the inclusion of their
meals’ value in their wages. Also, Our Haus failed to prove that the value of the facilities it furnished was fair and
reasonable. Finally, instead of deducting the maximum amount of 70% of the value of the meals, Our Haus actually
withheld its full value.

The LA ruled in favor of Our Haus. He held that if the reasonable values of the board and lodging would be taken into
account, the respondents’ daily wages would meet the minimum wage rate. As to the other benefits, the LA found that the
respondents were not able to substantiate their claims for it.

The NLRC, in turn, reversed the LA’s decision. The NLRC noted that the respondents did not authorize Our Haus in
writing to charge the values of their board and lodging to their wages. Thus, it cannot be credited. The NLRC also ruled
that respondents are entitled 13th month payments and SIL payments. However, it sustained the LA’s ruling that the
respondents were not entitled to overtime pay since the exact dates and times when they rendered overtime work had not
been proven.

Our Haus moved for reconsideration and submitted 5 kasunduans as new evidence to show that the respondents
authorized Our Haus in writing to charge the values of their meals and lodging to their wages. The NLRC denied Our
Haus’ motion, thus it appealed to the CA.

In its petition, Our Haus made a distinction between deduction and charging. According to them, a written authorization
is only necessary if the facility’s value will be deducted and will not be needed if it will merely be charged or included in
the computation of wages. Our Haus claimed that it did not actually deduct the values of the meals and housing benefits.
It only considered these in computing the total amount of wages paid to the respondents for purposes of compliance with
the minimum wage law. Hence, the written authorization requirement should not apply.

The CA affirmed in toto the NLRC’s rulings. It found no real distinction between deduction and charging and ruled that
the legal requirements before any deduction or charging can be made, apply to both. Our Haus, however, failed to prove
that it complied with any of the requirements laid down in Mabeza v. National Labor Relations Commission. Accordingly,
it cannot consider the values of its meal and housing facilities in the computation of the respondents’ total wages.

ISSUE: Whether or not the facility’s value should be included in the computation of respondent’s wages [Supplements]
RULING: To justify its noncompliance with the requirements for the deductibility of a facility Our Haus made a
substantial dinstinction between deduction and the charging of a facility’s value to the wages. It explained that in
deduction, the amount of the wage would still be lessened by the facility’s value, thus needing the employee’s consent. On
the other hand, in charging, there is no reduction of the employee’s wages since the facility’s value will just be
theoretically added to the wage for purposes of complying with the minimum wage requirement.
Our Haus’ argument is a vain attempt to circumvent the minimum wage law by trying to create a distinction where none
exists.

In reality, deduction and charging both operate to lessen the actual take-home pay of an employee; they are two sides of
the same coin. In both, the employee receives a lessened amount because supposedly, the facility’s value, which is part of
his wage, had already been paid to him in kind. As there is no substantial distinction between the two, the requirements
set by law must apply to both.

These requirements as summarized in Mabeza v. NLRC are the following:

a. proof must be shown that such facilities are customarily furnished by the trade;
b. the provision of deductible facilities must be voluntarily accepted in writing by the employee; and
c. the facilities must be charged at fair and reasonable value.

One of the badges to show that a facility is customarily furnished by the trade is the existence of a company policy or
guideline showing that provisions for a facility were designated as part of the employees’ salaries.

In this case, the records reveal that the board and lodging were given on a per project basis. Our Haus did not show if
these benefits were also provided in its other construction projects, thus negating its claimed customary nature. If Our
Haus really had the practice of freely giving lodging, electricity and water provisions to its employees, then Our Haus
should not deduct its values from the respondents’ wages. Otherwise, this will run contrary to the affiants’ claim that
these benefits were traditionally given free of charge.

Apart from company policy, the employer may also prove compliance with the first requirement by showing the existence
of an industry-wide practice of furnishing the benefits in question among enterprises engaged in the same line of
business. However, Our Haus could not really be expected to prove compliance with the first requirement since the living
accommodation of workers in the construction industry is not simply a matter of business practice they are mandated by
the law itself to ensure the humane working conditions of construction employees despite their constant exposure to
hazardous working environments.

Moreover, the law mandates that the cost of the implementation of the requirements for the construction safety and
health of workers, shall be integrated to the overall project cost. As part of the project cost that construction companies
already charge to their clients, the value of the housing of their workers cannot be charged again to their employees’
salaries. Our Haus cannot pass the burden of the OSH costs of its construction projects to its employees by deducting it as
facilities. This is Our Haus’ obligation under the law.

Lastly, even if a benefit is customarily provided by the trade, it must still pass the purpose test. Under this test, if a benefit
or privilege granted to the employee is clearly for the employer’s convenience, it will not be considered as a facility but a
supplement. Here, careful consideration is given to the nature of the employer’s business in relation to the work
performed by the employee. This test is used to address inequitable situations wherein employers consider a benefit
deductible from the wages even if the factual circumstances show that it clearly redounds to the employers’ greater
advantage.

Under the law, only the value of the facilities may be deducted from the employees’ wages but not the value of
supplements. Facilities include articles or services for the benefit of the employee or his family but exclude tools of the
trade or articles or services primarily for the benefit of the employer or necessary to the conduct of the employer’s
business. The law also prescribes that the computation of wages shall exclude whatever benefits, supplements or
allowances given to employees. Supplements are paid to employees on top of their basic pay and are free of charge. Since
it does not form part of the wage, a supplement’s value may not be included in the determination of whether an employer
complied with the prescribed minimum wage rates.

In the present case, the board and lodging provided by Our Haus cannot be categorized as facilities but as supplements. In
SLL International Cables Specialist v. NLRC, the court distinguished the two terms. It said that the distinction lies not so
much in the kind of benefit or items given, but in the purpose for which it is given. If it is primarily for the employee’s
gain, then the benefit is a facility; if its provision is mainly for the employer’s advantage, then it is a supplement.

Our Haus is engaged in the construction business, a labor-intensive enterprise. The success of its projects is largely a
function of the physical strength, vitality and efficiency of its laborers. Its business will be jeopardized if its workers are
weak, sickly, and lack the required energy to perform strenuous physical activities. Thus, by ensuring that the workers are
adequately and well fed, the employer is actually investing on its business.

Moreover, in the construction business, contractors are usually faced with the problem of meeting target deadlines. More
often than not, work is performed continuously, day and night, in order to finish the project on the designated turn-over
date. Thus, it will be more convenient to the employer if its workers are housed near the construction site to ensure their
ready availability during urgent or emergency circumstances. Also, productivity issues like tardiness and unexpected
absences would be minimized.

Based on these considerations, we conclude that even under the purpose test, the subsidized meals and free lodging
provided by Our Haus are actually supplements. Although they also work to benefit the respondents, an analysis of the
nature of these benefits in relation to Our Haus’ business shows that they were given primarily for Our Haus’ greater
convenience and advantage. If weighed on a scale, the balance tilts more towards Our Haus’ side. Accordingly, their values
cannot be considered in computing the total amount of the respondents’ wages.
 WESLEYAN UNIVERSITY PHILS. V WESLEYAN PHILS. FACULTY & STAFF ASSOCIATION, G.R. NO. 181806,
MARCH 12, 2014

Facts: Petitioner Wesleyan University-Philippines is a non-stock, non-profit educational institution duly organized and
existing under the laws of the Philippines. Respondent Wesleyan University-Philippines Faculty and Staff Association, on
the other hand, is a duly registered labor organizatio acting as the sole and exclusive bargaining agent of all rank-and-file
faculty and staff employees of petitioner.

In December 2003, the parties signed a 5-year CBA, effective June 1, 2003 until May 31, 2008. On August 16, 2005,
petitioner, through its President, Atty. Guillermo T. Maglaya (Atty. Maglaya), issued a Memorandum in which provided
new guidelines relating to vacation and sick leave credits.

The respondents, however, through their president, informed the petitioner’s president that they would not accede to the
unilateral changes made by the petitioner. On February 8, 2006, a Labor Management Committee (LMC) Meeting was held
during which petitioner advised respondent to file a grievance complaint on the implementation of the vacation and sick
leave policy. In the same meeting, petitioner announced its plan of implementing a one-retirement policy, which was
unacceptable to respondent.

Unable to settle their differences at the grievance level, the parties referred the matter to a Voluntary Arbitrator. During
the hearing, respondent submitted affidavits to prove that there is an established practice of giving two retirement
benefits, one from the Private Education Retirement Annuity Association (PERAA) Plan and another from the CBA
Retirement Plan.

Voluntary Arbiter Ruling: The VA held that the new guidelines on the availment of vacation and sick leave credits and
vacation leave commutation are contrary to law. The one-retirement policy is also contrary to law and was revoked and
rescinded.

Court of Appeals: The Aggrieved Party filed an appeal to the CA which was dismissed for being lack of merit,
subsequently, their motion for reconsideration was also denied.

Hence, they filed the case to the SC

Issues:
1. Whether or not the petitioner can unilaterally reduce the benefits received by its employees under the CBA.
2. Whether or not the petitioner can unilaterally make changes to what had already been stipulated to a prior CBA

Ruling:
1. No.
Article 100 of the Labor Code provides for the Non-Diminution Rule. This rule prohibits the employers from eliminating
or reducing the benefits received by their employees. It applies only if the benefit is based on an express policy, a written
contract, or has ripened into a practice. To be considered a practice, it must be consistently and deliberately made by the
employer over a long period of time. However, this rule admits of an exception and that is when the practice is due to
error in the construction or application of a doubtful or difficult question of law. The error, however, must be
corrected immediately after its discovery; otherwise, the rule on Non-Diminution of Benefits would still apply.

In the case at bar, respondent presented substantial evidence in the form of affidavits supporting its claim that there are
two retirement plans. As gleaned from the affidavits, petitioner has been giving two retirement benefits as early as 1997.
Petitioner failed to present any evidence to refute the veracity of said affidavits. Moreover, no evidence was shown to
prove petitioner contention that there is only one retirement plan as the CBA Retirement Plan and the PERAA Plan are
one and the same.

2. No.
A collective bargaining agreement cannot be unilaterally changed. The Memorandum dated August 16, 2005 imposes a
limitation not agreed upon by the parties nor stated in the CBA. Hence, it must be struck down.

It is provided in Sections 1 and 2 of Article XII of the CBA that all covered employees are entitled to 15 days sick leave and
15 days vacation leave with pay every year and that after the second year of service, all unused vacation leave shall be
converted to cash and paid to the employee at the end of each school year, not later than August 30 of each year. Whereas,
it is provided in the Memorandum dated August 16, 2005 that vacation and sick leave credits are not automatic as leave
credits would be earned on a month-to-month basis. The said Memorandum, therefore, limits the available leave credits of
an employee at the start of the school year.
 EQUITABLE BANKING CORPORATION V SADAC, G.R. NO. 164772, JUNE 8, 2006

FACTS: Ricardo Sadac was appointed Vice President of the Legal Department of petitioner Bank effective 1 August
1981, and subsequently General Counsel thereof on 8 December 1981. On June 1989, nine lawyers of petitioner Bank’s
Legal Department, in a letter-petition to the Chairman of the Board of Directors, accused respondent Sadac of abusive
conduct and ultimately, petitioned for a change in leadership of the department. On the ground of lack of confidence
in Sadac, under the rules of client and lawyer relationship, petitioner Bank instructed respondent Sadac to deliver all
materials in his custody in all cases in which the latter was appearing as its counsel of record. In reaction thereto,
Sadac requested for a full hearing and formal investigation but the same remained unheeded. On 9 November 1989,
respondent Sadac filed a complaint for illegal dismissal with damages against petitioner Bank and individual members
of the Board of Directors thereof. After learning of the filing of the complaint, petitioner Bank terminated the services
of respondent Sadac. Finally, on 10 August 1989, Sadac was removed from his office

Labor Arbiter rendered decision that Sadac’s termination was illegal and entitled to reinstatement and payment of full
back wages. NLRC affirmed the decision upon appeal by the Bank. Sadac filed for execution of judgment where it
gave its computation which amounted to P 6.03 M representing his back wages and the increases he should have
received during the time he was illegally dismissed. The Bank opposed to Sadac’s computation. The Labor Arbiter
favor Sadac’s computation. NLRC, upon appeal by the bank, reversed the decision. CA reversed the decision of NLRC.
Hence, this petition.

ISSUE: Whether or not the computation of back wages shall include the general increases.

RULING: To resolve the issue, the court revisits its pronouncements on the interpretation of the term backwages.
Backwages in general are granted on grounds of equity for earnings which a worker or employee has lost due to his
illegal dismissal. It is not private compensation or damages but is awarded in furtherance and effectuation of the
public objective of the Labor Code. Nor is it a redress of a private right but rather in the nature of a command to the
employer to make public reparation for dismissing an employee either due to the former’s unlawful act or bad faith.

In the case of Bustamante v. National Labor Relations Commission, It said that the Court deems it appropriate to
reconsider such earlier ruling on the computation of back wages by now holding that conformably with the evident
legislative intent as expressed in Rep. Act No. 6715, back wages to be awarded to an illegally dismissed employee,
should not, as a general rule, be diminished or reduced by the earnings derived by him elsewhere during the period of
his illegal dismissal. The underlying reason for this ruling is that the employee, while litigating the legality (illegality)
of his dismissal, must still earn a living to support himself and family, while full backwages have to be paid by the
employer as part of the price or penalty he has to pay for illegally dismissing his employee. The clear legislative intent
of the amendment in Rep. Act No. 6715 is to give more benefits to workers than was previously given them. Thus, a
closer adherence to the legislative policy behind Rep. Act No. 6715 points to “full backwages” as meaning exactly that,
i.e., without deducting from backwages the earnings derived elsewhere by the concerned employee during the period
of his illegal dismissal.

There is no vested right to salary increases. Sadac may have received salary increases in the past only proves fact of
receipt but does not establish a degree of assuredness that is inherent in backwages. The conclusion is that Sadac’s
computation of his full backwages which includes his prospective salary increases cannot be permitted.
 MILLARES V NLRC, 305 SCRA 500

FACTS: Petitioners are 116 occupied technical, managerial and Vice Presidential positions in the mill site of respondent
Paper Industries Corporation of the Philippines (PICOP) in Bislig, Surigao del Sur. They were retrenched by respondent
PICOP when it suffered a major financial setback in 1992, brought about by the joint impact of restrictive government
regulations on logging and the economic crisis. Accordingly, petitioners were given separation pay computed at the rate
of one (1) month basic pay for every year of service.
Believing that the allowances they regularly received on a monthly basis during their employment should have been
included in the computation thereof, they lodged a complaint for separation pay differentials.

The ‘allowances’ in question, with its conditions:

1. Staff/Manager's Allowance- PICOP provides free housing facilities, including free water and electricity to supervisory
and managerial employees assigned in Bislig. BUT once a vacancy occurs in the company-provided housing
accommodations, the employee concerned transfers to the company premises and his housing allowance is
discontinued.
2. Transportation Allowance- in the form of advances for actual transportation expenses subject to liquidation… given
only to employees who have personal cars.
3. Bislig Allowance- given to Division Managers and corporate officers assigned in Bislig on account of the hostile
environment prevailing therein- BUT once the officer is transferred outside Bislig, the allowance stops.

Lower Courts’ Ruling

LA: Granted; concluded that the allowances should be included in the petitioners' basic pay, as per Art. 97, LC.
NLRC: Set Aside the LA’s decision. It decreed that the allowances did not form part of the salary base in computing
separation pay (SC agrees).
● Basis: Estate of the late Eugene J. Kneebone v. NLRC- the representation and transportation allowances were deemed
not part of salary and should therefore be excluded in the computation of separation benefits.

Before the SC, petitioners submit that:

● Their allowances are included in the definition of "facilities" in Art. 97, par. (f), of the Labor Code, being necessary
and indispensable for their existence and subsistence.
● They insist on the applicability of Santos, Soriano, The Insular Life Assurance Company, Planters Products, Inc. and
Songco which are all against the NLRC holding that the salary base in computing separation pay includes not just
the basic salary but also the regular allowances.

ISSUE: WON the allowances form part of the salary base in computing separation pay [NO]

HELD: The subject allowances did not form part of petitioners' wages.

1. The ‘facilities’ were not customarily furnished by ER to the EE.

In case of retrenchment to prevent losses, Art. 283 of the Labor Code imposes on the employer an obligation to grant to
the affected employees separation pay equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of
service, whichever is higher.

What exactly does the term “PAY” connote? As per Art. 97, LC, "Pay" is not defined therein but "wage." In Songco, we
explained that both words are synonymous.

Specifically, "WAGE" is defined in letter (f) as:

The remuneration or earnings, however designated, capable of being expressed in terms of money, whether fixed or
ascertained on a time, task, piece, or commission basis, or other method of calculating the same, which is payable by an
employer to an employee under a written or unwritten contract of employment for work done or to be done, or for services
rendered or to be rendered and includes the fair and reasonable value, as determined by the Secretary of Labor, of
board, lodging, or other facilities CUSTOMARILY furnished by the employer to the employee.
When an employer customarily furnishes his employee board, lodging or other facilities, the fair and reasonable value
thereof, as determined by the Secretary of Labor and Employment is included in a "wage."

"Customary" is founded on long-established and constant practice connoting regularity. The receipt of an allowance on a
monthly basis does not ipso facto characterize it as regular and forming part of a salary because the nature of the grant is
a factor worth considering.

Here, the subject allowance were TEMPORARILY, not regularly received by petitioners, since the latter’s continuous
enjoyment of the disputed allowances was based on contingencies the occurrence of which wrote finis to such
enjoyment.

2. The ‘allowances’ were not for the employees but for the employee
In determining whether a privilege is a facility, the criterion is not so much its kind but its purpose.
Here, the assailed allowances are not embraced in "facilities" on the main consideration that they are granted for
respondent PICOP's benefit and convenience, i.e., to insure that petitioners render quality performance. Moreover, that
the assailed allowances were for the benefit and convenience of respondent company was supported by the circumstance
that they were not subjected to withholding tax.

It is the obligation of the employer to pay an illegally dismissed employee the whole amount of his salaries plus all other
benefits, bonuses and general increases to which he would have been normally entitled had he not been dismissed and had
not stopped working. The same holds true in case of retrenched employees.

As culled from the Planters, Soriano and Santos, separation pay, when awarded to an illegally dismissed employee in lieu of
reinstatement or to a retrenched employee should be computed, based not only on the basic salary but also on the regular
allowances that the employee had been receiving. But in view of the previous discussion that the disputed allowances were
not regularly received by petitioners herein, there was no reason at all for petitioners to resort to the above cases.

Disposition: Dismissed; NLRC decision, affirmed.

 ARCO METAL PRODUCTS, INC. V SAMAHAN NG MANGGAGAWA SA ARCO METAL- NAFLU, W G.R. NO.
170734, MAY 14, 2008;

FACTS: Petitioner is a company engaged in the manufacture of metal products, whereas respondent is the labor union of
petitioner’s rank and file employees. Sometime in December 2003, petitioner paid the 13th month pay, bonus, and leave
encashment of three union members in amounts proportional to the service they actually rendered in a year, which is less
than a full twelve (12) months. Respondent protested the prorated scheme, claiming that on several occasions petitioner
did not prorate the payment of the same benefits to seven (7) employees who had not served for the full 12 months.
According to respondent, the prorated payment violates the rule against diminution of benefits under Article 100 of the
Labor Code.

Thus, they filed a complaint before the National Conciliation and Mediation Board (NCMB).

Issue: Whether or not the grant of 13th month pay, bonus, and leave encashment in full regardless of actual service
rendered constitutes voluntary employer practice and, consequently, whether or not the prorated payment of the said
benefits constitutes diminution of benefits under Article 100 of the Labor Code.

Held: Any benefit and supplement being enjoyed by employees cannot be reduced, diminished, discontinued or
eliminated by the employer. The principle of non-diminution of benefits is founded on the Constitutional mandate to
"protect the rights of workers and promote their welfare and to afford labor full protection. Said mandate in turn is the
basis of Article 4 of the Labor Code which states that all doubts in the implementation and interpretation of this Code,
including its implementing rules and regulations shall be rendered in favor of labor.

Jurisprudence is replete with cases which recognize the right of employees to benefits which were voluntarily given by
the employer and which ripened into company practice. Thus, in Davao Fruits Corporation v. Associated Labor Unions, et
al. where an employer had freely and continuously included in the computation of the 13th month pay those items that
were expressly excluded by the law, we held that the act which was favorable to the employees though not conforming to
law had thus ripened into a practice and could not be withdrawn, reduced, diminished, discontinued or eliminated. In
Sevilla Trading Company v. Semana, we ruled that the employer’s act of including non-basic benefits in the computation
of the 13th month pay was a voluntary act and had ripened into a company practice which cannot be peremptorily
withdrawn.

In the years 1992, 1993, 1994, 1999, 2002 and 2003, petitioner had adopted a policy of freely, voluntarily and consistently
granting full benefits to its employees regardless of the length of service rendered. True, there were only a total of seven
employees who benefited from such a practice, but it was an established practice nonetheless. Jurisprudence has not laid
down any rule specifying a minimum number of years within which a company practice must be exercised in order to
constitute voluntary company practice. Thus, it can be six (6) years, three (3) years, or even as short as two (2) years.
Petitioner cannot shirk away from its responsibility by merely claiming that it was a mistake or an error, supported only
by an affidavit of its manufacturing group head. Hence, petition was denied.