Cases on Labor Standard Midterm 2014 Part 1

8/11/2019 Cases on Labor Standard Midterm 2014 Part 1

1/41

CASES ON LABOR STANDARDS MID-TERM 2014 PART 1

1

Republic of the Philippines

SUPREME COURT

Baguio City

FIRST DIVISION

G.R. No. 118506 April 18, 1997

NORMA MABEZA, petitioner,

vs.

NATIONAL LABOR RELATIONS COMMISSION, PETER NG/HOTEL SUPREME, respondents.

KAPUNAN, J.:

This petition seeking the nullification of a resolution of public respondent National Labor Relations

Commission dated April 28, 1994 vividly illustrates why courts should be ever vigilant in the preservation of

the constitutionally enshrined rights of the working class. Without the protection accorded by our laws and the

tempering of courts, the natural and historical inclination of capital to ride roughshod over the rights of labor

would run unabated.

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

Petitioner Norma Mabeza contends that around the first week of May, 1991, she and her co-employees at the

Hotel Supreme in Baguio City were asked by the hotel's management to sign an instrument attesting to the

latter's compliance with minimum wage and other labor standard provisions of law. 1 The instrument provides:

2

JOINT AFFIDAVIT

We, SYLVIA IGANA, HERMINIGILDO AQUINO, EVELYN OGOY, MACARIA JUGUETA, ADELAIDA NONOG,

NORMA MABEZA, JONATHAN PICART and JOSE DIZON, all of legal ages (sic), Filipinos and residents of

Baguio City, under oath, depose and say:

1. That we are employees of Mr. Peter L. Ng of his Hotel Supreme situated at No. 416 Magsaysay Ave.,

Baguio City.

2. That the said Hotel is separately operated from the Ivy's Grill and Restaurant;

3. That we are all (8) employees in the hotel and assigned in each respective shifts;

4. That we have no complaints against the management of the Hotel Supreme as we are paid accordingly

and that we are treated well.


2/41


2

5. That we are executing this affidavit voluntarily without any force or intimidation and for the purpose of

informing the authorities concerned and to dispute the alleged report of the Labor Inspector of the

Department of Labor and Employment conducted on the said establishment on February 2, 1991.

IN WITNESS WHEREOF, we have hereunto set our hands this 7th day of May, 1991 at Baguio City, Philippines.

(Sgd.) (Sgd.) (Sgd.)

SYLVIA IGAMA HERMINIGILDO AQUINO EVELYN OGOY

(Sgd.) (Sgd.) (Sgd.)

MACARIA JUGUETA ADELAIDA NONOG NORMA MABEZA.

(Sgd.) (Sgd.)

JONATHAN PICART JOSE DIZON

SUBSCRIBED AND SWORN to before me this 7th day of May, 1991, at Baguio City, Philippines.

Asst. City Prosecutor

Petitioner signed the affidavit but refused to go to the City Prosecutor's Office to swear to the veracity and

contents of the affidavit as instructed by management. The affidavit was nevertheless submitted on the same

day to the Regional Office of the Department of Labor and Employment in Baguio City.

As gleaned from the affidavit, the same was drawn by management for the sole purpose of refuting findings of

the Labor Inspector of DOLE (in an inspection of respondent's establishment on February 2, 1991) apparentlyadverse to the private respondent. 3

After she refused to proceed to the City Prosecutor's Office on the same day the affidavit was submitted to

the Cordillera Regional Office of DOLE petitioner avers that she was ordered by the hotel management to

turn over the keys to her living quarters and to remove her belongings from the hotel

premises. 4 According to her, respondent strongly chided her for refusing to proceed to the City Prosecutor's

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

denied by management. When she attempted to return to work on May 10, 1991, the hotel's cashier, Margarita

Choy, informed her that she should not report to work and, instead, continue with her unofficial leave of

absence. Consequently, on May 13, 1991, three days after her attempt to return to work, petitioner filed acomplaint for illegal dismissal before the Arbitration Branch of the National Labor Relations Commission

CAR Baguio City. In addition to her complaint for illegal dismissal, she alleged underpayment of wages, non-

payment of holiday pay, service incentive leave pay, 13th month pay, night differential and other benefits. The

complaint was docketed as NLRC Case No. RAB-CAR-05-0198-91 and assigned to Labor Arbiter Felipe P. Pati.

Responding to the allegations made in support of petitioner's complaint for illegal dismissal, private respondent

Peter Ng alleged before Labor Arbiter Pati that petitioner "surreptitiously left (her job) without notice to the

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

money claims for underpayment and other benefits as these were paid in the form of facilities to petitioner and

the hotel's other employee. 7 Pointing to the Affidavit of May 7, 1991, the private respondent asserted that his

employees actually have no problems with management. In a supplemental answer submitted eleven (11)

months after the original complaint for illegal dismissal was filed, private respondent raised a new ground, loss

of confidence, which was supported by a criminal complaint for Qualified Theft he filed before the prosecutor's

office of the City of Baguio against petitioner on July 4, 1991. 8


3/41


3

On May 14, 1993, Labor Arbiter Pati rendered a decision dismissing petitioner's complaint on the ground of

loss of confidence. His disquisitions in support of his conclusion read as follows:

It appears from the evidence of respondent that complainant carted away or stole one (1) blanket, 1 piece

bedsheet, 1 piece thermos, 2 pieces towel (Exhibits "9", "9-A," "9-B," "9-C" and "10" pages 12-14 TSN, December

1, 1992).

In fact, this was the reason why respondent Peter Ng lodged a criminal complaint against complainant for

qualified theft and perjury. The fiscal's office finding a prima facie evidence that complainant committed the

crime of qualified theft issued a resolution for its filing in court but dismissing the charge of perjury (Exhibit

"4" for respondent and Exhibit "B-7" for complainant). As a consequence, complainant was charged in court for

the said crime (Exhibit "5" for respondent and Exhibit "B-6" for the complainant).

With these pieces of evidence, complainant committed serious misconduct against her employer which is one

of the just and valid grounds for an employer to terminate an employee (Article 282 of the Labor Code asamended). 9

On April 28, 1994, respondent NLRC promulgated its assailed

Resolution 10 affirming the Labor Arbiter's decision. The resolution substantially incorporated the findings

of the Labor Arbiter. 11 Unsatisfied, petitioner instituted the instant special civil action for certiorari under Rule

65 of the Rules of Court on the following grounds: 12

1. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION

COMMITTED A PATENT AND PALPABLE ERROR AMOUNTING TO GRAVE ABUSE OF DISCRETION IN ITS

FAILURE TO CONSIDER THAT THE ALLEGED LOSS OF CONFIDENCE IS A FALSE CAUSE AND ANAFTERTHOUGHT ON THE PART OF THE RESPONDENT-EMPLOYER TO JUSTIFY, ALBEIT ILLEGALLY, THE

DISMISSAL OF THE COMPLAINANT FROM HER EMPLOYMENT;


COMMITTED A PATENT AND PALPABLE ERROR AMOUNTING TO GRAVE ABUSE OF DISCRETION IN

ADOPTING THE RULING OF THE LABOR ARBITER THAT THERE WAS NO UNDERPAYMENT OF WAGES

AND BENEFITS ON THE BASIS OF EXHIBIT "8" (AN UNDATED SUMMARY OF COMPUTATION PREPARED

BY ALLEGEDLY BY RESPONDENT'S EXTERNAL ACCOUNTANT) WHICH IS TOTALLY INADMISSIBLE AS AN

EVIDENCE TO PROVE PAYMENT OF WAGES AND BENEFITS;


COMMITTED A PATENT AND PALPABLE ERROR AMOUNTING TO GRAVE ABUSE OF DISCRETION IN

FAILING TO CONSIDER THE EVIDENCE ADDUCED BEFORE THE LABOR ARBITER AS CONSTITUTING

UNFAIR LABOR PRACTICE COMMITTED BY THE RESPONDENT.

The Solicitor General, in a Manifestation in lieu of Comment dated August 8, 1995 rejects private respondent's

principal claims and defenses and urges this Court to set aside the public respondent's assailed resolution. 13

We agree.

It is settled that in termination cases the employer bears the burden of proof to show that the dismissal is for

just cause, the failure of which would mean that the dismissal is not justified and the employee is entitled to

reinstatement. 14


4/41


4

In the case at bar, the private respondent initially claimed that petitioner abandoned her job when she failed to

return to work on May 8, 1991. Additionally, in order to strengthen his contention that there existed sufficient

cause for the termination of petitioner, he belatedly included a complaint for loss of confidence, supporting this

with charges that petitioner had stolen a blanket, a bedsheet and two towels from the hotel. 15 Appended to

his last complaint was a suit for qualified theft filed with the Baguio City prosecutor's office.

From the evidence on record, it is crystal clear that the circumstances upon which private respondent anchored

his claim that petitioner "abandoned" her job were not enough to constitute just cause to sanction the

termination of her services under Article 283 of the Labor Code. For abandonment to arise, there must be

concurrence of two things: 1) lack of intention to work; 16 and 2) the presence of overt acts signifying the

employee's intention not to work. 17

In the instant case, respondent does not dispute the fact that petitioner tried to file a leave of absence when

she learned that the hotel management was displeased with her refusal to attest to the affidavit. The fact that

she made this attempt clearly indicates not an intention to abandon but an intention to return to work afterthe period of her leave of absence, had it been granted, shall have expired.

Furthermore, while absence from work for a prolonged period may suggest abandonment in certain instances,

mere absence of one or two days would not be enough to sustain such a claim. The overt act (absence) ought

to unerringly point to the fact that the employee has no intention to return to work, 18 which is patently not

the case here. In fact, several days after she had been advised to take an informal leave, petitioner tried to

resume working with the hotel, to no avail. It was only after she had been repeatedly rebuffed that she filed a

case for illegal dismissal. These acts militate against the private respondent's claim that petitioner abandoned

her job. As the Solicitor General in his manifestation observed:

Petitioner's absence on that day should not be construed as abandonment of her job. She did not report

because the cashier told her not to report anymore, and that private respondent Ng did not want to see her in

the hotel premises. But two days later or on the 10th of May, after realizing that she had to clarify her

employment status, she again reported for work. However, she was prevented from working by private

respondents. 19

We now come to the second cause raised by private respondent to support his contention that petitioner was

validly dismissed from her job.

Loss of confidence as a just cause for dismissal was never intended to provide employers with a blank check forterminating their employees. Such a vague, all-encompassing pretext as loss of confidence, if unqualifiedly given

the seal of approval by this Court, could readily reduce to barren form the words of the constitutional

guarantee of security of tenure. Having this in mind, loss of confidence should ideally apply only to cases

involving employees occupying positions of trust and confidence or to those situations where the employee is

routinely charged with the care and custody of the employer's money or property. To the first class belong

managerial employees, i.e., those vested with the powers or prerogatives to lay down management policies

and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees or effectively

recommend such managerial actions; and to the second class belong cashiers, auditors, property custodians,

etc., or those who, in the normal and routine exercise of their functions, regularly handle significant amounts of

money or property. Evidently, an ordinary chambermaid who has to sign out for linen and other hotel property

from the property custodian each day and who has to account for each and every towel or bedsheet utilized by

the hotel's guests at the end of her shift would not fall under any of these two classes of employees for which

loss of confidence, if ably supported by evidence, would normally apply. Illustrating this distinction, this Court

in Marina Port Services, Inc. vs. NLRC, 20 has stated that:


5/41


5

To be sure, every employee must enjoy some degree of trust and confidence from the employer as that is one

reason why he was employed in the first place. One certainly does not employ a person he distrusts. Indeed,

even the lowly janitor must enjoy that trust and confidence in some measure if only because he is the one who

opens the office in the morning and closes it at night and in this sense is entrusted with the care or protection

of the employer's property. The keys he holds are the symbol of that trust and confidence.

By the same token, the security guard must also be considered as enjoying the trust and confidence of his

employer, whose property he is safeguarding. Like the janitor, he has access to this property. He too, is charged

with its care and protection.

Notably, however, and like the janitor again, he is entrusted only with the physical task of protecting that

property. The employer's trust and confidence in him is limited to that ministerial function. He is not

entrusted, in the Labor Arbiter's words, with the duties of safekeeping and safeguarding company policies,

management instructions, and company secrets such as operation devices. He is not privy to these confidential

matters, which are shared only in the higher echelons of management. It is the persons on such levels who,because they discharge these sensitive duties, may be considered holding positions of trust and confidence. The

security guard does not belong in such category. 21

More importantly, we have repeatedly held that loss of confidence should not be simulated in order to justify

what would otherwise be, under the provisions of law, an illegal dismissal. "It should not be used as a

subterfuge for causes which are illegal, improper and unjustified. It must be genuine, not a mere afterthought

to justify an earlier action taken in bad faith." 22

In the case at bar, the suspicious delay in private respondent's filing of qualified theft charges against petitioner

long after the latter exposed the hotel's scheme (to avoid its obligations as employer under the Labor Code) byher act of filing illegal dismissal charges against the private respondent would hardly warrant serious

consideration of loss of confidence as a valid ground for dismissal. Notably, the Solicitor General has himself

taken a position opposite the public respondent and has observed that:

If petitioner had really committed the acts charged against her by private respondents (stealing supplies of

respondent hotel), private respondents should have confronted her before dismissing her on that ground.

Private respondents did not do so. In fact, private respondent Ng did not raise the matter when petitioner went

to see him on May 9, 1991, and handed him her application for leave. It took private respondents 52 days or up

to July 4, 1991 before finally deciding to file a criminal complaint against petitioner, in an obvious attempt to

build a case against her.

The manipulations of private respondents should not be countenanced. 23

Clearly, the efforts to justify petitioner's dismissal on top of the private respondent's scheme of inducing his

employees to sign an affidavit absolving him from possible violations of the Labor Code taints with evident

bad faith and deliberate malice petitioner's summary termination from employment.

Having said this, we turn to the important question of whether or not the dismissal by the private respondent

of petitioner constitutes an unfair labor practice.

The answer in this case must inevitably be in the affirmative.

The pivotal question in any case where unfair labor practice on the part of the employer is alleged is whether

or not the employer has exerted pressure, in the form of restraint, interference or coercion, against his

employee's right to institute concerted action for better terms and conditions of employment. Without doubt,


6/41


7/41


7

lodging) but the purpose. 31 Considering, therefore, that hotel workers are required to work different shifts

and are expected to be available at various odd hours, their ready availability is a necessary matter in the

operations of a small hotel, such as the private respondent's hotel.

It is therefore evident that petitioner is entitled to the payment of the deficiency in her wages equivalent to the

full wage applicable from May 13, 1988 up to the date of her illegal dismissal.

Additionally, petitioner is entitled to payment of service incentive leave pay, emergency cost of living allowance,

night differential pay, and 13th month pay for the periods alleged by the petitioner as the private respondent

has never been able to adduce proof that petitioner was paid the aforestated benefits.

However, the claims covering the period of October 1987 up to the time of filing the case on May 13, 1988 are

barred by prescription as P.D. 442 (as amended) and its implementing rules limit all money claims arising out

of employer-employee relationship to three (3) years from the time the cause of action accrues. 32

We depart from the settled rule that an employee who is unjustly dismissed from work normally should be

reinstated without loss of seniority rights and other privileges. Owing to the strained relations between

petitioner and private respondent, allowing the former to return to her job would only subject her to possible

harassment and future embarrassment. In the instant case, separation pay equivalent to one month's salary for

every year of continuous service with the private respondent would be proper, starting with her job at the

Belfront Hotel.

In addition to separation pay, backwages are in order. Pursuant to R.A. 6715 and our decision in Osmalik

Bustamante, et al. vs. National Labor Relations Commission, 33 petitioner is entitled to full backwages from the

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

Finally, in dismissal cases, the law requires that the employer must furnish the employee sought to be

terminated from employment with two written notices before the same may be legally effected. The first is a

written notice containing a statement of the cause(s) for dismissal; the second is a notice informing the

employee of the employer's decision to terminate him stating the basis of the dismissal. During the process

leading to the second notice, the employer must give the employee ample opportunity to be heard and defend

himself, with the assistance of counsel if he so desires.

Given the seriousness of the second cause (qualified theft) of the petitioner's dismissal, it is noteworthy that

the private respondent never even bothered to inform petitioner of the charges against her. Neither waspetitioner given the opportunity to explain the loss of the articles. It was only almost two months after

petitioner had filed a complaint for illegal dismissal, as an afterthought, that the loss was reported to the police

and added as a supplemental answer to petitioner's complaint. Clearly, the dismissal of petitioner without the

benefit of notice and hearing prior to her termination violated her constitutional right to due process. Under

the circumstance an award of One Thousand Pesos (P1,000.00) on top of payment of the deficiency in wages

and benefits for the period aforestated would be proper.

WHEREFORE, premises considered, the RESOLUTION of the National Labor Relations Commission dated April

24, 1994 is REVERSED and SET ASIDE, with costs. For clarity, the economic benefits due the petitioner are

hereby summarized as follows:

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

dismissal;

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


8/41


8

3) Separation pay equal to one month's salary for every year of petitioner's continuous service with the

private respondent starting with her job at the Belfront Hotel;

4) Full backwages, without qualification or deduction, from the date of petitioner's illegal dismissal up to

the date of promulgation of this decision pursuant to our ruling in Bustamante vs. NLRC. 34

5) P1,000.00.

ORDERED.

Padilla, Bellosillo and Vitug, JJ., concur.

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


SUPREME COURT

Manila


9/41


9

THIRD DIVISION

G.R. No. 102132. March 19, 1993.

DAVAO INTEGRATED PORT STEVEDORING SERVICES, petitioner, vs. RUBEN V. ABARQUEZ, in his capacity

as an accredited Voluntary Arbitrator and THE ASSOCIATION OF TRADE UNIONS (ATU-TUCP), respondents.

Libron, Gaspar & Associates for petitioner.

Bansalan B. Metilla for Association of Trade Unions (ATUTUCP).

SYLLABUS

1. LABOR LAWS AND SOCIAL LEGISLATION; LABOR RELATIONS; COLLECTIVE BARGAINING

AGREEMENT; DEFINED; NATURE THEREOF; CONSTRUCTION TO BE PLACED THEREON. A collective

bargaining agreement (CBA), as used in Article 252 of the Labor Code, refers to a contract executed upon

request of either the employer or the exclusive bargaining representative incorporating the agreement reached

after negotiations with respect to wages, hours of work and all other terms and conditions of employment,

including proposals for adjusting any grievances or questions arising under such agreement. While the terms

and conditions of a CBA constitute the law between the parties, it is not, however, an ordinary contract to

which is applied the principles of law governing ordinary contracts. A CBA, as a labor contract within the

contemplation of Article 1700 of the Civil Code of the Philippines which governs the relations between labor

and capital, is not merely contractual in nature but impressed with public interest, thus, it must yield to thecommon good. As such, it must be construed liberally rather than narrowly and technically, and the courts

must place a practical and realistic construction upon it, giving due consideration to the context in which it is

negotiated and purpose which it is intended to serve.

2. ID.; ID.; ID.; ID.; ID.; ID.; CASE AT BAR. It is thus erroneous for petitioner to isolate Section 1,

Article VIII of the 1989 CBA from the other related section on sick leave with pay benefits, specifically Section

3 thereof, in its attempt to justify the discontinuance or withdrawal of the privilege of commutation or

conversion to cash of the unenjoyed portion of the sick leave benefit to regular intermittent workers. The

manner they were deprived of the privilege previously recognized and extended to them by petitioner-company

during the lifetime of the CBA of October 16, 1985 until three (3) months from its renewal on April 15, 1989,or a period of three (3) years and nine (9) months, is not only tainted with arbitrariness but likewise

discriminatory in nature. It must be noted that the 1989 CBA has two (2) sections on sick leave with pay

benefits which apply to two (2) distinct classes of workers in petitioner's company, namely: (1) the regular non-

intermittent workers or those workers who render a daily eight-hour service to the company and are governed

by Section 1, Article VIII of the 1989 CBA; and (2) intermittent field workers who are members of the regular

labor pool and the present regular extra labor pool as of the signing of the agreement on April 15, 1989 or

those workers who have irregular working days and are governed by Section 3, Article VIII of the 1989 CBA. It

is not disputed that both classes of workers are entitled to sick leave with pay benefits provided they comply

with the conditions set forth under Section 1 in relation to the last paragraph of Section 3, to wit: (1) the

employee-applicant must be regular or must have rendered at least one year of service with the company; and

(2) the application must be accompanied by a certification from a company-designated physician. the phrase

"herein sick leave privilege," as used in the last sentence of Section 1, refers to the privilege of having a fixed 15 -

day sick leave with pay which, as mandated by Section 1, only the non-intermittent workers are entitled to. This

fixed 15-day sick leave with pay benefit should be distinguished from the variable number of days of sick leave,

not to exceed 15 days, extended to intermittent workers under Section 3 depending on the number of hours of


10/41


10

service rendered to the company, including overtime pursuant to the schedule provided therein. It is only fair

and reasonable for petitioner-company not to stipulate a fixed 15-day sick leave with pay for its regular

intermittent workers since, as the term "intermittent" implies, there is irregularity in their work-days.

Reasonable and practical interpretation must be placed on contractual provisions. Interpetatio fienda est ut res

magis valeat quam pereat. Such interpretation is to be adopted, that the thing may continue to have efficacy

rather than fail.

3. ID.; ID.; ID.; SICK LEAVE BENEFITS; NATURE AND PURPOSE. Sick leave benefits, like other

economic benefits stipulated in the CBA such as maternity leave and vacation leave benefits, among others, are

by their nature, intended to be replacements for regular income which otherwise would not be earned because

an employee is not working during the period of said leaves. They are non-contributory in nature, in the sense

that the employees contribute nothing to the operation of the benefits. By their nature, upon agreement of the

parties, they are intended to alleviate the economic condition of the workers.

4. ID.; ID.; JURISDICTION OF VOLUNTARY ARBITRATOR; CASE AT BAR. Petitioner-company'sobjection to the authority of the Voluntary Arbitrator to direct the commutation of the unenjoyed portion of

the sick leave with pay benefits of intermittent workers in his decision is misplaced. Article 261 of the Labor

Code is clear. The questioned directive of the herein public respondent is the necessary consequence of the

exercise of his arbitral power as Voluntary Arbitrator under Article 261 of the Labor Code "to hear and decide

all unresolved grievances arising from the interpretation or implementation of the Collective Bargaining

Agreement." We, therefore, find that no grave abuse of discretion was committed by public respondent in

issuing the award (decision). Moreover, his interpretation of Sections 1 and 3, Article VIII of the 1989 CBA

cannot be faulted with and is absolutely correct.

5. ID.; CONDITIONS OF EMPLOYMENT; PROHIBITION AGAINST ELIMINATION OR DIMINUTION OFBENEFITS; BENEFITS GRANTED PURSUANT TO COMPANY PRACTICE OR POLICY CANNOT BE

PEREMPTORILY WITHDRAWN. Whatever doubt there may have been early on was clearly obliterated when

petitioner-company recognized the said privilege and paid its intermittent workers the cash equivalent of the

unenjoyed portion of their sick leave with pay benefits during the lifetime of the CBA of October 16, 1985 until

three (3) months from its renewal on April 15, 1989. Well-settled is it that the said privilege of commutation or

conversion to cash, being an existing benefit, the petitioner-company may not unilaterally withdraw, or

diminish such benefits. It is a fact that petitioner-company had, on several instances in the past, granted and

paid the cash equivalent of the unenjoyed portion of the sick leave benefits of some intermittent workers.

Under the circumstances, these may be deemed to have ripened into company practice or policy which cannot

be peremptorily withdrawn.

D E C I S I O N

ROMERO, J p:

In this petition for certiorari, petitioner Davao Integrated Port Services Corporation seeks to reverse the Award

1 issued on September 10, 1991 by respondent Ruben V. Abarquez, in his capacity as Voluntary Arbitrator of the

National Conciliation and Mediation Board, Regional Arbitration Branch XI in Davao City in Case No. AC-211-

BX1-10-003-91 which directed petitioner to grant and extend the privilege of commutation of the unenjoyed

portion of the sick leave with pay benefits to its intermittent field workers who are members of the regular

labor pool and the present regular extra pool in accordance with the Collective Bargaining Agreement (CBA)

executed between petitioner and private respondent Association of Trade Unions (ATU-TUCP), from the time

it was discontinued and henceforth.

The facts are as follows:


11/41


11

Petitioner Davao Integrated Port Stevedoring Services (petitioner-company) and private respondent ATU-TUCP

(Union), the exclusive collective bargaining agent of the rank and file workers of petitioner-company, entered

into a collective bargaining agreement (CBA) on October 16, 1985 which, under Sections 1 and 3, Article VIII

thereof, provide for sick leave with pay benefits each year to its employees who have rendered at least one (1)

year of service with the company, thus:

"ARTICLE VIII

Section 1. Sick Leaves The Company agrees to grant 15 days sick leave with pay each year to every

regular non-intermittent worker who already rendered at least one year of service with the company. However,

such sick leave can only be enjoyed upon certification by a company designated physician, and if the same is

not enjoyed within one year period of the current year, any unenjoyed portion thereof, shall be converted to

cash and shall be paid at the end of the said one year period. And provided however, that only those regular

workers of the company whose work are not intermittent, are entitled to the herein sick leave privilege.

xxx xxx xxx

Section 3. All intermittent field workers of the company who are members of the Regular Labor Pool shall

be entitled to vacation and sick leaves per year of service with pay under the following schedule based on the

number of hours rendered including overtime, to wit:

Hours of Service Per Vacation Sick Leave

Calendar Year Leave

Less than 750 NII NII

751 825 6 days 6 days

826 900 7 7

901 925 8 8

926 1,050 9 9

1,051 1,125 10 10

1,126 1,200 11 11

1,201 1,275 12 12

1,276 1,350 13 13

1,351 1,425 14 14

1,426 1,500 15 15

The conditions for the availment of the herein vacation and sick leaves shall be in accordance with the above

provided Sections 1 and 2 hereof, respectively."


12/41


12

Upon its renewal on April 15, 1989, the provisions for sick leave with pay benefits were reproduced under

Sections 1 and 3, Article VIII of the new CBA, but the coverage of the said benefits was expanded to include the

"present Regular Extra Labor Pool as of the signing of this Agreement." Section 3, Article VIII, as revised,

provides, thus:

"Section 3. All intermittent field workers of the company who are members of the Regular Labor Pool and

present Regular Extra Labor Pool as of the signing of this agreement shall be entitled to vacation and sick

leaves per year of service with pay under the following schedule based on the number of hours rendered

including overtime, to wit:

Hours of Service Per Vacation Sick Leave

Calendar Year Leave

Less than 750 NII NII

751 825 6 days 6 days

826 900 7 7

901 925 8 8

926 1,050 9 9

1,051 1,125 10 10

1,126 1,200 11 11

1,201 1,275 12 12

1,276 1,350 13 13

1,351 1,425 14 14

1,426 1,500 15 15

The conditions for the availment of the herein vacation and sick leaves shall be in accordance with the above

provided Sections 1 and 2 hereof, respectively."

During the effectivity of the CBA of October 16, 1985 until three (3) months after its renewal on April 15, 1989,

or until July 1989 (a total of three (3) years and nine (9) months), all the field workers of petitioner who are

members of the regular labor pool and the present regular extra labor pool who had rendered at least 750

hours up to 1,500 hours were extended sick leave with pay benefits. Any unenjoyed portion thereof at the end

of the current year was converted to cash and paid at the end of the said one-year period pursuant to Sections

1 and 3, Article VIII of the CBA. The number of days of their sick leave per year depends on the number of

hours of service per calendar year in accordance with the schedule provided in Section 3, Article VIII of the

CBA.


13/41


13

The commutation of the unenjoyed portion of the sick leave with pay benefits of the intermittent workers or

its conversion to cash was, however, discontinued or withdrawn when petitioner-company under a new

assistant manager, Mr. Benjamin Marzo (who replaced Mr. Cecilio Beltran, Jr. upon the latter's resignation in

June 1989), stopped the payment of its cash equivalent on the ground that they are not entitled to the said

benefits under Sections 1 and 3 of the 1989 CBA.

The Union objected to the said discontinuance of commutation or conversion to cash of the unenjoyed sick

leave with pay benefits of petitioner's intermittent workers contending that it is a deviation from the true

intent of the parties that negotiated the CBA; that it would violate the principle in labor laws that benefits

already extended shall not be taken away and that it would result in discrimination between the non-

intermittent and the intermittent workers of the petitioner-company.

Upon failure of the parties to amicably settle the issue on the interpretation of Sections 1 and 3, Article VIII of

the 1989 CBA, the Union brought the matter for voluntary arbitration before the National Conciliation and

Mediation Board, Regional Arbitration Branch XI at Davao City by way of complaint for enforcement of theCBA. The parties mutually designated public respondent Ruben Abarquez, Jr. to act as voluntary arbitrator.

After the parties had filed their respective position papers, 2 public respondent Ruben Abarquez, Jr. issued on

September 10, 1991 an Award in favor of the Union ruling that the regular intermittent workers are entitled to

commutation of their unenjoyed sick leave with pay benefits under Sections 1 and 3 of the 1989 CBA, the

dispositive portion of which reads:

"WHEREFORE, premises considered, the management of the respondent Davao Integrated Port Stevedoring

Services Corporation is hereby directed to grant and extend the sick leave privilege of the commutation of the

unenjoyed portion of the sick leave of all the intermittent field workers who are members of the regular laborpool and the present extra pool in accordance with the CBA from the time it was discontinued and henceforth.

SO ORDERED."

Petitioner-company disagreed with the aforementioned ruling of public respondent, hence, the instant petition.

Petitioner-company argued that it is clear from the language and intent of the last sentence of Section 1, Article

VIII of the 1989 CBA that only the regular workers whose work are not intermittent are entitled to the benefit

of conversion to cash of the unenjoyed portion of sick leave, thus: ". . . And provided, however, that only those

regular workers of the Company whose work are not intermittent are entitled to the herein sick leaveprivilege."

Petitioner-company further argued that while the intermittent workers were paid the cash equivalent of their

unenjoyed sick leave with pay benefits during the previous management of Mr. Beltran who misinterpreted

Sections 1 and 3 of Article VIII of the 1985 CBA, it was well within petitioner-company's rights to rectify the

error it had committed and stop the payment of the said sick leave with pay benefits. An error in payment,

according to petitioner-company, can never ripen into a practice.

We find the arguments unmeritorious.

A collective bargaining agreement (CBA), as used in Article 252 of the Labor Code, refers to a contract

executed upon request of either the employer or the exclusive bargaining representative incorporating the

agreement reached after negotiations with respect to wages, hours of work and all other terms and conditions

of employment, including proposals for adjusting any grievances or questions arising under such agreement.


14/41


14

While the terms and conditions of a CBA constitute the law between the parties, 3 it is not, however, an

ordinary contract to which is applied the principles of law governing ordinary contracts. 4 A CBA, as a labor

contract within the contemplation of Article 1700 of the Civil Code of the Philippines which governs the

relations between labor and capital, is not merely contractual in nature but impressed with public interest,

thus, it must yield to the common good. As such, it must be construed liberally rather than narrowly and

technically, and the courts must place a practical and realistic construction upon it, giving due consideration to

the context in which it is negotiated and purpose which it is intended to serve. 5

It is thus erroneous for petitioner to isolate Section 1, Article VIII of the 1989 CBA from the other related

section on sick leave with pay benefits, specifically Section 3 thereof, in its attempt to justify the discontinuance

or withdrawal of the privilege of commutation or conversion to cash of the unenjoyed portion of the sick leave

benefit to regular intermittent workers. The manner they were deprived of the privilege previously recognized

and extended to them by petitioner-company during the lifetime of the CBA of October 16, 1985 until three (3)

months from its renewal on April 15, 1989, or a period of three (3) years and nine (9) months, is not only

tainted with arbitrariness but likewise discriminatory in nature. Petitioner-company is of the mistaken notionthat since the privilege of commutation or conversion to cash of the unenjoyed portion of the sick leave with

pay benefits is found in Section 1, Article VIII, only the regular non-intermittent workers and no other can avail

of the said privilege because of the proviso found in the last sentence thereof.

It must be noted that the 1989 CBA has two (2) sections on sick leave with pay benefits which apply to two

(2) distinct classes of workers in petitioner's company, namely: (1) the regular non-intermittent workers or

those workers who render a daily eight-hour service to the company and are governed by Section 1, Article VIII

of the 1989 CBA; and (2) intermittent field workers who are members of the regular labor pool and the

present regular extra labor pool as of the signing of the agreement on April 15, 1989 or those workers who

have irregular working days and are governed by Section 3, Article VIII of the 1989 CBA.

It is not disputed that both classes of workers are entitled to sick leave with pay benefits provided they comply

with the conditions set forth under Section 1 in relation to the last paragraph of Section 3, to wit: (1) the

employee-applicant must be regular or must have rendered at least one year of service with the company; and

(2) the application must be accompanied by a certification from a company-designated physician.

Sick leave benefits, like other economic benefits stipulated in the CBA such as maternity leave and vacation

leave benefits, among others, are by their nature, intended to be replacements for regular income which

otherwise would not be earned because an employee is not working during the period of said leaves. 6 They

are non-contributory in nature, in the sense that the employees contribute nothing to the operation of thebenefits. 7 By their nature, upon agreement of the parties, they are intended to alleviate the economic

condition of the workers.

After a careful examination of Section 1 in relation to Section 3, Article VIII of the 1989 CBA in light of the

facts and circumstances attendant in the instant case, we find and so hold that the last sentence of Section 1,

Article VIII of the 1989 CBA, invoked by petitioner-company does not bar the regular intermittent workers

from the privilege of commutation or conversion to cash of the unenjoyed portion of their sick leave with pay

benefits, if qualified. For the phrase "herein sick leave privilege," as used in the last sentence of Section 1, refers

to the privilege of having a fixed 15-day sick leave with pay which, as mandated by Section 1, only the non-

intermittent workers are entitled to. This fixed 15-day sick leave with pay benefit should be distinguished from

the variable number of days of sick leave, not to exceed 15 days, extended to intermittent workers under

Section 3 depending on the number of hours of service rendered to the company, including overtime pursuant

to the schedule provided therein. It is only fair and reasonable for petitioner-company not to stipulate a fixed

15-day sick leave with pay for its regular intermittent workers since, as the term "intermittent" implies, there is

irregularity in their work-days. Reasonable and practical interpretation must be placed on contractual


15/41


15

provisions. Interpetatio fienda est ut res magis valeat quam pereat. Such interpretation is to be adopted, that

the thing may continue to have efficacy rather than fail. 8

We find the same to be a reasonable and practical distinction readily discernible in Section 1, in relation to

Section 3, Article VIII of the 1989 CBA between the two classes of workers in the company insofar as sick leave

with pay benefits are concerned. Any other distinction would cause discrimination on the part of intermittent

workers contrary to the intention of the parties that mutually agreed in incorporating the questioned

provisions in the 1989 CBA.

Public respondent correctly observed that the parties to the CBA clearly intended the same sick leave privilege

to be accorded the intermittent workers in the same way that they are both given the same treatment with

respect to vacation leaves - non-commutable and non-cumulative. If they are treated equally with respect to

vacation leave privilege, with more reason should they be on par with each other with respect to sick leave

privileges. 9 Besides, if the intention were otherwise, during its renegotiation, why did not the parties expressly

stipulate in the 1989 CBA that regular intermittent workers are not entitled to commutation of the unenjoyedportion of their sick leave with pay benefits?

Whatever doubt there may have been early on was clearly obliterated when petitioner-company recognized the

said privilege and paid its intermittent workers the cash equivalent of the unenjoyed portion of their sick leave

with pay benefits during the lifetime of the CBA of October 16, 1985 until three (3) months from its renewal

on April 15, 1989. Well-settled is it that the said privilege of commutation or conversion to cash, being an

existing benefit, the petitioner-company may not unilaterally withdraw, or diminish such benefits. 10 It is a fact

that petitioner-company had, on several instances in the past, granted and paid the cash equivalent of the

unenjoyed portion of the sick leave benefits of some intermittent workers. 11 Under the circumstances, these

may be deemed to have ripened into company practice or policy which cannot be peremptorily withdrawn. 12

Moreover, petitioner-company's objection to the authority of the Voluntary Arbitrator to direct the

commutation of the unenjoyed portion of the sick leave with pay benefits of intermittent workers in his

decision is misplaced. Article 261 of the Labor Code is clear. The questioned directive of the herein public

respondent is the necessary consequence of the exercise of his arbitral power as Voluntary Arbitrator under

Article 261 of the Labor Code "to hear and decide all unresolved grievances arising from the interpretation or

implementation of the Collective Bargaining Agreement." We, therefore, find that no grave abuse of discretion

was committed by public respondent in issuing the award (decision). Moreover, his interpretation of Sections 1

and 3, Article VIII of the 1989 CBA cannot be faulted with and is absolutely correct.

WHEREFORE, in view of the foregoing, the petition is DISMISSED. The award (decision) of public respondent

dated September 10, 1991 is hereby AFFIRMED. No costs.

SO ORDERED.

Feliciano, Bidin, Davide, Jr. and Melo, JJ., concur.

Gutierrez, Jr., on terminal leave.


SUPREME COURT

Manila


16/41


16

FIRST DIVISION

G.R. No. 85073 August 24, 1993

DAVAO FRUITS CORPORATION, petitioner,

vs.

ASSOCIATED LABOR UNIONS (ALU) for in behalf of all the rank-and-file workers/employees of DAVAO

FRUITS CORPORATION and NATIONAL LABOR RELATIONS COMMISSION, respondents.

Dominguez & Paderna Law Offices for petitioners.

The Solicitor General for public respondents.

QUIASON, J.:

This is a petition for certiorari to set aside the resolution of the National Labor Relations Commission (NLRC),

dismissing for lack of merit petitioner's appeal from the decision of the Labor Arbiter in NLRC Case No. 1791-

MC-X1-82.

On December 28, 1982 respondent Associated Labor Unions (ALU), for and in behalf of all the rank-and-file

workers and employees of petitioner, filed a complaint (NLRC Case No. 1791-MC-XI-82) before the Ministry ofLabor and Employment, Regional Arbitration Branch XI, Davao City, against petitioner, for "Payment of the

Thirteenth-Month Pay Differentials." Respondent ALU sought to recover from petitioner the thirteenth month

pay differential for 1982 of its rank-and-file employees, equivalent to their sick, vacation and maternity leaves,

premium for work done on rest days and special holidays, and pay for regular holidays which petitioner,

allegedly in disregard of company practice since 1975, excluded from the computation of the thirteenth month

pay for 1982.

In its answer, petitioner claimed that it erroneously included items subject of the complaint in the computation

of the thirteenth month pay for the years prior to 1982, upon a doubtful and difficult question of law.

According to petitioner, this mistake was discovered only in 1981 after the promulgation of the Supreme Courtdecision in the case of San Miguel Corporation v. Inciong (103 SCRA 139).

A decision was rendered on March 7, 1984 by Labor Arbiter Pedro C. Ramos, in favor of respondent ALU. The

dispositive portion of the decision reads as follows:

WHEREFORE, in view of all the foregoing considerations, judgment is hereby rendered ordering respondent to

pay the 1982 13th month pay differential to all its rank-and-file workers/employees herein represented by

complainant Union (Rollo, p. 32).

Petitioner appealed the decision of the Labor Arbiter to the NLRC, which affirmed the said decision accordingly

dismissed the appeal for lack of merit.

Petitioner elevated the matter to this Court in a petition for review under Rule 45 of the Revised Rules of

Court. This error notwithstanding and in the interest of justice, this Court resolved to treat the instant petition

as a special civil action for certiorari under Rule 65 of the Revised Rules of Court (P.D. No. 1391, Sec. 5; Rules


17/41


17

Implementing P.D. No. 1391, Rule II, Sec. 7; Cando v. National Labor Relations Commission, 189 SCRA 666

[1990]: Pearl S. Buck Foundation, Inc. v. National Labor Relations Commission, 182 SCRA 446 [1990]).

The crux of the present controversy is whether in the computation of the thirteenth month pay given by

employers to their employees under P.D.

No. 851, payments for sick, vacation and maternity leaves, premiums for work done on rest days and special

holidays, and pay for regular holidays may be excluded in the computation and payment thereof, regardless of

long-standing company practice.

Presidential Decree No. 851, promulgated on December 16, 1975, mandates all employers to pay their employees

a thirteenth month pay. How this pay shall be computed is set forth in Section 2 of the "Rules and Regulations

Implementing Presidential Decree No. 851," thus:

SECTION 2. . . .

(a) "Thirteenth month pay" shall mean one twelfth (1/12) of the basic salary of an employee within a

calendar year.

(b) "Basic Salary" shall include all renumerations or earnings paid by an employer to an employee for

services rendered but may not include cost of living allowances granted pursuant to Presidential Decree No.

525 or Letter of Instructions No. 174, profit-sharing payments, and all allowances and monetary benefits which

are not considered or integrated as part of the regular or basic salary of the employee at the time of the

promulgation of the Decree on December 16, 1975.

The Department of Labor and Employment issued on January 16, 1976 the "Supplementary Rules andRegulations Implementing P.D. No. 851" which in paragraph 4 thereof further defines the term "basic salary,"

thus:

4. Overtime pay, earnings and other renumerations which are not part of the basic salary shall not be

included in the computation of the 13th month pay.

Clearly, the term "basic salary" includes renumerations or earnings paid by the employer to employee, but

excludes cost-of-living allowances, profit-sharing payments, and all allowances and monetary benefits which

have not been considered as part of the basic salary of the employee as of December 16, 1975. The exclusion of

cost-of-living allowances and profit sharing payments shows the intention to strip "basic salary" of paymentswhich are otherwise considered as "fringe" benefits. This intention is emphasized in the catch all phrase "all

allowances and monetary benefits which are not considered or integrated as part of the basic salary." Basic

salary, therefore does not merely exclude the benefits expressly mentioned but all payments which may be in

the form of "fringe" benefits or allowances (San Miguel Corporation v. Inciong, supra, at 143-144). In fact, the

Supplementary Rules and Regulations Implementing P.D. No. 851 are very emphatic in declaring that overtime

pay, earnings and other renumerations shall be excluded in computing the thirteenth month pay.

In other words, whatever compensation an employee receives for an eight-hour work daily or the daily wage

rate in the basic salary. Any compensation or remuneration other than the daily wage rate is excluded. It

follows therefore, that payments for sick, vacation and maternity leaves, premium for work done on rest days

special holidays, as well as pay for regular holidays, are likewise excluded in computing the basic salary for the

purpose of determining the thirteen month pay.

Petitioner claims that the mistake in the interpretation of "basic salary" was caused by the opinions, orders and

rulings rendered by then Acting Labor Secretary Amado C. Inciong, expressly including the subject items in


18/41


18

computing the thirteenth month pay. The inclusion of these items is clearly not sanctioned under P.D. No. 851,

the governing law and its implementing rules, which speak only of "basis salary" as the basis for determining

the thirteenth month pay.

Moreover, whatever doubt arose in the interpretation of P.D. No. 851 was erased by the Supplementary Rules

and Regulations which clarified the definition of "basic salary."

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

While doubt may have been created by the prior Rules and Regulations and 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

broad inclusion is now a subject of broad exclusion. The Supplementary Rules and Regulations cure theseeming tendency of the former rules to include all remunerations and earnings within the definition of basic

salary.

The all-embracing phrase "earnings and other remunerations which are deemed not part of the basic salary

includes within its meaning payments for sick, vacation, or maternity leaves, premium for work performed on

rest days and special holidays, pay for regular holidays and night differentials. As such they are deemed not

part of the basic salary and shall not be considered in the computation of the 13th-month pay. If they were not

so excluded, it is hard to find any "earnings and other remunerations" expressly excluded in computation of the

13th month-pay. Then the exclusionary provision would prove to be idle and with purpose.

The "Supplementary Rules and Regulations Implementing P.D. No. 851," which put to rest all doubts in the

computation of the thirteenth month pay, was issued by the Secretary of Labor as early as January 16, 1976,

barely one month after the effectivity of P.D. No. 851 and its Implementing Rules. And yet, petitioner computed

and paid the thirteenth month pay, without excluding the subject items therein until 1981. Petitioner continued

its practice in December 1981, after promulgation of the afore-quoted San Miguel decision on February 24, 1981,

when petitioner purportedly "discovered" its mistake.

From 1975 to 1981, petitioner had freely, voluntarily and continuously included in the computation of its

employees' thirteenth month pay, the payments for sick, vacation and maternity leaves, premiums for work

done on rest days and special holidays, and pay for regular holidays. The considerable length of time thequestioned items had been included by petitioner indicates a unilateral and voluntary act on its part, sufficient

in itself to negate any claim of mistake.

A company practice favorable to the employees had indeed been established and the payments made pursuant

thereto, ripened into benefits enjoyed by them. And any benefit and supplement being enjoyed by the

employees cannot be reduced, diminished, discontinued or eliminated by the employer, by virtue of Section 10

of the Rules and Regulations Implementing P.D. No. 851, and Article 100 of the labor of the Philippines, which

prohibit the diminution or elimination by the employer of the employees' existing benefits (Tiangco v.

Leogardo, Jr., 122 SCRA 267, [1983]).

Petitioner cannot invoke the principle of solutio indebiti which as a civil law concept that is not applicable in

Labor Law. Besides, in solutio indebiti, the obligee is required to return to the obligor whatever he received

from the latter (Civil Code of the Philippines, Arts. 2154 and 2155). Petitioner in the instant case, does not

demand the return of what it paid respondent ALU from 1975 until 1981; it merely wants to "rectify" the error


19/41


19

it made over these years by excluding unilaterally from the thirteenth month pay in 1982 the items subject of

litigation. Solutio indebiti, therefore, is not applicable to the instant case.

WHEREFORE, finding no grave abuse of discretion on the part of the NLRC, the petition is hereby DISMISSED,

and the questioned decision of respondent NLRC is AFFIRMED accordingly.

Cruz, Grio-Aquino, Davide, Jr. and Bellosillo, JJ., concur.


SUPREME COURTManila

SECOND DIVISION

G.R. No. 152456 April 28, 2004

SEVILLA TRADING COMPANY, petitioner,

vs.

A.V.A. TOMAS E. SEMANA, SEVILLA TRADING WORKERS UNIONSUPER, respondents.

DECISION

PUNO, J.:

On appeal is the Decision1 of the Court of Appeals in CA-G.R. SP No. 63086 dated 27 November 2001

sustaining the Decision2 of Accredited Voluntary Arbitrator Tomas E. Semana dated 13 November 2000, as well

as its subsequent Resolution3 dated 06 March 2002 denying petitioners Motion for Reconsideration.

The facts of the case are as follows:

For two to three years prior to 1999, petitioner Sevilla Trading Company (Sevilla Trading, for short), a

domestic corporation engaged in trading business, organized and existing under Philippine laws, added to the

base figure, in its computation of the 13th-month pay of its employees, the amount of other benefits received

by the employees which are beyond the basic pay. These benefits included:

(a) Overtime premium for regular overtime, legal and special holidays;

(b) Legal holiday pay, premium pay for special holidays;

(c) Night premium;

(d) Bereavement leave pay;

(e) Union leave pay;


20/41


20

(f) Maternity leave pay;

(g) Paternity leave pay;

(h) Company vacation and sick leave pay; and

(i) Cash conversion of unused company vacation and sick leave.

Petitioner claimed that it entrusted the preparation of the payroll to its office staff, including the computation

and payment of the 13th-month pay and other benefits. When it changed its person in charge of the payroll in

the process of computerizing its payroll, and after audit was conducted, it allegedly discovered the error of

including non-basic pay or other benefits in the base figure used in the computation of the 13th-month pay of

its employees. It cited the Rules and Regulations Implementing P.D. No. 851 (13th-Month Pay Law), effective

December 22, 1975, Sec. 2(b) which stated that:

"Basic salary" shall include all remunerations or earnings paid by an employer to an employee for services

rendered but may not include cost-of-living allowances granted pursuant to P.D. No. 525 or Letter of

Instruction No. 174, profit-sharing payments, and all allowances and monetary benefits which are not

considered or integrated as part of the regular or basic salary of the employee at the time of the promulgation

of the Decree on December 16, 1975.

Petitioner then effected a change in the computation of the thirteenth month pay, as follows:

13th-month pay = net basic pay

12 monthswhere:

net basic pay = gross pay (non-basic pay or other benefits)

Now excluded from the base figure used in the computation of the thirteenth month pay are the following:

a) Overtime premium for regular overtime, legal and special holidays;

b) Legal holiday pay, premium pay for special holidays;

c) Night premium;

d) Bereavement leave pay;

e) Union leave pay;

f) Maternity leave pay;

g) Paternity leave pay;

h) Company vacation and sick leave pay; and

i) Cash conversion of unused vacation/sick leave.

Hence, the new computation reduced the employees thirteenth month pay. The daily piece -rate workers

represented by private respondent Sevilla Trading Workers Union SUPER (Union, for short), a duly organized


21/41


21

and registered union, through the Grievance Machinery in their Collective Bargaining Agreement, contested the

new computation and reduction of their thirteenth month pay. The parties failed to resolve the issue.

On March 24, 2000, the parties submitted the issue of "whether or not the exclusion of leaves and other

related benefits in the computation of 13th-month pay is valid" to respondent Accredited Voluntary Arbitrator

Tomas E. Semana (A.V.A. Semana, for short) of the National Conciliation and Mediation Board, for

consideration and resolution.

The Union alleged that petitioner violated the rule prohibiting the elimination or diminution of employees

benefits as provided for in Art. 100 of the Labor Code, as amended. They claimed that paid leaves, like sick

leave, vacation leave, paternity leave, union leave, bereavement leave, holiday pay and other leaves with pay in

the CBA should be included in the base figure in the computation of their 13th-month pay.

On the other hand, petitioner insisted that the computation of the 13th-month pay is based on basic salary,

excluding benefits such as leaves with pay, as per P.D. No. 851, as amended. It maintained that, in adjusting itscomputation of the 13th-month pay, it merely rectified the mistake its personnel committed in the previous

years.

A.V.A. Semana decided in favor of the Union. The dispositive portion of his Decision reads as follows:

WHEREFORE, premises considered, this Voluntary Arbitrator hereby declared that:

1. The company is hereby ordered to include sick leave and vacation leave, paternity leave, union leave,

bereavement leave and other leave with pay in the CBA, premium for work done on rest days and special

holidays, and pay for regular holidays in the computation of the 13th-month pay to all covered and entitledemployees;

2. The company is hereby ordered to pay corresponding backwages to all covered and entitled employees

arising from the exclusion of said benefits in the computation of 13th-month pay for the year 1999.

Petitioner received a copy of the Decision of the Arbitrator on December 20, 2000. It filed before the Court of

Appeals, a "Manifestation and Motion for Time to File Petition for Certiorari" on January 19, 2001. A month

later, on February 19, 2001, it filed its Petition for Certiorari under Rule 65 of the 1997 Rules of Civil Procedure

for the nullification of the Decision of the Arbitrator. In addition to its earlier allegations, petitioner claimed

that assuming the old computation will be upheld, the reversal to the old computation can only be made to theextent of including non-basic benefits actually included by petitioner in the base figure in the computation of

their 13th-month pay in the prior years. It must exclude those non-basic benefits which, in the first place, were

not included in the original computation. The appellate court denied due course to, and dismissed the petition.

Hence, this appeal. Petitioner Sevilla Trading enumerates the grounds of its appeal, as follows:

1. THE DECISION OF THE RESPONDENT COURT TO REVERT TO THE OLD COMPUTATION OF THE 13th-

MONTH PAY ON THE BASIS THAT THE OLD COMPUTATION HAD RIPENED INTO PRACTICE IS

WITHOUT LEGAL BASIS.

2. IF SUCH BE THE CASE, COMPANIES HAVE NO MEANS TO CORRECT ERRORS IN COMPUTATION

WHICH WILL CAUSE GRAVE AND IRREPARABLE DAMAGE TO EMPLOYERS.4


22/41


22

First, we uphold the Court of Appeals in ruling that the proper remedy from the adverse decision of the

arbitrator is a petition for review under Rule 43 of the 1997 Rules of Civil Procedure, not a petition for

certiorari under Rule 65. Section 1 of Rule 43 states:

RULE 43

Appeals from the Court of Tax Appeals and

Quasi-Judicial Agencies to the Court of Appeals

SECTION 1. Scope. This Rule shall apply to appeals from judgments or final orders of the Court of Tax

Appeals and from awards, judgments, final orders or resolutions of or authorized by any quasi-judicial agency

in the exercise of its quasi-judicial functions. Among these agencies are the Civil Service Commission, Central

Board of Assessment Appeals, Securities and Exchange Commission, Office of the President, Land Registration

Authority, Social Security Commission, Civil Aeronautics Board, Bureau of Patents, Trademarks and Technology

Transfer, National Electrification Administration, Energy Regulatory Board, National TelecommunicationsCommission, Department of Agrarian Reform under Republic Act No. 6657, Government Service Insurance

System, Employees Compensation Commission, Agricultural Inventions Board, Insurance Commission,

Philippine Atomic Energy Commission, Board of Investments, Construction Industry Arbitration Commission,

and voluntary arbitrators authorized by law. [Emphasis supplied.]

It is elementary that the special civil action of certiorari under Rule 65 is not, and cannot be a substitute for an

appeal, where the latter remedy is available, as it was in this case. Petitioner Sevilla Trading failed to file an

appeal within the fifteen-day reglementary period from its notice of the adverse decision of A.V.A. Semana. It

received a copy of the decision of A.V.A. Semana on December 20, 2000, and should have filed its appeal under

Rule 43 of the 1997 Rules of Civil Procedure on or before January 4, 2001. Instead, petitioner filed on January19, 2001 a "Manifestation and Motion for Time to File Petition for Certiorari," and on February 19, 2001, it filed

a petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure. Clearly, petitioner Sevilla Trading

had a remedy of appeal but failed to use it.

A special civil action under Rule 65 of the Rules of Court will not be a cure for failure to timely file a petition

for review on certiorari under Rule 45 (Rule 43, in the case at bar) of the Rules of Court. Rule 65 is an

independent action that cannot be availed of as a substitute for the lost remedy of an ordinary appeal,

including that under Rule 45 (Rule 43, in the case at bar), especially if such loss or lapse was occasioned by

ones own neglect or error in the choice of remedies.5

Thus, the decision of A.V.A. Semana had become final and executory when petitioner Sevilla Trading filed its

petition for certiorari on February 19, 2001. More particularly, the decision of A.V.A. Semana became final and

executory upon the lapse of the fifteen-day reglementary period to appeal, or on January 5, 2001. Hence, the

Court of Appeals is correct in holding that it no longer had appellate jurisdiction to alter, or much less, nullify

the decision of A.V.A. Semana.

Even assuming that the present petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure is a

proper action, we still find no grave abuse of discretion amounting to lack or excess of jurisdiction committed

by A.V.A. Semana. "Grave abuse of discretion" has been interpreted to mean "such capricious and whimsical

exercise of judgment as is equivalent to lack of jurisdiction, or, in other words where the power is exercised in

an arbitrary or despotic manner by reason of passion or personal hostility, and it must be so patent and gross

as to amount to an evasion of positive duty or to a virtual refusal to perform the duty enjoined or to act at all

in contemplation of law."6 We find nothing of that sort in the case at bar.


23/41


23

On the contrary, we find the decision of A.V.A. Semana to be sound, valid, and in accord with law and

jurisprudence. A.V.A. Semana is correct in holding that petitioners stance of mistake or error in the

computation of the thirteenth month pay is unmeritorious. Petitioners submission of financial statements every

year requires the services of a certified public accountant to audit its finances. It is quite impossible to suggest

that they have discovered the alleged error in the payroll only in 1999. This implies that in previous years it

does not know its cost of labor and operations. This is merely basic cost accounting. Also, petitioner failed to

adduce any other relevant evidence to support its contention. Aside from its bare claim of mistake or error in

the computation of the thirteenth month pay, petitioner merely appended to its petition a copy of the 1997-

2002 Collective Bargaining Agreement and an alleged "corrected" computation of the thirteenth month pay.

There was no explanation whatsoever why its inclusion of non-basic benefits in the base figure in the

computation of their 13th-month pay in the prior years was made by mistake, despite the clarity of statute and

jurisprudence at that time.

The instant case needs to be distinguished from Globe Mackay Cable and Radio Corp. vs. NLRC,7 which

petitioner Sevilla Trading invokes. In that case, this Court decided on the proper computation of the cost-of-living allowance (COLA) for monthly-paid employees. Petitioner Corporation, pursuant to Wage Order No. 6

(effective 30 October 1984), increased the COLA of its monthly-paid employees by multiplying the P3.00 daily

COLA by 22 days, which is the number of working days in the company. The Union disagreed with the

computation, claiming that the daily COLA rate of P3.00 should be multiplied by 30 days, which has been the

practice of the company for several years. We upheld the contention of the petitioner corporation. To answer

the Unions contention of company practice, we ruled that:

Payment in full by Petitioner Corporation of the COLA before the execution of the CBA in 1982 and in

compliance with Wage Orders Nos. 1 (26 March 1981) to 5 (11 June 1984), should not be construed as

constitutive of voluntary employer practice, which cannot now be unilaterally withdrawn by petitioner. To beconsidered as such, it should have been practiced over a long period of time, and must be shown to have been

consistent and deliberate . . . The test of long practice has been enunciated thus:

. . . Respondent Company agreed to continue giving holiday pay knowing fully well that said employees are not

covered by the law requiring payment of holiday pay." (Oceanic Pharmacal Employees Union [FFW] vs. Inciong,

94 SCRA 270 [1979])

Moreover, before Wage Order No. 4, there was lack of administrative guidelines for the implementation of the

Wage Orders. It was only when the Rules Implementing Wage Order No. 4 were issued on 21 May 1984 that a

formula for the conversion of the daily allowance to its monthly equivalent was laid down.

Absent clear administrative guidelines, Petitioner Corporation cannot be faulted for erroneous application of

the law . . .

In the above quoted case, the grant by the employer of benefits through an erroneous application of the law

due to absence of clear administrative guidelines is not considered a voluntary act which cannot be unilaterally

discontinued. Such is not the case now. In the case at bar, the Court of Appeals is correct when it pointed out

that as early as 1981, this Court has held in San Miguel Corporation vs. Inciong8 that:

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:


24/41


24

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 13th-month 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 benefitswhich 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

empathic 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 ofthe 13th-month pay. Then the exclusionary provision would prove to be idle and with no purpose.

In the light of the clear ruling of this Court, there is, thus no reason for any mistake in the construction or

application of the law. When petitioner Sevilla Trading still included over the years non-basic benefits of its

employees, such as maternity leave pay, cash equivalent of unused vacation and sick leave, among others in the

computation of the 13th-month pay, this may only be construed as a voluntary act on its part. Putting the

blame on the petitioners payroll personnel is inexcusable.

In Davao Fruits Corporation vs. Associated Labor Unions, we likewise held that:9

The "Supplementary Rules and Regulations Implementing P.D. No. 851" which put to rest all doubts in the

computation of the thirteenth month pay, was issued by the Secretary of Labor as early as January 16, 1976,

barely one month after the effectivity of P.D. No. 851 and its Implementing Rules. And yet, petitioner computed

and paid the thirteenth month pay, without excluding the subject items therein until 1981. Petitioner continued


25/41


25

its practice in December 1981, after promulgation of the aforequoted San Miguel decision on February 24, 1981,

when petitioner purportedly "discovered" its mistake.

From 1975 to 1981, petitioner had freely, voluntarily and continuously included in the computation of its

employees thirteenth month pay, without the payments for sick, vacation and maternity leave,premium for

work done on rest days and special holidays, and pay for regular holidays. The considerable length of time the

questioned items had been included by petitioner indicates a unilateral and voluntary act on its part, sufficient

in itself to negate any claim of mistake.

A company practice favorable to the employees had indeed been established and the payments made pursuant

thereto, ripened into benefits enjoyed by them. And any benefit and supplement being enjoyed by the

employees cannot be reduced, diminished, discontinued or eliminated by the employer, by virtue of Sec. 10 of

the Rules and Regulations Implementing P.D. No. 851, and Art. 100 of the Labor Code of the Philippines which

prohibit the diminution or elimination by the employer of the employees existing benefits. [Tiangco vs.

Leogardo, Jr., 122 SCRA 267 (1983)]

With regard to the length of time the company practice should have been exercised to constitute voluntary

employer practice which cannot be unilaterally withdrawn by the employer, we hold that jurisprudence has not

laid down any rule requiring a specific minimum number of years. In the above quoted case of Davao Fruits

Corporation vs. Associated Labor Unions,10 the company practice lasted for six (6) years. In another case,

Davao Integrated Port Stevedoring Services vs. Abarquez,11 the employer, for three (3) years and nine (9)

months, approved the commutation to cash of the unenjoyed portion of the sick leave with pay benefits of its

intermittent workers. While in Tiangco vs. Leogardo, Jr.,12 the employer carried on the practice of giving a fixed

monthly emergency allowance from November 1976 to February 1980, or three (3) years and four (4) months.

In all these cases, this Court held that the grant of these benefits has ripened into company practice or policywhich cannot be peremptorily withdrawn. In the case at bar, petitioner Sevilla Trading kept the practice of

including non-basic benefits such as paid leaves for unused sick leave and vacation leave in the computation of

their 13th-month pay for at least two (2) years. This, we rule likewise constitutes voluntary employer practice

which cannot be unilaterally withdrawn by the employer without violating Art. 100 of the Labor Code:

Art. 100. Prohibition against elimination or diminution of benefits. Nothing in this Book shall be construed to

eliminate or in any way diminish supplements, or other employee benefits being enjoyed at the time of

promulgation of this Code.

IN VIEW WHEREOF, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 63086dated 27 November 2001 and its Resolution dated 06 March 2002 are hereby AFFIRMED.

SO ORDERED.

Quisumbing, Austria-Martinez, Callejo, Sr.*, and Tinga, JJ., concur.


26/41


26


SUPREME COURT

Manila

FIRST DIVISION

G.R. No. L-69741 August 19, 1986

BROKENSHIRE MEMORIAL HOSPITAL, INC., petitioner,vs.

THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION AND THE BROKENSHIRE MEMORIAL

HOSPITAL EMPLOYEES AND WORKERS UNION-FFW, respondents.

Maximo Magno-Libre for petitioner.

Ireneo B. Bernardo for private respondent.

NARVASA, J.:

Are employees in a private enterprise entitled to the so called "13th month pay" prescribed by PD 851 "on top

of bonuses" already being given by the employer prior to the decree's effectivity on December 16, 1975?

To this question, a negative answer has twice been given by this Court.

In National Federation of Sugar Workers (NFSW) vs. Ovejera, promulgated on May 31, 1982 1-where a collective

bargaining agreement required the employer among others "to maintain the present practice on the grant of

Christmas bonus, milling bonus and amelioration bonus" ("amounting to more than a month's pay")-this Courtmade the following pronouncements on the issue: 2

Keenly sensitive to the needs of the workingmen, yet mindful of the mounting production cost that are the woe

of capital which provides employment to labor, President Ferdinand E. Marcos issued Presidential Decree No.

851 on 16 December 1975. Thereunder, 'all employers are hereby required to pay all their employees receiving a

basic salary of not more than Pl,000 a month, regardless of the nature of their employment, a 13th month pay

not later than December 24 of every year.' Exempted from the obligation however are:

Employers already paying their employees a 13th month pay or its equivalent. . . . (Section 2)

The evident intention of the law, as revealed by the law itself, was to grant an additional income in the form of

a 13th month pay to employees not already receiving the same. Otherwise put, the intention was to grant some

relief-not to all workers-but only to the unfortunate ones not actually paid a 13th month salary or what

amounts to it, by whatever name called; but it was not envisioned that a double burden would be imposed on

the employer already paying his employees a 13th month pay or its equivalent-whether out of pure generosity


27/41


27

or on the basis of a binding agreement and, in the latter case, regardless of the conditional character of the

grant (such as making the payment dependent on profit), so long as there is actual payment. Otherwise, what

was conceived to be a 13th month salary would in effect become a 14th or possibly 15th month pay.

This view is justified by the law itself which makes no distinction in the grant of exemption: 'Employers already

paying their employees a 13th month pay or its equivalent are not covered by this Decree.' (P.D. 851)

The Rules Implementing P.D. 851 issued by MOLE immediately after the adoption of said law reinforce this

stand. Under Section 3(e) thereof-

The term "its equivalent" . . . shall include Christmas bonus, mid-year bonus, profit-sharing payments and other

cash bonuses amounting to not less than 1/12th of the basic salary but shall not include cash and stock

dividends, cost of living allowances and all other allowances regularly enjoyed by the employee, as well as non-

monetary benefits. Where an employer pays less than 1/12th of the employee's basic salary, the employer shall

pay the difference.' (Empahsis supplied)

Having been issued by the agency charged with the implementation of PD 851 as its contemporaneous

interpretation of the law, the quoted rule should be accorded great weight.

Pragmatic considerations also weigh heavily in favor of crediting both voluntary and contractual bonuses for

the purpose of determining liability for the 13th month pay. To require employers (already giving their

employees a 13th month salary or its equivalent to give a second 13th month pay would be unfair and

productive of undesirable results. To the employer who had acceded and is already bound to give bonuses to

his employees, the additional burden of a 13th month pay would amount to a penalty for his munificence or

liberality. The probable reaction of one so circumstanced would be to withdraw the bonuses or resist furthervoluntary grants for fear that if and when a law is passed giving the same benefits, his prior concessions might

not be given due credit; and this negative attitude would have an adverse impact on the employees.

In Dole Philippines, Inc. vs.

Date post:	03-Jun-2018
Category:	Documents
Upload:	jonas-cu
View:	217 times
Download:	0 times

Cases on Labor Standard Midterm 2014 Part 1

Documents