296-A Phil.

587

FIRST DIVISION
[ G.R. No. 85073. August 24, 1993 ]
DAVAO FRUITS CORPORATION, PETITIONER,
VS. ASSOCIATED LABOR UNIONS (ALU) FOR
AND IN BEHALF OF ALL THE RANK-AND-FILE
WORKERS/EMPLOYEES OF DAVAO FRUITS
CORPORATION AND NATIONAL LABOR
RELATIONS COMMISSION, RESPONDENTS.
DECISION

QUIASON, J.:

This is a petition for certiorari to set aside the resolution of the

National Labor Relations Commission (NLRC), dismissing for
lack of merit petitioner’s appeal from the decision of the Labor
Arbiter in NLRC Case No. 1791-MC-XI-82.

On December 28, 1982, respondent Associated Labor Unions

(ALU), for and in behalf of all the rank-and-file workers and
employees of petitioner, filed a complaint (NLRC Case No. 1791-
MC-XI-82) before the Ministry of Labor and Employment,
Regional Arbitration Branch XI, Davao City, against petitioner,
for "Payment of the Thirteenth-Month Pay Differentials."
Respondent ALU sought to recover from petitioner the thirteenth
month pay differential for 1982 of its rank-and-file 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 thirteenth month pay for 1982.

In its answer, petitioner claimed that it erroneously included items

subject of the complaint in the computation of the thirteenth
month pay for the years prior to 1982, upon a doubtful and
difficult question of law. According to petitioner, this mistake was
discovered only in 1981 after the promulgation of the Supreme
Court decision in the case of San Miguel Corporation v. Inciong
(103 SCRA 139).

A decision was rendered on March 7, 1984 by Labor Arbiter

Pedro C. Ramos, in favor of respondent ALU. The dispositive
portion of the decision reads as follows:

"WHEREFORE, in view of all the foregoing

considerations, judgment is hereby rendered ordering
respondent to pay the 1982 - 13th month pay
differential to all its rank-and-file workers/employees,
herein represented by complainant Union" (Rollo, p.
32).

Petitioner appealed the decision of the Labor Arbiter to the

NLRC, which affirmed the said decision and accordingly
dismissed the appeal for lack of merit.

Petitioner elevated the matter to this Court in a petition for review

under Rule 45 of the Revised Rules of Court. This error
notwithstanding and in the interest of justice, this Court resolved
to treat the instant petition as a special civil action for certiorari
under Rule 65 of the Revised Rules of Court (P.D. No. 1391, Sec.
5; Rules Implementing P.D. No. 1391, Rule II, Sec. 7; Cando v.
National Labor Relations Commission, 189 SCRA 666 [1990];
Pearl S. Buck Foundation, Inc. v. National Labor Relations
Commission, 182 SCRA 446 [1990]).

The crux of the present controversy is whether in the computation

of the thirteenth month pay given by employers to their
employees under P.D. No. 851, payments for sick, vacation and
maternity leaves, premiums for work done on rest days and
special holidays, and pay for regular holidays may be excluded in
the computation and payment thereof, regardless of long-standing
company practice.

Presidential Decree No. 851, promulgated on December 16, 1975,

mandates all employers to pay their employees a thirteenth month
pay. How this pay shall be computed is set forth in Section 2 of
the "Rules and Regulations Implementing Presidential Decree No.
851" thus:

“SECTION 2. x x x

(a) ‘Thirteenth month pay’ shall mean one twelfth

(1/12) of the basic salary of an employee within a
calendar year.

(b) ‘Basic Salary’ shall include all remunerations or

earnings paid by an employer to an employee for
services rendered but may not include cost-of-living
allowances granted pursuant to Presidential Decree
No. 525 or Letter of Instructions No. 174, profit-
sharing payments, and all allowances and monetary
benefits which are not considered or integrated as part
of the regular or basic salary of the employee at the
time of the promulgation of the Decree on December
16, 1975.”
The Department of Labor and Employment issued on January 16,
1976 the "Supplementary Rules and Regulations Implementing
P.D. No. 851" which in paragraph 4 thereof further defines the
term "basic salary," thus:

"4. Overtime pay, earnings and other remunerations

which are not part of the basic salary shall not be
included in the computation of the 13 month pay."

Clearly, the term "basic salary" includes all remunerations or

earnings paid by the employer to the employee, but excludes cost-
of-living allowances, profit-sharing payments, and all allowances
and monetary benefits which have not been considered as part of
the basic salary of the employee as of December 16, 1975. The
exclusion of cost-of-living allowances and profit sharing
payments shows the intention to strip "basic salary" of payments
which are otherwise considered as "fringe" benefits. This
intention is emphasized in the catch-all phrase "all allowances and
monetary benefits which are not considered or integrated as part
of the basic salary." Basic salary, therefore does not merely
exclude the benefits expressly mentioned but all payments which
may be in the form of “fringe” benefits or allowances (San Miguel
Corporation v. Inciong, supra, at 143-144). In fact, the
Supplementary Rules and Regulations Implementing P.D. No. 851
are very emphatic in declaring that overtime pay, earnings and
other remunerations shall be excluded in computing the thirteenth
month pay.

In other words, whatever compensation an employee receives for

an eight-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, premium for work done on rest days and
special holidays, as well as pay for regular holidays, are likewise
excluded computing the basic salary for the purpose of
determining the thirteenth month pay.

Petitioner claims that the mistake in the interpretation of "basic

salary" was caused by the opinions, orders and rulings rendered
by then Acting Labor Secretary Amado G. Inciong, expressly
including the subject items in computing the thirteenth month pay.
The inclusion of these items is clearly not sanctioned under P.D.
No. 851, the governing law and its implementing rules, which
speak only of "basic salary" as the basis for determining the
thirteenth month pay.

Moreover, whatever doubt arose in the interpretation of P.D. No.

851 was erased by the Supplementary Rules and Regulations
which clarified the definition of “basic salary.”

As pointed out in San Miguel Corporation v. Inciong, (supra):

“While doubt may have been created by the prior

Rules and Regulations Implementing Presidential
Decree 851 which defines basic salary to include all
remunerations or earnings paid by an employer to an
employee, this cloud is dissipated in the later and more
controlling Supplementary Rules and Regulations
which categorically, exclude from the definition of
basic salary earnings and other remunerations paid by
employer to an employee. A cursory perusal of the two
sets of Rules indicates that what has hitherto been the
subject of a broad inclusion is now a subject of broad
exclusion. The Supplementary Rules and Regulations
cure the seeming tendency of the former rules to
include all remunerations and earnings within the
definition of basic salary.
 The all-embracing phrase 'earnings and other
remunerations' which are deemed not part of the basic
salary includes within its meaning payments for sick,
vacation, or maternity leaves, premium for work
performed on rest days and special holidays, pay for
regular holidays’ and night differentials. As such they
are deemed not part of the basic salary and shall not be
considered in the computation of the 13th-month pay.
If they were not so excluded, it is hard to find any
'earnings and other remunerations' expressly excluded
in the computation of the 13th-month pay. Then the
exclusionary provision would prove to be idle and
with no purpose.”

The "Supplementary Rules and Regulations Implementing P.D.

No. 851," which put to rest all doubts in the computation of the
thirteenth month pay, was issued by the Secretary of Labor as
early as January 16, 1976, barely one month after the effectivity
of P.D. No. 851 and its Implementing Rules. And yet, petitioner
computed and paid the thirteenth month pay, without excluding
the subject items therein until 1981. Petitioner continued its
practice in December 1981, after promulgation of the afore-
quoted San Miguel decision on February 24, 1981, when
petitioner purportedly "discovered" its mistake.

From 1975 to 1981, petitioner had freely, voluntarily and

continuously included in the computation of its employees’
thirteenth month pay, the payments for sick, vacation and
maternity leaves, premiums for work done on rest days and
special holidays, and pay for regular holidays. The considerable
length of time the questioned items had been included by
petitioner indicates a unilateral and voluntary act on its part,
sufficient in itself to negate any claim of mistake.
A company practice favorable to the employees had indeed been
established and the payments made pursuant thereto, ripened into
benefits enjoyed by them. And any benefit and supplement being
enjoyed by the employees cannot be reduced, diminished,
discontinued or eliminated by the employer, by virtue of Section
10 of the Rules and Regulations Implementing P.D. No. 851, and
Article 100 of the Labor Code of the Philippines, which prohibit
the diminution or elimination by the employer of the employees’
existing benefits (Tiangco v. Leogardo, Jr., 122 SCRA 267,
[1983]).

Petitioner cannot invoke the principle of solutio indebiti which is

a civil law concept that is not applicable in Labor Law. Besides, in
solutio indebiti, the obligee is required to return to the obligor
whatever he received from the latter (Civil Code of the
Philippines, Arts. 2154 and 2155). Petitioner in the instant case,
does not demand the return of what it paid respondent ALU from
1975 until 1981; it merely wants to "rectify” the error it made
over these years by excluding unilaterally from the thirteenth
month pay in 1982 the items subject of litigation. Solutio indebiti,
therefore, is not applicable to the instant case.

WHEREFORE, finding no grave abuse of discretion on the part

of the NLRC, the petition is hereby DISMISSED, and the
questioned decision of respondent NLRC is AFFIRMED
accordingly.

Cruz, (Chairman), Griño-Aquino, Davide, Jr., and Bellosillo, JJ.,

concur.

Source: Supreme Court E-Library | Date created: September 24, 2018

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