Labor Midterm Case Digests

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University of San Carlos
School of Law and Governance

LABOR STANDARDS
MIDTERM CASE DIGEST COMPILATION
Submitted by:
BONGHANOY, Rei La Datsun G.
(EH405MC)

Submitted to:
Atty. Jefferson M. Marquez

1

TABLE OF CONTENTS

2

Applicable Laws
4
2) Basic Principles
4
1)

3)

Hiring of Employee

4)

Wage and the Wage Rationalization Act
42

5)

Violation of Wage Orders

6)

Wage Enforcement and Recovery
65

7)

Wage Protection Provisions and Prohibitions Regarding Wages
79

8)

Payment of Wages

9)

Conditions of Employment
103

10) Minimum

29

65

99

Labor Standard Benefits

108
11) Other

Special Benefits
134

12) 2011

NLRC Rules of Procedure
160

3

1. APPLICABLE LAWS
2. BASIC PRINCIPLES
Singer Sewing Machine vs. NLRC
G.R. No. 91307 January 24, 1991
FACTS:
Singer Machine Collectors Union-Baguio (SIMACUBA), the respondent union, filed a
petition for direct certification as the sole and exclusive bargaining agent of all collectors of the
Singer Sewing Machine Company, Baguio City branch (hereinafter referred to as "the
Company").
The Company opposed the petition mainly on the ground that the union members are
actually not employees but are independent contractors as evidenced by the collection agency
agreement which they signed. The respondent Med-Arbiter, finding that there exists an
employer-employee relationship between the union members and the Company, granted the
petition for certification election. On appeal, Secretary of Labor Franklin M. Drilon affirmed it.
ISSUE:
Whether or not there exists an employee-employer relationship between the parties.
RULING:
SC ruled in favor of petitioner. Private respondents are independent contractors, not
employees. As such, they cannot enter into a collective bargaining agreement with the
petitioner.
The present case mainly calls for the application of the control test, which if not satisfied,
would lead us to conclude that no employer-employee relationship exists. Hence, if the union
members are not employees, no right to organize for purposes of bargaining, nor to be certified
as such bargaining agent can ever be recognized. The following elements are generally
considered in the determination of the employer-employee relationship; "(1) the selection and
engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the
power to control the employee's conduct — although the latter is the most important element".
The nature of the relationship between a company and its collecting agents depends on
the circumstances of each particular relationship. Not all collecting agents are employees and
neither are all collecting agents independent contractors. The collectors could fall under either
category depending on the facts of each case.
A thorough examination of the facts of the case leads us to the conclusion that the
existence of an employer-employee relationship between the Company and the collection
agents cannot be sustained. The plain language of the agreement reveals that the designation
as collection agent does not create an employment relationship and that the applicant is to be
considered at all times as an independent contractor.
The Court finds that since private respondents are not employees of the Company, they
are not entitled to the constitutional right to join or form a labor organization for purposes of
collective bargaining. Accordingly, there is no constitutional and legal basis for their "union" to
be granted their petition for direct certification.

4

Manila Golf Club vs. IAC
G.R. No. 64948 September 27, 1994
FACTS:
This is originally filed with the Social Security Commission (SSC) via petition of 17
persons who styled themselves as “ Caddies of Manila Golf and Country Club-PTCCEA” for the
coverage and availment of benefits of the Social Security Act as amended, PTCCEA (Philippine
Technical, Clerical, Commercial Employees Association) a labor organization where which they
claim for membership.
The same time two other proceedings were filed and pending. These are certification
election case filed by PTCCEA on behalf of the same caddies of Manila Golf and Country club
which was in favor of the caddies and compulsory arbitration case involving PTCCEA and Manila
Golf and Country Club which was dismissed and ruled that there was no employer-employee
relationship between the caddies and the club.
ISSUE:
Whether or not persons rendering caddying services for members of golf clubs and their
guests in said clubs' courses or premises are the employees of such clubs and therefore within
the compulsory coverage of the Social Security System (SSS).
RULING:
SC ruled in favor of the petitioner. Llamar is not an employee of the Manila Golf and
Country Club, Inc. The club is under no obligation to report him for compulsory coverage to the
SSS.
In the very nature of things, caddies must submit to some supervision of their conduct
while enjoying the privilege of pursuing their occupation within the premises and grounds of
whatever club they do work in. They work for the club to which they attach themselves on
sufferance but, on the other hand, also without having to observe any working hours, free to
leave anytime they please, to stay away for as long they like.
These considerations clash frontally with the concept of employment. It can happen that
a caddy who has rendered services to a player on one day may still find sufficient time to work
elsewhere. Under such circumstances, the caddy may leave the premises and to go to such
other place of work that he wishes. These are things beyond the control of the petitioner.

5

Encyclopedia Britanica vs. NLRC
G.R. No. 87098 November 4, 1996
FACTS:
Private respondent Benjamin Limjoco was a Sales Division Manager of petitioner
Encyclopaedia Britannica and was in charge of selling petitioner's products through some sales
representatives. As compensation, private respondent received commissions from the products
sold by his agents. He was also allowed to use petitioner's name, goodwill and logo. It was,
however, agreed upon that office expenses would be deducted from private respondent's
commissions. Petitioner would also be informed about appointments, promotions, and transfers
of employees in private respondent's district.
Limjoco resigned from office to pursue his private business. Then on October 30, 1975,
he filed a complaint against petitioner Encyclopaedia Britannica with the Department of Labor
and Employment, claiming for non-payment of separation pay and other benefits, and also
illegal deduction from his sales commissions.
ISSUE:
Whether or not there exists an employer-employee relationship between the parties.
RULING:
SC ruled that Limjoco was not an employee of the petitioner company. He was merely an
agent or an independent dealer of the petitioner.
The records of the case at bar showed that there was no such relationship. He was free
to conduct his work and he was free to engage in other means of livelihood. At the time he was
connected with the petitioner company, private respondent was also a director and later the
president of the Farmers' Rural Bank. Had he been an employee of the company, he could not
be employed elsewhere and he would be required to devote full time for petitioner. If private
respondent was indeed an employee, it was rather unusual for him to wait for more than a year
from his separation from work before he decided to file his claims.

6

Carungcong vs. Sunlife
G.R. No. 118086 December 15, 1997
FACTS:
Susan Carungcong began her career in the insurance industry in 1974 as an agent of Sun
Life Assurance Company of Canada. She signed an Agent Agreement with Sun Life. In virtue of
which she was designated the latter’s agent to solicit applications for its insurance and annuity
policies.
This contract was superseded some five years later when she signed two (2) new
agreements. The first, denominated Career Agent’s or Unit Manager’s Agreement, dealt with
such matters as the agent’s commissions, his obligations, limitations on his authority, and
termination of the agreement by death, or by written notice with or without cause. The second
was titled, Manager’s Supplementary Agreement.
It explicitly described as a “further
agreement”. Carungcong and Sun Life executed another Agreement named New Business
Manager with the function generally to manage a New Business Office established. This latest
Agreement stressed that the New Business Manager in performance of his duties defined herein,
shall be considered an independent contractor and not an employee of Sun Life, and that under
no circumstance shall the New Business Manager and/or his employees be considered
employees of Sun Life.
Ms. Eleizer Sibayan, Manager of Sun Life’s Internal Audit Department, commenced an
inquiry into the special fund availments of Carungcong and other New Business Managers.
Respondent Lance Kemp, had been receiving reports of anomalies in relation thereto from unit
managers and agents. Thereafter, on January 1990, Carungcong was confronted with and asked
to explain the discrepancies set out in Sibayan’s report. She was given a letter signed by Metron
V. Deveza, CLU, Director, Marketing, which advised of the termination of her relationship with
Sun Life.
Carungcong promptly instituted proceedings for vindication in the Arbitration Branch of
the National Labor Relations Commissions on January 16, 1990. There she succeeded in
obtaining a favorable judgment. Labor Arbiter found that there existed an employer-employee
relationship between her and Sun Life. On appeal, the National Labor Relations Commission
reversed the Arbiter’s judgment. It affirmed that no employment relationship existed between
Carungcong and Sun Life.
ISSUE:
Whether or not there exists an employer-employee relationship between the parties.
RULING:
SC held that Carungcong is not an employee of Sun Life Co. She was an independent
contractor.
Noteworthy is that this last agreement which emphasized, like the “Career Agent’s or
Unit Manager’s Agreement” first signed by her, that in performance of her duties defined herein.
Carungcong would be considered an independent contractor and not an employee of Sun Life,
and that under no circumstance shall the New Business Manager and/or his employees be
considered employees of Sun Life.
Carungcong is an independent contractor. It was indicated in the very face of the
contract. The rules and regulations of the company is not sufficient to establish an employeremployee relationship. It does not necessarily create any employer-employee relationship where
the employers’ controls have to interfere in the methods and means by which employee would
like employ to arrive at the desired results.

7

Carungcong admitted that she was free to work as she pleases, at the place and time
she felt convenient for her to do so. She was not paid to a fixed salary and was mainly paid by
commissions depending on the volume of her performance.

Ramos vs. CA
G.R. No. 124354; April 11, 2002
FACTS:
Petitioner Erlinda Ramos, after seeking professional medical help, was advised to
undergo an operation for the removal of a stone in her gall bladder (cholecystectomy). She
was referred to Dr. Hosaka, a surgeon, who agreed to perform the operation on her. The
operation was scheduled for June 17, 1985 at 9:00 in the morning at private respondent De
Los Santos Medical Center (DLSMC). Since neither petitioner Erlinda nor her husband,
petitioner Rogelio, knew of any anesthesiologist, Dr. Hosaka recommended to them the
services of Dr. Gutierrez. On the following day, she was ready for operation as early as 7:30
am. Around 9:30, Dr. Hosaka has not yet arrived. By 10 am, Rogelio wanted to pull out his
wife from the operating room. Dr. Hosaka finally arrived at 12:10 pm more than 3 hours of
the scheduled operation.
Dr. Guiterres tried to intubate Erlinda. The nail beds of Erlinda were bluish
discoloration in her left hand. At 3 pm, Erlinda was being wheeled to the Intensive care Unit
and stayed there for a month. Since the ill-fated operation, Erlinda remained in comatose
condition until she died.
The family of Ramos sued them for damages.
ISSUE:
Whether or not there exists an employer-employee relationship between the medical
center and Drs. Hosaka and Guiterrez.
RULING:
SC ruled that there was no employee-employer relationship between de Los Santos
Medical Center and Drs. Hosaka and Gutierrez.
After a careful consideration of the arguments raised by DLSMC, the Court finds that
respondent hospital’s position on this issue is meritorious. There is no employer-employee
relationship between DLSMC and Drs. Gutierrez and Hosaka which would hold DLSMC solidarily
liable for the injury suffered by petitioner Erlinda under Article 2180 of the Civil Code.
As explained by respondent hospital, that the admission of a physician to membership in
DLSMC’s medical staff as active or visiting consultant is first decided upon by the Credentials
Committee. Neither is there any showing that it is DLSMC which pays any of its consultants for
medical services rendered by the latter to their respective patients. Moreover, the contract
between the consultant in respondent hospital and his patient is separate and distinct from the
contract between respondent hospital and said patient. The first has for its object the rendition
of medical services by the consultant to the patient, while the second concerns the provision by
the hospital of facilities and services by its staff such as nurses and laboratory personnel
necessary for the proper treatment of the patient.
The hospital does not hire consultants but it accredits and grants him the privilege of
maintaining a clinic and/or admitting patients. It is the patient who pays the consultants. The
hospital cannot dismiss the consultant but he may lose his privileges granted by the hospital.
The hospital’s obligation is limited to providing the patient with the preferred room
accommodation and other things that will ensure that the doctor’s orders are carried out.

8

Sonza vs. ABS-CBN
G.R. No. 138051; June 10, 2004
FACTS:
Respondent ABS-CBN Broadcasting Corporation ("ABS-CBN") signed an Agreement
("Agreement") with the Mel and Jay Management and Development Corporation ("MJMDC"). ABSCBN was represented by its corporate officers while MJMDC was represented by SONZA, as
President and General Manager, and Carmela Tiangco ("TIANGCO"), as EVP and Treasurer.
Referred to in the Agreement as "AGENT," MJMDC agreed to provide SONZA’s services
exclusively to ABS-CBN as talent for radio and television.
ABS-CBN agreed to pay for SONZA’s services a monthly talent fee of P310,000 for the
first year and P317,000 for the second and third year of the Agreement. ABS-CBN would pay the
talent fees on the 10th and 25th days of the month. SONZA filed a complaint against ABS-CBN
before the Department of Labor and Employment, National Capital Region in Quezon City.
SONZA complained that ABS-CBN did not pay his salaries, separation pay, service incentive
leave pay, 13th month pay, signing bonus, travel allowance and amounts due under the
Employees Stock Option Plan ("ESOP").
ISSUE:
Whether Jay Sonza is an employee of ABS-CBN or an independent contractor.
RULING:
SC ruled that Sonza is an independent contractor.
Selection and Engagement of Employees. Independent contractors often present
themselves to possess unique skills, expertise or talent to distinguish them from ordinary
employees. The specific selection and hiring of SONZA, because of his unique skills, talent and
celebrity status not possessed by ordinary employees, is a circumstance indicative, but not
conclusive, of an independent contractual relationship. If SONZA did not possess such unique
skills, talent and celebrity status, ABS-CBN would not have entered into the Agreement with
SONZA but would have hired him through its personnel department just like any other
employee.
Payment of Wages. All the talent fees and benefits paid to SONZA were the result of
negotiations that led to the Agreement. If SONZA were ABS-CBN’s employee, there would be no
need for the parties to stipulate on benefits such as "SSS, Medicare, x x x and 13th month
pay"20 which the law automatically incorporates into every employer-employee contract.
Whatever benefits SONZA enjoyed arose from contract and not because of an employeremployee relationship. SONZA’s talent fees, amounting to P317,000 monthly in the second and
third year, are so huge and out of the ordinary that they indicate more an independent
contractual relationship rather than an employer-employee relationship.
Power of Dismissal. During the life of the Agreement, ABS-CBN agreed to pay SONZA’s
talent fees as long as "AGENT and Jay Sonza shall faithfully and completely perform each
condition of this Agreement."24 Even if it suffered severe business losses, ABS-CBN could not
retrench SONZA because ABS-CBN remained obligated to pay SONZA’s talent fees during the
life of the Agreement. This circumstance indicates an independent contractual relationship
between SONZA and ABS-CBN.

9

Power of Control. Applying the control test to the present case, we find that SONZA is not
an employee but an independent contractor. The control test is the most important test our
courts apply in distinguishing an employee from an independent contractor.29 This test is based
on the extent of control the hirer exercises over a worker. The greater the supervision and
control the hirer exercises, the more likely the worker is deemed an employee. The converse
holds true as well – the less control the hirer exercises, the more likely the worker is considered
an independent contractor.30

Lazaro vs. Social Security Commission
G.R. No. 138254; July 30, 2004
FACTS:
Private respondent Rosalina M. Laudato ("Laudato") filed a petition before the SSC for
social security coverage and remittance of unpaid monthly social security contributions against
her three (3) employers. Among the respondents was herein petitioner Angelito L. Lazaro
("Lazaro"), proprietor of Royal Star Marketing ("Royal Star"), which is engaged in the business of
selling home appliances. Laudato alleged that despite her employment as sales supervisor of
the sales agents for Royal Star from April of 1979 to March of 1986, Lazaro had failed during the
said period, to report her to the SSC for compulsory coverage or remit Laudato's social security
contributions.
ISSUE:
Whether or not there exists an employee-employer relationship between Laudato and
Royal Star Marketing.
RULING:
SC ruled that there exists such relationship between the parties.
It is an accepted doctrine that for the purposes of coverage under the Social Security
Act, the determination of employer-employee relationship warrants the application of the
"control test," that is, whether the employer controls or has reserved the right to control the
employee, not only as to the result of the work done, but also as to the means and methods by
which the same is accomplished.
Suffice it to say, the fact that Laudato was paid by way of commission does not preclude
the establishment of an employer-employee relationship. The relevant factor remains, as stated
earlier, whether the "employer" controls or has reserved the right to control the "employee" not
only as to the result of the work to be done but also as to the means and methods by which the
same is to be accomplished.

10

Phil. Global Comm. vs. De Vera
G.R. No. 157214; June 7, 2005
FACTS:
Philippine Global Communications inc. is a corporation engaged in the business of
communication services and allied activities while Ricardo de Vera is a physician by profession
whom petitioner enlisted to attend to the medical needs of its employees. The controversy rose
when petitioner terminated his engagement.
In 1981, Dr. de Vera offered his services to petitioner. The parties agreed and formalized
the respondent’s proposal in a document denominated as retainership contract which will be for
a period of one year, subject to renewal and clearly stated that respondent will cover the
retainership the company previously with Dr. Eulau. The agreement went until 1994, in the
years 1995-1996, it was renewed verbally. The turning point of the parties’ relationship was
when petitioner, thru a letter bearing the subject TERMINATION – RETAINERSHIP CONTRACT,
informed Dr. de Vera of its decision to discontinue the latter’s retainer contract because the
management has decided that it would be more practical to provide medical services to its
employees through accredited hospitals near the company premises.
On January 1997, de Vera fileda complaint for illegal dismissal before the NLRC, alleging
that he had been actually employed by the company as its company physician since 1991. The
commission rendered decision in favor of Philcom and dismissed the complaint saying that de
Vera was an independent contractor. On appeal to NLRC, it reversed the decision of the Labor
Arbiter stating that de Vera is a regular employee and directed the company to reinstate him.
Philcom appealed to the CA where it rendered decision deleting the award but reinstating de
Vera. Philcom filed this petition involving the difference of a job contracting agreements from
employee-employer relationship.
ISSUE:
Whether or not there exists an employee-employer relationship between the parties.
RULING:
SC ruled that there was no such relationship existing between Dr. de Vera and Phil. Com.
The elements of an employer-employee relationship are wanting in this case. The record
are replete with evidence showing that respondent had to bill petitioner for his monthly
professional fees. It simply runs against the grain of common experience to imagine that an
ordinary employee has yet to bill his employer to receive his salary.
The power to terminate the parties’ relationship was mutually vested on both. Either may
terminate the arrangement at will, with or without cause.
Remarkably absent is the element of control whereby the employer has reserved the
right to control the employee not only as to the result of the work done but also as to the means
and methods by which the same is to be accomplished.

11

Petitioner had no control over the means and methods by which respondent went about
performing his work at the company premises. In fine, the parties themselves practically agreed
on every terms and conditions of the engagement, which thereby negates the element of
control in their relationship.

ABS-CBN vs. Nazareno
G.R. No. 164156; September 26, 2006
FACTS:
Petitioner ABS-CBN Broadcasting Corporation (ABS-CBN) is engaged in the broadcasting
business and owns a network of television and radio stations, whose operations revolve around
the broadcast, transmission, and relay of telecommunication signals. It sells and deals in or
otherwise utilizes the airtime it generates from its radio and television operations. It has a
franchise as a broadcasting company, and was likewise issued a license and authority to
operate by the National Telecommunications Commission.
Petitioner employed respondents Nazareno, Gerzon, Deiparine, and Lerasan as
production assistants (PAs) on different dates. They were assigned at the news and public
affairs, for various radio programs in the Cebu Broadcasting Station. On December 19, 1996,
petitioner and the ABS-CBN Rank-and-File Employees executed a Collective Bargaining
Agreement (CBA) to be effective during the period from December 11, 1996 to December 11,
1999. However, since petitioner refused to recognize PAs as part of the bargaining unit,
respondents were not included to the CBA.
In October 2000, respondents filed a Complaint for Recognition of Regular Employment
Status, Underpayment of Overtime Pay, Holiday Pay, Premium Pay, Service Incentive Pay, Sick
Leave Pay, and 13th Month Pay with Damages against the petitioner before the NLRC. The Labor
Arbiter rendered judgment in favor of the respondents, and declared that they were regular
employees of petitioner as such, they were awarded monetary benefits. NLRC affirmed the
decision of the Labor Arbiter. Petitioner filed a motion for reconsideration but CA dismissed it.
ISSUE:
Whether or not the respondents were considered regular employees of ABS-CBN.
RULING:
SC ruled that Production Assistants (Pas) are regular workers. Thus, they are entitled to
the benefits in the CBA between ABS-CBN and its rank-and-file employees.
It was held that where a person has rendered at least one year of service, regardless of
the nature of the activity performed, or where the work is continuous or intermittent, the
employment is considered regular as long as the activity exists, the reason being that a
customary appointment is not indispensable before one may be formally declared as having
attained regular status.
The Court states that the primary standard, therefore, of determining regular
employment is the reasonable connection between the particular activity performed by the
employee in relation to the usual trade or business of the employer. The test is whether the
former is usually necessary or desirable in the usual business or trade of the employer. The
connection can be determined by considering the nature of work performed and its relation to
the scheme of the particular business or trade in its entirety. Also, if the employee has been
performing the job for at least a year, even if the performance is not continuous and merely
12

intermittent, the law deems repeated and continuing need for its performance as sufficient
evidence of the necessity if not indispensability of that activity to the business. Hence, the
employment is considered regular, but only with respect to such activity and while such activity
exists.
Additionally, respondents cannot be considered as project or program employees
because no evidence was presented to show that the duration and scope of the project were
determined or specified at the time of their engagement. In the case at bar, however, the
employer-employee relationship between petitioner and respondents has been proven. In the
selection and engagement of respondents, no peculiar or unique skill, talent or celebrity status
was required from them because they were merely hired through petitioner’s personnel
department just like any ordinary employee. Respondents did not have the power to bargain for
huge talent fees, a circumstance negating independent contractual relationship. Respondents
are highly dependent on the petitioner for continued work. The degree of control and
supervision exercised by petitioner over respondents through its supervisors negates the
allegation that respondents are independent contractors.
The presumption is that when the work done is an integral part of the regular business of
the employer and when the worker, relative to the employer, does not furnish an independent
business or professional service, such work is a regular employment of such employee and not
an independent contractor. As regular employees, respondents are entitled to the benefits
granted to all other regular employees of petitioner under the CBA . Besides, only talent-artists
were excluded from the CBA and not production assistants who are regular employees of the
respondents. Moreover, under Article 1702 of the New Civil Code: “In case of doubt, all labor
legislation and all labor contracts shall be construed in favor of the safety and decent living of
the laborer.”

13

Francisco vs. NLRC
G.R. No. 170087; August 31, 2006
FACTS:
Angelina Francisco was hired by Kasei Corporation during the incorporation stage. She
was designated as accountant and corporate secretary and was assigned to handle all the
accounting needs of the company. She was also designated as Liason Officer to the City of
Manila to secure permits for the operation of the company.
In 1996, Petitioner was designated as Acting Manager. She was assigned to handle
recruitment of all employees and perform management administration functions. In 2001, she
was replaced by Liza Fuentes as Manager. Kasei Corporation reduced her salary to P2,500 per
month which was until September. She asked for her salary but was informed that she was no
longer connected to the company. She did not anymore report to work since she was not paid
for her salary. She filed an action for constructive dismissal with the Labor Arbiter.
ISSUE:
Whether or not there was an employer-employee relationship.
RULING:
SC held that there was such relationship. Francisco was constructively dismissed. To
ascertain if such relationship exists, the Court used two-tiered test—control test and economic
reality test.
The court held that in this jurisdiction, there has been no uniform test to determine the
existence of an employer-employee relation. Generally, courts have relied on the so-called right
of control test where the person for whom the services are performed reserves a right to control
not only the end to be achieved but also the means to be used in reaching such end. In addition
to the standard of right-of-control, the existing economic conditions prevailing between the
parties, like the inclusion of the employee in the payrolls, can help in determining the existence
of an employer-employee relationship.
The better approach would therefore be to adopt a two-tiered test involving: (1) the
putative employer’s power to control the employee with respect to the means and methods by
which the work is to be accomplished; and (2) the underlying economic realities of the activity
or relationship.
The court observed the need to consider the existing economic conditions prevailing
between the parties, in addition to the standard of right-of-control like the inclusion of the
employee in the payrolls, to give a clearer picture in determining the existence of an employeremployee relationship based on an analysis of the totality of economic circumstances of the
worker.

14

Thus, the determination of the relationship between employer and employee depends
upon the circumstances of the whole economic activity, such as: (1) the extent to which the
services performed are an integral part of the employer’s business; (2) the extent of the
worker’s investment in equipment and facilities; (3) the nature and degree of control exercised
by the employer; (4) the worker’s opportunity for profit and loss; (5) the amount of initiative,
skill, judgment or foresight required for the success of the claimed independent enterprise; (6)
the permanency and duration of the relationship between the worker and the employer; and (7)
the degree of dependency of the worker upon the employer for his continued employment in
that line of business. The proper standard of economic dependence is whether the worker is
dependent on the alleged employer for his continued employment in that line of business.
By applying the control test, there is no doubt that petitioner is an employee of Kasei
Corporation because she was under the direct control and supervision of Seiji Kamura, the
corporation’s Technical Consultant. It is therefore apparent that petitioner is economically
dependent on respondent corporation for her continued employment in the latter’s line of
business.
There can be no other conclusion that petitioner is an employee of respondent Kasei
Corporation. She was selected and engaged by the company for compensation, and is
economically dependent upon respondent for her continued employment in that line of
business. Her main job function involved accounting and tax services rendered to Respondent
Corporation on a regular basis over an indefinite period of engagement.
Respondent
Corporation hired and engaged petitioner for compensation, with the power to dismiss her for
cause. More importantly, Respondent Corporation had the power to control petitioner with the
means and methods by which the work is to be accomplished.

Nogales et. al. vs. Capitol Medical Center et. al.
G.R. No. 142625; December 19, 2006
FACTS:
Pregnant with her fourth child, Corazon Nogales ("Corazon"), who was then 37 years old,
was under the exclusive prenatal care of Dr. Oscar Estrada ("Dr. Estrada") beginning on her
fourth month of pregnancy or as early as December 1975. Around midnight of 25 May 1976,
Corazon started to experience mild labor pains prompting Corazon and Rogelio Nogales
("Spouses Nogales") to see Dr. Estrada at his home. After examining Corazon, Dr. Estrada
advised her immediate admission to the Capitol Medical Center ("CMC"). t 6:13 a.m., Corazon
started to experience convulsionsAt 6:22 a.m., Dr. Estrada, assisted by Dr. Villaflor, applied low
forceps to extract Corazon's baby. In the process, a 1.0 x 2.5 cm. piece of cervical tissue was
allegedly torn.At 6:27 a.m., Corazon began to manifest moderate vaginal bleeding which rapidly
became profuse. Corazon died at 9:15 a.m. The cause of death was "hemorrhage, post partum.
ISSUE:
Whether or not the Capitol Medical Center is solidarily liable.
RULING:
SC held CMC solidarily liable together with Dr. Estrada. The “doctrine of apparent
authority” was used to make CMC vicariously liable even if Dr. Estrada is an independent
contractor.
Private hospitals, hire, fire and exercise real control over their attending and visiting
"consultant" staff. The basis for holding an employer solidarily responsible for the negligence of
its employee is found in Article 2180 of the Civil Code which considers a person accountable not
only for his own acts but also for those of others based on the former's responsibility under a
relationship of patria potestas.
In general, a hospital is not liable for the negligence of an independent contractor15

physician. There is, however, an exception to this principle. The hospital may be liable if the
physician is the "ostensible" agent of the hospital. This exception is also known as the "doctrine
of apparent authority”.
For a hospital to be liable under the doctrine of apparent authority, a plaintiff must show
that: (1) the hospital, or its agent, acted in a manner that would lead a reasonable person to
conclude that the individual who was alleged to be negligent was an employee or agent of the
hospital; (2) where the acts of the agent create the appearance of authority, the plaintiff must
also prove that the hospital had knowledge of and acquiesced in them; and (3) the plaintiff
acted in reliance upon the conduct of the hospital or its agent, consistent with ordinary care and
prudence. In the instant case, CMC impliedly held out Dr. Estrada as a member of its medical
staff. Through CMC's acts, CMC clothed Dr. Estrada with apparent authority thereby leading the
Spouses Nogales to believe that Dr. Estrada was an employee or agent of CMC.

Coca-Cola Bottlers Phils. vs. Dr. Climaco
G.R. No. 146881; February 5, 2007
FACTS:
Dr. Climaco is a medical doctor who was hired by the petitioner by virtue of retainer
agreement. The agreement states that there is no employer-employee relationship between the
parties. The retainer agreement was renewed annually. The last one expired on Dec. 31, 1993.
Despite of the non-renewal of the agreement, respondent continued to perform his functions as
company doctor until he received a letter in March 1995 concluding their retainer agreement.
Respondent filed a complaint before the NLRC seeking recognition as a regular employee
of the petitioner company and prayed for the payment of all benefits of a regular employee. In
the decision of the Labor Arbiter, the company lacked control over the respondent’s
performance of his duties. Respondent appealed where it rendered that no employer-employee
relationship existed between the parties.
The CA ruled that an employer-employee relationship existed.
ISSUE:
Whether or not there exists an employer-employee relationship between the parties.
RULING:
SC ruled that there is no such relationship between the parties.
The Court, in determining the existence of an employer-employee relationship, has
invariably adhered to the four-fold test: (1) the selection and engagement of the employee; (2)
the payment of wages; (3) the power of dismissal; and (4) the power to control the employee’s
conduct, or the so-called “control test,” considered to be the most important element.
The Court agrees with the finding of the Labor Arbiter and the NLRC that the
circumstances of this case show that no employer-employee relationship exists between the
parties. The Comprehensive Medical Plan, provided guidelines merely to ensure that the end
result was achieved, but did not control the means and methods by which respondent
performed his assigned tasks. In addition, the Court finds that the schedule of work and the
requirement to be on call for emergency cases do not amount to such control, but are necessary
incidents to the Retainership Agreement.
16

Considering that there is no employer-employee relationship between the parties, the
termination of the Retainership Agreement, which is in accordance with the provisions of the
Agreement, does not constitute illegal dismissal of respondent.

Calamba Medical Center vs. NLRC et. al.
G.R. No. 176484; November 25, 2008
FACTS:
The Calamba Medical Center (petitioner), a privately-owned hospital, engaged the
services of medical doctors-spouses Ronaldo Lanzanas (Dr. Lanzanas) and Merceditha Lanzanas
(Dr. Merceditha) in March 1992 and August 1995, respectively, as part of its team of resident
physicians. Reporting at the hospital twice-a-week on twenty-four-hour shifts, respondents were
paid a monthly "retainer" of P4,800.00 each. It appears that resident physicians were also given
a percentage share out of fees charged for out-patient treatments, operating room assistance
and discharge billings, in addition to their fixed monthly retainer.
The work schedules of the members of the team of resident physicians were fixed by
petitioner's medical director Dr. Raul Desipeda (Dr. Desipeda). And they were issued
identification cards by petitioner and were enrolled in the Social Security System (SSS). Income
taxes were withheld from them.
Dr. Meluz Trinidad (Dr. Trinidad), also a resident physician at the hospital, inadvertently
overheard a telephone conversation of respondent Dr. Lanzanas with a fellow employee,
Diosdado Miscala, through an extension telephone line. Apparently, Dr. Lanzanas and Miscala
were discussing the low "census" or admission of patients to the hospital.
Dr. Trinidad issued to Dr. Lanzanas a memorandum asking her to explain within 24 hours
why no disciplinary action should be taken against him. Pending investigation, he was placed
under a 30-day preventive suspension.
Inexplicably, petitioner did not give respondent Dr. Merceditha, who was not involved in
the said incident, any work schedule after sending her husband Dr. Lanzanas the memorandum,
nor inform her the reason therefor, albeit she was later informed by the Human Resource
Department (HRD) officer that that was part of petitioner's cost-cutting measures.
Dr. Lanzanas filed a complaint for illegal suspension before the National Labor Relations
Commission (NLRC)-Regional Arbitration Board (RAB) IV. Dr. Merceditha subsequently filed a
complaint for illegal dismissal.
ISSUE:

17




Whether or not there exists an employer-employee relationship between petitioner and
the spouses-respondents.
Whether or not the spouses-respondents were legally dismissed.

RULING:
SC held that there exists such relationship. The spouses-respondents were illegally
dismissed.
On the first issue
Under the "control test," an employment relationship exists between a physician and a
hospital if the hospital controls both the means and the details of the process by which the
physician is to accomplish his task.
As priorly stated, private respondents maintained specific work-schedules, as determined
by petitioner through its medical director, which consisted of 24-hour shifts totaling forty-eight
hours each week and which were strictly to be observed under pain of administrative sanctions.
That petitioner exercised control over respondents gains light from the undisputed fact
that in the emergency room, the operating room, or any department or ward for that matter,
respondents' work is monitored through its nursing supervisors, charge nurses and orderlies.
Without the approval or consent of petitioner or its medical director, no operations can be
undertaken in those areas. For control test to apply, it is not essential for the employer to
actually supervise the performance of duties of the employee, it being enough that it has the
right to wield the power.
On the second issue
Petitioner thus failed to observe the two requirements,before dismissal can be effected ─
notice and hearing ─ which constitute essential elements of the statutory process; the first to
apprise the employee of the particular acts or omissions for which his dismissal is sought, and
the second to inform the employee of the employer's decision to dismiss him. Non-observance
of these requirements runs afoul of the procedural mandate.
The termination notice sent to and received by Dr. Lanzanas on April 25, 1998 was the
first and only time that he was apprised of the reason for his dismissal. He was not afforded,
however, even the slightest opportunity to explain his side. His was a "termination upon receipt"
situation. While he was priorly made to explain on his telephone conversation with Miscala, he
was not with respect to his supposed participation in the strike and failure to heed the return-towork order.
As for the case of Dr. Merceditha, her dismissal was worse, it having been effected
without any just or authorized cause and without observance of due process. In fact, petitioner
never proferred any valid cause for her dismissal except its view that "her marriage to [Dr.
Lanzanas] has given rise to the presumption that her sympath[y] [is] with her husband; [and
that when [Dr. Lanzanas] declared that he was going to boycott the scheduling of their workload
by the medical doctor, he was presumed to be speaking for himself [and] for his wife
Merceditha."

18

Escasinas et. al. vs. Shangri-la
G.R. No. 178827; March 4, 2009
FACTS:
Registered nurses Jeromie D. Escasinas and Evan Rigor Singco (petitioners) were
engaged in 1999 and 1996, respectively, by Dr. Jessica Joyce R. Pepito (respondent doctor) to
work in her clinic at respondent Shangri-la’s Mactan Island Resort (Shangri-la) in Cebu of which
she was a retained physician.
In late 2002, petitioners filed with the NLRC a complaint for regularization, underpayment
of wages, non-payment of holiday pay, night shift differential and 13th month pay differential
against respondents, claiming that they are regular employees of Shangri-la. Shangri-la
claimed, however, that petitioners were not its employees but of respondent doctor whom it
retained via Memorandum of Agreement (MOA) pursuant to Article 157 of the Labor Code, as
amended. Respondent doctor for her part claimed that petitioners were already working for the
previous retained physicians of Shangri-la before she was retained by Shangri-la; and that she
maintained petitioners’ services upon their request.
ISSUE:



Whether or not there was an employee-employer relationship between Shangri-La
and the petitioners.
Whether or not Dr. Pepito is an independent contractor

RULING:
SC ruled that there no such relationship. The petitioners are under the direct supervision
of Dr. Pepito, an independent contractor.
On the first issue
The resolution of the case hinges, in the main, on the correct interpretation of Art. 157
vis a vis Art. 280 and the provisions on permissible job contracting of the Labor Code, as
amended. Under the foregoing provision, Shangri-la, which employs more than 200 workers, is
mandated to “furnish” its employees with the services of a full-time registered nurse, a parttime physician and dentist, and an emergency clinic which means that it should provide or
make available such medical and allied services to its employees, not necessarily to hire or
employ a service provider. The term “full-time” in Art. 157 cannot be construed as referring to
19

the type of employment of the person engaged to provide the services, for Article 157 must not
be read alongside Art. 280[9] in order to vest employer-employee relationship on the employer
and the person so engaged. The phrase “services of a full-time registered nurse” should thus be
taken to refer to the kind of services that the nurse will render in the company’s premises and to
its employees, not the manner of his engagement.
On the second issue
The existence of an independent and permissible contractor relationship is generally
established by considering the following determinants: whether the contractor is carrying on an
independent business; the nature and extent of the work; the skill required; the term and
duration of the relationship; the right to assign the performance of a specified piece of work; the
control and supervision of the work to another; the employer's power with respect to the hiring,
firing and payment of the contractor's workers; the control of the premises; the duty to supply
the premises, tools, appliances, materials and labor; and the mode, manner and terms of
payment.
Against the above-listed determinants, the Court holds that respondent doctor is a
legitimate independent contractor. That Shangri-la provides the clinic premises and medical
supplies for use of its employees and guests do not necessarily prove that respondent doctor
lacks substantial capital and investment. Besides, the maintenance of a clinic and provision of
medical services to its employees is required under Art. 157, which are not directly related to
Shangri-la’s principal business – operation of hotels and restaurants.
Tongko vs. The Manufacturer’s Life Insurance Co., Inc. November 7, 2008
G.R. No. 167622, November 07, 2008
FACTS:
Manufacturers Life Insurance Co. (Phils.), Inc. (Manulife) is a domestic corporation
engaged in life insurance business.Renato A. Vergel De Dios was, during the period material,
its President and Chief Executive Officer. Gregorio V. Tongko started his professional
relationship with Manulife on July 1, 1977 by virtue of a Career Agent's Agreement
(Agreement) he executed with Manulife. In the Agreement, it is provided that: It is understood
and agreed that the Agent is an independent contractor and nothing contained herein shall be
construed or interpreted as creating an employer-employee relationship between the
Company and the Agent. The Company may terminate this Agreement for any breach or
violation of any of the provisions hereof by the Agent by giving written notice to the Agent
within fifteen (15) days from the time of the discovery of the breach. No waiver,
extinguishment, abandonment, withdrawal or cancellation of the right to terminate this
Agreement by the Company shall be construed for any previous failure to exercise its right
under any provision of this Agreement.
Either of the parties hereto may likewise terminate his Agreement at any time without
cause, by giving to the other party fifteen (15) days notice in writing. In 1983, Tongko was
named as a Unit Manager in Manulife's Sales Agency Organization.In 1990, he became a
Branch Manager. As the CA found, Tongko's gross earnings from his work at Manulife,
consisting of commissions, persistency income, and management overrides. The problem
started sometime in 2001, when Manulife instituted manpower development programs in the
regional sales management level. Relative thereto, De Dios addressed a letter dated
November 6, 2001 to Tongko regarding an October 18, 2001 Metro North Sales Managers
Meeting. Stating that Tongko’s Region was the lowest performer (on a per Manager basis) in
terms of recruiting in 2000 and, as of today, continues to remain one of the laggards in this
area.
Other issues were:"Some Managers are unhappy with their earnings and would want to
revert to the position of agents." And "Sales Managers are doing what the company asks them
to do but, in the process, they earn less." Tongko was then terminated. Therefrom, Tongko filed
a Complaint dated November 25, 2002 with the NLRC against Manulife for illegal dismissal in
20

the Complaint. In a Decision dated April 15, 2004, Labor Arbiter dismissed the complaint for
lack of an employer-employee relationship. The NLRC's First Division, while finding an
employer-employee relationship between Manulife and Tongko applying the four-fold test, held
Manulife liable for illegal dismissal. Thus, Manulife filed an appeal with the CA. Thereafter, the
CA issued the assailed Decision dated March 29, 2005, finding the absence of an employeremployee relationship between the parties and deeming the NLRC with no jurisdiction over the
case.Hence, Tongko filed this petition.
ISSUES:
 WON Tongko was an employee of Manulife
 WON Tongko was illegally dismissed.
RULING:
1. Yes
In the instant case, Manulife had the power of control over Tongko that would make him
its employee. Several factors contribute to this conclusion. In the Agreement dated July 1,
1977 executed between Tongko and Manulife, it is provided that: The Agent hereby agrees to
comply with all regulations and requirements of the Company as herein provided as well as
maintain a standard of knowledge and competency in the sale of the Company's products
which satisfies those set by the Company and sufficiently meets the volume of new business
required of Production Club membership.Under this provision, an agent of Manulife must
comply with three (3) requirements: (1) compliance with the regulations and requirements of
the company; (2) maintenance of a level of knowledge of the company's products that is
satisfactory to the company; and (3) compliance with a quota of new businesses. Among the
company regulations of Manulife are the different codes of conduct such as the Agent Code of
Conduct, Manulife Financial Code of Conduct, and Manulife Financial Code of Conduct
Agreement, which demonstrate the power of control exercised by the company over Tongko.
The fact that Tongko was obliged to obey and comply with the codes of conduct was not
disowned by respondents. Thus, with the company regulations and requirements alone, the
fact that Tongko was an employee of Manulife may already be established. Certainly, these
requirements controlled the means and methods by which Tongko was to achieve the
company's goals.
More importantly, Manulife's evidence establishes the fact that Tongko was tasked to
perform administrative duties that establishes his employment with Manulife. Additionally, it
must be pointed out that the fact that Tongko was tasked with recruiting a certain number of
agents, in addition to his other administrative functions, leads to no other conclusion that he
was an employee of Manulife.
2. Yes
In its Petition for Certiorari dated January 7, 2005[26] filed before the CA, Manulife
argued that even if Tongko is considered as its employee, his employment was validly
terminated on the ground of gross and habitual neglect of duties, inefficiency, as well as willful
disobedience of the lawful orders of Manulife. Manulife stated: In the instant case, private
respondent, despite the written reminder from Mr. De Dios refused to shape up and altogether
disregarded the latter's advice resulting in his laggard performance clearly indicative of his
willful disobedience of the lawful orders of his superior. As private respondent has patently
failed to perform a very fundamental duty, and that is to yield obedience to all reasonable
rules, orders and instructions of the Company, as well as gross failure to reach at least
minimum quota, the termination of his engagement from Manulife is highly warranted and
therefore, there is no illegal dismissal to speak of. It is readily evident from the above-quoted
portions of Manulife's petition that it failed to cite a single iota of evidence to support its
claims. Manulife did not even point out which order or rule that Tongko disobeyed. More
importantly, Manulife did not point out the specific acts that Tongko was guilty of that would
constitute gross and habitual neglect of duty or disobedience. Manulife merely cited Tongko's
alleged "laggard performance," without substantiating such claim, and equated the same to
21

disobedience and neglect of duty. Apropos thereto, Art. 277(b), of the Labor Code mandates in
explicit terms that the burden of proving the validity of the termination of employment rests
on the employer. Failure to discharge this evidential burden would necessarily mean that the
dismissal was not justified, and, therefore, illegal. The Labor Code provides that an employer
may terminate the services of an employee for just cause and this must be supported by
substantial evidence. The settled rule in administrative and quasi-judicial proceedings is that
proof beyond reasonable doubt is not required in determining the legality of an employer's
dismissal of an employee, and not even a preponderance of evidence is necessary as
substantial evidence is considered sufficient. Substantial evidence is more than a mere
scintilla of evidence or relevant evidence as a reasonable mind might accept as adequate to
support a conclusion, even if other minds, equally reasonable, might conceivably opine
otherwise. Here, Manulife failed to overcome such burden of proof. It must be reiterated that
Manulife even failed to identify the specific acts by which Tongko's employment was
terminated much less support the same with substantial evidence. To repeat, mere
conjectures cannot work to deprive employees of their means of livelihood. Thus, it must be
concluded that Tongko was illegally dismissed. Moreover, as to Manulife's failure to comply
with the twin notice rule, it reasons that Tongko not being its employee is not entitled to such
notices. Since we have ruled that Tongko is its employee, however, Manulife clearly failed to
afford Tongko said notices. Thus, on this ground too, Manulife is guilty of illegal dismissal.

CAONG, JR. V. AVELINO REGUALOS
GR No. 179428
January 26, 2011
FACTS:
Petitioners were hired by respondent under a boundary agreement, as drivers of his
jeepneys. Consequently, petitioners were barred him from driving because of the deficiency in
the boundary payment. They pleaded with respondent but to no avail.During the mandatory
conference, respondent manifested that petitioners were not dismissed and that they could
drive his jeepneys once they paid their arrears. Petitioners, however, refused to do so and
averred that they were illegally dismissed by respondent without just cause. They filed separate
complaints for illegal dismissal against respondent who barred them from driving the vehicles
due to deficiencies in their boundary payments. In his answer, respondent alleged that
petitioners were lessees of his vehicles and not his employees; hence, the Labor Arbiter had no
jurisdiction.
ISSUE:
Whether or not the policy of suspending drivers pending payment of arrears in their
boundary obligations reasonable?
HELD:
It is already settled that the relationship between jeepney owners/operators and jeepney
drivers under the boundary system is that of employer-employee and not of lessor-lessee. The
fact that the drivers do not receive fixed wages but only get the amount in excess of the socalled "boundary" that they pay to the owner/operator is not sufficient to negate the
relationship between them as employer and employee.

22

Indeed, petitioners' suspension cannot be categorized as dismissal, considering that
there was no intent on the part of respondent to sever the employer-employee relationship
between him and petitioners. In fact, it was made clear that petitioners could put an end to the
suspension if they only pay their recent arrears. As it was, the suspension dragged on for years
because of petitioners' stubborn refusal to pay. It would have been different if petitioners
complied with the condition and respondent still refused to readmit them to work. Then there
would have been a clear act of dismissal.
Respondent's policy of suspending drivers who fail to remit the full amount of the
boundary was fair and reasonable under the circumstances.Under a boundary scheme, the
driver remits the "boundary," which is a fixed amount, to the owner/operator and gets to earn
the amount in excess thereof. Thus, on a day when there are many passengers along the route,
it is the driver who actually benefits from it. It would be unfair then if, during the times when
passengers are scarce, the owner/operator will be made to suffer by not getting the full amount
of the boundary. Unless clearly shown or explained by an event that irregularly and negatively
affected the usual number of passengers within the route, the scarcity of passengers should not
excuse the driver from paying the full amount of the boundary.
The petition is denied for lack of merit.

ATOK BIG WEDGE COMPANY, INC. V JESUS P. GISON
GR. No. 169510
August 8,2011
FACTS:
Respondent was engaged as part-time consultant on retainer basis by petitioner. As a
consultant on retainer basis, respondent assisted petitioner's retained legal counsel with
matters pertaining to the prosecution of cases against illegal surface occupants within the area
covered by the company's mineral claims. Respondent was likewise tasked to perform liaison
work with several government agencies, which he said was his expertise.Petitioner did not
require respondent to report to its office on a regular basis, except when occasionally requested
by the management to discuss matters needing his expertise as a consultant. As payment for
his services, respondent received a retainer fee of P3,000.00 a month. The said arrangement
continued for the next eleven years.
Sometime thereafter, since respondent was getting old, he requested that petitioner
cause his registration with the Social Security System (SSS), but petitioner did not accede to his
request. He later reiterated his request but it was ignored by petitioner considering that he was
only a retainer/consultant.
On the same date petitioner, issued a memorandum advising respondent that within 30
days from receipt thereof, petitioner is terminating his retainer contract with the company since
his services are no longer necessary. Respondent filed a complaint for illegal dismissal, unfair

23

labor practice, underpayment of wages, non-payment of 13th month pay, vacation pay, and sick
leave pay with the National Labor Relations Commission (NLRC).
ISSUE:
Whether or not there existed an employer-employee relationship between the petitioner
and respondent.
HELD:
To ascertain the existence of an employer-employee relationship jurisprudence has
invariably adhered to the four-fold test, to wit:
(1) the selection and engagement of the employee;
(2) the payment of wages;
(3) the power of dismissal; and
(4) the power to control the employee's conduct, or the so-called "control test."
Of these four, the last one is the most important. The so-called "control test" is
commonly regarded as the most crucial and determinative indicator of the presence or absence
of an employer-employee relationship. Under the control test, an employer-employee
relationship exists where the person for whom the services are performed reserves the right to
control not only the end achieved, but also the manner and means to be used in reaching that
end.
Applying the aforementioned test, an employer-employee relationship is apparently
absent in the case at bar. Among other things, respondent was not required to report everyday
during regular office hours of petitioner. Respondent's monthly retainer fees were paid to him
either at his residence or a local restaurant. More importantly, petitioner did not prescribe the
manner in which respondent would accomplish any of the tasks in which his expertise as a
liaison officer was needed; respondent was left alone and given the freedom to accomplish the
tasks using his own means and method. Respondent was assigned tasks to perform, but
petitioner did not control the manner and methods by which respondent performed these tasks.
Verily, the absence of the element of control on the part of the petitioner engenders a
conclusion that he is not an employee of the petitioner.

24

SEMBLANTE V. COURT OF APPEALS
GR No. 196426
August 15, 2011
FACTS:
Petitioners assert that they were hired by respondents, as the official masiador and
sentenciador, respectively, of the cockpit sometime in 1993.
Amasiador calls and takes the bets from the gamecock owners and other bettors and
orders the start of the cockfight. He also distributes the winnings after deducting the arriba, or
the commission for the cockpit. Meanwhile, as the sentenciador oversees the proper gaffing of
fighting cocks, determines the fighting cocks' physical condition and capabilities to continue the
cockfight, and eventually declares the result of the cockfight.
For their services as masiador and sentenciador, Semblante receives PhP2,000 per week
or a total of PhP8,000 per month, while Pilar gets PhP3,500 a week or PhP14,000 per month.
They work every Tuesday, Wednesday, Saturday, and Sunday every week, excluding monthly
derbies and cockfights held on special holidays. Their working days start at 1:00 p.m. and last
until 12:00 midnight, or until the early hours of the morning depending on the needs of the
cockpit. Petitioners had both been issued employees' identification cards that they wear every
time they report for duty. They alleged never having incurred any infraction and/or violation of
the cockpit rules and regulations.
On November 14, 2003, however, petitioners were denied entry into the cockpit upon the
instructions of respondents, and were informed of the termination of their services effective that
date. This prompted petitioners to file a complaint for illegal dismissal against respondents.
ISSUE:
Whether or not there existed an employer-employee relationship between the petitioners
and respondent.
HELD:

Petitioners are NOT employees of respondents, since their relationship fails to pass
muster the four-fold test of employment We have repeatedly mentioned in countless decisions:
(1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of
dismissal; and (4) the power to control the employee's conduct, which is the most important
element.
As found by both the NLRC and the CA, respondents had no part in petitioners' selection
and management; petitioners' compensation was paid out of the arriba(which is a percentage
deducted from the total bets), not by petitioners; and petitioners performed their functions as
masiador and sentenciador free from the direction and control of respondents. In the conduct of
their work, petitioners relied mainly on their "expertise that is characteristic of the cockfight
gambling," and were never given by respondents any tool needed for the performance of their
work.
Respondents, not being petitioners' employers, could never have dismissed, legally or
illegally, petitioners, since respondents were without power or prerogative to do so in the first
place. The rule on the posting of an appeal bond cannot defeat the substantive rights of
respondents to be free from an unwarranted burden of answering for an illegal dismissal for
which they were never responsible.

25

JOSE MEL BERNARTE V. PHILIPPINE BASKETBALL ASSOCIATION
G.R. No. 192084,
September 14, 2011
FACTS:
Petitioner Bernarte was invited to join the Philippine Basketball Association (PBA) as a
referee. Consequently, he was made to sign contracts on a year-to-year basis. During the term
of Commissioner Eala, however, changes were made on the terms of their employment. For
instance, he was not made to sign a contract during the first conference of the All-Filipino Cup
which was from February 23, 2003 to June 2003. It was only during the second conference when
he was made to sign a one and a half month contract for the period July 1 to August 5, 2003.On
January 15, 2004, Bernarte received a letter from the Office of the Commissioner advising him
that his contract would not be renewed citing his unsatisfactory performance on and off the
court. It was a total shock for Bernarte who was awarded Referee of the year in2003. He felt
that the dismissal was caused by his refusal to fix a game upon order of Ernie De Leon.
Respondents aver, on the other hand, that Bernarte was not illegally dismissed because he was
not an employee of the PBA. His contract of retainer was simply not renewed. PBA had the
prerogative of whether or not to renew his contract.
ISSUE:
Whether or not the repeated signing of a contract of retainer by a basketball referee is
sufficient to make him a regular employee
HELD:

To determine the existence of an employer-employee relationship, case law has
consistently applied the four-fold test, to wit: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer's power
to control the employee on the means and methods by which the work is accomplished. The socalled "control test" is the most important indicator of the presence or absence of an employeremployee relationship.
In the case at bar, the petitioner, a basketball referee of the PBA, is an independent
contractor. There was no control over the means and methods by which petitioner performs his
work as a referee officiating a PBA basketball game. The contractual stipulations in the retainer
contracts do not pertain to, much less dictate, how and when petitioner will blow the whistle
and make calls. On the contrary, they merely serve as rules of conduct or guidelines in order to
maintain the integrity of the professional basketball league.
Moreover, the following circumstances indicate that petitioner is an independent
contractor: (1) the referees are required to report for work only when PBA games are scheduled,
which is three times a week spread over an average of only 105playing days a year, and they
officiate games a tan average of two hours per game; and (2) the only deductions from the fees
received by the referees are withholding taxes. In other words, unlike regular employees who
ordinarily report or work eight hours per day for five days a week, petitioner is required to report
for work only when PBA games are scheduled or three times a week. In addition, there are no
deductions for contributions to the Social Security System, Philhealth or Pag-Ibig, which are the
usual deductions from employees' salaries. These undisputed circumstances buttress the fact
that petitioner is an independent contractor, and not an employee of respondents. Furthermore,
the applicable foreign case law declares that a referee is an independent contractor whose
special skills and independent judgment are required specifically for such position and cannot
possibly be controlled by the hiring party.

26

LIRIO V. GENOVIA
GR No. 169757

November 23, 2011

FACTS:
Respondent Wilmer D. Genovia was hired on Aug. 15, 2001 as studio manager by
petitioner Cesar C. Lirio, owner of Celkor Ad Sonicmix Recording Studio, to promote and sell the
studio’s services to music enthusiasts and other prospective clients. He received a monthly
salary of P7,000.00 and additional commission of P100 per hour as recording technician.
Respondent was made to report for work from Monday to Friday from 9:00 a.m. to 6 p.m.
On Saturdays, he was required to work half-day only, but most of the time, he still rendered
eight hours of work or more. All the employees of petitioner, including respondent, rendered
overtime work almost everyday, but petitioner never kept a daily time record to avoid paying
the employees overtime pay.
In a complaint for illegal dismissal, petitioner invoked the defense that no employeremployee relationship exists between him and respondent. Theirs is one of an informal
partnership since they agreed to contribute money, property or industry to a common fund with
the intention of dividing the profits among themselves.
ISSUE:
Whether or not there existed an employer-employee relationship between the petitioners
and respondent.
Ruling:
The elements to determine the existence of an employment relationship are: (a) the
selection and engagement of the employee; (b) the payment of wages; (c) the power of
dismissal; and (d) the employer’s power to control the employee’s conduct. The most important
element is the employer’s control of the employee’s conduct, not only as to the result of the
work to be done, but also as to the means and methods to accomplish it.
It is settled that no particular form of evidence is required to prove the existence of an
employer-employee relationship. Any competent and relevant evidence to prove the relationship
may be admitted.
In this case, the documentary evidence presented by respondent to prove that he was an
employee of petitioner are as follows: (a) a document denominated as “payroll” (dated July 31,
2001 to March 15, 2002) certified correct by petitioner, which showed that respondent received
a monthly salary of P7,000, with the corresponding deductions due to absences incurred by
respondent; and two copies of petty cash vouchers, showing the amounts he received and
signed for in the payrolls.
The said documents showed that petitioner hired respondent as an employee and he was
paid monthly wages of P7,000. Petitioner wielded the power to dismiss as respondent stated
that he was verbally dismissed by petitioner, and respondent, thereafter, filed an action for
illegal dismissal against petitioner. The power of control refers merely to the existence of the
power. It is not essential for the employer to actually supervise the performance of duties of the
employee, as it is sufficient that the former has a right to wield the power.
On the other hand, petitioner failed to prove that his relationship with respondent was
one of partnership. Such claim was not supported by any written agreement.

27

CHARLIE JAO V. BCC PRODUCTS SALES, INC.
GR No. 163700
April 18, 2012
FACTS:
Petitioner maintained that respondent BCC Product Sales, Inc. (BCC) and its President,
respondent Terrance Ty (Ty), employed him as comptroller starting from September 1995 with a
monthly salary of P20,000.00 to handle the financial aspect of BCC's business; 2 that on October
19, 1995, the security guards of BCC, acting upon the instruction of Ty, barred him from entering
the premises of BCC where he then worked; that his attempts to report to work in November
and December 12, 1995 were frustrated because he continued to be barred from entering the
premises of BCC; and that he filed a complaint dated December 28, 1995 for illegal dismissal,
reinstatement with full backwages, non-payment of wages, damages and attorney's fees. 4
Respondents countered that petitioner was not their employee but the employee of
Sobien Food Corporation (SFC), the major creditor and supplier of BCC; and that SFC had posted
him as its comptroller in BCC to oversee BCC's finances and business operations and to look
after SFC's interests or investments in BCC.; that their issuance of the ID to petitioner was only
for the purpose of facilitating his entry into the BCC premises in relation to his work of
overseeing the financial operations of BCC for SFC; that the ID should not be considered as
evidence of petitioner's employment in BCC; that petitioner executed an affidavit in March 1996,
20 stating, among others, as follows:
1. I am a CPA (Certified Public Accountant) by profession but presently associated with,
or employed by, Sobien Food Corporation with the same business address as
abovestated;
2. In the course of my association with, or employment by, Sobien Food Corporation
(SFC, for short), I have been entrusted by my employer to oversee and supervise
collections on account of receivables due SFC from its customers or clients; for instance,
certain checks due and turned over by one of SFC's customers is BCC Product Sales, Inc.,
operated or run by one Terrance L. Ty, (President and General manager).
Petitioner counters, however, that the affidavit did not establish the absence of an
employer-employee relationship between him and respondents because it had been executed in
March 1996, or after his employment with respondents had been terminated on December 12,
1995; and that the affidavit referred to his subsequent employment by SFC following the
termination of his employment by BCC.
ISSUE:
The sole issue is whether or not an employer-employee relationship existed between
petitioner and BCC. A finding on the existence of an employer-employee relationship will
automatically warrant a finding of illegal dismissal, considering that respondents did not state
any valid grounds to dismiss petitioner.
HELD:

In determining the presence or absence of an employer-employee relationship, the Court
has consistently looked for the following incidents, to wit: (a) the selection and engagement of
the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer's
power to control the employee on the means and methods by which the work is accomplished.
The last element, the so-called control test, is the most important element.
Petitioner presented no document setting forth the terms of his employment by BCC. The
failure to present such agreement on terms of employment may be understandable and
expected if he was a common or ordinary laborer who would not jeopardize his employment by
28

demanding such document from the employer, but may not square well with his actual status as
a highly educated professional.
Petitioner's admission that he did not receive his salary for the three months of his
employment by BCC, as his complaint for illegal dismissal and non-payment of wages and the
criminal case for estafa he later filed against the respondents for non-payment of wages
indicated, further raised grave doubts about his assertion of employment by BCC. If the
assertion was true, we are puzzled how he could have remained in BCC's employ in that period
of time despite not being paid the first salary of P20,000.00/month. Moreover, his name did not
appear in the payroll of BCC despite him having approved the payroll as comptroller.
Lastly, the confusion about the date of his alleged illegal dismissal provides another
indicium of the insincerity of petitioner's assertion of employment by BCC. In the petition for
review on certiorari, he averred that he had been barred from entering the premises of BCC on
October 19, 1995, 27 and thus was illegally dismissed. Yet, his complaint for illegal dismissal
stated that he had been illegally dismissed on December 12, 1995 when respondents' security
guards barred him from entering the premises of BCC, 28 causing him to bring his complaint
only on December 29, 1995, and after BCC had already filed the criminal complaint against him.
The wide gap between October 19, 1995 and December 12, 1995 cannot be dismissed as a
trivial inconsistency considering that the several incidents affecting the veracity of his assertion
of employment by BCC earlier noted herein transpired in that interval.
With all the grave doubts thus raised against petitioner's claim, we need not dwell at
length on the other proofs he presented, like the affidavits of some of the employees of BCC, the
ID, and the signed checks, bills and receipts. Suffice it to be stated that such other proofs were
easily explainable by respondents and by the aforestated circumstances showing him to be the
employee of SFC, not of BCC.

29

3. HIRING OF EMPLOYEES
Ollendorf vs. Abrahanson
G.R. No. 13228; September 13, 1918
FACTS:
The record discloses that Ollendorf is and for a long time past has been engaged in the
city of Manila and elsewhere in the Philippines in the business of manufacturing ladies'
embroidered underwear for export. Ollendorf imports the material from which this underwear is
made and adopts decorative designs which are embroidered upon it by Filipino needle workers
from patterns selected and supplied by him. Most of the embroidery work is done in the homes
of the workers. The embroiderers employed by plaintiff are under contract to work for plaintiff
exclusively.
On September 1915, plaintiff and defendant entered into a contract. Under the terms of
this, agreement defendant entered the employ of plaintiff and worked for him until April 1916,
when defendant, on account of ill health, left plaintiff's employ and went to the United States.
While in plaintiff's employ defendant had access to all parts of plaintiff's establishment, and had
full opportunity to acquaint himself with plaintiff's business methods and business connections.
The duties performed by him were such as to make it necessary that he should have this
knowledge of plaintiff s business. Defendant had a general knowledge of the Philippine
embroidery business before his employment by plaintiff, having been engaged in similar work
for several years.
Some months after his departure, defendant returned to Manila as the manager of the
Philippine Underwear Company, a corporation. This corporation does not maintain a factory in
the Philippine Islands, but sends material and embroidery designs from New York to its local
representative here who employs Filipino needle workers to embroider the designs and make up
the garments in their homes. The only difference between plaintiff's business and that of the
firm by which the defendant is employed, is the method of doing the finishing work — the
manufacture of the embroidered material into finished garments.
Shortly after defendant's return to Manila and the commencement by him of the
discharge of the duties of his position as local manager of the Philippine Embroidery Company,
plaintiff commenced this action, the principal purpose of which is to prevent, by injunction, any
further breach of that part of defendant's contract of employment by plaintiff, by which he
agreed that he would not "enter into or engage himself directly or indirectly . . . in a similar or
competitive business to that of (plaintiff) anywhere within the Philippine Islands for a period of
five years . . ." from the date of the agreement.
ISSUE:
Whether or not the contract is valid.
RULING:
SC ruled that the contract is valid.
The only limitation upon the freedom of contractual agreement is that the pacts
established shall not be contrary to "law, morals or public order." (Civil Code, art. 1255.)

30

Public welfare is first considered, and if it be not involved, and the restraint upon one
party is not greater than protection to the other party requires, the contract may be sustained.
The question is whether, under the particular circumstances of the case and the nature of the
particular contract involved in it the contract is, or is not, unreasonable.
The Courts adopt the modern rule that the validity of restraints upon trade or
employment is to be determined by the intrinsic reasonableness of the restriction in each case,
rather than by any fixed rule, and that such restrictions may be upheld when not contrary to the
public welfare and not greater than is necessary to afford a fair and reasonable protection to the
party in whose favor it is imposed.
A business enterprise may and often does depend for its success upon the owner's
relations with other dealers, his skill in establishing favorable connections, his methods of
buying and selling — a multitude of details, none vital if considered alone, but which in the
aggregate constitute the sum total of the advantages which are the result of the experience or
individual aptitude and ability of the man or men by whom the business has been built up.
Failure or success may depend upon the possession of these intangible but all-important assets,
and it is natural that their possessor should seek to keep them from falling into the hands of his
competitors.
It is with this object in view that such restrictions as that now under consideration are
written into contracts of employment. Their purpose is the protection of the employer, and if
they do not go beyond what is reasonably necessary to effectuate this purpose they should be
upheld. We are of the opinion, and so hold, that in the light of the established facts the restraint
imposed upon defendant by his contract is not unreasonable.

31

Del Castillo vs. Richmond
G.R. No. L-21127; February 9, 1924
FACTS:
The case was instituted to declare the contract of services entered into by Alfonso del
Castillo as null and void. Del Castillo alleges that the provisions and conditions contained in the
third paragraph of said contract constitute an illegal and unreasonable restriction upon his
liberty to contract, are contrary to public policy, and are unnecessary in order to constitute a
just and reasonable protection to the defendant; and asked that the same be declared null and
void and of no effect.
The said contract constituted an illegal and unreasonable restriction upon the right of the
plaintiff to contract and was contrary to public policy. It will be noted that the restrictions placed
upon the plaintiff are strictly limited (a) to a limited district or districts, and (b) during the time
while the defendant or his heirs may own or have open a drugstore, or have an interest in any
other one within said limited district.
ISSUE:
Whether or not the said restraint is reasonable.
RULING:
SC ruled that the restriction is reasonable and not contrary to public policy.
The law concerning contracts which tend to restrain business or trade has gone through
a long series of changes from time to time with the changing conditions of trade and commerce.
With trifling exceptions, said changes have been a continuous development of a general rule.
The early cases show plainly a disposition to avoid and annul all contract which
prohibited or restrained any one from using lawful trade " at any time or at any place," as being
against the benefit of the state. Later, however, the rule became well established that if the
restraint was limited to "a certain time" and within "a certain place", such contracts were valid
and not "against the benefit of the state." Later cases, and we think the rule is now well
established, have held that contract in restraint of trade is valid providing there is a limitation
upon either time or place. A contract, however, which restrains a man entering into a business
or trade without either a limitation as to time or place, will be held in valid.
As stated in the case of Ollendorf vs. Abrahamson, The public welfare of course must
always be considered, and if it be not involved and the restraint upon one party is not greater
than protection to the other requires, contracts like the one we are discussing will be sustained.
The general tendency, we believe, of modern authority, is to make the test whether the restraint
is reasonably necessary for the protection of the contracting parties. If the contract is
reasonably necessary to protect the interest of the parties, it will be upheld.
In that case we held that a contract by which an employee agrees refrain a given length
of time, after the expiration of the term of his employment, from engaging in business,
competitive with that of his employer, is not void as being in restraint of trade if the restraint
imposed is not greater than that which is necessary to afford a reasonable protection.

32

PT & T vs. NLRC
G.R. No. 118978; May 23, 1997
FACTS:
Grace de Guzman was initially hired by petitioner as a reliever for a fixed period from
November 21, 1990 until April 20, 1991 vice one C.F. Tenorio who went on maternity leave.
Under the Reliever Agreement which she signed with Petitioner Company, her employment was
to be immediately terminated upon expiration of the agreed period. Thereafter, from June 10,
1991 to July 1, 1991, and from July 19, 1991 to August 8, 1991, private respondent’s services as
reliever were again engaged by petitioner, this time in replacement of one Erlinda F. Dizon who
went on leave during both periods. After August 8, 1991, and pursuant to their Reliever
Agreement, her services were terminated.
It now appears that private respondent had made the s representation, that she was
single eventhough she contracted marriage months before, in the two successive reliever
agreements which she signed on June 10, 1991 and July 8, 1991. When petitioner supposedly
learned about the same later, its branch supervisor sent to private respondent a memorandum
requiring her to explain the discrepancy. In that memorandum, she was reminded about the
company’s policy of not accepting married women for employment.
Private respondent was dismissed from the company effective January 29, 1992, which
she readily contested by initiating a complaint for illegal dismissal. Labor Arbiter handed down a
decision declaring that private respondent, who had already gained the status of a regular
employee, was illegally dismissed by petitioner. On appeal to the National Labor Relations
Commission (NLRC), said public respondent upheld the labor arbiter and it ruled that private
respondent had indeed been the subject of an unjust and unlawful discrimination by her
employer, PT&T.
ISSUE:
Whether or not discrimination merely by reason of the marriage of a female employee is
expressly prohibited by Article 136.
RULING:
SC ruled that the stipulation is violative of Art. 136 of the Labor Code.
An employer is free to regulate, according to his discretion and best business judgment,
all aspects of employment, “from hiring to firing,” except in cases of unlawful discrimination or
those which may be provided by law. Petitioner’s policy of not accepting or considering as
disqualified from work any woman worker who contracts marriage runs afoul of the test of, and
the right against, discrimination, afforded all women workers by our labor laws and by no less
than the Constitution.
Respondent’s act of concealing the true nature of her status from PT&T could not be properly
characterized as willful or in bad faith as she was moved to act the way she did mainly because
she wanted to retain a permanent job in a stable company. In other words, she was practically
forced by that very same illegal company policy into misrepresenting her civil status for fear of
being disqualified from work.
33

The government, to repeat, abhors any stipulation or policy in the nature of that adopted
by petitioner PT&T. The Labor Code states, in no uncertain terms, as follows:
“ART. 136. Stipulation against marriage. - It shall be unlawful for an employer to
require as a condition of employment or continuation of employment that a woman
shall not get married, or to stipulate expressly or tacitly that upon getting married, a
woman employee shall be deemed resigned or separated, or to actually dismiss,
discharge, discriminate or otherwise prejudice a woman employee merely by reason
of marriage.”
Under American jurisprudence, job requirements which establish employer preference or
conditions relating to the marital status of an employee are categorized as a “sex-plus”
discrimination where it is imposed on one sex and not on the other. Further, the same should be
evenly applied and must not inflict adverse effects on a racial or sexual group which is protected
by federal job discrimination laws.
Petitioner’s policy is not only in derogation of the provisions of Article 136 of the Labor
Code on the right of a woman to be free from any kind of stipulation against marriage in
connection with her employment, but it likewise assaults good morals and public policy, tending
as it does to deprive a woman of the freedom to choose her status, a privilege that by all
accounts inheres in the individual as an intangible and inalienable right.
Hence, while it is true that the parties to a contract may establish any agreements,
terms, and conditions that they may deem convenient, the same should not be contrary to law,
morals, good customs, public order, or public policy. Carried to its logical consequences, it may
even be said that petitioner’s policy against legitimate marital bonds would encourage illicit or
common-law relations and subvert the sacrament of marriage.

34

Duncan Asso. Of Detailman-PTGWO vs. Glaxo
G.R. No. 162994; September 17, 2004
FACTS:

Petitioner Pedro A. Tecson was hired by respondent Glaxo Wellcome Philippines, Inc.) as
medical representative on October 1995, after Tecson had undergone training and orientation.
Tecson signed a contract of employment which stipulates, among others, that he agrees to
study and abide by existing company rules; to disclose to management any existing or future
relationship by consanguinity or affinity with co-employees or employees of competing drug
companies and should management find that such relationship poses a possible conflict of
interest, to resign from the company.
The Employee Code of Conduct of Glaxo similarly provides that an employee is
expected to inform management of any existing or future relationship by consanguinity or
affinity with co-employees or employees of competing drug companies. If management
perceives a conflict of interest or a potential conflict between such relationship and the
employee’s employment with the company, the management and the employee will explore the
possibility of a “transfer to another department in a non-counterchecking position” or
preparation for employment outside the company after six months.
Tecson was initially assigned to market Glaxo’s products in the Camarines SurCamarines Norte sales area. Subsequently, Tecson entered into a romantic relationship with
Bettsy, an employee of Astra Pharmaceuticals (Astra), a competitor of Glaxo. Bettsy was Astra’s
Branch Coordinator in Albay. Despite of warnings, Tecson married Bettsy. The superiors of Tecson
reminded him of the company policy and suggested that either him or Bettsy shall resign from
their respective companies. Tecson requested more time to resolve the issue. In November of
1999, Glaxo transferred Tecson to Mindanao area involving the provinces of Butuan, Surigao and
Agusan del Sur. Tecson did not agree to the reassignment and referred this matter to the
grievance committee. It was resolved and was submitted to voluntary arbitration.
The NCMB rendered decision that Glaxo’s policy was a valid one. Aggrieved, Tecson filed
a petition to the CA where CA held that Glaxo’s policy prohibiting its employees from having
personal relationships with employees of competitor companies is a valid exercise of its
management prerogatives. Hence, this petition.
ISSUE:
Whether or not the policy of a pharmaceutical company prohibiting its employees from
marrying employees of any competitor company is valid.
RULING:
SC ruled that the prohibition is valid. It is an exercise of the company’s management
prerogative.
There is no error to the Court of Appeals when it ruled that Glaxo’s policy prohibiting an
employee from having a relationship with an employee of a competitor company is a valid
35

exercise of management prerogative. Glaxo has a right to guard its trade secrets, manufacturing
formulas, marketing strategies and other confidential programs and information from
competitors, especially so that it and Astra are rival companies in the highly competitive
pharmaceutical industry.
The prohibition against personal or marital relationships with employees of competitor
companies upon Glaxo’s employees is reasonable under the circumstances because
relationships of that nature might compromise the interests of the company. In laying down the
assailed company policy, Glaxo only aims to protect its interests against the possibility that a
competitor company will gain access to its secrets and procedures. That Glaxo possesses the
right to protect its economic interests cannot be denied.
No less than the Constitution recognizes the right of enterprises to adopt and enforce
such a policy to protect its right to reasonable returns on investments and to expansion and
growth. Indeed, while our laws endeavor to give life to the constitutional policy on social justice
and the protection of labor, it does not mean that every labor dispute will be decided in favor of
the workers. The law also recognizes that management has rights which are also entitled to
respect and enforcement in the interest of fair play.
City of Manila v. Laguio
G.R. No. 118127; April 12, 2005
FACTS:
Private respondent Malate Tourist Development Corporation (MTDC) is a corporation
engaged in the business of operating hotels, motels, hostels and lodging houses. It built and
opened Victoria Court in Malate which was licensed as a motel although duly accredited with the
Department of Tourism as a hotel.
On June 1993, MTDC filed a Petition for Declaratory Relief with Prayer for a Writ of
Preliminary Injunction and/or Temporary Restraining Order with the lower court impleading as
defendants, herein petitioners City of Manila, Hon. Alfredo S. Lim, Hon. Joselito L. Atienza, and
the members of the City Council of Manila. MTDC prayed that the Ordinance, insofar as it
includes motels and inns as among its prohibited establishments, be declared invalid and
unconstitutional.
Enacted by the City Council on 9 March 1993 and approved by petitioner City Mayor on
30 March 1993, the said Ordinance is entitled– AN ORDINANCE PROHIBITING THE
ESTABLISHMENT OR OPERATION OF BUSINESSES PROVIDING CERTAIN FORMS OF AMUSEMENT,
ENTERTAINMENT, SERVICES AND FACILITIES IN THE ERMITA-MALATE AREA, PRESCRIBING
PENALTIES FOR VIOLATION THEREOF, AND FOR OTHER PURPOSES.
MTDC argued that the Ordinance erroneously and improperly included in its enumeration
of prohibited establishments, motels and inns such as MTDC’s Victoria Court considering that
these were not establishments for “amusement” or “entertainment” and they were not
“services or facilities for entertainment,” nor did they use women as “tools for entertainment,”
and neither did they “disturb the community,” “annoy the inhabitants” or “adversely affect the
social and moral welfare of the community.”
ISSUE:
Whether or not the aforementioned Ordinance is valid and constitutional.
RULING:
SC ruled that the ordinance is null and void. Said ordinance is ultra vires, thus,
unconstitutional.
The Court is of the opinion, and so holds, that the lower court did not err in declaring the
Ordinance, as it did, ultra vires and therefore null and void. The Ordinance is so replete with
constitutional infirmities that almost every sentence thereof violates a constitutional provision.
The prohibitions and sanctions therein transgress the cardinal rights of persons enshrined by the

36

Constitution. The Court is called upon to shelter these rights from attempts at rendering them
worthless.
A long line of decisions has held that for an ordinance to be valid, it must not only be
within the corporate powers of the local government unit to enact and must be passed
according to the procedure prescribed by law, it must also conform to the following substantive
requirements: (1) must not contravene the Constitution or any statute; (2) must not be unfair or
oppressive; (3) must not be partial or discriminatory; (4) must not prohibit but may regulate
trade; (5) must be general and consistent with public policy; and (6) must not be unreasonable.
Ordinances shall only be valid when they are not contrary to the Constitution and to the
laws. The Ordinance must satisfy two requirements: it must pass muster under the test of
constitutionality and the test of consistency with the prevailing laws. That ordinances should be
constitutional uphold the principle of the supremacy of the Constitution. The requirement that
the enactment must not violate existing law gives stress to the precept that local government
units are able to legislate only by virtue of their derivative legislative power, a delegation of
legislative power from the national legislature. The delegate cannot be superior to the principal
or exercise powers higher than those of the latter.
The prohibition of the enumerated establishments will not per se protect and promote
the social and moral welfare of the community; it will not in itself eradicate the alluded social ills
of prostitution, adultery, fornication nor will it arrest the spread of sexual disease in Manila.
Conceding for the nonce that the Ermita-Malate area teems with houses of ill-repute and
establishments of the like which the City Council may lawfully prohibit, it is baseless and
insupportable to bring within that classification sauna parlors, massage parlors, karaoke bars,
night clubs, day clubs, super clubs, discotheques, cabarets, dance halls, motels and inns. This is
not warranted under the accepted definitions of these terms. The enumerated establishments
are lawful pursuits which are not per se offensive to the moral welfare of the community.
That these are used as arenas to consummate illicit sexual affairs and as venues to
further the illegal prostitution is of no moment. We lay stress on the acrid truth that sexual
immorality, being a human frailty, may take place in the most innocent of places that it may
even take place in the substitute establishments enumerated under Section 3 of the Ordinance.
The problem, it needs to be pointed out, is not the establishment, which by its nature
cannot be said to be injurious to the health or comfort of the community and which in itself is
amoral, but the deplorable human activity that may occur within its premises. While a motel
may be used as a venue for immoral sexual activity, it cannot for that reason alone be punished.
It cannot be classified as a house of ill-repute or as a nuisance per se on a mere likelihood or a
naked assumption. If that were so and if that were allowed, then the Ermita-Malate area would
not only be purged of its supposed social ills, it would be extinguished of its soul as well as
every human activity, reprehensible or not, in its every nook and cranny would be laid bare to
the estimation of the authorities.
The Ordinance seeks to legislate morality but fails to address the core issues of morality.
Try as the Ordinance may to shape morality, it should not foster the illusion that it can make a
moral man out of it because immorality is not a thing, a building or establishment; it is in the
hearts of men. The City Council instead should regulate human conduct that occurs inside the
establishments, but not to the detriment of liberty and privacy which are covenants, premiums
and blessings of democracy.
In the instant case, there is a clear invasion of personal or property rights, personal in
the case of those individuals desirous of owning, operating and patronizing those motels and
property in terms of the investments made and the salaries to be paid to those therein
employed. If the City of Manila so desires to put an end to prostitution, fornication and other
social ills, it can instead impose reasonable regulations such as daily inspections of the
establishments for any violation of the conditions of their licenses or permits; it may exercise its
37

authority to suspend or revoke their licenses for these violations; and it may even impose
increased license fees. In other words, there are other means to reasonably accomplish the
desired end.

Star Paper Corp. v. Simbol
G.R. No. 164774; April 12, 2006
FACTS:
Petitioner Star Paper Corporation is a corporation engaged in trading, principally of paper
products. Josephine Ongsitco is its Manager of the Personnel and Administration Department
while Sebastian Chua is its Managing Director.
Respondents Ronaldo D. Simbol (Simbol), Wilfreda N. Comia (Comia) and Lorna E. Estrella
(Estrella) were all regular employees of the company. Simbol was employed by the company on
October 1993 and met Alma Dayrit, also an employee of the company, whom he married on
June 1998. Prior to the marriage, Ongsitco advised the couple that should they decide to get
married, one of them should resign pursuant to a company policy. Simbol resigned on June 20,
1998 pursuant to the company policy.
Comia was hired by the company on February 1997. She met Howard Comia, a coemployee, whom she married on June 1, 2000. Ongsitco likewise reminded them that pursuant
to company policy, one must resign should they decide to get married. Comia resigned on June
30, 2000.
Estrella was hired on July 29, 1994. She met Luisito Zuñiga (Zuñiga), also a co-worker.
Petitioners stated that Zuñiga, a married man, got Estrella pregnant. The company allegedly
could have terminated her services due to immorality but she opted to resign on December 21,
1999.
The respondents signed a Release and Confirmation Agreement and stated therein that
they have no money and property accountabilities in the company. Respondents offer a
different version of their dismissal. Respondents later filed a complaint for unfair labor practice,
constructive dismissal, separation pay and attorney’s fees. They averred that the
aforementioned company policy is illegal and contravenes Article 136 of the Labor Code.
Labor Arbiter dismissed the complaint and states that the company policy was decreed
pursuant to what the respondent corporation perceived as management prerogative. On appeal
38

to the NLRC, the Commission affirmed the decision of the Labor Arbiter. In its assailed Decision
dated August 3, 2004, the Court of Appeals reversed the NLRC decision.
ISSUE:
Whether or not the said policy is a valid exercise of the company’s management
prerogative.
RULING:
SC ruled that it not a valid exercise of its management prerogative. There is no
reasonable business necessity of the policy.
The case at bar involves Article 136 of the Labor Code which provides: It
shall
be
unlawful for an employer to require as a condition of employment or continuation of
employment that a woman employee shall not get married, or to stipulate expressly or tacitly
that upon getting married a woman employee shall be deemed resigned or separated, or to
actually dismiss, discharge, discriminate or otherwise prejudice a woman employee merely by
reason of her marriage.
With more women entering the workforce, employers are also enacting employment
policies specifically prohibiting spouses from working for the same company. We note that two
types of employment policies involve spouses: policies banning only spouses from working in
the same company (no-spouse employment policies), and those banning all immediate family
members, including spouses, from working in the same company (anti-nepotism employment
policies).
It utilizes two theories of employment discrimination: the disparate treatment and the
disparate impact. Under the disparate treatment analysis, the plaintiff must prove that an
employment policy is discriminatory on its face. No-spouse employment policies requiring an
employee of a particular sex to either quit, transfer, or be fired are facially discriminatory. On
the other hand, to establish disparate impact, the complainants must prove that a facially
neutral policy has a disproportionate effect on a particular class.
The courts that have broadly construed the term “marital status” rule that it
encompassed the identity, occupation and employment of one's spouse. They hold that the
absence of such a bona fide occupational qualification invalidates a rule denying employment to
one spouse due to the current employment of the other spouse in the same office. Thus, they
rule that unless the employer can prove that the reasonable demands of the business require a
distinction based on marital status and there is no better available or acceptable policy which
would better accomplish the business purpose, an employer may not discriminate against an
employee based on the identity of the employee’s spouse. This is known as the bona fide
occupational qualification exception.
We note that since the finding of a bona fide occupational qualification justifies an
employer’s no-spouse rule, the exception is interpreted strictly and narrowly by these state
courts. There must be a compelling business necessity for which no alternative exists other than
the discriminatory practice. To justify a bona fide occupational qualification, the employer must
prove two factors: (1) that the employment qualification is reasonably related to the essential
operation of the job involved; and, (2) that there is a factual basis for believing that all or
substantially all persons meeting the qualification would be unable to properly perform the
duties of the job.
The court does not find a reasonable business necessity in the case at bar. The
protection given to labor in our jurisdiction is vast and extensive that we cannot prudently draw
inferences from the legislature’s silence that married persons are not protected under our
Constitution and declare valid a policy based on a prejudice or stereotype. Thus, for failure of
petitioners to present undisputed proof of a reasonable business necessity, we rule that the
questioned policy is an invalid exercise of management prerogative.

39

Del Monte Phils. V. Velasco
G.R. No. 153477; March 6, 2007
FACTS:
Lolita Velasco was hired by Del Monte as seasonal employee and was subsequently
regularized by Del Monte. On June 1987, petitioner warned Velasco of its absences and was
repeatedly reminded that her absence without permission may result to forfeiture of her
vacation leave.
Another warning was sent due to her absences without permission which eventually led
to the forfeiture of her vacation entitlement. On September 1994, a notice of hearing was sent
to Velasco informing her of the charges filed against her foe violating the Absence without leave
rule. On January 1995, after the hearing, Del Monte terminated the services of Velasco due to
excessive absence without leave. Feeling aggrieved, Velasco filed a case for illegal dismissal.
She asserted that she was absent since she was suffering urinary tract infection and she was
pregnant.
She sent an application for leave to the supervisor. Upon check up of the company
doctor, Velasco was advised to rest. On the following check-ups, she was again advised to rest
where this time, she was not able to get secure a leave.
The Labor Arbiter rendered decision that she was an incorrigible absentee. Respondent
appealed to the NLRC. NLRC vacated the decision of the Labor Arbiter. It decided that
respondent was illegally dismissed and was entitled to reinstatement. Petitioner appealed to CA
where it dismissed its claim and affirmed NLRC. Thus, this petition.
ISSUE:

40

Whether or not the dismissal was legal on account of absences made due to Velasco’s
pregnancy.
RULING:
SC ruled that the termination was illegal.
The termination was illegal since it comes within the purview of the prohibited acts
provided in Article 137 of the Labor Code. Based on Art. 137, it shall be unlawful for any
employer (1) to deny any woman employee the benefits provided for in this Chapter or to
discharge any woman employed by him for the purpose of preventing her from enjoying any of
the benefits provided under this Code; (2) to discharge such woman on account of her
pregnancy, or while on leave or in confinement due to her pregnancy; and (3) to discharge or
refuse the admission of such woman upon returning to her work for fear that she may again be
pregnant.
The respondent was illegally dismissed by the petitioner on account of her pregnancy.
The act of the employer is unlawful, it being contrary to law.

Yrasuegui vs. Philippine Airlines
G.R. No. ; October 17, 2008
FACTS:
This case portrays the peculiar story of an international flight steward who was dismissed
because of his failure to adhere to the weight standards of the airline company.
Petitioner Armando G. Yrasuegui was a former international flight steward of Philippine
Airlines, Inc. (PAL). He stands five feet and eight inches (5’8”) with a large body frame. The
proper weight for a man of his height and body structure is from 147 to 166 pounds, the ideal
weight being 166 pounds, as mandated by the Cabin and Crew Administration Manual of PAL.
The weight problem of petitioner dates back to 1984. Back then, PAL advised him to go
on an extended vacation leave from December 29, 1984 to March 4, 1985 to address his weight
concerns. Apparently, petitioner failed to meet the company’s weight standards,
prompting another leave without pay from March 5, 1985 to November 1985.
After meeting the required weight, petitioner was allowed to return to work. But
petitioner’s weight problem recurred. He again went on leave without pay from October 17,
1988 to February 1989.
On April 26, 1989, petitioner weighed 209 pounds, 43 pounds over his ideal weight. In
line with company policy, he was removed from flight duty effective May 6, 1989 to July 3, 1989.
He was formally requested to trim down to his ideal weight and report for weight checks on
several dates. He was also told that he may avail of the services of the company physician
should he wish to do so. He was advised that his case will be evaluated on July 3, 1989.
41

On February 25, 1989, petitioner underwent weight check. It was discovered that he
gained, instead of losing, weight. He was overweight at 215 pounds, which is 49 pounds
beyond the limit. Consequently, his off-duty status was retained.
Despite efforts, he remained to be overweight based on the company’s weight
standards. He was served Notice of Administrative Charge for violation of company standards
on weight requirements. He did not deny his being overweight. What he claimed, instead, is that
his violation, if any, had already been condoned by PAL since “no action has been taken by the
company” regarding his case “since 1988.” He also claimed that PAL discriminated against him
because “the company has not been fair in treating the cabin crew members who are similarly
situated.”
On June 15, 1993, petitioner was formally informed by PAL that due to his inability to
attain his ideal weight, “and considering the utmost leniency” extended to him “which spanned
a period covering a total of almost five (5) years,” his services were considered terminated
“effective immediately.”
His motion for reconsideration having been denied, petitioner filed a complaint for illegal
dismissal against PAL.
ISSUE:
Whether or not the dismissal of Yrasuegui was a valid exercise of management
prerogative.
RULING:
SC ruled that the dismissal of Yrasuegui was a valid exercise of management
prerogative. The weight standard is considered a continuing qualification for an employee’s
position.
The obesity of petitioner is a ground for dismissal under Article 282(e) of the Labor Code.
A reading of the weight standards of PAL would lead to no other conclusion than that they
constitute a continuing qualification of an employee in order to keep the job. Tersely put, an
employee may be dismissed the moment he is unable to comply with his ideal weight as
prescribed by the weight standards. The dismissal of the employee would thus fall under Article
282(e) of the Labor Code. As explained by the CA:
x x x [T]he standards violated in this case were not mere “orders” of the
employer; they were the “prescribed weights” that a cabin crew must maintain in
order to qualify for and keep his or her position in the company. In other
words, they were standards that establish continuing qualifications for an
employee’s position. In this sense, the failure to maintain these standards does
not fall under Article 282(a) whose express terms require the element of
willfulness in order to be a ground for dismissal. The failure to meet the
employer’s qualifying standards is in fact a ground that does not squarely fall
under grounds (a) to (d) and is therefore one that falls under Article 282(e) – the
“other causes analogous to the foregoing.”
By its nature, these “qualifying standards” are norms that apply prior to
and after an employee is hired. They apply prior to employment because
these are the standards a job applicant must initially meet in order to be hired.
They apply after hiring because an employee must continue to meet these
standards while on the job in order to keep his job. Under this perspective, a
violation is not one of the faults for which an employee can be dismissed pursuant
to pars. (a) to (d) of Article 282; the employee can be dismissed simply because
he no longer “qualifies” for his job irrespective of whether or not the failure to
qualify was willful or intentional. x x x

42

After a meticulous consideration of all arguments pro and con, We uphold the legality of
dismissal. Separation pay, however, should be awarded in favor of the employee as an act of
social justice or based on equity. This is so because his dismissal is not for serious misconduct.
Neither is it reflective of his moral character.

4. WAGE & THE WAGE RATIONALIZATION ACT
Ilaw at Buklod ng Manggagawa vs. NLRC
G.R. No. 91980; June 27, 1991
FACTS:
The controversy at bar had its origin in the “wage distortions” affecting the employees of
respondent San Miguel Corporation allegedly caused by RA 6727, otherwise known as Wage
Rationalization Act.
Upon the effectivity of the said Act, the union known as Ilaw at Buklod ng Mangagawa—
said to represent more or less 4, 500 employees of San Miguel Corporation who are working at
various plants, offices and warehouses located at the National Capital Region—presented to the
Company a “demand” for the correction of the “significant distortion in the worker’s wages”. In
that “demand”, the Union invoked Section 4(d) of RA 6727. The provision provided that should
there be any dispute regarding wage distortions, shall first be settled “voluntarily between the
parties and in the event of a deadlock, the same shall be finally resolved through compulsory
arbitration such disputes by the regional branches of the NLRC having jurisdiction over the
workplace”.

43

But the “demand” according to the Union has been ignored by the company. The Union
averred that the company offered a measly across-the board wage increase of P7.00 per day,
per employee, as against the proposal of the Union of P25.00 per day, per employee. Later, the
Union reduced its proposal to P15.00 per day, per employee by way of amicable settlement.
When the company rejected the reduced proposal of the Union the members thereof in their
own accord, the workers refused to render overtime services, most especially at the Beer
Bottling Plans at Polo. The work schedule of the workers constitutes a built-in automatic
overtime. They work 10 hours for the first shift and 10 to 14 hours for the second shift, from
Mondays to Fridays and on Saturdays, 8 hours for both shifts. The refusal of the workers to work
more than 8-hours caused substantial losses to the company. This led SMC to file a complaint
before NLRC against the Union. It sought to declare the strike or slowdown illegal and to
terminate the employment of the union officers and shop stewards.
ISSUE:
Whether or not the partial or limited strike, with the purpose of correction of the wage
distortion, of the Union is valid.
RULING:
SC ruled that the concerted activity of the Union is illegal.
The partial strike or concerted refusal by the Union members to follow the five-year-old
work schedule which they had therefore been observing, resorted to as a means of coercing
correction of "wage distortions," was therefore forbidden by law and contract and, on this
account, illegal.
Awareness by the Union of the proscribed character of its members' collective activities,
is clearly connoted by its attempt to justify those activities as a means of protesting and
obtaining redress against said members working overtime every day from Monday to Friday (on
an average of 12 hours), and every Saturday (on 8 hour shifts), rather than as a measure to
bring about rectification of the wage distortions caused by RA 6727 — which was the real cause
of its differences with SMC. By concealing the real cause of their dispute with management
(alleged failure of correction of wage distortion), and trying to make it appear that the
controversy involved application of the eight-hour labor law, they obviously hoped to remove
their case from the operation of the rules implementing RA 6727 that "Any issue involving wage
distortion shall not be a ground for a strike/lockout." The stratagem cannot succeed.
In view of the foregoing factual and legal considerations, it leads to the basic conclusion
that the concerted acts of the members of petitioner Union in question are violative of the law
and their formal agreement with the employer.
Employers Confederation of the Phils. vs. NWPC
G.R. No. 96169; September 24, 1991
FACTS:
On October 17, 1995, the Regional Tripartite Wages and Productivity Board, Region II,
Tuguegarao, Cagayan (RTWPB), by virtue of Republic Act No. 6727 (R.A. No. 6727), otherwise
known as the Wage Rationalization Act, issued Wage Order No. R02-03 (Wage Order), as follows:
Section 1. Upon effectivity of this Wage Order, all employees/workers in the private sector
throughout Region II, regardless of the status of employment are granted an across-the-board
increase of P15.00 daily.
The Wage Order was published in a newspaper of general circulation on December 2,
1995 and took effect on January 1, 1996. Its Implementing Rules were approved on February 14,
1996. Per Section 13 of the Wage Order, any party aggrieved by the Wage Order may file an
appeal with the National Wages and Productivity Commission (NWPC) through the RTWPB within
10 calendar days from the publication of the Wage Order.

44

Banker’s Council in a letter inquiry to NWPC requested for ruling to seek exemption from
coverage of the wage order since the members bank are paying more than the regular wage.
NWPC replied that the member banks are covered by the wage order and does not fall with the
exemptible categories.
In another letter inquiry, Metrobank asked for the interpretation of the applicability of the
wage order. NWPC referred it to RTWPB. RTWPB in return clarified that establishments in Region
2 are covered by the wage order. Petitioner filed a petition with the CA and denied the petition.
ISSUE:
Whether or not the wage order is void thus it has no legal effect and the RTWPB acted in
excess of its jurisdiction.
RULING:
SC 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.
The powers of NWPC are enumerated in ART. 121. Powers and Functions of the
Commission. - The Commission shall have the following powers and functions: (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; (f) To
review plans and programs of the Regional Tripartite Wages and Productivity Boards to
determine whether these are consistent with national development plans; (g) To exercise
technical and administrative supervision over the Regional Tripartite Wages and Productivity
Boards.
R.A. No. 6727 declared it a 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
industrial dispersal; and to allow business and industry reasonable returns on investment,
expansion and growth.
In line with its declared policy, R.A. No. 6727 created 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.
The Court declared that there are two ways of fixing the minimum wage: the "floor-wage"
method and the "salary-ceiling" method. The "floor-wage" method involves the fixing of a
determinate amount to be added to the prevailing statutory minimum wage rates. On the other
hand, in the "salary-ceiling" method, the wage adjustment was to be applied to employees
receiving a certain denominated salary ceiling. In other words, workers already being paid more
than the existing minimum wage (up to a certain amount stated in the Wage Order) are also to
be given a wage increase.
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 of P15.00 to all employees and workers of
Region 2. 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
45

denominated salary ceiling. As correctly pointed out by the OSG, the Wage Order granted
additional benefits not contemplated by R.A. No. 6727.

Mabeza vs. NLRC
G.R. No. 118506; April 18, 1997
FACTS:
Petitioner Norma Mabeza contends that on the first week of May 1991, she and her coemployees 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
46

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 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 has exerted pressure, in the form of restraint, interference
or coercion, against his employee's right to institute concerted action for better terms and
conditions of employment constitutes unfair labor practice.
RULING:
SC 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.

47

Joy Brothers Inc. vs. NWPC
G.R. No. 122932; June 17, 1991
FACTS:
Wage Order No. NCR-03, providing for a twenty-seven peso wage increase for all private
sector workers and employees in the National Capital Region receiving one hundred fifty-four
pesos (P154.00) and below daily, was approved November 29, 1993.
On February 1994, petitioner applied for exemption from said wage order on the ground
that it was a distressed establishment. The RTWPB denied petitioner's application for
exemption after holding that the corporation accumulated profits amounting to P38,381.80 for
the period under review. Petitioner's motion for reconsideration was likewise denied by the
48

Wages and Productivity Board on January 5, 1995. On appeal to the National Wages and
Productivity Commission, petitioner was again denied relief.
More specifically, petitioner contends that the interim period to be reckoned with is from
January 1, 1993 to December 15, 1993 and not merely up to September 30, 1993 as held by
respondent Commission. Significantly, the period up to December 31, 1993 will reflect losses in
petitioner corporation's books, but not if the covered interim period is only up to September 30,
1993.
ISSUE:
Whether or not Petitioner Corporation falls within the exemption for distressed
establishments.
RULING:
SC ruled that petitioner company does not fall under the exemptions given to distressed
establishments.
The petitioner company is not entitled to exemption of the wage order since it is not a
distressed establishment. Under Section 5 of Wage Order No. NCR-03, distressed firms may be
exempted from the provisions of the Order upon application with and due determination of the
Board. NWPC Guidelines No. 01, Series of 1992, providing for the Revised Guidelines on
Exemption indicate the criteria to qualify for exemption as follows:
For Distressed Establishments: In the case of a stock corporation, partnership, single
proprietorship, non-stock, non-profit organization or cooperative engaged in a business activity
or charging fees for its services —When accumulated losses for the last 2 full accounting periods
and interim period, if any, immediately preceding the effectivity of the Order have impaired by
at least 25 percent the: Paid-up capital at the end of the last full accounting period preceding
the effectivity of the Order, in the case of corporations: Total invested capital at the beginning of
the last full accounting period preceding the effectivity of the Order in the case of partnerships
and single proprietorships. Establishments operating for less than two (2) years may be granted
exemption when accumulated losses for said period have impaired by at least 25% the paid-up
capital or total invested capital, as the case may be."
Section 8, paragraph a, of the Rules Implementing Wage Order No. NCR-03 provides that
exemption from compliance with the wage increase may be granted to distressed
establishments whose paid-up capital has been impaired by at least twenty-five percent (25%)
or which registers capital deficiency or negative net worth.
The Guidelines expressly require interim quarterly financial statements for the period
immediately preceding December 16, 1993. The last two full accounting periods here are 1991
and 1992, for which years petitioner incurred net profits of P53,607.00 and P60,188.00,
respectively.

Prubankers Assoc. vs. Prudential Bank
G.R. No. 131247; January 25, 1999
FACTS:
On November, the RTWPB 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 had rendered service for
at least three (3) months before its effectivity, and for the same period thereafter, in the
following categories: P17.50 in the cities of Naga and Legaspi; P15.50 in the municipalities of
Tabaco, Daraga, Pili and the city of Iriga; and P10.00 for all other areas in the Bicol Region.
49

On November 1993, RTWPB 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
employees in the private sector as follows: by Ten Pesos (P10.00) in the cities of Cebu, Mandaue
and Lapulapu; Five Pesos (P5.00) in the municipalities of Compostela, Liloan, Consolacion,
Cordova, Talisay, Minglanilla, Naga and the cities of Davao, Toledo, Dumaguete, Bais, Canlaon,
and Tagbilaran. The bank granted a COLA of P17.50 to its employees at its Naga Branch, the
only branch covered by Wage Order No. RB 5-03, and integrated the P150.00 per month COLA
into the basic pay of its rank-and-file employees at its Cebu, Mabolo and P. del Rosario branches,
the branches covered by Wage Order No. RB VII-03.
On June 7, 1994, 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. It
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.
ISSUE:
Whether or not a wage distortion resulted from respondent's implementation of the
Wage Orders.
RULING:
SC ruled that there is no wage distortion since the wage order implementation covers all
the branches of the bank.
The hierarchy of positions was still preserved. The levels of different pay classes was not
eliminated. The statutory definition of wage distortion is found in Article 124 of the Labor Code,
as amended by Republic Act No. 6727, which reads: 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 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."
Wage distortion involves four elements: (1) An existing hierarchy of positions with
corresponding salary rates; (2) A significant change in the salary rate of a lower pay class
without a concomitant increase in the salary rate of a higher one; (3) The elimination of the
distinction between the two levels and (4) The existence of the distortion in the same region of
the country.
A disparity in wages between employees holding similar positions but in different regions
does not constitute wage distortion as contemplated by law. As stated, 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.

Millares et. al vs. NLRC
G.R. No. 122827; March 29, 1999
FACTS:
Petitioners numbering one hundred sixteen occupied the positions of Technical Staff, Unit
Manager, Section Manager, Department Manager, Division Manager and Vice President in the
50

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 one (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.
ISSUE:
Whether the allowances are included in the definition of "facilities" in Art. 97(f) of the
Labor Code being necessary and indispensable for their existence and subsistence.
RULING:
SC ruled that allowances are not part of the wages of the employees.
Wage is defined in letter (f) as the remuneration or earnings, however designated,
capable of being expressed in terms of money, whether fixed or ascertained on a time, task,
piece, or commission basis, or other method of calculating the same, which is payable by an
employer to an employee under a written or unwritten contract of employment for work done or
to be done, or for services rendered or to be rendered and includes the fair and reasonable
value, as determined by the Secretary of Labor, of board, lodging, or other facilities customarily
furnished by the employer to the employee.
When an employer customarily furnishes his employee board, lodging or other facilities,
the fair and reasonable value thereof, as determined by the Secretary of Labor and
Employment, is included in "wage." Customary is founded on long-established and constant
practice connoting regularity. The receipt of an allowance on a monthly basis does not ipso
facto characterize it as regular and forming part of salary because the nature of the grant is a
factor worth considering. The court agrees with the observation of the Office of the Solicitor
General that the subject allowances were temporarily, not regularly, received by petitioners.
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 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.
In determining whether a privilege is a facility, the criterion is not so much its kind but its
purpose. Revenue Audit Memo Order No. 1-87 pertinently provides —3.2… transportation,
representation or entertainment expenses shall not constitute taxable compensation if: (a) It is
for necessary travelling and representation or entertainment expenses paid or incurred by the
employee in the pursuit of the trade or business of the employer, and (b) The employee is
required to, and does, make an accounting/liquidation for such expense in accordance with the
specific requirements of substantiation for such category or expense. Board and lodging
allowances furnished to an employee not in excess of the latter's needs and given free of
charge, constitute income to the latter except if such allowances or benefits are furnished to the
employee for the convenience of the employer and as necessary incident to proper performance
of his duties in which case such benefits or allowances do not constitute taxable income.
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
51

consideration of being assigned to the hostile environment then prevailing in Bislig. The
inevitable conclusion is that subject allowances did not form part of petitioners' wages.

International School Alliance of Educators vs. Quisumbing
G.R. No. 128845; June 1, 2000

52

FACTS:
International School, Inc., pursuant to Presidential Decree 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 should be granted the same salary as foreign hire
teachers
RULING:
SC ruled that local hire teachers should be granted the same salary as that of foreign
hire teachers.
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 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
53

have similar functions and responsibilities, which they perform under similar working conditions.
Thus the employees are entitled to same salary for performance of equal work.
Bankard Employees Union vs. NLRC
G.R. No. 140689; February 17, 2004
FACTS:
Bankard, Inc. classifies its employees by levels: Level I, Level II, Level III, Level IV, and
Level V. On May 1993, its Board of Directors approved a New Salary Scale, made retroactive to
April 1, 1993, for the purpose of making its hiring rate competitive in the industry’s labor
market. The New Salary Scale increased the hiring rates of new employees, to wit: Levels I and
V by one thousand pesos (P1,000.00), and Levels II, III and IV by nine hundred pesos (P900.00).
Accordingly, the salaries of employees who fell below the new minimum rates were also
adjusted to reach such rates under their levels.
This made Bankard Employees Union-WATU (petitioner), the duly certified exclusive
bargaining agent of the regular rank and file employees of Bankard, to request for the increase
in the salary of its old, regular employees. Bankard insisted that there was no obligation on the
part of the management to grant to all its employees the same increase in an across-the-board
manner.
Petitioner filed a notice of strike. The strike was averted when the dispute was certified
by the Secretary of Labor and Employment for compulsory arbitration. NLRC finding no wage
distortion dismissed the case for lack of merit. Petitioner’s motion for reconsideration of the
dismissal of the case was denied.
ISSUE:
Whether the unilateral adoption by an employer of an upgraded salary scale that
increased the hiring rates of new employees without increasing the salary rates of old
employees resulted in wage distortion within the contemplation of Article 124 of the Labor
Code.
RULING:
The Court will not interfere in the management prerogative of the petitioner. The
employees are not precluded to negotiate through the provisions of the CBA.
Upon the enactment of R.A. No. 6727 (WAGE RATIONALIZATION ACT, amending, among
others, Article 124 of the Labor Code), the term "wage distortion" was explicitly defined 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.
In the case of Prubankers Association v. Prudential Bank and Trust Company, it laid down
the four elements of wage distortion, to wit: (1.) An existing hierarchy of positions with
corresponding salary rates; (2) A significant change in the salary rate of a lower pay class
without a concomitant increase in the salary rate of a higher one; (3) The elimination of the
distinction between the two levels; and (4) The existence of the distortion in the same region of
the country.
Normally, a company has a wage structure or method of determining the wages of its
employees. In a problem dealing with "wage distortion," the basic assumption is that there
exists a grouping or classification of employees that establishes distinctions among them on
some relevant or legitimate bases. Involved in the classification of employees are various
factors such as the degrees of responsibility, the skills and knowledge required, the complexity
of the job, or other logical basis of differentiation. The differing wage rate for each of the
existing classes of employees reflects this classification.

54

Put differently, the entry of new employees to the company ipso facto places them under
any of the levels mentioned in the new salary scale which private respondent adopted
retroactive to April 1, 1993. While seniority may be a factor in determining the wages of
employees, it cannot be made the sole basis in cases where the nature of their work differs.
Moreover, for purposes of determining the existence of wage distortion, employees
cannot create their own independent classification and use it as a basis to demand an acrossthe-board increase in salary.
The wordings of Article 124 are clear. If it was the intention of the legislators to cover all
kinds of wage adjustments, then the language of the law should have been broad, not restrictive
as it is currently phrased:
Article 124. Standards/Criteria for Minimum Wage Fixing. Where the application of any
prescribed wage increase by virtue of a law or Wage Order issued by any Regional Board results
in distortions of the wage structure within an establishment, the employer and the union shall
negotiate to correct the distortions. Any dispute arising from the wage distortions shall be
resolved through the grievance procedure under their collective bargaining agreement and, if it
remains unresolved, through voluntary arbitration.
Article 124 is entitled "Standards/Criteria for Minimum Wage Fixing." It is found in
CHAPTER V on "WAGE STUDIES, WAGE AGREEMENTS AND WAGE DETERMINATION" which
principally deals with the fixing of minimum wage. Article 124 should thus be construed and
correlated in relation to minimum wage fixing, the intention of the law being that in the event of
an increase in minimum wage, the distinctions embodied in the wage structure based on skills,
length of service, or other logical bases of differentiation will be preserved.
If the compulsory mandate under Article 124 to correct "wage distortion" is applied to
voluntary and unilateral increases by the employer in fixing hiring rates which is inherently a
business judgment prerogative, then the hands of the employer would be completely tied even
in cases where an increase in wages of a particular group is justified due to a re-evaluation of
the high productivity of a particular group, or as in the present case, the need to increase the
competitiveness of Bankard’s hiring rate. An employer would be discouraged from adjusting the
salary rates of a particular group of employees for fear that it would result to a demand by all
employees for a similar increase, especially if the financial conditions of the business cannot
address an across-the-board increase.
Wage distortion is a factual and economic condition that may be brought about by
different causes. The mere factual existence of wage distortion does not, however, ipso facto
result to an obligation to rectify it, absent a law or other source of obligation which requires its
rectification.

55

Odango vs. NLRC
G.R. No. 147420; June 10, 2004
FACTS:
Petitioners are monthly-paid employees of ANTECO whose workdays are from Monday to
Friday and half of Saturday. After a routine inspection, the Regional Branch of the Department of
Labor and Employment found ANTECO liable for underpayment of the monthly salaries of its
employees. On September 1989, the DOLE directed ANTECO to pay its employees wage
differentials amounting to P1,427,412.75. ANTECO failed to pay. On various dates in 1995,
thirty-three (33) monthly-paid employees filed complaints with the NLRC praying for payment of
wage differentials, damages and attorney’s fees.
On November 1996, the Labor Arbiter rendered a Decision in favor of petitioners granting
them wage differentials amounting to P1,017,507.73 and attorney’s fees of 10%. ANTECO
appealed the Decision to the NLRC where it reversed the Labor Arbiter’s Decision. The NLRC
denied petitioners’ motion for reconsideration. Petitioners then elevated the case to CA where it
dismissed the petition for failure to comply with Section 3, Rule 46 of the Rules of Court. The
Court of Appeals explained that petitioners failed to allege the specific instances where the
NLRC abused its discretion. The appellate court denied petitioners’ motion for reconsideration.
Hence, this petition.
ISSUE:
Whether or not the petitioners are entitled to money claims.
RULING:
SC ruled that the petitioners are not entitled to money claims or wage differentials.
The petitioners claim is based on Section 2, Rule IV, Book III of the Implementing Rules
and Policy Instructions No. 9 issued by the Secretary of Labor which was declared null and void
since in the guise of clarifying the Labor Code’s provisions on holiday pay, they in effect
amended them by enlarging the scope of their exclusion.
Even assuming that Section 2, Rule IV of Book III is valid, their claim will still fail. The
basic rule in this jurisdiction is "no work, no pay." The right to be paid for un-worked days is
generally limited to the ten legal holidays in a year. Petitioners’ claim is based on a mistaken
notion that Section 2, Rule IV of Book III gave rise to a right to be paid for un-worked days
beyond the ten legal holidays. Petitioners’ line of reasoning is not only a violation of the "no
work, no pay" principle, it also gives rise to an invidious classification, a violation of the equal
protection clause.

56

C. Planas Commercial vs. NLRC
G.R. No. 144619; November 11, 2005
FACTS:
In September 1993, Morente, Allauigan and Ofialda and others filed a complaint for
underpayment of wages, non-payment of overtime pay, holiday pay, service incentive leave
pay, and premium pay for rest day and holiday and night shift differential against petitioners in
the Arbitration Branch of NLRC. It alleged that Cohu is engaged in the business of wholesale of
plastic products and fruits of different kinds with more than 24 employees. Respondents were
hired on January 1990, May 1990 and July 19991 as laborers and were paid below the minimum
wage for the past 3 years. They were required to work for more than 8 hours a day and never
enjoyed the minimum benefits. Petitioners filed their comment stating that the respondents
were their helpers.
The Labor Arbiter rendered a decision dismissing the money claims. Respondents filed an
appeal with the NLRC where it granted the money claims of Ofialda, Morente and Allaguian.
Petitioners appealed with the CA but it was denied. It said that the company having claimed of
exemption of the coverage of the minimum wage shall have the burden of proof to the claim.
In the present petition, the Petitioners insist that C. Planas Commercial is a retail
establishment principally engaged in the sale of plastic products and fruits to the customers for
personal use, thus exempted from the application of the minimum wage law; that it merely
leases and occupies a stall in the Divisoria Market and the level of its business activity requires
and sustains only less than ten employees at a time. Petitioners contend that private
respondents were paid over and above the minimum wage required for a retail establishment,
thus the Labor Arbiter is correct in ruling that private respondents’ claim for underpayment has
no factual and legal basis. Petitioners claim that since private respondents alleged that
petitioners employed 24 workers, it was incumbent upon them to prove such allegation which
private respondents failed to do.
ISSUE:
Whether or not petitioner is exempted from the application of minimum wage law.
RULING:
The contention of the petitioners that they are exempted by the law must be proven. The
petitioners have not successfully shown that they had applied for the exemption.
R.A. No. 6727 known as the Wage Rationalization Act provides for the statutory minimum
wage rate of all workers and employees in the private sector. Section 4 of the Act provides for
exemption from the coverage, thus: Sec. 4. (c) Exempted from the provisions of this Act are
household or domestic helpers and persons employed in the personal service of another,
including family drivers. Also, retail/service establishments regularly employing not more than
ten (10) workers may be exempted from the applicability of this Act upon application with and
as determined by the appropriate Regional Board in accordance with the applicable rules and
regulations issued by the Commission. Whenever an application for exemption has been duly
filed with the appropriate Regional Board, action on any complaint for alleged non-compliance
with this Act shall be deferred pending resolution of the application for exemption by the
appropriate Regional Board.

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In the event that applications for exemptions are not granted, employees shall receive
the appropriate compensation due them as provided for by this Act plus interest of one percent
(1%) per month retroactive to the effectivity of this Act.
Clearly, for a retail/service establishment to be exempted from the coverage of the
minimum wage law, it must be shown that the establishment is regularly employing not more
than ten (10) workers and had applied for exemptions with and as determined by the
appropriate Regional Board in accordance with the applicable rules and regulations issued by
the Commission.
EJR Crafts Corp. vs. CA
G.R. No. 154101; March 10, 2006
FACTS:
In 1997, private respondents filed a complaint for underpayment of wages, regular
holiday pay, overtime pay, nonpayment of 13th month pay and service incentive leave pay
against petitioner before the Regional Office, NCR of the Department of Labor and Employment
(DOLE). Acting on the complaint, Regional Director issued an inspection authority to Senior
Labor Enforcement Officer.
On 22 August 1997, an inspection was conducted on the premises of petitioner’s offices
wherein the following violations of labor standards law were discovered, to wit: non-presentation
of employment records (payrolls and daily time records); underpayment of wages, regular
holiday pay, and overtime pay; and nonpayment of 13th month pay and service incentive leave
pay. On the same day, the Notice of Inspection Result was received by and explained to the
manager of petitioner corporation Mr. Jae Kwan Lee, with the corresponding directive that
necessary restitution be effected within five days from said receipt.
As no restitution was made, the Regional Office thereafter conducted summary
investigations. However, despite due notice, petitioner failed to appear for two consecutive
scheduled hearings. Petitioner failed to question the findings of the Labor Inspector received by
and explained to the corporation’s manager. Petitioner then filed a Motion for Reconsideration of
said Order arguing that the Regional Director has no jurisdiction over the case as private
respondents were allegedly no longer connected with petitioner corporation at the time of the
filing of the complaint and when the inspection was conducted, and that private respondents’
claims are within the exclusive and original jurisdiction of the Labor Arbiters.
ISSUE:
Whether or not the Regional Director has jurisdiction over the claims of herein private
respondents.
RULING:
The Court favors the respondents in the money claims against the petitioner company. It
is admitted that for the Regional Director to exercise the power to order compliance, or the socalled "enforcement power" under Article 128(b) of P.D. No. 442 as amended, it is necessary
that the employer-employee relationship still exists. In support of its contention that it is the
Labor Arbiter and not the Regional Director who has jurisdiction over the claims of herein private
respondents, petitioner contends that at the time the complaint was filed, the private
respondents were no longer its employees. Considering thus that there still exists an employeremployee relationship between petitioner and private respondents and that the case involves
violations of labor standard provisions of the Labor Code, we agree with the Undersecretary of
Labor and the appellate court that the Regional Director has jurisdiction to hear and decide the
instant case in conformity with Article 128(b) of the Labor Code which states:
Art. 128. Visitorial and Enforcement Power. – (b) Notwithstanding the provisions of
Articles 129 and 217 of this Code to the contrary, and in cases where the relationship of
employer-employee still exists, the Secretary of Labor and Employment or his duly
authorized representatives shall have the power to issue compliance orders to give effect
to the labor standards provisions of this Code and other labor legislation based on the
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findings of labor employment and enforcement officers or industrial safety engineers
made in the course of inspection. The Secretary or his duly authorized representatives
shall issue writs of execution to the appropriate authority for the enforcement of their
orders, except in cases where the employer contests the findings of the labor
employment and enforcement officer and raises issues supported by documentary proofs
which were not considered in the course of inspection.

Pag Asa Steel Works vs. CA
G.R. No. 166647; March 31, 2006
FACTS:
Petitioner Pag-Asa Steel Works, Inc. is a corporation duly organized and existing under
Philippine laws and is engaged in the manufacture of steel bars and wire rods. Pag-Asa Steel
Workers Union is the duly authorized bargaining agent of the rank-and-file employees.
RTWPB of NCR issued a wage order which provided for a P 13.00 increase of the salaries
receiving minimum wages. The Petitioner and the union negotiated on the increase. Petitioner
forwarded a letter to the union with the list of adjustments involving rank and file employees. In
September 1999, the petitioner and union entered into an collective bargaining agreement
where it provided wage adjustments namely P15, P25, P30 for three succeeding year. On the
first year, the increase provided were followed until RTWPB issued another wage order where it
provided for a P25.50 per day increase in the salary of employees receiving the minimum wage
and increased the minimum wage to P223.50 per day. Petitioner paid the P25.50 per day
increase to all of its rank-and-file employees.
On November 2000, Wage Order No. NCR-08 was issued where it provided the increase
of P26.50 per day. The union president asked that the wage order be implemented where
petitioner rejected the request claiming that there was no wage distortion and it was not obliged
to grant the wage increase. The union submitted the matter for voluntary arbitration where it
favored the position of the company and dismissed the complaint. The matter was elevated to
CA where it favored the respondents. Hence, this petition.
ISSUE:
Whether or not the company was obliged to grant the wage increase under Wage Order
No. NCR-08 as a matter of practice.
RULING:
The Court favors the petitioner that wage increase shall not be granted by virtue of CBA
or matter of practice by the company. It is submitted that employers unless exempt are
mandated to implement the said wage order but limited to those entitled thereto. There is no
legal basis to implement the same across-the-board. A perusal of the record shows that the
lowest paid employee before the implementation of Wage Order #8 is P250.00/day and none
was receiving below P223.50 minimum. This could only mean that the union can no longer
demand for any wage distortion adjustment. The provision of wage order #8 and its
implementing rules are very clear as to who are entitled to the P26.50/day increase, i.e.,
"private sector workers and employees in the National Capital Region receiving the prescribed
daily minimum wage rate of P223.50 shall receive an increase of Twenty-Six Pesos and Fifty
Centavos (P26.50) per day," and since the lowest paid is P250.00/day the company is not
obliged to adjust the wages of the workers.

59

The provision in the CBA that "Any Wage Order to be implemented by the Regional
Tripartite Wage and Productivity Board shall be in addition to the wage increase adverted above"
cannot be interpreted in support of an across-the-board increase. If such were the intentions of
this provision, then the company could have simply accepted the original demand of the union
for such across-the-board implementation, as set forth in their original proposal. The fact that
the company rejected this proposal can only mean that it was never its intention to agree, to
such across-the-board implementation. Wage Order No. NCR-08 clearly states that only those
employees receiving salaries below the prescribed minimum wage are entitled to the wage
increase provided therein, and not all employees across-the-board as respondent Union would
want petitioner to do. Considering therefore that none of the members of respondent Union are
receiving salaries below the P250.00 minimum wage, petitioner is not obliged to grant the wage
increase to them.
Moreover, to ripen into a company practice that is demandable as a matter of right, the
giving of the increase should not be by reason of a strict legal or contractual obligation, but by
reason of an act of liberality on the part of the employer. Hence, even if the company
continuously grants a wage increase as mandated by a wage order or pursuant to a CBA, the
same would not automatically ripen into a company practice.
Metropolitan Bank vs. NWPC
G.R. No. 144322; February 6, 2007
FACTS:
On October 17, 1995, the Regional Tripartite Wages and Productivity Board, Region II,
Tuguegarao, Cagayan (RTWPB), by virtue of Republic Act No. 6727 (R.A. No. 6727), otherwise
known as the Wage Rationalization Act, issued Wage Order No. R02-03 (Wage Order), as follows:
Section 1. Upon effectivity of this Wage Order, all employees/workers in the private sector
throughout Region II, regardless of the status of employment are granted an across-the-board
increase of P15.00 daily.
The Wage Order was published in a newspaper of general circulation on December 2,
1995 and took effect on January 1, 1996. Its Implementing Rules were approved on February 14,
1996. Per Section 13 of the Wage Order, any party aggrieved by the Wage Order may file an
appeal with the National Wages and Productivity Commission (NWPC) through the RTWPB within
10 calendar days from the publication of the Wage Order.
Banker’s Council in a letter inquiry to NWPC requested for ruling to seek exemption from
coverage of the wage order since the members bank are paying more than the regular wage.
NWPC replied that the member banks are covered by the wage order and does not fall with the
exemptible categories.
In another letter inquiry, Metrobank asked for the interpretation of the applicability of the
wage order. NWPC referred it to RTWPB. RTWPB in return clarified that establishments in Region
2 are covered by the wage order. Petitioner filed a petition with the CA and denied the petition.
ISSUE:
Whether or not the wage order is void thus it has no legal effect and the RTWPB acted in
excess of its jurisdiction.
RULING:
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.
The powers of NWPC are enumerated in ART. 121. Powers and Functions of the
Commission. - The Commission shall have the following powers and functions: (d) To review
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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; (f) To
review plans and programs of the Regional Tripartite Wages and Productivity Boards to
determine whether these are consistent with national development plans; (g) To exercise
technical and administrative supervision over the Regional Tripartite Wages and Productivity
Boards.
R.A. No. 6727 declared it a 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
industrial dispersal; and to allow business and industry reasonable returns on investment,
expansion and growth.
In line with its declared policy, R.A. No. 6727 created 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.
The Court declared that there are two ways of fixing the minimum wage: the "floor-wage"
method and the "salary-ceiling" method. The "floor-wage" method involves the fixing of a
determinate amount to be added to the prevailing statutory minimum wage rates. On the other
hand, in the "salary-ceiling" method, the wage adjustment was to be applied to employees
receiving a certain denominated salary ceiling. In other words, workers already being paid more
than the existing minimum wage (up to a certain amount stated in the Wage Order) are also to
be given a wage increase.
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 of P15.00 to all employees and workers of
Region 2. 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. As correctly pointed out by the OSG, the Wage Order granted
additional benefits not contemplated by R.A. No. 6727.

61

Equitable Bank vs. Sadac
G.R. No. 164772; June 8, 2006
FACTS:
Ricardo Sadac was appointed Vice President of the Legal Department of petitioner Bank
effective 1 August 1981, and subsequently General Counsel thereof on 8 December 1981. On
June 1989, nine lawyers of petitioner Bank’s Legal Department, in a letter-petition to the
Chairman of the Board of Directors, accused respondent Sadac of abusive conduct and
ultimately, petitioned for a change in leadership of the department. On the ground of lack of
confidence in Sadac, under the rules of client and lawyer relationship, petitioner Bank instructed
respondent Sadac to deliver all materials in his custody in all cases in which the latter was
appearing as its counsel of record. In reaction thereto, Sadac requested for a full hearing and
formal investigation but the same remained unheeded. On 9 November 1989, respondent Sadac
filed a complaint for illegal dismissal with damages against petitioner Bank and individual
members of the Board of Directors thereof. After learning of the filing of the complaint,
petitioner Bank terminated the services of respondent Sadac. Finally, on 10 August 1989, Sadac
was removed from his office
Labor Arbiter rendered decision that Sadac’s termination was illegal and entitled to
reinstatement and payment of full back wages. NLRC affirmed the decision upon appeal by the
Bank. Sadac filed for execution of judgment where it gave its computation which amounted to
P 6.03 M representing his back wages and the increases he should have received during the
time he was illegally dismissed. The Bank opposed to Sadac’s computation. The Labor Arbiter
favor Sadac’s computation. NLRC, upon appeal by the bank, reversed the decision. CA reversed
the decision of NLRC. Hence, this petition.
ISSUE:
Whether or not the computation of back wages shall include the general increases.
RULING:
To resolve the issue, the court revisits its pronouncements on the interpretation of the
term backwages. Backwages in general are granted on grounds of equity for earnings which a
worker or employee has lost due to his illegal dismissal. It is not private compensation or
damages but is awarded in furtherance and effectuation of the public objective of the Labor
Code. Nor is it a redress of a private right but rather in the nature of a command to the

62

employer to make public reparation for dismissing an employee either due to the former’s
unlawful act or bad faith.
In the case of Bustamante v. National Labor Relations Commission, It said that the Court
deems it appropriate to reconsider such earlier ruling on the computation of back wages by
now holding that conformably with the evident legislative intent as expressed in Rep. Act No.
6715, back wages to be awarded to an illegally dismissed employee, should not, as a general
rule, be diminished or reduced by the earnings derived by him elsewhere during the period of
his illegal dismissal. The underlying reason for this ruling is that the employee, while litigating
the legality (illegality) of his dismissal, must still earn a living to support himself and family,
while full backwages have to be paid by the employer as part of the price or penalty he has to
pay for illegally dismissing his employee. The clear legislative intent of the amendment in Rep.
Act No. 6715 is to give more benefits to workers than was previously given them. Thus, a closer
adherence to the legislative policy behind Rep. Act No. 6715 points to "full backwages" as
meaning exactly that, i.e., without deducting from backwages the earnings derived elsewhere
by the concerned employee during the period of his illegal dismissal.
There is no vested right to salary increases. Sadac may have received salary increases
in the past only proves fact of receipt but does not establish a degree of assuredness that is
inherent in backwages. The conclusion is that Sadac’s computation of his full backwages which
includes his prospective salary increases cannot be permitted.

S.I.P FOOD HOUSE ET. AL VS. BATOLINA
GR NO. 192473 OCT. 11, 2010
FACTS:
The GSIS Multi-Purpose Cooperative (GMPC) is an entity organized by the employees of
the Government Service Insurance System (GSIS). Incidental to its purpose, GMPC wanted to
operate a canteen in the new GSIS Building, but had no capability and expertise in this
area. Thus, it engaged the services of the petitioner S.I.P. Food House (SIP), owned by the
spouses Alejandro and Esther Pablo, as concessionaire. The respondents Restituto Batolina
and nine (9) others (the respondents) worked as waiters and waitresses in the canteen.
In February 2004, GMPC terminated SIP’s “contract as GMPC concessionaire,” because
of GMPC’s decision “to take direct investment in and management of the GMPC canteen;” SIP’s
continued refusal to heed GMPC’s directives for service improvement; and the alleged
interference of the Pablos’ two sons with the operation of the canteen. The termination of the
concession contract caused the termination of the respondents’ employment, prompting them
to file a complaint for illegal dismissal, with money claims, against SIP and the spouses Pablo.
The employer of the respondents claimed that it was merely a labor-only contractor of
GMPC. Hence, it could not be liable.
ISSUE:
WON there exist an employer-employee relationship
RULING:
We affirm the CA ruling that SIP was the respondents’ employer. The NLRC decision,
which the CA affirmed, states:
Respondents have been the concessionaire of GMPC canteen for nine (9)
years. During this period, complainants were employed at the said canteen. On February
29, 2004, respondents’ concession with GMPC was terminated. When respondents were
prevented from entering the premises as a result of the termination of their concession,
they sent a protest letter dated April 14, 2004 to GMPC thru their counsel. Pertinent
portion of the letter:
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We write this letter in behalf of our client Mr. & Mrs.
Alejandro C. Pablo, the concessionaires who used to occupy and/or
rent the area for a cafeteria/canteen at the 2 nd Floor of
the GSIS Building for the past several years.
Last March 12, 2004, without any court writ or order, and
with the aid of your armed agents, you physically barred our clients
& their employees/helpers from entering the said premises and
from performing their usual duties of serving the food requirements
of GSIS personnel and others.
Clearly, no less than respondents, thru their counsel, admitted that complainants
herein were their employees.
That complainants were employees of respondents is further bolstered by the
fact that respondents do not deny that they were the ones who paid complainants
salary. When complainants charged them of underpayment, respondents even
interposed the defense of file (sic) board and lodging given to complainants.
The CA ruled out SIP’s claim that it was a labor-only contractor or a mere agent of
GMPC. We agree with the CA; SIP and its proprietors could not be considered as mere agents of
GMPC because they exercised the essential elements of an employment relationship with the
respondents such as hiring, payment of wages and the power of control, not to mention that SIP
operated the canteen on its own account as it paid a fee for the use of the building and for the
privilege of running the canteen. The fact that the respondents applied with GMPC in February
2004 when it terminated its contract with SIP, is another clear indication that the two entities
were separate and distinct from each other. We thus see no reason to disturb the CA’s findings.

64

SLL INTERNATIONAL CABLE SPECIALIST VS. NLRC
G.R. No. 172161, March 2, 2011
FACTS:
Sometime in 1996, and January 1997, private respondents Roldan Lopez (Lopez for
brevity) and Danilo Cañete (Cañete for brevity), and Edgardo Zuñiga (Zuñiga for brevity)
respectively, 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. After their training,
Zuñiga, Cañete and Lopez were engaged as project employees by the petitioners in their
Islacom project in Bohol. Private respondents started on March 15, 1997 until December 1997.
Upon the completion of their project, their employment was also terminated. Private
respondents received the amount of P145.00, the minimum prescribed daily wage for Region
VII. 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. Sometime in March
1998, Zuñiga and Cañete were engaged again by Lagon as project employees for its PLDT
Antipolo, Rizal project, which ended sometime in (sic) the late September 1998. As a
consequence, Zuñiga and Cañete's employment was terminated. For this project, Zuñiga
and Cañete received only the wage of P145.00 daily. The minimum prescribed wage for Rizal
at that time was P160.00.
Sometime in late November 1998, private respondents re-applied in the Racitelcom
project of Lagon in Bulacan. Zuñiga and Cañete were re-employed. Lopez was also hired for
the said specific project. For this, private respondents received the wage of P145.00. Again,
after the completion of their project in March 1999, private respondents went home to Cebu
City.
On May 21, 1999, private respondents for the 4th time worked with Lagon's project in
Camarin, Caloocan City with Furukawa Corporation as the general contractor. Their contract
would expire on February 28, 2000, the period of completion of the project. From May 21, 1997December 1999, private respondents received the wage of P145.00. At this time, the minimum
prescribed rate for Manila was P198.00. In January to February 28, the three received the wage
of P165.00. The existing rate at that time was P213.00.

65

For reasons of delay on the delivery of imported materials from Furukawa Corporation,
the Camarin project was not completed on the scheduled date of completion. Face[d] with
economic problem[s], Lagon was constrained to cut down the overtime work of its worker[s][,]
including private respondents. Thus, when requested by private respondents on February 28,
2000 to work overtime, Lagon refused and told private respondents that if they insist, they
would have to go home at their own expense and that they would not be given anymore time
nor allowed to stay in the quarters. This prompted private respondents to leave their work and
went home to Cebu. On March 3, 2000, private respondents filed a complaint for illegal
dismissal, non-payment of wages, holiday pay, 13th month pay for 1997 and 1998 and service
incentive leave pay as well as damages and attorney's fees.
In their answers, petitioners admit employment of private respondents but claimed that
the latter were only project employees, for their services were merely engaged for a specific
project or undertaking and the same were covered by contracts duly signed by private
respondents. Petitioners further 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.
Lastly, petitioners alleged that since the workplaces of private respondents were all in
Manila, the complaint should be filed there. Thus, petitioners prayed for the dismissal of the
complaint for lack of jurisdiction and utter lack of merit.
LA ruled that the respondents were regular employees and were underpaid. However,
the LA found that petitioners were not liable for illegal dismissal. The LA viewed private
respondents' act of going home as an act of indifference when petitioners decided to prohibit
overtime work. These decisions of the LA were affirmed by the NLRC, and subsequently by the
CA, on appeal. Hence, this petition.
ISSUE:
 WON respondents were underpaid
 WON the allowances should be added to their basic pay
HELD:
The petition is bereft of merit. As a general rule, on payment of wages, a party who
alleges payment as a defense has the burden of proving it. xxx
Moreover, before the value of facilities can be deducted from the employees' wages, the
following requisites must all be attendant: 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; and finally, 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.
"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.
While the general rule is that any decision rendered without jurisdiction is a total nullity
and may be struck down at any time, the party that asserts it must be in good faith and not
66

evidently availing thereof simply to thwart the execution of an award that has long become final
and executory.

5. VIOLATION OF WAGE ORDERS
6. WAGE ENFORCEMENT AND RECOVERY
Rajah Humabon Hotel vs. Trajano
G.R. Nos. 100222-23 September 14, 1993
FACTS:
For redress in regard to underpaid wages and non-payment of benefits, the herein
respondent-employees turned to the regional director of the Department of Labor and
Employment. The jurisdictional competence of such official is, however, disputed and
challenged by the employers in the instant petition who contend that it is the labor arbiter who
may properly entertain the grievance. The aggregate claims of each of the twenty-five
employees of petitioner are above the amount of P5,000.00 fixed by Republic Act No. 6715.
ISSUE:
Who between the Regional Director of the Department of Labor and Employment and the
Labor Arbiter has jurisdiction over the complaint of private respondents.
RULING:
The Labor Arbiter has exclusive jurisdiction over the complaint of private respondents
which involves a money claim exceeding P5,000.
The principle of continuous jurisdiction of the regional director, as applied by the
Secretary of Labor to the suit filed by herein private respondents on March 14, 1989 prior to the
effectivity of Republic Act No. 6715, is therefore incorrect. To sustain otherwise would sanction a
situation where all employees' claims, regardless of amount, can be heard and determined by
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the Secretary of Labor under his visitorial power. This does not, however, appear to be the
legislative intent. The Secretary of Labor should be held as possessed of his plenary visitorial
powers to order the inspection of all establishments where labor is employed, to look into all
possible violations of labor laws and regulations but the power to hear and decide employees'
claims exceeding P5,000.00 for each employee should be left to the Labor Arbiter as the
exclusive repository of the power to hear and decide such claims.
Regional directors under Republic Act No. 6715, can try money claims only if the
following requisites concur:
a) The claim is presented by an employee or person employed in domestic or
household service, or househelper under the code;
b) The claimant, no longer being employed, does not seek reinstatement; and,
c) The aggregate money claim of the employee or housekeeper does not exceed five
thousand pesos (P5,000.00).

Guico vs. Secretary of Labor
G.R. No. 131750; November 16, 1998
FACTS:
The Secretary of Labor received a letter-complaint requesting for an investigation of
petitioner's establishment, Copylandia Services & Trading, for violation of labor standards laws.
Pursuant to the visitorial and enforcement powers of the Secretary of Labor and Employment or
his duly authorized representative under Article 128 of the Labor Code, as amended, inspections
were conducted at Copylandia's outlets. The inspections yielded the following violations
involving twenty-one (21) employees who are copier operators:
(1) underpayment of wages;
(2) underpayment of 13th month pay; and
(3) no service incentive leave with pay.
Thus, the Secretary of Labor ordered petitioner to pay the respondents. Petitioner
questioned the jurisdiction of the Regional Director 6715. He argued that the Regional Director
has no jurisdiction over the complaint of the 21 employees since their individual monetary
claims exceed the P5,000.00 limit. On the other hand, the respondent Secretary held that the
jurisdictional limitation imposed by Article 129 on his visitorial and enforcement power under
Article 128 (b) of the Labor Code, as amended, has been repealed by Republic Act No. 7730. He
pointed out that the amendment "notwithstanding the provisions of Article 129 and 217 of the
Labor Code to the contrary" erased all doubts as to the amendatory nature of the new law.
ISSUE:
Whether or not the Secretary of Labor has jurisdiction take cognizance of the instant
labor case.
RULING:
SC ruled in favor of the Secretary of Labor. It overruled its previous ruling on the matter.

68

SC sustained the jurisdiction of the respondent Secretary. As
pointed out, this Court's ruling in Servando — that the visitorial power
to order and enforce compliance with labor standard laws cannot
individual claim exceeds P5,000.00, can no longer be applied in view
No. 7730 amending Article 128(b) of the Labor Code.

the respondent correctly
of the Secretary of Labor
be exercised where the
of the enactment of R.A.

Ex-Bataan Veterans Security Agency vs. Secretary of Labor et. al.
G.R. No. 152396; January 14, 2005
FACTS:
Ex-Bataan Veterans Security Agency, Inc. (EBVSAI) is in the business of providing security
services while private respondents are EBVSAI's employees assigned to the National Power
Corporation at Ambuklao Hydro Electric Plant, Bokod, Benguet (Ambuklao Plant). Private
respondents led by Alexander Pocding (Pocding) instituted a complaint for underpayment of
wages against EBVSAI before the Regional Office of the Department of Labor and Employment
(DOLE). The money claims exceeded P5,000.
ISSUE:
 Whether the Secretary of Labor or his duly authorized representatives acquired
jurisdiction over EBVSAI
 Whether or not the Director of DOLE has jurisdiction over the labor dispute o money
claims exceeding P5,000.
RULING:
Anent the first issue, EBVSAI does not deny having received the notices of hearing.
Evidence shows that petitioners received notices of hearing. The notices of hearing were sent to
the petitioners’ Manila office. They were also informed of EBVSAI's violations and were asked to
present the employment records of the private respondents for verification. They were,
moreover, asked to submit, within 10 days, proof of compliance or their position paper. The
Regional Director validly acquired jurisdiction over EBVSAI. EBVSAI can no longer question the
jurisdiction of the Regional Director after receiving the notices of hearing and after appearing
before the Regional Director.

69

Anent the second issue, the Regional Director validly assumed jurisdiction over the
money claims of private respondents even if the claims exceeded P5,000 because such
jurisdiction was exercised in accordance with Article 128(b) of the Labor Code and the case does
not fall under the exception clause.
In order to divest the Regional Director or his representatives of jurisdiction, the following
elements must be present: (a) that the employer contests the findings of the labor regulations
officer and raises issues thereon; (b) that in order to resolve such issues, there is a need to
examine evidentiary matters; and (c) that such matters are not verifiable in the normal course
of inspection. The rules also provide that the employer shall raise such objections during the
hearing of the case or at any time after receipt of the notice of inspection results.

Sapio vs. Undaloc Construction et. al.
G.R. No. 155034; May 22, 2008
FACTS:
The controversy started with a complaint filed by petitioner against Undaloc Construction
and/or Engineer Cirilo Undaloc for illegal dismissal, underpayment of wages and nonpayment of
statutory benefits. Respondent Undaloc Construction, a single proprietorship owned by Cirilo
Undaloc, is engaged in road construction business in Cebu City. Petitioner avers that he was paid
a daily salary way below the minimum wage provided for by law. His claim of salary differential
represents the difference between the daily wage he actually received and the statutory
minimum wage.
ISSUE:
Whether or not petitioner is entitled to salary differential after his termination.
RULING:
The total salary differential that petitioner is lawfully entitled to amounts to P6,578.00
However, pursuant to Section 12 of Republic Act (R.A.) No. 6727, as amended by R.A. No. 8188.
Respondents are required to pay double the amount owed to petitioner, bringing their total
liability to P13,156.00. The employer concerned shall be ordered to pay an amount equivalent to
double the unpaid benefits owing to the employees: Provided, That payment of indemnity shall
not absolve the employer from the criminal liability imposable under this Act.

70

Hon. Secretary of Labor vs. Panay Veterans Security and Investigation Agency
G.R. No. 167708; August 22, 2008
FACTS:
Petitioners Edgardo M. Agapay and Samillano A. Alonso, Jr. were hired by respondent
Panay Veteran’s Security and Investigation Agency, Inc. as security guards sometime in 1988.
They were stationed at the plant site of Food Industries, Inc. (FII) in Sta. Rosa, Laguna until FII
terminated its contract with respondent security agency on July 6, 2000. They were not given
new assignments and their benefits (including 13 th month pay, overtime pay and holiday pay as
well as wage differentials due to underpayment of wages) were withheld by respondent security
agency. This prompted them to file a complaint for violation of labor standards in the regional
office of the Department of Labor and Employment in the National Capital Region (DOLE-NCR).
Acting on the complaint, Manuel M. Cayabyab, a labor employment officer of the DOLENCR, conducted an inspection of respondent security agency on October 30, 2000. During the
inspection, respondent security agency failed to present its payroll as well as the daily time
records submitted by petitioners Agapay and Alonso, Jr. Such failure was noted as a violation.
Respondents neither paid the claims of petitioners Agapay and Alonso, Jr. nor questioned
the labor employment officer’s findings. Thus, in his May 10, 2001 order, the Regional Director
of the DOLE-NCR adopted the findings and computation of Cayabyab as to the unpaid benefits
due to petitioners Agapay and Alonso, Jr. Respondents filed an appeal for the reduction of the
surety/ cash bond.
ISSUE:


Whether or not there has been a perfected appeal made by the respondents.

71



Whether or not a motion to reduce bond is allowed in appeals to the Secretary of
Labor.

RULING:
SC held that there has been no perfected appeal. SC also ruled that reduction of the
bond is not allowed in appeals before the Secretary of Labor.
On the first issue—RESPONDENTS FAILED TO PERFECT THEIR APPEAL:
The rule is that, to perfect an appeal of the Regional Director’s order involving a
monetary award in cases which concern the visitorial and enforcement powers of the Secretary
of Labor and Employment, the appeal must be filed and the cash or surety bond equivalent to
the monetary award must be posted within ten calendar days from receipt of the order. Failure
either to file the appeal or post the bond within the prescribed period renders the order final and
executory.
The legislative intent to make the bond an indispensable requisite for the perfection of
an appeal by the employer is underscored by the provision that “an appeal by the employer
may be perfected only upon the posting of a cash or surety bond. The word “only” makes it
clear that the lawmakers intended the posting of a cash or surety bond by the employer to be
the exclusive means by which an employer’s appeal may be perfected.
In this case, respondents admit that they failed to post the required bond when they filed
their appeal to the Secretary of Labor and Employment. Because of such failure, the appeal was
never perfected and the May 10, 2001 order of the DOLE-NCR Regional Director attained finality.
On the second issue—MOTION TO REDUCE APPEAL BOND IS NOT ALLOWED IN APPEALS TO THE
SECRETARY OF LABOR:
The jurisdiction of the NLRC is separate and distinct from that of the Secretary of Labor
and Employment. In the exercise of their respective jurisdictions, each agency is governed by
its own rules of procedure. In other words, the rules of procedure of the NLRC are different from
(and do not apply in) cases cognizable by the Secretary of Labor and Employment.
Unlike the New Rules of Procedure of the NLRC, no provision in the Rules on the
Disposition of Labor Standards Cases governs the filing of a motion for the reduction of the
amount of the bond. However, on matters that are not covered by the Rules on the Disposition
of Labor Standards Cases, the suppletory application of the Rules of Court is authorized. In other
words, the Rules on the Disposition of Labor Standards Cases does not sanction the suppletory
resort to the rules of procedure of the NLRC.
By ruling that the rules of procedure of the NLRC should be applied suppletorily to respondents’
appeal to the Secretary of Labor of Employment, the CA effectively amended the Rules on the
Disposition of Labor Standards Cases. In the process, it encroached on the rule-making power of
the Secretary of Labor and Employment.
The posting of a cash or surety bond to perfect an appeal of an order involving a
monetary award has a two-fold purpose:
(1) to assure the employee that, if he finally prevails in the case, the monetary
award will be given to him upon dismissal of the employer’s appeal and
(2) to discourage the employer from using the appeal to delay or evade payment
of his obligations to the employee.

72

National Mines and Allied Workers Union vs. Marcopper Mining Corp.
G.R. No. 174641; November 11, 2008
FACTS:
DENR ordered the indefinite suspension of MARCOPPER's operations for causing damage
to the environment of the Province of Marinduque by spilling the company's mine waste or
tailings from an old underground impounding area into the Boac River, in violation of its ECC.
NAMAWU was the exclusive bargaining representative of the rank-and-file workers of
MARCOPPER. It filed a complaint with the NLRC against MARCOPPER for nonpayment of wages,
separation pay, damages, and attorney's fees.
NAMAWU claimed that due to the indefinite suspension of MARCOPPER's operations, its
members were not paid the wages due them for six months. It further claimed that its members
are also entitled to be paid their separation pay pursuant to their collective bargaining
agreement with MARCOPPER and under existing implementing rules of the Labor Code. There
had been an illegal strike which occurred.
ISSUE:
Whether or not it is necessary that MARCOPPER file an appeal bond
RULING:
In the context of the NLRC appeal bond that is directly at issue, MARCOPPER had every
reason to claim in its April 10, 2000 appeal to the NLRC that it should be excused from filing an
appeal bond with respect to the NAMAWU members who were no longer company employees.
The CA decision decreeing the termination of employment of those involved in the illegal strike
case had already been issued at that time. We subsequently ruled on the same issue during the
time the environmental incident case was pending before the NLRC. Thus, when the NLRC
73

dismissed MARCOPPER's appeal for failure to file the requisite appeal bond corresponding to the
615 NAMAWU members, the termination of employment of these NAMAWU members was
already a settled matter that the NLRC was in no position to disregard. In this light, the CA was
correct in reversing the dismissal of MARCOPPER's appeal for failure to file an appeal bond.
Pursued to its logical end, the CA conclusions should lead to the dismissal of NAMAWU's
complaint with respect to its 615 previously dismissed members.

Jethro Intelligence and Security Corp. vs. SOLE
GR NO. 172537, Aug. 14, 2009
FACTS:
Jethro is a security service contractor with a security service contract agreement with copetitioner Yakult Phils. Respondent Frederick Garcia (Garcia), one of the security guards
deployed by Jethro, file a complaint for underpayment of wages, legal/special holiday pay,
premium pay for rest day, 13th month pay, and night shift differential, the Department of Labor
and Employment (DOLE)-Regional Office No. IV conducted an inspection at Yakult’s premises in
Calamba, Laguna in the course of which several labor standards violations were noted, including
keeping of payrolls and daily time records in the main office, underpayment of wages, overtime
pay and other benefits, and non-registration with the DOLE as required under Department Order
No. 18-02.
Petitioners attribute grave abuse of discretion on the part of the DOLE Regional Director
and the SOLE in this wise: (1) the SOLE has no jurisdiction over the case because, following
Article 129 of the Labor Code, the aggregate money claim of each employee exceeded
P5,000.00
ISSUE:
WON the SOLE has the power to determine the violations of Labor Standards.
RULING:
While it is true that under Articles 129 and 217 of the Labor Code, the Labor Arbiter has
jurisdiction to hear and decide cases where the aggregate money claims of each employee

74

exceeds P5,000.00, said provisions do not contemplate nor cover the visitorial and enforcement
powers of the Secretary of Labor or his duly authorized representatives.
The Secretary of Labor, under Art. 106, LC, exercises quasi-judicial power, at least to the
extent necessary to determine violations of labor standards provisions of the Code. He, or the
regional directors, can issue compliance orders and writs of execution for the execution thereof.
The Secretary or his duly authorized representatives shall issue writs of execution to the
appropriate authority for the enforcement of their orders, except in cases where the employer
contests the finding of the labor employment and enforcement officer and raises issues
supported by documentary proofs which were not considered in the course of inspection.

Philippine Hoteliers Inc, et al vs. National Union of Workers in Hotel, Restaurant and
Allied Industries-Dusit Hotel Nikko Chapter
GR No. 181972, August 25, 2009
FACTS:
Wage Order No. 9, approved by the Regional Tripartite Wages and Productivity Board
(RTWPB) of the National Capital Region (NCR), took effect on 5 November 2001. It grants P30.00
ECOLA to particular employees and workers of all private sectors, identified as follows in Section
1 thereof:
Section 1. Upon the effectivity of this Wage Order, all private sector workers and
employees in the National Capital Region receiving daily wage rates of TWO HUNDRED FIFTY
PESOS (P250.00) up to TWO HUNDRED NINETY PESOS (P290.00) shall receive an emergency
cost of living allowance in the amount of THIRTY PESOS (P30.00) per day payable in two
tranches as follows:
Amount of ECOLA
P15.00
P15.00

Effectivity
5 November 2001
1 February 2002

On 20 March 2002, respondent National Union of Workers in Hotel, Restaurant and Allied
Industries-Dusit Hotel Nikko Chapter (Union), through its President, Reynaldo C. Rasing (Rasing),
sent a letter 4 to Director Alex Maraan (Dir. Maraan) of the Department of Labor and
Employment-National Capital Region (DOLE-NCR), reporting the non-compliance of Dusit Hotel
with WO No. 9, while there was an on-going compulsory arbitration before the National Labor
75

Relations Commission (NLRC) due to a bargaining deadlock between the Union and Dusit Hotel;
and requesting immediate assistance on this matter. On 24 May 2002, Rasing sent Dir. Maraan
another letter following-up his previous request for assistance.
Acting on Rasing's letters, the DOLE-NCR sent Labor Standards Officer Estrellita
Natividad (LSO Natividad) to conduct an inspection of Dusit Hotel premises on 24 April 2002. In
the first Inspection, the report showed that Dusit Hotel is exempt from complying with WO no. 9.
Due to the Second request for inspection, DOLE representative conducted another round of
inspection and the Labor Standards Officer noted the following in her inspection report:
* Non-presentation of records/payrolls
* Based on submitted payrolls & list of union members by NUWHRAIN-DUSIT
HOTEL NIKKO Chapter, there are one hundred forty-four (144) affected in the
implementation of Wage Order No. NCR-09-> ECOLA covering the periods from
Nov. 5/01 to present.
Accordingly, the DOLE-NCR issued a Notice of Inspection Result directing Dusit Hotel to
effect restitution and/or correction of the noted violations within five days from receipt of the
Notice, and to submit any question on the findings of the labor inspector within the same
period, otherwise, an order of compliance would be issued. The Notice of Inspection Result was
duly received by Dusit Hotel Assistant Personnel Manager Rogelio Santos.
In the meantime, the NLRC rendered a Decision 9 dated 9 October 2002 in NLRC-NCR-CC
No. 000215-02 — the compulsory arbitration involving the Collective Bargaining Agreement
(CBA) deadlock between Dusit Hotel and the Union — granting the hotel employees the
following wage increases, in accord with the CBA:
Effective January 1, 2001 - P500.00/month
Effective January 1, 2002 - P550.00/month
Effective January 1, 2003 - P600.00/month
On 22 October 2002, based on the results of the second inspection of Dusit Hotel premises,
DOLE-NCR, through Dir. Maraan, issued the Order 10 directing Dusit Hotel to pay 144 of its
employees the total amount of P1,218,240.00, corresponding to their unpaid ECOLA under WO
No. 9; plus, the penalty of double indemnity, pursuant to Section 12 of Republic Act No. 6727,
11 as amended by Republic Act No. 8188.
Dusit Hotel filed a Motion for Reconsideration 13 of the DOLE-NCR Order dated 22 October
2002, arguing that the NLRC Decision dated 9 October 2002, resolving the bargaining deadlock
between Dusit Hotel and the Union, and awarding salary increases under the CBA to hotel
employees retroactive to 1 January 2001, already rendered the DOLE-NCR Order moot and
academic. With the increase in the salaries of the hotel employees ordered by the NLRC
Decision of 9 October 2002, along with the hotel employees' share in the service charges, the
144 hotel employees, covered by the DOLE-NCR Order of 22 October 2002, would already be
receiving salaries beyond the coverage of WO No.
Acting on the Motion for Reconsideration of Dusit Hotel, DOLE-NCR issued a Resolution 14 on
27 December 2002, setting aside its earlier Order dated 22 October 2002 for being moot and
academic, in consideration of the NLRC Decision dated 9 October 2002; and dismissing the
complaint of the Union against Dusit Hotel, for non-compliance with WO No. 9, for lack of merit.
ISSUE:
 Whether the 144 hotel employees were still entitled to ECOLA granted by WO No. 9
despite the increases in their salaries, retroactive to 1 January 2001, ordered by NLRC in
the latter's Decision dated 9 October 2002.
 Whether Dusit Hotel is liable for the double indemnity for violation of the wage order.
RULING:
76

The Court rules in the negative.
It must be noted that the hotel employees have a right to their share in the service
charges collected by Dusit Hotel, pursuant to Article 96 of the Labor Code of 1991, to wit:
Article 96.Service charges. — All service charges collected by hotels, restaurants and
similar establishments shall be distributed at the rate of eighty-five percent (85%) for all
covered employees and fifteen percent (15%) for management. The share of employees
shall be equally distributed among them. In case the service charge is abolished, the
share of the covered employees shall be considered integrated in their wages.
Since Dusit Hotel is explicitly mandated by the afore-quoted statutory provision to pay its
employees and management their respective shares in the service charges collected, the hotel
cannot claim that payment thereof to its 82 employees constitute substantial compliance with
the payment of ECOLA under WO No. 9. Undoubtedly, the hotel employees' right to their shares
in the service charges collected by Dusit Hotel is distinct and separate from their right to
ECOLA; gratification by the hotel of one does not result in the satisfaction of the other.
The Court, however, finds no basis to hold Dusit Hotel liable for double indemnity. Under
Section 2 (m) of DOLE Department Order No. 10, Series of 1998, 30 the Notice of Inspection
Result "shall specify the violations discovered, if any, together with the officer's
recommendation and computation of the unpaid benefits due each worker with an advice that
the employer shall be liable for double indemnity in case of refusal or failure to correct the
violation within five calendar days from receipt of notice". A careful review of the Notice of
Inspection Result dated 29 May 2002, issued herein by the DOLE-NCR to Dusit Hotel, reveals
that the said Notice did not contain such an advice. Although the Notice directed Dusit Hotel to
correct its noted violations within five days from receipt thereof, it was not sufficiently apprised
that failure to do so within the given period would already result in its liability for double
indemnity. The lack of advice deprived Dusit Hotel of the opportunity to decide and act
accordingly within the five-day period, as to avoid the penalty of double indemnity. By 22
October 2002, the DOLE-NCR, through Dir. Maraan, already issued its Order directing Dusit Hotel
to pay 144 of its employees the total amount of P1,218,240.00, corresponding to their unpaid
ECOLA under WO No. 9; plus the penalty of double indemnity, pursuant to Section 12 of
Republic Act No. 6727, as amended by Republic Act No. 8188.
Although the Court is mindful of the fact that labor embraces individuals with a weaker
and unlettered position as against capital, it is equally mindful of the protection that the law
accords to capital. While the Constitution is committed to the policy of social justice and the
protection of the working class, it should not be supposed that every labor dispute will be
automatically decided in favor of labor. Management also has its own rights which, as such, are
entitled to respect and enforcement in the interest of simple fair play.

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Tiger Construction and Development Corp. vs. Abay
GR NO. 164141 February 26, 2010
FACTS:
On the basis of a complaint filed by respondents Reynaldo Abay and fifty-nine (59) others
before the Regional Office of the Department of Labor and Employment (DOLE), an inspection
was conducted by DOLE officials at the premises of petitioner TCDC. Several labor standard
violations were noted, such as deficiencies in record keeping, non-compliance with various wage
orders, non-payment of holiday pay, and underpayment of 13th month pay. The case was then
set for summary hearing.
However, before the hearing could take place, the Director of Regional Office No. V, Ma.
Glenda A. Manalo (Director Manalo), issued an Order on July 25, 2002, which reads:
XXX in view of the foregoing, this case falls under the original and exclusive jurisdiction
of the National Labor Relations Commission as provided under Article 217 of the Labor
Code of the Philippines.5
On September 30, 2002, Director Manalo issued an Order directing TCDC to pay
P2,123,235.90 to its employees representing underpayment of salaries, 13th month pay, and
underpayment of service incentive leave pay and regular holiday pay. TCDC filed a Motion for
Reconsideration on October 17, 2002 and a Supplemental Pleading to the Motion for

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Reconsideration on November 21, 2002, reiterating the argument that Director Manalo had lost
jurisdiction over the matter.
Apparently convinced by petitioner’s arguments, Director Manalo again endorsed the
case to the NLRC Regional Arbitration Branch V (Legaspi City). On January 27, 2003, the NLRC
returned the entire records of the case to Director Manalo on the ground that the NLRC does not
have jurisdiction over the complaint.
Having the case in her office once more, Director Manalo finally issued an Order dated
January 29, 2003 denying petitioner’s motion for reconsideration for lack of merit. Since TCDC
did not interpose an appeal within the prescribed period, Director Manalo issued forthwith a Writ
of Execution on February 12, 2003.
ISSUE:
The issue in the case is whether petitioner can still assail the January 29, 2003 Order of
Director Manalo allegedly on the ground of lack of jurisdiction, after said Order has attained
finality and is already in the execution stage.
RULING:
The petition lacks merit.
Petitioner admits that it failed to appeal the January 29, 2003 Order within the period
prescribed by law. It likewise admits that the case was already in the execution process when it
resorted to a belated appeal to the DOLE Secretary. Petitioner, however, excuses itself from the
effects of the finality of the Order by arguing that it was allegedly issued without jurisdiction and
may be assailed at any time.
While it is true that orders issued without jurisdiction are considered null and void and, as
a general rule, may be assailed at any time, the fact of the matter is that in this case, Director
Manalo acted within her jurisdiction. Under Article 128 (b) of the Labor Code, 14 as amended by
Republic Act (RA) No. 7730,15 the DOLE Secretary and her representatives, the regional
directors, have jurisdiction over labor standards violations based on findings made in the course
of inspection of an employer’s premises. The said jurisdiction is not affected by the amount of
claim involved, as RA 7730 had effectively removed the jurisdictional limitations found in
Articles 129 and 217 of the Labor Code insofar as inspection cases, pursuant to the visitorial and
enforcement powers of the DOLE Secretary, are concerned. 16 The last sentence of Article 128(b)
of the Labor Code recognizes an exception 17 to the jurisdiction of the DOLE Secretary and her
representatives, but such exception is neither an issue nor applicable here.
People’s Broadcasting (Bombo Radyo Phils.) vs. Secretary of DOLE, et. al.
G.R. No. 179652; May 8, 2009
FACTS:
The petition traces its origins to a complaint filed by Jandeleon Juezan (respondent)
against People’s Broadcasting Service, Inc. (Bombo Radyo Phils., Inc) (petitioner) for illegal
deduction, non-payment of service incentive leave, 13 th month pay, premium pay for holiday
and rest day and illegal diminution of benefits, delayed payment of wages and non-coverage of
SSS, PAG-IBIG and Philhealth before the Department of Labor and Employment (DOLE) Regional.
On the basis of the complaint, the DOLE conducted a plant level inspection. In the findings of
the Labor Inspector, Bombo Radyo denies that there exists an employer-employee relationship
between the parties. DOLE Regional Director ruled that there exists an employer-employee
relationship. Thus, Bombo Radyo is asked to pay the money claims of Juezan. On appeal to the
DOLE Secretary, petitioner denied once more the existence of employer-employee relationship.
In its Order, the Acting DOLE Secretary dismissed the appeal on the ground that petitioner did
not post a cash or surety bond and instead submitted a Deed of Assignment of Bank Deposit.
ISSUE:
Whether or not he Secretary of Labor in the exercise of its visitorial and enforcement
powers has the power to determine the existence of an employer-employee relationship.
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RULING:
SC ruled that the Secretary of Labor in the exercise of its visitorial and enforcement
powers cannot determine the existence of an employee-employer relationship.
Under Art. 128(b), the provision is quite explicit that the visitorial and enforcement
power of the DOLE comes into play only “in cases when the relationship of employer-employee
still exists.” It also underscores the avowed objective underlying the grant of power to the
DOLE which is “to give effect to the labor standard provision of this Code and other labor
legislation.” Of course, a person’s entitlement to labor standard benefits under the labor laws
presupposes the existence of employer-employee relationship in the first place.
The clause “in cases where the relationship of employer-employee still exists” signifies
that the employer-employee relationship must have existed even before the emergence of the
controversy. Necessarily, the DOLE’s power does not apply in two instances, namely:
(a) where the employer-employee relationship has ceased; and (b) where no such
relationship has ever existed.
In the first situation, the claim has to be referred to the NLRC because it is the NLRC
which has jurisdiction in view of the termination of the employer-employee relationship. The
same procedure has to be followed in the second situation since it is the NLRC that has
jurisdiction in view of the absence of employer-employee relationship between the evidentiary
parties from the start.
Clearly the law accords a prerogative to the NLRC over the claim when the employeremployee relationship has terminated or such relationship has not arisen at all. The reason is
obvious. In the second situation especially, the existence of an employer-employee relationship
is a matter which is not easily determinable from an ordinary inspection, necessarily so,
because the elements of such a relationship are not verifiable from a mere ocular examination.
The intricacies and implications of an employer-employee relationship demand that the level of
scrutiny should be far above the cursory and the mechanical. While documents, particularly
documents found in the employer’s office are the primary source materials, what may prove
decisive are factors related to the history of the employer’s business operations, its current
state as well as accepted contemporary practices in the industry. More often than not, the
question of employer-employee relationship becomes a battle of evidence, the determination of
which should be comprehensive and intensive and therefore best left to the specialized quasijudicial body that is the NLRC.
It can be assumed that the DOLE in the exercise of its visitorial and
enforcement power somehow has to make a determination of the existence of an
employer-employee relationship. Such prerogatival determination, however, cannot
be co-extensive with the visitorial and enforcement power itself. Indeed, such
determination is merely preliminary, incidental and collateral to the DOLE’s primary
function of enforcing labor standards provisions.
The determination of the
existence of employer-employee relationship is still primarily lodged with the NLRC.
This is the meaning of the clause “in cases where the relationship of employeremployee still exists” in Art. 128 (b).
The existence of an employer-employee relationship is a statutory prerequisite
to and a limitation on the power of the Secretary of Labor, one which the legislative
branch is entitled to impose. The rationale underlying this limitation is to eliminate the
prospect of competing conclusions of the Secretary of Labor and the NLRC, on a matter fraught
with questions of fact and law, which is best resolved by the quasi-judicial body, which is the
NRLC, rather than an administrative official of the executive branch of the government. If the
Secretary of Labor proceeds to exercise his visitorial and enforcement powers absent the first
requisite, as the dissent proposes, his office confers jurisdiction on itself which it cannot
otherwise acquire.

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7. WAGE PROTECTION PROVISIONS AND PROHIBITIONS REGARDING WAGES
Gaa vs. CA
G.R. No. L-44169; December 3, 1985
FACTS:
Rosario Gaa is occupying a managerial/ supervisory position in El Grande Hotel. A Notice
of Garnishment upon El Grande Hotel, where petitioner was then employed, garnishing her
"salary, commission and/or remuneration." Petitioner then filed with the Court of First Instance
of Manila 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.
ISSUE:
Whether or not the renumeration of Gaa are exempted from execution or attachment
pursuant to Art. 1708 of the Civil Code.
RULING:
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SC held that, “We do not think that the legislature intended the exemption in Article
1708 of the New Civil Code to operate in favor of any but those who are laboring men or women
in the sense that their work is manual. Persons belonging to this class usually look to the reward
of a day's labor for immediate or present support, and such persons are more in need of the
exemption than any others. Petitioner Rosario A. Gaa is definitely not within that class.

Nestle Phils. vs. NLRC
G.R. No. 85197 March 18, 1991
FACTS:
The private respondents were employed by the petitioner either as sales representatives
or medical representatives. By reason of the nature of their work they were each allowed to
avail of the company's car loan policy. Under that policy, the company advances the purchase
price of a car to be paid back by the employee through monthly deductions from his salary, the
company retaining the ownership of the motor vehicle until it shall have been fully paid for. All
of the private respondents availed of the petitioner's car loan policy.
Respondents were dismissed from service because of their participation in the strike/
certain irregularities. As such, they filed a case of illegal dismissal before the NLRC. In the
Notices of Dismissal, they were asked by the Company to settle the accounts payable of their
car loans or return the car for proper disposition. The Company filed a civil suit to recover
possession of the cars. Private respondents sought a temporary restraining order in the NLRC to
stop the company from cancelling their car loans and collecting their monthly amortizations
pending the final resolution of their appeals in the illegal dismissal case. NLRC granted the TRO.

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ISSUE:
Whether or not NLRC is correct in granting the TRO in favor of the respondents pending
the case of illegal dismissal.
RULING:
Nestlé's demand for payment of the private respondents' amortizations on their car
loans, or, in the alternative, the return of the cars to the company, is not a labor, but a civil,
dispute. It involves debtor-creditor relations, rather than employee-employer relations. The
NLRC gravely abused its discretion and exceeded its jurisdiction by issuing the writ of injunction
to stop the company from enforcing the civil obligation of the private respondents under the car
loan agreements and from protecting its interest in the cars which, by the terms of those
agreements, belong to it (the company) until their purchase price shall have been fully paid by
the employee. The terms of the car loan agreements are not in issue in the labor case. The
rights and obligations of the parties under those contracts may be enforced by a separate civil
action in the regular courts, not in the NLRC.

Five J Taxi vs. NLRC
G.R. No. 111474 August 22, 1994
FACTS:
Private respondents Domingo Maldigan and Gilberto Sabsalon were hired by the
petitioners as taxi drivers. Aside from the daily "boundary", they were also required to pay
P20.00 for car washing, and to further make a P15.00 deposit to answer for any deficiency in
their "boundary," for every actual working day.
ISSUE:
Whether or not the car wash payment is an illegal deduction as contemplated in the
Labor Code.
RULING:
SC held that the amount doled out was paid directly to the person who washed the unit,
thus we find nothing illegal in this practice, much more to consider the amount paid by the
driver as illegal deduction in the context of the law. Consequently, private respondents are not
entitled to the refund of the P20.00 car wash payments they made. It will be noted that there
was nothing to prevent private respondents from cleaning the taxi units themselves, if they

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wanted to save their P20.00.Car washing after a tour of duty is a practice in the taxi industry,
and is, in fact, dictated by fair play.

Phil. Veterans Bank vs. NLRC
G.R. No. 130439 October 26, 1999
FACTS:
Due to financial losses, the Philippine Veterans Bank was placed in receivership pursuant
to the order of the Central Bank of the Philippines. Consequently, its employees, including
private respondent Dr. Jose Teodorico V. Molina, were terminated from work and given their
respective separation pay and other benefits. Dr. Molina filed a complaint before NLRC. He
demanded the implementation of the Wage Orders No. 1 and 2. Both the Labor Arbiter and
NLRC granted the petition of Molina.
ISSUE:
Whether or not Molina is entitled to the increase of his salary pursuant to Wage Orders
No. 1 and 2.
RULING:
SC held that Molina’s salary is within the coverage of the said wage orders. W.O. 1
expressly states that employees having a monthly salary of not more than P3,802.08 are
entitled to receive the mandated wage increase. Undeniably, MOLINA was receiving a monthly
salary of P3,754.60. This fact alone leaves no doubt that he should benefit from said wage order.
On the other hand, W.O. 2 raised the ceiling for entitlement to the wage increase. If MOLINA was
covered by the earlier wage order, with more reason should the later wage order apply to him.

Philippine Appliances Corp. vs. CA
G.R. No. 149434; June 3, 2004
FACTS:
Petitioner is a domestic corporation engaged in the business of manufacturing
refrigerators, freezers and washing machines. Respondent United Philacor Workers Union-NAFLU
is the duly elected collective bargaining representative of the rank-and-file employees of
petitioner. During the collective bargaining negotiations between petitioner and respondent
union in 1997 (for the last two years of the collective bargaining agreement covering the period
of July 1, 1997 to August 31, 1999), petitioner offered the amount of four thousand pesos
(P4,000.00) to each employee as an "early conclusion bonus". Upon conclusion of the CBA
negotiations, petitioner accordingly gave this early signing bonus. After the expiration of the
CBA, both parties negotiated for a new CBA. However, it resulted to a deadlock. The respondent
union filed before the NCMB a notice of strike due to bargaining deadlock. The Department of
Labor and Employment took cognizance of the case and ordered, among other things, herein
petitioner to award signing bonus. Petitioner argued that the award of the signing bonus was
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patently erroneous since it was not part of the employees’ salaries or benefits or of the
collective bargaining agreement. It is not demandable or enforceable since it is in the nature of
an incentive.
ISSUE:
Whether or not the award of a signing bonus by the Secretary of Labor is correct.
RULING:
SC held that the signing bonus must not be awarded.
The CBA negotiation between petitioner and respondent union failed notwithstanding the
intervention of the NCMB. Respondent union went on strike for eleven days and blocked the
ingress to and egress from petitioner’s two work plants. The labor dispute had to be referred to
the Secretary of Labor and Employment because neither of the parties was willing to
compromise their respective positions regarding the four remaining items which stood
unresolved. While we do not fault any one party for the failure of the negotiations, it is apparent
that there was no more goodwill between the parties and that the CBA was clearly not signed
through their mutual efforts alone. Hence, the payment of the signing bonus is no longer
justified and to order such payment would be unfair and unreasonable for petitioner.
Furthermore, we have consistently ruled that a bonus is not a demandable and
enforceable obligation.

Agabon vs. NLRC
G.R. No. 158693; November 17, 2004
FACTS:
Private respondent Riviera Home Improvements, Inc. is engaged in the business of
selling and installing ornamental and construction materials. It employed petitioners Virgilio
Agabon and Jenny Agabon as gypsum board and cornice installers. Private respondents were
terminated due to abandonment of work. Virgilio’s wage was deducted for SSS loan and the
value of the shoes from petitioner Virgilio Agabon's 13th month pay.
ISSUE:
 Whether or not the employer can deduct from its employees’ wage.
 Who will prove payment of wages—employee or employer.
RULING:
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SC held employers cannot deduct any amount from the wage of its employees without
their consent. Under Article 113 of the Labor Code, employers are prohibited from making any
deductions without the employee's knowledge and consent. In the instant case, private
respondent failed to show that the deduction of the SSS loan and the value of the shoes from
petitioner Virgilio Agabon's 13th month pay was authorized by the latter. The lack of authority to
deduct is further bolstered by the fact that petitioner Virgilio Agabon included the same as one
of his money claims against private respondent.
As a general rule, one who pleads payment has the burden of proving it. Even where the
employee must allege non-payment, the general rule is that the burden rests on the employer
to prove payment, rather than on the employee to prove non-payment. The reason for the rule
is that the pertinent personnel files, payrolls, records, remittances and other similar documents
– which will show that overtime, differentials, service incentive leave and other claims of
workers have been paid – are not in the possession of the worker but in the custody and
absolute control of the employer.In the case at bar, if private respondent indeed paid
petitioners' holiday pay and service incentive leave pay, it could have easily presented
documentary proofs of such monetary benefits to disprove the claims of the petitioners. But it
did not, except with respect to the 13th month pay wherein it presented cash vouchers showing
payments of the benefit in the years disputed.

American Wire & Cable Daily Rated Employees vs. American Wire
G.R. No. 155059; April 29, 2005
FACTS:
American Wire and Cable Co., Inc., is a corporation engaged in the manufacture of wires
and cables. There are two unions in this company, the American Wire and Cable Monthly-Rated
Employees Union (Monthly-Rated Union) and the American Wire and Cable Daily-Rated
Employees Union (Daily-Rated Union).
An original action was filed before the NCMB of the Department of Labor and
Employment (DOLE) by the two unions for voluntary arbitration. They alleged that the private
respondent, without valid cause, suddenly and unilaterally withdrew and denied certain benefits
and entitlements which they have long enjoyed. These are service award, 35% premium of an
employee’s basic pay rendered during special days, Christmas party and promotional increase.
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ISSUE:
Whether or not the benefits/entitlements are in the nature of a bonus, and assuming
they are so, whether they are demandable and enforceable obligations.
RULING:
SC held that in order to resolve the issue. The said benefits must be considered whether
these are considered “bonus” or not.
A bonus 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. The
granting of a bonus is a management prerogative, something given in addition to what is
ordinarily received by or strictly due the recipient. Thus, a bonus is not a demandable and
enforceable obligation, except when it is made part of the wage, salary or compensation of the
employee.
Based on the foregoing pronouncement, it is obvious that the benefits/entitlements
subjects of the instant case are all bonuses which were given by the private respondent out of
its generosity and munificence. The benefits given are all in excess of what the law requires
each employer to give its employees. Since they are above what is strictly due to the members
of petitioner-union, the granting of the same was a management prerogative, which, whenever
management sees necessary, may be withdrawn, unless they have been made a part of the
wage or salary or compensation of the employees.
For a bonus to be enforceable, it must have been promised by the employer and
expressly agreed upon by the parties, or it must have had a fixed amount and had been a long
and regular practice on the part of the employer. The benefits/entitlements in question were
never subjects of any express agreement between the parties. They were never incorporated in
the Collective Bargaining Agreement (CBA).

Honda Philippines vs. Samahang Malayang Manggagawa sa Honda
G.R. No. 145561; June 15, 2005
FACTS:
The Collective Bargaining Agreement (CBA) of the parties contains stipulation regarding
13th and 14th month pay. The CBA which contained such stipulation is effective until 2000. In the
latter part of 1998, the parties started negotiations for the 4 th and 5th year of their CBA.
However, efforts failed which lead to the union’s submission of a Notice of Strike on the ground
of bargaining deadlock. Thereafter, Honda filed a Notice of Lockout. It sought the intervention of
Secretary of DOLE. The Secretary ordered the striking workers to cease and desist from the
strike and to return back to work. After the strike, the Management issued a memorandum
stating that the pro-rated computation of the bonuses. Its new computation of the 13th and
14th month pay to be granted to all its employees whereby the thirty-one (31)-day long strike
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shall be considered unworked days for purposes of computing said benefits. As per the
company’s new formula, the amount equivalent to 1/12 of the employees’ basic salary shall be
deducted from these bonuses, with a commitment however that in the event that the strike is
declared legal, Honda shall pay the amount deducted. Aggrieved, the union filed a complaint
against Honda.
ISSUE:
Whether the pro-rated computation of the 13th month pay and the other bonuses in
question is valid and lawful.
RULING:
It is not valid and lawful because it violates Article 100 of the Labor Code. This Court held
that the grant of these benefits has ripened into company practice or policy which cannot be
peremptorily withdrawn.
A cursory reading of the provisions will show that they did not state categorically
whether the computation of the 13th month pay, 14th month pay and the financial assistance
would be based on one full month’s basic salary of the employees, or pro-rated based on the
compensation actually received. The arbitrator thus properly resolved the ambiguity in favor of
labor as mandated by Article 1702 of the Civil Code. The Court of Appeals affirmed the
arbitrator’s finding and added that the computation of the 13th month pay should be based on
the length of service and not on the actual wage earned by the worker.

Producers Bank vs. NLRC
G.R. No. 100701; March 28, 2001
FACTS:
Private respondents charge petitioners for diminution of benefits, non-compliance with
Wage Order No. 6 and non-payment of holiday pay. It has been placed under conservatorship by
the Central Bank to recover to revitalize from its nets losses. As a result, there has been a
reduction and/or continuance of the said benefits to its employers.
ISSUE:
Whether or not the removal/ and or discontinuance of the benefits is justified and valid.
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RULING:
With regards the bonuses given to its employees, SC ruled that the bank is justified in
withdrawing the said bonus. It ratiocinated that the bank 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. These bonuses credited for the mid-year
bonus and Christmas bonus as part of the 13th month pay by the bank is justified.
It is worth noting that 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. The granting of a bonus is a management prerogative, something given in addition to
what is ordinarily received by or strictly due the recipient. Thus, a bonus is not a demandable
and enforceable obligation, except when it is made part of the wage, salary or compensation of
the employee. 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.

Jardin vs. NLRC
G.R. No. 119268; February 23, 2000
FACTS:
Petitioners were drivers of private respondent, Philjama International Inc., a domestic
corporation engaged in the operation of "Goodman Taxi." Petitioners used to drive private
respondent's taxicabs every other day on a 24-hour work schedule under the boundary system.
Under this arrangement, the petitioners earned an average of P400.00 daily. Nevertheless,
private respondent admittedly regularly deducts from petitioners, daily earnings the amount of
P30.00 supposedly for the washing of the taxi units. Believing that the deduction is illegal,
petitioners decided to form a labor union to protect their rights and interests.
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Upon learning about the plan of petitioners, private respondent refused to let petitioners
drive their taxicabs when they reported for work on August 6, 1991, and on succeeding days.
Petitioners suspected that they were singled out because they were the leaders and active
members of the proposed union. Aggrieved, petitioners filed with the labor arbiter a complaint
against private respondent for unfair labor practice, illegal dismissal and illegal deduction of
washing fees.
ISSUE:
Whether or not the taxi drivers are considered employees of the Goodman Taxi entitling
them to full backwages.
RULING:
SC ruled that the taxi drivers are employees of the company. Thus, they are entitled to
full backwages.
Applying the 4-fold test, the owner exercise supervision and control over drivers. The
management of the business is in the owner's hands. Hence, petitioners are undoubtedly
employees of private respondent because as taxi drivers they perform activities which are
usually necessary or desirable in the usual business or trade of their employer. With regard to
the amount deducted daily by private respondent from petitioners for washing of the taxi units,
we view the same as not illegal in the context of the law. We note that after a tour of duty, it is
incumbent upon the driver to restore the unit he has driven to the same clean condition when
he took it out. Car washing after a tour of duty is indeed a practice in the taxi industry and is in
fact dictated by fair play. Hence, the drivers are not entitled to reimbursement of washing
charges.

Manila Jockey’s Club Employees Labor Union vs. Manila Jockey Club
G.R. No. 167601; March 7, 2007
FACTS:
Petitioner Manila Jockey Club Employees Labor Union-PTGWO and respondent Manila
Jockey Club, Inc., a corporation with a legislative franchise to conduct, operate and maintain
horse races, entered into a Collective Bargaining Agreement (CBA). The CBA governed the
economic rights and obligations of respondent’s regular monthly paid rank-and-file employees.
In the CBA, the parties agreed to a 7-hour work schedule from 9:00 a.m. to 12:00 noon and from
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1:00 p.m. to 5:00 p.m. on a work week of Monday to Saturday, as contained under Section 1,
Article IV, of the same CBA. All work performed in excess of seven (7) hours work schedule and
on days not included within the work week shall be considered overtime and paid as such.
Except those monthly compensation which includes work performed during Saturday, Sunday,
and Holiday when races are held at the Club. An inter-office memorandum was issued declaring
that the hours of work of regular monthly-paid employees shall be from 1:00 p.m. to 8:00 p.m.
when horse races are held, that is, every Tuesday and Thursday. The memorandum, however,
maintained the 9:00 a.m. to 5:00 p.m. schedule for non-race days. Petitioners questioned the
above office memorandum as violative of the prohibition against non-diminution of wages and
benefits guaranteed the CBA which specified the work schedule of respondent's employees to
be from 9:00 a.m. to 5:00 p.m. Petitioner claimed that as a result of the memorandum, the
employees are precluded from rendering their usual overtime work from 5:00 p.m. to 9:00 p.m.
ISSUE:
Whether or not the change in the work schedule violated Article 100 of the Labor Code
on the non-diminution of wages and benefits guaranteed under the parties’ CBA.
RULING:
SC held in favor of Manila Jockey Club. It stated that the work schedule is justified, it
being a management prerogative.
Respondent, as employer, cites the change in the program of horse races as reason for
the adjustment of the employees’ work schedule. It rationalizes that when the CBA was signed,
the horse races started at 10:00 a.m. When the races were moved to 2:00 p.m., there was no
other choice for management but to change the employees' work schedule as there was no
work to be done in the morning. Evidently, the adjustment in the work schedule of the
employees is justified. While it is true that Section 1, Article IV of the CBA provides for a 7-hour
work schedule from 9:00 a.m. to 12:00 noon and from 1:00 p.m. to 5:00 p.m. from Mondays to
Saturdays, Section 2, Article XI, however, expressly reserves on respondent the prerogative to
change existing methods or facilities to change the schedules of work.
Manila Jockey Club was not obliged to allow all its employees to render overtime work everyday
for the whole year, but only those employees whose services were needed after their regular
working hours and only upon the instructions of management. The overtime pay was not given
to each employee consistently, deliberately and unconditionally, but as a compensation for
additional services rendered. Thus, overtime pay does not fall within the definition of benefits
under Article 100 of the Labor Code on prohibition against elimination or diminution of benefits.

San Miguel Corp. et. al vs. Layoc Jr. et. al.
G.R. No. 149640; October 19, 2007
FACTS:
Respondents were among the “Supervisory Security Guards” of the Beer Division of the
San Miguel Corporation. From the commencement of their employment, the private respondents
were required to punch their time cards for purposes of determining the time they would come
in and out of the company’s work place. As such, the private respondents were availing the
benefits for overtime, holiday and night premium duty through time card punching. However, in
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the early 1990’s, the San Miguel Corporation embarked on a Decentralization Program. The Beer
Division of the San Miguel Corporation implemented “no time card policy” whereby the
supervising security guards of the Beer Division were no longer required to punch their time
cards. However, in lieu of the overtime pay and the premium pay, the personnel of the Beer
Division of the petitioner San Miguel Corporation affected by the “No Time Card Policy” were
given a 10% across-the-board increase on their basic pay while the supervisors who were
assigned in the night shift (6:00 p.m. to 6:00 a.m.) were given night shift allowance ranging
from P2,000.00 to P2,500.00 a month. Aggrieved, respondents filed a complaint for unfair labor
practice, violation of Article 100 of the Labor Code of the Philippines, and violation of the equal
protection clause and due process of law in relation to paragraphs 6 and 8 of Article 32 of the
New Civil Code of the Philippines.
ISSUE:
Whether or not the “No Time Card Policy” constitutes a violation of Article 100 of the
Labor Code.
RULING:
SC ruled in favor of the petitioners. Petitioners exercised management prerogative in the
implementation of the “No Time Card Policy”.
As a general rule, managerial employees are not entitled to overtime pay for services
rendered in excess of eight hours a day. Respondents failed to show that the circumstances of
the present case constitute an exception to this general rule.
Respondents assert that Article 100 of the Labor Code prohibits the elimination or
diminution of benefits. However, contrary to the nature of benefits, petitioners did not freely
give the payment for overtime work to respondents. Petitioners paid respondents overtime pay
as compensation for services rendered in addition to the regular work hours. Respondents
rendered overtime work only when their services were needed after their regular working hours
and only upon the instructions of their superiors. Respondents even differ as to the amount of
overtime pay received on account of the difference in the additional hours of services rendered.
Aside from their allegations, respondents were not able to present anything to prove that
petitioners were obliged to permit respondents to render overtime work and give them the
corresponding overtime pay. Even if petitioners did not institute a “no time card policy,”
respondents could not demand overtime pay from petitioners if respondents did not render
overtime work. The requirement of rendering additional service differentiates overtime pay
from benefits such as thirteenth month pay or yearly merit increase. These benefits do not
require any additional service from their beneficiaries. Thus, overtime pay does not fall within
the definition of benefits under Article 100 of the Labor Code.

San Miguel Corp. vs. Pontillas
G.R. No. 155178; May 7, 2008
FACTS:
San Miguel Corporation (petitioner) employed Angel C. Pontillas (respondent) as a daily
wage company guard. In 1984, respondent became a monthly-paid employee which entitled
him to yearly increases in salary. Respondent alleged that his yearly salary increases were only
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a percentage of what the other security guards received. On 19 October 1993, respondent
filed an action for recovery of damages due to discrimination under Article 100 of the Labor
Code of the Philippines (Labor Code), as amended, as well as for recovery of salary differential
and backwages. Pending the complaint of herein petitioner, a memorandum was sent out by the
Management stating that there will be a transfer from OroVerde Warehouse, where respondent
is stationed, to VisMin Logistics Operations. Claiming that he is waiting for the directive of his
supervisor, respondent continued reporting in the OroVerde Warehouse. For alleged
insubordination of the order, respondent was terminated. Thus, he filed an amended complaint.
ISSUE:
Whether or not the directive of transfer was valid and reasonable.
RULING:
SC held that the petitioner exercised management prerogative in its directive of transfer
from the OroVerde Warehouse to VisMin Logistics Operation.
The employer exercises the prerogative to transfer an employee for valid reasons and
according to the requirements of its business, provided the transfer does not result in demotion
in rank or diminution of the employee’s salary, benefits, and other privileges. In this case, we
found that the order of transfer was reasonable and lawful considering the integration of Oro
Verde Warehouse with VisMin Logistics Operations. Respondent was properly informed of the
transfer but he refused to receive the notices on the pretext that he was wary because of his
pending case against petitioner. Respondent failed to prove that petitioner was acting in bad
faith in effecting the transfer. There was no demotion involved, or even a diminution of his
salary, benefits, and other privileges. Respondent’s persistent refusal to obey petitioner’s lawful
order amounts to willful disobedience under Article 282 of the Labor Code.

Arco Metal Products vs. Samahan ng Manggagawa sa Arco-Metal-NAFLU
G.R. No. 170734; May 14, 2008
FACTS:

Petitioner is a company engaged in the manufacture of metal products, whereas
respondent is the labor union of petitioner’s rank and file employees. Sometime in December
2003, petitioner paid the 13th month pay, bonus, and leave encashment of three union members
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in amounts proportional to the service they actually rendered in a year, which is less than a full
twelve (12) months. Respondent protested the prorated scheme, claiming that on several
occasions petitioner did not prorate the payment of the same benefits to seven (7) employees
who had not served for the full 12 months. According to respondent, the prorated payment
violates the rule against diminution of benefits under Article 100 of the Labor Code. Thus, they
filed a complaint before the National Conciliation and Mediation Board (NCMB). The parties
submitted the case for voluntary arbitration.
ISSUE:
Whether or not the prorated payment of the benefits constitute a violation under Art. 100
of the Labor Code.
RULING:
SC ruled in favor of the respondents. The voluntary grant of the benefits has been an
established company practice. It has been a company practice which grants full benefits to its
employees regardless of the length of service rendered.
There is no doubt that in order to be entitled to the full monetization of sixteen (16) days
of vacation and sick leave, one must have rendered at least one year of service. The clear
wording of the provisions does not allow any other interpretation. Anent the 13th month pay and
bonus, we agree with the findings of Labor Arbiter Mangabat that the CBA provisions did not
give any meaning different from that given by the law, thus it should be computed at 1/12 of
the total compensation which an employee receives for the whole calendar year. The bonus is
also equivalent to the amount of the 13 th month pay given, or in proportion to the actual service
rendered by an employee within the year.
Any benefit and supplement being enjoyed by employees cannot be reduced,
diminished, discontinued or eliminated by the employer. The principle of non-diminution of
benefits is founded on the Constitutional mandate to "protect the rights of workers and promote
their welfare, and “to afford labor full protection. Said mandate in turn is the basis of Article 4 of
the Labor Code which states that “all doubts in the implementation and interpretation of this
Code, including its implementing rules and regulations shall be rendered in favor of labor.”
Jurisprudence is replete with cases which recognize the right of employees to benefits which
were voluntarily given by the employer and which ripened into company practice. Thus in
Davao Fruits Corporation v. Associated Labor Unions, et al. where an employer had freely and
continuously included in the computation of the 13th month pay those items that were expressly
excluded by the law, we held that the act which was favorable to the employees though not
conforming to law had thus ripened into a practice and could not be withdrawn, reduced,
diminished, discontinued or eliminated. In Sevilla Trading Company v. Semana, we ruled that
the employer’s act of including non-basic benefits in the computation of the 13 th month pay was
a voluntary act and had ripened into a company practice which cannot be peremptorily
withdrawn. Meanwhile in Davao Integrated Port Stevedoring Services v. Abarquez, Court
ordered the payment of the cash equivalent of the unenjoyed sick leave benefits to its
intermittent workers after finding that said workers had received these benefits for almost four
years until the grant was stopped due to a different interpretation of the CBA provisions. We
held that the employer cannot unilaterally withdraw the existing privilege of commutation or
conversion to cash given to said workers, and as also noted that the employer had in fact
granted and paid said cash equivalent of the unenjoyed portion of the sick leave benefits to
some intermittent workers.

Aguanza vs. Asian Terminal Inc.
GR NO. 163505 August 14, 2009
FACTS:

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Petitioner Gualberto Aguanza was employed with respondent company Asian Terminal,
Inc. from April 15, 1989 to October 1997. He was initially employed as Derickman or Crane
Operator and was assigned as such aboard Bismark IV, a floating crane barge owned by Asian
Terminals, Inc. based at the port of Manila. Aside from his basic pay, he received meal
allowance, fixed overtime pay and out-of port allowance [when the barge is assigned outside
Metro Manila].
Sometime in September 1997, the Bismark IV, together with its crew, was temporarily
assigned at the Mariveles Grains Terminal in Mariveles, Bataan. Then, on October 20, 1997,
respondent James Keith issued a memo to the crew of Bismark IV stating that the barge had
been permanently transferred to the Mariveles Grains terminal beginning October 1, 1997 and
because of that, its crew would no longer be entitled to out of port benefits of 16 hours overtime
and P200 a day out-of port allowance.
Because of the said development, Aguanza questioned the diminution of his benefits.
Aguanza insisted on reporting to work in Manila although his barge, Bismark IV, and its other
crew were already permanently based in Mariveles, Bataan. [Aguanza] was not allowed to time
in in Manila because his work was in Mariveles, Bataan. He therefore was not able to render his
services, and was accordingly not paid for doing nothing.
ISSUE:
Was Aguanza constructively dismissed?
RULING:
No. The transfer of operations is a valid exercise of management prerogative. Aguanza
asserts that his transfer constituted constructive dismissal, while ATI asserts that Aguanza’s
transfer was a valid exercise of management prerogative.
ATI’s transfer of Bismark IV’s base from Manila to Bataan was, contrary to Aguanza’s
assertions, a valid exercise of management prerogative. The transfer of employees has been
traditionally among the acts identified as a management prerogative subject only to limitations
found in law, collective bargaining agreement, and general principles of fair play and justice.
Even as the law is solicitous of the welfare of employees, it must also protect the right of an
employer to exercise what are clearly management prerogatives. The free will of management
to conduct its own business affairs to achieve its purpose cannot be denied.
On the other hand, the transfer of an employee may constitute constructive dismissal
"when continued employment is rendered impossible, unreasonable or unlikely; when there is a
demotion in rank and/or a diminution in pay; or when a clear discrimination, insensibility or
disdain by an employer becomes unbearable to the employee." Aguanza’s situation is not within
the purview of this discussion.

Genesis Transport Service Inc. vs. Unyon ng Malatang Manggagwa ng Genesis
Transport
GR No. 182114; April 5, 2010
FACTS:
Respondent Juan Taroy was hired by petitioner Genesis Transport Service, Inc. (Genesis
Transport) as driver on commission basis at 9% of the gross revenue per trip.
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On May 10, 2002, Taroy was, after due notice and hearing, terminated from employment
after an accident on April 20, 2002 where he was deemed to have been driving recklessly.
Taroy thus filed a complaint for illegal dismissal and payment of service incentive leave
pay, claiming that he was singled out for termination because of his union activities, other
drivers who had met accidents not having been dismissed from employment. Taroy later
amended his complaint to implead his herein co-respondent Unyon ng Malayang Manggagawa
ng Genesis Transport (the union) as complainant and add as grounds of his cause of action
unfair labor practice (ULP), reimbursement of illegal deductions on tollgate fees, and payment of
service incentive leave pay.
Respecting the claim for refund of illegal deductions, Taroy alleged that in 1997,
petitioner started deducting from his weekly earnings an amount ranging from P160 to P900
representing toll fees, without his consent and written authorization as required under Article
113 of the Labor Code and contrary to company practice; and that deductions were also taken
from the bus conductor’s earnings to thus result to double deduction.
Genesis Transport countered that Taroy committed several violations of company rules
for which he was given warnings or disciplined accordingly; that those violations, the last of
which was the April 20, 2002 incident, included poor driving skills, tardiness, gambling inside
the premises, use of shabu, smoking while driving, insubordination and reckless driving; and
that Taroy’s dismissal was on a valid cause and after affording him due process.
The Labor Arbiter rendered dismissing instant complaint for illegal dismissal for lack of
merit and was ordered to refund to complainant the underpayment/differential due him as a
result of the deduction of the tollgate fees from the gross receipts. The NLRC affirmed the Labor
Arbiter’s decision with modification. It deleted the award to Taroy of attorney’s fees.
The respondent challenged the decision on the CA questioning the Labor Arbiter’s failure
to pass on the propriety of his preventive suspension, dismissal of his complaint for constructive
dismissal and ULP, and failure to award him service incentive leave pay. The petitioners
questioned the order for them to refund "underpayment" and pay attorney’s fees.
ISSUE:
 Whether or not the respondent is entitled for a refund “underpayment” for the toll fees
deducted from his weekly earnings.
 Whether or not the issue of preventive suspension violated Taroy’s right to due process.
RULING:
The Supreme Court affirmed CA decision with the refund of underpayment with the
modification that the award of nominal damages to respondent Juan Taroy is deleted.
First Issue:
The Court take judicial notice of petitioners’ claim that the deduction of tollgate fees
from the gross earnings of drivers is an accepted and long-standing practice in the
transportation industry. Expertravel & Tours, Inc. v. Court of Appeals10 instructs:
Generally speaking, matters of judicial notice have three material
requisites: (1) the matter must be one of common and general knowledge; (2) it
must be well and authoritatively settled and not doubtful or uncertain; and (3) it
must be known to be within the limits of the jurisdiction of the court. The principal
guide in determining what facts may be assumed to be judicially known is that of
notoriety. Hence, it can be said that judicial notice is limited to facts evidenced by
public records and facts of general notoriety.
Moreover, a judicially noticed fact must be one not subject to a reasonable
dispute in that it is either: (1) generally known within the territorial jurisdiction of
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the trial court; or (2) capable of accurate and ready determination by resorting to
sources whose accuracy cannot reasonably be questionable.
None of the material requisites for the Court to take judicial notice of a particular matter
was established by petitioners.
Albeit the amounts representing tollgate fees were deducted from gross revenues and
not directly from Taroy’s commissions, the labor tribunal and the appellate court correctly held
that the withholding of those amounts reduced the amount from which Taroy’s 9% commission
would be computed. Such a computation not only marks a change in the method of payment of
wages, resulting in a diminution of Taroy’s wages in violation of Article 113 vis-à-vis Article 100
of the Labor Code, as amended. It need not be underlined that without Taroy’s written consent
or authorization, the deduction is considered illegal.
The invocation of the rule on "company practice" is generally used with respect to the
grant of additional benefits to employees, not on issues involving diminution of benefits.
Second Issue:
Respecting the issue of statutory due process, the Court holds that Taroy’s right thereto
was not violated.
In any event, what the Rules require is that the employer act on the suspended worker’s
status of employment within the 30-day period by concluding the investigation either by
absolving him of the charges, or meting the corresponding penalty if liable, or ultimately
dismissing him. If the suspension exceeds the 30-day period without any corresponding action
on the part of the employer, the employer must reinstate the employee or extend the period of
suspension, provided the employee’s wages and benefits are paid in the interim.
In the present case, petitioner company had until May 20, 2002 to act on Taroy’s case. It
did by terminating him through a notice dated May 10, 2002, hence, the 30-day requirement
was not violated even if the termination notice was received only on June 4, 2002, absent any
showing that the delayed service of the notice on Taroy was attributable to Genesis Transport.
Taroy’s statutory due process not having been violated, he is not entitled to the award of
nominal damages.

Central Azucarera de Tarlac vs. Central Azucarera de Tarlac Labor Union-NLU
GR NO 188949 July 26, 2010
FACTS:
The facts of this case are not in dispute. In compliance with Presidential Decree (P.D.) No.
851, petitioner granted its employees the mandatory thirteenth (13th) - month pay since 1975.
The formula used by petitioner in computing the 13th-month pay was: Total Basic Annual Salary
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divided by twelve (12). Included in petitioner’s computation of the Total Basic Annual Salary
were the following: basic monthly salary; first eight (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.
ISSUE:
WON the petitioner’s computation of the 13 th Month Pay use for almost thirty (30)
years has ripened into a company policy or practice.
RULING:
The 13th-month pay mandated by Presidential Decree (P.D.) No. 851 represents an
additional income based on wage but not part of the wage. It is equivalent to one-twelfth (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 one month during the calendar year. If the employee worked for only a portion of the year,
the 13th-month pay is computed pro rata.
x x x 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 thirty (30)
years and has ripened into a company policy or practice which cannot be unilaterally withdrawn.

SHS Perforated Materials Inc. et. al vs. Diaz
GR NO. 185814 Oct. 13, 2010
FACTS:
Manuel F. Diaz (respondent) was hired by petitioner SHS as Manager for Business
Development on probationary status from July 18, 2005 to January 18, 2006, with a monthly
salary of P100,000.00. Respondents duties, responsibilities, and work hours were described in
the Contract of Probationary Employment. During meetings with the respondent,
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Hartmannshenn expressed his dissatisfaction over respondents poor performance. Respondent
allegedly failed to make any concrete business proposal or implement any specific measure to
improve the productivity of the SHS office and plant or deliver sales except for a meagre
P2,500.00 for a sample product. In numerous electronic mail messages, respondent
acknowledged his poor performance and offered to resign from the company.
On November 29, 2005, Hartmannshenn instructed Taguiang not to release respondents
salary. Later that afternoon, respondent called and inquired about his salary. Taguiang informed
him that it was being withheld and that he had to immediately communicate with
Hartmannshenn. Again, respondent denied having received such directive. The next day, on
November 30, 2005, respondent served on SHS a demand letter and a resignation letter.
On December 9, 2005, respondent filed a Complaint against the petitioners for illegal
dismissal; non-payment of salaries/wages and 13th month pay with prayer for reinstatement
and full backwages; exemplary damages, and attorneys fees, costs of suit, and legal interest.
The Labor Arbiter and the CA, on appeal, rendered a decision in favour of the respondent.
Hence, this petition.
ISSUE:
WON the CA erred in affirming the Labor Arbiter’s finding that respondent had been
constructively dismissed.
RULING:
Petitioners contend that respondent could not have been constructively dismissed
because he voluntarily resigned as evidenced by his resignation letter. They assert that
respondent was not forced to draft the letter and his intention to resign is clear from the
contents and terms used, and that given respondents professional and educational background,
he was fully aware of the import and consequences of the said letter. They maintain that
respondent resigned to save face and avoid disciplinary measures due to his allegedly dismal
work performance and failure to report to work.
The Court, however, agrees with the LA and the CA that respondent was forced to resign
and was, thus, constructively dismissed. In Duldulao v. Court of Appeals, it was written:
There is constructive dismissal if an act of clear discrimination, insensibility, or disdain by
an employer becomes so unbearable on the part of the employee that it would foreclose
any choice by him except to forego his continued employment. It exists where there is
cessation of work because continued employment is rendered impossible, unreasonable
or unlikely, as an offer involving a demotion in rank and a diminution in pay.

NIÑA JEWELRY MANUFACTURING OF METAL ARTS, INC. vs. MONTECILLO
G.R. No. 188169. November 28, 2011.
FACTS:
Madeline Montecillo and Liza Trinidad were first employed as goldsmiths by the
petitioner Niña Jewelry Manufacturing of Metal Arts, Inc. in 1996 and 1994, respectively.
Madeline's weekly rate was P1,500.00 while Liza's was P2,500.00. Taking into consideration the
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incidents of theft involving goldsmiths in Niña Jewelry's employ, it imposed a policy for
goldsmiths requiring them to post cash bonds or deposits in varying amounts but in no case
exceeding 15% of the latter's salaries per week. The deposits were intended to answer for any
loss or damage which Niña Jewelry may sustain by reason of the goldsmiths' fault or negligence
in handling the gold entrusted to them. Niña Jewelry alleged that the goldsmiths were given the
option not to post deposits, but to sign authorizations allowing the former to deduct from the
latter's salaries amounts not exceeding 15% of their take home pay should it be found that they
lost the gold entrusted to them. The respondents claimed otherwise insisting that Niña Jewelry
left the goldsmiths with no option but to post the deposits. The respondents alleged that they
were constructively dismissed by Niña Jewelry as their continued employments were made
dependent on their readiness to post the required deposits. Niña Jewelry averred that on August
14, 2004, the respondents no longer reported for work and signified their defiance against the
new policy which at that point had not even been implemented yet.The respondents filed
against Niña Jewelry complaints for illegal dismissal seeking reinstatement and payment of
backwages, attorney's fees and 13th month pay.
Labor Arbiter Jose Gutierrez (LA Gutierrez) dismissed the respondents' complaints for
lack of merit but ordered Niña Jewelry to pay Madeline the sum of P3,750.00, and Liza,
P6,250.00, representing their proportionate entitlements to 13th month pay for the year 2004.
The respondents filed an appeal before the NLRC which affirmed LA Gutierrez's dismissal of the
amended complaints but deleted the award of 13th month pay based on findings that the
former had contracted unpaid individual loans from Niña Jewelry. The respondents then filed a
Petition for Certiorari before the CA where the appellate court reversed the findings of the LA
and the NLRC.
ISSUE:
Whether or not the petitioner’s policy of requiring its employee-goldsmiths to post cash
bonds or deposits is valid.
SC RULING:
The petition is partly meritorious.
In view of the foregoing, we hold that no dismissal, constructive or otherwise, occurred.
The findings of the NLRC and the LA that it was the respondents who stopped reporting for work
are supported by substantial evidence. Hence, the CA erred when it re-evaluated the parties'
respective evidence and granted the petition filed before it. However, we agree with the CA that
it is baseless for Niña Jewelry to impose its new policy upon the goldsmiths under its employ
without first complying with the strict requirements of the law.
It was the respondents who merely stopped reporting for work. While it is conceded that
the new policy will impose an additional burden on the part of the respondents, it was not
intended to result in their demotion.
On the other hand, it is important to note that Article 113 of the Labor Code is clear that
there are only three exceptions to the general rule that no deductions from the employees'
salaries can be made. The exception which finds application in the instant petition is in cases
where the employer is authorized by law or regulations issued by the Secretary of Labor to
effect the deductions. On the other hand, Article 114 states that generally, deposits for loss or
damages are not allowed except in cases where the employer is engaged in such trades,
occupations or business where the practice of making deposits is a recognized one, or is
necessary or desirable as determined by the Secretary of Labor in appropriate rules or
regulations.
While the petitioners are not absolutely precluded from imposing the new policy, they
can only do so upon compliance with the requirements of the law. In other words, 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
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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.

8. PAYMENT OF WAGES
Congson vs. NLRC
G.R. No. 114250; April 5, 1995
FACTS:
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Dominico C. Congson is the registered owner of Southern Fishing Industry. Respondents
were hired as piece-rate employees uniformly paid at a rate of P1.00 per tuna weighing thirty
(30) to eighty (80) kilos per movement. They work for 7 days a week. Due to alleged scarcity of
tuna, Congson notified his proposal to reduce the rate-per-tuna movement. When they reported
the following day, they found out that they were already replaced with new set of workers. They
wanted to have a dialogue with the management, but they waited in vain. Thus, they filed a
case before NLRC for underpayment of wages (violation of the minimum wage law) and nonpayment of overtime pay, 13th month pay, holiday pay, rest day pay, and five (5)-day service
incentive leave pay; and for constructive dismissal.
Petitioner conceded that his payment of wages falls below the minimum wage law. He
averred that NLRC should have considered as forming a substantial part of private respondents'
total wages the cash value of the tuna liver and intestines private respondents were entitled to
retrieve. He argued that the combined value of the cash wage and monetary value of the tuna
liver and intestines clearly exceeded the minimum wage fixed by law.
Both the Labor Arbiter and the NLRC ruled in favor of the respondents.
ISSUE:
Whether or not the form of payment by Congson is valid pursuant to Article 102 of the
Labor Code.
RULING:
Petitioner's practice of paying the private respondents the minimum wage by means of
legal tender combined with tuna liver and intestines runs counter to the above cited provision of
the Labor Code. The fact that said method of paying the minimum wage was not only agreed
upon by both parties in the employment agreement but even expressly requested by private
respondents, does not shield petitioner. Article 102 of the Labor Code is clear. Wages shall be
paid only by means of legal tender. The only instance when an employer is permitted to pay
wages informs other than legal tender, that is, by checks or money order, is when the
circumstances prescribed in the second paragraph of Article 102 are present.

North Davao Mining vs. NLRC
G.R. No. 112546; March 13, 1996
FACTS:

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Due to financial losses, North Davao Mining Corporation laid off workers. Respondent
Wilfredo Guillema is one among several employees of North Davao who were separated by
reason of the company’s closure on May 31, 1992. It appears that, during the life of the
petitioner corporation, from the beginning of its operations in 1981 until its closure in 1992, it
had been giving separation pay equivalent to thirty (30) days’ pay for every year of service.
Moreover, inasmuch as the region where North Davao operated was plagued by insurgency and
other peace and order problems, the employees had to collect their salaries at a bank in Tagum,
Davao del Norte, some 58 kilometers from their workplace and about 2 ½hours’ travel time by
public transportation; this arrangement lasted from 1981 up to 1990.
ISSUE:
Whether or not time spent in collecting wages in a place other than the place of
employment is compensable notwithstanding that the same is done during official time.
RULING:
SC, affirming the decision of the Labor Arbiter, finds that the hours spent by
complainants in collecting salaries at a bank in Tagum, Davao del Norte shall be considered
compensable hours worked. Considering further the distance between Amacan, Maco to Tagum
which is 2½ hours by travel and the risks in commuting all the time in collecting complainants’
salaries, would justify the granting of backwages equivalent to two (2) days in a month as
prayed for. Corollary, we likewise hold respondents liable for the transportation expenses
incurred by complainants at P40.00 round trip fare during pay days.

National Federation of Labor vs. CA
G.R. No. 149464; October 19, 2004
FACTS:
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National Federation of Labor (NFL) was the duly registered bargaining agent of the dailyand-monthly-paid rank-and-file employees of SDPI in the Latuan rubber plantation. SDPI and
NFL executed a collective bargaining agreement (CBA) in which they agreed that in case of
permanent or temporary lay-off, workers affected would be entitled to termination pay as
provided by the Labor Code. The 150 petitioners were daily-and-monthly paid employees of
SDPI in the Latuan plantation and were, likewise, members of NFL. The termination of the
petitioners’ employment was based on the closure of SDPI, Latuan rubber plantation, as a
consequence of the implementation of CARL, which set the deadline for the compulsory
distribution of agricultural, including agro-industrial lands ten years after the effectivity of the
law. As a result, each of the petitioners received his separation pay equivalent to one-half month
pay for every year of service, and other benefits which were all lumped in one Metrobank check.
The petitioners simultaneously executed individual “Released and Quitclaim” following the
explanation to them by Executive Labor Arbiter (ELA) Rhett Julius J. Plagata of the nature and
legal effects of the said quitclaims.
ISSUE:
Whether or not the check is a valid form of payment for wages.
RULING:
SC held that the payments of separation pay and other benefits in check are not in
violation of Article 102 of the Labor Code.
Payment by check- payment of wages by bank checks, postal checks or money orders is
allowed where such manner of wage payment is customary on the date of the effectivity of the
Code, where it is stipulated in a collective bargaining agreement, or where all of the following
conditions are met:





There is a bank or other facility for encashment within a radius of one (1)
kilometer from the workplace;
The employer, or any of his agents or representatives, does not receive any
pecuniary benefit directly or indirectly from the arrangement;
The employee are given reasonable time during banking hours to withdraw
their wages from the bank which time shall be considered as compensable
hours worked if done during the working hours; and
The payment by check is with the written consent of the employees
concerned if there is no collective agreement authorizing the payment of
wages by bank checks.

In the present case, the petitioners’ separation pay, other benefits, and the wages from
January 1 to 17 were paid in check. Strictly speaking, SDPI violated the Labor Code when it
included wages from January 1 to 17, 1998 in the check. Considering, however, the amount of
other monetary benefits to be paid, payment in check was the most convenient form for both
the petitioners and the respondent.

Hiers of Sara Lee vs. Rey
104

G.R. No. 149013; August 31, 2006
FACTS:
The House of Sara Lee (petitioner) is engaged in the direct selling of a variety of product
lines for men and women, including cosmetics, intimate apparels, perfumes, ready to wear
clothes and other novelty items, through its various outlets nationwide. It employs Credit
Administration Supervisors (CAS) to supervise and monitor the credit collection of the
Independent Business Managers (IBMs) and Independent Group Supervisors (IGSs). A 38- or 52day “rolling due date” is given to each of its IBMs and IGSs. CAS is under the direct control and
supervision of Branch Operations Manager (BOM). Cynthia Rey was a CAS at the Cagayan de
Oro Branch of the petitioner. She was later transferred to Butuan City. While respondent was still
working in Butuan City, she allegedly instructed the Accounts Receivable Clerk of the Cagayan
de Oro outlet, a certain Ms. Magi Caroline Mendoza, to change the credit term of one of the IBMs
of the petitioner, a certain Ms. Mariam Rey-Petilla, who happens to be respondent’s sister-in-law,
from the 52-day limit to an “unauthorized” term of 60 days. Ms. Mendoza reported the matter to
the BOM Villagracia. Villagracia discreetly investigated the matter and found out that it was not
only Ms. Petilla who was given extensions to the “rolling due dates” but other IBMs as well.
On the basis of the hearing, the alleged voluntary admissions of respondent, and the
findings of the auditor’s report, the petitioner formally dismissed the respondent for breach of
trust and confidence. The dismissal lead to respondent’s filing of her Complaint for illegal
dismissal, backwages and damages, with the Labor Arbiter.
Both Labor Arbiter and the NLRC ruled in favor the respondent.
ISSUE:
Whether or not respondent was dismissed for just cause.
RULING:
SC held that respondent was dismissed for just cause. In the present case, the
respondent is not an ordinary rank-and-file employee. The nature of her work requires a
substantial amount of trust and confidence on the part of the employer. Being the Credit
Administration Supervisor of the Cagayan de Oro and Butuan City branches of the petitioner,
respondent occupied a highly sensitive and critical position and may thus be dismissed on the
ground of loss of trust and confidence.

9. CONDITIONS OF EMPLOYMENT
105

San Juan de Dios Hospital vs. NLRC
G.R. No. 126383; November 28, 1997
FACTS:
Petitioners, the rank-and-file employee-union officers and members of San Juan De Dios
Hospital Employees Association sent a letter requesting and pleading for the expeditious
implementation and payment by respondent Juan De Dios Hospital of the ’40 HOURS/5-DAY
WORKWEEK’ with compensable weekly two (2) days off provided for by Republic Act 5901 as
clarified for enforcement by the Secretary of Labor’s Policy Instructions No. 54. RA 5901 seeks to
reduce the number of hospital personnel, considering the nature of their work, and at the same
time guarantee the payment to them of a full weekly wage for seven (7) days. Respondent
hospital failed to give a favorable response; thus, petitioners filed a complaint regarding their
claims for statutory benefits under the above-cited law and policy issuance. Both Labor Arbiter
and NLRC dismissed the complaint.
ISSUE:
Whether or not the Policy Instructions No. 54 issued by then Labor Secretary (now
Senator) Franklin M. Drilon is valid.
RULING:
The interpretation of Labor Secretary Drilon is not valid.
A cursory reading of Article 83 of the Labor Code betrays petitioners’ position that
“hospital employees” are entitled to “a full weekly salary with paid two (2) days’ off if they have
completed the 40-hour/5-day workweek”.
What Article 83 merely provides are:
(1) the regular office hour of eight hours a day, five days per week for
health personnel, and
(2) where the exigencies of service require that health personnel work for
six days or forty-eight hours then such health personnel shall be entitled to an
additional compensation of at least thirty percent of their regular wage for work
on the sixth day.
There is nothing in the law that supports then Secretary of Labor’s assertion that
“personnel in subject hospitals and clinics are entitled to a full weekly wage for seven (7) days if
they have completed the 40-hour/5-day workweek in any given workweek”. Needless to say,
the Secretary of Labor exceeded his authority by including a two days off with pay in
contravention of the clear mandate of the statute. Such act the Court shall not countenance.
Administrative interpretation of the law, we reiterate, is at best merely advisory, and the Court
will not hesitate to strike down an administrative interpretation that deviates from the provision
of the statute.

106

Sime Darby vs. NLRC
G.R. No. 119205. April 15, 1998
FACTS:
Sime Darby Pilipinas, Inc., petitioner, is engaged in the manufacture of automotive tires,
tubes and other rubber products. Sime Darby Salaried Employees Association (ALU-TUCP),
private respondent, is an association of monthly salaried employees of petitioner at its Marikina
factory. Prior to the present controversy, all company factory workers in Marikina including
members of private respondent union worked from 7:45 a.m. to 3:45 p.m. with a 30 minute paid
“on call” lunch break. Petitioner issued a memorandum to all factory-based employees advising
all its monthly salaried employees in its Marikina Tire Plant a change in work schedule and
elimination of the 30 minute paid “on call” lunch break. Private respondent felt affected
adversely by the change in the work schedule and discontinuance of the 30-minute paid “on
call” lunch break, it filed on behalf of its members a complaint with the Labor Arbiter for unfair
labor practice, discrimination and evasion of liability. Labor Arbiter and NLRC dismissed the
complaint of the union ratiocinating that the actuation of Sime Derby is an exercise of
management prerogative. Upon motion for reconsideration, NLRC reversed its decision and
declared that declared that the new work schedule deprived the employees of the benefits of
time-honored company practice of providing its employees a 30-minute paid lunch break
resulting in an unjust diminution of company privileges prohibited by Art. 100 of the Labor Code.
ISSUE:
Whether or not the act of management in revising the work schedule of its employees
and discarding their paid lunch break constitutive of unfair labor practice.
RULING:
SC ruled in favor the of the petitioners.
The right to fix the work schedules of the employees rests principally on their employer.
In the instant case petitioner, as the employer, cites as reason for the adjustment the efficient
conduct of its business operations and its improved production. It rationalizes that while the old
work schedule included a 30-minute paid lunch break, the employees could be called upon to do
jobs during that period as they were “on call.” Even if denominated as lunch break, this period
could very well be considered as working time because the factory employees were required to
work if necessary and were paid accordingly for working. With the new work schedule, the
employees are now given a one-hour lunch break without any interruption from their employer.
For a full one-hour undisturbed lunch break, the employees can freely and effectively use this
hour not only for eating but also for their rest and comfort which are conducive to more
efficiency and better performance in their work. Since the employees are no longer required to
work during this one-hour lunch break, there is no more need for them to be compensated for
this period. We agree with the Labor Arbiter that the new work schedule fully complies with the
daily work period of eight (8) hours without violating the Labor Code. Besides, the new schedule
applies to all employees in the factory similarly situated whether they are union members or
not.

107

PAL vs. NLRC
G.R. No. 132805; February 2, 1999
FACTS:
Dr. Herminio A. Fabros was employed as flight surgeon at petitioner company. He was
assigned at the PAL Medical Clinic at Nichols and was on duty from 4:00 in the afternoon until
12:00 midnight. While on meal break, an employee of the PAL Cargo Services died due to a
heart attack. PAL Medical Director Dr. Godofredo B. Banzon ordered the Chief Flight Surgeon to
conduct an investigation. The Chief Flight Surgeon, in turn, required private respondent to
explain why no disciplinary sanction should be taken against him. In his explanation, private
respondent asserted that he was entitled to a thirty-minute meal break; that he immediately left
his residence upon being informed by Mr. Eusebio, nurse, about the emergency and he arrived
at the clinic a few minutes later; that Mr. Eusebio panicked and brought the patient to the
hospital without waiting for him. Finding private respondent’s explanation unacceptable, the
management charged private respondent with abandonment of post while on duty. He was
given ten days to submit a written answer to the administrative charge. In his answer, private
respondent reiterated the assertions in his previous explanation. He further denied that he
abandoned his post. After evaluating the charge as well as the answer of private respondent,
petitioner company decided to suspend private respondent for three months. Private respondent
filed a complaint for illegal suspension against petitioner.
Both Labor Arbiter and NLRC declared the suspension illegal.
ISSUE:
Whether or not Dr. Herminio Fabros’ act of leaving the company premises during his
break constitutes abandonment of post which warrants suspension.
RULING:
The eight-hour work period does not include the meal break. Nowhere in the law may it
be inferred that employees must take their meals within the company premises. Employees are
not prohibited from going out of the premises as long as they return to their posts on time.
Private respondent’s act, therefore, of going home to take his dinner does not constitute
abandonment.

108

Linton Commercial Co., Inc. vs. Hellera
G.R. No. 163147; October 10, 2007
FACTS:
Linton is a domestic corporation engaged in the business of importation, wholesale, retail
and fabrication of steel and its by-products. Due to the Asian Financial Crisis, it decided to
suspend its operations from 18 December 1997 to 5 January 1998 and submitted it to DOLE. It
submitted another memorandum informing them that effective 12 January 1998, it would
implement a new compressed workweek of three (3) days on a rotation basis. In other words,
each worker would be working on a rotation basis for three working days only instead for six
days a week. On the same day, Linton submitted an establishment termination report
concerning the rotation of its workers. Linton proceeded with the implementation of the new
policy without waiting for its approval by DOLE. Aggrieved, sixty-eight (68) workers (workers)
filed a Complaint for illegal reduction of workdays with the NLRC. The workers pointed out that
Linton implemented the reduction of work hours without observing Article 283 of the Labor
Code, which required submission of notice thereof to DOLE one month prior to the
implementation of reduction of personnel, since Linton filed only the establishment termination
report enacting the compressed workweek on the very date of its implementation. Petitioner
claimed that due to the currency crisis it suffered considerable losses and the reduction of the
working hours was instituted as a cost-cutting measure.
ISSUE:
Whether or not there was an illegal reduction of work when Linton implemented a
compressed workweek by reducing from six to three the number of working days with the
employees working on a rotation basis.
RULING:
The compressed workweek arrangement was unjustified and illegal. Petitioners
committed illegal reduction of work hours.
For the reduction of working hours to be valid, it must take into consideration the
following: the arrangement was temporary, it was a more humane solution instead of a
retrenchment of personnel, there was notice and consultations with the workers and
supervisors, a consensus were reached on how to deal with deteriorating economic conditions
and it was sufficiently proven that the company was suffering from losses.
This case was done through a reduced workweek that resulted in an unsettling
diminution of the periodic pay for a protracted period. Permitting reduction of work and pay at
the slightest indication of losses would be contrary to the State’s policy to afford protection to
labor and provide full employment. Certainly, management has the prerogative to come up with
measures to ensure profitability or loss minimization. However, such privilege is not absolute.
Management prerogative must be exercised in good faith and with due regard to the rights of
labor.

109

Bisig Manggagawa sa Tryco vs. NLRC
G.R. No. 151309; October 15, 2008
FACTS:
Tryco Pharma Corporation (Tryco) is a manufacturer of veterinary medicines and its
principal office is located in Caloocan City. Petitioners Joselito Lariño, Vivencio Barte, Saturnino
Egera and Simplicio Aya-ay are its regular employees, occupying the positions of helper,
shipment helper and factory workers, respectively, assigned to the Production Department.
They are members of Bisig Manggagawa sa Tryco (BMT), the exclusive bargaining representative
of the rank-and-file employees. Tryco and the petitioners signed separate Memoranda of
Agreement (MOA), providing for a compressed workweek schedule to be implemented in the
company effective May 20, 1996. As provided in the MOA, 8:00 a.m. to 6:12 p.m., from Monday
to Friday, shall be considered as the regular working hours, and no overtime pay shall be due
and payable to the employee for work rendered during those hours.
ISSUE:
Whether or not the MOA is valid and enforceable.
RULING:
SC held that the MOA is enforceable and valid. We do not agree with the petitioners'
assertion that the MOA is not enforceable as it is contrary to law. The MOA is enforceable and
binding against the petitioners. Where it is shown that the person making the waiver did so
voluntarily, with full understanding of what he was doing, and the consideration for the
quitclaim is credible and reasonable, the transaction must be recognized as a valid and binding
undertaking.
Notably, the MOA complied with the following conditions set by the DOLE, under D.O. No. 21, to
protect the interest of the employees in the implementation of a compressed workweek
scheme:
 The employees voluntarily agree to work more than eight (8) hours a day the total
in a week of which shall not exceed their normal weekly hours of work prior to
adoption of the compressed workweek arrangement;
 There will not be any diminution whatsoever in the weekly or monthly take-home
pay and fringe benefits of the employees;
 If an employee is permitted or required to work in excess of his normal weekly
hours of work prior to the adoption of the compressed workweek scheme, all such
excess hours shall be considered overtime work and shall be compensated in
accordance with the provisions of the Labor Code or applicable Collective
Bargaining Agreement (CBA);
 Appropriate waivers with respect to overtime premium pay for work performed in
excess of eight (8) hours a day may be devised by the parties to the agreement.
The effectivity and implementation of the new working time arrangement shall be by
agreement of the parties.

110

10.

MINIMUM LABOR STANDARD BENEFITS

Union of Filipino Employees vs. Vicar
G.R. No. 79255; January 20, 1992
FACTS:
On November 8, 1985, respondent Filipro, Inc. (now Nestle Philippines, Inc.) filed with the
National Labor Relations Commission a petition for declaratory relief seeking a ruling on its
rights and obligations respecting claims of its monthly paid employees for holiday pay.
Both Filipro and the Union of Filipro Employees (UFE) agreed to submit the case for
voluntary arbitration and appointed respondent Benigno Vivar, Jr. as voluntary arbitrator.
Arbitrator Vivar rendered a decision directing Filipro to pay its monthly paid employees holiday
pay pursuant to Article 94 of the Code, subject only to the exclusions and limitations specified in
Article 82 and such other legal restrictions as are provided for in the Code.
However, the respondent arbitrator refused to take cognizance of the case reasoning
that he had no more jurisdiction to continue as arbitrator because he had resigned from service
effective May 1, 1986.
ISSUE:
Whether or not sales personnel are excluded in the payment of holiday pay.
RULING:
The Court ruled that field personnel are not entitled to such pay.
Under Article 82, field personnel are not entitled to holiday pay. Said article defines field
personnel as "non-agricultural 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 controversy centers on the interpretation of the clause "whose actual hours of work
in the field cannot be determined with reasonable certainty." It is undisputed that these sales
personnel start their field work at 8:00 a.m. after having reported to the office and come back to
the office at 4:00 p.m. or 4:30 p.m. if they are Makati-based.
The petitioner maintains that the period between 8:00 a.m. to 4:00 or 4:30 p.m.
comprises the sales personnel's working hours which can be determined with reasonable
certainty.
The Court does not agree. 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.
The Court concurs with the arbitrator when it disposed that the requirement for the
salesmen and other similarly situated employees to report for work at the office at 8:00 a.m.
and return at 4:00 or 4:30 p.m. is not within the realm of work in the field as defined in the Code
but an exercise of purely management prerogative of providing administrative control over such
personnel. This does not in any manner provide a reasonable level of determination on the
actual field work of the employees which can be reasonably ascertained. Actual field work
begins after 8:00 a.m. when the sales personnel follow their field itinerary, and ends
immediately before 4:00 or 4:30 p.m. when they report back to their office. The period between
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8:00 a.m. and 4:00 or 4:30 p.m. comprises their hours of work in the field, the extent or scope
and result of which are subject to their individual capacity and industry and which 'cannot be
determined with reasonable certainty.' This is the reason why effective supervision over field
work of salesmen and medical representatives, truck drivers and merchandisers is practically a
physical impossibility. Consequently, they are excluded from the ten holidays with pay.
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. SECTION 1.
Coverage. — This rule shall apply to all
employees except: (e) Field personnel and other employees whose time and
performance is unsupervised by the employer.
The Court finds that the rule did not add another element to the Labor Code definition of
field personnel. The clause "whose time and performance is unsupervised by the employer" did
not amplify but merely interpreted and expounded the clause "whose actual hours of work in
the field cannot be determined with reasonable certainty." The former clause is still within the
scope and purview of Article 82 which defines field personnel. 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.
The petitioner claims that the fact that these sales personnel are given incentive bonus
every quarter based on their performance is proof that their actual hours of work in the field can
be determined with reasonable certainty. The Court thinks otherwise. The criteria for granting
incentive bonus are:
(1) attaining or exceeding sales volume based on sales target;
(2) good collection performance;
(3) proper compliance with good market hygiene;
(4) good merchandising work;
(5) minimal market returns and
(6) proper truck maintenance.
The above criteria indicate that these sales personnel are given incentive bonuses
precisely because of the difficulty in measuring their actual hours of field work. These
employees are evaluated by the result of their work and not by the actual hours of field work
which are hardly susceptible to determination.
In San Miguel Brewery, Inc. v. Democratic Labor Organization, the Court had occasion to
discuss the nature of the job of a salesman. It states that:
"The reasons for excluding an outside salesman are fairly apparent. Such a salesman, to
a greater extent, works individually. There are no restrictions respecting the time he shall work
and he can earn as much or as little, within the range of his ability, as his ambition dictates. In
lieu of overtime he ordinarily receives commissions as extra compensation. He works away from
his employer's place of business, is not subject to the personal supervision of his employer, and
his employer has no way of knowing the number of hours he works per day."

112

National Sugar Refinery Corp. , vs. NLRC
G.R. No. 101761 March 24, 1993
FACTS:
Petitioner National Sugar Refineries Corporation (NASUREFCO), a corporation which is
fully owned and controlled by the Government, operates three (3) sugar refineries located at
Bukidnon, Iloilo and Batangas. The Batangas refinery was privatized on April 11, 1992 pursuant
to Proclamation No. 50.
Private respondent union represents the former supervisors of the NASUREFCO Batangas
Sugar Refinery, namely, the Technical Assistant to the Refinery Operations Manager, Shift Sugar
Warehouse Supervisor, Senior Financial/Budget Analyst, General Accountant, Cost Accountant,
Sugar Accountant, Junior Financial/Budget Analyst, Shift Boiler Supervisor,, Shift Operations
Chemist, Shift Electrical Supervisor, General Services Supervisor, Instrumentation Supervisor,
Community Development Officer, Employment and Training Supervisor, Assistant Safety and
Security Officer, Head and Personnel Services, Head Nurse, Property Warehouse Supervisor,
Head of Inventory Control Section, Shift Process Supervisor, Day Maintenance Supervisor and
Motorpool Supervisor.
On June 1, 1988, petitioner implemented a Job Evaluation (JE) Program affecting all
employees, from rank-and-file to department heads which was designed to rationalized the
duties and functions of all positions, reestablish levels of responsibility, and recognize both
wage and operational structures. Jobs were ranked according to effort, responsibility, training
and working conditions and relative worth of the job. As a result, all positions were re-evaluated,
and all employees including the members of respondent union were granted salary adjustments
and increases in benefits commensurate to their actual duties and functions.
The Courts glean from the records that for about ten years prior to the JE Program, the
members of respondent union were treated in the same manner as rank-and file employees. As
such, they used to be paid overtime, rest day and holiday pay pursuant to the provisions of
Articles 87, 93 and 94 of the Labor Code as amended. On May 11, 1990, petitioner NASUREFCO
recognized herein respondent union, which was organized pursuant to Republic Act NO. 6715
allowing supervisory employees to form their own unions, as the bargaining representative of all
the supervisory employees at the NASUREFCO Batangas Sugar Refinery. Two years after the
implementation of the JE Program, specifically on June 20, 1990, the members of herein
respondent union filed a complainant with the executive labor arbiter for non-payment of
overtime, rest day and holiday pay allegedly in violation of Article 100 of the Labor Code.
ISSUE:
Whether or not the members of respondent union are entitled to overtime, rest day and
holiday pay.
RULING:
The members of the union are not entitled to overtime, rest and holiday pay since they
fall within the classification of managerial employees which makes them a part of the exempted
employees.
It must of necessity be ascertained first whether or not the union members, as
supervisory employees, are to be considered as officers or members of the managerial staff who
are exempt from the coverage of Article 82 of the Labor Code.

113

It is not disputed that the members of respondent union are supervisory employees, as
defined employees, as defined under Article 212(m), Book V of the Labor Code on Labor
Relations, which reads: “'Managerial employee' is one who is vested with powers or prerogatives
to lay down and execute management policies and/or to hire, transfer, suspend, lay-off, recall,
discharged, assign or discipline employees. Supervisory employees are those who, in the
interest of the employer effectively recommend such managerial actions if the exercise of such
authority is not merely routinary or clerical in nature but requires the use of independent
judgment. All employees not falling within any of those above definitions are considered rankand-file employees of this Book."
Article 82 of the Labor Code states: “The provisions of this title shall apply to employees
in all establishments and undertakings whether for profit or not, but not to government
employees, managerial employees, field personnel, members of the family of the employer who
are dependent on him for support, domestic helpers, persons in the personal service of another,
and workers who are paid by results as determined by the Secretary of Labor in Appropriate
regulations.”
As used herein, 'managerial employees' refer to those whose primary duty consists of
the management of the establishment in which they are employed or of a department or
subdivision thereof, and to other officers or members of the managerial staff.
'Sec. 2.
Exemption. — The provisions of this rule shall not apply to the following
persons if they qualify for exemption under the condition set forth herein:
(b)
Managerial employees, if they meet all of the following conditions, namely:
(1)
Their primary duty consists of the management of the establishment in
which they are employed or of a department or subdivision thereof:
(2)
They customarily and regularly direct the work of two or more employees
therein:
(3)
They have the authority to hire or fire other employees of lower rank; or
their suggestions and recommendations as to the hiring and firing and as
to the promotion or any other change of status of other employees are
given particular weight.
(c)

Officers or members of a managerial staff if they perform the following duties and
responsibilities:
(1)
The primary duty consists of the performance of work directly related to
management policies of their employer;
(2)
Customarily and regularly exercise discretion and independent judgment;
(3)
(i) Regularly and directly assist a proprietor or a managerial employee
whose primary duty consists of the management of the establishment in
which he is employed or subdivision thereof; or
(ii) execute under general supervision work along specialized or technical
lines requiring special training, experience, or knowledge; or
(iii) execute under general supervision special assignments and tasks;
(4)
Who do not devote more 20 percent of their hours worked in a work-week
to activities which are not directly and closely related to the performance
of the work described in paragraphs (1), (2), and above."

They are clearly officers or members of the managerial staff because they meet all the
conditions prescribed by law and, hence, they are not entitled to overtime, rest day and
supervisory employees under Article 212 (m) should be made to apply only to the provisions on
Labor Relations, while the right of said employees to the questioned benefits should be
considered in the light of the meaning of a managerial employee and of the officers or members
of the managerial staff, as contemplated under Article 82 of the Code and Section 2, Rule I Book
III of the implementing rules.
In other words, for purposes of forming and joining unions, certification elections,
collective bargaining, and so forth, the union members are supervisory employees. In terms of
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working conditions and rest periods and entitlement to the questioned benefits, however, they
are officers or members of the managerial staff, hence they are not entitled thereto.
The union members will readily show that these supervisory employees are under the
direct supervision of their respective department superintendents and that generally they assist
the latter in planning, organizing, staffing, directing, controlling communicating and in making
decisions in attaining the company's set goals and objectives. These supervisory employees are
likewise responsible for the effective and efficient operation of their respective departments.
More specifically, their duties and functions include, among others, the following
operations whereby the employee:
1) assists the department superintendent in the following:
a) planning of systems and procedures relative to department activities;
b) organizing and scheduling of work activities of the department, which
includes employee shifting scheduled and manning complement;
c) decision making by providing relevant information data and other inputs;
d) attaining the company's set goals and objectives by giving his full support;
e) selecting the appropriate man to handle the job in the department; and
f) preparing annual departmental budget;
2) observes, follows and implements company policies at all times and recommends
disciplinary action on erring subordinates;
3) trains and guides subordinates on how to assume responsibilities and become more
productive;
4) conducts semi-annual performance evaluation of his subordinates and recommends
necessary action for their development/advancement;
5) represents the superintendent or the department when appointed and authorized by
the former;
6) coordinates and communicates with other inter and intra department supervisors
when necessary;
7) recommends disciplinary actions/promotions;
8) recommends measures to improve work methods, equipment performance, quality of
service and working conditions;
9) sees to it that safety rules and regulations and procedure and are implemented and
followed by all NASUREFCO employees, recommends revisions or modifications to said
rules when deemed necessary, and initiates and prepares reports for any observed
abnormality within the refinery;
10) supervises the activities of all personnel under him and goes to it that instructions to
subordinates are properly implemented; and
11) performs other related tasks as may be assigned by his immediate superior.
From the foregoing, it is apparent that the members of respondent union discharge
duties and responsibilities which ineluctably qualify them as officers or members of the
managerial staff, as defined in Section 2, Rule I Book III of the aforestated Rules to Implement
the Labor Code, viz.:
(1) their primary duty consists of the performance of work directly related to
management policies of their employer;
(2) they customarily and regularly exercise discretion and independent judgment;

115

(3) they regularly and directly assist the managerial employee whose primary duty
consist of the management of a department of the establishment in which they are
employed
(4) they execute, under general supervision, work along specialized or technical lines
requiring special training, experience, or knowledge;
(5) they execute, under general supervision, special assignments and tasks; and
(6) they do not devote more than 20% of their hours worked in a work-week to activities
which are not directly and clearly related to the performance of their work hereinbefore
described.
Under the facts obtaining in this case, The Court is constrained to agree with petitioner
that the union members should be considered as officers and members of the managerial staff
and are, therefore, exempt from the coverage of Article 82. Perforce, they are not entitled to
overtime, rest day and holiday.

Salazar vs. NLRC
G.R. No. 109210; April 17, 1996
FACTS:
On April 1990, private respondent employed petitioner as construction/project engineer
for the construction of the Monte de Piedad building in Cubao, Quezon City. Allegedly, by virtue
of an oral contract, petitioner would also receive a share in the profits after completion of the
project and that petitioner's services in excess of eight (8) hours on regular days and services
rendered on weekends and legal holidays shall be compensable overtime at the rate of P27.85
per hour.
On 16 April 1991, petitioner received a memorandum issued by private respondent's
project manager, Engr. Nestor A. Delantar informing him of the termination of his services
effective on 30 April 1991.
On 13 September 1991, petitioner filed a complaint against private respondent for illegal
dismissal, unfair labor practice, illegal deduction, non-payment of wages, overtime rendered,
service incentive leave pay, commission, allowances, profit-sharing and separation pay with the
NLRC-NCR Arbitration Branch, Manila.
ISSUE:
Whether or not petitioner is entitled to separation pay.
RULING:
The petitioner is not entitled to separation pay. Petitioner admitted that his job was to
supervise the laborers in the construction project. Hence, although petitioner cannot strictly be
classified as a managerial employee under Art. 82 of the Labor Code, and sec. 2(b), Rule 1, Book
III of the Omnibus Rules Implementing the Labor Code, nonetheless he is still not entitled to
payment of the aforestated benefits because he falls squarely under another exempt category
— "officers or members of a managerial staff" as defined under sec. 2(c) of the abovementioned
implementing rules:
SECTION 2. Exemption. — The provisions of this Rule shall not apply to the
following persons if they qualify for exemption under the condition set forth herein:
(c) Officers or members of a managerial staff if they perform the following duties
and responsibilities:
(1) The primary duty consists of the performance of work directly related
to management policies of their employer;
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(2) Customarily and regularly exercise discretion and independent
judgment;
(3) [i] Regularly and directly assist a proprietor or a managerial employee
whose primary duty consists of the management of the establishment in
which he is employed or subdivision thereof; or [ii] execute under general
supervision work along specialized or technical lines requiring special
training, experience, or knowledge; or [iii] execute under general
supervision special assignments and tasks; and
(4) who do not devote more than 20 percent of their hours worked in a
work-week to activities which are not directly and closely related to the
performance of the work described in paragraphs (1), (2), and (3) above.
The petitioner was paid overtime benefits does not automatically and necessarily denote
that petitioner is entitled to such benefits. Art. 82 of the Labor Code specifically delineates who
are entitled to the overtime premiums and service incentive leave pay provided under Art. 87,
93, 94 and 95 of the Labor Code and the exemptions thereto.
As previously determined petitioner falls under the exemptions and therefore has no
legal claim to the said benefits. It is well and good that petitioner was compensated for his
overtime services. However, this does not translate into a right on the part of petitioner to
demand additional payment when, under the law, petitioner is clearly exempted there from.
Labor Congress of the Phils., vs. NLRC
G.R. No. 1239381; May 21, 1998
FACTS:
The 99 persons named as petitioners in this proceeding were rank-and-file employees of
respondent Empire Food Products, which hired them on various dates. Petitioners filed against
private respondents a complaint for payment of money claims and for violation of labor
standards laws They also filed a petition for direct certification of petitioner Labor Congress of
the Philippines as their bargaining representative. In an Order dated October 24, 1990, Mediator
Arbiter approved the memorandum of agreement and certified LCP "as the sole and exclusive
bargaining agent among the rank-and-file employees of Empire Food Products for purposes of
collective bargaining with respect to wages, hours of work and other terms and conditions of
employment".
On November 1990, petitioners through LCP President Navarro submitted to private
respondents a proposal for collective bargaining. On January 1991, petitioners filed a complaint
against private respondents for Unfair Labor Practice by way of Illegal Lockout and/or Dismissal;
Union busting thru Harassments [sic], threats, and interfering with the rights of employees to
self-organization; Violation of the Memorandum of Agreement dated October 23, 1990;
Underpayment of Wages in violation of R.A. No. 6640 and R.A. No. 6727, such as Wages
promulgated by the Regional Wage Board; Actual, Moral and Exemplary Damages."
ISSUE:
Whether or not the petitioners are entitled to labor standard benefits considering they
are paid by piece-rate worker.
RULING:
The petitioners are so entitled to these benefits namely, holiday pay, premium pay, 13th
month pay and service incentive leave. Three (3) factors lead us to conclude that petitioners,
although piece-rate workers, were regular employees of private respondents. First, as to the
nature of petitioners' tasks were necessary or desirable in the usual business of private
respondents, who were engaged in the manufacture and selling of such food products; second,
petitioners worked for private respondents throughout the year, and third, the length of time
that petitioners worked for private respondents. Thus, while petitioners' mode of compensation
was on a "per piece basis," the status and nature of their employment was that of regular
employees.

117

The Rules Implementing the Labor Code exclude certain employees from receiving
benefits such as nighttime pay, holiday pay, service incentive leave and 13th month pay, "field
personnel and other employees whose time and performance is unsupervised by the employer,
including those who are engaged on task or contract basis, purely commission basis, or those
who are paid a fixed amount for performing work irrespective of the time consumed in the
performance thereof."
Plainly, petitioners as piece-rate workers do not fall within this group. As mentioned
earlier, not only did petitioners labor under the control of private respondents as their employer,
likewise did petitioners toil throughout the year with the fulfillment of their quota as supposed
basis for compensation.
Further, in Section 8(b), Rule IV, Book III which we quote hereunder, piece workers are
specifically mentioned as being entitled to holiday pay.
SEC. 8. Holiday pay of certain employees. —
(b) Where a covered employee is paid by results or output, such as
payment on piece work, his holiday pay shall not be less than his average daily
earnings for the last seven (7) actual working days preceding the regular holiday:
Provided, however, that in no case shall the holiday pay be less than the
applicable statutory minimum wage rate.
In addition, the Revised Guidelines on the Implementation of the 13th Month Pay Law, in
view of the modifications to P.D. No. 851 19 by Memorandum Order No. 28, clearly exclude the
employer of piece rate workers from those exempted from paying 13th month pay, to wit:
EXEMPTED EMPLOYERS
The following employers are still not covered by P.D. No. 851:
d.
Employers of those who are paid on purely commission, boundary or task basis, and
those who are paid a fixed amount for performing specific work, irrespective of the
time consumed in the performance thereof, except where the workers are paid on
piece-rate basis in which case the employer shall grant the required 13th month pay
to such workers.
The Revised Guidelines as well as the Rules and Regulations identify those workers who
fall under the piece-rate category as those who are paid a standard amount for every piece or
unit of work produced that is more or less regularly replicated, without regard to the time spent
in producing the same.
As to overtime pay, the rules, however, are different. According to Sec 2(e), Rule I, Book
III of the Implementing Rules, workers who are paid by results including those who are paid on
piece-work, takay, pakiao, or task basis, if their output rates are in accordance with the
standards prescribed under Sec. 8, Rule VII, Book III, of these regulations, or where such rates
have been fixed by the Secretary of Labor in accordance with the aforesaid section, are not
entitled to receive overtime pay. As such, petitioners are beyond the ambit of exempted persons
and are therefore entitled to overtime pay.

118

Mercidar Fishing Corp., vs. NLRC
G.R. No. 112574; October 8, 1998
FACTS:
This case originated from a complaint filed on September 20, 1990 by private respondent
Fermin Agao, Jr. against petitioner for illegal dismissal, violation of P.D. No. 851, and nonpayment of five days service incentive leave for 1990. Private respondent had been employed
as a "bodegero" or ship's quartermaster on February 12, 1988. He complained that he had been
constructively dismissed by petitioner when the latter refused him assignments aboard its boats
after he had reported to work on May 28, 1990.
Private respondent alleged that he had been sick and thus allowed to go on leave
without pay for one month from April 28, 1990 but that when he reported to work at the end of
such period with a health clearance, he was told to come back another time as he could not be
reinstated immediately. Thereafter, petitioner refused to give him work. For this reason, private
respondent asked for a certificate of employment from petitioner on September 6, 1990.
However, when he came back for the certificate on September 10, petitioner refused to issue
the certificate unless he submitted his resignation. Since private respondent refused to submit
such letter unless he was given separation pay, petitioner prevented him from entering the
premises.
Petitioner, on the other hand, alleged that it was private respondent who actually
abandoned his work.
ISSUE:
Whether or not the fishing crew members are considered field personnel as classified in
Art. 82 of the Labor Code.
RULING:
Art. 82 of the Labor Code provides: “The provisions of this title [Working Conditions and
Rest Periods] shall apply to employees in all establishments and undertakings whether for profit
119

or not, but not to government employees, field personnel, members of the family of the
employer who are dependent on him for support, domestic helpers, persons in the personal
service of another, and workers who are paid by results as determined by the Secretary of Labor
in appropriate regulations.”
"Field personnel" shall refer to non-agricultural 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.
In contrast, in the case at bar, during the entire course of their fishing voyage, fishermen
employed by petitioner have no choice but to remain on board its vessel. Although they perform
non-agricultural work away from petitioner's business offices, the fact remains that throughout
the duration of their work they are under the effective control and supervision of petitioner
through the vessel's patron or master.

San Miguel Corp., vs. CA
G.R. No. 146775; Jan. 30, 2000
FACTS:
On 17 October 1992, the Department of Labor and Employment conducted a routine
inspection in the premises of San Miguel Corporation in Sta. Filomena, Iligan City. In the course
of the inspection, it was discovered that there was underpayment by SMC of regular Muslim
holiday pay to its employees. DOLE sent a copy of the inspection result to SMC and it was
received by and explained to its personnel officer Elena dela Puerta.
SMC contested the findings and DOLE conducted summary hearings on 19 November
1992, 28 May 1993 and 4 and 5 October 1993. Still, SMC failed to submit proof that it was
paying regular Muslim holiday pay to its employees. Hence, Director IV of DOLE Iligan District
Office issued a compliance order directing SMC to consider Muslim holidays as regular holidays
and to pay both its Muslim and non-Muslim employees holiday pay within thirty (30) days from
the receipt of the order. SMC appealed but it was dismissed.
ISSUE:
Whether or not the employees are entitled with regular Muslim holiday pay.
RULING:
The employees are entitled to regular Muslim holiday pay. Muslim holidays are provided
under Articles 169 and 170, Title I, Book V, of Presidential Decree No. 1083, otherwise known as
the Code of Muslim Personal Laws, which states: Official Muslim holidays. — The following are
hereby recognized as legal Muslim holidays:
(a) 'Amun Jadîd (New Year), which falls on the first day of the first lunar month of
Muharram;
(b) Maulid-un-Nabî (Birthday of the Prophet Muhammad), which falls on the twelfth day of
the third lunar month of Rabi-ul-Awwal,
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(c) Lailatul Isrâ Wal Mi'râj (Nocturnal Journey and Ascension of the Prophet Muhammad),
which falls on the twenty-seventh day of the seventh lunar month of Rajab:
(d) 'Îd-ul-Fitr (Hari Raya Puasa), which falls on the first day of the tenth lunar month of
Shawwal, commemorating the end of the fasting season; and
(e) 'Îd-ul-Adhâ (Hari Raya Haji),which falls on the tenth day of the twelfth lunar month of
Dhû'l-Hijja.
Art. 170 provides the provinces and cities where officially observed. — (1) Muslim
holidays shall be officially observed in the Provinces of Basilan, Lanao del Norte, Lanao del Sur,
Maguindanao, North Cotabato, Iligan, Marawi, Pagadian, and Zamboanga and in such other
Muslim provinces and cities as may hereafter be created; (2)
Upon proclamation by the
President of the Philippines, Muslim holidays may also be officially observed in other provinces
and cities.
The foregoing provisions should be read in conjunction with Article 94 of the Labor Code,
which provides: 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.
However, there should be no distinction between Muslims and non-Muslims as regards
payment of benefits for Muslim holidays. The Court reminds the respondent-appellant that
wages and other emoluments granted by law to the working man are determined on the basis of
the criteria laid down by laws and certainly not on the basis of the worker's faith or religion.
At any rate, Article 3(3) of Presidential Decree No. 1083 also declares that ". . . nothing
herein shall be construed to operate to the prejudice of a non-Muslim." In addition, the 1999
Handbook on Workers' Statutory Benefits states considering that all private corporations,
offices, agencies, and entities or establishments operating within the designated Muslim
provinces and cities are required to observe Muslim holidays, both Muslim and Christians
working within the Muslim areas may not report for work on the days designated by law as
Muslim holidays.

121

Tan vs. Lagrama
G.R. No. 151228; August 15, 2002
FACTS:
Petitioner Rolando Tan is the president of Supreme Theater Corporation and the general
manager of Crown and Empire Theaters in Butuan City. Private respondent Leovigildo Lagrama
is a painter, making ad billboards and murals for the motion pictures shown at the Empress,
Supreme, and Crown Theaters for more than 10 years, from September 1, 1988 to October 17,
1998.
On October 17, 1998, private respondent Lagrama was summoned by Tan and
upbraided: "Nangihi na naman ka sulod sa imong drawinganan." ("You again urinated inside
your work area.") When Lagrama asked what Tan was saying, Tan told him, "Ayaw daghang
estorya. Dili ko gusto nga mo-drawing ka pa. Guikan karon, wala nay drawing. Gawas." ("Don't
say anything further. I don't want you to draw anymore. From now on, no more drawing. Get
out.")
Lagrama denied the charge against him. He claimed that he was not the only one who
entered the drawing area and that, even if the charge was true, it was a minor infraction to
warrant his dismissal. However, everytime he spoke, Tan shouted "Gawas" ("Get out"), leaving
him with no other choice but to leave the premises. Lagrama filed a complaint with the National
Labor Relations Commission (NLRC) in Butuan City. He alleged that he had been illegally
dismissed and sought reinvestigation and payment of 13th month pay, service incentive leave
pay, salary differential, and damages.
As no amicable settlement had been reached, Labor Arbiter Rogelio P. Legaspi directed
the parties to file their position papers. It declared that the dismissal illegal and order the
payment of monetary benefits. Tan appealed to the NLRC and reversing the decision of the
Labor Arbiter.

122

ISSUE:
Whether or not the respondent was illegally dismissed and thus entitled to payment of
benefits provided by law.
RULING:
The respondent was illegally dismissed and entitled to benefits. The Implementing Rules
of the Labor Code provide that no worker shall be dismissed except for a just or authorized
cause provided by law and after due process. This provision has two aspects: (1) the legality of
the act of dismissal, that is, dismissal under the grounds provided for under Article 282 of the
Labor Code and (2) the legality in the manner of dismissal. The illegality of the act of dismissal
constitutes discharge without just cause, while illegality in the manner of dismissal is dismissal
without due process.
In this case, by his refusal to give Lagrama work to do and ordering Lagrama to get out
of his sight as the latter tried to explain his side, petitioner made it plain that Lagrama was
dismissed. Urinating in a work place other than the one designated for the purpose by the
employer constitutes violation of reasonable regulations intended to promote a healthy
environment under Art. 282(1) of the Labor Code for purposes of terminating employment, but
the same must be shown by evidence. Here there is no evidence that Lagrama did urinate in a
place other than a rest room in the premises of his work.
Instead of ordering his reinstatement as provided in Art. 279 of the Labor Code, the
Labor Arbiter found that the relationship between the employer and employee has been so
strained that the latter's reinstatement would no longer serve any purpose. The parties do not
dispute this finding. Hence, the grant of separation pay in lieu of reinstatement is appropriate.
This is of course in addition to the payment of backwages which, in accordance with the
ruling in Bustamante v. NLRC should be computed from the time of Lagrama's dismissal up to
the time of the finality of this decision, without any deduction or qualification.
The Bureau of Working Conditions 32 classifies workers paid by results into two groups,
namely; (1) those whose time and performance is supervised by the employer, and (2) those
whose time and performance is unsupervised by the employer. The first involves an element of
control and supervision over the manner the work is to be performed, while the second does
not. If a piece worker is supervised, there is an employer-employee relationship, as in this case.
However, such an employee is not entitled to service incentive leave pay since, as pointed out
in Makati Haberdashery v. NLRC 33 and Mark Roche International v. NLRC, 34 he is paid a fixed
amount for work done, regardless of the time he spent in accomplishing such work.

123

Lambo vs. NLRC
G.R. No. 111042; October 26, 1999
FACTS:
Petitioners Avelino Lambo and Vicente Belocura were employed as tailors by private
respondents J.C. Tailor Shop and/or Johnny Co on September 10, 1985 and March 3, 1985,
respectively. They worked from 8:00 a.m. to 7:00 p.m. daily, including Sundays and holidays. As
in the case of the other 100 employees of private respondents, petitioners were paid on a piecework basis, according to the style of suits they made. Regardless of the number of pieces they
finished in a day, they were each given a daily pay of at least P64.00.
On January 17, 1989, petitioners filed a complaint against private respondents for illegal
dismissal and sought recovery of overtime pay, holiday pay, premium pay on holiday and rest
day, service incentive leave pay, separation pay, 13th month pay, and attorney’s fees. After
hearing, Labor Arbiter found private respondents guilty of illegal dismissal and accordingly
ordered them to pay petitioners’ claims. On appeal, the NLRC reversed the decision of the Labor
Arbiter. The NLRC held petitioners guilty of abandonment of work and accordingly dismissed
their claims except that for 13th month pay.
Petitioners allege that they were dismissed by private respondents as they were about to
file a petition with the Department of Labor and Employment (DOLE) for the payment of benefits
such as Social Security System (SSS) coverage, sick leave and vacation leave. They deny that
they abandoned their work.
ISSUE:
Whether or not the petitioners are entitled to the minimum benefits provided by law.

124

RULING:
The petitioners are entitled to the minimum benefits provided by law. There is no dispute
that petitioners were employees of private respondents although they were paid not on the
basis of time spent on the job but according to the quantity and the quality of work produced by
them. There are two categories of employees paid by results: (1) those whose time and
performance are supervised by the employer. (Here, there is an element of control and
supervision over the manner as to how the work is to be performed. A piece-rate worker belongs
to this category especially if he performs his work in the company premises.); and (2) those
whose time and performance are unsupervised. (Here, the employer’s control is over the result
of the work. Workers on pakyao and takay basis belong to this group.) Both classes of workers
are paid per unit accomplished.
Piece-rate payment is generally practiced in garment factories where work is done in the
company premises, while payment on pakyao and takay basis is commonly observed in the
agricultural industry, such as in sugar plantations where the work is performed in bulk or in
volumes difficult to quantify. 4 Petitioners belong to the first category, i.e., supervised
employees.
In this case, private respondents exercised control over the work of petitioners. As
tailors, petitioners worked in the company’s premises from 8:00 a.m. to 7:00 p.m. daily,
including Sundays and holidays. The mere fact that they were paid on a piece-rate basis does
not negate their status as regular employees of private respondents. The term "wage" is broadly
defined in Art. 97 of the Labor Code as remuneration or earnings, capable of being expressed in
terms of money whether fixed or ascertained on a time, task, piece or commission basis.
Payment by the piece is just a method of compensation and does not define the essence of the
relations. Nor does the fact that petitioners are not covered by the SSS affect the employeremployee relationship.
As petitioners were illegally dismissed, they are entitled to reinstatement with back
wages. The Arbiter applied the rule in the Mercury Drug case, according to which the recovery
of back wages should be limited to three years without qualifications or deductions. Any award
in excess of three years is null and void as to the excess. The Labor Arbiter correctly ordered
private respondents to give separation pay.
Considerable time has lapsed since petitioners’ dismissal, so that reinstatement would
now be impractical and hardly in the best interest of the parties. In lieu of reinstatement,
separation pay should be awarded to petitioners at the rate of one month salary for every year
of service, with a fraction of at least six (6) months of service being considered as one (1) year.
The awards for overtime pay, holiday pay and 13th month pay are in accordance with our
finding that petitioners are regular employees, although paid on a piece-rate basis.

125

R&E Transport vs. Latag
G.R. No. 155214; Feb. 13, 2004
FACTS:
Pedro Latag was a regular employee of La Mallorca Taxi since March 1, 1961. When La
Mallorca ceased from business operations, Latag transferred to R & E Transport, Inc. He was
receiving an average daily salary of five hundred pesos (P500.00) as a taxi driver. Latag got sick
in January 1995 and was forced to apply for partial disability with the SSS, which was granted.
When he recovered, he reported for work in September 1998 but was no longer allowed to
continue working on account of his old age. Latag thus asked Felix Fabros, the administrative
officer of [petitioners], for his retirement pay pursuant to Republic Act 7641 but he was ignored.
Thus, on December 21, 1998, Latagfiled a case for payment of his retirement pay before
the NLRC. Latag however died on April 30, 1999. Subsequently, his wife, Avelina Latag,
substituted him. On January 10, 2000, the Labor Arbiter rendered a decision in favor of Latag.
ISSUE:
Whether or not Latag is entitled to retirement benefits considering she signed a waiver of
quitclaim.
RULING:
The respondent is entitled to retirement benefits despite of the waiver of quitclaims.
There is no dispute the fact that the late Pedro M. Latag is entitled to retirement benefits.
Rather, the bone of contention is the number of years that he should be credited with in
126

computing
service to
companies
record, the

those benefits. The findings of the NLRC that Pedro must be credited only with his
R & E Transport, Inc., because the evidence shows that the aforementioned
are two different entities. After a careful and painstaking review of the evidence on
court supports the NLRC's findings.

As to the Quitclaim and Waiver signed by Respondent Latag, the CA committed no error
when it ruled that the document was invalid and could not bar her from demanding the benefits
legally due her husband. This is not say that all quitclaims are invalid per se. Courts, however,
are wary of schemes that frustrate workers' rights and benefits, and look with disfavor upon
quitclaims and waivers that bargain these away.
Undisputably, Pedro M. Latag was credited with 14 years of service with R & E Transport,
Inc. Article 287 of the Labor Code, as amended by Republic Act No. 7641, 30 provides:
Retirement. — In the absence of a retirement plan or agreement providing for retirement
benefits of employees in the establishment, an employee upon reaching the age of sixty (60)
years or more, but not beyond sixty-five (65) years which is hereby declared the compulsory
retirement age, who has served at least five (5) years in said establishment, may retire and
shall be entitled to retirement pay equivalent to at least one-half (1/2) month salary for every
year of service, a fraction of at least six (6) months being considered as one whole year. Unless
the parties provide for broader inclusions, the term one half-month salary shall mean fifteen (15)
days plus one-twelfth (1/12) of the 13th month pay and the cash equivalent of not more than
five (5) days of service incentive leaves
The rules implementing the New Retirement Law similarly provide the above-mentioned
formula for computing the one-half month salary. Since Pedro was paid according to the
"boundary" system, he is not entitled to the 13th month 32 and the service incentive pay;
hence, his retirement pay should be computed on the sole basis of his salary.
It is accepted that taxi drivers do not receive fixed wages, but retain only those sums in
excess of the "boundary" or fee they pay to the owners or operators of their vehicles. Thus, the
basis for computing their benefits should be the average daily income. In this case, the CA
found that Pedro was earning an average of five hundred pesos (P500) per day. We thus
compute his retirement pay as follows: P500 x 15 days x 14 years of service equals P105,000.

Asian Transmission vs. CA
G.R. No. 144664; March 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.

127

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:
Whether or not the employees are entitled to the computation embodied in the bulletin
clarification.
RULING:
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.
2.
3.
4.
5.
6.
7.
8.
9.
10.

New Year's Day
Maundy Thursday
Good Friday
Araw ng Kagitingan
Labor Day
Independence Day
National Heroes Day
Bonifacio Day
Christmas Day
Rizal Day

January 1
Movable Date
Movable Date
April 9 (Bataan and Corregidor Day)
May 1
June 12
Last Sunday of August
November 30
December 25
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 recurring opportunity to commemorate the heroism of
the Filipino people, promote national identity, and deepen the spirit of patriotism.
128

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.

Autobus Transport System vs. Bautista
G.R. No. 156364; May 16, 2005
FACTS:
Respondent Antonio Bautista has been employed by petitioner Auto Bus Transport
Systems, Inc., since May 1995, as driver-conductor with travel routes Manila-Tuguegarao via
Baguio, Baguio-Tuguegarao via Manila and Manila-Tabuk via Baguio. Respondent was paid on
commission basis, seven percent (7%) of the total gross income per travel, on a twice a month
basis.
On January 2000, while respondent was driving Autobus No. 114 along Sta. Fe, Nueva
Vizcaya, the bus he was driving accidentally bumped the rear portion of Autobus No. 124, as the
latter vehicle suddenly stopped at a sharp curve without giving any warning. Respondent
averred that the accident happened because he was compelled by the management to go back
to Roxas, Isabela, although he had not slept for almost twenty-four (24) hours, as he had just
arrived in Manila from Roxas, Isabela.
Respondent further alleged that he was not allowed to work until he fully paid the
amount of P75,551.50, representing thirty percent (30%) of the cost of repair of the damaged
129

buses and that despite respondent's pleas for reconsideration, the same was ignored by
management. After a month, management sent him a letter of termination. Thus, on 02
February 2000, respondent instituted a Complaint for Illegal Dismissal with Money Claims for
nonpayment of 13th month pay and service incentive leave pay against Autobus.
On 29 September 2000, based on the pleadings and supporting evidence presented by
the parties, Labor Arbiter decided that the complaint be dismissed where the respondent must
pay to the complainant.
ISSUE:
Whether or not respondent is entitled to service incentive leave.
RULING:
The respondent is entitled to service incentive leave.
The disposition of the issue revolves around the proper interpretation of Article 95 of the
Labor Code vis-à-vis Section 1(D), Rule V, Book III of the Implementing Rules and Regulations of
the Labor Code which provides: RIGHT TO SERVICE INCENTIVE LEAVE, (a) Every employee who
has rendered at least one year of service shall be entitled to a yearly service incentive leave of
five days with pay.
Moreover, Book III, Rule V: SERVICE INCENTIVE LEAVE also states that this rule shall apply
to all employees except: (d) Field personnel and other employees whose performance is
unsupervised by the employer including those who are engaged on task or contract basis,
purely commission basis, or those who are paid in a fixed amount for performing work
irrespective of the time consumed in the performance thereof;
A careful examination of said provisions of law will result in the conclusion that the grant
of service incentive leave has been delimited by the Implementing Rules and Regulations of the
Labor Code to apply only to those employees not explicitly excluded by Section 1 of Rule V.
According to the Implementing Rules, Service Incentive Leave shall not apply to employees
classified as "field personnel."
The phrase "other employees whose performance is unsupervised by the employer"
must not be understood as a separate classification of employees to which service incentive
leave shall not be granted. Rather, it serves as an amplification of the interpretation of the
definition of field personnel under the Labor Code as those "whose actual hours of work in the
field cannot be determined with reasonable certainty."
The same is true with respect to the phrase "those who are engaged on task or contract
basis, purely commission basis." Said phrase should be related with "field personnel," applying
the rule on ejusdem generis that general and unlimited terms are restrained and limited by the
particular terms that they follow. Hence, employees engaged on task or contract basis or paid
on purely commission basis are not automatically exempted from the grant of service incentive
leave, unless, they fall under the classification of field personnel.
What must be ascertained in order to resolve the issue of propriety of the grant of
service incentive leave to respondent is whether or not he is a field personnel.
According to Article 82 of the Labor Code, "field personnel" shall refer to non-agricultural
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. This definition is further elaborated in the Bureau of Working
Conditions (BWC), Advisory Opinion to Philippine Technical-Clerical Commercial Employees
Association 10 which states that:
As a general rule, field personnel are those whose performance of their
job/service is not supervised by the employer or his representative, the workplace being
130

away from the principal office and whose hours and days of work cannot be determined
with reasonable certainty; hence, they are paid specific amount for rendering specific
service or performing specific work. If required to be at specific places at specific times,
employees including drivers cannot be said to be field personnel despite the fact that
they are performing work away from the principal office of the employee.
At this point, it is necessary to stress that the definition of a "field personnel" is not
merely concerned with the location where the employee regularly performs his duties but also
with the fact that the employee's performance is unsupervised by the employer. As discussed
above, field personnel are those who regularly perform their duties away from the principal
place of business of the employer and whose actual hours of work in the field cannot be
determined with reasonable certainty. Thus, in order to conclude whether an employee is a field
employee, it is also necessary to ascertain if actual hours of work in the field can be determined
with reasonable certainty by the employer. In so doing, an inquiry must be made as to whether
or not the employee's time and performance are constantly supervised by the employer.
Respondent is not a field personnel but a regular employee who performs tasks usually
necessary and desirable to the usual trade of petitioner's business. Accordingly, respondent is
entitled to the grant of service incentive leave.
The clear policy of the Labor Code is to grant service incentive leave pay to workers in all
establishments, subject to a few exceptions. Section 2, Rule V, Book III of the Implementing
Rules and Regulations provides that "every employee who has rendered at least one year of
service shall be entitled to a yearly service incentive leave of five days with pay."
Service incentive leave is a right which accrues to every employee who has served
"within 12 months, whether continuous or broken reckoned from the date the employee started
working, including authorized absences and paid regular holidays unless the working days in the
establishment as a matter of practice or policy, or that provided in the employment contracts, is
less than 12 months, in which case said period shall be considered as one year." It is also
"commutable to its money equivalent if not used or exhausted at the end of the year." In other
words, an employee who has served for one year is entitled to it. He may use it as leave days or
he may collect its monetary value. To limit the award to three years, as the solicitor general
recommends, is to unduly restrict such right.
San Miguel Corp., vs. Del Rosario
G.R. No. 168194; Dec. 13, 2005
FACTS:
On April 17, 2000, respondent was employed by petitioner as key account specialist. On
March 9, 2001, petitioner informed respondent that her probationary employment will be
severed at the close of the business hours of March 12, 2001. On March 13, 2001, respondent
was refused entry to petitioner's premises. On June 24, 2002, respondent filed a complaint
against petitioner for illegal dismissal and underpayment/non-payment of monetary benefits.
Respondent alleged that petitioner feigned an excess in manpower because after her dismissal,
it hired new recruits and re-employed two of her batch mates. On the other hand, petitioner
claimed that respondent was a probationary employee whose services were terminated as a
result of the excess manpower that could no longer be accommodated by the company.
The Labor Arbiter declared respondent a regular employee because her employment
exceeded six months and holding that she was illegally dismissed as there was no authorized
cause to terminate her employment. On appeal to NLRC, it modified the previous decision.
ISSUE:
Whether or not the respondent was an employee and was illegally terminated. If so, is
she entitled to monetary benefits?
RULING:

131

In termination cases, the burden of proving the circumstances that would justify the
employee's dismissal rests with the employer. The best proof that petitioner should have
presented to prove the probationary status of respondent is her employment contract. None,
having been presented, the continuous employment of respondent as an account specialist for
almost 11 months, from April 17, 2000 to March 12, 2001, means that she was a regular
employee and not a temporary reliever or a probationary employee. And while it is true that by
way of exception, the period of probationary employment may exceed six months when the
parties so agree, such as when the same is established by company policy, or when it is
required by the nature of the work, none of these exceptional circumstance were proven in the
present case. Thus, respondent whose employment exceeded six months is undoubtedly a
regular employee of petitioner.
Her termination from employment must be for a just or authorized cause, otherwise, her
dismissal would be illegal. Petitioner tried to justify the dismissal of respondent under the
authorized cause of redundancy. It thus argued in the alternative that even assuming that
respondent qualified for regular employment, her services still had to be terminated because
there are no more regular positions in the company. Undoubtedly, petitioner is invoking a
redundancy which allegedly resulted in the termination not only of the trainees, probationers
but also of some of its regular employees.
Redundancy, for purposes of the Labor Code, exists where the services of an employee
are in excess of what is reasonably demanded by the actual requirements of the enterprise.
Succinctly put, a position is redundant where it is superfluous, and superfluity of a position or
positions may be the outcome of a number of factors, such as over-hiring of workers, decreased
volume of business, or dropping of a particular product line or service activity previously
manufactured or undertaken by the enterprise. The criteria in implementing a redundancy are:
(a) less preferred status, e.g. temporary employee; (b) efficiency; and (c) seniority. What further
militated against the alleged redundancy advanced by petitioner is their failure to refute
respondent's assertion that after her dismissal, it hired new recruits and re-employed two of her
batch mates. The Court finds that petitioner was not able to discharge the burden of proving
that the dismissal of respondent was valid.
Considering that respondent was illegally dismissed, she is entitled not only to
reinstatement but also to payment of full back wages, computed from the time her
compensation was actually withheld from her on March 13, 2001, up to her actual
reinstatement. She is likewise entitled to other benefits, i.e., service incentive leave pay and
13th month pay computed from such date also up to her actual reinstatement. Respondent is
not entitled to holiday pay because the records reveal that she is a monthly paid regular
employee. Under Section 2, Rule IV, Book III of the Omnibus Rules Implementing the Labor
Code, employees who are uniformly paid by the month, irrespective of the number of working
days therein, shall be presumed to be paid for all the days in the month whether worked or not.

Penaranda vs. Baganga Plywood Corp.
G.R. No. 159577; May 3, 2006
FACTS:
Sometime in June 1999, Petitioner Charlito Peñaranda was hired as an employee of
Baganga Plywood Corporation (BPC) to take charge of the operations and maintenance of its
132

steam plant boiler. In May 2001, Peñaranda filed a Complaint for illegal dismissal with money
claims against BPC and its general manager, Hudson Chua, before the NLRC.
After the parties failed to settle amicably, the labor arbiter directed the parties to file
their position papers and submit supporting documents.
Peñaranda alleges that he was employed by respondent Banganga on March 15, 1999
with a monthly salary of P5,000.00 as Foreman/Boiler Head/Shift Engineer until he was illegally
terminated on December 19, 2000. he alleges that his services were terminated without the
benefit of due process and valid grounds in accordance with law. Furthermore, he was not paid
his overtime pay, premium pay for working during holidays/rest days, night shift differentials
and finally claimed for payment of damages and attorney's fees having been forced to litigate
the present complaint.
Respondent BPC is a domestic corporation duly organized and existing under Philippine
laws and is represented herein by its General Manager HUDSON CHUA, the individual
respondent. Respondents allege that complainant's separation from service was done pursuant
to Art. 283 of the Labor Code. The respondent BPC was on temporary closure due to repair and
general maintenance and it applied for clearance with the Department of Labor and
Employment, Regional Office No. XI, to shut down and to dismiss employees. And due to the
insistence of herein complainant he was paid his separation benefits.
Consequently, when respondent BPC partially reopened in January 2001, Peñaranda failed to
reapply.
The labor arbiter ruled that there was no illegal dismissal and that petitioner's Complaint
was premature because he was still employed by BPC. Petitioner’s money claims for illegal
dismissal was also weakened by his quitclaim and admission during the clarificatory conference
that he accepted separation benefits, sick and vacation leave conversions and thirteenth month
pay.
ISSUE:
Whether or not Peñaranda is a regular, common employee entitled to monetary benefits
under Art. 82 of the Labor Code and is entitled to the payment of overtime pay and other
monetary benefits.
RULING:
The petitioner is not entitled to overtime pay and other monetary benefits.
The Court disagrees with the NLRC's finding that petitioner was a managerial employee.
However, petitioner was a member of the managerial staff, which also takes him out of the
coverage of labor standards. Like managerial employees, officers and member of the
managerial staff are not entitled to the provisions of law on labor standards.
The Implementing Rules of the Labor Code define members of a managerial staff as
those with the following duties and responsibilities:
(1)
The primary duty consists of the performance of work directly related to
management policies of the employer;
(2)
Customarily and regularly exercise discretion and independent judgment;
(3)
(i) Regularly and directly assist a proprietor or a managerial employee whose
primary duty consists of the management of the establishment in which he is
employed or subdivision thereof; or (ii) execute under general supervision work
along specialized or technical lines requiring special training, experience, or
knowledge; or (iii) execute under general supervision special assignments and
tasks; and
(4)
who do not devote more than 20 percent of their hours worked in a workweek to
activities which are not directly and closely related to the performance of the
work described in paragraphs (1), (2), and (3) above."

133

The petitioner’s work involves:
1.
To supply the required and continuous steam to all consuming units at minimum
cost.
2.
To supervise, check and monitor manpower workmanship as well as operation of
boiler and accessories.
3.
To evaluate performance of machinery and manpower.
4.
To follow-up supply of waste and other materials for fuel.
5.
To train new employees for effective and safety white working.
6.
Recommend parts and suppliers purchases. acEHSI
7.
To recommend personnel actions such as: promotion, or disciplinary action.
8.
To check water from the boiler, feedwater and softener, regenerate softener if
beyond hardness limit.
9.
Implement Chemical Dosing.
10.
Perform other task as required by the superior from time to time." 34
The foregoing enumeration, particularly items, 1, 2, 3, 5 and 7 illustrates that petitioner
was a member of the managerial staff. His duties and responsibilities conform to the definition
of a member of a managerial staff under the Implementing Rules.
Petitioner supervised the engineering section of the steam plant boiler. His work involved
overseeing the operation of the machines and the performance of the workers in the
engineering section. This work necessarily required the use of discretion and independent
judgment to ensure the proper functioning of the steam plant boiler. As supervisor, petitioner is
deemed a member of the managerial staff.
Noteworthy, even petitioner admitted that he was a supervisor. In his Position Paper, he
stated that he was the foreman responsible for the operation of the boiler. The term foreman
implies that he was the representative of management over the workers and the operation of
the department. Petitioner's evidence also showed that he was the supervisor of the steam
plant. His classification as supervisors is further evident from the manner his salary was paid.
He belonged to the 10% of respondent's 354 employees who were paid on a monthly basis; the
others were paid only on a daily basis.

Leyte IV Electric Cooperative Inc. vs. LEYECO IV Employees Union- ALU
G.R. No. 1577745; October 19, 2007

134

FACTS:
On April 6, 1998, Leyte IV Electric Cooperative, Inc. (petitioner) and Leyeco IV Employees
Union-ALU (respondent) entered into a Collective Bargaining Agreement (CBA) covering
petitioner rank-and-file employees, for a period of five (5) years effective January 1, 1998. On
June 7, 2000, respondent, through its Regional Vice-President, Vicente P. Casilan, sent a letter to
petitioner demanding holiday pay for all employees, as provided for in the CBA.
Petitioner, on the other hand, in its Position Paper, insisted payment of the holiday pay in
compliance with the CBA provisions, stating that payment was presumed since the formula used
in determining the daily rate of pay of the covered employees is Basic Monthly Salary divided by
30 days or Basic Monthly Salary multiplied by 12 divided by 360 days, thus with said formula,
the employees are already paid their regular and special days, the days when no work is done,
the 51 un-worked Sundays and the 51 un-worked Saturdays.
ISSUE:
Whether or not Leyte IV Electric Cooperative is liable for underpayment of holiday pay.
RULING:
The Voluntary Arbitrator gravely abused its discretion in giving a strict or literal
interpretation of the CBA provisions that the holiday pay be reflected in the payroll slips. Such
literal interpretation ignores the admission of respondent in its Position Paper that the
employees were paid all the days of the month even if not worked. In light of such admission,
petitioner's submission of its 360 divisor in the computation of employees' salaries gains
significance.
This ruling was applied in Wellington Investment and Manufacturing Corporation v.
Trajano, 43 Producers Bank of the Philippines v. National Labor Relations Commission. In this
case, the monthly salary was fixed by Wellington to provide for compensation for every working
day of the year including the holidays specified by law — and excluding only Sundays. In fixing
the salary, Wellington used what it called the "314 factor"; that is, it simply deducted 51
Sundays from the 365 days normally comprising a year and used the difference, 314, as basis
for determining the monthly salary. The monthly salary thus fixed actually covered payment for
314 days of the year, including regular and special holidays, as well as days when no work was
done by reason of fortuitous cause, such as transportation strike, riot, or typhoon or other
natural calamity, or cause not attributable to the employees.
It was also applied in Odango v. National Labor Relations Commission, where Court ruled
that the use of a divisor that was less than 365 days cannot make the employer automatically
liable for underpayment of holiday pay. In said case, the employees were required to work only
from Monday to Friday and half of Saturday. Thus, the minimum allowable divisor is 287, which
is the result of 365 days, less 52 Sundays and less 26 Saturdays (or 52 half Saturdays). Any
divisor below 287 days meant that the employees were deprived of their holiday pay for some
or all of the ten legal holidays. The 304-day divisor used by the employer was clearly above the
minimum of 287 days.
In this case, the employees are required to work only from Monday to Friday. Thus, the
minimum allowable divisor is 263, which is arrived at by deducting 51 un-worked Sundays and
51 un-worked Saturdays from 365 days. Considering that petitioner used the 360-day divisor,
which is clearly above the minimum, indubitably, petitioner's employees are being given their
holiday pay. Thus, the Voluntary Arbitrator should not have simply brushed aside petitioner's
divisor formula. In granting respondent's claim of non-payment of holiday pay, a "double
burden" was imposed upon petitioner because it was being made to pay twice for its employees'
holiday pay when payment thereof had already been included in the computation of their
monthly salaries. Hence, the petition is granted.

Bahia Shipping Services vs. Chua
135

G.R. No. 162195; April 8, 2008
FACTS:
Private respondent Reynaldo Chua was hired by the petitioner shipping company, Bahia
Shipping Services, Inc., as a restaurant waiter on board a luxury cruise ship liner M/S Black
Watch pursuant to a Philippine Overseas Employment Administration (POEA) approved
employment contract dated October 9, 1996 for a period of nine (9) months from October 18,
1996 to July 17, 1997. On October 18, 1996, the private respondent left Manila for Heathrow,
England to board the said sea vessel where he will be assigned to work. On February 15, 1997,
the private respondent reported for his working station one and one-half hours late. On February
17, 1997, the master of the vessel served to the private respondent an official warningtermination form pertaining to the said incident. On March 8, 1997, the vessel's master, ship
captain Thor Fleten conducted an inquisitorial hearing to investigate the said incident.
Thereafter, on March 9, 1997, private respondent was dismissed from the service on the
strength of an unsigned and undated notice of dismissal. An alleged record or minutes of the
said investigation was attached to the said dismissal notice.
On March 24, 1997, the private respondent filed a complaint for illegal dismissal and other
monetary claims. The private respondent alleged that he was paid only US$300.00 per month as
monthly salary for five (5) months instead of US$410.00 as stipulated in his employment
contract. Thus, he claimed that he was underpaid in the amount of US$110.00 per month for
that same period of five (5) months. He further asserted that his salaries were also deducted
US$20.00 per month by the petitioner for alleged union dues. Private respondent argued that it
was his first offense committed on board the vessel. He adverted further that the petitioner has
no proof of being a member of the AMOSUP or the ITF to justify its claim to deduct the said
union dues [from] his monthly salary.
ISSUE:
Whether or not reporting for work one and one-half hours late and abandoning his work
are valid grounds for dismissal.
RULING:
It being settled that the dismissal of respondent was illegal, it follows that the latter is
entitled to payment of his salary for the unexpired portion of his contract, as provided under
Republic Act (R.A.) No. 8042, considering that his employment was pre-terminated on March 9,
1997 or four months prior to the expiration of his employment contract on July 17, 1997.
Article 279 of the Labor Code, as amended, mandates that an illegally dismissed employee
is entitled to the twin reliefs of (a) either reinstatement or separation pay, if reinstatement is no
longer viable, and (b) backwages. Both are distinct reliefs given to alleviate the economic
damage suffered by an illegally dismissed employee and, thus, the award of one does not bar
the other. Both reliefs are rights granted by substantive law which cannot be defeated by mere
procedural lapses. Substantive rights like the award of backwages resulting from illegal
dismissal must not be prejudiced by a rigid and technical application of the rules. The order of
the Court of Appeals to award backwages being a mere legal consequence of the finding that
respondents were illegally dismissed by petitioners, there was no error in awarding the same.
The Court has consistently applied the foregoing exception to the general rule. It does so
yet again in the present case. Section 10 of R.A. No. 8042, entitles an overseas worker who has
been illegally dismissed to "his salaries for the unexpired portion of the employment contract or
for three (3) months for every year of the unexpired term, whichever is less." The CA correctly
applied the interpretation of the Court in Marsaman Manning Agency, Inc. v. National Labor
Relations Commission that the second option which imposes a three months salary cap applies
only when the term of the overseas contract is fixed at one year or longer; otherwise, the first
option applies in that the overseas worker shall be entitled payment of all his salaries for the
entire unexpired period of his contract.

136

PNCC vs. Skyway Traffic Management and Security Division Workers Organization
GR NO. 171231 Feb 17, 2010
FACTS:
Petitioner PNCC Skyway Corporation Traffic Management and Security Division Workers'
Organization (PSTMSDWO) is a labor union duly registered with the Department of Labor and
Employment (DOLE). Respondent PNCC Skyway Corporation is a corporation duly organized and
operating under and by virtue of the laws of the Philippines. They entered into CBA. Pertinent
provisions are as follows:
ARTICLE VIII VACATION LEAVE AND SICK LEAVE
Section 1. Vacation Leave.
[b]The company shall schedule the vacation leave of employees during the
year taking into consideration the request of preference of the employees.
PNCC then created a schedule of leaves for their employees. Petitioner objected to the
implementation of the said memorandum. It insisted that the individual members of the union
have the right to schedule their vacation leave. It opined that the unilateral scheduling of the
employees' vacation leave was done to avoid the monetization of their vacation leave in
December 2004.
ISSUE:
WON the PNCC has the sole discretion to schedule the vacation leaves of its employees.
HELD:

PNCC has the sole discretion to schedule the vacation leaves of its employees.

The rule is that where the language of a contract is plain and unambiguous, its meaning
should be determined without reference to extrinsic facts or aids. The intention of the parties
must be gathered from that language, and from that language alone. Stated differently, where
the language of a written contract is clear and unambiguous, the contract must be taken to
mean that which, on its face, it purports to mean, unless some good reason can be assigned to
show that the words used should be understood in a different sense.
In the case at bar, the contested provision of the CBA is clear and unequivocal. Article
VIII, Section 1 (b) of the CBA categorically provides that the scheduling of vacation leaves ha ll
be under the option of the employer. Thus, if the terms of a CBA are clear and leave no doubt
upon the intention of the contracting parties, the literal meaning of its stipulation shall prevail.
In fine, the CBA must be strictly adhered to and respected if its ends have to be achieved, being
the law between the parties. In Faculty Association of Mapua Institute of Technology (FAMIT) v.
Court of Appeals, this Court held that the CBA during its life time binds all the parties. The
provisions of the CBA must be respected since its terms and conditions constitute the law
between the parties. The parties cannot be allowed to change the terms they agreed upon on
the ground that the same are not favorable to them.
The purpose of a vacation leave is to afford a laborer a chance to get a much-needed
rest to replenish his worn-out energy and acquire a new vitality to enable him to efficiently
perform his duties, and not merely to give him additional salary and bounty. Accordingly, the
vacation leave privilege was not intended to serve as additional salary, but as a non-monetary
benefit. To give the employees the option not to consume it with the aim of converting it to
cash at the end of the year would defeat the very purpose of vacation leave.

137

11.

OTHER SPECIAL BENEFITS

Villuga vs. NLRC
G.R. No. L-75038; August 23, 1993
FACTS:
A basic factor underlying the exercise of rights and the filing of claims for benefits under
the Labor Code and other presidential issuances or labor legislations is the status and nature of
one's employment.
Petitioner Elias Villuga was employed as cutter in the tailoring shop owned by private
respondent Rodolfo Zapanta and known as Broad Street Tailoring located at Shaw Boulevard,
Mandaluyong, Metro Manila. As cutter, he was paid a fixed monthly salary of P840.00 and a
monthly transportation allowance of P40.00. In addition to his work as cutter, Villuga was
assigned the chore of distributing work to the shop's tailors or sewers when both the shop's
manager and assistant manager would be absent. He saw to it that their work conformed with
the pattern he had prepared and if not, he had them redone, repaired or re-sewn.
The other petitioners were ironers, repairmen and sewers. They were paid a fixed
amount for every item ironed, repaired or sewn, regardless of the time consumed in
accomplishing the task. Petitioners did not fill up any time record since they did not observe
regular or fixed hours of work. They were allowed to perform their work at home especially
when the volume of work, which depended on the number of job orders, could no longer be
coped up with.
From February 17 to 22, 1978, petitioner Villuga failed to report for work allegedly due to
illness. For not properly notifying his employer, he was considered to have abandoned his work.
In a complaint filed with the Regional Office of the Department of Labor, Villuga claimed
that he was refused admittance when he reported for work after his absence, allegedly due to
his active participation in the union organized by private respondent's tailors. He further
claimed that he was not paid overtime pay, holiday pay, premium pay for work done on rest
days and holidays, service incentive leave pay and 13th month pay.
On May 1979, Labor Arbiter rendered a decision ordering the dismissal of the complaint
for unfair labor practices, illegal dismissal and other money claims except petitioner Villuga's
claim for 13th month pay for the years 1976, 1977 and 1980.
ISSUE:
Whether or not such employment is managerial in character or that of a rank and file
employee are primordial considerations before extending labor benefits.
RULING:
The Court ruled that the characterization of such employment is important in the
determination of benefits since some employees are exempted to such benefits.
Under Rule I, Section 2(c), Book III of the Implementing Rules of the Labor Code, to be a
member of a managerial staff, the following elements must concur or co-exist, to wit:
(1) that his primary duty consists of the performance of work directly related to
management policies;
(2) that he customarily and regularly exercises discretion and independent judgment in
the performance of his functions;
(3) that he regularly and directly assists in the management of the establishment; and
(4) that he does not devote twenty per cent of his time to work other than those
described above.
138

Applying the above criteria to petitioner Villuga's case, it is undisputed that his primary
work or duty is to cut or prepare patterns for items to be sewn, not to lay down or implement
any of the management policies, as there is a manager and an assistant manager who perform
said functions.
It is true that in the absence of the manager and assistant manager, he distributes and
assigns work to employees but such duty, though involving discretion, is occasional and not
regular or customary. He had also the authority to order the repair or resewing of defective
items but such authority is part and parcel of his function as cutter to see to it that the items cut
are sewn correctly lest the defective nature of the workmanship be attributed to his "poor
cutting." Villuga does not participate in policy-making. Rather, the functions of his position
involve execution of approved and established policies.
In Franklin Baker Company of the Philippines v. Trajano, it was held that employees who
do not participate in policy-making but are given ready policies to execute and standard
practices to observe are not managerial employees. The test of "supervisory or managerial
status" depends on whether a person possesses authority that is not merely routinary or clerical
in nature but one that requires use of independent judgment. In other words, the functions of
the position are not managerial in nature if they only execute approved and established policies
leaving little or no discretion at all whether to implement said policies or not.
Consequently, the exclusion of Villuga from the benefits claimed under Article 87
(overtime pay and premium pay for holiday and rest day work), Article 94, (holiday pay), and
Article 95 (service incentive leave pay) of the Labor Code, on the ground that he is a managerial
employee is unwarranted. He is definitely a rank and file employee hired to perform the work of
a cutter and not hired to perform supervisory or managerial functions. The fact that he is
uniformly paid by the month does not exclude him from the benefits of holiday pay. He should
therefore be paid in addition to the 13th month pay, his overtime pay, holiday pay, premium
pay for holiday and rest day, and service incentive leave pay.

139

CJC Trading vs. NLRC
G.R. No. 115884; July 20, 1995
FACTS:
Private respondents Ricardo Ausan, Jr. and Ernesto Alanan were employed by petitioner
since 1983 and 1978 as truck drivers and were paid on a "per trip or task basis." They filed
separate complaints on against petitioner CJC Trading, Incorporated and/or Ms. Celia J. Carlos for
illegal dismissal and non-payment of premium pay for holiday and rest day, service incentive
leave pay and thirteenth month pay. These cases were consolidated.
On 22 July 1993, a decision was rendered by the Labor Arbiter dismissing the complaints
and were not entitled to the labor standards benefits claimed by them because they were paid
on a "per trip or per task basis.
On appeal, NLRC affirmed in toto the decision of the Labor Arbiter.
ISSUE:
Whether or not the respondents are entitled to the benefits provided by law.
RULING:
The employees are granted to retirement benefits. An employee who voluntarily resigns
is not entitled to separation pay unless otherwise stipulated in an employment contract or
collective bargaining agreement, or sanctioned by established employer practice or policy. The
Labor Code is devoid of any provision which grants separation pay to employees who voluntarily
resign. Neither was there anything in the record that shows that, in the instant case, there is a
collective bargaining agreement or any other agreement or established company policy
concerning the payment of separation pay to employees who resign.
Considering that private respondents were close to the age of sixty (60) at the time they
stopped working for petitioner and that they had been in the employ of petitioner for several
years, the Court, considers that this could be deemed to be in effect a prayer for the grant of
retirement benefits.
reads:

The pertinent law is Article 287 of the Labor Code, as amended by R.A. No. 7641, which
Retirement. — Any employee may be retired upon reaching the retirement
age established in the collective bargaining agreement or other applicable
employment contract.

In case of retirement, the employee shall be entitled to receive such retirement benefits
as he may have earned under existing laws and any collective bargaining agreement and other
agreements: Provided, however, That an employee's retirement benefits under any collective
bargaining and other agreements shall not be less than those provided herein.
In the absence of a retirement plan or agreement providing for retirement benefits of
employees in the establishment, an employee upon reaching the age of sixty (60) years or
more, but not beyond sixty-five (65) years which is hereby declared the compulsory retirement
age, who has served at least five (5) years in the said establishment, may retire and shall be
entitled to retirement pay equivalent to at least one-half (1/2) month salary for every year of
service, a fraction of at least six (6) months being considered as one whole year.

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R.A. No. 7641 may be given effect where (1) the claimant for retirement benefits was still
the employee of the employer at the time the statute took effect; and (2) the claimant was in
compliance with the requirements for eligibility under the statute for such retirement benefits. It
appears that private respondents did not qualify for the benefits of R.A. No. 7641 under the
terms of this law itself. Since the record does not show any retirement plan or collective
bargaining agreement providing for retirement benefits to petitioner's employees, the applicable
retirement benefits to petitioner's employees, the applicable retirement age is the optional
retirement age of sixty (60) years according to Article 287, which would qualify the retiree to
retirement benefits equivalent to one-half (1/2) month's salary for every year of service.
Unfortunately, at the time private respondent stopped working for petitioner, they had not yet
reached the age of sixty (60) years. The Court stresses that there is nothing to prevent
petitioners from voluntarily giving private respondents some financial assistance on an ex gratia
basis.

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Pantranco North Express vs. NLRC
G.R. No. 95940; July 24, 1996
FACTS:
Private respondent was hired by petitioner in 1964 as a bus conductor. He eventually
joined the Pantranco Employees Association-PTGWO. He continued in petitioner's employ until
August 12, 1989, when he was retired at the age of fifty-two (52) after having rendered twenty
five years' service. The basis of his retirement was the compulsory retirement provision of the
collective bargaining agreement between the petitioner and the aforenamed union. On February
1990, private respondent filed a complaint for illegal dismissal against petitioner with NLRC. The
complaint was consolidated with two other cases of illegal dismissal having similar facts and
issues, filed by other employees, non-union members.
Labor Arbiter rendered his decision finding that the three complainants were illegally and
unjustly dismissed and order the respondent to reinstate them to their former or substantially
equivalent positions without loss of seniority rights with full back wages and other benefits.
Petitioner appealed to public respondent, which issued the questioned Resolution affirming the
labor arbiter's decision in toto.
ISSUE:
Whether or not the CBA stipulation on compulsory retirement after twenty-five years of
service is legal and enforceable.
RULING:
The Court ruled that the CBA stipulation is legal and enforceable.
The bone of contention in this case is the provision on compulsory retirement after 25
years of service. Article XI, Section 1 (e) (5) of the May 2, 1989 Collective Bargaining Agreement
8 between petitioner company and the union states:
Section 1. The COMPANY shall formulate a retirement plan with the following main
features:
(e) The COMPANY agrees to grant the retirement benefits herein provided to
regular employees who may be separated from the COMPANY for any of the following
reasons:
(5) Upon reaching the age of sixty (60) years or upon completing twentyfive (25) years of service to the COMPANY, whichever comes first, and the
employee shall be compulsory retired and paid the retirement benefits herein
provided."
The said Code provides: Art. 287. Retirement. — Any employee may be retired upon
reaching the retirement age established in the Collective Bargaining Agreement or other
applicable employment contract. In case of retirement, the employee shall be entitled to receive
such retirement benefits as he may have earned under existing laws and any collective
bargaining or other agreement."
The Court agrees with petitioner and the Solicitor General. Art. 287 of the Labor Code as
worded permits employers and employees to fix the applicable retirement age at below 60
years. Moreover, providing for early retirement does not constitute diminution of benefits. In
almost all countries today, early retirement, i.e., before age 60, is considered a reward for
services rendered since it enables an employee to reap the fruits of his labor — particularly
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retirement benefits, whether lump-sum or otherwise — at an earlier age, when said employee,
in presumably better physical and mental condition, can enjoy them better and longer.
As a matter of fact, one of the advantages of early retirement is that the corresponding
retirement benefits, usually consisting of a substantial cash windfall, can early on be put to
productive and profitable uses by way of income-generating investments, thereby affording a
more significant measure of financial security and independence for the retiree who, up till then,
had to contend with life's vicissitudes within the parameters of his fortnightly or weekly wages.
Thus we are now seeing many CBAs with such early retirement provisions. And the same cannot
be considered a diminution of employment benefits.
Being a product of negotiation, the CBA between the petitioner and the union intended
the provision on compulsory retirement to be beneficial to the employees-union members,
including herein private respondent. When private respondent ratified the CBA with the union,
he not only agreed to the CBA but also agreed to conform to and abide by its provisions. Thus, it
cannot be said that he was illegally dismissed when the CBA provision on compulsory retirement
was applied to his case.
Incidentally, we call attention to Republic Act No. 7641, known as "The Retirement Pay
Law", which went into effect on January 7, 1993. Although passed many years after the
compulsory retirement of herein private respondent, nevertheless, the said statute sheds light
on the present discussion when it amended
Art. 287 of the Labor Code, to make it read as follows: Retirement. — Any employee may
be retired upon reaching the retirement age establish in the collective bargaining agreement or
other applicable employment contract.
In the absence of a retirement plan or agreement providing for retirement benefits of
employees in the establishment, an employee upon reaching the age of sixty (60) years or
more, but not beyond sixty-five (65) years which is hereby declared the compulsory retirement
age, who has served at least five (5) years in the said establishment may retire . . ."
The aforequoted provision makes clear the intention and spirit of the law to give
employers and employees a free hand to determine and agree upon the terms and conditions of
retirement. Providing in a CBA for compulsory retirement of employees after twenty-five (25)
years of service is legal and enforceable so long as the parties agree to be governed by such
CBA. The law presumes that employees know what they want and what is good for them absent
any showing that fraud or intimidation was employed to secure their consent thereto.

143

R&E Transport vs. Latag
G.R. No. 155214; Feb. 13, 2004
FACTS:
Pedro Latag was a regular employee of La Mallorca Taxi since March 1, 1961. When La
Mallorca ceased from business operations, Latag transferred to R & E Transport, Inc. He was
receiving an average daily salary of five hundred pesos (P500.00) as a taxi driver.
Latag got sick in January 1995 and was forced to apply for partial disability with the SSS,
which was granted. When he recovered, he reported for work in September 1998 but was no
longer allowed to continue working on account of his old age. Latag thus asked Felix Fabros, the
administrative officer of [petitioners], for his retirement pay pursuant to Republic Act 7641 but
he was ignored.
Thus, on December 21, 1998, Latagfiled a case for payment of his retirement pay before
the NLRC. Latag however died on April 30, 1999. Subsequently, his wife, Avelina Latag,
substituted him. On January 10, 2000, the Labor Arbiter rendered a decision in favor of Latag.
ISSUE:
Whether or not Latag is entitled to retirement benefits considering she signed a waiver of
quitclaim.
RULING:
The respondent is entitled to retirement benefits despite of the waiver of quitclaims.
There is no dispute the fact that the late Pedro M. Latag is entitled to retirement benefits.
Rather, the bone of contention is the number of years that he should be credited with in
computing those benefits. The findings of the NLRC that Pedro must be credited only with his
service to R & E Transport, Inc., because the evidence shows that the aforementioned
companies are two different entities. After a careful and painstaking review of the evidence on
record, the court supports the NLRC's findings.
As to the Quitclaim and Waiver signed by Respondent Latag, the CA committed no error
when it ruled that the document was invalid and could not bar her from demanding the benefits
legally due her husband. This is not say that all quitclaims are invalid per se. Courts, however,
are wary of schemes that frustrate workers' rights and benefits, and look with disfavor upon
quitclaims and waivers that bargain these away.
Undisputably, Pedro M. Latag was credited with 14 years of service with R & E Transport,
Inc. Article 287 of the Labor Code, as amended by Republic Act No. 7641, 30 provides:
Retirement. — In the absence of a retirement plan or agreement providing for retirement
benefits of employees in the establishment, an employee upon reaching the age of sixty (60)
years or more, but not beyond sixty-five (65) years which is hereby declared the compulsory
retirement age, who has served at least five (5) years in said establishment, may retire and
144

shall be entitled to retirement pay equivalent to at least one-half (1/2) month salary for every
year of service, a fraction of at least six (6) months being considered as one whole year. Unless
the parties provide for broader inclusions, the term one half-month salary shall mean fifteen (15)
days plus one-twelfth (1/12) of the 13th month pay and the cash equivalent of not more than
five (5) days of service incentive leaves.
The rules implementing the New Retirement Law similarly provide the above-mentioned
formula for computing the one-half month salary. Since Pedro was paid according to the
"boundary" system, he is not entitled to the 13th month 32 and the service incentive pay;
hence, his retirement pay should be computed on the sole basis of his salary.
It is accepted that taxi drivers do not receive fixed wages, but retain only those sums in
excess of the "boundary" or fee they pay to the owners or operators of their vehicles. Thus, the
basis for computing their benefits should be the average daily income. In this case, the CA
found that Pedro was earning an average of five hundred pesos (P500) per day. We thus
compute his retirement pay as follows: P500 x 15 days x 14 years of service equals P105,000.
Rufina Patis vs. Alusitain
G.R. No. 146202; July 14, 2004
FACTS:
On March 1948, Alusitain was hired as a laborer at the Rufina Patis Factory owned and
operated by petitioner Lucas. After close to forty three years, Alusitain admittedly tendered his
letter of resignation. On May 22, 1991, Alusitain executed a duly notarized affidavit of
separation from employment and submitted the same on even date to the Pensions Department
of the Social Security System (SSS).
On January 7, 1993, Republic Act No. 7641 (R.A. 7641) Sometime in 1995, Alusitain,
claiming that he retired from the company on January 31, 1995, having reached the age of 65
and due to poor health, verbally demanded from petitioner Lucas for the payment of his
retirement benefits. By his computation, he claimed that he was entitled to P86,710.00.
Petitioner Lucas, however, refused to pay the retirement benefits of Alusitain, prompting
the latter to make a written demand on September 20, 1995. Lucas, however, remained
adamant in his refusal to give in to Alusitain's demands. Having failed to arrive at an amicable
settlement, Alusitain filed on November 17, 1995 a complaint before the NLRC against
petitioners Rufina Patis Factory and Lucas for non-payment of retirement benefits.
ISSUE:
Whether or not the respondent is entitled to the benefits granted by the amendment of
the law.
RULING:
The respondent is entitled to the retirement benefits.
Republic Act No. 7641 (R.A. 7641), "AN ACT AMENDING ARTICLE 287 OF PRESIDENTIAL
DECREE NO. 442, AS AMENDED OTHERWISE KNOWN AS THE LABOR CODE OF THE PHILIPPINES,
BY PROVIDING FOR RETIREMENT PAY TO QUALIFIED PRIVATE SECTOR EMPLOYEES IN THE
ABSENCE OF ANY RETIREMENT PLAN IN THE ESTABLISHMENT," took effect providing, among
other things, thusly:
Art. 287.
Retirement. — Any employee may be retired upon reaching the retirement
age established in the collective bargaining agreement or other applicable employment
contract.
In the absence of a retirement plan or agreement providing for retirement benefits of
employees in the establishment, an employee upon reaching the age of sixty (60) years or
more, but not beyond sixty five (65) years which is hereby declared the compulsory retirement
age, who has served at least five (5) years in the said establishment, may retire and shall be

145

entitled to retirement pay equivalent to at least one half (½) month salary for every year of
service, a fraction of at least six (6) months being considered as one whole year.
Unless the parties provide for broader inclusions, the term one half (½) month salary
shall mean fifteen (15) days plus one twelfth (1/12) of the 13th month pay and the cash
equivalent of not more than five (5) days of service incentive leaves.
Violation of this provision is hereby declared unlawful and subject to the penal provisions
under Article 288 of this Code.
The Court believes that the respondent nevertheless maintained that he continued
working for petitioners until January 1995, the date of actual retirement, due to illness and old
age, and that he merely accomplished the foregoing documents in compliance with the
requirements of the SSS in order to avail of his retirement benefits.

Sta. Catalina College vs. NLRC
G.R. No. 144483; November 19, 2003
FACTS:
In June 1955, Hilaria was hired as an elementary school teacher at the Sta. Catalina
College. In 1970, she applied for and was granted a one year leave of absence without pay on
account of the illness of her mother. After the expiration in 1971 of her leave of absence, she
had not been heard from by Sta. Catalina College. In the meantime, she was employed as a
teacher at the San Pedro Parochial School during school year 1980-1981 and at the Liceo de San
Pedro, Biñan, Laguna during school year 1981-1982.
In 1982, she applied anew at petitioner school which hired her. On March 1997, during
the 51st Commencement Exercises of petitioner school, Hilaria was awarded a Plaque of
Appreciation for thirty years of service and P12,000.00 as gratuity pay. On May 1997, Hilaria
reached the compulsory retirement age of 65. Retiring pursuant to Article 287 of the Labor
Code, as amended by Republic Act 7641, petitioner school pegged her retirement benefits at
P59,038.35, computed on the basis of fifteen years of service from 1982 to 1997. Her service
from 1955 to 1970 was excluded in the computation, petitioner school having asserted that she
had, in 1971, abandoned her employment. Hilaria insisted, that her retirement benefits should
be computed on the basis of her thirty years of service, inclusive of the period from 1955 to
1970 and that the gratuity pay earlier given to her should not be deducted there from.
The parties having failed to agree on how the retirement benefits should be computed,
Hilaria filed a complaint before the NLRC for non-payment of retirement benefits. Labor Arbiter
rendered ordering the respondents to pay the complainant the amount of P18,185.26 only as
the differential of her retirement benefits.
ISSUE:
Whether or not Hilaria's services for the school during the period from 1955 to 1970
should be factored in the computation of her retirement benefits.
RULING:
Hilaria cannot be credited for her services in 1955-1970 in the determination of her
retirement benefits. This Court is not unmindful of Hilaria's rendition of a total of thirty years of
teaching in petitioner school and should be accorded ample support in her twilight years.
Petitioner school in fact acknowledges her dedicated service to its students. She can, however,
only be awarded with what she is rightfully entitled to under the law.

146

Retirement benefits, on the other hand, are intended to help the employee enjoy the
remaining years of his life, releasing him from the burden of worrying for his financial support,
and are a form of reward for his loyalty to the employer.
In Hilaria's case, her retirement pay as computed by petitioners amounts to P59,038.35,
P28,853.09 of which had already been given to her under the PERAA. Since the computed
amount of her retirement pay is much lower than that provided under the law, she is entitled to
receive the difference between the actual amount of her retirement benefits as required by law
and that provided for under the PERAA.
Article 287 of the Labor Code, as amended by Republic Act 7641 or the New Retirement
Law, provides: Retirement. — Any employee may be retired upon reaching the retirement age
established in the collective bargaining agreement or other applicable employment contract. In
case of retirement, the employee shall be entitled to receive such retirement benefits as he may
have earned under existing laws and any collective bargaining agreement and other
agreements: Provided, however, That an employee's retirement benefits under any collective
bargaining and other agreements shall not be less than those provided herein.
In the absence of a retirement plan or agreement providing for retirement benefits of
employees in the establishment, an employee upon reaching the age of sixty (60) years or
more, but not beyond sixty-five (65) years which is hereby declared the compulsory retirement
age, who has served at least five (5) years in the said establishment, may retire and shall be
entitled to retirement pay equivalent to at least one-half (½) month salary for every year of
service, a fraction of at least six (6) months being considered as one whole year.
Unless the parties provide for broader inclusions, the term one half (½) month salary
shall mean fifteen (15) days plus one-twelfth (1/12) of the 13th month pay and the cash
equivalent of not more than five (5) days of service incentive leaves.
Likewise, Section 3.3, Rule II of the Rules Implementing R.A. 7641 provides: 3.3. Where
both the employer and the employee contribute to a retirement fund in accordance with an
individual or collective agreement or other applicable employment contract, the employer's
total contribution thereto shall not be less than the total retirement benefits to which the
employee would have been entitled had there been no such retirement fund. In case the
employer's contribution is less than the retirement benefits provided under this Rule, the
employer shall pay the difference.
Hence, Hilaria is entitled to receive P98,706.45 computed as follows:
One-half month salary
= (15 days x latest salary per day) + (5 days leave x
latest salary per day) + (1/12 of 13th month pay)
= P4,512.30 + P1,504.10 + P547.33
= P6,563.73
Retirement Pay

= number of years in service x one-half month salary
= 5 years x P6,580.43
= P98,455.95

Since petitioner school had already paid Hilaria P28,853.09 representing employer
contributions under the PERAA, the same should be deducted from the retirement pay due her,
to thereby leave a balance of P69,602.86 still due her.

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Honda Phils., vs. Samahan ng mga Manggagawa sa Honda
G.R. No. 145561; June 15, 2005
FACTS:
The case stems from the collective bargaining agreement between Honda and the
respondent union that it granted the computation of 14th month pay as the same as 13th month
pay. Honda continues the practice of granting financial assistance covered every December
each year of not less than 100% of the basic salary. In the latter part of 1998, the parties started
to re-negotiate for the fourth and fifth years of the CBA. The union filed a notice of strike on the
ground of unfair labor practice for deadlock.
DOLE assumed jurisdiction over the case and certified it to the NLRC for compulsory
arbitration. The striking employees were ordered to return to work and management to accept
them back under the same terms prior to the strike staged. Honda issued a memorandum of the
new computation of the 13th month and 14th month pay to be granted to all its employees
whereby the 31 long strikes shall be considered unworked days for purpose of computing the
said benefits. The amount equivalent to ½ of the employees’ basic salary shall be deducted
from these bonuses, with a commitment that in the event that the strike is declared legal,
Honda shall pay the amount.
The respondent union opposed the pro-rated computation of bonuses. This issue was
submitted to voluntary arbitration where it ruled that the company’s implementation of the prorated computation is invalid.
ISSUE:
Whether or not the pro-rated computation of the 13th and 14th month pays and other
bonuses in question is valid and lawful.
RULING:
The Court ruled that the pro-rated computation is invalid.
The pro-rated computation of Honda as a company policy has not ripened into a company
practice and it was the first time they implemented such practice.
The payment of the 13th month pay in full month payment by Honda has become an
established practice. The length of time where it should be considered in practice is not being
laid down by jurisprudence. The voluntary act of the employer cannot be unilaterally withdrawn
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without violating Article 100 of the Labor Code.
The court also rules that the withdrawal of the benefit of paying a full month salary for 13 th
month pay shall constitute a violation of Article 100 of the Labor Code.

Jaculbe vs. Silliman University
G.R. No. 156934; March 16, 2007
FACTS:
Sometime in 1958, petitioner began working for respondent’s university medical center
as a nurse. In a letter in December 1992, respondent, through its Human Resources
Development Office, informed petitioner that she was approaching her 35 th year of service with
the university and was due for automatic retirement on November 18, 1993, at which time she
would be 57 years old. This was pursuant to respondent’s retirement plan for its employees
which provided that its members could be automatically retired “upon reaching the age of 65 or
after 35 years of uninterrupted service to the university.” Respondent required certain
documents in connection with petitioner’s impending retirement.
A brief exchange of letters between petitioner and respondent followed. Petitioner
emphatically insisted that the compulsory retirement under the plan was tantamount to a
dismissal and pleaded with respondent to be allowed to work until the age of 60 because this
was the minimum age at which she could qualify for SSS pension. But respondent stood pat on
its decision to retire her, citing “company policy.”
On November 15, 1993, petitioner filed a complaint in the National Labor Relations
Commission (NLRC) for “termination of service with preliminary injunction and/or restraining
order.” On November 18, 1993, respondent compulsorily retired petitioner. The labor arbiter
rendered a decision finding respondent guilty of illegal dismissal and ordered that petitioner be
reinstated and paid full back wages. On appeal, the NLRC reversed the labor arbiter’s decision
and dismissed the complaint. the CA affirmed the NLRC.
ISSUE:
Whether or not the respondent’s retirement plan imposing automatic retirement after 35
years of service contravenes the security of tenure clause in the 1987 Constitution and the
Labor Code.
RULING:
Retirement plans allowing employers to retire employees who are less than the
compulsory retirement age of 65 are not per se repugnant to the constitutional guaranty of
security of tenure. Article 287 of the Labor Code provides: Retirement - Any employee may be
retired upon reaching the retirement age established in the collective bargaining agreement or
other applicable employment contract. By its express language, the Labor Code permits
employers and employees to fix the applicable retirement age at below 60 years.
149

The rules and regulations of the plan show that participation therein was not voluntary at
all. Rule III of the plan, on membership, stated:
SECTION 1 – MEMBERSHIP, All full-time Filipino employees of the University will
automatically become members of the Plan, provided, however, that those who have
retired from the University, even if rehired, are no longer eligible for membership in the
Plan. A member who continues to serve the University cannot withdraw from the Plan.
SECTION 2 – EFFECTIVITY OF MEMBERSHIP, Membership in the Plan starts on the day a
person is hired on a full-time basis by the University.
SECTION 3 – TERMINATION OF MEMBERSHIP, Termination of membership in the Plan shall
be upon the death of the member, resignation or termination of employee’s contract by
the University, or retirement from the University.
Meanwhile, Rule IV, on contributions, stated:
The Plan is contributory. The University shall set aside an amount
equivalent to 3½% of the basic salaries of the faculty and staff. To this shall be
added a 5% deduction from the basic salaries of the faculty and staff.
A member on leave with the University approval shall continue paying, based on his pay
while on leave, his leave without pay should pay his contributions to the Plan. However, a
member, who has been on leave without pay should pay his contributions based on his salary
plus the University’s contributions while on leave or the full amount within one month
immediately after the date of his reinstatement. Provided, further that if a member has no
sufficient source of income while on leave may pay within six months after his reinstatement.
It was through no voluntary act of her own that petitioner became a member of the plan.
In fact, the only way she could have ceased to be a member thereof was if she stopped working
for respondent altogether. Furthermore, in the rule on contributions, the repeated use of the
word “shall” ineluctably pointed to the conclusion that employees had no choice but to
contribute to the plan (even when they were on leave).
Retirement is the result of a bilateral act of the parties, a voluntary agreement between
the employer and the employee whereby the latter, after reaching a certain age agrees to sever
his or her employment with the former. The truth was that petitioner had no choice but to
participate in the plan, given that the only way she could refrain from doing so was to resign or
lose her job. It is axiomatic that employer and employee do not stand on equal footing, a
situation which often causes an employee to act out of need instead of any genuine
acquiescence to the employer. This was clearly just such an instance.
An employer is free to impose a retirement age less than 65 for as long as it has the
employees’ consent. Stated conversely, employees are free to accept the employer’s offer to
lower the retirement age if they feel they can get a better deal with the retirement plan
presented by the employer. Thus, having terminated petitioner solely on the basis of a provision
of a retirement plan which was not freely assented to by her, respondent was guilty of illegal
dismissal.

150

Intercontinental Broadcasting Corp., vs. Amarilla
G.R. No. 162775; October 27, 2006
FACTS:
On various dates, petitioner employed the following persons at its Cebu station: Candido
C. Quiñones, Jr, Corsini R. Lagahit, as Studio Technician, Anatolio G. Otadoy, as Collector and
Noemi Amarilla, as Traffic Clerk. On March 1986, the government sequestered the station,
including its properties, funds and other assets, and took over its management and operations
from its owner, Roberto Benedicto.
However, in December 1986, the government and
Benedicto entered into a temporary agreement under which the latter would retain its
management and operation. On November 1990, the Presidential Commission on Good
Government (PCGG) and Benedicto executed a Compromise Agreement, where Benedicto
transferred and assigned all his rights, shares and interests in petitioner station to the
government.
In the meantime, the four employees retired from the company and received, on
staggered basis, their retirement benefits under the 1993 Collective Bargaining Agreement
between petitioner and the bargaining unit of its employees. In the meantime, a P1,500.00
salary increase was given to all employees of the company, current and retired, effective July
1994. However, when the four retirees demanded theirs, petitioner refused and instead
informed them via a letter that their differentials would be used to offset the tax due on their
retirement benefits in accordance with the National Internal Revenue Code (NIRC).
The four retirees filed separate complaints against IBC TV-13 Cebu and Station Manager
Louella F. Cabañero for unfair labor practice and non-payment of backwages before the NLRC.
ISSUE:
Whether or not the retirement benefits of respondents are part of their gross income.
RULING:
The Court agrees with petitioner that under the CBA, it is not obliged to pay for the taxes
on the respondents' retirement benefits. CBA did not provide a provision where petitioner
obliged itself to pay the taxes on the retirement benefits of its employees. The Court also agrees

151

with petitioner that, under the NIRC, the retirement benefits of respondents are part of their
gross income subject to taxes.
Section 28 (b) (7) (A) of the NIRC of 1986 23 provides: Gross Income. — (b) Exclusions
from gross income. — The following items shall not be included in gross income and shall be
exempt from taxation under this Title: (7) Retirement benefits, pensions, gratuities, etc. — A.)
Retirement benefits received by officials and employees of private firms whether individuals or
corporate, in accordance with a reasonable private benefit plan maintained by the employer:
Provided, That the retiring official or employee has been in the service of the same employer for
at least ten (10) years and is not less than fifty years of age at the time of his retirement:
Provided, further, That the benefits granted under this subparagraph shall be availed of by an
official or employee only once. For purposes of this subsection, the term "reasonable private
benefit plan" means a pension, gratuity, stock bonus or profit-sharing plan maintained by an
employer for the benefit of some or all of his officials or employees, where contributions are
made by such employer for officials or employees, or both, for the purpose of distributing to
such officials and employees the earnings and principal of the fund thus accumulated, and
wherein it is provided in said plan that at no time shall any part of the corpus or income of the
fund be used for, or be diverted to, any purpose other than for the exclusive benefit of the said
official and employees.
Revenue Regulation No. 12-86, the implementing rules of the foregoing provisions,
provides: (b) Pensions, retirements and separation pay. — Pensions, retirement and separation
pay constitute compensation subject to withholding tax, except the following: (1) Retirement
benefit received by official and employees of private firms under a reasonable private benefit
plan maintained by the employer, if the following requirements are met: (i) The retirement plan
must be approved by the Bureau of Internal Revenue; (ii) The retiring official or employees must
have been in the service of the same employer for at least ten (10) years and is not less than
fifty (50) years of age at the time of retirement; and (iii) The retiring official or employee shall
not have previously availed of the privilege under the retirement benefit plan of the same or
another employer.
Thus, for the retirement benefits to be exempt from the withholding tax, the taxpayer is
burdened to prove the concurrence of the following elements:
(1) a reasonable private benefit plan is maintained by the employer;
(2) the retiring official or employee has been in the service of the same employer for at
least 10 years;
(3) the retiring official or employee is not less than 50 years of age at the time of his
retirement; and
(4) the benefit had been availed of only once.
Article VIII of the 1993 CBA provides for two kinds of retirement plans - compulsory and
optional. Thus:
ARTICLE VIII RETIREMENT
Section 1: Compulsory Retirement — Any employee who has reached the age of
Fifty Five (55) years shall be retired from the COMPANY and shall be paid a
retirement pay in accordance with the following schedule:
LENGTH OF SERVICE RETIREMENT BENEFITS=
1 year-below 5 yrs. 15 days for every year of service
5 years-9 years
30 days for every year of service
10 years-14 years
50 days for every year of service
15 years-19 years
65 days for every year of service
20 years or more
80 days for every year of service
A supervisor who reached the age of Fifty (50) may at his/her option retire with
the same retirement benefits provided above.
Section 2: Optional Retirement — Any covered employee, regardless of age, who
has rendered at least five (5) years of service to the COMPANY may voluntarily
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retire and the COMPANY agrees to pay Long Service Pay to said covered employee
in accordance with the following schedule:
LENGTH OF SERVICE RETIREMENT BENEFITS
5-9 years
15 days for every year of service
10-14 years 30 days for every year of service
15-19 years 50 days for every year of service
20 years or more
60 days for every year of service
Section 3: Fraction of a Year — In computing the retirement under Section 1 and 2
of this Article, a fraction of at least six (6) months shall be considered as one
whole year. Moreover, the COMPANY may exercise the option of extending the
employment of an employee.
Section 4: Severance of Employment Due to Illness — When a supervisor suffers
from disease and/or permanent disability and her/his continued employment is
prohibited by law or prejudicial to her/his health of the health of his coemployees, the COMPANY shall not terminate the employment of the subject
supervisor unless there is a certification by a competent public health authority
that the disease is of such a nature or at such stage that it can not be cured
within a period of six (6) months even with proper medical treatment. The
supervisor may be separated upon payment by the COMPANY of separation pay
pursuant to law, unless the supervisor falls within the purview of either Sections 1
or 2 hereof. In which case, the retirement benefits indicated therein shall apply,
whichever is higher.
Section 5: Loyalty Recognition — The COMPANY shall recognize the services of the
supervisor/director who have reached the following number of years upon
retirement by granting him/her a plaque of appreciation and any lasting gift: 10
years but below 15 years (P3,000.00) worth; 15 years but below 20 year
(P7,000.00) worth; 20 years and more (P10,000.00) worth.
Respondents were qualified to retire optionally from their employment with petitioner.
there is no record that the 1993 CBA had been approved or was ever presented to the BIR.
Hence, the retirement benefits of respondents are taxable.
Under Section 80 of the NIRC, petitioner, as employer, was obliged to withhold the taxes
on said benefits and remit the same to the BIR. Section 80. Liability for Tax. — (A) Employer. —
The employer shall be liable for the withholding and remittance of the correct amount of tax
required to be deducted and withheld under this Chapter. If the employer fails to withhold and
remit the correct amount of tax as required to be withheld under the provision of this Chapter,
such tax shall be collected from the employer together with the penalties or additions to the tax
otherwise applicable in respect to such failure to withhold and remit.

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Letran Calamba Faculty & Employees Association vs. NLRC et al.
G.R. No. 156225; January 29, 2008
FACTS:
On October 8, 1992, the Letran Calamba Faculty and Employees Association (petitioner)
filed with Regional Arbitration Branch No. IV of the National Labor Relations Commission (NLRC)
a Complaint against Colegio de San Juan de Letran, Calamba, Inc. (respondent) for collection of
various monetary claims due to its members. Some of the allegations of the petitioners in its
Position Paper are: (1) In the computation of the thirteenth month pay of its academic
personnel, respondent does not include as basis therefor their compensation for overloads. It
only takes into account the pay the faculty members receive for their teaching loads not
exceeding eighteen (18) units; (2) respondent has not paid the wage increases required by
Wage Order No. 5 to its employees who qualify thereunder; (3) respondent has not also paid its
employees the holiday pay for the ten (10) regular holidays as provided for in Article 94 of the
Labor Code. Respondent has refused without justifiable reasons and despite demands to pay its
obligations.
As to the inclusion of the overloads of respondent's faculty members in the computation
of their 13th-month pay, petitioner argues that under the Revised Guidelines on the
Implementation of the 13th-Month Pay Law, promulgated by the Secretary of Labor on
November 16, 1987, the basic pay of an employee includes remunerations or earnings paid by
his employer for services rendered, and that excluded therefrom are the cash equivalents of
unused vacation and sick leave credits, overtime, premium, night differential, holiday pay and
cost-of-living allowances. Petitioner claims that since the pay for excess loads or overloads does
not fall under any of the enumerated exclusions and considering that the said overloads are
being performed within the normal working period of eight hours a day, it only follows that the
overloads should be included in the computation of the faculty members' 13th-month pay.

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ISSUE:
Whether or not a teacher's overload pay should be considered in the computation of his
or her 13th-month pay.
RULING:
It is a settled rule that when an administrative or executive agency renders an opinion or
issues a statement of policy, it merely interprets a pre-existing law and the administrative
interpretation is at best advisory for it is the courts that finally determine what the law means.
In the present case, while the DOLE Order may not be applicable, the Court finds that overload
pay should be excluded from the computation of the 13th-month pay of petitioner's members.
In resolving the issue of the inclusion or exclusion of overload pay in the computation of
a teacher's 13th-month pay, it is decisive to determine what "basic salary" includes and
excludes. In this respect, the Court's disquisition in San Miguel Corporation v. Inciong is
instructive, to wit: Under Presidential Decree 851 and its implementing rules, the basic salary of
an employee is used as the basis in the determination of his 13th month pay. Any
compensations or remunerations which are deemed not part of the basic pay is excluded as
basis in the computation of the mandatory bonus. Under the Rules and Regulations
Implementing Presidential Decree 851, the following compensations are deemed not part of the
basic salary: a) Cost-of-living allowances granted pursuant to Presidential Decree 525 and Letter
of Instruction No. 174; b) Profit sharing payments; c) All allowances and monetary benefits
which are not considered or integrated as part of the regular basic salary of the employee at the
time of the promulgation of the Decree on December 16, 1975.
Under a later set of Supplementary Rules and Regulations Implementing Presidential
Decree 851 issued by the then Labor Secretary Blas Ople, overtime pay, earnings and other
remunerations are excluded as part of the basic salary and in the computation of the 13thmonth pay. The exclusion of cost-of-living allowances under Presidential Decree 525 and Letter
of Instruction No. 174 and profit sharing payments indicate the intention to strip basic salary of
other payments which are properly considered as "fringe" benefits. Likewise, the catch-all
exclusionary phrase "all allowances and monetary benefits which are not considered or
integrated as part of the basic salary" shows also the intention to strip basic salary of any and
all additions which may be in the form of allowances or "fringe" benefits. Moreover, the
Supplementary Rules and Regulations Implementing Presidential Decree 851 is even more
emphatic in declaring that earnings and other remunerations which are not part of the basic
salary shall not be included in the computation of the 13th-month pay.
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 works 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 13thmonth pay. Then the exclusionary provision would prove to be idle and with no purpose.
This conclusion finds strong support under the Labor Code of the Philippines. To cite a
few provisions: “Art. 87. Overtime work. Work may be performed beyond eight (8) hours a day
provided that the employee is paid for the overtime work, additional compensation equivalent
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to his regular wage plus at least twenty-five (25%) percent thereof”. It is clear that overtime pay
is an additional compensation other than and added to the regular wage or basic salary, for
reason of which such is categorically excluded from the definition of basic salary under the
Supplementary Rules and Regulations Implementing Presidential Decree 851. In Article 93 of the
same Code, paragraph “c.) work performed on any special holiday shall be paid an additional
compensation of at least thirty percent (30%) of the regular wage of the employee."
It is likewise clear that premium for special holiday which is at least 30% of the regular
wage is an additional compensation other than and added to the regular wage or basic salary.
For similar reason it shall not be considered in the computation of the 13th-month pay. In the
same manner that payment for overtime work and work performed during special holidays is
considered as additional compensation apart and distinct from an employee's regular wage or
basic salary, an overload pay, owing to its very nature and definition, may not be considered as
part of a teacher's regular or basic salary, because it is being paid for additional work performed
in excess of the regular teaching load.
Moreover, petitioner failed to refute private respondent's contention that excess teaching
load is paid by the hour, while the regular teaching load is being paid on a monthly basis; and
that the assignment of overload is subject to the availability of teaching loads. This only goes to
show that overload pay is not integrated with a teacher's basic salary for his or her regular
teaching load. In addition, overload varies from one semester to another, as it is dependent
upon the availability of extra teaching loads. As such, it is not legally feasible to consider
payments for such overload as part of a teacher's regular or basic salary. Verily, overload pay
may not be included as basis for determining a teacher's 13th-month pay.

Reyes vs. NLRC et al.
G.R. No. 160233; August 8, 2007
FACTS:
Petitioner was employed as a salesman at private respondent's Grocery Division in
Davao City on August 12, 1977. He was eventually appointed as unit manager of Sales
Department-South Mindanao District, a position he held until his retirement on November 30,
1997. Thereafter, he received a letter regarding the computation of his separation pay. Insisting
that his retirement benefits and 13th month pay must be based on the average monthly salary
of P42,766.19, which consists of P10,919.22 basic salary and P31,846.97 average monthly
commission, petitioner refused to accept the check issued by private respondent in the amount
of P200,322.21. Instead, he filed a complaint before the arbitration branch of the NLRC for
retirement benefits, 13th month pay, tax refund, earned sick and vacation leaves, financial
assistance, service incentive leave pay, damages and attorney's fees.
Petitioner contends that the commissions form part of the basic salary, citing the case of
Philippine Duplicators, Inc. v. National Labor Relations Commission, wherein the Court held that
commissions earned by salesmen form part of their basic salary. Private respondent counters
that petitioner knew that the overriding commission is not included in the basic salary because
it had not been considered as such for a long time in the computation of the 13th month pay,
leave commissions, absences and tardiness.
ISSUE:
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Whether or not the average monthly sales commission of thirty one thousand eight
hundred forty six and 97/100 (Php31,846.97) should be included in the computation of his
retirement benefits and 13th month pay.
RULING:
This Court has held, in Philippine Duplicators that, the salesmen's commissions,
comprising a pre-determined percentage of the selling price of the goods sold by each
salesman, were properly included in the term basic salary for purposes of computing the 13th
month pay. The salesmen's commission are not overtime payments, nor profit-sharing payments
nor any other fringe benefit but a portion of the salary structure which represents an automatic
increment to the monetary value initially assigned to each unit of work rendered by a salesman.
Contrarily, 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, which are generally tied
to the productivity, or capacity for revenue production, of a corporation and such bonuses
closely resemble profit-sharing payments and have no clear direct or necessary relation to the
amount of work actually done by each individual employee. Further, commissions paid by the
Boie-Takeda Company to its medical representatives could not have been sales commissions in
the same sense that Philippine Duplicators paid the salesmen their sales commissions. Medical
representatives are not salesmen; they do not effect any sale of any article at all.
In fine, whether or not a commission forms part of the basic salary depends upon the
circumstances or conditions for its payment, which indubitably are factual in nature for they will
require a re-examination and calibration of the evidence on record.
As to the main issue whether petitioner's commissions be considered in the computation
of his retirement benefits and 13th month pay, we rule in the negative. Article 287 of the Labor
Code, as amended by Republic Act No. 7641, otherwise known as The New Retirement Law, 22
provides: Retirement. — Any employee may be retired upon reaching the retirement age
established in the collective bargaining agreement or other applicable employment contract… In
the absence of a retirement plan or agreement providing for retirement benefits of employees in
the establishment, an employee upon reaching the age of sixty (60) years or more, but not
beyond sixty five (65) years which is hereby declared the compulsory retirement age, who has
served at least five (5) years in the said establishment, may retire and shall be entitled to
retirement pay equivalent to at least one half (1/2) month salary for every year of service, a
fraction of at least six (6) months being considered as one whole year. Unless the parties
provide for broader inclusions, the term one half (1/2) month salary shall mean fifteen (15) days
plus one twelfth (1/12) of the 13th month pay and the cash equivalent of not more than five (5)
days of service incentive leaves.
Petitioner filed for optional retirement upon reaching the age of 60. However, the basis in
computing his retirement benefits is his latest salary rate of P10,919.22 as the commissions he
received are in the form of profit-sharing payments specifically excluded by the foregoing rules.
Case law has it that when these earnings and remuneration are closely akin to fringe benefits,
overtime pay or profit-sharing statements, they are properly excluded in computing retirement
pay. However, sales commissions which are effectively an integral portion of the basic salary
structure of an employee, shall be included in determining the retirement pay.
At bar, petitioner Rogelio J. Reyes was receiving a monthly sum of P10,919.22 as salary
corresponding to his position as Unit Manager. Thus, as correctly ruled by public respondent
NLRC, the "overriding commissions" paid to him by Universal Robina Corp. could not have been
'sales commissions' in the same sense that Philippine Duplicators paid its salesmen sales
commissions. Unit Managers are not salesmen; they do not effect any sale of article at all.
Therefore, any commission which they receive is certainly not the basic salary which measures
the standard or amount of work of complainant as Unit Manager. Accordingly, the additional
payments made to petitioner were not in fact sales commissions but rather partook of the
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nature of profit-sharing business. Certainly, from the foregoing, the doctrine in Boie-Takeda
Chemicals and Philippine Fuji Xerox Corporation, which pronounced that commissions are
additional pay that does not form part of the basic salary, applies to the present case. Aside
from the fact that as unit manager petitioner did not enter into actual sale transactions, but
merely supervised the salesmen under his control, the disputed commissions were not regularly
received by him. Only when the salesmen were able to collect from the sale transactions can
petitioner receive the commissions. Conversely, if no collections were made by the salesmen,
then petitioner would receive no commissions at all. In fine, the commissions which petitioner
received were not part of his salary structure but were profit-sharing payments and had no
clear, direct or necessary relation to the amount of work he actually performed. The collection
made by the salesmen from the sale transactions was the profit of private respondent from
which petitioner had a share in the form of a commission. Hence, petition is denied.

Arco Metal Products Co., Inc., et al. vs. Samahan ng Mga Manggagawa sa Arco Metal
NAFLU
G.R. No. 170734; May 14, 2008
FACTS:
Petitioner is a company engaged in the manufacture of metal products, whereas
respondent is the labor union of petitioner’s rank and file employees. Sometime in December
2003, petitioner paid the 13th month pay, bonus, and leave encashment of three union members
in amounts proportional to the service they actually rendered in a year, which is less than a full
twelve (12) months. Respondent protested the prorated scheme, claiming that on several
occasions petitioner did not prorate the payment of the same benefits to seven (7) employees
who had not served for the full 12 months. According to respondent, the prorated payment
violates the rule against diminution of benefits under Article 100 of the Labor Code. Thus, they
filed a complaint before the National Conciliation and Mediation Board (NCMB).
ISSUE:
Whether or not the grant of 13th month pay, bonus, and leave encashment in full
regardless of actual service rendered constitutes voluntary employer practice and,
consequently, whether or not the prorated payment of the said benefits constitute diminution of
benefits under Article 100 of the Labor Code.
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RULING:
Any benefit and supplement being enjoyed by employees cannot be reduced,
diminished, discontinued or eliminated by the employer. The principle of non-diminution of
benefits is founded on the Constitutional mandate to "protect the rights of workers and promote
their welfare and to afford labor full protection. Said mandate in turn is the basis of Article 4 of
the Labor Code which states that all doubts in the implementation and interpretation of this
Code, including its implementing rules and regulations shall be rendered in favor of labor.
Jurisprudence is replete with cases which recognize the right of employees to benefits
which were voluntarily given by the employer and which ripened into company practice. Thus in
DavaoFruits Corporation v. Associated Labor Unions, et al. where an employer had freely and
continuously included in the computation of the 13th month pay those items that were expressly
excluded by the law, we held that the act which was favorable to the employees though not
conforming to law had thus ripened into a practice and could not be withdrawn, reduced,
diminished, discontinued or eliminated. In Sevilla Trading Company v. Semana, we ruled that
the employer’s act of including non-basic benefits in the computation of the 13 th month pay was
a voluntary act and had ripened into a company practice which cannot be peremptorily
withdrawn.
In the years 1992, 1993, 1994, 1999, 2002 and 2003, petitioner had adopted a policy of
freely, voluntarily and consistently granting full benefits to its employees regardless of the
length of service rendered. True, there were only a total of seven employees who benefited from
such a practice, but it was an established practice nonetheless. Jurisprudence has not laid down
any rule specifying a minimum number of years within which a company practice must be
exercised in order to constitute voluntary company practice. Thus, it can be six (6) years, three
(3) years, or even as short as two (2) years. Petitioner cannot shirk away from its responsibility
by merely claiming that it was a mistake or an error, supported only by an affidavit of its
manufacturing group head. Hence, petition was denied.

Universal Robina Sugar Milling Corp. vs. Caballeda
G.R. No. 156644; July 28, 2008
FACTS:
Petitioner Universal Robina Sugar Milling Corporation (URSUMCO) is a domestic
corporation engaged in the sugar milling business and petitioner Renato Cabati is URSUMCO's
manager. Respondent Agripino Caballeda (Agripino) worked as welder for URSUMCO from March
1989 until June 23, 1997 with a salary of P124.00 per day, while respondent Alejandro Cadalin
(Alejandro) worked for URSUMCO as crane operator from 1976 up to June 15, 1997 with a salary
of P209.30 per day.
On April 24, 1991, John Gokongwei, Jr., President of URSUMCO, issued a Memorandum
establishing the company policy on “Compulsory Retirement” (Memorandum) of its
employees. The memorandum provides that all employees corporate-wide who attain 60 years
of age on or before April 30, 1991 shall be considered retired on May 31, 1991.

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On April 29, 1993, URSUMCO and the National Federation of Labor (NFL), a legitimate
labor organization and the recognized sole and exclusive bargaining representative of all the
monthly and daily paid employees of URSUMCO, of which Alejandro was a member, entered into
a Collective Bargaining Agreement (CBA). Article XV of the said CBA particularly provided that
the retirement benefits of the members of the collective bargaining unit shall be in accordance
with law.
Agripino and Alejandro (respondents), having reached the age of 60, were allegedly
forced to retire by URSUMCO. Agripino averred that URSUMCO illegally dismissed him from
employment on June 24, 1997 when he was forced to retire upon reaching the age of sixty (60)
years old. Upon the termination of his employment, he accepted his separation pay and applied
for retirement benefits with the Social Security System (SSS). Earlier, on April 15, 1997,
Alejandro turned 60 years old. On May 28, 1997, he filed his application for retirement with
URSUMCO, attaching his birth and baptismal certificates. On July 23, 1997, he accepted his
retirement benefits and executed a quitclaim in favor of URSUMCO.
Thereafter, on August 6, 1997, Agripino filed a Complaint for illegal dismissal, damages
and attorney’s fees before the Labor Arbiter (LA) of Dumaguete City. He alleged that his
compulsory retirement was in violation of the provisions of Republic Act (R.A.) 7641 and, was in
effect, a form of illegal dismissal.
On August 26, 1997, Alejandro likewise filed a Complaint for illegal dismissal,
underpayment of retirement benefits, damages and attorney’s fees before the LA, alleging that
he was given only 15 days per year of service by way of retirement benefits and further
assails that his compulsory retirement was discriminatory considering that there were other
workers over sixty (60) years of age who were allowed to continuously report for work.
ISSUES:
Whether respondents were illegally terminated on account of compulsory retirement or the
same voluntarily retired.
RULING:
SC ruled in favor of the respondents.
Retirement is the result of a bilateral act of the parties, a voluntary agreement between
the employer and the employee whereby the latter, after reaching a certain age, agrees to
sever his or her employment with the former. The age of retirement is primarily determined by
the existing agreement between the employer and the employees. However, in the absence of
such agreement, the retirement age shall be fixed by law. Under Art. 287 of the Labor Code as
amended, the legally mandated age for compulsory retirement is 65 years, while the set
minimum age for optional retirement is 60 years.
In this case, it may be stressed that the CBA does not per se specifically provide for the
compulsory retirement age nor does it provide for an optional retirement plan. It merely
provides that the retirement benefits accorded to an employee shall be in accordance with law.
Thus, we must apply Art. 287 of the Labor Code which provides for two types of retirement: (a)
compulsory and (b) optional. The first takes place at age 65, while the second is primarily
determined by the collective bargaining agreement or other employment contract or employer's
retirement plan. In the absence of any provision on optional retirement in a collective bargaining
agreement, other employment contract, or employer's retirement plan, an employee may
optionally retire upon reaching the age of 60 years or more, but not beyond 65 years, provided
he has served at least five years in the establishment concerned. That prerogative is exclusively
lodged in the employee.
Indubitably, the voluntariness of the respondents' retirement is the meat of the instant
controversy. Petitioners postulate that respondents voluntarily retired particularly when
Alejandro filed his application for retirement, submitted all the documentary requirements,
accepted the retirement benefits and executed a quitclaim in favor of URSUMCO. Respondents
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claim otherwise, contending that they were merely forced to comply as they were no longer
given any work assignment and considering that the severance of their employment with
URSUMCO is a condition precedent for them to receive their retirement benefits.
Generally, the law looks with disfavor on quitclaims and releases by employees who have
been inveigled or pressured into signing them by unscrupulous employers seeking to evade
their legal responsibilities and frustrate just claims of employees. They are frowned upon as
contrary to public policy. A quitclaim is ineffective in barring recovery of the full measure of a
worker's rights, and the acceptance of benefits therefrom does not amount to estoppels.
To be precise, only Alejandro was able to claim a partial amount of his retirement benefit.
Thus, it is clear from the decisions of the LA, NLRC and CA that petitioners are still liable to pay
Alejandro the differential on his retirement benefits. On the other hand, Agripino was actually
and totally deprived of his retirement benefit.
Moreover, the petitioners, not the respondents, have the burden of proving that the
quitclaim was voluntarily entered into. In previous cases, we have considered, among others,
the educational attainment of the employees concerned in upholding the validity of the
quitclaims which they have executed in favor of their employers.

Cercado vs. Uniprom, Inc.
GR NO. 188154 October 13, 2010
FACTS:
Petitioner Lourdes A. Cercado (Cercado) started working for respondent UNIPROM, Inc.
(UNIPROM) on December 15, 1978 as a ticket seller assigned at Fiesta Carnival, Araneta Center,
Quezon City. Later on, she was promoted as cashier and then as clerk typist. On April 1, 1980,
UNIPROM instituted an Employees’ Non-Contributory Retirement Plan 4 which provides that any
participant with twenty (20) years of service, regardless of age, may be retired at his option or
at the option of the company. UNIPROM exercised its option under the retirement plan, and
decided to retire Cercado effective at the end of business hours on February 15, 2001. A check

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of even date in the amount of P100,811.70, representing her retirement benefits under the
regular retirement package, was issued to her. Cercado refused to accept the check.
The CA, however, ruled that UNIPROM’s retirement plan was consistent with Article 287
of the Labor Code, which provides that "any employee may be retired upon reaching the
retirement age established in the collective bargaining agreement or other applicable
employment contract."
ISSUE:
WON UNIPROM has a bona fide retirement plan.
HELD:
The petition is meritorious.
x x x We reiterate the well-established meaning of retirement in this jurisdiction:
Retirement is the result of a bilateral act of the parties, a voluntary agreement between the
employer and the employee whereby the latter, after reaching a certain age, agrees to sever his
or her employment with the former.
Acceptance by the employees of an early retirement age option must be explicit,
voluntary, free, and uncompelled. While an employer may unilaterally retire an employee earlier
than the legally permissible ages under the Labor Code, this prerogative must be exercised
pursuant to a mutually instituted early retirement plan. In other words, only the implementation
and execution of the option may be unilateral, but not the adoption and institution of the
retirement plan containing such option. For the option to be valid, the retirement plan
containing it must be voluntarily assented to by the employees or at least by a majority of them
through a bargaining representative.
The following pronouncements in Jaculbe v. Silliman University are elucidating:
An employer is free to impose a retirement age less than 65 for as long as it has
the employees’ consent. Stated conversely, employees are free to accept the
employer’s offer to lower the retirement age if they feel they can get a better deal
with the retirement plan presented by the employer.
We disagree with the CA’s conclusion that the retirement plan is part of petitioner’s
employment contract with respondent. It must be underscored that petitioner was hired in 1978
or 2 years before the institution of UNIPROM’s retirement plan in 1980. Logically, her
employment contract did not include the retirement plan, much less the early retirement age
option contained therein

Radio Mindanao Network Inc, et. al., vs. Ybarola, Jr. et. al.
GR No. 198662, September 12, 2012
FACTS:
Respondents Domingo Z. Ybarola, Jr. and Alfonso E. Rivera, Jr. were hired on June 15,
1977 and June 1, 1983, respectively, by RMN. They eventually became account managers,
soliciting advertisements and servicing various clients of RMN.

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On September 15, 2002, the respondents' services were terminated as a result of RMN's
reorganization/restructuring; they were given their separation pay — P631,250.00 for Ybarola,
and P481,250.00 for Rivera. Sometime in December 2002, they executed release/quitclaim
affidavits.
Dissatisfied with their separation pay, the respondents filed separate complaints (which
were later consolidated) against RMN and its President, Eric S. Canoy, for illegal dismissal with
several money claims, including attorney's fees. They indicated that their monthly salary rates
were P60,000.00 for Ybarola and P40,000.00 for Rivera.
The respondents argued that the release/quitclaim they executed should not be a bar to
the recovery of the full benefits due them; while they admitted that they signed release
documents, they did so due to dire necessity.
The petitioners denied liability. Labor Arbiter Patricio Libo-on dismissed the illegal
dismissal complaint, but ordered the payment of additional separation pay to the respondents
— P490,066.00 for Ybarola and P429,517.55 for Rivera. On appeal by the petitioners to the
NLRC, the NLRC set aside the labor arbiter's decision and dismissed the complaint for lack of
merit. 6 It ruled that the withholding tax certificate cannot be the basis of the computation of
the respondents' separation pay as the tax document included the respondents' cost-of-living
allowance and commissions. As a general rule, commissions cannot be included in the base
figure for the computation of the separation pay because they have to be earned by actual
market transactions attributable to the respondents.
The NLRC upheld the validity of the respondents' quitclaim affidavits as they failed to
show that they were forced to execute the documents. In its decision of February 17, 2011, the
CA granted the petition and set aside the assailed NLRC dispositions.
ISSUE:
Whether or not respondents' commissions were not part of their salaries to be
considered in the computation of their separation pay
RULING
The petitioners insist that the respondents' commissions were not part of their salaries,
because they failed to present proof that they earned the commission due to actual market
transactions attributable to them. They submit that the commissions are profit-sharing
payments which do not form part of their salaries.
The Supreme Court was not convinced. If these commissions had been really profitsharing bonuses to the respondents, they should have received the same amounts, yet, as the
NLRC itself noted, Ybarola and Rivera received P372,173.11 and P586,998.50 commissions,
respectively, in 2002. The variance in amounts the respondents received as commissions
supports the CA's finding that the salary structure of the respondents was such that they only
received a minimal amount as guaranteed wage; a greater part of their income was derived
from the commissions they get from soliciting advertisements; these advertisements are the
"products" they sell. As the CA aptly noted, this kind of salary structure does not detract from
the character of the commissions being part of the salary or wage paid to the employees for
services rendered to the company.
The petitioners' reliance on our ruling inTalam v. National Labor Relations Commission,
regarding the "proper appreciation of quitclaims," as they put it, is misplaced. While Talam, in
the cited case, and Ybarola and Rivera, in this case, are not unlettered employees, their
situations differ in all other respects.
In Talam, the employee received a valuable consideration for his less than two years of
service with the company; he was not shortchanged and no essential unfairness took place.
In this case, as the CA noted, the separation pay the respondents each received was
163

deficient by at least P400,000.00; thus, they were given only half of the amount they were
legally entitled to. To be sure, a settlement under these terms is not and cannot be a reasonable
one, given especially the respondents' length of service — 25 years for Ybarola and 19 years for
Rivera. The CA was correct when it opined that the respondents were in dire straits when they
executed the release/quitclaim affidavits. Without jobs and with families to support, they dallied
in executing the quitclaim instrument, but were eventually forced to sign given their
circumstances.

12.

2011 NLRC RULES OF PROCEDURE

LARKINS vs. NLRC
G.R. No. 92432 February 23, 1995

164

FACTS:
Petitioner was a member of the US Air Force assigned to oversee the dormitories of the
Third Aircraft Generation Squadron (3 AGS) at Clark Air Base, Pampanga. 3 AGS terminated the
contract for the maintenance of the dorms with De Guzman Custodial Services. The employees,
including private respondents, were allowed to continue working for 3 AGS. It was left to the
new contractor, the JAC Maintenance Services owned by Joselito Cunanan, to decide whether it
would retain their services, however, the latter chose to bring in his own workers. Private
respondents filed a complaint with the Regional Arbitration Branch of the NLRC against
petitioner, Lt. Col. Frankhauser, and Cunanan for illegal dismissal, underpayment of wages,
claims for emergency cost of living allowance, thirteenth-month pay, service incentive leave pay
and holiday premiums. Cunanan was dropped as party respondent. Petitioner and Lt. Col.
Frankhauser failed to answer the complaint and to appear at the hearings. They also failed to
submit their position paper, which the Labor Arbiter deemed a waiver on their part. The case
was submitted for decision on the basis of private respondents' position paper and supporting
documents.
On November 21, 1988, the Labor Arbiter granted all the claims of private respondents
finding both Frankhauser and petitioner "guilty of illegal dismissal" and ordered them to
reinstate private respondents with full back wages, or to pay their separation pay.
Petitioner alleges that she never received nor was served, any summons or copies of the
original and amended complaints, and therefore the Labor Arbiter had no jurisdiction over her
person under Article XIV of the R.P. ? U.S. Military Bases Agreement. NLRC issued a Resolution
affirming the decision of the Labor Arbiter, while the Solicitor General disagreed.
ISSUE:
Whether or not the questioned resolutions are null and void because respondent Labor
Arbiter did not acquire jurisdiction to entertain and decide the case.
HELD:
The Labor Arbiter did not acquire jurisdiction over the petitioner.
The "Agreement between the Republic of the Philippines and the United States of
America Concerning Military Bases," otherwise known as the R.P. U.S. Military Bases Agreement,
governed the rights, duties, authority, and the exercise thereof by Philippine and American
nationals inside the U.S. military bases in the country. Article XIV provides that No process, civil
or criminal, shall be served within any base except with the permission of the commanding
officer of such base; but should the commanding officer refuse to grant such permission he shall
forthwith take the necessary steps to serve such process, and to provide the attendance of the
server of such process before the appropriate court in the Philippines or procure such server to
make the necessary affidavit or declaration to prove such service as the case may require.
Summonses and other processes issued by Philippine courts and administrative agencies for
United States Armed Forces personnel within any U.S. base in the Philippines could be served
therein only with the permission of the Base Commander. If he withholds giving his permission,
he should designate another person to serve the process, and obtain the server's affidavit for
filing with the appropriate court.
The Labor Arbiter did not follow said procedure; instead, addressed the summons to Lt.
Col. Frankhauser and not the Base Commander. Respondents do not dispute petitioner's claim
that no summons was ever issued and served on her, however, they sent notices of the
hearings to her. Notices of hearing are not summonses. The provisions and prevailing
jurisprudence in Civil Procedure may be applied by analogy to NLRC proceedings (Revised Rules
of the NLRC, Rule I, Sec. 3). It is basic that the Labor Arbiter cannot acquire jurisdiction over the
person of the respondent without the latter being served with summons. In the absence of
service of summons or a valid waiver thereof, the hearings and judgment rendered by the Labor
Arbiter are null and void.

165

Petitioner appealed to the NLRC and participated in the oral argument before the said
body, however this does not constitute a waiver of the lack of summons and a voluntary
submission of her person to the jurisdiction of the Labor Arbiter. She may have raised grounds
other than lack of jurisdiction, but these grounds were discussed in relation to and as a result of
the issue of the lack of jurisdiction. In effect, petitioner set forth only one issue and that is the
absence of jurisdiction over her person. If an appearance before the NLRC is precisely to
question the jurisdiction of the said agency over the person of the defendant, then this
appearance is not equivalent to service of summons.

UERM-Memorial Medical Center vs. NLRC
G.R. No. 110419 March 3, 1997
FACTS:
166

On 14 December 1987 Republic Act No. 6640 took effect which mandated a ten (P10.00)
peso increase on the prevailing daily minimum wage of P54.00. In applying said law, the
petitioners granted salary increases to their employees based on the following computation, to
wit:
1. To members of the faculty who are non-union members, P304.17 per month;
2. To rank-and-file employees (individual complainants who are union members), P209.17
per month.
There was a difference of P95.00 in the salaries of the two classes of employees. Private
respondents who are rank and file employees demanded payment of the difference. Before the
parties could settle their dispute, Republic Act No. 6727 took effect on 1 July 1989 which again
increased the daily minimum wage in the private sector (whether agricultural or nonagricultural) by P25.00. In compliance, petitioners paid their employees using the following
computation, to wit:
1. To members of the faculty who are non-union members, P760.42 a month; and
2. To rank-and-file employees (individual complainants who are union members), P523.00
a month.
Again, there was a difference of P237.42 per month between the salaries of union
members and non-union members. In September 1987, petitioners increased the hiring rate of
the new employees to P188.00 per month. Private respondents once more demanded from the
petitioners payment of the salary differential mandated by RA No. 6727 and correction of the
wage distortion brought about by the increase in the hiring rate of new employees.
On 12 April 1988, Policy Instruction No. 54 was issued by the then Secretary of Labor
Franklin Drilon, the pertinent provision of which reads:
. . . the personnel in subject hospitals and clinics are entitled to a full weekly wage of
seven days if they have completed the 40-hour/5-day workweek in any given workweek.
All enforcement and adjudicatory agencies of this Department shall be guided by this
issuance in the disposition of cases involving the personnel of covered hospitals and
clinics.
Petitioners challenged the validity of said Policy Instruction and refused to pay the
salaries of the private respondents for Saturdays and Sundays. Consequently, a complaint was
filed by the private respondents, represented by the Federation of Free Workers (FFW), claiming
salary differentials under Republic Act Nos. 6640 and 6727, correction of the wage distortion
and the payment of salaries for Saturdays and Sundays under Policy Instruction No. 54. Within
the reglementary period for appeal, the petitioners filed their Notice and Memorandum of
Appeal with a Real Estate Bond consisting of land and various improvements therein worth
P102,345,650. The private respondents moved to dismiss the appeal on the ground that Article
223 of the Labor Code, as amended, requires the posting of a cash or surety bond. The NLRC
directed petitioners to post a cash or surety bond of P17,082,448.56 with a warning that failure
to do so would cause the dismissal of the appeal. The petitioners filed a Motion for
Reconsideration alleging it is not in a viable financial condition to post a cash bond nor to pay
the annual premium of P700,000.00 for a surety bond. On 6 October 1992, the NLRC dismissed
petitioners' appeal.
The SC ruled a liberal interpretation to this provision. In YBL (Your Bus Line) v. NLRC
. . . that while Article 223 of the Labor Code, as amended by Republic Act No.
6715, requiring a cash or surety bond in the amount equivalent to the monetary
award in the judgment appealed from for the appeal to be perfected, may be
considered a jurisdictional requirement, nevertheless, adhering to the principle
that substantial justice is better served by allowing the appeal on the merits
threshed out by the NLRC, the Court finds and so holds that the foregoing
requirement of the law should be given a liberal interpretation.

167

In Oriental Mindoro Electric Cooperative, Inc. v. National Labor Relations Commission
The intention of the lawmakers to make the bond an indispensable
requisite for the perfection of an appeal by the employer is underscored by the
provision that an appeal by the employer may be perfected "only upon the
posting of a cash or surety bond." The word "only" makes it perfectly clear, that
the lawmakers intended the posting of a cash or surety bond by the employer to
be the exclusive means by which an employer's appeal may be perfected. The
requirement is intended to discourage employers from using an appeal to delay,
or even evade, their obligation to satisfy their employees' just and lawful claims.
Considering, however, that the current policy is not to strictly follow technical rules but
rather to take into account the spirit and intention of the Labor Code, it would be prudent for us
to look into the merits of the case, especially since petitioner disputes the allegation that
private respondent was illegally dismissed.
The SC reiterates the policy which stresses the importance of deciding cases on the basis
of their substantive merit and not on strict technical rules. In the case at bar, the judgment
involved is more than P17 million and its precipitate execution can adversely affect the
existence of petitioner medical center. Likewise, the issues involved are not insignificant and
they deserve a full discourse by our quasi-judicial and judicial authorities. We are also confident
that the real property bond posted by the petitioners sufficiently protects the interests of private
respondents should they finally prevail. It is not disputed that the real property offered by
petitioners is worth P102,345,650. The judgment in favor of private respondent is only a little
more than P17 million.

168

Philtranco Service Enterprises, Inc. vs. NLRC
G.R. No. 124100 April 1, 1998
FACTS:
Nieva was employed as a driver by petitioner assigned to the Legaspi City-Pasay City
route. Nieva sideswiped an owner-type jeep and a criminal complaint was filed against him.
Philtranco posted a bail bond for Nieva. After having been suspended, he was told to wait until
his case was settled. The case was finally settled he was requested to file a new application as
he was no longer considered an employee of Philtranco, allegedly for being absent without leave
from October 19 to November 20, 1989.
Nieva filed a complaint for illegal dismissal and demanded for 13 th month pay with the
NLRC’s National Capital Region Arbitration Branch in Manila. Philtranco filed a motion to dismiss
on the ground of improper venue, stating that the complaint should have been lodged with the
NLRC’s Regional Arbitration Branch in Legaspi City, not only because Nieva was a resident
thereof, but also because the latter was hired, assigned, and based in Legaspi City.
ISSUE:
Whether or not NLRC’s NCR Arbitration Branch in Manila was a proper venue for the filing
of Nieva’s complaints for illegal dismissal
HELD:

The filing of the complaint with the National Capital Region Arbitration Branch was
proper, Manila being considered as part of Nieva’s workplace by reason of his plying the Legaspi
City-Pasay City route. In fact, Section 1(a), Rule IV of the New Rules of Procedure of the NLRC is
merely permissive. Provisions on venue are intended to assure convenience for the employee
and his witnesses and to promote the ends of justice provided that it is not oppressive to the
employer.

169

St. Martin Funeral Home vs. NLRC
G.R. No. 130866 September 16, 1998
FACTS:
Private respondent alleges that he started working as Operations Manager of petitioner
St. Martin Funeral Home on February 6, 1995. Petitioner on the other hand claims that private
respondent was not its employee but only the uncle of Amelita Malabed, the owner of petitioner
St. Martin's Funeral Home. When the mother of Amelita passed away, the latter then took over
the management of the business and made some changes in the business operation and private
respondent and his wife were no longer allowed to participate in the management thereof. As a
consequence, the latter filed a complaint charging that petitioner had illegally terminated his
employment.
The labor arbiter rendered a decision in favor of petitioner declaring that no employeremployee relationship existed between the parties and, therefore, his office had no jurisdiction
over the case.
On June 13, 1997, the NLRC rendered a resolution setting aside the questioned decision
and remanding the case to the labor arbiter for immediate appropriate proceedings. Petitioner
then filed a motion for reconsideration which was denied by the NLRC in its resolution dated
August 18, 1997 for lack of merit
ISSUE:
Whether or not the Court has the power to review decisions of the NLRC.
HELD:

When the issue was raised in an early case on the argument that this Court has no
jurisdiction to review the decisions of the NLRC, and formerly of the Secretary of Labor, since
there is no legal provision for appellate review thereof, the Court nevertheless rejected that
thesis. It held that there is an underlying power of the courts to scrutinize the acts of such
agencies on questions of law and jurisdiction even though no right of review is given by statute;
that the purpose of judicial review is to keep the administrative agency within its jurisdiction
and protect the substantial rights of the parties; and that it is that part of the checks and
balances which restricts the separation of powers and forestalls arbitrary and unjust
adjudications.
Pursuant to such ruling, and as sanctioned by subsequent decisions of this Court, the
remedy of the aggrieved party is to timely file a motion for reconsideration as a precondition for
any further or subsequent remedy, and then seasonably avail of the special civil action of
certiorari under Rule 65, for which said Rule has now fixed the reglementary period of sixty days
from notice of the decision. Curiously, although the 10-day period for finality of the decision of
the NLRC may already have lapsed as contemplated in Section 223 of the Labor Code, it has
been held that this Court may still take cognizance of the petition for certiorari on jurisdictional
and due process considerations if filed within the reglementary period under Rule 65.
Sec. 9. Jurisdiction. The Court of Appeals shall exercise: (3) Exclusive appellate
jurisdiction over all final judgments, decisions, resolutions, orders or awards of Regional Trial
Courts and quasi-judicial agencies, instrumentalities, boards or commissions, including the
Securities and Exchange Commission, the Social Security Commission, the Employees
Compensation Commission and the Civil Service Commission, except those falling within the
appellate jurisdiction of the Supreme Court in accordance with the Constitution, the Labor Code
of the Philippines under Presidential Decree No. 442, as amended, the provisions of this Act, and
of subparagraph (1) of the third paragraph and subparagraph (4) of the fourth paragraph of
Section 17 of the Judiciary Act of 1948.

170

Under the foregoing premises, the instant petition for certiorari is hereby REMANDED,
and all pertinent records thereof ordered to be FORWARDED, to the Court of Appeals for
appropriate action and disposition consistent with the views and ruling herein set forth, without
pronouncement as to costs.

LUDO & LUYM CORPORATION VS SAORNIDO
G.R. No. 140960. January 20, 2003
FACTS:
LUDO engaged the arrastre services of Cresencio Lu Arrastre Services (CLAS) for the
loading and unloading of its finished products at the wharf. Accordingly, several arrastre workers
were deployed by CLAS to perform the services needed by LUDO. These arrastre workers were
subsequently hired, on different dates, as regular rank-and-file employees of LUDO every time
the latter needed additional manpower services. Said employees thereafter joined respondent
union, the LUDO Employees Union (LEU), which acted as the exclusive bargaining agent of the
rank-and-file employees. Respondent union entered into a collective bargaining agreement with
LUDO which provides certain benefits to the employees, the amount of which vary according to
the length of service rendered by the availing employee. Thereafter, the union requested LUDO
to include in its members period of service the time during which they rendered arrastre
services to LUDO through the CLAS so that they could get higher benefits. LUDO failed to act on
the request. Thus, the matter was submitted for voluntary arbitration. Voluntary Arbitrator ruled
that: (1) the respondent employees were engaged in activities necessary and desirable to the
business of petitioner, and (2) CLAS is a labor-only contractor of petitioner. The Court of Appeals
affirmed in toto the decision of the Voluntary Arbitrator. Petitioner contends that the appellate
court erred when it upheld the award of benefits which were beyond the terms of submission
agreement and that the arbitrator must confine its adjudication to those issues submitted by the
parties for arbitration, which in this case is the sole issue of the date of regularization of the
workers. Hence, the award of benefits by the arbitrator was done in excess of jurisdiction.
ISSUE:
Whether or not the appellate court gravely erred when it upheld the award of benefits
which were beyond the terms of submission agreement.
HELD:
Generally, the arbitrator is expected to decide only those questions expressly delineated
by the submission agreement. Nevertheless, the arbitrator can assume that he has the
necessary power to make a final settlement since arbitration is the final resort for the
adjudication of disputes.13 The succinct reasoning enunciated by the CA in support of its holding,
that the Voluntary Arbitrator in a labor controversy has jurisdiction to render the questioned
arbitral awards, deserves our concurrence, thus: In general, the arbitrator is expected to decide
those questions expressly stated and limited in the submission agreement. However, since
arbitration is the final resort for the adjudication of disputes, the arbitrator can assume that he
has the power to make a final settlement. Thus, assuming that the submission empowers the
arbitrator to decide whether an employee was discharged for just cause, the arbitrator in this
instance can reasonable assume that his powers extended beyond giving a yes-or-no answer
and included the power to reinstate him with or without back pay.

171

Hansin Engineering and Construction Co. Ltd. vs. Court of Appeals
G.R. No. 165910 April 10, 2006
FACTS:
Hanjin is a construction company that had been contracted by the Philippine
Government for the construction of various foreign-financed projects. Hanjin and the Philippine
Government entered into contracts for the construction of the Malinao Dam at Pilar, Bohol, with
a projected completion period of 1,050 calendar days, including main canal and lateral projects
for 750 days. From August 1995 to August 1996, Hanjin contracted the services of 712
carpenters, masons, truck drivers, helpers, laborers, heavy equipment operators, leadmen,
engineers, steelmen, mechanics, electricians and others.
In April 1998, 712 employees filed complaints for illegal dismissal and for payment of
benefits against petitioners, before the NLRC. The complainants averred that they were regular
employees of Hanjin and that they were separated from employment without any lawful or just
cause. Only 521 of the complainants affixed their signatures in the complaints.
Petitioners alleged that the complainants were mere project employees in its Bohol
Irrigation Project and that 2 of the worekers were charged with qualified theft before the RTC.
Some of the complainants had already migrated to USA or had died, while 117 of them were still
under the employ of Hanjin. Petitioner stated that some of the complainants had voluntarily
resigned; 14 were absent without prior approved leave; 15 had signed a Motion to Withdraw
from the complaint; and many of the complainants were separated on account of the
completion of the project. However, petitioners failed to append any document to support their
claim.
Labor Arbiter rendered judgment in favor of the 428 complainants, granting separation
pay and attorney's fees to each of them stating that the complainants were regular employees
of petitioner and their claims for underpayment, holiday pay, premium pay for holiday and rest
day, 13th month pay, and service incentive leave would be computed after sufficient data were
made available.
Petitioners appealed the decision to the NLRC, which affirmed with modification the
Labor Arbiter's ruling. Petitioners filed a Motion for the Reconsideration of the decision (with a
motion to conduct clarificatory hearings)
Petitioners appended to their motion machine copies of some of the complainants'
employment contracts, resignation letters of others who were given monetary awards in the
decision, and 11 folders consisting mostly of payrolls.
NLRC partially granted petitioners' motion. Unsatisfied, petitioners filed a Petition for
Certiorari under Rule 65 of the Revised Rules of Court in the CA. CA dismissed the petition and
affirmed the NLRC's ruling that the dismissed employees were regular employees. The CA
stressed that petitioners failed to refute the claim of the respondents that they were regular
employees. Petitioners moved to reconsider the decision, which the CA denied.
ISSUE:
Whether or not respondents are project employees.
172

HELD:
While respondent alleged that "complainants all signed a contract of employment at the
time they were hired indicating therein the particular project they will be working on, the period
and other conditions provided in their contracts which complainants fully knew and understood,"
nowhere in the records can the said contracts be found. Moreover, let it be stressed that under
DO No. 19, Series of 1993 on project employment, six (6) indicators are enumerated therein and
one of which is that:
"(T)he termination of his employment in the particular project/undertaking is
reported to the Department of Labor and Employment (DOLE) Regional Office
having jurisdiction over the workplace within 30 days following the date of his
separation from work x x x."
In this particular case, the records do not show that a similar report was ever made by
respondent to the Department of Labor and Employment. Such failure of respondent employer
to report to the nearest employment office of the Department of Labor, the termination of the
workers it claimed as project employees at the time it completed the project, is proof that
complainants were not project employees.
The principal test for determining whether particular employees are properly
characterized as project employees is: whether or not the project employees were assigned to
carry out a specific project or undertaking, the duration of which were specified at the time the
employees were engaged for that project. Predetermination of the duration or period of project
employment is essential in resolving whether one is a project employee or not. In the instant
case, the completion of the project for which the complainants were hired was not determined
at the start of their employment, there being no substantial proof thereof. The fact that
complainants had rendered more than one year of service at the time of their dismissal and
there being no substantial evidence to support that they were engaged to work on a specific
project or undertaking, overturns respondent’s allegation that complainants were project
employees hired for a specific fixed project for a limited period of time.
Complainants herein were, therefore, non-project employees, but regular employees.
Admittedly, being a duly licensed contractor firm in the Philippines, respondent is the awardee
of several construction projects and in many occasions it has been given the priority in the
awarding of subsequent projects.
In the light of the above facts and circumstances, the respondent's main defense that
completion of the project worked on by the complainants constitutes a valid cause of
termination is unsustainable. To repeat, there is no substantial evidence on record to sustain this
contention. The mere allegation of the respondents that under their employment contracts the
complainants were made to understand that they were project employees is definitely not
persuasive or unworthy of credence. The best evidence of which would have been the alleged
contracts.
These employees signed duly notarized waivers/quitclaims and who did not recant later.
In the absence of evidence showing the contrary, said quitclaims were executed voluntarily and
without any force or intimidation.
Petitioners submitted to the NLRC dubious machine copies of only some of respondents?
Contracts, including alleged employment termination reports submitted to the DOLE. The NLRC
found the contracts barren of probative weight and utterly insufficient to buttress the contention
of petitioners that respondents were only project employees.
Contrary to the representation of respondent's counsel, the original copies of the reports
made to DOLE were never produced and submitted to this Commission. Neither were they
presented for comparison with the machine copies. These machine copies were not also
certified as true copies by the DOLE.

173

The actual continuous employment of complainants by respondent Hanjin since 1991
until 1995 overcomes the piecemeal "appointments" covering for periods of six (6) months or
less. From these short term but repeated "appointments," it is apparent that the periods have
been imposed to preclude the acquisition of tenurial security by the employee and which kind of
employment contracts should be disregarded for being contrary to public policy.
The appellate court, the NLRC and the Labor Arbiter are thus one in finding that
respondents were not project employees, and in sustaining respondents' claim of illegal
dismissal due to petitioners? failure to adduce contrary evidence. Well-settled is the rule that
findings of fact of quasi-judicial agencies, like the NLRC, are accorded not only respect but at
times even finality if such findings are supported by substantial evidence. Such findings of facts
can only be set aside upon showing of grave abuse of discretion, fraud or error of law, none of
which have been shown in this case.

Phil. Journalistic Inc. vs. NLRC
G.R. No. 166421, September 05, 2006
FACTS:
In NLRC’s Resolution dated May 31, 2001, petitioner Philippine Journalists, Inc. (PJI) was
adjudged liable in the total amount of P6,447,008.57 for illegally dismissing 31 complainantsemployees and that there was no basis for the implementation of petitioner's retrenchment
program.
Thereafter, the parties executed a Compromise Agreement dated July 9, 2001, where PJI
undertook to reinstate the 31 complainant-employees effective July 1, 2001 without loss of
seniority rights and benefits; 17 of them who were previously retrenched were agreed to be
given full and complete payment of their respective monetary claims, while 14 others would be
paid their monetary claims minus what they received by way of separation pay.
The compromise agreement was submitted to the NLRC for approval. All the employees
mentioned in the agreement and in the NLRC Resolution affixed their signatures thereon. They
likewise signed the Joint Manifesto and Declaration of Mutual Support and Cooperation which
had also been submitted for the consideration of the labor tribunal.
The NLRC forthwith issued another Resolution on July 25, 2002, which among others
declared that Thus, the compromise agreement was approved and NCMB-NCR-NS-03-087-00
was deemed closed and terminated.
In the meantime, however, the Union filed another Notice of Strike on July 1, 2002. In an
Order dated September 16, 2002, the DOLE Secretary certified the case to the Commission for
compulsory arbitration. The case was docketed as NCMB-NCR- NS-07-251-02.
In its Resolution dated July 31, 2003, the NLRC ruled that the complainants were not
illegally dismissed. The May 31, 2001 Resolution declaring the retrenchment program illegal did
not attain finality as "it had been academically mooted by the compromise agreement entered
into between both parties on July 9, 2001."
The Union assailed the ruling of the NLRC before the CA via petition for certiorari under
Rule
65.
In its Decision dated August 17, 2004, the appellate court held that the NLRC gravely abused its
discretion in ruling for PJI. The compromise agreement referred only to the award given by the
NLRC to the complainants in the said case, that is, the obligation of the employer to the
complainants. The CA pointed out that the NLRC Resolution nevertheless declared that
respondent failed to prove the validity of its retrenchment program, which according to it,

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stands even after the compromise agreement was executed; it was the reason why the
agreement was reached in the first place.
ISSUES AND RULING:

I. Whether or not the petitioner’s petition for certiorari under Rule 65 of the
Revised Rules of Civil Procedure is a proper remedy in this case.
At the outset, we note that this case was brought before us via petition for certiorari
under Rule 65 of the Revised Rules of Civil Procedure. The proper remedy, however, was to file a
petition under Rule 45. It must be stressed that certiorari under Rule 65 is "a remedy narrow in
scope and inflexible in character. It is not a general utility tool in the legal workshop." Moreover,
the special civil action for certiorari will lie only when a court has acted without or in excess of
jurisdiction or with grave abuse of discretion.
Be that as it may, a petition for certiorari may be treated as a petition for review under
Rule 45. Such move is in accordance with the liberal spirit pervading the Rules of Court and in
the interest of substantial justice. As the instant petition was filed within the prescribed fifteenday period, and in view of the substantial issues raised, the Court resolves to give due course to
the petition and treat the same as a petition for review on certiorari.
II. Whether or not the the NLRC of the agreement forged between it and the
respondent Union did not render the NLRC resolution ineffectual, nor rendered it
"moot and academic.”
Contrary to the allegation of petitioners, the execution and subsequent approval by the
NLRC of the agreement forged between it and the respondent Union did not render the NLRC
resolution ineffectual, nor rendered it "moot and academic." The agreement becomes part of the
judgment of the court or tribunal, and as a logical consequence, there is an implicit waiver of
the
right
to
appeal.
In any event, the compromise agreement cannot bind a party who did not voluntarily take part
in the settlement itself and gave specific individual consent. It must be remembered that a
compromise agreement is also a contract; it requires the consent of the parties, and it is only
then that the agreement may be considered as voluntarily entered into.
A careful perusal of the wordings of the compromise agreement will show that the parties
agreed that the only issue to be resolved was the question of the monetary claim of several
employees.
The agreement was later approved by the NLRC. The case was considered closed and
terminated and the Resolution dated May 31, 2001 fully implemented insofar as the employees
"mentioned in paragraphs 2c and 2d of the compromise agreement" were concerned. Hence,
the CA was correct in holding that the compromise agreement pertained only to the "monetary
obligation" of the employer to the dismissed employees, and in no way affected the Resolution
in NCMB-NCR-NS-03-087-00 dated May 31, 2001 where the NLRC made the pronouncement that
there was no basis for the implementation of petitioners' retrenchment program.
To reiterate, the rule is that when judgment is rendered based on a compromise
agreement, the judgment becomes immediately executory, there being an implied waiver of the
parties' right to appeal from the decision. The judgment having become final, the Court can no
longer reverse, much less modify it.
III. Whether or not CA can review the factual findings or legal conclusions of the labor
tribunal.
Petitioners' argument that the CA is not a trier of facts is likewise erroneous. In the
exercise of its power to review decisions by the NLRC, the CA can review the factual findings or
legal conclusions of the labor tribunal. Thus, the CA is not proscribed from "examining evidence

175

anew to determine whether the factual findings of the NLRC are supported by the evidence
presented and the conclusions derived therefrom accurately ascertained."

Balagtas Multi-Purpose Cooperative, Inc. vs. Court of Appeals
G.R. No. 159268 October 27, 2006
FACTS:
Balagtas Multi-Purpose Cooperative, Inc. is a duly organized and existing cooperative
under the laws of the Philippines. Sometime in April 1991, Balagtas hired Josefina G. HipolitoHerrero, as part time manager in its office. Subsequently, Josefina made known of her intention
to take a leave of absence. Her proposal was immediately approved. However, after the lapse of
her leave of absence, Josefina did not report for work anymore. Later on, she filed her
resignation.
Consequently Josefina filed a complaint with the Provincial Office of the Department of
Labor in Malolos, Bulacan for illegal dismissal, and non-payment of 13 th month pay or Christmas
Bonus. She also prayed for reinstatement and paid backwages as well as moral damages.
The Labor Arbiter rendered judgment in favor of complainant and against respondents
and ordered the latter to pay the former 13th month pay, backwages and separation pay.
Aggrieved, herein petitioners appealed the decision to NLRC but failed to post either a
cash or surety bond as required by Article 223 of the Labor Code. They filed a manifestation and
motion instead, stating, that under Republic Act No. 6938, Article 62(7) of the Cooperative Code
of the Philippines, petitioners are exempt from putting up a bond in an appeal from the decision
of the inferior court.
NLRC ordered respondents to post a cash or surety bond in the amount of P218,000.00,
within 10 inextendible days from receipt of the Order, failure of which shall constitute a waiver
and non-perfection of the appeal.
Balagtas appealed to CA, which dismissed the petition holding that the exemption from
putting up a bond by a cooperative applies to cases decided by inferior courts only.
ISSUES:
1. Whether cooperatives are exempted from filing a cash or surety bond required to
perfect an employer’s appeal under Section 223 of Presidential Decree No. 442 (the
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Labor Code); and,
2. Whether a certification issued by the Cooperative Development Authority constitutes
substantial compliance with the requirement for the posting of a bond.
HELD:

1. No. Petitioners argue that there are certain benefits and privileges expressly granted
to cooperative under the Cooperative Code. It invoked the provision on Article 62 regarding the
exemption from payment of an appeal bond, to wit:
(7)All cooperatives shall be exempt from putting up a bond for bringing an appeal
against the decision of an inferior court or for seeking to set aside any third party claim:
Provided, That a certification of the Authority showing that the net assets of the
cooperative are in excess of the amount of the bond required by the court in similar
cases shall be accepted by the court as a sufficient bond.
However, it is only one among a number of such privileges which appear under the
article entitled “Tax and Other Exemptions” of the code. The provision cited by petitioners
cannot be taken in isolation and must be interpreted in relation to the Cooperative Code in its
entirety. Exceptions are to be strictly but reasonably construed; they extend only so far as their
language warrants, and all doubts should be resolved in favor of the general provision rather
than the exceptions.
2. No. Article 119 of the Cooperative Code itself expressly embodies the legislative
intention to extend the coverage of labor statutes to cooperatives. For this reason, petitioners
must comply with the requirement set forth in Article 223 of the Labor Code in order to perfect
their appeal to the NLRC. It must be pointed out that the right to appeal is not a constitutional,
natural or inherent right. It is a privilege of statutory origin and, therefore, available only if
granted or provided by statute. The law may validly provide limitations or qualifications thereto
or relief to the prevailing party in the event an appeal is interposed by the losing party.
In this case, the obvious and logical purpose of an appeal bond is to insure, during the
period of appeal, against any occurrence that would defeat or diminish recovery by the
employee under the judgment if the latter is subsequently affirmed.
Therefore, no error can be ascribed to the CA for holding that the phrase “inferior courts”
appearing in Article 62 paragraph (7) of the Cooperative Code does not extend to “quasi-judicial
agencies” and that, petitioners are not exempt from posting the appeal bond required under
Article 223 of the Labor Code.

St. Martin Funeral Homes vs. National Labor Relations Commission
G.R. No. 142351 November 22, 2006
FACTS:
The owner of petitioner St. Martin Funeral Homes, Inc. (St. Martin) is Amelita Malabed.
Prior to January 1996, Amelita’s mother managed the funeral parlor. In 1995, Aricayos was
granted financial assistance by Amelita’s mother. As a sign of appreciation, respondent
extended assistance in managing St. Martin without compensation and no written employment
contract between Amelita’s mother and respondent Aricayos; furthermore, respondent Aricayos
was not even listed as an employee in the Company’s payroll.
When Amelita’s mother died in January 1996, Amelita took over as manager of St.
Martin. Much to her chagrin, she found out that St. Martin had arrearages in the payment of BIR
taxes and other fees owing to the government, but company records tended to show that
payments were made thereon. As a result, Amelita removed the authority from respondent
Aricayos and his wife from taking part in managing St. Martin’s operations.

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Aggrieved, respondent Aricayos accused St. Martin of his illegal dismissal as Operations
Manager of the company. He believed that the cause of his termination was Amelita’s suspicion
that he pocketed PhP 38,000.00 which was set aside for payment to the BIR of St. Martin’s
valued added taxes.On October 25, 1996, the Labor Arbiter rendered a Decision, in favor of
petitioner declaring that his office had no jurisdiction over the case.
NLRC issued a Resolution annulling the Arbiter’s Decision and remanded the case to him
for appropriate proceedings, to determine the factual issue of the existence of employeremployee relationship between the parties. When its motion for reconsideration was rejected by
the NLRC, petitioner filed a petition for certiorari under Rule 65 before this Court, docketed as
G.R. No. 130866.
On September 16, 1998, this Court through Justice Jose Vitug, rendered the landmark
Decision in this case then docketed as G.R. No. 130866, holding for the first time that all
petitions for certiorari under Rule 65 assailing the decisions of the NLRC should henceforth be
filed with the CA
ISSUE:
Whether or not a petitioner can file his petition for certiorari under Rule65 to assail the
decision of a lower court like NLRC.
HELD:
A petition for certiorari under Rule 65 must first be filed at the Court of Appeals. Said
court has a concurrent jurisdiction on petitions for certiorari, mandamus, prohibitions. This is in
consonance with the hierarchy of courts.

10. DOLE PHILIPPINES vs. ESTEVA
G.R. No. 161115. November 30, 2006
FACTS:
Petitioner is a corporation engaged principally in the production and processing of
pineapple for the export market. Respondents are members of the Cannery Multi-Purpose
Cooperative (CAMPCO). CAMPCO was organized in accordance with Republic Act No. 6938,
otherwise known as the Cooperative Code of the Philippines. Pursuant to the Service Contract,
CAMPCO members rendered services to petitioner. The number of CAMPCO members that
report for work and the type of service they performed depended on the needs of petitioner at
any given time. Although the Service Contract specifically stated that it shall only be for a
period of six months, i.e., from 1 July to 31 December 1993, the parties had apparently
extended or renewed the same for the succeeding years without executing another written
contract. It was under these circumstances that respondents came to work for petitioner. DOLE
organized a Task Force that conducted an investigation into the alleged labor-only contracting
activities of the cooperatives. The Task Force identified six cooperatives that were engaged in
labor-only contracting, one of which was CAMPCO. In this case, respondents alleged that they
started working for petitioner at various times in the years 1993 and 1994, by virtue of the
Service Contract executed between CAMPCO and petitioner. All of the respondents had already
rendered more than one year of service to petitioner. While some of the respondents were still
working for petitioner, others were put on “stay home status” on varying dates in the years
1994, 1995, and 1996 and were no longer furnished with work thereafter. Together,
respondents filed a Complaint with the NLRC for illegal dismissal, regularization, wage
differentials, damages and attorney’s fees. Petitioner denied that respondents were its
employees. It explained that it found the need to engage external services to augment its
regular workforce, which was affected by peaks in operation, work backlogs, absenteeism, and
excessive leaves. It used to engage the services of individual workers for definite periods
specified in their employment contracts and never exceeding one year. However, such an
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arrangement became the subject of a labor case, in which petitioner was accused of preventing
the regularization of such workers.
ISSUES:
 Whether or not the court of appeals was correct when it made its own factual findings
and disregarded the factual findings of the labor arbiter and the NLRC.
 Whether or not CAMPCO was a mere labor-only contractor.
HELD:

The Court in the exercise of its equity jurisdiction may look into the records of the case
and re-examine the questioned findings. As a corollary, this Court is clothed with ample
authority to review matters, even if they are not assigned as errors in their appeal, if it finds that
their consideration is necessary to arrive at a just decision of the case. The same principles are
now necessarily adhered to and are applied by the Court of Appeals in its expanded jurisdiction
over labor cases elevated through a petition for certiorari; thus, we see no error on its part when
it made anew a factual determination of the matters and on that basis reversed the ruling of the
NLRC.
On the second issue, CAMPCO was a mere labor-only contractor. First, although petitioner
touts the multi-million pesos assets of CAMPCO, it does well to remember that such were
amassed in the years following its establishment. In 1993, when CAMPCO was established and
the Service Contract between petitioner and CAMPCO was entered into, CAMPCO only had
P6,600.00 paid-up capital, which could hardly be considered substantial. It only managed to
increase its capitalization and assets in the succeeding years by continually and defiantly
engaging in what had been declared by authorized DOLE officials as labor-only contracting.
Second, CAMPCO did not carry out an independent business from petitioner. It was precisely
established to render services to petitioner to augment its workforce during peak seasons.
Petitioner was its only client. Even as CAMPCO had its own office and office equipment, these
were mainly used for administrative purposes; the tools, machineries, and equipment actually
used by CAMPCO members when rendering services to the petitioner belonged to the latter.
Third, petitioner exercised control over the CAMPCO members, including respondents. Petitioner
attempts to refute control by alleging the presence of a CAMPCO supervisor in the work
premises. Yet, the mere presence within the premises of a supervisor from the cooperative did
not necessarily mean that CAMPCO had control over its members. Section 8(1), Rule VIII, Book
III of the implementing rules of the Labor Code, as amended, required for permissible job
contracting that the contractor undertakes the contract work on his account, under his own
responsibility, according to his own manner and method, free from the control and direction of
his employer or principal in all matters connected with the performance of the work except as to
the results thereof. As alleged by the respondents, and unrebutted by petitioner, CAMPCO
members, before working for the petitioner, had to undergo instructions and pass the training
provided by petitioner’s personnel. It was petitioner who determined and prepared the work
assignments of the CAMPCO members. CAMPCO members worked within petitioner’s plantation
and processing plants alongside regular employees performing identical jobs, a circumstance
recognized as an indicium of a labor-only contractorship. Fourth, CAMPCO was not engaged to
perform a specific and special job or service. In the Service Contract of 1993, CAMPCO agreed
to assist petitioner in its daily operations, and perform odd jobs as may be assigned. CAMPCO
complied with this venture by assigning members to petitioner. Apart from that, no other
particular job, work or service was required from CAMPCO, and it is apparent, with such an
arrangement, that CAMPCO merely acted as a recruitment agency for petitioner. Since the
undertaking of CAMPCO did not involve the performance of a specific job, but rather the supply
of manpower only, CAMPCO clearly conducted itself as a labor-only contractor. Lastly, CAMPCO
members, including respondents, performed activities directly related to the principal business
of petitioner. They worked as can processing attendant, feeder of canned pineapple and
pineapple processing, nata de coco processing attendant, fruit cocktail processing attendant,
and etc., functions which were, not only directly related, but were very vital to petitioner’s
business of production and processing of pineapple products for export.

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The declaration that CAMPCO is indeed engaged in the prohibited activities of labor-only
contracting, then consequently, an employer-employee relationship is deemed to exist between
petitioner and respondents, since CAMPCO shall be considered as a mere agent or intermediary
of petitioner.
Since respondents are now recognized as employees of petitioner, this Court is tasked to
determine the nature of their employment. In consideration of all the attendant circumstances
in this case, this Court concludes that respondents are regular employees of petitioner. As such,
they are entitled to security of tenure. They could only be removed based on just and
authorized causes as provided for in the Labor Code, as amended, and after they are accorded
procedural due process. Therefore, petitioner’s acts of placing some of the respondents on “stay
home status” and not giving them work assignments for more than six months were already
tantamount to constructive and illegal dismissal.

INTERCONTINENTAL BROADCASTING CORP vs. PANGANIBAN
G.R. No. 151407, February 06, 2007
FACTS:
Ireneo Panganiban (respondent) was employed as Assistant General Manager of the
Intercontinental Broadcasting Corporation (petitioner) from May 1986 until his preventive
suspension on August 26, 1988. Respondent resigned from his employment on September 2,
1988.
On April 12, 1989, respondent filed a civil case with the RTC of Quezon City, Branch 93
against the members of the Board of Administrators (BOA) of petitioner alleging, among others,
non-payment of his unpaid commissions. A motion to dismiss was filed by Joselito Santiago, one
of the defendants, on the ground of lack of jurisdiction, as respondent's claim was a labor
money claim, but this was denied by the RTC. Thus, Santiago filed a petition for certiorari with
the CA which granted Santiago's petition for lack of jurisdiction and set aside the RTC's Orders.
Thereafter, respondent was elected by the BOA as Vice-President for Marketing in July
1992. He resigned in April 1993. On July 24, 1996, respondent filed against petitioner a
complaint for illegal dismissal, separation pay, retirement benefits, unpaid commissions, and
damages. The Labor Arbiter (LA) ordered respondent's reinstatement with full backwages, and
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the payment of his unpaid commission, damages and attorney's fees. Petitioner appealed to the
NLRC but due to petitioner's failure to post a bond, the appeal was dismissed. The decision was
deemed final and executory.
ISSUE:
Whether or not respondent's claim for unpaid commissions has already prescribed.
HELD:
Yes. Respondent's claim had already prescribed as of September 1991. In addition, the
claims of private respondent for reinstatement, backwages and benefits in conjunction with his
employment from 1986 to 1988 have prescribed.
The applicable law in this case is Article 291 of the Labor Code which provides that "all
money claims arising from employer-employee relations accruing during the effectivity of this
Code shall be filed within three (3) years from the time the cause of action accrued; otherwise
they shall be forever barred."
The term "money claims" covers all money claims arising from an employer-employee
relation the prescription of an action is interrupted by (a) the filing of an action, (b) a written
extrajudicial demand by the creditor, and (c) a written acknowledgment of the debt by the
debtor.
On this point, the Court ruled that although the commencement of a civil action stops
the running of the statute of prescription or limitations, its dismissal or voluntary abandonment
by plaintiff leaves the parties in exactly the same position as though no action had been
commenced at all. Hence, while the filing of Civil Case could have interrupted the running of the
three-year prescriptive period, its consequent dismissal by the CA due to lack of jurisdiction
effectively canceled the tolling of the prescriptive period within which to file his money claim,
leaving respondent in exactly the same position as though no civil case had been filed at all.
The running of the three-year prescriptive period not having been interrupted by the filing of
Civil Case respondent's cause of action had already prescribed on September 2, 1991, three
years after his cessation of employment on September 2, 1988. Consequently, when respondent
filed his complaint for illegal dismissal, separation pay, retirement benefits, and damages in July
24, 1996, his claim, clearly, had already been barred by prescription.

Far East Agricultural Supply, Inc. vs. Lebatique
G.R. No. 162813, February 12, 2007
FACTS:
Petitioner Far East Agricultural Supply hired private respondent Jimmy Lebatique as truck
driver tasked to deliver animal feeds. On January 24, 2000, Lebatique complained of nonpayment of overtime work particularly on January 22, 2000, when he was required to make a
second delivery in Novaliches. That same day Lebatique was suspended apparently for illegal
use of company vehicle. He reported for work the next day but was prohibited from entering the
company premises.
On January 26, 2000, Lebatique sought assistance concerning the non-payment of his
overtime pay. According to him, two days later, he received a telegram from petitioners
requiring him to report for work. He reported for work on January 29, 2000 and was asked to
explain why he was claiming overtime pay. Later, Lebatique was terminated and was told to look
for another job.
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On March 20, 2000, Lebatique filed a complaint for illegal dismissal and non-payment of
overtime pay.
ISSUE:
What is the prescriptive period for money claims?
HELD:
All money claims arising from an employer-employee relationship shall be filed within
three years from the time the cause of action accrued; otherwise, they shall be forever barred
(Article 291, LC). If it is established that the benefits being claimed have been withheld from the
employee for a period longer than three years, the amount pertaining to the period beyond the
three-year prescriptive period is therefore barred by prescription. The amount that can only be
demanded by the aggrieved employee shall be limited to the amount of the benefits withheld
within three years before the filing of the complaint.
Lebatique timely filed his claim for service incentive leave pay, considering that in this
situation, the prescriptive period commences at the time he was terminated. On the other hand,
his claim regarding non-payment of overtime pay since he was hired in March 1996 is a different
matter. In the case of overtime pay, he can only demand for the overtime pay withheld for the
period within three years preceding the filing of the complaint on March 20, 2000. However, we
find insufficient the selected time records presented by petitioners to compute properly his
overtime pay. The Labor Arbiter should have required petitioners to present the daily time
records, payroll, or other documents in management’s control to determine the correct payment
due to him.
It is immaterial that Lebatique had filed a complaint for non-payment of overtime pay the
day he was suspended by management’s unilateral act. What matters is that he filed the
complaint for illegal dismissal on March 20, 2000, after he was told not to report for work, and
his filing was well within the prescriptive period allowed under the law.

Letran Calamba Faculty & Employees Association vs. NLRC
G.R. No. 156225; January 29, 2008
FACTS:
Three cases were consolidated involving petitioner Letran Calamba Faculty and
Employees Association and Colegio de San Juan de Letran, Calamba, for money claims and a
petition to declare the subject strike illegal filed by respondent .
On September 28, 1998, the Labor Arbiter (LA) handling the consolidated cases rendered
a Decision with the following dispositive portion:
WHEREFORE, premises considered, judgment is hereby rendered, as follows:
1. The money claims cases (RAB-IV-10-4560-92-L and RAB-IV-11-4624-92-L) are
hereby dismissed for lack of merit;
2. The petition to declare strike illegal (NLRC Case No. RAB-IV-3-6555-94-L) is hereby
dismissed, but the officers of the Union, particularly its President, Mr. Edmundo F.
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Marifosque, Sr., are hereby reprimanded and sternly warned that future conduct
similar to what was displayed in this case will warrant a more severe sanction
from this Office.
Both parties appealed to the NLRC. On July 28, 1999, the NLRC promulgated its Decision
dismissing both appeals. Petitioner filed a Motion for Reconsideration but the same was denied
by the NLRC in its Resolution dated June 21, 2000.
Petitioner then filed a special civil action for certiorari with the CA assailing the abovementioned NLRC Decision and Resolution. On May 14, 2002, the CA rendered the presently
assailed judgment dismissing the petition. Petitioner filed a Motion for Reconsideration but the
CA denied it in its Resolution promulgated on November 28, 2002.
Citing Agustilo v. Court of Appeals, petitioner contends that in a special civil action for
certiorari brought before the CA, the appellate court can review the factual findings and the
legal conclusions of the NLRC. Petitioner avers that the CA, in concluding that the NLRC Decision
was supported by substantial evidence, failed to specify what constituted said evidence. Thus,
petitioner asserts that the CA acted arbitrarily in affirming the Decision of the NLRC.
In its Comment, respondent contends that the ruling in Agustilo is an exception rather
than the general rule; that the general rule is that in a petition for certiorari, judicial review by
this Court or by the CA in labor cases does not go so far as to evaluate the sufficiency of the
evidence upon which the proper labor officer or office based his or its determination but is
limited only to issues of jurisdiction or grave abuse of discretion amounting to lack of
jurisdiction; that before a party may ask that the CA or this Court review the factual findings of
the NLRC, there must first be a convincing argument that the NLRC acted in a capricious,
whimsical, arbitrary or despotic manner; and that in its petition for certiorari filed with the CA,
herein petitioner failed to prove that the NLRC acted without or in excess of jurisdiction or with
grave
abuse
of
discretion.
Respondent argues that Agustilo is not applicable to the present case because in the former
case, the findings of fact of the LA and the NLRC are at variance with each other; while in the
present case, the findings of fact and conclusions of law of the LA and the NLRC are the same.
Respondent also avers that in a special civil action for certiorari, the discretionary power to
review factual findings of the NLRC rests upon the CA; and that absent any findings by the CA of
the need to resolve any unclear or ambiguous factual findings of the NLRC, the grant of the writ
of certiorari is not warranted.
ISSUE:
Whether or not the Court of Appeals erred in holding that the factual findings of the NLRC
cannot be reviewed in certiorari proceedings.
HELD:
In the instant case, the Court finds no error in the ruling of the CA that since nowhere in
the petition is there any acceptable demonstration that the LA or the NLRC acted either with
grave abuse of discretion or without or in excess of its jurisdiction, the appellate court has no
reason to look into the correctness of the evaluation of evidence which supports the labor
tribunals' findings of fact.
This Court held in Odango v. National Labor Relations Commission that:
The appellate court’s jurisdiction to review a decision of the NLRC in a
petition for certiorari is confined to issues of jurisdiction or grave abuse of
discretion. An extraordinary remedy, a petition for certiorari is available
only and restrictively in truly exceptional cases. The sole office of the writ
of certiorari is the correction of errors of jurisdiction including the
commission of grave abuse of discretion amounting to lack or excess of
jurisdiction. It does not include correction of the NLRC’s evaluation of the
evidence or of its factual findings. Such findings are generally accorded
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not only respect but also finality. A party assailing such findings bears the
burden of showing that the tribunal acted capriciously and whimsically or
in total disregard of evidence material to the controversy, in order that the
extraordinary writ of certiorari will lie.
Settled is the rule that the findings of the LA, when affirmed by the NLRC and the CA, are
binding on the Supreme Court, unless patently erroneous. It is not the function of the Supreme
Court to analyze or weigh all over again the evidence already considered in the proceedings
below. In a petition for review on certiorari, this Court’s jurisdiction is limited to reviewing errors
of law in the absence of any showing that the factual findings complained of are devoid of
support in the records or are glaringly erroneous. Firm is the doctrine that this Court is not a
trier of facts, and this applies with greater force in labor cases. Findings of fact of administrative
agencies and quasi-judicial bodies, which have acquired expertise because their jurisdiction is
confined to specific matters, are generally accorded not only great respect but even finality.
They are binding upon this Court unless there is a showing of grave abuse of discretion or where
it is clearly shown that they were arrived at arbitrarily or in utter disregard of the evidence on
record. We find none of these exceptions in the present case.
In petitions for review on certiorari like the instant case, the Court invariably sustains the
unanimous factual findings of the LA, the NLRC and the CA, specially when such findings are
supported by substantial evidence and there is no cogent basis to reverse the same, as in this
case.

Metro Transit Organization vs. Piglas NFWU-KMU et al.
G.R. No. 175460; April 14, 2008
FACTS:
Petitioner Metro Transit Organization, Inc. (MTO) is a government owned and controlled
corporation which entered into a Management and Operations Agreement (MOA) with the Light
Rail Transit Authority (LRTA) for the operation of the Light Rail Transit (LRT) Baclaran-Monumento
Line. Petitioner Jose L. Cortez, Jr. was sued in his official capacity as then Undersecretary of the
Department of Transportation and Communications and Chairman of the Board of Directors of
petitioner MTO.

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Respondents filed with the Labor Arbiter Complaints against petitioners and the LRTA for
the following: (1) illegal dismissal; (2) unfair labor practice for union busting; (3) moral and
exemplary damages; and (4) attorney's fees.
On 13 September 2004, the Labor Arbiter rendered judgment in favor of
respondents. Petitioners appealed to the National Labor Relations Commission (NLRC). In a
Resolution dated 19 May 2006, the NLRC dismissed petitioners' appeal for non-perfection since
it failed to post the required bond. Without filing a Motion for Reconsideration of the aforequoted NLRC Resolution, petitioners filed a Petition for Certiorari with the Court of Appeals
assailing the same.
On 24 August 2006, the Court of Appeals issued a Resolution dismissing the Petition. It
ruled:

The petitioners have filed this petition for certiorari against the resolution of the
NLRC dated May 19, 2006 dismissing the appeal for non-perfection. They have
not, however, filed a motion for reconsideration of the ruling prior to filing the
petition.
This renders the petition fatally defective. The motion for
reconsideration has been held to be a condition sine qua non for certiorari, the
rationale being that the lower court should be given the opportunity to correct its
error before recourse to the higher court is made.

ISSUE:
Whether or not petitioner can directly file the extraordinary remedy of certiorari without
filing first a motion for reconsideration with the NLRC.
HELD:
The Court of Appeals correctly ruled that petitioners' failure to file a motion for
reconsideration against the assailed Resolution of the NLRC rendered its petition for certiorari
before the appellate court as fatally defective.
It must be primarily established that petitioners contravened the procedural rule for the
extraordinary remedy of certiorari. The rule is, for the writ to issue, it must be shown that there
is no appeal, nor any plain, speedy and adequate remedy in the ordinary course of law.
The settled rule is that a motion for reconsideration is a condition sine qua non for the
filing of a petition for certiorari. Its purpose is to grant an opportunity for the court to correct
any actual or perceived error attributed to it by the re-examination of the legal and factual
circumstances of the case. The rationale of the rule rests upon the presumption that the court or
administrative body which issued the assailed order or resolution may amend the same, if given
the chance to correct its mistake or error.
We have held that the "plain," "speedy," and "adequate remedy" referred to in Section 1, Rule
65 of the Rules of Court is a motion for reconsideration of the questioned Order or Resolution.
As we consistently held in numerous cases, a motion for reconsideration is indispensable for it
affords the NLRC an opportunity to rectify errors or mistakes it might have committed before
resort to the courts can be had.
In the case at bar, petitioners directly went to the Court of Appeals on certiorari without
filing a motion for reconsideration with the NLRC. The motion for reconsideration would have
aptly furnished a plain, speedy, and adequate remedy. As a rule, the Court of Appeals, in the
exercise of its original jurisdiction, will not take cognizance of a petition for certiorari under Rule
65, unless the lower court has been given the opportunity to correct the error imputed to it. The
Court of Appeals correctly ruled that petitioners' failure to file a motion for reconsideration
against the assailed Resolution of the NLRC rendered its petition for certiorari before the
appellate court as fatally defective.
We agree in the Court of Appeals' finding that petitioners' case does not fall under any of
the recognized exceptions to the filing of a motion for reconsideration, to wit: (1) when the issue
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raised is purely of law; (2) when public interest is involved; (3) in case of urgency; or when the
questions raised are the same as those that have already been squarely argued and
exhaustively passed upon by the lower court. As the Court of Appeals reasoned, the issue before
the NLRC is both factual and legal at the same time, involving as it does the requirements of the
property bond for the perfection of the appeal, as well as the finding that petitioners failed to
perfect the same. Evidently, the burden is on petitioners seeking exception to the rule to show
sufficient justification for dispensing with the requirement.
Certiorari cannot be resorted to as a shield from the adverse consequences of
petitioners' own omission of the filing of the required motion for reconsideration. Nonetheless,
even if we are to disregard the petitioners' procedural faux pas with the Court of Appeals, and
proceed to review the propriety of the 19 May 2006 NLRC Resolution, we still arrive at the
conclusion that the NLRC did not err in denying petitioners' appeal for its failure to file a bond in
accordance with the Rules of Procedure of the NLRC.
In cases involving a monetary award, an employer seeking to appeal the decision of the
Labor Arbiter to the NLRC is unconditionally required by Article 223 of the Labor Code to post a
cash or surety bond equivalent to the amount of the monetary award adjudged. It should be
stressed that the intention of lawmakers to make the bond an indispensable requisite for the
perfection of an appeal by the employer is underscored by the provision that an appeal by the
employer may be perfected only upon the posting of a cash or surety bond. The word "only"
makes it perfectly clear that the lawmakers intended the posting of a cash or surety bond by the
employer to be the exclusive means by which an employer's appeal may be perfected.
Moreover, it bears stressing that the perfection of an appeal in the manner and within the period
prescribed by law is not only mandatory but jurisdictional, and failure to conform to the rules will
render the judgment sought to be reviewed final and unappeasable. It cannot be
overemphasized that the NLRC Rules, akin to the Rules of Court, promulgated by authority of
law, have the force and effect of law.
As borne by the records, petitioners filed a property bond which was conditionally
accepted by the NLRC subject to the following conditions specified in its 24 February 2006
Order:
The conditional acceptance of petitioner's property bond was subject to the submission
of the following: 1) Certified copy of Board Resolution or a Certificate from the Corporate
Secretary of Light Rail Transit Authority stating that the Corporation President is authorized by a
Board Resolution to submit title as guarantee of judgment award; 2) Certified Copy of the Titles
issued by the Registry of Deeds of Pasay City; 3) Certified Copy of the current tax declarations of
Titles; 4) Tax clearance from the City Treasurer of Pasay City; 5) Appraisal report of an accredited
appraisal company attesting to the fair market value of property within ten (10) days from
receipt of this Order. Failure to comply therewith will result in the dismissal of the appeal for
non-perfection thereof.
In the same Order, the NLRC warned that failure of the petitioners to comply with the
conditions would result in the dismissal of the appeal for non-perfection thereof. Petitioners
were directed to comply with its given conditions within 10 days from receipt of the Order with a
caveat that their failure will result in the dismissal of the appeal. Subsequently, in its 19 May
2006 Resolution, the NLRC finally made a factual finding that petitioners failed to comply with
the conditions attached to their posting of the property bond. Thus, the NLRC dismissed
petitioners' appeal for non-perfection thereof.
Essentially, the failure of petitioners to comply with the conditions for the posting of the
property bond is tantamount to a failure to post the bond as required by law. What is even more
salient is the fact that the NLRC had stressed that petitioners had, for more than a month from
receipt of its 24 February 2006 Order, to comply with the conditions set forth therein for the
posting of the property bond. It cannot be gainsaid that the NLRC had given petitioners a period
of 10 days from receipt of the Order with a warning that non-compliance would result in the
dismissal of their appeal for failure to perfect the same. Petitioners therefore disregarded the
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rudiments of the law in the perfection of their appeal. We are without recourse but to take
petitioners' failure against their interest.

J. K. Mercado & Sons Agricultural Enterprises, Inc., vs. Sto. Tomas
G.R. No. 158084, August 29, 2008
FACTS:
On December 3, 1993, the Regional Tripartite Wages and Productivity Board, Region XI,
issued Wage Order No. RTWPB-XI-03, granting a Cost of Living Allowance (COLA) to covered
workers.
On January 28, 1994, petitioner filed an application for exemption from the coverage of
the aforesaid wage order. Thus, however, was denied by the regional wage board for lack of
merit and ordered the petitioner to pay its covered workers the allowance prescribed under said
Wage Order.
Notwithstanding the said order, private respondents were not given the benefits due
them. Thus, private respondents filed an Urgent Motion for Writ of Execution, and Writ of
Garnishment seeking the enforcement of subject wage order against several entities including
herein petitioner.
The OIC-Regional Director, Region XI, issued a Writ of Execution for the enforcement of
the Order dated April 11, 1994 of the Regional Tripartite Wages and Productivity Board. On
November 17, 1998 and November 23, 1998, respectively, petitioner filed a Motion to Quash
the Writ of Execution and a Supplemental Motion to the Motion to Quash. Petitioner argued that
herein private respondents' right had already prescribed due to their failure to move for the
execution of the April 11, 1994 Order within the period provided under Article 291 of the Labor
Code, as amended, or within three (3) years from the finality of the said order.
Regional Director denied the motion, thus the petitioner filed a notice of appeal which
was thereafter denied for lack of merit. Hence a petition was filed in SC.
ISSUES:
 Whether or not the Article 291 of the Labor Code is not applicable to recovery of benefits
under the subject Wage Order, which entitled respondents to a cost of living allowance
(COLA)?
 Whether or not the claim of the private respondents for cost of living allowance (COLA)
pursuant to the Wage Order has already prescribed because of the failure of the
respondents to make the appropriate claim within the three (3) year prescriptive period
provided by Article 291 of the Labor Code, as amended.
RULING:
Art. 291 of the Labor Code applies to money claims in general and provides for a 3-year
prescriptive period to file them.
On the other hand, respondent employees' money claims in this case had been reduced
to a judgment, in the form of a Wage Order, which has become final and executory. The
prescription applicable, therefore, is not the general one that applies to money claims, but the
specific one applying to judgments. Thus, the right to enforce the judgment, having been
exercised
within
five
years,
has
not
yet
prescribed.
Stated otherwise, a claimant has three years to press a money claim. Once judgment is
rendered in her favor, she has five years to ask for execution of the judgment, counted from its
finality. This is consistent with the rule on statutory construction that a general provision should

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yield to a specific one and with the mandate of social justice that doubts should be resolved in
favor of labor.

J-PHIL MARINE, INC. and/or JESUS CANDAVA and NORMAN SHIPPING SERVICES vs.
NATIONAL LABOR RELATIONS COMMISSION and WARLITO E. DUMALAOG
G.R. No. 175366 August 11, 2008
FACTS:
The herein respondent, was a cook aboard vessels plying overseas, filed before the
National Labor Relations Commission (NLRC) a pro-forma complaint against petitioners for
unpaid money claims, moral and exemplary damages, and attorney’s fees and thereafter filed
two amended pro forma complaints praying for the award of overtime pay, vacation leave pay,
sick leave pay, and disability/medical benefits, he having, by his claim, contracted enlargement
of the heart and severe thyroid enlargement in the discharge of his duties as cook which
rendered him disabled.
Labor Arbiter Fe Superiaso-Cellan dismissed respondent’s complaint for lack of merit but
the NLRC reversed the Labor Arbiter’s decision and awarded US$50,000.00 disability benefit to
respondent. The Court of Appeals dismissed petitioners’ petition for, inter alia, failure to attach
to the petition all material documents, and for defective verification and certification.
Petitioners’ Motion for Reconsideration of the appellate court’s Resolution was denied; hence,
they filed the present Petition for Review on Certiorari.
During the pendency of the case, against the advice of his counsel, entered into a
compromise agreement with petitioners.
He thereupon signed a Quitclaim and Release
subscribed and sworn to before the Labor Arbiter. Petitioners filed before this Court a
Manifestation dated May 7, 2007 informing that, inter alia, they and respondent had forged an
amicable settlement.
Respondent’s counsel also filed before this Court, purportedly on behalf of respondent, a
Comment on the present petition. The parties having forged a compromise agreement as
respondent in fact has executed a Quitclaim and Release, the Court dismisses the petition.
ISSUE:
WON the compromise agreement/deed of quit claim entered by the parties is valid?
RULING:
Article 227 of the Labor Code provides:
Any compromise settlement, including those involving labor standard laws, voluntarily
agreed upon by the parties with the assistance of the Department of Labor, shall be final and
binding upon the parties. The National Labor Relations Commission or any court shall
not assume jurisdiction over issues involved therein except in case of non-compliance thereof or
if there is prima facie evidence that the settlement was obtained through fraud,
misrepresentation, or coercion.
In Olaybar v. NLRC, he Court, recognizing the conclusiveness of compromise
settlements as a means to end labor disputes, held that Article 2037 of the Civil Code, which
provides that “[a] compromise has upon the parties the effect and authority of res
judicata,” applies suppletorily to labor cases even if the compromise is not judicially
approved. That respondent was not assisted by his counsel when he entered into
the compromise does not render it null and void. Eurotech Hair Systems, Inc. v. Goo
enlightens:
A compromise agreement is valid as long as the consideration is reasonable
and the employee signed the waiver voluntarily, with a full understanding of
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what he was entering into. All that is required for the compromise to be deemed
voluntarily entered into is personal and specific individual consent. Thus, contrary
to respondent’s contention, the employee’s counsel need not be present at the time of
the signing of the compromise agreement.
It bears noting that, as reflected earlier, the Quitclaim and Waiver was subscribed and
sworn to before the Labor Arbiter.
Petition DISMISSED

SY vs ALC Industries
GR No. 168339 October 10, 2008
FACTS:
Petitioner was hired by respondent corporation ALCII as a supervisor in its purchasing
office. She was thereafter assigned to ALCII's construction project in Davao City as business
manager and supervisor of the Administrative Division. Her Davao assignment was from May
1997 to April 15, 1999.
Petitioner alleged that respondents refused to pay her salary beginning August 1998 and
allowances beginning June 1998, despite her almost weekly verbal follow-up. Petitioner filed a
complaint before the labor arbiter for unpaid salaries and allowances. Despite several notices
and warnings, respondents did not file a position paper to controvert petitioner's claims. The
case was submitted for resolution based solely on petitioner's allegations and evidence.
In his June 30, 2000 decision, the labor arbiter ordered ALCII and/or Dexter Ceriales to
pay petitioner P282,560 representing her unpaid salary and allowance.
Respondents filed an appeal with motion for reduction of bond in the National Labor
Relations Commission (NLRC) without posting any cash or surety bond. In a resolution dated
September 6, 2001, the NLRC dismissed respondents' appeal. It ruled that respondents failed to
adduce substantial evidence to support their arguments of non-liability. Moreover, it found no
justifiable reason to grant a reduction in the required bond.
Respondents were able to file a motion for reconsideration on time, accompanied by a
joint undertaking/declaration in lieu of the cash or surety bond. Nevertheless, respondents'
motion for reconsideration was denied.
On August 2, 2002, respondents filed a motion for clarification but this was likewise
denied. Respondents questioned the NLRC's denial of their motion for clarification and
reconsideration in the CA via a petition for certiorari and prohibition.
In its March 30, 2005 decision, the CA set aside the resolutions of the NLRC and the
decision of the labor arbiter and dismissed petitioner's complaint.
ISSUE:
WON the decision of the Labor Arbiter has become final and executory.
RULING:
Article 223. APPEAL. - Decisions, awards, or orders of the Labor Arbiter are final
and executory unless appealed to the Commission by any or both parties within ten
calendar days from receipt of such decisions, awards, or orders. xxx.
In case of a judgment involving a monetary award, an appeal by the employer may be
perfected only upon the posting of a cash or surety bond issued by a reputable bonding
company duly accredited by the Commission in the amount equivalent to the monetary
award in the judgment appealed from. (emphasis supplied)
Section 1, Rule VI of the Rules of Procedure of the NLRC, as amended, likewise provides
that the appeal must be filed within ten days from receipt of the decision, resolution or order of
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the labor arbiter. Moreover, Section 6 of the same rules provides that an appeal by the employer
may be perfected only upon the posting of a cash or surety bond. As the right to appeal is
merely a statutory privilege, it must be exercised only in the manner and in accordance with the
provisions of the law. Otherwise, the right to appeal is lost.
In a long line of cases, we have ruled that the payment of the appeal bond is a
jurisdictional requisite for the perfection of an appeal to the NLRC. The lawmakers intended to
make the posting of a cash or surety bond by the employer the exclusive means by which an
employer's appeal may be perfected. The rationale for this rule is:
The requirement that the employer post a cash or surety bond to perfect its/his
appeal is apparently intended to assure the workers that if they prevail in the
case, they will receive the money judgment in their favor upon the dismissal of
the employers' appeal. It was intended to discourage employers from using an
appeal to delay, or even evade, their obligation to satisfy their employee's just
and lawful claims.
The explanation advanced by respondents for their failure to pay the appeal bond belies
their claim. The NLRC found that respondents did not pay the appeal bond on the mistaken
notion that they were not liable for the monetary award and had already ceased operations due
to bankruptcy. Respondents belatedly filed a bond with their motion for reconsideration of the
NLRC's dismissal of their appeal. We cannot countenance such flagrant disregard of established
rules of procedure on appeals.
Moreover, the filing of a joint undertaking/declaration, filed way beyond the ten-day
reglementary period for perfecting an appeal and as a substitute for the cash or surety bond,
did not operate to validate the lost appeal.
The decision of the labor arbiter therefore became final and executory for failure of
respondents to perfect their appeal within the reglementary period. Clearly, the CA no longer
had jurisdiction to entertain respondents' appeal from the labor arbiter's decision.
Respondents point out that we have occasionally allowed exceptions to mandatory and
jurisdictional requirements in the perfection of appeals, such as disregarding unintended
lapses on the basis of strong and compelling reasons. This is true. However, the obvious motive
behind respondents' plea for liberality is to thwart petitioner's claims. This we cannot allow.
Respondents' lapses were far from unintentional. They were deliberate attempts to circumvent
established rules.
Respondents' other contention that they were deprived of due process is likewise devoid
of merit. Due process is satisfied when the parties are afforded fair and reasonable opportunity
to explain their respective sides of the controversy. In Mariveles Shipyard Corp. v. CA, we held:
The requirements of due process in labor cases before a Labor Arbiter is
satisfied when the parties are given the opportunity to submit their position
papers to which they are supposed to attach all the supporting documents or
documentary evidence that would prove their respective claims, in the event that the
Labor Arbiter determines that no formal hearing would be conducted or that such hearing
was not necessary. (emphasis supplied).
We ruled in Times Transportation Company, Inc. v. Sotelo:
To extend the period of appeal is to prolong the resolution of the case, a circumstance
which would give the employer the opportunity to wear out the energy and meager
resources of the workers to the point that they would be constrained to give up for less
than what they deserve in law.

190

PCI Travel Corporation vs. NLRC
GR No. 154379. October 31, 2008
FACTS:
A complaint for unfair labor practice was filed against petitioner by respondent NUBEAMEXPEA/PCI Travel Employees Union with the latter claiming that the former had been filling up
positions left by regular rank-and-file with contractual employees, but were performing work
which were usually necessary and desirable in the usual business or trade of the petitioner.
Petitioner moved to dismiss the complaint on the ground that the Union was not the real partyin-interest and then they manifested their readiness to prove that said employees were provided
by independent legitimate contractors and that it was not engaged in labor-only contracting in
position paper yet to be submitted, but the motion to dismiss is to be resolved first.
However, the Labor Arbiter rendered a decision in favor of the respondent ruling that a
motion to dismiss was a prohibited pleading. The same was affirmed by the NLRC but with
modification deleting the awards of damages. Before the CA, the petition was dismissed for
failure to attach copies of pleadings and documents relevant and pertinent to the same and the
because of the absence of proof that Elizabeth Legarda (petitioner’s president) was duly
authorized to sign the verification and certification of non-forum shopping.
ISSUES:
1. Whether the President of a corporation is authorized to sign the verification and
certification against non-forum shopping without need of a board resolution.
2. Whether or not the appellate court has erred in dismissing the petition on a single
technicality.
RULING:
While it must be borne in mind that under the Corporation Code, an individual corporate
officer cannot solely exercise any corporate power pertaining to the corporation without the
authority from the board of directors, the Supreme Court however had ruled otherwise in a long
line of cases before it. Summing it up, the following officials or employees of the company can
sign the verification and certification without need of a board resolution: (1) Chairperson of the
BOD, (2) President, (3) General Manager or Acting GM, (4) Personnel Officer and (5) an
Employment Specialist in a labor case.
Thus, that the President of the corporation can sign the verification and certification
without need of a board resolution, there thus exists a compelling reason for the reinstatement
of the petition before the CA.
A perusal of the petition for certiorari would reveal that petitioner intended to show the
grave abuse of discretion committed by the labor tribunals in not allowing the petitioner the
ample opportunity to submit its position paper on the alleged violation of the CBA. The Labor
Arbiter and the NLRC viewed it as a waiver on its part and hastened to rule that “since the
complainant’s allegations remain unrebutted, they are deemed correct and valid.” Due process
dictates that a person should be given the opportunity to be heard. Unfortunately, this was not
191

accorded to the petitioner and such right was even foreclosed when the appellate court
dismissed the petition before it on technical grounds.
The policy of our judicial system is to encourage full adjudication of the merits of an
appeal. Ends of justice are better served when both parties are heard and the controversy
decided on its merits. Thus, in the exercise of its equity jurisdiction, the Court will not hesitate to
reverse the dismissal of appeals that are grounded merely on technicalities.
***Remanded to the CA for resolution based on the merits.

LOPEZ VS. Q. C. SPORTS CLUB
GR No. 164032 January 19, 2009
FACTS:
Claiming that it is a registered independent labor organization and the incumbent
collective bargaining agent of Quezon City Sports Club (QCSC), the Kasapiang Manggagawa sa
Quezon City Sports Club (union) filed a complaint for unfair labor practice against QCSC on 12
November 1997.
The Union averred that it was ordered to submit a new information sheet. It
immediately wrote a letter addressed to the general manager, Angel Sadang, to inquire
about the information sheet, only to be insulted by the latter. The members of the union
were not paid their salaries on 30 June 1997. A board member, Antonio Chua allegedly
harassed one of the employees and told him not to join the strike and even promised a
promotion. On 4 July 1997, the union wrote a letter to the management for the release of
the members’ salaries for the period 16-30 June 1997, implementation of Wage Order No.
5, and granting of wage increases mandated by the Collective Bargaining Agreement
(CBA). When its letter went unanswered, the union filed a notice of strike on 10 July 1997
for violation of Article 248 (a)(c)(e) of the Labor Code, nonpayment of overtime pay,
refusal to hear its grievances, and malicious refusal to comply with the economic
provisions of the CBA. After conducting a strike vote, it staged a strike on 12 August
1997. On 16 August 1997, the QCSC placed some of its employees under temporary layoff status due to redundancy. It appears that on 22 December 1997, QCSC also filed a
petition for cancellation of registration against the union.
The Labor Arbiter (Lustria) found QCSC guilty of unfair labor practice. QCSC
appealed from the labor arbiter’s decision. It also filed a motion for reduction of the
appeal bond to P4,000,000.00.
The NLRC ordered the posting of an additional
P6,000,000.00) .QCSC filed a supplement to its appeal, citing a decision (Dinopol decision)
dated 9 October 1998 of Labor Arbiter Ernesto Dinopol declaring the strike of the union
illegal.
Meanwhile, the National Labor Relations Commission (NLRC) rendered a decision
granting the appeal and reversing the Lustria decision.
The other complainants (petitioners) meanwhile filed a motion for reconsideration
which was denied by the NLRC. They filed a petition for certiorari under Rule 65 before the
Court of Appeals but was denied.
ISSUES:
1. Do the simultaneous filing of the motion to reduce the appeal bond and posting
of the reduced amount of bond within the reglementary period for appeal
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constitute substantial compliance with Article 223 of the Labor Code?
2. Whether the NLRC erred in declaring them to have lost their employment
contrary to the Dinopol decision which only affected a few of the employees who
were union members.
RULING:
First issue:
Under the Rules, appeals involving monetary awards are perfected only upon
compliance with the following mandatory requisites, namely: (1) payment of the appeal
fees; (2) filing of the memorandum of appeal; and (3) payment of the required cash or
surety bond.
Thus, the posting of a bond is indispensable to the perfection of an appeal in cases
involving monetary awards from the decision of the labor arbiter. The filing of the bond is
not only mandatory but also a jurisdictional requirement that must be complied with in
order to confer jurisdiction upon the NLRC. Non-compliance with the requirement renders
the decision of the labor arbiter final and executory. This requirement is intended to
assure the workers that if they prevail in the case, they will receive the money judgment in
their favor upon the dismissal of the employer's appeal. It is intended to discourage
employers from using an appeal to delay or evade their obligation to satisfy their
employees' just and lawful claims.
However, Section 6 of the New Rules of Procedure of the NLRC also mandates,
among others, that no motion to reduce bond shall be entertained except on meritorious
grounds and upon the posting of a bond in a reasonable amount in relation to the
monetary award. Hence, the NLRC has the full discretion to grant or deny the motion to
reduce the amount of the appeal bond.
In the case of Nicol v. Footjoy Industrial Corporation ruled that the bond
requirement on appeals involving monetary awards had been and could be relaxed in
meritorious cases such as: (1) there was substantial compliance with the Rules; (2) the
surrounding facts and circumstances constitute meritorious grounds to reduce the bond;
(3) a liberal interpretation of the requirement of an appeal bond would serve the desired
objective of resolving controversies on the merits; or (4) the appellants, at the very least,
exhibited their willingness and/or good faith by posting a partial bond during the
reglementary period. Applying these jurisprudential guidelines, we find and hold that the
NLRC did not err in reducing the amount of the appeal bond and considering the appeal as
having been filed within the reglementary period.
The posting of the amount of P4,000,000.00 simultaneously with the filing of the
motion to reduce the bond to that amount, as well as the filing of the memorandum of
appeal, all within the reglementary period, altogether constitute substantial compliance
with the Rules.
Second issue:
We rule in favor of petitioners. The assailed Dinopol decision involves a complaint
for illegal strike filed by QCSC on the ground of a "no-strike no lockout" provision in the
CBA. The challenged decision was rendered in accordance with law and is supported by
factual evidence on record. In the notice of strike, the union did not state in particular the
acts which allegedly constitute unfair labor practice. Moreover, by virtue of the "no-strike
no lockout" provision in the CBA, the union was prohibited from staging an economic
strike, i.e., to force wage or other concessions from the employer which he is not required
by law to grant. However, it should be noted that while the strike declared by the union
was held illegal, only the union officers were declared as having lost their employment
status. In effect, there was a ruling only with respect to some union members while the
status of all others had remained disputed.
There is no conflict between the Dinopol and the Lustria decisions. While both
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rulings involve the same parties and same issues, there is a distinction between the
remedies sought by the parties in these two cases. In the Dinopol decision, it was QCSC
which filed a petition to declare the illegality of the 12 August 1997 strike by the union.
The consequence of the declaration of an illegal strike is termination from employment,
which the Labor Arbiter did so rule in said case. However, not all union members were
terminated. In fact, only a few union officers were validly dismissed in accordance with
Article 264 of the Labor Code. Corollarily, the other union members who had merely
participated in the strike but had not committed any illegal acts were not dismissed from
employment. Hence, the NLRC erred in declaring the employment status of all employees
as having been lost or forfeited by virtue of the Dinopol decision.
On the other hand, the Lustria decision involved the unfair labor practices alleged
by the union with particularity. In said case, Labor Arbiter Lustria sided with the Union and
found QCSC guilty of such practices. As a consequence, the affected employees were
granted backwages and separation pay. The grant of backwages and separation pay
however was not premised on the declaration of the illegality of the strike but on the
finding that these affected employees were constructively dismissed from work, as
evidenced by the layoffs effected by the company.
Therefore, with respect to petitioners and union officers Alex J. Santiago, Ma. Cecilia
Pangan, Ronilo E. Lee, and Genaro Bando, who apparently had been substituted by present
petitioner Teresita Bando, the Dinopol decision declaring them as having lost their
employment status still stands.
To recapitulate, the NLRC erred in setting aside the Lustria decision, as well as in
deleting the award of backwages and separation pay, despite the finding that the affected
employees had been constructively dismissed. Based on the foregoing, the Lustria
decision should be upheld and therefore reinstated except as regards the four petitioners.

194

Lockheed Detective &Watchman Agency
GR No. 185918 April 18, 2012
FACTS:
Petitioner Lockheed Detective and Watchman Agency, Inc. (Lockheed) entered into a
contract for security services with respondent University of the Philippines (UP).In 1998, several
security guards assigned to UP filed separate complaints against Lockheed and UP for payment
of underpaid wages, 25% overtime pay, premium pay for rest days and special holidays, holiday
pay, service incentive leave pay, night shift differentials, 13th month pay, refund of cash bond,
refund of deductions for the Mutual Benefits Aids System (MBAS), unpaid wages from December
16-31, 1998, and attorney’s fees. The Labor Arbiter then rendered a decision declaring
respondents Lockheed Detective and Watchman Agency, Inc. and UP to be solidarily liable to
complainants for the claims of the latter which are found to be meritorious. Both Lockheed and
UP appealed the Labor Arbiter’s decision.
NLRC modified the Labor Arbiter’s decision. It dismissed complainants’ claims for
premium pay for work on rest day and special holiday, and 5 days service incentive leave pay,
for lack of basis while, respondent University of the Philippines is still solidarily liable with
Lockheed in the payment of the rest of the claims covering the period of their service contract.
The complaining security guards and UP filed their respective motions for
reconsideration. NLRC denied said motions. As the parties did not appeal the NLRC decision,
the same became final and executor and a writ of execution was then issued but later quashed
by the Labor Arbiter on motion of UP due to disputes regarding the amount of the award. Later,
however, said order quashing the writ was reversed by the NLRC and the Labor Arbiter was
directed to issue a Writ of Execution for the satisfaction of the judgment award in favor of ThirdParty complainants. UP moved to reconsider the NLRC resolution. NLRC upheld its resolution but
with modification that the satisfaction of the judgment award in favor of Lockheed will be only
against the funds of UP which are not identified as public funds. The NLRC order and
resolution having become final, Lockheed filed a motion for the issuance of an alias writ of
execution. The same was granted.
A Notice of Garnishment was issued to Philippine National Bank (PNB) UP Diliman Branch
for the satisfaction of the (inclusive of execution fee). UP filed an Urgent Motion to Quash
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Garnishment. UP contended that the funds being subjected to garnishment at PNB are
government/public funds. UP argued that as public funds, the subject PNB account cannot be
disbursed except pursuant to an appropriation required by law. The Labor Arbiter, however,
dismissed the urgent motion for lack of merit.
The amount was withdrawn by the sheriff from UP’s PNB account. So UP filed a petition
for certiorari before the CA contending that respondents gravely abused their discretion in a
manner amounting to lack or excess of jurisdiction when they, despite prior knowledge, effected
the execution that caused paralyzation and dislocation to petitioner’s governmental functions.
The CA rendered a decision dismissing UP’s petition for certiorari. On reconsideration, however,
the CA issued the assailed Amended Decision. It held that without departing from its findings
that the funds covered in the savings account sought to be garnished do not fall within the
classification of public funds, it reconsiders the dismissal of the petition in light of the ruling in
the case of National Electrification Administration v. Morales which mandates that all
money claims against the government must first be filed with the Commission
on Audit (COA). Lockheed moved to reconsider the amended decision but the same was
denied in the assailed CA Resolution. The CA cited Manila International Airport Authority v. Court
of Appeals which held that UP ranks with MIAA, a government instrumentality exercising
corporate powers but not organized as a stock or non-stock corporation. While said corporations
are government instrumentalities, they are loosely called government corporate entities but not
government-owned and controlled corporations in the strict sense. Hence this petition by
Lockheed.
ISSUES:
WHETHER UP IS A GOVERNMENT ENTITY, SEPARATE AND DISTINCTPERSONALITY FROM
THE NATIONAL GOVERNMENT WITH ITS OWN CHARTER GRANTING IT THE RIGHT TO SUE AND BE
SUED?WHETHER IT CAN AVAIL OF THE IMMUNITY FROM SUIT OF THEGOVERNMENT?
HELD:
The petition has no merit.
The court agrees with UP that there was no point for Lockheed in discussing the doctrine
of state immunity from suit as this was never an issue in this case. Clearly, UP consented to be
sued when it participated in the proceedings below. What UP questions is the hasty garnishment
of its funds in its PNB account. The Court finds that the CA correctly applied the NEA case. Like
NEA, UP is a juridical personality separate and distinct from the government and has
the capacity to sue and be sued.
Thus, also like NEA, it cannot evade execution, and its funds may be subject to
garnishment or levy. However, before execution may be had, a claim for payment of the
judgment award must first be filed with the COA. Under Commonwealth Act No.327, as
amended by Section 26 of P.D. No. 1445, it is the COA which has primary jurisdiction to
examine, audit and settle "all debts and claims of any sort" due from or owing the Government
or any of its subdivisions, agencies and instrumentalities, including government-owned or
controlled corporations and their subsidiaries. With respect to money claims arising from the
implementation of Republic Act No. 6758, their allowance or disallowance is for COA to decide,
subject only to the remedy of appeal by petition for certiorari to this Court. As to the fait
accompli argument of Lockheed, contrary to its claim that there is nothing that can be done
since the funds of UP had already been garnished, since the garnishment was erroneously
carried out and did not go through the proper procedure (the filing of a claim with the COA), UP
is entitled to reimbursement of the garnished funds plus interest of 6% per annum, to be
computed from the time of judicial demand to be reckoned from the time UP filed a petition for
certiorari before the CA which occurred right after the withdrawal of the garnished funds from
PNB. PETITION DENIED.

196

Portillo vs Rudolf Lietz., Inc. et. al.
GR No. 196539, October 10, 2012
FACTS:
In a letter agreement dated 3 May 1991, signed by individual respondent Rudolf Lietz
(Rudolf) and conformed to by Portillo, the latter was hired by the former under the following
terms and conditions:
We acknowledge your proposal in your application specifically to the effect that
you will not engage in any other gainful employment by yourself or with any other
company either directly or indirectly without written consent of [Lietz Inc.], and
we hereby accept and henceforth consider your proposal an undertaking on your
part, a breach of which will render you liable to [Lietz Inc.] for liquidated
damages.
If you are in agreement with these terms and conditions of employment, please
signify your conformity below.4
On her tenth (10th) year with Lietz Inc., specifically on 1 February 2002, Portillo was
promoted to Sales Representative and received a corresponding increase in basic monthly
salary and sales quota. Portillo signed another letter agreement containing a "Goodwill Clause:"
It remains understood and you agreed that, on the termination of your
employment by act of either you or [Lietz Inc.], and for a period of three (3) years
thereafter, you shall not engage directly or indirectly as employee, manager,
proprietor, or solicitor for yourself or others in a similar or competitive business or
the same character of work which you were employed by [Lietz Inc.] to do and
perform. Should you breach this good will clause of this Contract, you shall pay
197

[Lietz Inc.] as liquidated damages the amount of 100% of your gross
compensation over the last 12 months, it being agreed that this sum is
reasonable and just.5
Three (3) years thereafter, on 6 June 2005, Portillo resigned from Lietz Inc. During her
exit interview, Portillo declared that she intended to engage in business—a rice dealership,
selling rice in wholesale.
On 15 June 2005, Lietz Inc. accepted Portillo’s resignation and reminded her of the
"Goodwill Clause" in the last letter agreement she had signed. Upon receipt thereof, Portillo
jotted a note thereon that the latest contract she had signed in February 2004 did not contain
any "Goodwill Clause" referred to by Lietz Inc. In response thereto, Lietz Inc. categorically wrote:
Please be informed that the standard prescription of prohibiting employees from
engaging in business or seeking employment with organizations that directly or
indirectly compete against [Lietz Inc.] for three (3) years after resignation remains
in effect.
The documentation you pertain to is an internal memorandum of your salary
increase, not an employment contract. The absence of the three-year prohibition
clause in this document (or any document for that matter) does not cancel the
prohibition itself. We did not, have not, and will not issue any cancellation of such
in the foreseeable future[.] [T]hus[,] regretfully, it is erroneous of you to believe
otherwise.6
In a subsequent letter dated 21 June 2005, Lietz Inc. wrote Portillo and supposed that the
exchange of correspondence between them regarding the "Goodwill Clause" in the employment
contract was a moot exercise since Portillo’s articulated intention to go into business, selling
rice, will not compete with Lietz Inc.’s products.
Subsequently, Lietz Inc. learned that Portillo had been hired by Ed Keller Philippines,
Limited to head its Pharma Raw Material Department. Ed Keller Limited is purportedly a direct
competitor of Lietz Inc.
Meanwhile, Portillo’s demands from Lietz Inc. for the payment of her remaining salaries
and commissions went unheeded. Lietz Inc. gave Portillo the run around, on the pretext that her
salaries and commissions were still being computed.
On 14 September 2005, Portillo filed a complaint with the National Labor Relations
Commission (NLRC) for non-payment of 1½ months’ salary, two (2) months’ commission, 13th
month pay, plus moral, exemplary and actual damages and attorney’s fees.
In its position paper, Lietz Inc. admitted liability for Portillo’s money claims in the total
amount of P110,662.16. However, Lietz Inc. raised the defense of legal compensation: Portillo’s
money claims should be offset against her liability to Lietz Inc. for liquidated damages in the
amount of ₱869,633.097 for Portillo’s alleged breach of the "Goodwill Clause" in the employment
contract when she became employed with Ed Keller Philippines, Limited. On 25 May 2007, Labor
Arbiter Daniel J. Cajilig granted Portillo’s complaint.
ISSUE:
Whether Portillo’s money claims for unpaid salaries may be offset against respondents’
claim for liquidated damages.
HELD:

Be that as it may, on more than one occasion, to serve the ultimate purpose of all rules
of procedures—attaining substantial justice as expeditiously as possible 15—we have accepted
procedurally incorrect petitions and decided them on the merits. We do the same here.

198

The Court of Appeals anchors its modified ruling on the ostensible causal connection
between Portillo’s money claims and Lietz Inc.’s claim for liquidated damages, both claims
apparently arising from the same employment relations. Thus, did it say:
x x x This Court will have to take cognizance of and consider the "Goodwill
Clause" contained [in] the employment contract signed by and between
[respondents and Portillo]. There is no gainsaying the fact that such "Goodwill
Clause" is part and parcel of the employment contract extended to [Portillo], and
such clause is not contrary to law, morals and public policy. There is thus a causal
connection between [Portillo’s] monetary claims against [respondents] and the
latter’s claim for liquidated damages against the former. Consequently, we should
allow legal compensation or set-off to take place. [Respondents and Portillo] are
both bound principally and, at the same time, are creditors of each other. [Portillo]
is a creditor of [respondents] in the sum of ₱110,662.16 in connection with her
monetary claims against the latter. At the same time, [respondents] are creditors
of [Portillo] insofar as their claims for liquidated damages in the sum of
₱980,295.2516 against the latter is concerned.
We are not convinced.
Paragraph 4 of Article 217 of the Labor Code appears to have caused the reliance by the
Court of Appeals on the "causal connection between [Portillo’s] monetary claims against
[respondents] and the latter’s claim from liquidated damages against the former."
Art. 217. Jurisdiction of Labor Arbiters and the Commission. – (a) Except as
otherwise provided under this code, the Arbiters shall have original and exclusive jurisdiction to
hear and decide, within thirty (30) calendar days after the submission of the case by the parties
for decision without extension, even in the absence of stenographic notes, the following case
involving all workers, whether agricultural or nonagricultural:
xxxx
4. Claims for actual, moral, exemplary and other forms of damages arising from
the employer-employee relations; (Underscoring supplied)
Evidently, the Court of Appeals is convinced that the claim for liquidated damages
emanates from the "Goodwill Clause of the employment contract and, therefore, is a claim for
damages arising from the employer-employee relations."
As early as Singapore Airlines Limited v. Paño,18 we established that not all disputes
between an employer and his employee(s) fall within the jurisdiction of the labor tribunals. We
differentiated between abandonment per se and the manner and consequent effects of such
abandonment and ruled that the first, is a labor case, while the second, is a civil law case.
Upon the facts and issues involved, jurisdiction over the present controversy must be
held to belong to the civil Courts. While seemingly petitioner's claim for damages arises from
employer-employee relations, and the latest amendment to Article 217 of the Labor Code under
PD No. 1691 and BP Blg. 130 provides that all other claims arising from employer-employee
relationship are cognizable by Labor Arbiters [citation omitted], in essence, petitioner's claim for
damages is grounded on the "wanton failure and refusal" without just cause of private
respondent Cruz to report for duty despite repeated notices served upon him of the disapproval
of his application for leave of absence without pay. This, coupled with the further averment that
Cruz "maliciously and with bad faith" violated the terms and conditions of the conversion
training course agreement to the damage of petitioner removes the present controversy from
the coverage of the Labor Code and brings it within the purview of Civil Law.
Clearly, the complaint was anchored not on the abandonment per se by private
respondent Cruz of his job—as the latter was not required in the Complaint to report back to
work—but on the manner and consequent effects of such abandonment of work translated in
terms of the damages which petitioner had to suffer.

199

Stated differently, petitioner seeks protection under the civil laws and claims
no benefits under the Labor Code. The primary relief sought is for liquidated
damages for breach of a contractual obligation. The other items demanded are not
labor benefits demanded by workers generally taken cognizance of in labor disputes,
such as payment of wages, overtime compensation or separation pay. The items
claimed are the natural consequences flowing from breach of an obligation,
intrinsically a civil dispute. The Court, therefore, believes and so holds that the
"money claims of workers" referred to in paragraph 3 of Article 217 embraces money
claims which arise out of or in connection with the employer-employee relationship,
or some aspect or incident of such relationship. Put a little differently, that money
claims of workers which now fall within the original and exclusive jurisdiction of
Labor Arbiters are those money claims which have some reasonable causal
connection with the employer-employee relationship.
We thereafter ruled that the "reasonable causal connection with the employer-employee
relationship" is a requirement not only in employees’ money claims against the employer but is,
likewise, a condition when the claimant is the employer.
In Dai-Chi Electronics Manufacturing Corporation v. Villarama, Jr., we pronounced that a
non-compete clause, as in the "Goodwill Clause" referred to in the present case, with a
stipulation that a violation thereof makes the employee liable to his former employer for
liquidated damages, refers to post-employment relations of the parties. That the "Goodwill
Clause" in this case is likewise a postemployment issue should brook no argument. There is no
dispute as to the cessation of Portillo’s employment with Lietz Inc. 23 She simply claims her
unpaid salaries and commissions, which Lietz Inc. does not contest. At that juncture, Portillo was
no longer an employee of Lietz Inc. 24The "Goodwill Clause" or the "Non-Compete Clause" is a
contractual undertaking effective after the cessation of the employment relationship between
the parties. In accordance with jurisprudence, breach of the undertaking is a civil law dispute,
not a labor law case.
It is clear, therefore, that while Portillo’s claim for unpaid salaries is a money claim that arises
out of or in connection with an employer-employee relationship, Lietz Inc.’s claim against Portillo
for violation of the goodwill clause is a money claim based on an act done after the cessation of
the employment relationship. And, while the jurisdiction over Portillo’s claim is vested in the
labor arbiter, the jurisdiction over Lietz Inc.’s claim rests on the regular courts.
This is, of course, to distinguish from cases of actions for damages where the
employer-employee relationship is merely incidental and the cause of action
proceeds from a different source of obligation. Thus, the jurisdiction of regular
courts was upheld where the damages, claimed for were based on tort [citation
omitted], malicious prosecution [citation omitted], or breach of contract, as when the
claimant seeks to recover a debt from a former employee [citation omitted] or seeks
liquidated damages in enforcement of a prior employment contract. [citation omitted]
Neither can we uphold the reasoning of respondent court that because the resolution of
the issues presented by the complaint does not entail application of the Labor Code or other
labor laws, the dispute is intrinsically civil. Article 217(a) of the Labor Code, as amended, clearly
bestows upon the Labor Arbiter original and exclusive jurisdiction over claims for damages
arising from employer-employee relations─in other words, the Labor Arbiter has jurisdiction to
award not only the reliefs provided by labor laws, but also damages governed by the Civil Code.
In the case at bar, the difference in the nature of the credits that one has against the other,
conversely, the nature of the debt one owes another, which difference in turn results in the
difference of the forum where the different credits can be enforced, prevents the application of
compensation. Simply, the labor tribunal in an employee’s claim for unpaid wages is without
authority to allow the compensation of such claims against the post employment claim of the
former employer for breach of a post employment condition. The labor tribunal does not have
jurisdiction over the civil case of breach of contract.

200

Certainly, the present Labor Code is even more committed to the view that on policy
grounds, and equally so in the interest of greater promptness in the disposition of labor matters,
a court is spared the often onerous task of determining what essentially is a factual matter,
namely, the damages that may be incurred by either labor or management as a result of
disputes or controversies arising from employer-employee relations.
There is no causal connection between the petitioner employees’ claim for unpaid wages
and the respondent employers’ claim for damages for the alleged "Goodwill Clause" violation.
Portillo’s claim for unpaid salaries did not have anything to do with her alleged violation of the
employment contract as, in fact, her separation from employment is not "rooted" in the alleged
contractual violation. She resigned from her employment. She was not dismissed. Portillo’s
entitlement to the unpaid salaries is not even contested. Indeed, Lietz Inc.’s argument about
legal compensation necessarily admits that it owes the money claimed by Portillo.
The alleged contractual violation did not arise during the existence of the employeremployee relationship. It was a post-employment matter, a post-employment violation.
Reminders are apt. That is provided by the fairly recent case of Yusen Air and Sea Services
Phils., Inc. v. Villamor,31 which harked back to the previous rulings on the necessity of
"reasonable causal connection" between the tortious damage and the damage arising from the
employer-employee relationship. Yusen proceeded to pronounce that the absence of the
connection results in the absence of jurisdiction of the labor arbiter. Importantly, such absence
of jurisdiction cannot be remedied by raising before the labor tribunal the tortious damage as a
defense. Thus:
When, as here, the cause of action is based on a quasi-delict or tort, which has no
reasonable causal connection with any of the claims provided for in Article 217,
jurisdiction over the action is with the regular courts. As it is, petitioner does not
ask for any relief under the Labor Code. It merely seeks to recover damages
based on the parties’ contract of employment as redress for respondent’s breach
thereof. Such cause of action is within the realm of Civil Law, and jurisdiction over
the controversy belongs to the regular courts. More so must this be in the present
case, what with the reality that the stipulation refers to the postemployment
relations of the parties.
For sure, a plain and cursory reading of the complaint will readily reveal that the subject
matter is one of claim for damages arising from a breach of contract, which is within the ambit
of the regular court’s jurisdiction. Indeed, the application of compensation in this case is
effectively barred by Article 113 of the Labor Code which prohibits wage deductions except in
three circumstances:
(a) In cases where the worker is insured with his consent by the employer, and the
deduction is to recompense the employer for the amount paid by him as premium on the
insurance;
(b) For union dues, in cases where the right of the worker or his union to check-off has
been recognized by the employer or authorized in writing by the individual worker
concerned; and
(c) In cases where the employer is authorized by law or regulations issued by the
Secretary of Labor.
PETITION GRANTED.
Building Care Corp. vs Macaraeg
GR No. 198357 December 10, 2012
FACTS:
Petitioners are in the business of providing security services to their clients. They hired
respondent as a security guard beginning August 25, 1996, assigning her at Genato Building in
Caloocan City. However, on March 9, 2008, respondent was relieved of her post. She was re201

assigned to Bayview Park Hotel from March 9-13, 2008, but after said period, she was allegedly
no longer given any assignment. Thus, on September 9, 2008, respondent filed a complaint
against petitioners for illegal dismissal, underpayment of salaries, non-payment of separation
pay and refund of cash bond. Conciliation and mediation proceedings failed, so the parties were
ordered to submit their respective position papers.
Respondent claimed that petitioners failed to give her an assignment for more than nine
months, amounting to constructive dismissal, and this compelled her to file the complaint for
illegal dismissal.
On the other hand, petitioners alleged in their position paper that respondent was
relieved from her post as requested by the client because of her habitual tardiness, persistent
borrowing of money from employees and tenants of the client, and sleeping on the job.
Petitioners allegedly directed respondent to explain why she committed such infractions, but
respondent failed to heed such order. Respondent was nevertheless temporarily assigned to
Bayview Park Hotel from March 9-13, 2008, but she also failed to meet said client's standards
and her posting thereat was not extended.
Respondent then filed an administrative complaint for illegal dismissal with the PNPSecurity Agencies and Guard Supervision Division on June 18, 2008, but she did not attend the
conference hearings for said case. Petitioners brought to the conference hearings a new
assignment order detailing respondent at the Ateneo de Manila University but, due to her
absence, petitioners failed to personally serve respondent said assignment order. Petitioners
then sent respondent a letter ordering her to report to headquarters for work assignment, but
respondent did not comply with said order. Instead, respondent filed a complaint for illegal
dismissal with the Labor Arbiter. On May 13, 2009, the Labor Arbiter rendered a Decision,
dismissing the charge of illegal dismissal as wanting in merit but ordering the Respondents
Leopard Security and Investigation Agency and Rupert Protacio to pay complainant a financial
assistance in the amount of P5,000.00.
Respondent then filed a Notice of Appeal with the National Labor Relations Commission
(NLRC), but in a Decision dated October 23, 2009, the NLRC dismissed the appeal for having
been filed out of time, thereby declaring that the Labor Arbiter's Decision had become final and
executory on June 16, 2009.8
Respondent elevated the case to the CA via a petition for certiorari, and on March 24,
2011, the CA promulgated its Decision, granting the petition for certiorari. Petitioners' motion
for reconsideration of the aforequoted Decision was denied per Resolution dated August 19,
2011. Hence, the present petition
ISSUE:
Whether the CA erred in liberally applying the rules of procedure and ruling that
respondent's appeal should be allowed and resolved on the merits despite having been filed out
of time.
HELD:
The Court cannot sustain the CA's
liberal application, or suspension of the
exception to the well-settled principle
administration of justice. In Marohomsalic

Decision. It should be emphasized that the resort to a
application of procedural rules, must remain as the
that rules must be complied with for the orderly
v. Cole,10 the Court stated:

While procedural rules may be relaxed in the interest of justice, it is well-settled
that these are tools designed to facilitate the adjudication of cases. The relaxation
of procedural rules in the interest of justice was never intended to be a license for
erring litigants to violate the rules with impunity. Liberality in the interpretation
and application of the rules can be invoked only in proper cases and under
justifiable causes and circumstances. While litigation is not a game of

202

technicalities, every case must be prosecuted in accordance with the prescribed
procedure to ensure an orderly and speedy administration of justice.
We must stress that the bare invocation of "the interest of substantial justice" line
is not some magic want that will automatically compel this Court to suspend
procedural rules. Procedural rules are not to be belittled, let alone dismissed
simply because their non-observance may have resulted in prejudice to a party's
substantial rights. Utter disregard of the rules cannot be justly rationalized by
harping on the policy of liberal construction. 13
In this case, the justifications given by the CA for its liberality by choosing to overlook
the belated filing of the appeal are, the importance of the issue raised, i.e., whether respondent
was illegally dismissed; and the belief that respondent should be "afforded the amplest
opportunity for the proper and just determination of his cause, free from the constraints of
technicalities, considering that the belated filing of respondent's appeal before the NLRC was
the fault of respondent's former counsel. Note, however, that neither respondent nor her former
counsel gave any explanation or reason citing extraordinary circumstances for her lawyer's
failure to abide by the rules for filing an appeal. Respondent merely insisted that she had not
been remiss in following up her case with said lawyer.
It is, however, an oft-repeated ruling that the negligence and mistakes of counsel bind
the client. A departure from this rule would bring about never-ending suits, so long as lawyers
could allege their own fault or negligence to support the client’s case and obtain remedies and
reliefs already lost by the operation of law. 15 The only exception would be, where the lawyer's
gross negligence would result in the grave injustice of depriving his client of the due process of
law.16 In this case, there was no such deprivation of due process. Respondent was able to fully
present and argue her case before the Labor Arbiter. She was accorded the opportunity to be
heard. Her failure to appeal the Labor Arbiter's Decision cannot, therefore, be deemed as a
deprivation of her right to due process.
The right to appeal is not a natural right or part of due process; it is merely a statutory
privilege and may be exercised only in the manner and in accordance with the provisions of law.
Thus, one who seeks to avail of the right to appeal must strictly comply with the requirements of
the rules, and failure to do so leads to the loss of the right to appeal.
It should also be borne in mind that the right of the winning party to enjoy the finality of
the resolution of the case is also an essential part of public policy and the orderly administration
of justice. Hence, such right is just as weighty or equally important as the right of the losing
party to appeal or seek reconsideration within the prescribed period.
When the Labor Arbiter's Decision became final, petitioners attained a vested right to
said judgment. They had the right to fully rely on the immutability of said Decision. Petition is
granted.

203

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