Labor Standards Atty.

Jacqueline Magdangal

I.

What is Two-Tiered Wage System?

The two-tiered wage system is a reform that maintains the mandatory

minimum wage setting under R.A. 6727 or the Wage Rationalization Act, as
the first tier (TIER 1) and complemented by a voluntary productivity-based
pay scheme as the second tier (TIER 2). It was conceptualized in 2010 and
implemented in 2012 with the support of social partners.

Mandatory Minimum Wage (Tier 1)

In setting the mandatory minimum wage, the RTWPBs refer to the
official data on:

 Poverty threshold (NSCB)

 Prevailing average wage rates (Labor Force Survey)
 Socio-Economic indicators such as Consumer Price Index (CPI),
inflation, employment, Gross Regional Domestic Product (GRDP),
among others

Voluntary Productivity-Based Pay (Tier 2)

The voluntary productivity-based pay shall be implemented through a
labor-management mechanism such as the productivity committee or any
similar body.

Workers’ representation in the Productivity committees ensures fair

and reasonable setting of performance criteria, standards, targets and profit
sharing scheme among others.

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II.

Provide a Summary of Latest Wage Orders and Implementing Rules issued by the Regional Boards.

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III.
Compare SHS Perforated Materials v. Diaz, October 13, 2010 with
Milan v. NLRC, February 4, 2015.

Any withholding of an Ee’s wages by an Er may only be allowed in the

form of wage deductions under the circumstances provided in Art. 113 of the
LC: 1) the worker is insured; 2) for union dues; 3) in cases authorized by
law or regulation issued by the SLE. In the absence of the following
circumstances, withholding thereof is thus unlawful (SHS Perforated
Materials, Inc. v. Diaz, G.R. 185814, October 13, 2010).

While, Milan vs NLRC talks about the withholding of final wages and
benefits of separated employees which is allowed when the employees
refuse to return the company property and to settle their debts, liabilities,
and accountabilities.

IV.
1. Tan v. Lagrama, August 15, 2002

Facts:
Lagrama works for Tan as painter of billboards and murals for the
motion pictures shown at the theaters managed by Tan for more than
10years. Lagrama was dismissed for having urinated in his working area.
Lagrama filed a complaint for illegal dismissal and non-payment of benefits
Tan asserted that Lagrama was an independent contractor as he was paid in
piece-work basis.

Issue:
Whether or not Lagrama is an independent contractor or an employee
of Tan.

Ruling:
Lagrama is an employee not an independent contractor.

Applying Four Fold Test

A. Power of Control - Evidence shows that the Lagrama performed his work
as painter and under the supervision and control of Tan.

Lagrama worked in a designated work area inside the theater of Tan

for the use of which petitioner prescribed rules, which rules included the
observance of cleanliness and hygeine and prohibition against urinating in
the work area and any other place other than rest rooms and Tan's control
over Lagrama's work extended not only the use of work area but also the
result of Lagrama’s work and the manner and means by which the work was
to be accomplished.

Lagrama is not an independent contractor because he did not enjoy

independence and freedom from the control and supervision of Tan and he
was subjected to Tan's control over the means and methods by which his
work is to be performed and accomplished

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Labor Standards Atty. Jacqueline Magdangal

B. Payment of Wages
Lagrama worked for Tan on a fixed piece work basis is of no moment.
Payment by result is a method of compensation and does not define the
essence of the relation.

That Lagrama was not reported as an employee to the SSS is not

conclusive, on the question whether he was an employee, otherwise Tan
would be rewarded for his failure or even neglect to perform his obligation.

C. Power of Dismissal – by Tan stating that he had the right to fire Lagrama,
Tan in effect acknowledged Lagrama to be his employee.

D. Power of Selection and Engagement of Employees – Tan engaged the

services of Lagrama without the intervention of third party.

2. Philippine Spring Water v. Mahilum, June 11, 2014

[Link] v. NLRC, April 18, 1997

Facts:
Petitioner Norma Mabeza contends that on 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.
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.

The affidavit was drawn by management for the sole purpose of

refuting findings of the Labor Inspector of DOLE apparently adverse to the
private respondent. After she refused to proceed to the City Prosecutor's
Office, petitioner states 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 Office to attest to the affidavit.
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
1991, the hotel's cashier informed her that she should not report to work
and, instead, continue with her unofficial leave of absence.

Consequently, 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.

Responding to the allegations for illegal dismissal, private respondent

Peter Ng alleged before Labor Arbiter 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

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Labor Standards Atty. Jacqueline Magdangal

underpayment and other benefits as these were paid in the form of facilities
to petitioner and the hotel's other employees.
Labor Arbiter dismissed the complaint. On April 1994, respondent NLRC
promulgated its assailed Resolution affirming the Labor Arbiter's decision.

Issue:
Whether or not the employer’s 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 constitutes
unfair labor practice.

Ruling:
The Court ruled that there was unfair labor practice.
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. 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.

Granting that meals and lodging were provided and indeed constituted
facilities, such facilities could not be deducted without the employer
complying first with certain legal requirements. Without satisfying these
requirements, the employer simply cannot deduct the value from the
employee's wages. First, proof must be shown that such facilities are
customarily furnished by the trade. Second, the provision of deductible
facilities must be voluntarily accepted in writing by the employee. Finally,
facilities must be charged at fair and reasonable value. These requirements
were not met in the instant case.

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 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.

4. Phil. Fisheries Development Authority v. NLRC, 213 SCRA 621

(1992)

Facts:
QVEGG was delinquent in the performance of its contractual
obligations so QVEGG requested the restructuring of its overdue account
which was granted by the PFDA subject to several ―instructions.‖ Should
QVEGG fail to comply with the ―instructions,‖ PFDA would terminate the

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Labor Standards Atty. Jacqueline Magdangal

contract and file the necessary legal action. It appears, however, that it was
only on February 22, 1993 that QVEGG paid its January 1993 space rental
and electric and water bills. PFDA then terminated their contract for failure
of QVEGG to strictly comply with the terms and conditions imposed. QVEGG,
on the other hand, sought reconsideration explaining that it interpreted
paragraph c of the ―instructions‖ in relation to paragraph 3 of the contract
which provides for that its failure to pay rentals for two successive months
shall be a ground for the termination of the contract. This was denied.

QVEGG then filed a complaint for Enforcement of Contract and

Damages before the Regional Trial Court (RTC). PFDA contended that
paragraph 3 of the contract was rendered ineffective by the new terms and
conditions of the ―instructions.‖ The RTC found for QVEGG and declared
illegal the termination of the contract by the PFDA, it holding that paragraph
c of the ―instructions‖ did not modify paragraph 3 of the lease contract but
it did not grant QVEGG‘s prayer for damages.

Both QVEGG and PFDA appealed to the Court of Appeals (CA) which
dismissed their petitions for want of merit.

Issue:
Whether or not paragraph 3 of the lease contract is rendered
ineffective by the new terms and conditions set forth in the ―instructions.

Held:
The termination by the PFDA of the contract is illegal since paragraph
3 of the contract calls for its termination only after the QVEGG fails for two
successive months to comply with its obligations there under.

The New Civil Code provides that ―various stipulations of a contract

shall be interpreted together, attributing to the doubtful ones that sense
which may result from all of them taken jointly.‘‘

Indeed, paragraph c of the ―instructions‘ cannot stand alone

independently of paragraph 3 of the lease contract for paragraph c does not
provide for the amount, period or manner of payment. Said paragraph c did
not amend paragraph 3 of the lease contract, hence, it is only the QVEGG
that fails.

5. Iran v. NLRC, 289 SCRA 433 (1998)

Facts:
Petitioner Antonio Iran is engaged in softdrinks merchandising and
distribution in Mandaue City, Cebu, employing truck drivers who double as
salesmen, truck helpers, and non-field personnel in pursuit thereof.

Petitioner hired private respondents Godofredo Petralba, Moreno

Cadalso, Celso Labiaga and Fernando Colina as drivers/salesmen while
private respondents Pepito Tecson, Apolinario Gimena, Jesus Bandilao,
Edwin Martin and Diosdado Gonzalgo were hired as truck helpers.
Drivers/salesmen drove petitioners delivery trucks and promoted, sold and
delivered softdrinks to various outlets in Mandaue City. The truck helpers
assisted in the delivery of softdrinks to the different outlets covered by the
driver/salesmen.

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Labor Standards Atty. Jacqueline Magdangal

As part of their compensation, the driver/salesmen and truck helpers

of petitioner received commissions per case of softdrinks sold at the
following rates:

SALESMEN:
Ten Centavos (P0.10) per case of Regular softdrinks.
Twelve Centavos (P0.12) per case of Family Size softdrinks.

TRUCK HELPERS:
Eight Centavos (P0.08) per case of Regular softdrinks.
Ten Centavos (P0.10) per case of Family Size softdrinks

Sometime in June 1991, petitioner, while conducting an audit of his

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

On the other hand, private respondents, on December 5, 1991, filed

complaints against petitioner for illegal dismissal, illegal deduction,
underpayment of wages, premium pay for holiday and rest day, holiday pay,
service incentive leave pay, 13th month pay, allowances, separation pay,
and recovery of cash bond, damages and attorney’s fees.

The labor arbiter found that petitioner had validly terminated private
Respondents, there being just cause for the latter’s dismissal. Nevertheless,
he also ruled that petitioner had not complied with minimum wage
requirements in compensating private respondents, and had failed to pay
private respondents their 13th month pay.

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

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

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

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Labor Standards Atty. Jacqueline Magdangal

This definition explicitly includes commissions as part of wages. While

commissions are, indeed, incentives or forms of encouragement to inspire
employees to put a little more industry on the jobs particularly assigned to
them, still these commissions are direct remunerations for services
rendered. In fact, commissions have been defined as the recompense,
compensation or reward of an agent, salesman, executor, trustee, receiver,
factor, broker or bailee, when the same is calculated as a percentage on the
amount of his transactions or on the profit to the principal. The nature of the
work of a salesman and the reason for such type of remuneration for
services rendered demonstrate clearly that commissions are part of a
salesmans wage or salary.

Thus, the commissions earned by private respondents in selling

softdrinks constitute part of the compensation or remuneration paid to
drivers/salesmen and truck helpers for serving as such, and hence, must be
considered part of the wages paid them.

The NLRC asserts that the inclusion of commissions in the computation

of wages would negate the practice of granting commissions only after an
employee has earned the minimum wage or over. While such a practice does
exist, the universality and prevalence of such a practice is questionable at
best. In truth, this Court has taken judicial notice of the fact that some
salesmen do not receive any basic salary but depend entirely on
commissions and allowances or commissions alone, although an employer-
employee relationship exists. Undoubtedly, this salary structure is intended
for the benefit of the corporation establishing such, on the apparent
assumption that thereby its salesmen would be moved to greater enterprise
and diligence and close more sales in the expectation of increasing their
sales commissions. This, however, does not detract from the character of
such commissions as part of the salary or wage paid to each of its salesmen
for rendering services to the corporation.

Likewise, there is no law mandating that commissions be paid only

after the minimum wage has been paid to the employee. Verily, the
establishment of a minimum wage only sets a floor below which an
employees remuneration cannot fall, not that commissions are excluded
from wages in determining compliance with the minimum wage law.

The court cites Philippine Agricultural Commercial and Industrial

Workers Union VS NLRC: “Drivers and conductors who are compensated
purely on a commission basis are automatically entitled to the basic
minimum pay mandated by law should said commissions be less than their
basic minimum for eight hours work.”

It can, thus, be inferred that were said commissions equal to or even

exceed the minimum wage, the employer need not pay, in addition, the
basic minimum pay prescribed by law. It follows then that commissions are
included in determining compliance with minimum wage
requirements.

6. Aklan Electric Corp., Inc. v. NLRC, 323 SCRA 258 (2000)

FACTS:

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Labor Standards Atty. Jacqueline Magdangal

January 22, 1991 by way of a resolution of the Board of Directors of

AKELCO it allowed the temporary holding of office at Amon Theater, Kalibo,
Aklan upon the recommendation of Atty. Leovigildo Mationg, then project
supervisor, on the ground that the office at Lezo, Aklan was dangerous and
unsafe. Majority of the employees including the herein complainants,
continued to report for work at Lezo, Aklan and were paid of their salaries.
The complainants claimed that transfer of office from Lezo, Aklan to Kalibo,
Aklan was illegal because it failed to comply with the legal requirements
under P.D. 269, thus the they remained and continued to work at the Lezo
Office until they were illegally locked out therefrom by the respondents.
Despite the illegal lock out however, complainants continued to report daily
to the location of the Lezo Office, prepared to continue in the performance of
their regular duties. Complainants who continuously reported for work at
Lezo, Aklan were not paid their salaries from June 1992 up to March 18,
1993.

LA dismissed the complaints. NLRC reversed and set aside the LA’s
decision and RULING that private respondents are entitled to unpaid wages.

NLRC based its conclusion on the following: (a) the letter of Leyson,
Office Manager of AKELCO addressed to AKELCO’s General Manager, Atty.
Mationg, requesting for the payment of private respondents’ unpaid wages
from June 16, 1992 to March18, 1993; (b) the memorandum of said Atty.
Mationg in answer to the letter request of Leyson where he made an
assurance that he will recommend such request; (c) the private respondents’
own computation of their unpaid wages.-

Petitioner AKELCO claims

– compensable service is best shown by timecards, payslips and other
similar documents and it was an error for public respondent to consider the
computation of the claims for wages and benefits submitted merely by
private respondents as substantial evidence

ISSUE:
WON the refusal of private respondents to work under the lawful
orders of AKELCO management are covered by the “no work, no pay”
principle (thus not entitled to the claim for unpaid wages)

RULING:
The above bases of the NLRC does not constitute substantial evidence
to support the conclusion that private respondents are entitled to the
payment of wages from June 16, 1992 to March18, 1993. Substantial
evidence is that amount of relevant evidence which a reasonable mind might
accept as adequate to justify a conclusion. These evidences relied upon by
public respondent did not establish the fact that private respondents actually
rendered services in the Kalibo office during the stated period.

It has been established that the petitioner’s business office was

transferred to Kalibo and all its equipments, records and facilities were
transferred thereat and that it conducted its official business in Kalibo during
the period in question. It was incumbent upon private respondents to prove
that they indeed rendered services for petitioner, which they failed to do.

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Labor Standards Atty. Jacqueline Magdangal

It would neither be fair nor just to allow private respondents to recover

something they have not earned and could not have earned because they
did not render services at the Kalibo office during the stated period.

7. SSS v. SSS Supervisors' Union, 117 SCRA 746 (1982)

[Link] School Alliance v. Quisumbing, G.R. No. 128845,
June 1, 2000

Facts:
International School, Inc., pursuant to PD 732, is a domestic
educational institution established primarily for dependents of foreign
diplomatic personnel and other temporary residents. To enable the School to
continue carrying out its educational program and improve its standard of
instruction, Section 2(c) of the same decree authorizes the School to employ
its own teaching and management personnel selected by it either locally or
abroad, from Philippine or other nationalities, such personnel being exempt
from otherwise applicable laws and regulations attending their employment,
except laws that have been or will be enacted for the protection of
employees.

The School hires both foreign and local teachers as members of its
faculty, classifying the same into two: (1) foreign-hires and (2) local-hires.
The School employs four tests to determine whether a faculty member
should be classified as a foreign-hire or a local hire: (a) What is one's
domicile? (b) Where is one's home economy? (c) To which country does one
owe economic allegiance? (d) Was the individual hired abroad specifically to
work in the School and was the School responsible for bringing that
individual to the Philippines? Should the answer to any of these queries point
to the Philippines, the faculty member is classified as a local hire; otherwise,
he or she is deemed a foreign-hire.
The School grants foreign-hires certain benefits not accorded local- hires.
These include housing, transportation, shipping costs, taxes, and home leave
travel allowance. Foreign-hires are also paid a salary rate twenty-five
percent (25%) more than local-hires. The School justifies the difference on
two "significant economic disadvantages" foreign-hires have to endure,
namely: (a) the "dislocation factor" and (b) limited tenure. The
compensation scheme is simply the School's adaptive measure to remain
competitive on an international level in terms of attracting competent
professionals in the field of international education.

Issue:
Whether or not local hire teachers shall enjoy same salary as foreign
hire teachers where they perform the same work.

Ruling:
Employees are entitled to same salary for performance of equal work.

Notably, the International Covenant on Economic, Social, and Cultural

Rights, supra, in Article 7 thereof, provides: The States Parties to the
present Covenant recognize the right of everyone to the enjoyment of just
and favorable conditions of work, which ensure, in particular: ( a)
Remuneration which provides all workers, as a minimum, with: (i) Fair
wages and equal remuneration for work of equal value without distinction of
any kind, in particular women being guaranteed conditions of work not

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Labor Standards Atty. Jacqueline Magdangal

inferior to those enjoyed by men, with equal pay for equal work; The
foregoing provisions impregnably institutionalize in this jurisdiction the long
honored legal truism of "equal pay for equal work." Persons who work with
substantially equal qualifications, skill, effort and responsibility, under similar
conditions, should be paid similar salaries. This rule applies to the School.

The School contends that petitioner has not adduced evidence that
local-hires perform work equal to that of foreign-hires. The Court finds this
argument a little inconsiderate. If an employer accords employees the same
position and rank, the presumption is that these employees perform equal
work. If the employer pays one employee less than the rest, it is not for that
employee to explain why he receives less or why the others receive more.
The employer has discriminated against that employee; it is for the
employer to explain why the employee is treated unfairly.

In this case, the employer has failed to discharge this burden. There is
no evidence here that foreign-hires perform 25% more efficiently or
effectively than the local-hires. Both groups have similar functions and
responsibilities, which they perform under similar working conditions.

9. Asian Transmission Corp. v. CA, G.R. No. 144664, May 15, 2004

Facts:
The Department of Labor and Employment (DOLE) issued an
Explanatory Bulletin dated March 11, 1993 wherein it clarified that
employees are entitled to 200% of their basic wage on April 9, 1993,
whether unworked, which apart from being Good Friday is also Araw ng
Kagitingan, both legal holidays.

The bulletin reads: "On the correct payment of holiday compensation

on April 9, 1993 which apart from being Good Friday is also Araw ng
Kagitingan, i.e., two regular holidays falling on the same day, this
Department is of the view that the covered employees are entitled to at least
two hundred percent (200%) of their basic wage even if said holiday is
unworked. The first 100% represents the payment of holiday pay on April 9,
1993 as Good Friday and the second 100% is the payment of holiday pay for
the same date as Araw ng Kagitingan.

Said bulletin was reproduced on January 23, 1998, when April 9, 1998
was both Maundy Thursday and Araw ng Kagitingan. Despite the
explanatory bulletin, [Asian Transmission Corporation opted to pay its daily
paid employees only 100% of their basic pay on April 9, 1998. Respondent
Bisig ng Asian Transmission Labor Union (BATLU) protested.

In accordance with Step 6 of the grievance procedure of the Collective

Bargaining Agreement (CBA) existing between petitioner and BATLU, the
controversy was submitted for voluntary arbitration. On July 31, 1998, the
Office of the Voluntary Arbitrator rendered a decision directing petitioner to
pay its covered employees "200% and not just 100% of their regular daily
wages for the unworked April 9, 1998 which covers two regular holidays,
namely, Araw ng Kagitingan and Maundy Thursday."

Issue:

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Labor Standards Atty. Jacqueline Magdangal

WON the employees are entitled to the computation embodied in the

bulletin clarification.

Held:
The employees are entitled to the computation given in the bulletin
clarification.

Subject of interpretation in the case at bar is Article 94 of the Labor

Code which reads: 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 Year's 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
thirtieth of December and the day designated by law for holding a general
election, which was amended by Executive Order No. 203 issued on June 30,
1987, such that the regular holidays are now:
1. New Year's Day January 1
2. Maundy ThursdayMovable Date
3. Good Friday Movable Date
4. Araw ng Kagitingan April 9 (Bataan and Corregidor Day)
5. Labor Day May 1
6. Independence Day June 12
7. National Heroes Day Last Sunday of August
8. Bonifacio Day November 30
9. Christmas Day December 25
10. Rizal Day December 30

The Court agrees with the voluntary arbitrator. The Voluntary

Arbitrator held that Article 94 of the Labor Code provides for holiday pay for
every regular holiday, the computation of which is determined by a legal
formula which is not changed by the fact that there are two holidays falling
on one day, like on April 9, 1998 when it was Araw ng Kagitingan and at the
same time was Maundy Thursday; and that that the law, as amended,
enumerates ten regular holidays for every year should not be interpreted as
authorizing a reduction to nine the number of paid regular holidays "just
because April 9 (Araw ng Kagitingan) in certain years, like 1993 and 1998, is
also Holy Friday or Maundy Thursday."

Holiday pay is a legislated benefit enacted as part of the Constitutional

imperative that the State shall afford protection to labor. Its purpose is not
merely "to prevent diminution of the monthly income of the workers on
account of work interruptions. In other words, although the worker is forced
to take a rest, he earns what he should earn, that is, his holiday pay." 8 It is
also intended to enable the worker to participate in the national celebrations
held during the days identified as with great historical and cultural
significance.

Independence Day (June 12), Araw ng Kagitingan (April 9), National

Heroes Day (last Sunday of August), Bonifacio Day (November 30) and Rizal
Day (December 30) were declared national holidays to afford Filipinos with a

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Labor Standards Atty. Jacqueline Magdangal

recurring opportunity to commemorate the heroism of the Filipino people,

promote national identity, and deepen the spirit of patriotism.
Labor Day (May 1) is a day traditionally reserved to celebrate the
contributions of the working class to the development of the nation, while
the religious holidays designated in Executive Order No. 203 allow the
worker to celebrate his faith with his family.

As reflected above, Art. 94 of the Labor Code, as amended, afford a

worker the enjoyment of ten paid regular holidays. The provision is
mandatory, regardless of whether an employee is paid on a monthly or daily
basis. Unlike a bonus, which is a management prerogative, holiday pay is a
statutory benefit demandable under the law. Since a worker is entitled to the
enjoyment of ten paid regular holidays, the fact that two holidays fall on the
same date should not operate to reduce to nine the ten holiday pay benefits
a worker is entitled to receive.

10. Jose Rizal College v. NLRC, 156 SCRA 27 (1987)

Facts:
Petitioner is a non-stock, non-profit educational institution duly
organized and existing under the laws of the Philippines.

Private respondent National Alliance of Teachers and Office Workers

(NATOW) in behalf of the faculty and personnel of Jose Rizal College filed a
complaint against the college for said alleged non-payment of holiday pay
from 1975 to 1977.

Labor Arbiter:

 The faculty and personnel of the respondent Jose Rizal College who are
paid their salary by the month uniformly in a school year, irrespective
of the number of working days in a month, without deduction for
holidays, are presumed to be already paid the 10 paid legal holidays
and are no longer entitled to separate payment for the said regular
holidays;
 The personnel of the respondent Jose Rizal College who are paid their
wages daily are entitled to be paid the 10 unworked regular holidays
according to the pertinent provisions of the Rules and Regulations
Implementing the Labor Code;
 Collegiate faculty of the respondent Jose Rizal College who by contract
are paid compensation per student contract hour are not entitled to
unworked regular holiday pay considering that these regular holidays
have been excluded in the programming of the student contact hours.

NLRC: Teaching personnel paid by the hour are entitled to holiday pay

Issue:
Whether or not the school faculty who according to their contracts are
paid per lecture hour are entitled to unworked holiday pay.

Held:
No. The provisions in the Labor Code as to holiday pay do not apply in
this case.

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Labor Standards Atty. Jacqueline Magdangal

Subject holiday pay is provided for in the Labor Code (Presidential

Decree No. 442, as amended), which reads:

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 in the Implementing Rules and Regulations, Rule IV, Book III, which
reads:

SEC. 8. Holiday pay of certain employees. — (a) Private school teachers,

including faculty members of colleges and universities, may not be paid for
the regular holidays during semestral vacations. They shall, however, be
paid for the regular holidays during Christmas vacations. …

The aforementioned implementing rule is not justified by the

provisions of the law which after all is silent with respect to faculty members
paid by the hour. Regular holidays specified as such by law are known to
both school and faculty members as no class days;” certainly the latter do
not expect payment for said unworked days, and this was clearly in their
minds when they entered into the teaching contracts.

On the other hand, both the law and the Implementing Rules
governing holiday pay are silent as to payment on Special Public Holidays.

It is readily apparent that the declared purpose of the holiday pay

which is the prevention of diminution of the monthly income of the
employees on account of work interruptions is defeated when a regular class
day is cancelled on account of a special public holiday and class hours are
held on another working day to make up for time lost in the school calendar.
Otherwise stated, the faculty member, although forced to take a rest, does
not earn what he should earn on that day. Be it noted that when a special
public holiday is declared, the faculty member paid by the hour is deprived
of expected income, and it does not matter that the school calendar is
extended in view of the days or hours lost, for their income that could be
earned from other sources is lost during the extended days. Similarly, when
classes are called off or shortened on account of typhoons, floods, rallies,
and the like, these faculty members must likewise be paid, whether or not
extensions are ordered.

SC Decision:

(a) exempting petitioner from paying hourly paid faculty members their pay
for regular holidays, whether the same be during the regular semesters of
the school year or during semestral, Christmas, or Holy Week vacations;

(b) but ordering petitioner to pay said faculty members their regular hourly
rate on days declared as special holidays or for some reason classes are
called off or shortened for the hours they are supposed to have taught,
whether extensions of class days be ordered or not; in case of extensions

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Labor Standards Atty. Jacqueline Magdangal

said faculty members shall likewise be paid their hourly rates should they
teach during said extensions.

11. Trans-Asia Phil. Employees Association v. NLRC, 320 SCRA 347

(1999)

Facts:
On 7 July 1988, Trans-Asia Philippines Employees Association (TAPEA)
entered into a Collective Bargaining Agreement (“CBA”) with their employer.
The CBA provided for, among others, the payment of holiday pay with a
stipulation that if an employee is permitted to work on a legal holiday, the
said employee will receive a salary equivalent to 200% of the regular daily
wage plus a 60% premium pay.

Despite the conclusion of the CBA, however, an issue was still left
unresolved with regard to the claim of TAPEA for payment of holiday pay.
Since the parties were not able to arrive at an amicable settlement despite
the conciliation meetings, TAPEA, led by its President, petitioner Arnie
Galvez, filed a complaint for the payment of their holiday pay in arrears. On
18 September 1988, petitioners amended their complaint to include the
payment of holiday pay for the duration of the recently concluded CBA (from
1988 to 1991), unfair labor practice, damages and attorney’s fees.

In their Position Paper, TAPEA contended that their claim for holiday
pay in arrears is based on the non-inclusion of the same in their monthly
pay.

In response, Trans-Asia contended that it has always honored the

labor law provisions on holiday pay by incorporating the same in the
payment of the monthly salaries of its employees. In support of this claim,
Trans-Asia pointed out that it has long been the standing practice of the
company to use the divisor of “286” days in computing for its employees’
overtime pay and daily rate deductions for absences.

52 x 44 / 8 = 286 days

Where: 52 = number of weeks in a year

44 = number of work hours per week

8 = number of work hours per day

Trans-Asia further clarified that the “286” days divisor already takes
into account the ten (10) regular holidays in a year since it only subtracts
from the 365 calendar days the unworked and unpaid 52 Sundays and 26
Saturdays (employees are required to work half-day during Saturdays).
Trans-Asia claimed that if the ten (10) regular holidays were not included in
the computation of their employees’ monthly salary, the divisor which they
would have used would only be 277 days which is arrived at by subtracting
52 Sundays, 26 Saturdays and the 10 legal holidays from 365 calendar days.

Issue:
Whether the Trans-Asia’s use of 286 days as divisor is invalid.

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Labor Standards Atty. Jacqueline Magdangal

Held:

No, it is not in such a way that the Supreme Court adjusted the
divisor.

Trans-Asia’s inclusion of holiday pay in petitioners’ monthly salary is

clearly established by its consistent use of the divisor of “286” days in the
computation of its employees’ benefits and deductions. The use by Trans-
Asia of the “286” days divisor was never disputed by petitioners. A simple
application of mathematics would reveal that the ten (10) legal holidays in a
year are already accounted for with the use of the said divisor. As explained
by Trans-Asia, if one is to deduct the unworked 52 Sundays and 26
Saturdays (derived by dividing 52 Saturdays in half since petitioners are
required to work half-day on Saturdays) from the 365 calendar days in a
year, the resulting divisor would be 286 days (should actually be 287 days).
Since the ten (10) legal holidays were never included in subtracting the
unworked and unpaid days in a calendar year, the only logical conclusion
would be that the payment for holiday pay is already incorporated into the
said divisor.

However, SC held that that there is a need to adjust the divisor used
by Trans-Asia to 287 days, instead of only 286 days, in order to properly
account for the entirety of regular holidays and special days in a year as
prescribed by Executive Order No. 203 in relation to Section 6 of the Rules
Implementing Republic Act 6727.

On the other hand, Section 6 of the Implementing Rules and

Regulations of Republic Act No. 6727 provides:

Sec. 6. Suggested Formula in Determining the Equivalent Monthly

Statutory Minimum Wage Rates. — Without prejudice from existing company
practices, agreements or policies, the following formulas may be used as
guides in determining the equivalent monthly statutory minimum wage
rates:

xxx xxx xxx

d) For those who do not work and are not considered paid on Saturdays and
Sundays or rest days:

Equivalent Monthly = Average Daily Wage Rate x 262 days / 12 months

Where 262 days =

250 days — Ordinary working days

10 days — Regular holidays

2 days — Special days (If considered paid; if actually worked, this is

equivalent to 2.6

Based on the above, the proper divisor that should be used for a
situation wherein the employees do not work and are not considered paid on

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Labor Standards Atty. Jacqueline Magdangal

Saturdays and Sundays or rest days is 262 days. In the present case, since
the employees of Trans-Asia are required to work half-day on Saturdays, 26
days should be added to the divisor of 262 days, thus, resulting to 288 days.
However, due to the fact that the rest days of petitioners fall on a Sunday,
the number of unworked but paid legal holidays should be reduced to nine
(9), instead of ten (10), since one legal holiday under E.O. No. 203 always
falls on the last Sunday of August, National Heroes Day. Thus, the divisor
that should be used in the present case should be 287 days.

However, the Court notes that if the divisor is increased to 287 days,
the resulting daily rate for purposes of overtime pay, holiday pay and
conversions of accumulated leaves would be diminished. To illustrate, if an
employee receives P8,000.00 as his monthly salary, his daily rate would be
P334.49, computed as follows:

P8,000.00 x 12 months / 287 days = P334.49/day

Whereas if the divisor used is only 286 days, the employee’s daily rate
would be P335.66, computed as follows:

P8,000.00 x 12 months / 286 days = P335.66/day

Clearly, this muddled situation would be violative of the proscription on

the non-diminution of benefits under Section 100 of the Labor Code. On the
other hand, the use of the divisor of 287 days would be to the advantage of
petitioners if it is used for purposes of computing for deductions due to the
employee’s absences. In view of this situation, the Court rules that the
adjusted divisor of 287 days should only be used by Trans-Asia for
computations which would be advantageous to petitioners (i.e., deductions
for absences), and not for computations which would diminish the existing
benefits of the employees (i.e., overtime pay, holiday pay and leave
conversions.)

12. Union of Filipro Employees v. Vivar, 205 SCRA 200 (1992)

Facts:
On November 8, 1985, respondent Filipro, Inc. (now Nestle Philippines,
Inc.) filed with the National Labor Relations Commission (NLRC) a petition
for claims of its monthly paid employees for holiday pay.

Abitrator Vivar: Filipro to pay its monthly paid employees holiday pay
pursuant to Art 94 of Labor Code, subject to exclusions and limitations in Art
82.

Filipro filed a motion for clarification seeking (1) the limitation of the
award to three years, (2) the exclusion of salesmen, sales representatives,
truck drivers, merchandisers and medical representatives (hereinafter
referred to as sales personnel) from the award of the holiday pay, and (3)
deduction from the holiday pay award of overpayment for overtime, night
differential, vacation and sick leave benefits due to the use of 251 divisor.

Petitioner UFE answered that the award should be made effective from
the date of effectivity of the Labor Code, that their sales personnel are not
field personnel and are therefore entitled to holiday pay, and that the use of

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Labor Standards Atty. Jacqueline Magdangal

251 as divisor is an established employee benefit which cannot be

diminished.

Arbitrator Vivar: On January 14, 1986, the respondent arbitrator

issued an order declaring that the effectivity of the holiday pay award shall
retroact to November 1, 1974, the date of effectivity of the Labor Code. He
adjudged, however, that the company’s sales personnel are field personnel
and, as such, are not entitled to holiday pay. He likewise ruled that with the
grant of 10 days’ holiday pay, the divisor should be changed from 251 to
261 and ordered the reimbursement of overpayment for overtime, night
differential, vacation and sick leave pay due to the use of 251 days as
divisor.

Issues:
1) Whether or not Nestle’s sales personnel are entitled to holiday pay; and
2) Whether or not, concomitant with the award of holiday pay, the divisor
should be changed from 251 to 261 days and whether or not the previous
use of 251 as divisor resulted in overpayment for overtime, night
differential, vacation and sick leave pay.

Held:

1. Sales personnel are not entitled to holiday pay.

Under Article 82, field personnel are not entitled to holiday pay. Said
article defines field personnel as “non-agritultural employees who regularly
perform their duties away from the principal place of business or branch
office of the employer and whose actual hours of work in the field cannot be
determined with reasonable certainty.”

The law requires that the actual hours of work in the field be
reasonably ascertained. The company has no way of determining whether or
not these sales personnel, even if they report to the office before 8:00 a.m.
prior to field work and come back at 4:30 p.m, really spend the hours in
between in actual field work.

Moreover, the requirement that “actual hours of work in the field

cannot be determined with reasonable certainty” must be read in
conjunction with Rule IV, Book III of the Implementing Rules which
provides:

Rule IV Holidays with Pay

Sec. 1. Coverage — This rule shall apply to all employees except:

xxx xxx xxx

(e) Field personnel and other employees whose time and performance is
unsupervised by the employer . . . (Emphasis supplied)

Hence, in deciding whether or not an employee’s actual working hours

in the field can be determined with reasonable certainty, query must be
made as to whether or not such employee’s time and performance is
constantly supervised by the employer.

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Labor Standards Atty. Jacqueline Magdangal

2. The divisor in computing the award of holiday pay should still be 251
days.

While in that case the issue was whether or not salesmen were entitled
to overtime pay, the same rationale for their exclusion as field personnel
from holiday pay benefits also applies.

The petitioner union also assails the respondent arbitrator’s ruling

that, concomitant with the award of holiday pay, the divisor should be
changed from 251 to 261 days to include the additional 10 holidays and the
employees should reimburse the amounts overpaid by Filipro due to the use
of 251 days’ divisor.

The 251 working days divisor is the result of subtracting all Saturdays,
Sundays and the ten (10) legal holidays from the total number of calendar
days in a year. If the employees are already paid for all non-working days,
the divisor should be 365 and not 251.

In the petitioner’s case, its computation of daily ratio since September

1, 1980, is as follows:

monthly rate x 12 months / 251 days

The use of 251 days’ divisor by respondent Filipro indicates that

holiday pay is not yet included in the employee’s salary, otherwise the
divisor should have been 261.

It must be stressed that the daily rate, assuming there are no

intervening salary increases, is a constant figure for the purpose of
computing overtime and night differential pay and commutation of sick and
vacation leave credits. Necessarily, the daily rate should also be the same
basis for computing the 10 unpaid holidays.

The respondent arbitrator’s order to change the divisor from 251 to

261 days would result in a lower daily rate which is violative of the
prohibition on non-diminution of benefits found in Article 100 of the Labor
Code. To maintain the same daily rate if the divisor is adjusted to 261 days,
then the dividend, which represents the employee’s annual salary, should
correspondingly be increased to incorporate the holiday pay.

To illustrate, if prior to the grant of holiday pay, the employee’s annual

salary is P25,100, then dividing such figure by 251 days, his daily rate is
P100.00 After the payment of 10 days’ holiday pay, his annual salary already
includes holiday pay and totals P26,100 (P25,100 + 1,000). Dividing this by
261 days, the daily rate is still P100.00. There is thus no merit in respondent
Nestle’s claim of overpayment of overtime and night differential pay and sick
and vacation leave benefits, the computation of which are all based on the
daily rate, since the daily rate is still the same before and after the grant of
holiday pay.

13. Wellington Investment Inc. v. Trajano, 245 SCRA 561 (1995)

Facts:

26 | P e e j a y N o t e s
Labor Standards Atty. Jacqueline Magdangal

Upon an inspection of the Wellington Flour Mills, owned and operated

by petitioner, the latter was accused of non-payment of regular holidays
falling on a Sunday for monthly-paid employees.

Petitioner’s Arguments:

Monthly salary of the monthly-paid employees already includes holiday

pay for all the regular holidays.
To pay for the extra days (regular holidays on a Sunday), as compelled by
the Order of the DOLE, it is in effect being compelled to pay for alleged extra
working days.
DOLE’s Contentions:

Regular holidays falling on Sundays have precluded the enjoyment by

the employees of a non-working day and the employees consequently have
to work for additional days.
When a regular holiday falls on a Sunday, an extra or additional working day
is created and the employer has the obligation to pay its employees for the
extra day.

Issue:
Whether or not a monthly-paid employee is entitled to an additional
pay aside from his usual holiday pay, whenever a regular holiday falls on a
Sunday.

Held:
[Link] agree with DOLE’s theory would increase the number of days in
a year, instead of 365 days, as basis for computation of salary for monthly-
paid employees. There is no provision of law requiring employers to make
adjustments in the monthly salary rate set by them to take account of the
legal holiday falling on Sundays or to reckon a year at more than 365 days.

14. SMC v. CA, 375 SCRA 311 (2002)

Facts:
Upon a routine inspection done by the Department of Labor and
Employment in the premises of San Miguel Corporation in Iligan City, it was
discovered that there was underpayment by SMC of regular Muslim Holiday
pay to its employees. SMC received the inspection result which later on
contested such thus DOLE conducted summary hearings. Both DOLE
Regional Office and National Office ruled against SMC ordering the latter to
consider Muslim Holidays as regular holidays and to pay its Muslim and non-
Muslim employees holiday pay.

Issue:
Whether or not the Muslim holiday pay is applicable to employees
regardless of faith or religion

Held:
Yes. Although Article 3 of Presidential Decree 1083 (Code of Muslim
Personal Laws) provides that the provisions of the code shall be applicable
only to Muslims, on which the petitioner based its defense, the same article
provides further that nothing in the code shall be construed to the prejudice
of non-Muslims. The Supreme Court stated that there should be no

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Labor Standards Atty. Jacqueline Magdangal

distinction between Muslims and non-Muslims as regards the payment of

benefits for Muslim Holidays. The Court, quoting the Court of Appeals,
“assuming that the SMC is correct, then Muslims throughout the Philippines
are also not entitled to holiday pays on Christian holidays declared by law.
We must remind (SMC) that wages and other emoluments granted by law
are determined not on the basis of the worker’s faith or religion”, finds
against the petitioner, and dismissed the petition.

15. Arms Taxi v. NLRC, 219 SCRA 306 (1993)

16. Millares v. NLRC, 305 SCRA 500 (1999)

FACTS:
Petitioners numbering 116 occupied different positions in the mill site
of respondent Paper Industries Corporation of the Philippines (PICOP) in
Bislig, Surigao del Sur.

In 1992 PICOP suffered a major financial setback allegedly brought

about by the joint impact of restrictive government regulations on logging
and the economic crisis. To avert further losses, it undertook a retrenchment
program and terminated the services of petitioners. Accordingly, petitioners
received separation pay computed at the rate of 1 month basic pay for every
year of service. Believing however that the allowances they allegedly
regularly received on a monthly basis during their employment should have
been included in the computation thereof they lodged a complaint for
separation pay differentials.

The allowances in question pertained to the following —

Staff/Manager’s Allowance — Respondent PICOP provides free housing

facilities to supervisory and managerial employees assigned in Bislig. The
privilege includes free water and electric consumption.

Transportation Allowance — The company grants transportation

allowance to key officers and Managers assigned in the mill site who use
their own vehicles in the performance of their duties.

Bislig Allowance — The Bislig Allowance is given to Division Managers

and corporate officers assigned in Bislig on account of the hostile
environment prevailing therein.

ISSUE:
Does the subject allowances form part of petitioners’ “wages” for the
computation of separation pay?

HELD:
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 1 month pay or at least 1/2 month pay for
every year of service, whichever is higher. Since the law speaks of “pay,”
the question arises, “What exactly does the term connote?”

We correlate Art. 283 with Art. 97 of the same Code on definition of

terms. “Pay” is not defined therein but “wage.” In Songco the Court

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Labor Standards Atty. Jacqueline Magdangal

explained that both words (as well as salary) generally refer to one and the
same meaning, i.e., a reward or recompense for services performed.

Specifically, “wage” is defined in letter (f) as the remuneration or

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

We invite attention to the above-underlined clause. Stated differently,

when an employer customarily furnishes his employee board, lodging or
other facilities, the fair and reasonable value thereof, as determined by the
Secretary of Labor and Employment, is included in “wage.”

In order to ascertain whether the subject allowances form part of

petitioner’s “wages,” we divide the discussion on the following —
“customarily furnished;” “board, lodging or other facilities;” and, “fair
reasonable value as determined by the Secretary of Labor.”

“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 salary because
the nature of the grant is a factor worth considering. We agree with the
observation of the OSG that the subject allowances were temporarily, not
regularly, received by petitioners because —

In the case of the housing allowance, once a vacancy occurs in the

company-provided housing accommodations, the employee concerned
transfers to the company premises and his housing allowance is discontinued
....

On the other hand, the transportation allowance is in the form of

advances for actual transportation expenses subject to liquidation . . . given
only to employees who have personal cars.

The Bislig allowance is given to Division Managers and corporate

officers assigned in Bislig, Surigao del Norte. Once the officer is transferred
outside Bislig, the allowance stops.

We add that in the availment of the transportation allowance,

respondent PICOP set another requirement that the personal cars be used by
the employees in the performance of their duties. When the conditions for
availment ceased to exist, the allowance reached the cutoff point. The
finding of the NLRC along the same line likewise merits concurrence, i.e.,
petitioners’ continuous enjoyment of the disputed allowances was based on
contingencies the occurrence of which wrote finis to such enjoyment.

Although it is quite easy to comprehend “board” and “lodging,” it is not

so with “facilities.” Thus Sec. 5, Rule VII, Book III, of the Rules
Implementing the Labor Code gives meaning to the term as including

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Labor Standards Atty. Jacqueline Magdangal

articles or services for the benefit of the employee or his family but
excluding tools of the trade or articles or service primarily for the benefit of
the employer or necessary to the conduct of the employer’s business. The
Staff/Manager’s allowance may fall under “lodging” but the transportation
and Bislig allowances are not embraced in “facilities” on the main
consideration that they are granted as well as the Staff/Manager’s allowance
for PICOP’s benefit and convenience, i.e., to insure that petitioners render
quality performance. In determining whether a privilege is a facility, the
criterion is not so much its kind but its purpose.

The Secretary of Labor and Employment under Sec. 6, Rule VII, Book
III, of the Rules Implementing the Labor Code may from time to time fix in
appropriate issuances the “fair and reasonable value of board, lodging and
other facilities customarily furnished by an employer to his employees.”
Petitioners’ allowances do not represent such fair and reasonable value as
determined by the proper authority simply because the Staff/Manager’s
allowance and transportation allowance were amounts given by respondent
company in lieu of actual provisions for housing and transportation needs
whereas the Bislig allowance was given in consideration of being assigned to
the hostile environment then prevailing in Bislig.

17. SLL International Cables Specialist v. NLRC, 644 SCRA 411

(2011)

FACTS:
Private respondents Lopez, Canete and Zuniga were hired by petitioner
Lagon as apprentice or trainee cable/lineman. The three were paid the full
minimum wage and other benefits but since they were only trainees, they
did not report for work regularly but came in as substitutes to the regular
workers or in undertakings that needed extra workers to expedite
completion of work. Their employment is terminated upon completion of
each project.

For 4 separate projects from May 1997-December 1999, they received

the wage of P145.00, the minimum prescribed daily wage for Region VII
when they first started work in March 1997

[In July 1997, the amount of P145 was increased to P150.00 by the
Regional Wage Board (RWB) and in October of the same year, the latter was
increased to P155.00. In 1999, the minimum prescribed rate for Manila was
P198.00.]

In January to February 2000, the 3 received the wage of P165.00. The

existing rate at that time was P213.00.

In March 2000, private respondents filed a complaint for illegal

dismissal, non-payment of wages, holiday pay, 13th month pay for 1997 and
1998 and SIL pay as well as damages and AF.

In their answers, petitioners alleged that the food allowance of P63.00

per day as well as private respondents allowance for lodging house,
transportation, electricity, water and snacks allowance should be added to
their basic pay. With these, petitioners claimed that private respondents
received higher wage rate than that prescribed in Rizal and Manila. They

30 | P e e j a y N o t e s
Labor Standards Atty. Jacqueline Magdangal

argued that the rulings in Agabon v. NLRC and Glaxo Wellcome Philippines,
Inc. v. Nagkakaisang Empleyado Ng Wellcome-DFA should be applied by
analogy, in the sense that the lack of written acceptance of the employees of
the facilities enjoyed by them should not mean that the value of the facilities
could not be included in the computation of the private respondents’
“wages.”

ISSUE:
Should the value of the facilities be included in the computation of the
“wages” received by private respondents.

HELD:
NO. On whether the value of the facilities should be included in the
computation of the “wages” received by private respondents, Section 1 of
DOLE Memorandum Circular No. 2 provides that an employer may provide
subsidized meals and snacks to his employees provided that the subsidy
shall not be less that 30% of the fair and reasonable value of such facilities.
In such cases, the employer may deduct from the wages of the employees
not more than 70% of the value of the meals and snacks enjoyed by the
latter, provided that such deduction is with the written authorization of the
employees concerned.

Moreover, before the value of facilities can be deducted from the

employees’ wages, the following requisites must all be attendant: proof must
be shown that such facilities are customarily furnished by the trade; the
provision of deductible facilities must be voluntarily accepted in writing by
the employee; and facilities must be charged at reasonable value.

Mere availment is not sufficient to allow deductions from employees’

wages.

These requirements, however, have not been met in this case. SLL
failed to present any company policy or guideline showing that provisions for
meals and lodging were part of the employee’s salaries. It also failed to
provide proof of the employees’ written authorization, much less show how
they arrived at their valuations. At any rate, it is not even clear whether
private respondents actually enjoyed said facilities.

**

The Court, at this point, makes a distinction between “facilities” and

“supplements.” It is of the view that the food and lodging, or the electricity
and water allegedly consumed by private respondents in this case were not
facilities but supplements. In the case of Atok-Big Wedge Assn. v. Atok-Big
Wedge Co., the two terms were distinguished from one another in this wise:

“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.

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Labor Standards Atty. Jacqueline Magdangal

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 distinction lies not so much in
the kind of benefit or item (food, lodging, bonus or sick leave) given, but in
the purpose for which it is given. In the case at bench, the items provided
were given freely by SLL for the purpose of maintaining the efficiency and
health of its workers while they were working at their respective projects.

For said reason, the cases of Agabon and Glaxo are inapplicable in this
case. At any rate, these were cases of dismissal with just and authorized
causes. The present case involves the matter of the failure of the petitioners
to comply with the payment of the prescribed minimum wage.

18. Our Haus Realty v. Parian, G.R. No. 204651, August 6, 2014
19. Songco v. NLRC, 183 SCRA 610 (1990)

FACTS:
Zuelig filed an application for clearance to terminate the services of
Songco, and others, on the ground of retrenchment due to financial losses.
During the hearing, the parties agreed that the sole issue to be resolved was
the basis of the separation pay due. The salesmen received monthly salaries
of at least P400.00 and commission for every sale they made.

The Collective Bargaining Agreements between Zuelig and the union of

which Songco, et al. were members contained the following provision: "Any
employee who is separated from employment due to old age, sickness,
death or permanent lay-off, not due to the fault of said employee, shall
receive from the company a retirement gratuity in an amount equivalent to
one (1) month's salary per year of service."

The Labor Arbiter ordered Zuelig to pay Songco et al., separation pay
equivalent to their one month salary (exclusive of commissions, allowances,
etc.) for every year of service with the company.

The National Labor Relations Commission sustained the Arbiter.

ISSUE:
Whether or not earned sales commissions and allowances should be
included in the monthly salary of Songco, et al. for the purpose of computing
their separation pay.

RULING:
In the computation of backwages and separation pay, account must be
taken not only of the basic salary of the employee, but also of the
transportation and emergency living allowances.

Even if the commissions were in the form of incentives or

encouragement, so that the salesman would be inspired to put a little more
industry on jobs particularly assigned to them, still these commissions are
direct remunerations for services rendered which contributed to the increase
of income of the employee. Commission is the recompense compensation or
reward of an agent, salesman, executor, trustee, receiver, factor, broker or

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bailee, when the same is calculated as a percentage on the amount of his

transactions or on the profit to the principal. The nature of the work of a
salesman and the reason for such type of remuneration for services
rendered demonstrate that commissions are part of Songco, et al's wage or
salary.

The Court takes judicial notice of the fact that some salesmen do not
receive any basic salary, but depend on commissions and allowances or
commissions alone, although an employer-employee relationships exists.

If the opposite view is adopted, i.e., that commissions do not form

part of the wage or salary, then in effect, we will be saying that this kind of
salesmen do not receive any salary and, therefore, not entitled to separation
pay in the event of discharge from employment. This narrow interpretation
is not in accord with the liberal spirit of the labor laws, and considering the
purpose of separation pay which is, to alleviate the difficulties which confront
a dismissed employee thrown to the streets to face the harsh necessities of
life.

In Soriano vs. NLRC (155 SCRA 124), we held that the commissions
also claimed by the employee (override commission plus net deposit
incentive) are not properly includible in such base figure since such
commissions must be earned by actual market transactions attributable to
the petitioner [salesman]. Since the commissions in the present case were
earned by actual transactions attributable to Song, et al., these should be
included in their separation pay. In the computation thereof, what should be
taken into account is the average commission earned during their last year
of employment.

20. Boie Takeda v. De la Serna, 228 SCRA 329 (1993)

Facts:
A routine inspection was conducted on May 2, 1989 in the premises of
petitioner Boie-Takeda Chemicals Inc. by Labor and Development officer
Reynaldo B. Ramos under Inspection Authority No. 4-209-89. It was found
out that Boie-Takeda had not been including the commissions earned by its
medical representatives in the computation of their 13th month pay.

Ramos served a Notice of Inspection Results on Boie-Takeda through

its president (Mr. Benito Araneta) requiring Boie-Takeda that within 10
calendar days from notice to effect restitution or correction of “the
underpayment of 13th month pay for the years 1986, 1987 and 1988 of med
reps in the amount of Php 558, 810.89. Boie-Tekeda wrote the Labor
Department contesting the Notice of Inspection Results and expressing that
the commission paid to the med reps are not included in the computation of
the 13th month pay. It also pointed out that if there were no sales made
under the effort of a particular rep, there’s no commission during the period
when no sale was transacted so commissions are not and cannot be legally
defined as regular in nature.

A motion for reconsideration was filed by Boie-Takeda. Acting Labor

Secretary De La Serna affirmed the order on July 24, 1989 with modification
that the commissions earned by the med reps before August 13, 1989, the

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effectivity date of Memorandum Order No. 28 and its implementing

guidelines, shall be excluded in the computation of the 13th month pay.

Issue:
Whether the commissions earned by the med reps should be included
in the computation of the 13th month pay

Ruling:
In including the commissions in the computation of the 13th month
pay, the second paragraph of section 5 (a) of the Revised Guidelines on the
Implementation of the 13th Month Pay Law unduly expanded the concept of
“basic salary” as defined in Presidential Decree 851. It is a fundamental rule
that implementing cannot add to or detract from the provisions of the law. It
is designed to implement. Administrative regulations adopted under
legislative authority by a particular department must be in harmony with the
provisions of the law. They are intended to carry into effect. Their scope
cannot be widened. An administrative agency cannot amend an act of
Congress.

21. Phil. Duplicators v. NLRC, 241 SCRA 380 (1995)

Facts:

Private respondent union, for and on behalf of its member-salesmen,

asked petitioner corporation for payment of 13th month pay computed on
the basis of the salesmen’s fixed or guaranteed wages plus commissions.

Petitioner corporation refused the union’s request, but stated it would

respect an opinion from the MOLE. On 17 November 1987, acting upon a
request for opinion submitted by respondent union, Director Augusto G.
Sanchez of the Bureau of Working Conditions, MOLE, rendered an opinion to
respondent union declaring applicable the provisions of Explanatory Bulletin
No. 86-12, Item No. 5 (a):

. . . . Since the salesmen of Philippine Duplicators are receiving a fixed

basic wage plus commission on sales and not purely on commission basis,
they are entitled to receive 13th month pay provided they worked at least
one (1) month during the calendar year. May we add at this point that in
computing such 13th month pay, the total commissions of said salesmen for
the calendar year shall be divided by twelve (12). (Emphasis supplied)

Notwithstanding Director Sanchez’ opinion or ruling, petitioner refused

to pay the claims of its salesmen for 13th month pay computed on the basis
of both fixed wage plus sales commissions.

Issue:
WON sales commission is included in the coverage of basic salary for
purposes of computing 13th month pay.

Held:
In the first place, Article 97 (f) of the Labor Code defines the term
“wage” (which is equivalent to “salary,” as used in P.D. No. 851 and
Memorandum Order No. 28) in the following terms:

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(f) “Wage“ paid to any employee shall mean the remuneration or

earnings, however designated, capable of being expressed in terms of
money, whether fixed or ascertained on a time, task, piece, or commission
basis, or other method of calculating the same, which is payable by an
employer to an employee under a written or unwritten contract of
employment for work done or to be done, or for services rendered or to be
rendered, and includes the fair and reasonable value, as determined by the
Secretary of Labor, of board, lodging, or other facilities customarily furnished
by the employer to the employee. “Fair and reasonable value” shall not
include any profit to the employer or to any person affiliated with the
employer. (Emphasis supplied)

In the instant case, there is no question that the sales commissions

earned by salesmen who make or close a sale of duplicating machines
distributed by petitioner corporation constitute part of the compensation or
remuneration paid to salesmen for serving as salesmen, and hence as part
of the “wage” or “salary” of petitioner’s salesmen. Indeed, it appears that
petitioner pays its salesmen a small fixed or guaranteed wage; the greater
part of the salesmen’s wages or salaries being composed of the sales or
incentive commissions earned on actual sales closed by them. No doubt this
particular salary structure was intended for the benefit of petitioner
corporation, on the apparent assumption that thereby its salesmen would be
moved to greater enterprise and diligence and close more sales in the
expectation of increasing their sales commissions. This, however, does not
detract from the character of such commissions as part of the salary or wage
paid to each of its salesmen for rendering services to petitioner corporation.

In Boie-Takeda the so-called commissions “paid to or received by

medical representatives of Boie-Takeda Chemicals or by the rank and file
employees of Philippine Fuji Xerox Co.,” were excluded from the term “basic
salary” because these were paid to the medical representatives and rank-
and-file employees as “productivity bonuses.” The Second Division
characterized these payments as additional monetary benefits not properly
included in the term “basic salary” in computing their 13th month pay. As a
rule a bonus is an amount granted and paid to an employee for his industry
loyalty which contributed to the success of the employer’s business and
made possible the realization of profits. It is an act of generosityof the
employer for which the employee ought to be thankful and grateful. It is also
granted by an enlightened employer to spur the employee to greater efforts
for the success of the business and realization of bigger profits. From the
legal point of view a bonus is not and mandable and enforceable obligation.
It is so when It is made part of the wage or salary or compensation.

22. Plastic Town Center Corp. v. NLRC, 172 SCRA 580 (1989)

Facts:
On September 1984, respondent Nagkakaisang Lakas ng Manggagawa
(NLM)-Katipunan filed a complaint against petitioner Plastic Town Center
Corporation with:

– violation of CBA by crediting the P1 per day increase in gratuity pay to

resigning employees instead of 30 days equivalent to one month
– unfair labor practice by giving only 26 days pay instead of 30 days
equivalent to one month as gratuity pay to resigning employees.

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In the CBA, it was provided that:

Company agreed to grant regular workers who rendered at least one

year of continuous service of P1 per worked day.
Company to grant gratuity pay to a resigning employee or laborer
amounting to, among others, one month salary for those who rendered two
to five years of service.

Plastic Town Center Corporation maintained that under the principle of

“fair day’s wage for fair day’s labor”, gratuity pay should be computed on
the basis of 26 days for one month salary considering that the employees
are daily paid.

Issue:
Whether the PTC’s contention that the gratuity pay should be
computed on the basis of 26 days for one month salary instead of 30 days is
valid.

Held:
No, PTC’s contention does not hold merit in this case. Gratuity pay is
not intended to pay a worker for actual services rendered. It is a money
benefit given to the workers whose purpose is “to reward employees or
laborers who have rendered satisfactory and efficient service to the
company.”

While it may be enforced once it forms part of a contractual

undertaking, the grant of such benefit is not mandatory so as to be
considered a part of labor standard law unlike salary, which are covered in
Labor Code. Nowhere has it ever been stated that gratuity pay should be
based on actual number of days worked over the period of years forming its
basis. Court saw no point in counting the number of days worked over a ten-
year period to determine the meaning of “two and one- half months’
gratuity.”

Moreover any doubts or ambiguity in the contract between

management and the union members should be resolved in favor of the
laborer. When months are not designated by name, a month is understood
to be 30 days.

23. Davao Fruits Corp. v. ALU, 225 SCRA 562 (1993)

Facts:
Respondent ALU for and in behalf of all the rank-and-file workers and
employees of petitioner sought to recover from the latter the 13th month
pay differential for 1982 of said employees, equivalent to their sick, vacation
and maternity leaves, premium for work done on rest days and special
holidays, and pay for regular holidays which petitioner, allegedly in disregard
of company practice since 1975, excluded from the computation of the 13th
month pay for 1982.

Issue:
WON in the computation of the 13th month pay under PD No. 851,
payments for sick, vacation and maternity leaves, premiums for work done

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on rest days and special holidays, and pay for regular holidays may be
excluded in the computation and payment thereof.

Held:
Yes. Basic salary does not merely exclude the benefits expressly
mentioned but all payments which may be in the form of fringe benefits or
allowances.

Sec. 4 of the Supplementary Rules and Regulations Implementing PD

No. 851 provides that “overtime pay, earnings and other remunerations
which are not part of the basic salary shall not be included in the
computation of the 13th month pay.

Whatever compensation an employee receives for an 8 hour work daily

or the daily wage rate is the basic salary. Any compensation or remuneration
other than the daily wage rate is excluded. It follows therefore, that
payments for sick, vacation and maternity leaves, premiums for work done
on rest days and special holidays, as well as pay for regular holidays, are
likewise excluded in computing the basic salary for the purpose of
determining the 13th month pay.

24. Nasipit Lumber Co. v. NWPC, 289 SCRA 667 (1998)

FACTS:
The Region X [Tripartite Wages and Productivity] Board issued Wage
Order No. RX-01 which provides the increase in minimum wage rates
applicable to workers and employees in the private sector in Northern
Mindanao (Region X) (P13.00/day for Agusan del Norte, Bukidnon, Misamis
Oriental, and the Cities of Butuan, Gingoog, and Cagayan de Oro;
P11.00/day for Agusan del Sur, Surigao del Norte and Misamis Occidental,
and the Cities of Surigao Oroquieta, Ozamis and Tangub; and P9.00/day for
Camiguin).

Nasipit Lumber Company, Inc. (NALCO), Philippine Wallboard

Corporation (PWC), and Anakan Lumber Company (ALCO), claiming to be
separate and distinct from each other but for expediency and practical
purposes, jointly filed an application for exemption from the Wage Orders as
distressed establishments and based the exemption on Guidelines No. 3
issued by the herein Board, specifically Sec. 3(2) thereof which, among
others, provides:

For purposes of this Guidelines the following criteria to determine whether

the applicant-firm is actually distressed shall be used.
xxx xxx xxx
2. Establishment belonging to distressed industry - an establishment that
is engaged in an industry that is distressed due to conditions beyond
its control as may be determined by the Board in consultation with DTI
and NWPC.

Petitioners aver that they are engaged in logging and integrated wood
processing industry but are distressed due to conditions beyond their
control, to wit: 1) Depressed economic conditions due to worldwide
recession; 2) Peace and order and other emergency-related problems
causing disruption and suspension of normal logging operations; 3)

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Imposition of environmental fee for timber production in addition to regular

forest charges; 4) Logging moratorium in Bukidnon; 5) A reduction in the
annual allowable volume of cut logs of NALCO& ALCO by 59%; 6) Highly
insufficient raw material supply; 7) Extraordinary increases in the cost of
fuel, oil, spare parts, and maintenance; 8) Excessive labor cost/production
ratio that is more or less 47%; and 9) Lumber export ban.

Private respondent unions jointly opposed the application for exemption

on the ground that said companies are not distressed establishments since
their capitalization has not been impaired by 25%.

RTWPB approved the applicants’ joint application for exemption citing

liquidity problems and business decline in the wood-processing industry.

Private respondents lodged an appeal with the NWPC, which reversed the
applications of herein petitioners. Guidelines No. 3 could not be used as valid
basis for granting their application for exemption since it did not pass the
approval of the NWPC.

ISSUE:
WON a guideline issued by an RTWPB without the approval of or,
worse, contrary to the guidelines promulgated by the NWPC is valid?

HOLDING:
NO. Article 121 of the Labor Code lists the powers and functions of the
NWPC. Which includes that the Commission has the power to (c) To
prescribe rules and guidelines for the determination of appropriate minimum
wage and productivity measures at the regional, provincial or industry
levels; (d) To review regional wage levels set by the Regional Tripartite
Wages and Productivity Boards to determine if these are in accordance with
prescribed guidelines and national development plans; among others. Article
122 of the Labor Code, on the other hand, prescribes the powers of the
RTWPB, one of which is (b) to determine and fix minimum wage rates
applicable in their region, provinces or industries therein and to issue the
corresponding wage orders, subject to guidelines issued by the Commission.

The foregoing clearly grants the NWPC, not the RTWPB, the power to
"prescribe the rules and guidelines" for the determination of minimum wage
and productivity measures. While the RTWPB has the power to issue wage
orders under Article 122 (b) of the Labor Code, such orders are subject to
the guidelines prescribed by the NWPC. Significantly, the NWPC authorized
the RTWPB to issue exemptions from wage orders, but subject to its review
and approval. Since the NWPC never assented to Guideline No. 3 of the
RTWPB, the said guideline is inoperative and cannot be used by the latter in
deciding or acting on petitioners' application for exemption.

To allow RTWPB Guideline No. 3 to take effect without the approval of

the NWPC is to arrogate unto RTWPB a power vested in the NWPC by Article
121 of the Labor Code, as amended by RA 6727. If a discrepancy occurs
"between the basic law and an implementing rule or regulation, it is the
former that prevails." This is so because the law cannot be broadened by a
mere administrative issuance. It is axiomatic that "[a]n administrative
agency cannot amend an act of Congress." Article 122 (e) of the Labor Code
cannot be construed to enable the RTWPB to decide applications for

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exemption on the basis of its own guidelines which were not reviewed and
approved by the NWPC, for the simple reason that a statutory grant of
"powers should not be extended by implication beyond what may be
necessary for their just and reasonable execution. Official powers cannot be
merely assumed by administrative officers, nor can they be created by the
courts in the exercise of their judicial functions."

25. Employers Confederation v. NWPC, 201 SCRA 759 (1991)

Facts:
On October 15, 1990, the Regional Board of the National Capital
Region issued Wage Order No. NCR-01, increasing the minimum wage by
P17.00 daily in the National Capital Region. The Trade Union Congress of the
Philippines (TUCP) moved for reconsideration; so did the Personnel
Management Association of the Philippines (PMAP). ECOP opposed.

On October 23, 1990, the Board issued Wage Order No. NCR01-A,
amending Wage Order No. NCR-01. It provides that all workers and
employees in the private sector in the National Capital Region already
receiving wages above the statutory minimum wage rates up to one hundred
and twenty-five pesos (P125.00) per day shall also receive an increase of
seventeen pesos (P17.00) per day.

ECOP appealed to the National Wages and Productivity Commission

contending that the board's grant of an "across-the-board" wage increase to
workers already being paid more than existing minimum wage rates (up to
P125.00 a day) as an alleged excess of authority. ECOP further alleges that
under the Republic Act No. 6727, the boards may only prescribe "minimum
wages," not determine "salary ceilings." ECOP likewise claims that Republic
Act No. 6727 is meant to promote collective bargaining as the primary mode
of settling wages, and in its opinion, the boards cannot preempt collective
bargaining agreements by establishing ceilings.

On November 6, 1990, the Commission promulgated an Order,

dismissing the appeal for lack of merit. On November 14, 1990, the
Commission denied reconsideration. ECOP then, elevated the case via
petition for review on certiorari to the Supreme Court.

Issue:
Whether Wage Order No. NCR-01-A providing for new wage rates, as
well as authorizing various Regional Tripartite Wages and Productivity
Boards to prescribe minimum wage rates for all workers in the various
regions, and for a National Wages and Productivity Commission to review,
among other functions, wage levels determined by the boards is valid.

Ruling:
The Supreme Court ruled in favor of the National Wages and
Productivity Commission and Regional Tripartite Wages and Productivity
Board-NCR, Trade Union Congress of the Philippines and denied the petition
of ECOP.

The Supreme Court held that Republic Act No. 6727 was intended to
rationalize wages, first, by providing for full-time boards to police wages
round-the-clock, and second, by giving the boards enough powers to achieve

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this objective. The Court is of the opinion that Congress meant the boards to
be creative in resolving the annual question of wages without labor and
management knocking on the legislature's door at every turn.

The Court's opinion is that if Republic No. 6727 intended the boards
alone to set floor wages, the Act would have no need for a board but an
accountant to keep track of the latest consumer price index, or better, would
have Congress done it as the need arises, as the legislature, prior to the Act,
has done so for years. The fact of the matter is that the Act sought a
"thinking" group of men and women bound by statutory standards. The
Court is not convinced that the Regional Board of the National Capital
Region, in decreeing an across-the-board hike, performed an unlawful act of
legislation. It is true that wage-firing, like rate-fixing, constitutes an act
Congress; it is also true, however, that Congress may delegate the power to
fix rates provided that, as in all delegations cases, Congress leaves sufficient
standards. As this Court has indicated, it is impressed that the above-quoted
standards are sufficient, and in the light of the floor-wage method's failure,
the Court believes that the Commission correctly upheld the Regional Board
of the National Capital Region.

26. Metrobank v. NWPC, 514 SCRA 346 (2007)

Facts:
By issuing Wage Order No. R02-03, RTWPB granted a general across-
the-board increase of P15.00 to all employees and workers of Region 2.
Instead of appealing the wage order to NWPC, Metrobank
sent a letter-query to the NWPC. It later filed a petition for certiorari and
prohibition with the Court of Appeals.

Issues:
(1) Whether petitioner's recourse to a petition for certiorari and prohibition
with the CA was proper
(2) Whether the wage order is void and of no legal effect

Held:
(1) Improper
In the issuance of the assailed Wage Order, RTWPB did not act in any
judicial, quasi-judicial capacity, or ministerial capacity. It was in the nature
of subordinate legislation, promulgated by it in the exercise of delegated
power under R.A. No. 6727. It was issued in the exercise of quasi-legislative
power.

Section 13 of the assailed Wage Order explicitly provides that any

party aggrieved by the Wage Order may file an appeal with the NWPC
through the RTWPB within 10 days from the publication of the wage order.

In this case, petitioner did not avail of the remedy provided by law. No
appeal to the NWPC was filed by the petitioner within such time. It was only
seven months later when it filed a letter-inquiry with the NWPC seeking a
clarification on the application of the Wage Order. However, this letter-
inquiry is not an appeal.

No direct action was taken by the NWPC on the issuance or

implementation of the Wage Order. Thus, not only was it improper to

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Labor Standards Atty. Jacqueline Magdangal

implead the NWPC as party-respondent in the petition before the CA and this
Court, but also petitioner failed to avail of the primary jurisdiction of the
NWPC under Article 121 of the Labor Code.

2) Wage order is not entirely void, though RTWPB exceeded its authority
In line with its declared policy, R.A. No. 6727created the NWPC, vested
with the power to prescribe rules and guidelines for the determination of
appropriate minimum wage and productivity measures at the regional,
provincial or industry levels; and authorized the RTWPB to determine and fix
the minimum wage rates applicable in their respective regions, provinces, or
industries therein and issue the corresponding wage orders, subject to the
guidelines issued by the NWPC.

Pursuant to its wage fixing authority, the RTWPB may issue wage
orders which set the daily minimum wage rates, based on the standards or
criteria set by Article 124 of the Labor Code.

[SC cited ECOPcase, two (2) ways of fixing minimum wage: the "floor-wage"
method and the "salaryceiling" method]

In the present case, the RTWPB did not determine or fix the minimum
wage rate by the "floor-wage method" or the "salary-ceiling method" in
issuing the Wage Order. The RTWPB did not set a wage level nor a range to
which a wage adjustment or increase shall be added. Instead, it granted an
across-the-board wage increase. In doing so, the RTWPB exceeded its
authority by extending the coverage of the Wage Order to wage earners
receiving more than the prevailing minimum wage rate, without a
denominated salary ceiling. The Wage Order granted additional benefits not
contemplated by R.A. No. 6727.
Thus, the Court finds that Section 1, Wage Order No. R02-03 is void
insofar as it grants a wage increase to employees earning more than the
minimum wage rate; and pursuant to the separability clause of the Wage
Order, Section 1 is declared valid with respect to employees earning the
prevailing minimum wage rate.

27. NIASSI v. NELU-ALU-TUCP, G.R. No. 162411, June 30, 2008

FACTS:
[P]etitioners, as employees of private respondent National Steel
Corporation (NSC), filed separate complaints for unfair labor practice,
regularization and monetary benefits with the NLRC, Sub-Regional
Arbitration Branch XII, Iligan City. The complaints were consolidated and
after hearing, the Labor Arbiter declared petitioners “regular project
employees who shall continue their employment as such for as long as such
[project] activity exists,” but entitled to the salary of a regular employee
pursuant to the provisions in the collective bargaining agreement. It also
ordered payment of salary differentials.

The NLRC in its questioned resolutions modified the Labor Arbiter’s

decision. It affirmed the Labor Arbiter’s holding that petitioners were project
employees since they were hired to perform work in a specific undertaking
— the Five Years Expansion Program, the completion of which had been
determined at the time of their engagement and which operation was not
directly related to the business of steel manufacturing. The NLRC, however,

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set aside the award to petitioners of the same benefits enjoyed by regular
employees for lack of legal and factual basis.

The law on the matter is Article 280 of the Labor Code, where the
petitioners argue that they are “regular” employees of NSC because: (i) their
jobs are “necessary, desirable and work-related to private respondent’s main
business, steel-making”; and (ii) they have rendered service for six (6) or
more years to private respondent NSC.

ISSUE:
Whether or not petitioners are considered “permanent employees” as
opposed to being only “project employees” of NSC.

HELD:
NO. Petition for Certiorari dismissed for lack of merit. NLRC
Resolutions affirmed.

Function of the proviso. Petitioners are not considered “permanent

employees”. However, contrary to petitioners’ apprehensions, the
designation of named employees as “project employees” and their
assignment to a specific project are effected and implemented in good faith,
and not merely as a means of evading otherwise applicable requirements of
labor laws.

On the claim that petitioners’ service to NSC of more than six (6)
years should qualify them as “regular employees”, the Supreme Court
believed this claim is without legal basis. The simple fact that the
employment of petitioners as project employees had gone beyond one (1)
year, does not detract from, or legally dissolve, their status as “project
employees”. The second paragraph of Article 280 of the Labor Code, quoted
above, providing that an employee who has served for at least one (1) year,
shall be considered a regular employee, relates to casual employees, not to
project employees.

28. Cagayan Sugar Milling Co. v. Secretary, 284 SCRA 150 (1998)
29. Prubankers Association v. Prudential Bank, 302 SCRA 74 (1999)

Facts:
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,

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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.

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.

Issue:
Whether 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.

Ruling:
The petition is devoid of merit.

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.

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Labor Standards Atty. Jacqueline Magdangal

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:

 An existing hierarchy of positions with corresponding salary rates

 A significant change in the salary rate of a lower pay class without a
concomitant increase in the salary rate of a higher one
 The elimination of the distinction between the two levels
 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

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Labor Standards Atty. Jacqueline Magdangal

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:

The demand for living wages; Wage adjustment vis-a-vis the

consumer price index; The cost of living and changes or increases therein;
The needs of workers and their families; The need to induce industries to
invest in the countryside; Improvements in standards of living; The
prevailing wage levels; Fair return of the capital invested and capacity to pay
of employers; Effects on employment generation and family income; and
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

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compensation, petitioner has apparently misunderstood both the meaning of

wage distortion and the intent of the law to regionalize wage rates.

It must be understood that varying in each region of the country are

controlling factors such as the cost of living; supply and demand of basic
goods, services and necessities; and the purchasing power of the peso.
Other considerations underscore the necessity of the law. Wages in some
areas may be increased in order to prevent migration to the National Capital
Region and, hence, to decongest the metropolis. Therefore, what the
petitioner herein bewails is precisely what the law provides in order to
achieve its purpose.

Petitioner claims that it “does not insist that the Regional Wage Boards
created pursuant to RA 6727 do not have the authority to issue wage orders
based on the distinctive situations and needs existing in each region. So
also, . . . it does not insist that the [B]ank should not implement regional
wage orders. Neither does it seek to penalize the Bank for following Wage
Order VII-03. . . . What it simply argues is that it is wrong for the Bank to
peremptorily abandon a national wage structure and replace the same with a
regionalized structure in violation of the principle of equal pay for equal
work. And, it is wrong to say that its act of abandoning its national wage
structure is mandated by law.”

As already discussed above, we cannot sustain this argument.

Petitioner contradicts itself in not objecting, on the one hand, to the right of
the regional wage boards to impose a regionalized wage scheme; while
insisting, on the other hand, on a national wage structure for the whole
Bank. To reiterate, a uniform national wage structure is antithetical to the
purpose of RA 6727.

The objective of the law also explains the wage disparity in the
example cited by petitioner: Armae Librero, though only in Pay Class 4 in
Mabolo, was, as a result of the Wage Order, receiving more than Bella
Cristobal, who was already in Pay Class 5 in Subic. 12 RA 6727 recognizes
that there are different needs for the different situations in different regions
of the country. The fact that a person is receiving more in one region does
not necessarily mean that he or she is better off than a person receiving less
in another region. We must consider, among others, such factors as cost of
living, fulfillment of national economic goals, and standard of living. In any
event, this Court, in its decisions, merely enforces the law. It has no power
to pass upon its wisdom or propriety.

Equal Pay for Equal Work

Petitioner also avers that the implementation of the Wage Order in

only one region violates the equal-pay-for-equal-work principle. This is not
correct. At the risk of being repetitive, we stress that RA 6727 mandates
that wages in every region must be set by the particular wage board of that
region, based on the prevailing situation therein. Necessarily, the wages in
different regions will not be uniform. Thus, under RA 6727, the minimum
wage in Region 1 may be different from that in Region 13, because the
socioeconomic conditions in the two regions are different.

Meaning of “Establishment”

46 | P e e j a y N o t e s
Labor Standards Atty. Jacqueline Magdangal

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.”

30. P.I. Manufacturing v. P.I. Manufacturing Supervisors, 543 SCRA

613 (2008)

FACTS:
Petitioner P.I. Manufacturing, Incorporated is a domestic corporation
engaged in the manufacture and sale of household appliances. Respondent
P.I. Manufacturing Supervisors and Foremen Association (PIMASUFA) is an
organization of petitioner’s supervisors and foremen, joined in this case by
its federation, the National Labor Union (NLU).

December 10, 1987, R.A. No. 6640 was passed providing an increase
in the statutory minimum wage and salary rates of employees and workers
in the private sector, to which it is increased by P10.00 per day, except non-

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agricultural workers and employees outside Metro Manila who shall receive
an increase of P11.00 per day: Provided, That those already receiving above
the minimum wage up to P100.00 shall receive an increase of P10.00 per
day. Excepted from the provisions of this Act are domestic helpers and
persons employed in the personal service of another.

December 18, 1987, petitioner and respondent PIMASUFA entered into

a new CBA (1987 CBA) whereby the supervisors were granted an increase of
P625.00 per month and the foremen, P475.00 per month. The increases
were made retroactive to May 12, 1987, or prior to the passage of R.A. No.
6640, and every year thereafter until July 26, 1989.

January 26, 1989, respondents PIMASUFA and NLU filed a complaint

with NLRC charging petitioner with violation of R.A. No. 6640. Respondents
attached to their complaint a numerical illustration of wage distortion
resulting from the implementation of R.A. No. 6640.

LA favored respondents ordering Petitioner to give members of

respondent PIMASUFA wage increases equivalent to 13.5% of their basic pay
they were receiving prior to December 14, 1987. On appeal by petitioner,
the NLRC affirmed LA’s judgment. Petitioner filed a petition for certiorari with
SCourt. However, SC referred the petition to CA. CA affirmed the Decision of
the NLRC with modification by raising the 13.5% wage increase to 18.5%.
M.R. was denied. Petitioner went to SC but it favored respondents. Hence
this MR.

ISSUES:
1. Whether the implementation of R.A. No. 6640 resulted in a wage
distortion
2. Whether such distortion was cured or remedied by the 1987 CBA.

RULING:

Yes. R.A. No. 6727, otherwise known as the Wage Rationalization Act,
explicitly defines“wage distortion”as: “a situation where an increase in
prescribed wage rates results in the elimination or severe contraction of
intentional quantitative differences in wage or salary rates between and
among employee groups in an establishment as to effectively obliterate the
distinctions embodied in such wage structure based on skills, length of
service, or other logical bases of differentiation.”

Otherwise stated, wage distortion means the disappearance or virtual

disappearance of pay differentials between lower and higher positions in an
enterprise because of compliance with a wage order. The increase in the
wage rates by virtue of R.A. No. 6640 resulted in wage distortion or the
elimination of the intentional quantitative differences in the wage rates of
the supervisor employees of petitioner.

II. Yes. Wage distortions were cured or remedied when respondent

PIMASUFA entered into the 1987 CBA with petitioner after the effectivity of
R.A. No. 6640. The 1987 CBA increased the monthly salaries of the
supervisors by P625.00 and the foremen, by P475.00, effective May 12,
1987. These increases re-established and broadened the gap, not only

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Labor Standards Atty. Jacqueline Magdangal

between the supervisors and the foremen, but also between them and the
rank-and-file employees. Significantly, the 1987 CBA wage increases almost
doubled that of the P10.00 increase under R.A. No. 6640.

The P625.00/month means P24.03 increase per day for the

supervisors, while the P475.00/month means P18.26 increase per day for
the foremen. Such gap as re-established by virtue of the CBA is more than a
substantial compliance with R.A. No. 6640. CA erred in not taking into
account the provisions of the CBA. The provisions of the CBA should be read
in harmony with the wage orders, whose benefits should be given only to
those employees covered thereby.

To require petitioner to pay all the members of respondent PIMASUFA

a wage increase of 18.5%, over and above the negotiated wage increases
provided under the 1987 CBA, is highly unfair and oppressive to the former.
It was not the intention of R.A. No. 6640 to grant an across-the-board
increase in pay to all the employees of petitioner. Only those receiving
wages P100.00 and below are entitled to the P10.00 wage increase. The
apparent intention of the law is only to upgrade the salaries or wages of the
employees specified therein. Almost all of the members of respondent
PIMASUFA have been receiving wage rates above P100.00 and, therefore,
not entitled to the P10.00 increase. Only 3 of them are receiving wage rates
below P100.00, thus, entitled to such increase.

TO compel employers simply to add on legislative increases in salaries

or allowances without regard to what is already being paid, would be to
penalize employers who grant their workers more than the statutory
prescribed minimum rates of increases. Clearly, this would be counter-
productive so far as securing the interests of labor is concerned.

It must be stressed that a CBA constitutes the law between the parties
when freely and voluntarily entered into. Iit has not been shown that
respondent PIMASUFA was coerced or forced by petitioner to sign the 1987
CBA. All of its 13 officers signed the CBA with the assistance of respondent
NLU. They signed it fully aware of the passage of R.A. No. 6640. The duty to
bargain requires that the parties deal with each other with open and fair
minds. Respondents cannot invoke the beneficial provisions of the 1987 CBA
but disregard the concessions it voluntary extended to petitioner. The goal of
collective bargaining is the making of agreements that will stabilize business
conditions and fix fair standards of working conditions. Respondents’ posture
contravenes this goal.

31. Congson v. NLRC, 243 SCRA 260 (1995)

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

During the first week of June 1990, petitioner notified his workers of
his proposal to reduce the rate-per-tuna movement due to the scarcity of
tuna. Private respondents resisted petitioner's proposed rate reduction.

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Labor Standards Atty. Jacqueline Magdangal

When they reported for work the next day, they were informed that they had
been replaced by a new set of workers.

On June 1990, private respondents filed a case against petitioner

before the NLRC for underpayment of wages (non-compliance with Rep. Act
Nos. 6640 and 6727) and non-payment of overtime pay, 13th month pay,
holiday pay, rest day pay, and five (5)-day service incentive leave pay; and
for constructive dismissal. With respect to their monetary claims, private
respondents charged petitioner with violation of the minimum wage law,
alleging that with petitioner's rates and the scarcity of tuna catches, private
respondents' average monthly earnings each did not exceed ONE
THOUSAND PESOS (P1,000.00). In addition to the amount of P1.00 per
'bariles' per movement herein complainants get the intestines and liver of
the tuna as part of their salary. That for every tuna delivered, herein
complainants extract at least three (3) kilos of intestines and liver. That the
minimum prevailing price of tuna intestine and liver in 1986 to 1990 range
from P15.00 to P20.00/kilo. The value of the tuna intestine and liver should
be computed in arriving at the daily wage of herein complainants because
the very essence of the agreement between complainants and respondent
is: complainants shall be paid only P1.00 per tuna per movement BUT the
intestines and liver of the tuna delivered shall go to the herein complainants.
It should be noted that tuna intestines and liver are easily disposed of in any
public market. What they are after, in truth and in fact is the tuna intestines
and liver which they can easily convert into cash." Quite clearly, petitioner
admits that the P1.00-per-tuna movement is the actual wage rate applied to
private respondents as expressly agreed upon by both parties. Petitioner
further admits that private respondents were entitled to retrieve the tuna
intestines and liver as part of their compensation.

Issue:
WON the means of payment of the wage is valid.

Held:

The means of payment of wage is invalid.

The Labor Code expressly provides:

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

Undoubtedly, petitioner's practice of paying the private respondents

the minimum wage by means of legal tender combined with tuna liver and
intestines runs counter to the above cited provision of the Labor Code. The
fact that said method of paying the minimum wage was not only agreed
upon by both parties in the employment agreement but even expressly
requested by private respondents, does not shield petitioner. Article 102 of
the Labor Code is clear. Wages shall be paid only by means of legal tender.
The only instance when an employer is permitted to pay wages in forms

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Labor Standards Atty. Jacqueline Magdangal

other than legal tender, that is, by checks or money order, is when the
circumstances prescribed in the second paragraph of Article 102 are present.

32. National Federation of Labor v. CA, G.R. No. 149464, October 19,
2004

FACTS:
Petitioners are bona fide members of the National Federation of Labor
(NFL), a legitimate labor organization duly registered with the Department of
Labor and Employment. They were employed by private respondents Charlie
Reith and Susie Galle Reith, general manager and owner, respectively, of the
354-hectare Patalon Coconut Estate located at Patalon, Zamboanga City.
Patalon Coconut Estate was engaged in growing agricultural products and in
raising livestock.

In 1988, Congress enacted into law Republic Act (R.A.) No. 6657,
otherwise known as the Comprehensive Agrarian Reform Law (CARL), which
mandated the compulsory acquisition of all covered agricultural lands for
distribution to qualified farmer beneficiaries under the so-called
Comprehensive Agrarian Reform Programme (CARP).

Pursuant to R.A. No. 6657, the Patalon Coconut Estate was awarded to
the Patalon Estate Agrarian Reform Association (PEARA), a cooperative
accredited by the Department of Agrarian Reform (DAR), of which
petitioners are members and co-owners.

As a result of this acquisition, private respondents shut down the

operation of the Patalon Coconut Estate and the employment of the
petitioners was severed on July 31, 1994. Petitioners did not receive any
separation pay.

Subsequently, the cooperative took over the estate. Being

beneficiaries of the Patalon Coconut Estate pursuant to the CARP, the
petitioners became part-owners of the land.

Petitioners, thereafter, filed individual complaints before the Regional

Arbitration Branch (RAB) of the National Labor Relations Commission (NLRC)
in Zamboanga City, praying for their reinstatement with full backwages on
the ground that they were illegally dismissed.

RAB dismissed the complaints for lack of merit. However, ordered

respondents thru [sic] its owner-manager or its duly authorized
representative to pay complainants’ separation pay in view of the latter’s
cessation of operations or forced sale, and for 13th month differential pay.

NLRC on appeal, set aside the decision of RAB ordering respondents to

pay separation pay and 13th month differentials stating that, the severance
of employer-employee relationship between the parties came about
INVOLUNTARILY, as a result of an act of the State. MR Denied. Hence, this
petition.

ISSUE:
Whether or not an employer that was compelled to cease its operation
because of the compulsory acquisition by the government of its land for

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Labor Standards Atty. Jacqueline Magdangal

purposes of agrarian reform, is liable to pay separation pay to its affected

employees

HELD:

NO. Petitioners contend that they are entitled to separation pay citing
Article 283 of the Labor Code (see codal)

It is clear that Article 283 of the Labor Code applies in cases of

closures of establishment and reduction of personnel.1âwphi1 The peculiar
circumstances in the case at bar, however, involves neither the closure of an
establishment nor a reduction of personnel as contemplated under the
aforesaid article. When the Patalon Coconut Estate was closed because a
large portion of the estate was acquired by DAR pursuant to CARP, the
ownership of that large portion of the estate was precisely transferred to
PEARA and ultimately to the petitioners as members thereof and as agrarian
lot beneficiaries. Hence, Article 283 of the Labor Code is not applicable to
the case at bench.

In other words, Article 283 of the Labor Code does not contemplate a
situation where the closure of the business establishment is forced upon the
employer and ultimately for the benefit of the employees.

Capital and management sectors must also be protected under a

regime of justice and the rule of law.

33. Bermiso v. Escano Inc., 105 Phil. 231 (1959)

34. Philippine Journalists Inc. v. De Jesus, G.R. No. 208027 / 2019-
04-01
35. Insular Hotel Employees v. Waterfront Insular Hotel, September
22, 2010

FACTS:
On Nov. 2000, the Hotel sent DOLE a Notice of Suspension of
Operations for 6 months due to severe and serious business losses.- During
the suspension, Rojas, Pres. of Davao insular Hotel Free Employees Union
(DIHFEU-NFL) the recognized labor organization in the Hotel, sent the Hotel
several letters asking it to reconsider its decision. The Union members
wanted to keep their jobs and to help the Hotel, so it suggested several
ideas in its Manifesto to solve the high cost on payroll, such as: downsize
manpower structure to 100 rank-and-file EEs, a new pay scale, etc.

DIHFEU-NFL signed a memorandum of agreement where the Hotel

agreed to re-open the hotel. The retained employees individually signed a
“reconfirmation of Employment.” In June 2001, the Hotel resumed its
business operations.

On Aug. 2002, Darius Joves and Debbie Planas, local officers of the
National Federation of Labor (NFL), fileda Notice of Mediation before the
NCMB, stating that the Union involved was "DARIUS JOVES/DEBBIEPLANAS
ET. AL, National Federation of Labor." The issue was the diminution of wages
and benefitsthrough unlawful MOA. In support of his authority to file the
complaint, Joves, assisted by Atty. Cullo, presented several SPAs which
were, undated and un notarized.

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Labor Standards Atty. Jacqueline Magdangal

Petitioner and respondent signed a Submission Agreement, where the

union stated was "INSULARHOTEL EMPLOYEES UNION-NFL."- The Hotel filed
with the NCMB a Manifestation with Motion for a Second Preliminary
Conference, alleging that the persons who filed the complaint in the name of
the Insular Hotel Employees Union-NFL have no authority to represent the
Union.

Cullo confirmed that the case was filed not by the IHEU-NFL but by the NFL.
When asked to present his authority from NFL, Cullo admitted that the case
was filed by individual employees named in the SPAs.- The Hotel argued that
the persons who signed the complaint were not the authorized
representatives of the Union indicated in the Submission Agreement nor
were they parties to the MOA. It filed a Motion to Withdraw, which Cullo then
filed an Opposition to where the same was captioned: NATIONAL
FEDERATION OF LABOR and 79 Individual Employees, Union Members,
Complainants,-versus-Waterfront Insular Hotel Davao, Respondent. Cullo
reiterated that the complainants were not representing IHEU-NFL.

The Accredited Voluntary Arbitrator (AVA) denied the Motion to

Withdraw.- The Hotel submitted its Motion for reconsideration and stressed
that the Submission Agreement was void because the Union did not consent
thereto.- Cullo filed a Comment/Opposition to the Hotel's motion for
recomendation. Again, Cullo admitted that the case was not initiated by the
IHEUNFL, saying that the individual complainants are not representing the
union but filing the complaint through their appointed attorneys-in-fact to
assert their individual rights as workers who are entitled to the benefits
granted by law and stipulated in the collective bargaining agreement. There
is no mention there of Insular Hotel Employees Union, but only National
Federation of Labor (NFL). The local union was not included as party-
complainant considering that it was a party to theassailed MOA.

The AVA denied the Motion. He, however, ruled that the Hotel was
correct when it objected to NFL as proper party-complainant, as the proper
one is INSULAR HOTEL EMPLOYEES UNION-NFL. In the submission
agreement, the party complainant written is INSULAR HOTEL EMPLOYEES
UNION-NFL and not the NATIONAL FEDERATION OF LABOR and 79 other
members. However, since the NFL is the mother federation of the local
union, and signatory to the existing CBA, it can represent the union.

Cullo, in subsequent documents, started using the caption "Insular

Hotel Employees Union-NFL, Complainant.

The case was remanded to the NCMB. The Hotel reiterated to the NCMB that
the individual union members have no standing. The Hotel did not appear
before the NCMB to select a new AVA. The new AVA decided in favor of cullo,
declaring the Memorandum of agreement invalid.

ISSUES:
1. Did CA err in finding that the AVA has no jurisdiction over the case
because the notice of mediation does not mention the name of the local
union but only the affiliate federation?
2. Do the individual members of the union have the requisite standing to
question the Memorandum of agreement before the BCMB?

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Labor Standards Atty. Jacqueline Magdangal

3. If the individual members of the union have no authority to file the case,
does the federation to which the local union is affiliated has the standing to
do so?

RULING:
In the notice of mediation filed in the NCMB, it stated that the union
involved was darius joves/Debbie Planes et al., National federation of labor.
In the submission agreement, however, it stated that the union involved was
Insular Hotel Employees Union-NFL. Cullo clarified in subsequent documents
captioned as National Federation of Labor and 79 individual employees,
members, complainants that the complainants are not representing the
union but filing the complaint through their appointed attorneys in fact.
While it is undisputed that the submission agreement was signed by
respondent IHEU-NFL, then represented by Joven and Cullo, this court finds
that there are 2 circumstances which affect its validity: first, the Notice of
Mediation was filed by a party who had no authority to do so; second, that
respondent had persistently voiced out its objection questioning the
authority of Joves, Cullo and the individual members of the Union to file the
complaint before the NCMB.

Procedurally, the first step to submit a case for mediation is to file a

notice of preventive mediation with the NCMB. It is only after this step that a
submission agreement may be entered
into by the parties concerned.

Section 3, Rule IV of the NCMB Manual of Procedure provides who may

file a notice of preventive mediation, to wit:
Who may file a notice or declare a strike or lockout or request preventive
mediation. - Any certified or duly recognized bargaining representative may
file a notice or declare a strike or request for preventive mediation in cases
of bargaining deadlocks and unfair labor practices. The employer may file a
notice or declare a lockout or request for preventive mediation in the same
cases. In the absence of a certified or duly recognized bargaining
representative, any legitimate labor organization in the establishment may
file a notice, request preventive mediation or declare a strike, but only on
grounds of unfair labor practice.

it is clear that only a certified or duly recognized bargaining agent may

file a notice or request for preventive mediation. It is curious that even Cullo
himself admitted, in a number of pleadings, that the case was filed not by
the Union but by individual members thereof. Clearly, therefore, the NCMB
had no jurisdiction to entertain the notice filed before it.

Even though respondent signed a Submission Agreement, it had,

however, immediately manifested its desire to withdraw from the
proceedings after it became apparent that the Union had no part in the
complaint. As a matter of fact, only four days had lapsed after the signing of
the Submission Agreement when respondent called the attention of AVA
Olvida in a "Manifestation with Motion for a Second Preliminary Conference"
that the persons who filed the instant complaint in the name of Insular Hotel
Employees Union-NFL had no authority to represent the Union. Respondent
cannot be estopped in raising the jurisdictional issue, because it is basic that
the issue of jurisdiction may be raised at any stage of the proceedings, even
on appeal, and is not lost by waiver or by estoppel.

54 | P e e j a y N o t e s
Labor Standards Atty. Jacqueline Magdangal

Petitioners have not been duly authorized to represent the union. Art.
260, the parties to a CBA shall name or designate their respective
representatives to the grievance machinery and if the grievance is unsettled
in that level, it shall automatically be referred to the voluntary arbitrators
designated in advance by parties to a CBA.

The CBA recognizes that DIHFEU-NFL is the exclusive bargaining

representative of all permanent employees. The inclusion of the word NFL
after the name of the local union merely stresses that the local union is
NFL’s affiliate. It does not, however, mean that the local union cannot stand
on its own. The local union owes its creation and continued existence to the
will of its members and not to the federation of which it belongs.

A local union does not owe its existence to the federation with which it
is affiliated. It is a separate and distinct voluntary association owing its
creation to the will of its members. Merely affiliation does not divest the local
union of its own personality; neither does it give the mother federation the
license to act independently of the local union. It only gives rise to a contract
of agency, where the former acts in representation of the latter. Hence local
unions are considered principals while the federation is deemed to be merely
their agent.

36. Royal Plant Workers Union v. Coca Cola Bottlers, April 15, 2013

FACTS:
The bottling operators took issue with the removal of the chairs in as
this would, according to the employer, hamper the efficient flow of
operations. After initiating the grievance machinery of the CBA in November
2008, the parties were still at a deadlock. Before submitting to arbitration
the issue, both parties availed of the NCMB Regional Branch but still they
failed to arrive at an amicable settlement.

They then executed a Submission Agreement which was accepted by

the Arbitration Committee to resolve the sole issue of whether the removal
of chairs of the operators assigned at the production/manufacturing line
while performing their duties and responsibilities is valid or not. Arbitration
Committee rendered a decision in favor of the Union and against CCBPI as
CCBPI failed to present evidences of sleeping while on duty. Not contented,
CCBPI filed a petition for review under Rule 43 before the CA which set aside
the decision of the Arbitration Committee. The Union argued that the proper
remedy in challenging the decision of the Arbitration Committee before the
CA is a petition for certiorari under Rule 65. The petition for review under
Rule 43 resorted to by CCBPI should have been dismissed for being an
improper remedy.

ISSUE:
Whether or not an appeal to the CA via a petition for review under
Rule 43 of the 1997 Rules of Civil Procedure is the proper remedy to
question the decision of the Arbitration Committee.

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Labor Standards Atty. Jacqueline Magdangal

RULING:
Yes. The Court has already ruled in a number of cases that a decision
or award of a voluntary arbitrator is appealable to the CA via a petition for
review under Rule 43.

As held in Samahan ng mga Manggagawa sa Hyatt-NUWHRAIN-APL v.

Bacungan, the Court said that “the question on the proper recourse to assail
a decision of a voluntary arbitrator has already been settled in Luzon
Development Bank v. Association of Luzon Development Bank Employees,
where the Court held that the decision or award of the voluntary arbitrator
or panel of arbitrators should likewise be appealable to the Court of Appeals,
in line with the procedure outlined in Revised Administrative Circular No. 1-
95 (now embodied in Rule 43 of the 1997 Rules of Civil Procedure), just like
those of the quasi-judicial agencies, boards and commissions enumerated
therein, and consistent with the original purpose to provide a uniform

37. Apodaca v. NLRC, 172 SCRA 442 (1989)

Facts:
Petitioner was employed in respondent corporation. Respondent Jose
M. Mirasol persuaded petitioner to subscribe to 1,500 shares of respondent
corporation at P100.00 per share or a total of P150,000.00. He made an
initial payment of P37,500.00. Petitioner was appointed President and
General Manager of the respondent corporation. However, he resigned.
Petitioner instituted with the NLRC a complaint against private respondents
for the payment of his unpaid wages, his cost of living allowance, the
balance of his gasoline and representation expenses and his bonus
compensation. Private respondents admitted that there is due to petitioner
the amount of P17,060.07 but this was applied to the unpaid balance of his
subscription in the amount of P95,439.93. Petitioner questioned the set-off
alleging that there was no call or notice for the payment of the unpaid
subscription and that, accordingly, the alleged obligation is not enforceable.
The labor arbiter ruled in favor of the petitioner. Then, NLRC held that a
stockholder who fails to pay his unpaid subscription on call becomes a debtor
of the corporation and that the set-off of said obligation against the wages
and others due to petitioner is not contrary to law, morals and public policy.

Issue:
WON the corporation can validly offset the unpaid shared in lieu of the
wages?

Held:
No. The unpaid subscriptions are not due and payable until a call is
made by the corporation for payment. Private respondents have not
presented a resolution of the board of directors of respondent corporation
calling for the payment of the unpaid subscriptions. It does not even appear
that a notice of such call has been sent to petitioner by the respondent
corporation. No doubt such set-off was without lawful basis, if not
premature. As there was no notice or call for the payment of unpaid
subscriptions, the same is not yet due and payable. Lastly, the NLRC has no
jurisdiction to determine such intra-corporate dispute between the
stockholder and the corporation as in the matter of unpaid subscriptions.

56 | P e e j a y N o t e s
Labor Standards Atty. Jacqueline Magdangal

This controversy is within the exclusive jurisdiction of the Securities and

Exchange Commission.

38. Five J Taxi v. NLRC, 235 SCRA 556 (1994)

39. Niña Jewelry v. Montecillo, G.R. No. 188169, November 28, 2011

Facts:
Respondent Glyza Esteban (Esteban) was employed in January 2004
as Sales Clerk, and assigned at Bluer Than Blue Joint Ventures Company’s
(petitioner) EGG boutique in SM City Marilao, Bulacan, beginning the year
2006. Part of her primary tasks were attending to all customer needs,
ensuring efficient inventory, coordinating orders from clients, cashiering and
reporting to the accounting department.

In November 2006, the petitioner received a report that several

employees have access to its point-of-sale (POS) system through a universal
password given by Elmer Flores (Flores). Upon investigation, it was
discovered that it was Esteban who gave Flores the password. The petitioner
sent a letter memorandum to Esteban on November 8, 2006, asking her to
explain in writing why she should not be disciplinary dealt with for tampering
with the company’s POS system through the use of an unauthorized
password. Esteban was also placed under preventive suspension for ten
days.

On November 13, 2006, Esteban’s preventive suspension was lifted,

but at the same time, a notice of termination was sent to her, finding her
explanation unsatisfactory and terminating her employment immediately on
the ground of loss of trust and confidence. Esteban was given her final pay,
including benefits and bonuses, less inventory variances incurred by the
store amounting to ₱8,304.93. Esteban signed a quitclaim and release in
favor of the petitioner.

On December 6, 2006, Esteban filed a complaint for illegal dismissal,

illegal suspension, holiday pay, rest day and separation pay.

In a Decision dated September 28, 2007, the Labor Arbiter (LA) ruled
in favor of Esteban and found that she was illegally dismissed. The LA also
awarded separation pay, backwages, unpaid salary during her preventive
suspension and attorney’s fees.

The petitioner filed an appeal with the National Labor Relations

Commission (NLRC), and in its Decision dated September 23, 2008, the
NLRC reversed the decision of the LA and dismissed the case for illegal
dismissal. Thus, Esteban went to the Court of Appeals (CA) on certiorari. In
the assailed Decision dated November 25, 2009, the CA granted Esteban’s
petition and reinstated the LA decision.

Issue:
Whether the Honorable Court of Appeals gravely abused its discretion
in holding that the wage deduction for the negative variance amounting to P
8,304.93 is unfounded.

Ruling:

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Labor Standards Atty. Jacqueline Magdangal

The petitioner deducted the amount of ₱8,304.93 from Esteban’s last

salary. According to the petitioner, this represents the store’s negative
variance for the year 2005 to 2006. The petitioner justifies the deduction on
the basis of alleged trade practice and that it is allowed by the Labor Code.

Article 113 of the Labor Code provides that no employer, in his own
behalf or in behalf of any person, shall make any deduction from the wages
of his employees, except in cases where the employer is authorized by law
or regulations issued by the Secretary of Labor and Employment, among
others. The Omnibus Rules Implementing the Labor Code, meanwhile,
provides:

SECTION 14. Deduction for loss or damage. – Where the employer is

engaged in a trade, occupation or business where the practice of making
deductions or requiring deposits is recognized to answer for the
reimbursement of loss or damage to tools, materials, or equipment supplied
by the employer to the employee, the employer may make wage deductions
or require the employees to make deposits from which deductions shall be
made, subject to the following conditions:

(a) That the employee concerned is clearly shown to be responsible for the
loss or damage;

(b) That the employee is given reasonable opportunity to show cause why
deduction should not be made;

(c) That the amount of such deduction is fair and reasonable and shall not
exceed the actual loss or damage; and

(d) That the deduction from the wages of the employee does not exceed 20
percent of the employee’s wages in a week.

In this case, the petitioner failed to sufficiently establish that Esteban

was responsible for the negative variance it had in its sales for the year
2005 to 2006 and that Esteban was given the opportunity to show cause the
deduction from her last salary should not be made. The Court cannot accept
the petitioner’s statement that it is the practice in the retail industry to
deduct variances from an employee’s salary, without more. In Niña Jewelry
Manufacturing of Metal Arts, Inc. v. Montecillo the Court ruled that:

The petitioners should first establish that the making of deductions

from the salaries is authorized by law, or regulations issued by the Secretary
of Labor. Further, the posting of cash bonds should be proven as a
recognized practice in the jewelry manufacturing business, or alternatively,
the petitioners should seek for the determination by the Secretary of Labor
through the issuance of appropriate rules and regulations that the policy the
former seeks to implement is necessary or desirable in the conduct of
business. The petitioners failed in this respect. It bears stressing that
without proofs that requiring deposits and effecting deductions are
recognized practices, or without securing the Secretary of Labor’s
determination of the necessity or desirability of the same, the imposition of
new policies relative to deductions and deposits can be made subject to
abuse by the employers. This is not what the law intends.

58 | P e e j a y N o t e s
Labor Standards Atty. Jacqueline Magdangal

40. South Motorists Enterprises v. Tosoc, 181 SCRA 386 (1990)

Facts
Forty-six workers, Tosoc et al., (Respondents) filed complaints for
non-payment of emergency cost of living allowances against South Motorists
before the Naga City District Office of Regional Office No. 5 of the then
Ministry of Labor.

The District Labor Officer issued a Special Order directing its Labor
Regulation Officers to conduct an inspection and verification of South
Motorists’ employment records.

On the date of the inspection and verification, South Motorists was

unable to present its employment records on the allegation that they had
been sent to the main office in Manila.

The case was reset and deferred many times. South Motorists
requested extension.

The assigned Labor Regulation Officers submitted an Inspection Report

on the basis of which an Order was issued by Labor Officer Domingo Reyes
directing South Motorists to pay Tosoc, et al. P184,689.12 representing the
emergency cost of living allowances.

South Motorists moved for reconsideration but was denied. The

Secretary of Labor and Employment affirmed the appealed Order.

Hence, this certiorari petition questioning the monetary award by the

Regional Director and, in general, his jurisdiction to validly award money
claims.

South Motorists’ Position: Only the Labor Arbiter, who is a trier of

facts, may determine after hearing such questions as whether or not an
employer-employee relationship exists; whether or not the workers were
project workers; whether or not the employees worked continuously or
whether or not they should receive emergency cost of living allowances and
if entitled, how much each should receive. Thus, SOUTH the case should be
referred to the Labor Arbiter for proper proceedings.

Issue
WoN the Labor Arbiter should have jurisdiction

Ruling:
Article 129 and Article 217 of the Labor Code, as recently amended by
Republic Act No. 6715, are applicable in this case. Said amendments, being
curative in nature, have retroactive effect.

Based on these provisions, Regional Directors are empowered to hear

and decide, in a summary proceeding, claims for recovery of wages and
other monetary claims and benefits, including legal interest, subject to the
concurrence of the following requisites:
1) the claim is presented by an employee or person employed in domestic
or household service, or househelper under the Code;
2) the claim arises from employer-employee relations;

59 | P e e j a y N o t e s
Labor Standards Atty. Jacqueline Magdangal

3) the claimant no longer being employed, does not seek reinstatement;

and
4) the aggregate money claim of each employee or househelper does not
exceed P5,000.00 (Art. 129, Labor Code, as amended by R.A. 6715).
Where these requisites do not concur, the Labor Arbiters shall have
exclusive original jurisdiction over claims arising from employer-employee
relationship except claims for employees' compensation, social security,
medicare and maternity benefits.

41. Gaa v. CA, 140 SCRA 304 (1985)

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.

ART. 1708. The laborer' s wage shall not be subject to execution or

attachment, except for debts incurred for food, shelter, clothing and medical
attendance."

Issue:
1. Is Gaa considered a laborer as to exempt his salary from garnishment
under art. 1708?
2. Whether or not CA was correct in interpreting Article 1708 of the New
Civil Code?

Ruling:
1. NO. It is beyond dispute that petitioner is not an ordinary or rank and
file laborer but "a responsibly place employee," of El Grande Hotel,
responsible for planning, directing, controlling, and coordinating the
activities of all housekeeping personnel. Considering the importance of
petitioner's function in El Grande Hotel, it is undeniable that petitioner is
occupying a position equivalent to that of a managerial or supervisory
position.

In its broadest sense, the word "laborer" includes everyone who

performs any kind of mental or physical labor, but as commonly and
customarily used and understood, it only applies to one engaged in some
form of manual or physical labor.

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Labor Standards Atty. Jacqueline Magdangal

In Kline vs. Russel, 113 Ga. 1085, 39 SE 477, citing Oliver vs. Macon
Hardware Co., supra, it was held that a laborer, within the statute
exempting from garnishment the wages of a "laborer," is one whose work
depends on mere physical power to perform ordinary manual labor, and not
one engaged in services consisting mainly of work requiring mental skill or
business capacity, and involving the exercise of intellectual faculties.

2. 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.

The distinction between wages and salary was adverted to in Bell vs.
Indian Livestock Co. (Tex. Sup.), 11 S.W. 344, wherein it was said: "
'Wages' are the compensation given to a hired person for service, and the
same is true of 'salary'. The words seem to be synonymous, convertible
terms, though we believe that use and general acceptation have given to the
word 'salary' a significance somewhat different from the word 'wages' in
this: that the former is understood to relate to position of office, to be the
compensation given for official or other service, as distinguished from
'wages', the compensation for labor."

Therefore, CA was correct in ruling that Gaa’s salaries, commission

and other remuneration due her from the El Grande Hotel do not constitute
wages due a laborer which, under Article 1708 of the Civil Code, are not
subject to execution or attachment.

42. DBP v. Secretary, G.R. 79351, November 28, 1989

Fact:
Private respondents won a case for illegal dismissal, unfair labor
practice, illegal deductions from salaries and violation of the minimum wage
law against Riverside Mills Corporation. Consequently, a writ of execution
was issued, on October 22, 1985 , against the goods and chattel of RMC.
Said assets however had already been foreclosed by petitioner Development
Bank of the Philippines (DBP) through an extra-judicial proceedings as early
as 1983. Private respondents, in a motion, moved for the delivery of RMC
properties in possession of DBP, relying on the provisions of Article 110 of
the Labor Code giving them first preference over the mortgaged properties
of RMC for the satisfaction of the judgment rendered in their favor. Which
motion was granted. On appeal, the decision was affirmed.

Issue:
Whether or not Article 110 of the Labor Code finds application on the
instant case. Article 110 provides that in case of bankruptcy or liquidation of
an employer's business, his workers enjoy first preference as regards wages
due them for services rendered during the period prior to the bankruptcy or
liquidation.

61 | P e e j a y N o t e s
Labor Standards Atty. Jacqueline Magdangal

Ruling:
The Supreme Court held that Article 110 cannot be applied in the
instant case because the important requisite that employer's business must
be bankrupt is lacking. The Supreme Court ruled that in the Philippine
jurisdiction, bankruptcy, insolvency and general judicial liquidation
proceedings are the only means to establish that a business is bankrupt or
insolvent. Absent of such judicial declaration, the business cannot be
considered bankrupt for the purpose of applying the provisions of Article
110.

43. Republic v. Peralta, G.R. No. L-56568, May 20, 1987

FACTS:
The Republic of the Philippines seeks the review on certiorari of the
Order of the CFI of Manila in its Civil Case No. 108395 entitled "In the Matter
of Voluntary Insolvency of Quality Tobacco Corporation, Quality Tobacco.”

In its questioned Order, the trial court held that the above enumerated
claims of USTC and FOITAF (hereafter collectively referred to as the
"Unions") for separation pay of their respective members embodied in final
awards of the NLRC were to be preferred over the claims of the Bureau of
Customs and the BIR. The trial court, in so ruling, relied primarily upon
Article 110 of the Labor Code.

The Solicitor General, in seeking the reversal of the questioned Orders,

argues that Article 110 of the Labor Code is not applicable as it speaks of
"wages," a term which he asserts does not include the separation pay
claimed by the Unions.

"Separation pay," the Solicitor General contends: is given to a laborer

for a separation from employment computed on the basis of the number of
years the laborer was employed by the 7 SEC. 1. Requirements for Issuance
of License. Every applicant for license to operate a private employment
agency or manning agency shall submit a written application together with
the following requirements:

xxx xxx
f. A verified undertaking stating that the applicant:
xxx xxx xxx
(3) Shall assume joint and solidary liability with the employer for all claims
and liabilities which may arise in connection with the implementation of the
contract; including but not limited to payment of wages, health and disability
compensation and reparation.

ISSUE
WON separation pay of their respective members embodied in final
awards of the NLRC were to be preferred over the claims of the Bureau of
Customs and the BIR

HELD
Ratio For the specific purposes of Article 1109 and in thevcontext of
insolvency termination or separation pay isvreasonably regarded as forming
part of the remuneration or other money benefits accruing to employees or

62 | P e e j a y N o t e s
Labor Standards Atty. Jacqueline Magdangal

workers by reason of their having previously rendered services to their

employer; as such, they fall within the scope of "remuneration or earnings —
for services rendered or to be rendered — ."
Liability for separation pay might indeed have the effect of a penalty, so far
as the employer is concerned. So far as concerns the employees, however,
separation pay is additional remuneration to which they become entitled
because, having previously rendered services, they are separated from the
employer's service.

We note, in this connection, that in Philippine Commercial and

Industrial Bank (PCIB) us. National Mines and Allied Workers Union, the
Solicitor General took a different view and there urged that the term
"wages" under Article 110 of the Labor Code may be regarded as embracing
within its scope severance pay or termination or separation pay. In PCIB,
this Court agreed with the position advanced by the Solicitor General. We
see no reason for overturning this particular position.

The resolution of the issue of priority among the several claims filed in
the insolvency proceedings instituted by the Insolvent cannot, however, rest
on a reading of Article 110 of the labor Code alone.

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

Disposition MODIFIED and REMANDED to the trial court for further

proceedings in insolvency. Article 97 (f) of the Labor Code defines "wages" in
the following terms: Wage' paid to any employee shall mean the
remuneration or earnings, however designated, capable of being expressed
in terms of money, whether fixed or ascertained on a time, task, piece, or
commission basis, or other method of calculating the same, which is payable
by an employer to
an employee under a written or unwritten contract of employment for work
done or to be done, or for services rendered or to be rendered, and includes
the fair and reasonable value, as determined by the Secretary of Labor, of
board, lodging, or other facilities customarily furnished by the employer to
the employee. 'Fair and reasonable value' shall not include any profit to the
employer or to any person affiliated with the employer.

Article 110. Worker preference in case of bankruptcy — In the event of

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

44. Balladares v. Peak Ventures Corp., G.R. No. 161794, June 16,
2009

FACTS:

63 | P e e j a y N o t e s
Labor Standards Atty. Jacqueline Magdangal

Balladares and co-petitioners were hired as security guards by Peak

Ventures and were assigned at the premises of Yangco Market. They filed a
complaint for underpayment of wages against Peak Ventures with the DOLE.
The Regional Director of DOLE rendered judgment in favor of petitioners and
ruled that Peak Ventures and
Yangco Market are solidarily liable to petitioners, said decision was upheld by
Secretary of Labor. On certiorari, the Court of Appeals, ruled that Regional
Director has no jurisdiction over the case because the claims of each
petitioners exceeded PHP5,000, therefore power to adjudicate such claims
belong to the Labor Arbiter.

ISSUE:
Whether the Regional Director correctly assume jurisdiction over the
case?

RULING:
Yes, under Art. 128 of the Labor Code on Visitorial and Enforcement
Powers.

The Regional Director correctly assume jurisdiction over the case. The
complaint involved underpayment of wages. In order to verify the allegations
in the complaint, DOLE conducted an inspection which yielded proof of
violations of labor standards. By nature of the complaint and from the result
of the inspection the authority of the DOLE under Art. 128 of Labor Code
came into play regardless of monetary value of claims involved. The
Secretary of Labor or his duly authorized representatives is now empowered
to hear and decide in summary proceeding, any matter involving the
recovery of amount of wages and other monetary claims arising out of
employer-employee relationship at the time of inspections, even if the
amount of money claims exceed PHP5000.

The Regional Director correctly assumed jurisdiction over the money

claims of petitioners even if the claims exceeded PHP5,000. Said jurisdiction
was in accordance with Art. 128(b) of the Labor Code and the case does not
fall under the exception clause. We must take note that the doctrine in the
Servando case is no longer controlling upon the amendment of Art. 128 by
RA 7730, Secretary of Labor or his duly authorized representative is now
empowered to hear and decide money claims arising out of employer-
employee relationship at the time of inspection. In this case, Peak Ventures
did not contest the findings of Regional Director, it even admitted before the
Court of Appeals that petitioners were not paid correct wages and as a
defense tried to pass the buck to Yangco Market, therefore the case does not
fall under the exceptions provided in Art. 128 (b) of the Labor Code which
would have divested Regional Director of jurisdiction over the case.

45. Meteoro v. Creative Creatures, Inc., G.R. No. 171275, July 13,
2009

Facts
CREATIVE Creatures, Inc. is a business that primarily caters to the
production design requirements of ABS-CBN. CREATIVE hired the 33
PETITIONERS as artists, carpenters, and welders to design, create,
assemble, set-up and dismantle the props of production sets.

64 | P e e j a y N o t e s
Labor Standards Atty. Jacqueline Magdangal

[Feb./Mar. 1999] PETITIONERS filed complaints for non-payment and

illegal deductions with DOLE-NCR. The benefits allegedly unpaid were the
night-shift differential, overtime, holiday, 12th month, premium (Sunday
and/or rest day), SIL, and paternity leave pay, and other benefits.
a. During investigation, the labor inspector noted that records were
not made available, and that CREATIVE claimed the PETITIONERS were
independent talent workers.
b. In their position paper, CREATIVE argued that DOLE had no
jurisdiction since there is an absence of an employer-employee relationship,
as PETITIONERS were “free-lance”

[Apr. 1999] PETITIONERS filed complaints for illegal dismissal with

payment with the NLRC.

[Oct. 1999] The DOLE Regional Director issued an Order in the DOLE-
NCR case, directing CREATIVE to pay the money claims (totaling P2.7
Million).
a. The Reg. Director sustained PETITIONER’s claim (1) of an employer-
employee relationship, and (2) that they were regular employees, and that
(3) DOLE had jurisdiction
b. On appeal, the DOLE Secretary affirmed the Regional Director. She
anchored DOLE’s jurisdiction on the agency’s visitorial and enforcement
powers.

[May 2005] The CA declared the DOLE decisions as null and void.
a. It noted that under art. 128, the Regional Director may be divested
of jurisdiction when the respondent disputes the existence of an employer-
employee relationship, as in this case.
b. It no longer referred the case to the NLRC as there was one pending
already.

Issue:
WON the DOLE was divested of jurisdiction, i.e. the case falls within
the exception clause in art. 128(b) of the Labor Code. – YES

Held:
Petition dismissed; CA decision, affirmed. The case falls within the
exclusive jurisdiction of the NLRC.

The DOLE Secretary or her authorized representative has jurisdiction

to enforce compliance with labor standards under their broad visitorial and
enforcement powers in art. 128.

Legislative history: Art. 128 has gone through several amendments. In

Servando’s v. SOLE, the Court held that the DOLE did not have visitorial and
enforcement powers when the amounts claimed exceed P5,000. This would
later be reversed in Guico v. Quisumbing, Allied Investigation v. SOLE, and
Cireneo v. Bowling. In any event, the issue was settled by R.A. No. 7730,
which freed art. 128(b) from the jurisdiction restrictions in art. 129 and 217.

Nevertheless, the power of the Regional Director to hear and decide

monetary claims is not absolute. Under art. 128(b), there is an exception
clause, which divests the DOLE of jurisdiction when the following elements
all concur: (1) the employer contests and raises issues with the findings of

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the inspector; (2) in order to resolve the issues, there is a need to examine
evidentiary matters; and (3) the matters are not verifiable in the normal
course of inspection.

The CA correctly applied the exception clause: (1) CREATIVE

registered its objection during inspection and in its position paper, and it
continues to contest the DOLE jurisdiction; (2) there is a need to examine
evidentiary matters, since the four-fold test involves questions of fact; (3)
the key requirement, that the evidentiary matters are not verifiable in the
normal course of inspection, is also present, since while the check vouchers
could be readily verified, the claims of CREATIVE that the PETITIONERS were
not working exclusively for them could not.

“To contest” does not mean to simply raise “lack of jurisdiction,” but to
question the findings of the inspection.

In sum, because the three requisites have been met, the DOLE Reg.
Director should have endorsed the case to the NLRC.

46. Tanga-an v. Philippine Transmarine, G.R. No. 180636, March 13,

2013

FACTS:
Under the employment contract entered by Tangga-an with Philippine
Transmarine Carriers, Inc. (PTC) for and in behalf of its foreign employer,
Universe Tankship Delaware, LLC., he was to be employed for a period of six
months as chief engineer of the vessel the S.S. “Kure”. He was to be paid a
basic salary of US$5,000.00; vacation leave pay equivalent to 15 days a
month or US$2,500.00 per month and tonnage bonus in the amount of
US$700.00 a month. On February 2002, Tangga-an was deployed but was
dismissed on April 2002. Tangga-an filed a Complaint for illegal dismissal
with prayer for payment of salaries for the unexpired portion of his contract,
leave pay, exemplary and moral damages, attorney’s fees and interest.

The Labor Arbiter found petitioner to be illegally dismissed. As regards

petitioner’s claim for back salaries, LA said he is entitled not to four months
which is equivalent to the unexpired portion of his contract, but only to three
months, inclusive of vacation leave pay and tonnage bonus (or US$8,200 x 3
months = US$24,600) pursuant to Section 10 of Republic Act (RA) No. 8042
or The Migrant Workers and Overseas Filipinos Act of 2005.

ISSUE:
Whether or not an illegally dismissed overseas employee is only
entitled to 3months back salaries.

RULING:

No. As held in Marsaman Manning Agency, Inc. vs. NLRC, involving

Section 10 of Republic Act No. 8042, that an illegally dismissed overseas
employee is not entitled to three (3) months salary only. A plain reading of
Sec. 10 clearly reveals that the choice of which amount to award an illegally
dismissed overseas contract worker, i.e., whether his salaries for the
unexpired portion of his employment contract or three (3) months salary for
every year of the unexpired term, whichever is less, comes into play only

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when the employment contract concerned has a term of at least one (1)
year or more. This is evident from the wording “for every year of the
unexpired term” which follows the wording “salaries x x x for three months.”
To follow the thinking that private respondent is entitled to three (3) months
salary only simply because it is the lesser amount is to completely disregard
and overlook some words used in the statute while giving effect to some.

Petitioner must be awarded his salaries corresponding to the unexpired

portion of his six-month employment contract, or equivalent to four months.
This includes all his corresponding monthly vacation leave pay and tonnage
bonuses which are expressly provided and guaranteed in his employment
contract as part of his monthly salary and benefit package. Thus, petitioner
is entitled to back salaries of US$32,800 (or US$5,000 + US$2,500 +
US$700 = US$8,200 x 4 months). “Article 279 of the Labor Code mandates
that an employee’s full backwages shall be inclusive of allowances and other
benefits or their monetary equivalent.” As we have time and again held, “it
is the obligation of the employer to pay an illegally dismissed employee or
worker the whole amount of the salaries or wages, plus all other benefits
and bonuses and general increases, to which he would have been normally
entitled had he not been dismissed and had not stopped working.”

47. Montierro v. Rickmers Marine, G.R. No. 210634, January 14,

2015

Facts:
Noriel Montierro is an ordinary seaman, employed by Rickmers Marine
Agency Phils., Inc. He was asssigned to work on board the vessel MV CSAV
Maresias. Sometime in May 2010, while on board the vessel and going down
from crane ladder, Montierro lost his balance and twisted his legs, thus
injuring his right knee. On June 4, 2010, he was examined and treated by
Dr. Alegre II, the company-designated physician.. On September 3, 2010,
the 91st day of Montierro’s treatment, Dr. Alegre issued an interim disability
grade of ten. And on January 3, 2011 Dr. Alegre issued final assessment of
disability grade of 10. One month prior to the issuance of the the final
assessment, he filed before a labor arbiter a complaint for complete recovery
of permanent disability compensation, sickness allowance plus moral and
exemplary damages and attorney’s fees. In support of his complaint he
secured a Medical Certificate from a physician of his own choice.

Labor arbiter held that Montierro is entitled to permanent total

disability benefits, which relied on 120 days rule of inability of seafarers to
perform work introduced by 2005 case Crystal Shipping Inc. Vs Natividad.
One month sickness allowance and attorney’s fees was also awarded.

NLRC affirmed the decision of LA. After the denial of the Motion for
Reconsideration, Rickmers elevated the case to CA.

CA partially granted the petition. Downgrading the claim to Grade 10

permanent partial disability benefits because his disability is not deemed
total and permanent under the 240-day rule established by case of Vergara
vs. Hammonia Maritime Services, Inc. promulgated on October 6, 2008.

Attorney’s fees was deleted.

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Issues:
1. Whether 120 day rule or the 240 days rule should be applied.
2. Whether the opinion of the company doctor or the personal doctor of
the seafarer should prevail.
3. Whether Montierro is entitled to attorney’s fees.

Ruling:
1. If the maritime compensation complaint was filed prior to 6 October
2008, the 120-day rule applies; if, on the other hand, the complaint was
filed from 6 October 2008 onwards, the 240-day rule applies. Considering
that the complaint of Montierro was filed on December 3, 2010, 240-day rule
should prevail.

2. The procedure for determining the liability for work related death,
illness or injury in the case of overseas Filipino seafarers is as follows: when
the seafarer sustains a work-related illness or injury while on board the
vessel, his fitness for work shall be determined by the company-designated
physician. The physician has 120 days, or 240 days , if validly extended, to
make the assessment. If the physician appointed by the seafarer disagrees
with the assessment of the company designated physician, the opinion of a
third doctor may be agreed jointly between the employer and the seafarer,
whose decision shall be final and binding on them. Montierro, however,
preempted the procedure when he filed on December 3, 2010 a complaint
based on his chosen physician’s assessment. Hence, for failure of Montierro
to observe the procedure provided by POEA-SEC, the assessment of the
company doctor should prevail.

3. The rule on labor law is that withholding of wages need not be coupled
with malice or bad faith to warant the grant of attorney’s fees under Article
111 of the Labor Code. The premature filing of complaint by Montierro shows
that there is no unlawful withholding of benefits to speak of.

48. Dentech Manufacturing Corp. v. NLRC, 172 SCRA 588 (1989)

Facts:
Benjamin Marbella, Armando Torno, Juanito Tajan, Jr. and Joel Torno
were employed as welders, upholsterers and painters by of Dentech
Manufacturing Corporation, a firm engaged in the manufacture and sale of
dental equipment and supplies. However, they were dismissed from the firm
due to their alleged abandonment of their work without informing the
company about their reasons fordoing so. Marbella et al filed a complaint
with the arbitration branch of the NLRC for illegal dismissal and violation of
Presidential Decree No. 851. Among other things they sought the payment
of the cash bond they filed with the company at the start of their
employment.

Issue:
Whether or not Marbella et al are entitled to the refund of the cash
bond they filed with Dentech at the start of their service.

Held:
The Court held that refund of the cash bond filed by Marbella et al is in
[Link] 114 of the Labor Code prohibits an employer from requiting his
employees to file a cashbond or to make deposits, subject to certain

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exceptions: "when the employer is engaged in such trades, occupations or

business where the practice of making deductions or requiring deposits is a
recognize done, or is necessary or desirable as determined by the Secretary
of Labor in appropriate rules and regulations."Dentech have not satisfactorily
disputed the applicability of this provision of the Labor Code tothe case at
bar and further failed to show that the company is authorized by law to
require the private respondents to file the cash bond in question. Its to the
effect that the proceeds of the cash bond had already been given to a
certain carinderia to pay for the accounts of the private respondents there in
does not merit serious consideration. In fact, no evidence or receipt has
been shown to prove such payment.

49. Archilles Manufacturing Corp. v. NLRC, 244 SCRA 750 (1995)

FACTS:
Petitioner Metro Transit Organization, Inc. is the operator and manager
of the LRT System in Metro Manila. Private respondent THE SUPERVISORY
EMPLOYEES ASSOCIATION OF METRO (SEAM) is a union composed of
supervisory employees of petitioner Metro.

Prior to December 1989– Metro had a CBA only with its rank-and-file
employees. During the period when no CBA governed the terms and
conditions of employment between Metro and its supervisory employees,
whenever rank-and-file employees were paid a statutorily mandated salary
increase, supervisory employees were, as a matter of practice, also paid the
same amount plus P50.00.

**

April 1989– Metro paid its rank-and-file employees a salary increase of

P500.00 per month in accordance with the terms of their CBA. Metro,
however, did not extend a corresponding salary increase to its supervisory
employees.

In December 1989, the 1st CBA between Metro and SEAM took effect.
In compliance therewith, Metro paid its supervisory employees a salary
increase. The 2nd and 3rd year salary increases due rank-and-file and
supervisory employees were paid on as scheduled in their corresponding
CBAs.

In March 1992, SEAM filed a Notice of Strike before the NCMB charging
Metro with (a) discrimination in terms of wages. SEAM vigorously asserts
that an already existing wage distortion in respect of the salaries of rank-
and-file and supervisory employees was aggravated when Metro, on April
1989, paid its rank-and-file employees their CBA-stipulated P500.00
increase but did not grant a corresponding increase (and a premium) to its
supervisory employees.

Upon the other hand, petitioner Metro firmly maintains that its practice
of giving higher increases to supervisory employees whenever rank-and-file
employees were given increases, should not be regarded as compulsory. The
grant of a corresponding increase to supervisory employees is a prerogative
or discretionary act of generosity by management considering there is no
law or company policy mandating it.

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ISSUE:
IS THE BONUS (HIGHER INCREASE) TO SUPERVISORY EMPLOYEES
DEMANDABLE?

HELD:
YES. Basically, Metro’s argument is that such increase was merely a
bonus given to supervisory employees. A “bonus” is an amount granted and
paid to an employee for his industry and loyalty which contributed to the
success of the employer’s business and made possible the realization of
profits. It is something given in addition to what is ordinarily received by or
strictly due to the recipient.

The general rule is that a bonus is a gratuity or an act of liberality

which the recipient has no right to demand as a matter of right. A bonus,
however, is a demandable or enforceable obligation when it is made part of
the wage or salary or compensation of the employee.

Whether or not a bonus forms part of wages depends upon the

circumstances and conditions for its payment. If it is additional
compensation which the employer promised and agreed to give without any
conditions imposed for its payment, such as success of business or greater
production or output, then it is part of the wage. But if it is paid only if
profits are realized or if a certain level of productivity is achieved, it can not
be considered part of the wage. Where it is not payable to all but only to
some employees and only when their labor becomes more efficient or more
productive, it is only an inducement for efficiency, a prize therefor, not a
part of the wage.

In the case at bar, the increase of P550.00 sought by private

respondent SEAM was neither an inducement nor was it contingent on (a)
the success of the business of petitioner Metro; or (b) the increased
production or work output of the company or (c) the realization of profits.

The demand for this increase was based on a company practice,

admitted by Metro, of granting a salary increase (and a premium) to
supervisory employees whenever rank-and-file employees were granted a
salary increase. That those increases were precisely designed to correct or
minimize the wage distortion effects of increases given to rank-and-file
employees (under their CBA or under Wage Orders), highlights the fact that
those increases were part of the wage structure of supervisory employees.
The demanded increase therefore is not a bonus that is generally not
demandable as a matter of right. The demanded increase, in this instance, is
an enforceable obligation so far as the supervisory employees of Metro are
concerned.

50. Central Azucarera v. Central Azucarera Labor, G.R. No. 188949,

July 26, 2010

FACTS:
Petitioner is a domestic corporation engaged in the business of sugar
manufacturing, while respondent is a legitimate labor organization which
serves as the exclusive bargaining representative of petitioner’s rank-and-

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file employees. The controversy stems from the interpretation of the term
“basic pay,” essential in the computation of the 13th-month pay.

In compliance with P.D. No. 851, petitioner granted its employees the
mandatory 13th – month pay since 1975. The formula used by petitioner in
computing it was: Total Basic Annual Salary divided by 12. Included in
petitioner’s computation of the Total Basic Annual Salary were the following:
basic monthly salary; first 8 hours overtime pay on Sunday and legal/special
holiday; night premium pay; and vacation and sick leaves for each year.
Throughout the years, petitioner used this computation until 2006.

On November 6, 2004, respondent staged a strike. During the strike,

petitioner declared a temporary cessation of operations. December 2005, all
the striking union members were allowed to return to work. Subsequently,
petitioner declared another temporary cessation of operations for the
months of April and May 2006. The suspension of operation was lifted on
June 2006, but the rank-and-file employees were allowed to report for work
on a 15 day-per-month rotation basis that lasted until September 2006.
December 2006, petitioner gave the employees their 13th-month pay based
on the employee’s total earnings during the year divided by 12.

Respondent objected to this computation. It argued that petitioner did

not adhere to the usual computation of the 13th-month pay. It claimed that
the divisor should have been eight (8) instead of 12, because the employees
worked for only 8 months in 2006. It also asserted that petitioner did not
observe the company practice of giving its employees the guaranteed
amount equivalent to their 1 month pay, in instances where the computed
13th-month pay was less than their basic monthly pay. Petitioner explained
that the change in the computation of the 13th-month pay was intended to
rectify an error in the computation, particularly the concept of basic pay
which should have included only the basic monthly pay of the employees.

Respondent filed a complaint against petitioner for money claims

based on the alleged diminution of benefits/erroneous computation of 13th-
month pay before the Regional Arbitration Branch of the NLRC. LA favored
petitioner. Respondents filed an appeal. NLRC reversed LA’s decision.
Petitioner filed MR which was denied. It went to CA but it affirmed NLRC’s
decision. Hence this petition.

ISSUE:
Whether the new computation of the 13th month pay will result in
diminution of benefits of respondents

RULING:
Yes. The 13th-month pay represents an additional income based on
wage but not part of the wage. It is equivalent to 1/12 of the total basic
salary earned by an employee within a calendar year. All rank-and-file
employees, regardless of their designation or employment status and
irrespective of the method by which their wages are paid, are entitled to this
benefit, provided that they have worked for at least 1 month during the
calendar year. If the employee worked for only a portion of the year, the
13th-month pay is computed pro rata.

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Labor Standards Atty. Jacqueline Magdangal

The Rules and Regulations Implementing P.D. No. 851 defines 13th-
month pay as “1/12 of the basic salary of an employee within a calendar
year “ and basic salary as “shall include all remunerations or earnings paid
by an employer to an employee for services rendered but may not include
cost-of-living allowances granted pursuant to PD. 525 or Letter of
Instructions No. 174, profit-sharing payments, and all allowances and
monetary benefits which are not considered or integrated as part of the
regular or basic salary of the employee at the time of the promulgation of
the Decree on December 16, 1975.”

Supplementary Rules of P.D. No. 851 also clarified that overtime pay,
earnings, and other remuneration that are not part of the basic salary shall
not be included in the computation of the 13th-month pay.

A Revised Guidelines on the Implementation of the 13th-Month Pay

Law was also issued. It was specifically stated that the minimum 13th-month
pay required by law shall not be less than one-twelfth 1/12 of the total basic
salary earned by an employee within a calendar year.

The salary-related benefits should be included as part of the basic

salary in the computation of the 13th-month pay if, by individual or
collective agreement, company practice or policy, the same are treated as
part of the basic salary of the employees.

The practice of petitioner in giving 13th-month pay based on the

employees’ gross annual earnings which included the basic monthly salary,
premium pay for work on rest days and special holidays, night shift
differential pay and holiday pay continued for almost 30 years and has
ripened into a company policy or practice which cannot be unilaterally
withdrawn.

Article 100 of the Labor Code, otherwise known as the Non-Diminution

Rule, mandates that benefits given to employees cannot be taken back or
reduced unilaterally by the employer because the benefit has become part of
the employment contract, written or unwritten. The rule against diminution
of benefits applies if it is shown that the grant of the benefit is based on an
express policy or has ripened into a practice over a long period of time and
that the practice is consistent and deliberate. Nevertheless, the rule will not
apply if the practice is due to error in the construction or application of a
doubtful or difficult question of law. But even in cases of error, it should be
shown that the correction is done soon after discovery of the error.

The argument of petitioner that the grant of the benefit was not
voluntary and was due to error in the interpretation of what is included in
the basic salary deserves scant consideration. No doubtful or difficult
question of law is involved in this case. The guidelines set by the law are not
difficult to decipher. The voluntariness of the grant of the benefit was
manifested by the number of years the employer had paid the benefit to its
employees. Petitioner only changed the formula in the computation of the
13th-month pay after almost 30 years and only after the dispute between
the management and employees erupted. This act of petitioner in changing
the formula at this time cannot be sanctioned, as it indicates bad faith.

51. Framanlis Farms, Inc. v. MOLE, 171 SCRA 87 (1989)

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Facts:
Eighteen (18) employees of Framanlis Farms, Inc. filed against their
employer two labor standard cases alleging that in 1977 to 1979 they were
not paid emergency cost of living allowance (ECOLA) minimum wage, 13th
month pay, holiday pay, and service incentive leave pay.

In their answer, Framanlis Farms alleged that the employees were not
regular workers on their hacienda but were migratory (sacadas) or pakyaw
workers who worked on-and-off and were hired seasonally, or only during
the milling season, to do piece-work on the farms, hence, they were not
entitled to the benefits claimed by them.

The Minister of Labor directed Framanlis Farms to pay the deficiency

payment of emergency living allowance and service incentive leave pay,
holiday pay and social amelioration bonus for 3 years for 1977 to 1979.
Upon the petitioners' appeal of that Order, the Deputy Minister of Labor
modified it by ordering the employer to pay all non-pakyaw workers their
claim for holiday and incentive leave pay for the years 1977, 1978, all
'pakyaw' workers their pay differentials for the same period on days they
worked for at least eight (8) hours and earned below P8.06 daily, and all
complainants their 13th month pay for the years 1978 and 1979. The
Deputy Minister clarified that pakyaw workers were excluded from holiday
and service incentive leave pay.

Issue:
Whether awarding pay differentials, holiday and service incentive leave
for pakyaw workers who are not regular employees but are merely paid on
piece-rate, contrary to Art. 82 of the Labor Code

Ruling:
In 1976, PD No. 928 fixed a minimum wage of P7.00 for agricultural
workers in any plantation or agricultural enterprise irrespective of whether or
not the worker was paid on a piece-rate basis. However, effective July 1,
1978, the minimum wage was increased to P8.00 (Sec. 1, PD 1389).
Subsequently, PD 1614 provided for a P2.00 increase in the daily wage of all
workers effective April 1, 1979. The petitioners admit that those were the
minimum rates prevailing then. Therefore, the respondent Minister did not
err in requiring the petitioners to pay wage differentials to their pakyaw
workers who worked for at least eight hours daily and earned less than
P8.00 per day in 1978 to 1979.
With regard to the 13th month pay, petitioners admitted that they failed to
pay their workers 13th month pay in 1978 and 1979. However, they argued
that they substantially complied with the law by giving their workers a yearly
bonus and other non-monetary benefits amounting to not less than 1/12th
of their basic salary, in the form of food and free electricity.

52. Producers Bank v. NLRC, 355 SCRA 489 (2001)

FACTS:
The present petition originated from a complaint filed by private
respondent on 11 February 1988 with the Arbitration Branch, NLRC,
charging petitioner with diminution of benefits, non-compliance with Wage

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Labor Standards Atty. Jacqueline Magdangal

Order No. 6 and non-payment of holiday pay. In addition, private

respondent prayed for damages.

Labor arbiter dismissed the complaint for lack of merit. NLRC,

however, granted all of private respondent’s claims, except for damages.
Petition filed a Motion for Partial Reconsideration, which was denied by the
NLRC. Hence, recourse to this Court.

Petitioner contends: that the NLRC gravely abused its discretion in

ruling as it did for the succeeding reasons stated: (1) it contravened the
Supreme Court decision in Traders Royal Bank v. NLRC, et al., G.R. No.
88168, promulgated on August 30, 1990, (2) its ruling is not justified by law
and Art. 100 of the Labor Code, (3) its ruling is contrary to the CBA, and (4)
the so-called “company practice invoked by it has no legal and moral bases”
(4) petitioner, under conservatorship and distressed, is exempted under
Wage Order No. 6.

ISSUE:
WON respondent is entitled for the payment of the above-mentioned
monetary claims, particularly BONUS

HELD:
As to the bonuses, private respondent declared in its position papers
filed with the NLRC that –

Producers Bank of the Philippines, a banking institution, has been

providing several benefits to its employees since 1971 when it started its
operation. Among the benefits it had been regularly giving is a mid-year
bonus equivalent to an employee’s one-month basic pay and a Christmas
bonus equivalent to an employee’s one whole month salary (basic pay plus
allowance);
When P.D. 851, the law granting a 13thmonth pay, took effect, the basic pay
previously being given as part of the Christmas bonus was applied as
compliance to it (P.D. 851), the allowances remained as Christmas bonus;

From 1981 up to 1983, the bank continued giving one month basic pay
as mid-year bonus, one month basic pay as 13thmonth pay but the
Christmas bonus was no longer based on the allowance but on the basic pay
of the employees which is higher;

In the early part of 1984, the bank was placed under conservatorship
but it still provided the traditional mid-year bonus;
By virtue of an alleged Monetary Board Resolution No. 1566, bank only gave
a one-half (1/2) month basic pay as compliance of the 13thmonth pay and
none for the Christmas bonus.

Respondent’s Contention: that the mid-year and Christmas bonuses,

by reason of their having been given for thirteen consecutive years, have
ripened into a vested right and, as such, can no longer be unilaterally
withdrawn by petitioner without violating Article 100 of Presidential Decree
No. 4429 which prohibits the diminution or elimination of benefits already
being enjoyed by the employees. Although private respondent concedes that
the grant of a bonus is discretionary on the part of the employer, it argues

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Labor Standards Atty. Jacqueline Magdangal

that, by reason of its long and regular concession, it may become part of the
employee’s regular compensation.

Petitioner asserts: that it cannot be compelled to pay the alleged

bonus differentials due to its depressed financial condition, as evidenced by
the fact that in 1984 it was placed under conservatorship by the Monetary
Board. According to petitioner, it sustained losses in the millions of pesos
from 1984 to 1988, an assertion which was affirmed by the labor arbiter.
Moreover, petitioner points out that the collective bargaining agreement of
the parties does not provide for the payment of any mid-year or Christmas
bonus. On the contrary, section 4 of the collective bargaining agreement
states that –

Acts of Grace. Any other benefits or privileges which are not expressly
provided in this Agreement, even if now accorded or hereafter accorded to
the employees, shall be deemed purely acts of grace dependent upon the
sole judgment and discretion of the BANK to grant, modify or withdraw.

A bonus is an amount granted and paid to an employee for his

industry and loyalty which contributed to the success of the employer’s
business and made possible the realization of profits. It is an act of
generosity granted by an enlightened employer to spur the employee to
greater efforts for the success of the business and realization of bigger
profits.12 The granting of a bonus is a management prerogative, something
given in addition to what is ordinarily received by or strictly due the
recipient.13 Thus, a bonus is not a demandable and enforceable
obligation,14 except when it is made part of the wage, salary or
compensation of the employee.15

However, an employer cannot be forced to distribute bonuses which it

can no longer afford to pay. To hold otherwise would be to penalize the
employer for his past generosity. Thus, in Traders Royal Bank v. NLRC,16 we
held that –

It is clear x x x 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.

xxx

In 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 mid-year 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.

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Labor Standards Atty. Jacqueline Magdangal

This doctrine was reiterated in the more recent case of Manila Banking
Corporation v. NLR1

Petitioner was not only experiencing a decline in its profits, but was
reeling from tremendous losses triggered by a bank-run which began in
1983. In such a depressed financial condition, petitioner cannot be legally
compelled to continue paying the same amount of bonuses to its employees.
Thus, the conservator was justified in reducing the mid-year and Christmas
bonuses of petitioner’s employees. To hold otherwise would be to defeat the
reason for the conservatorship which is to preserve the assets and restore
the viability of the financially precarious bank. Ultimately, it is to the
employees’ advantage that the conservatorship achieve its purposes for the
alternative would be petitioner’s closure whereby employees would lose not
only their benefits, but their jobs as well.

53. Eastern Telecoms v. Eastern Telecoms, G.R. No. 185665,

February 8, 2012

FACTS:
Eastern Telecommunications Phils., Inc. (ETPI) is a corporation
engaged in the business of providing telecommunications facilities. Eastern
Telecoms Employees Union (ETEU) is the certified exclusive bargaining agent
of the company’s rank and file employees. It has an existing CBA with the
company to expire in the year 2004 with a Side Agreement signed on
September 3, 2001.

In essence, the labor dispute was a spin-off of the company’s plan to

defer payment of the 2003 14th, 15th and 16th month bonuses sometime in
April 2004. The company’s main ground in postponing the payment of
bonuses is due to allege continuing deterioration of company’s financial
position which started in the year 2000. However, ETPI while postponing
payment of bonuses sometime in April 2004, such payment would also be
subject to availability of funds.

Invoking the Side Agreement of the existing CBA for the period 2001-
2004 between ETPI and ETEU, the union strongly opposed the deferment in
payment of the bonuses by filing a preventive mediation complaint with the
NCMB.

Later, the company made a sudden turnaround in its position by

declaring that they will no longer pay the bonuses until the issue is resolved
through compulsory arbitration.

Thus ETEU filed a Notice of Strike on the ground of unfair labor

practice for failure of ETPI to pay the bonuses in gross violation of the
economic provision of the existing CBA.

ETPI insists that it is under no legal compulsion to pay 14th, 15th and
16th month bonuses for the year 2003 and 14th month bonus for the year
2004 contending that they are not part of the demandable wage or salary
and that their grant is conditional based on successful business performance
and the availability of company profits from which to source the same. To
thwart ETEU’s monetary claims, it insists that the distribution of the subject

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Labor Standards Atty. Jacqueline Magdangal

bonuses falls well within the company’s prerogative, being an act of pure
gratuity and generosity on its part. Thus, it can withhold the grant thereof
especially since it is currently plagued with economic difficulties and financial
losses.

ETPI further avers that the act of giving the subject bonuses did not
ripen into a company practice arguing that it has always been a contingent
one dependent on the realization of profits and, hence, the workers are not
entitled to bonuses if the company does not make profits for a given year. It
asseverates that the 1998 and 2001 CBA Side Agreements did not
contractually afford ETEU a vested property right to a perennial payment of
the bonuses. It opines that the bonus provision in the Side Agreement allows
the giving of benefits only at the time of its execution. For this reason, it
cannot be said that the grant has ripened into a company practice.

ISSUE:
Is ETPI is liable to pay 14th, 15th and 16th month bonuses for the
year 2003 and 14th month bonus for the year 2004 to the members of
respondent union?

HELD: YES
From a legal point of view, 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.
The grant 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.

A bonus, however, becomes a demandable or enforceable obligation

when it is made part of the wage or salary or compensation of the employee.
Particularly instructive is the ruling of the Court in Metro Transit
Organization, Inc. v. NLRC, where it was written:

Whether or not a bonus forms part of wages depends upon the

circumstances and conditions for its payment. If it is additional
compensation which the employer promised and agreed to give without any
conditions imposed for its payment, such as success of business or greater
production or output, then it is part of the wage. But if it is paid only if
profits are realized or if a certain level of productivity is achieved, it cannot
be considered part of the wage. Where it is not payable to all but only to
some employees and only when their labor becomes more efficient or more
productive, it is only an inducement for efficiency, a prize therefore, not a
part of the wage.

In the case at bench, it is indubitable that ETPI and ETEU agreed on

the inclusion of a provision for the grant of 14th, 15th and 16th month
bonuses in the 1998-2001 CBA Side Agreement, as well as in the 2001-2004
CBA Side Agreement, which was signed on September 3, 2001. The
provision, which was similarly worded, states:

Employment-Related Bonuses

The Company confirms that the 14th, 15th and 16th month bonuses
(other than the 13th month pay) are granted.

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Labor Standards Atty. Jacqueline Magdangal

A reading of the above provision reveals that the same provides for
the giving of 14th, 15th and 16th month bonuses without qualification. The
wording of the provision does not allow any other interpretation. There were
no conditions specified in the CBA Side Agreements for the grant of the
benefits contrary to the claim of ETPI that the same is justified only when
there are profits earned by the company. Terse and clear, the said provision
does not state that the subject bonuses shall be made to depend on the
ETPI’s financial standing or that their payment was contingent upon the
realization of profits. Neither does it state that if the company derives no
profits, no bonuses are to be given to the employees. In fine, the payment
of these bonuses was not related to the profitability of business operations.

The records are also bereft of any showing that the ETPI made it clear
before or during the execution of the Side Agreements that the bonuses
shall be subject to any condition. Indeed, if ETPI and ETEU intended that the
subject bonuses would be dependent on the company earnings, such
intention should have been expressly declared in the Side Agreements or the
bonus provision should have been deleted altogether. Verily, by virtue of its
incorporation in the CBA Side Agreements, the grant of 14th, 15th and 16th
month bonuses has become more than just an act of generosity on the part
of ETPI but a contractual obligation it has undertaken. Moreover, the
continuous conferment of bonuses by ETPI to the union members from 1998
to 2002 by virtue of the Side Agreements evidently negates its argument
that the giving of the subject bonuses is a management prerogative.

Granting arguendo that the CBA Side Agreement does not

contractually bind petitioner ETPI to give the subject bonuses, nevertheless,
the Court finds that its act of granting the same has become an established
company practice such that it has virtually become part of the employees’
salary or wage. A bonus may be granted on equitable consideration when
the giving of such bonus has been the company’s long and regular practice.
In Philippine Appliance Corporation v. CA, it was pronounced:

To be considered a “regular practice,” however, the giving of the

bonus should have been done over a long period of time, and must be
shown to have been consistent and deliberate. 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.

The records show that ETPI, aside from complying with the regular
13th month bonus, has been further giving its employees 14th month bonus
every April as well as 15th and 16th month bonuses every December of the
year, without fail, from 1975 to 2002 or for 27 years whether it earned
profits or not. The considerable length of time ETPI 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. Accordingly, a company practice in favor of the employees has been
established and the payments made by ETPI pursuant thereto ripened into
benefits enjoyed by the employees.

54. NWPC and RTWP v. APL, March 12, 2014

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Labor Standards Atty. Jacqueline Magdangal

FACTS

On October 15, 1990, the Regional Board of NCR issued Wage Order
No. NCR-01, increasing the minimum wage by P17 daily. The Trade Union
Congress of the Philippines (TUCP) and Personnel Management Association
of the Philippines (PMAP) moved for reconsideration. Petitioner Employers
Confederation of the Philippines (ECOP) opposed. Board then issued Wage
Order No. NCR-01-A, amending the wage order by stating that all workers
and employees in the private sector already receiving wages above the
statutory minimum wage rates up to P125 per day shall also receive the P17
daily increase. Petitioner ECOP appealed to respondent National Wages and
Productivity Commission (NWPC). NWPC: Appeal dismissed for lack of merit.
Motion for reconsideration denied. Hence, this petition.

ISSUE:
Whether or not respondent NWPC committed grave abuse of
discretion.

Ruling:
The Court is inclined to agree with the Government.
The NWPC noted that the determination of wages involved 2 methods: the
floor-wage method and the salary-ceiling method.

Floor-wage method- involves the fixing of a determinate amount that

would be added to the prevailing statutory minimum wage
-adopted in earlier wage orders

Salary-ceiling method- wage adjustment is applied to employees

receiving a certain denominated salary ceiling
-used in RAs 6640 and 6727 as well as 11 COLA issuances

The shift is due to the labor disputes arising from wage distortions.

RA 6727 was intended to rationalize wages.

This is done by:

1. providing full-time boards to police wages round-the-clock
2. giving the boards enough power to achieve this objective
SO, if RA 6727 only intended boards to set floor wages only, the Act would
not need a board but only an accountant to keep track of the latest
consumer price index or have Congress do it when the need arises.

The Board did not perform an unlawful act of legislation.

Congress may delegate he power to fix rates, provided that it leaves
sufficient standards. RA 6727 gave statutory standards for fixing the
minimum wage.

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 framework of the national economic and social
development program. In the determination of such regional minimum

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Labor Standards Atty. Jacqueline Magdangal

wages, the Regional Board shall, among other relevant factors, consider the
following:
(a) The demand for living wages;
(b) Wage adjustment vis-a-vis the consumer price index;
(c) The cost of living and changes or increases therein;
(d) The needs of workers and their families;
(e) The need to induce industries to invest in the countryside;
(f) Improvements in standards of living;
(g) The prevailing wage levels;
(h) Fair return of the capital invested and capacity to pay of employers;
(i) Effects of employment generation and family income; and
(j) The equitable distribution of income and wealth along the imperatives
of economic and social development."
The wage order was not acted in excess of board’s authority. The law gave
reasonable limitations to the delegated power of the board.

ECOP is of the mistaken impression that RA 6727 leaves labor and

management alone to decide wages.

The Court does not believe RA 6727 is meant to deregulate the

relation between labor and capital for several reasons:
1. The Constitution calls upon the State to protect labor
2. The Constitution calls upon the State to intervene when the common
goal so demands I regulating property and property relations
3. The Charter urges Congress to diffuse the wealth of the nation and
regulate the use of property
4. The Charter recognizes the just share of labor in the fruits of
production
5. Under the LC, the State shall regulate the relations between labor and
management
6. Under RA 6727, the State is interested in seeing that workers receive
fair and equitable wages
7. The Constitution is primarily a document of Social Justice and has not
fully embraced the concept of laissez-faire
Court cannot give an Act a meaning that will conflict with these basic
principles.

The concept of minimum wage is more than setting of a floor wage to

upgrade existing wages as ECOP believes.
Minimum wages underlies the rationales of RA 6727 and the Constitution.

The salary-cap method serves the purposes of RA 6727. Whether or

not it is a permanent policy of the Board s a question we may only
speculate. At the moment, it is a reasonable policy.

55. Cebu People’s Multi-purpose v. Carbonilla, January 27, 2016

Facts:
Eighteen (18) employees of Framanlis Farms, Inc. filed against their
employer two labor standard cases alleging that in 1977 to 1979 they were

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Labor Standards Atty. Jacqueline Magdangal

not paid emergency cost of living allowance (ECOLA) minimum wage, 13th
month pay, holiday pay, and service incentive leave pay.

In their answer, Framanlis Farms alleged that the employees were not
regular workers on their hacienda but were migratory (sacadas) or pakyaw
workers who worked on-and-off and were hired seasonally, or only during
the milling season, to do piece-work on the farms, hence, they were not
entitled to the benefits claimed by them.

The Minister of Labor directed Framanlis Farms to pay the deficiency

payment of emergency living allowance and service incentive leave pay,
holiday pay and social amelioration bonus for 3 years for 1977 to 1979.
Upon the petitioners' appeal of that Order, the Deputy Minister of Labor
modified it by ordering the employer to pay all non-pakyaw workers their
claim for holiday and incentive leave pay for the years 1977, 1978, all
'pakyaw' workers their pay differentials for the same period on days they
worked for at least eight (8) hours and earned below P8.06 daily, and all
complainants their 13th month pay for the years 1978 and 1979. The
Deputy Minister clarified that pakyaw workers were excluded from holiday
and service incentive leave pay.

Issue:
Whether awarding pay differentials, holiday and service incentive leave
for pakyaw workers who are not regular employees but are merely paid on
piece-rate, contrary to Art. 82 of the Labor Code

Ruling:
In 1976, PD No. 928 fixed a minimum wage of P7.00 for agricultural
workers in any plantation or agricultural enterprise irrespective of whether or
not the worker was paid on a piece-rate basis. However, effective July 1,
1978, the minimum wage was increased to P8.00 (Sec. 1, PD 1389).
Subsequently, PD 1614 provided for a P2.00 increase in the daily wage of all
workers effective April 1, 1979. The petitioners admit that those were the
minimum rates prevailing then. Therefore, the respondent Minister did not
err in requiring the petitioners to pay wage differentials to their pakyaw
workers who worked for at least eight hours daily and earned less than
P8.00 per day in 1978 to 1979.
With regard to the 13th month pay, petitioners admitted that they failed to
pay their workers 13th month pay in 1978 and 1979. However, they argued
that they substantially complied with the law by giving their workers a yearly
bonus and other non-monetary benefits amounting to not less than 1/12th
of their basic salary, in the form of food and free electricity.

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