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PEFTOK INTEGRATED SERVICES, INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and EDUARDO ABUGHO, ET. AL., respondents.

D E C I S I O N

PURISIMA, J.:

Pacta   privata   juri   publico   derogare   non   possunt.  Private agreements (between parties) cannot derogate from public right.

Filed on May 22, 1996, this petition for certiorari under Rule 65 of the Revised Rules of Court seeks to set aside the decision of the National Labor Relations Commission(NLRC) dismissing the appeal of petitioner. The case stemmed from the decision handed down by Labor Arbiter Noel Augusto S. Magbanua, disposing, as follows:

“WHEREFORE, in view of the foregoing premises, respondents-PEFTOK Security Agency and Timber Industries of the Philippines, Inc. (TIPI) and Union Plywood Corporation are hereby ordered to pay, jointly and solidarily the claims of complainants as previously computed as follows:

1. Eduardo Abugho P49,397.832. Clenio Macanoquit 31,596.123. Claro Mendez 49,308.834. Leovemin Lumban 16,666.455. Crispin Balingkit 44,772.346. Ulysses Labis 43,812.647. Fidel Sabellina 23,666.908. Leonardo Daluperi 27,026.599. Valentine Adame 17,084.9210. Gonzalo Ernero 18,018.5611. Celso Niluag 18,670.00

12. Reynaldo Maasin 19,499.28 [1]

GRAND TOTAL - 342,598.52

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Other claims are hereby dismissed for failure to substantiate and for lack of merit.

SO ORDERED.”

Pertinent sheriff’s return shows that the aforesaid decision was partly executed up to fifty percent (50%), Timber Industries of the Philippines (TIPI) having paid half of their solidary obligation to the security guards-employees, who quitclaimed and waived fifty percent (50%) of the benefits adjudged in their favor. On October 13, 1989,[2] Eduardo Abugho, Claro Mendez and Leonardo Daluperi executed a waiver[3] of all their claims against Peftok Integrated Services, Inc. (PEFTOK, for brevity) for the period ending on June 30, 1989. Said waiver[4] appeared to bar all claims they may have had against PEFTOK before June 30, 1989. Urged by their entitlement to full benefits as provided in the labor arbiter’s decision, the private respondents sought the issuance of an alias writ of execution.

On May 29, 1992, Eduardo Abugho, Fidel Sabellina, Leonardo Daluperi, Claro Mendez and Reynaldo Maasin executed another waiver and quitclaim[5] purportedly renouncing whatever claims they may have against PEFTOK for the period ending March 15, 1998. Such waiver or quitclaim was worded to preclude whatever claim they may have against PEFTOK on or before March 16, 1998. However, Eduardo Abugho, Fidel Sabellina, Leonardo Daluperi, Reynaldo Maasin and Claro Mendez subsequently executed affidavits [6]stating that the aforementioned quitclaims were prepared and readied for their signature by PEFTOK and they were forced to sign the same for fear that they would not be given their salary on pay day, and worse, their services would be terminated if they did not sign the said quitclaims under controversy.

Private respondents asserted that the waivers of claims signed by them are contrary to public policy; the same being written in the English language which they do not understand and the contents thereof were not explained to them. On June 19, 1995, the prayer for alias writ of execution was granted by Labor Arbiter Henry F. Te.

In support of its prayer, petitioner PEFTOK theorizes that the quitclaims executed by the security guards suffer no legal infirmity. Like any other right, the claims in dispute can be waived and waiver thereof is not prohibited by law. No surety bond is required to perfect an appeal, in the same manner that no bond is necessary for the issuance of an alias writ of execution; petitioner maintains.

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The comment sent in by the Solicitor General prays that the petition be dismissed outright for being premature and for non-compliance with the requisite motion for reconsideration of the NLRC decision before elevating the same to this court. It stressed that quitclaims by employees are basically against public policy.

There is no quibble over the fact that subject decision of the labor arbiter appealed from was received by petitioner on June 30, 1995. The appeal therefrom should have been interposed within 10 days or not later than July 10, 1995. But unfortunately for petitioner, its appeal was only filed on July 17, 1995. Indeed, it is decisively clear that petitioner’s appeal is flawed by late filing. The prescribed period for appeal is both mandatory and jurisdictional.

Then, too, the petition under consideration is likewise dismissable on the ground of prematurity. In consonance with the principle of exhaustion of administrative remedies, it was necessary for a motion for reconsideration of the decision of the National Labor Relations Commission to be filed in order to give NLRC a chance to correct its mistakes, if there be any. So also, under Rule 65 of the Revised Rules of Court, petitioner must establish that it has no plain, speedy and adequate remedy in the ordinary course of law for its perceived grievance.[7]

It is decisively clear that they (guards) affixed their signatures to subject waivers and/or quitclaims for fear that they would not be paid their salaries on pay day or worse, still, their services would be terminated if they did not sign those papers. In short, there was no voluntariness in the execution of the quitclaim or waivers in question. it should be borne in mind that in this jurisdiction, quitclaims, waivers or releases are looked upon with disfavor.[8] “Necessitous men are not free men.”[9] “They are commonly frowned upon as contrary to public policy and ineffective to bar claims for the full measure of the workers’ legal rights.”[10]

With respect to the posting of cash or surety bond, the requirement therefor is mandatory. The bond is sine qua non to the perfection of appeal from the labor arbiter’s monetary award.[11] The posting of cash or surety bond is unconditional”[12] and cannot therefore be trifled with. It is the intendment of the law that employees be assured that if they finally prevail in the case, they will receive the monetary award granted them. The bond also serves to discourage employers from using the appeal as a ploy to delay or evade payment of monetary obligations to their employees.

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WHEREFORE, the petition is hereby DISMISSED for lack of merit; the decision of the NLRC dated February 26, 1995 is AFFIRMED and the questioned alias writ of execution UPHELD.

SO ORDERED.

G.R. No. L-53515 February 8, 1989

SAN MIGUEL BREWERY SALES FORCE UNION (PTGWO), petitioner, vs.HON. BLAS F. OPLE, as Minister of Labor and SAN MIGUEL CORPORATION, respondents.

Lorenzo F. Miravite for petitioner.

Isidro D. Amoroso for New San Miguel Corp. Sales Force Union.

Siguion Reyna, Montecillo & Ongsiako for private respondent.

GRIÑO-AQUINO, J.:

This is a petition for review of the Order dated February 28, 1980 of the Minister of Labor in Labor Case No. AJML-069-79, approving the private respondent's marketing scheme, known as the "Complementary Distribution System" (CDS) and dismissing the petitioner labor union's complaint for unfair labor practice.

On April 17, 1978, a collective bargaining agreement (effective on May 1, 1978 until January 31, 1981) was entered into by petitioner San Miguel Corporation Sales Force Union (PTGWO), and the private respondent, San Miguel Corporation, Section 1, of Article IV of which provided as follows:

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Art. IV, Section 1. Employees within the appropriate bargaining unit shall be entitled to a basic monthly compensation plus commission based on their respective sales. (p. 6, Annex A; p. 113, Rollo.)

In September 1979, the company introduced a marketing scheme known as the "Complementary Distribution System" (CDS) whereby its beer products were offered for sale directly to wholesalers through San Miguel's sales offices.

The labor union (herein petitioner) filed a complaint for unfair labor practice in the Ministry of Labor, with a notice of strike on the ground that the CDS was contrary to the existing marketing scheme whereby the Route Salesmen were assigned specific territories within which to sell their stocks of beer, and wholesalers had to buy beer products from them, not from the company. It was alleged that the new marketing scheme violates Section 1, Article IV of the collective bargaining agreement because the introduction of the CDS would reduce the take-home pay of the salesmen and their truck helpers for the company would be unfairly competing with them.

The complaint filed by the petitioner against the respondent company raised two issues: (1) whether the CDS violates the collective bargaining agreement, and (2) whether it is an indirect way of busting the union.

In its order of February 28, 1980, the Minister of Labor found:

... We see nothing in the record as to suggest that the unilateral action of the employer in inaugurating the new sales scheme was designed to discourage union organization or diminish its influence, but rather it is undisputable that the establishment of such scheme was part of its overall plan to improve efficiency and economy and at the same time gain profit to the highest. While it may be admitted that the introduction of new sales plan somewhat disturbed the present set-up, the change however was too insignificant as to convince this Office to interpret that the innovation interferred with the worker's right to self-organization.

Petitioner's conjecture that the new plan will sow dissatisfaction from its ranks is already a prejudgment of the plan's viability and effectiveness. It is like saying that the plan will not work out to the

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workers' [benefit] and therefore management must adopt a new system of marketing. But what the petitioner failed to consider is the fact that corollary to the adoption of the assailed marketing technique is the effort of the company to compensate whatever loss the workers may suffer because of the new plan over and above than what has been provided in the collective bargaining agreement. To us, this is one indication that the action of the management is devoid of any anti-union hues. (pp. 24-25, Rollo.)

The dispositive part of the Minister's Order reads:

WHEREFORE, premises considered, the notice of strike filed by the petitioner, San Miguel Brewery Sales Force Union-PTGWO is hereby dismissed. Management however is hereby ordered to pay an additional three (3) months back adjustment commissions over and above the adjusted commission under the complementary distribution system. (p. 26, Rollo.)

The petition has no merit.

Public respondent was correct in holding that the CDS is a valid exercise of management prerogatives:

Except as limited by special laws, an employer is free to regulate, according to his own discretion and judgment, all aspects of employment, including hiring, work assignments, working methods, time, place and manner of work, tools to be used, processes to be followed, supervision of workers, working regulations, transfer of employees, work supervision, lay-off of workers and the discipline, dismissal and recall of work. ... (NLU vs. Insular La Yebana Co., 2 SCRA 924; Republic Savings Bank vs. CIR 21 SCRA 226, 235.) (Perfecto V. Hernandez, Labor Relations Law, 1985 Ed., p. 44.) (Emphasis ours.)

Every business enterprise endeavors to increase its profits. In the process, it may adopt or devise means designed towards that goal. In Abbott Laboratories vs. NLRC, 154 SCRA 713, We ruled:

... Even as the law is solicitous of the welfare of the employees, it must also protect the right of an employer to exercise what are

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clearly management prerogatives. The free will of management to conduct its own business affairs to achieve its purpose cannot be denied.

So long as a company's management prerogatives are exercised in good faith for the advancement of the employer's interest and not for the purpose of defeating or circumventing the rights of the employees under special laws or under valid agreements, this Court will uphold them (LVN Pictures Workers vs. LVN, 35 SCRA 147; Phil. American Embroideries vs. Embroidery and Garment Workers, 26 SCRA 634; Phil. Refining Co. vs. Garcia, 18 SCRA 110). San Miguel Corporation's offer to compensate the members of its sales force who will be adversely affected by the implementation of the CDS by paying them a so-called "back adjustment commission" to make up for the commissions they might lose as a result of the CDS proves the company's good faith and lack of intention to bust their union.

WHEREFORE, the petition for certiorari is dismissed for lack of merit.

SO ORDERED.

G.R. No. 101761. March 24, 1993.

NATIONAL SUGAR REFINERIES CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and NBSR SUPERVISORY UNION, (PACIWU) TUCP, respondents.

Jose Mario C. Bunag for petitioner.

The Solicitor General and the Chief Legal Officer, NLRC, for public respondent.

Zoilo V. de la Cruz for private respondent.

D E C I S I O N

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REGALADO, J p:

The main issue presented for resolution in this original petition for certiorari is whether supervisory employees, as defined in Article 212 (m), Book V of the Labor Code, should be considered as officers or members of the managerial staff under Article 82, Book III of the same Code, and hence are not entitled to overtime rest day and holiday pay.

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. 1 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. The JE Program 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.

We 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. With the implementation of the JE Program, the following adjustments

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were made: (1) the members of respondent union were re-classified under levels S-5 to S-8 which are considered managerial staff for purposes of compensation and benefits; (2) there was an increase in basic pay of the average of 50% of their basic pay prior to the JE Program, with the union members now enjoying a wide gap (P1,269.00 per month) in basic pay compared to the highest paid rank-and-file employee; (3) longevity pay was increased on top of alignment adjustments; (4) they were entitled to increased company COLA of P225.00 per month; (5) there was a grant of P100.00 allowance for rest day/holiday work.

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.

On January 7, 1991, Executive Labor Arbiter Antonio C. Pido rendered a decision 2 disposing as follows:

"WHEREFORE, premises considered, respondent National Sugar refineries Corporation is hereby directed to —

1. pay the individual members of complainant union the usual overtime pay, rest day pay and holiday pay enjoyed by them instead of the P100.00 special allowance which was implemented on June 11, 1988; and

2. pay the individual members of complainant union the difference in money value between the P100.00 special allowance and the overtime pay, rest day pay and holiday pay that they ought to have received from June 1, 1988.

All other claims are hereby dismissed for lack of merit.

SO ORDERED."

In finding for the members therein respondent union, the labor ruled that the along span of time during which the benefits were being paid to the supervisors

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has accused the payment thereof to ripen into contractual obligation; at the complainants cannot be estopped from questioning the validity of the new compensation package despite the fact that they have been receiving the benefits therefrom, considering that respondent union was formed only a year after the implementation of the Job Evaluation Program, hence there was no way for the individual supervisors to express their collective response thereto prior to the formation of the union; and the comparative computations presented by the private respondent union showed that the P100.00 special allowance given NASUREFCO fell short of what the supervisors ought to receive had the overtime pay rest day pay and holiday pay not been discontinued, which arrangement, therefore, amounted to a diminution of benefits.

On appeal, in a decision promulgated on July 19, 1991 by its Third Division, respondent National Labor Relations Commission (NLRC) affirmed the decision of the labor arbiter on the ground that the members of respondent union are not managerial employees, as defined under Article 212 (m) of the Labor Code and, therefore, they are entitled to overtime, rest day and holiday pay. Respondent NLRC declared that these supervisory employees are merely exercising recommendatory powers subject to the evaluation, review and final action by their department heads; their responsibilities do not require the exercise of discretion and independent judgment; they do not participate in the formulation of management policies nor in the hiring or firing of employees; and their main function is to carry out the ready policies and plans of the corporation. 3 Reconsideration of said decision was denied in a resolution of public respondent dated August 30, 1991. 4

Hence this petition for certiorari, with petitioner NASUREFCO asseverating that public respondent commission committed a grave abuse of discretion in refusing to recognized the fact that the members of respondent union are members of the managerial staff who are not entitled to overtime, rest day and holiday pay; and in making petitioner assume the "double burden" of giving the benefits due to rank-and-file employees together with those due to supervisors under the JE Program.

We find creditable merit in the petition and that the extraordinary writ of certiorari shall accordingly issue.

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The primordial issue to be resolved herein is whether the members of respondent union are entitled to overtime, rest day and holiday pay. Before this can be resolved, however 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.

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:

"(m) '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 rank-and-file employees of this Book."

Respondent NLRC, in holding that the union members are entitled to overtime, rest day and holiday pay, and in ruling that the latter are not managerial employees, adopted the definition stated in the aforequoted statutory provision.

Petitioner, however, avers that for purposes of determining whether or not the members of respondent union are entitled to overtime, rest day and holiday pay, said employees should be considered as "officers or members of the managerial staff" as defined under Article 82, Book III of the Labor Code on "Working Conditions and Rest Periods" and amplified in Section 2, Rule I, Book III of the Rules to Implement the Labor Code, to wit:

"Art. 82 Coverage. — 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.

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"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." (Emphasis supplied.)

xxx xxx xxx

'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:

xxx xxx xxx

(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; and

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(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."

It is the submission of petitioner that while the members of respondent union, as supervisors, may not be occupying managerial positions, 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 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.

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. Out of its concern for those with less privileges in life, this Court has inclined more often than not toward the worker and upheld his cause in his conflicts with the employer. Such favoritism, however, has not blinded us to the rule that justice is in every case for the deserving, to be dispensed in the light of the established facts and the applicable law and doctrine. 5

This is one such case where we are inclined to tip the scales of justice in favor of the employer.

The question whether a given employee is exempt from the benefits of the law is a factual one dependent on the circumstances of the particular case, In determining whether an employee is within the terms of the statutes, the criterion is the character of the work performed, rather than the title of the employee's position. 6

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Consequently, while generally this Court is not supposed to review the factual findings of respondent commission, substantial justice and the peculiar circumstances obtaining herein mandate a deviation from the rule.

A cursory perusal of the Job Value Contribution Statements 7 of 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;

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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; (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, we are 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.

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The distinction made by respondent NLRC on the basis of whether or not the union members are managerial employees, to determine the latter's entitlement to the questioned benefits, is misplaced and inappropriate. It is admitted that these union members are supervisory employees and this is one instance where the nomenclatures or titles of their jobs conform with the nature of their functions. Hence, to distinguish them from a managerial employee, as defined either under Articles 82 or 212 (m) of the Labor Code, is puerile and in efficacious. The controversy actually involved here seeks a determination of whether or not these supervisory employees ought to be considered as officers or members of the managerial staff. The distinction, therefore, should have been made along that line and its corresponding conceptual criteria.

II. We likewise no not subscribe to the finding of the labor arbiter that the payment of the questioned benefits to the union members has ripened into a contractual obligation.

A. Prior to the JE Program, the union members, while being supervisors, received benefits similar to the rank-and-file employees such as overtime, rest day and holiday pay, simply because they were treated in the same manner as rank-and-file employees, and their basic pay was nearly on the same level as those of the latter, aside from the fact that their specific functions and duties then as supervisors had not been properly defined and delineated from those of the rank-and-file. Such fact is apparent from the clarification made by petitioner in its motion for reconsideration 8 filed with respondent commission in NLRC Case No. CA No. I-000058, dated August 16, 1991, wherein, it lucidly explained:

"But, complainants no longer occupy the same positions they held before the JE Program. Those positions formerly classified as 'supervisory' and found after the JE Program to be rank-and-file were classified correctly and continue to receive overtime, holiday and restday pay. As to them, the practice subsists.

"However, those whose duties confirmed them to be supervisory, were re-evaluated, their duties re-defined and in most cases their organizational positions re-designated to confirm their superior rank and duties. Thus, after the JE program, complainants cannot be said to occupy the same positions." 9

It bears mention that this positional submission was never refuted nor controverted by respondent union in any of its pleadings filed before herein

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public respondent or with this Court. Hence, it can be safely concluded therefrom that the members of respondent union were paid the questioned benefits for the reason that, at that time, they were rightfully entitled thereto. Prior to the JE Program, they could not be categorically classified as members or officers of the managerial staff considering that they were then treated merely on the same level as rank-and-file. Consequently, the payment thereof could not be construed as constitutive of voluntary employer practice, which cannot be now be unilaterally withdrawn by petitioner. To be considered as such, it should have been practiced over a long period of time, and must be shown to have been consistent and deliberate. 10

The test or rationale of this rule on long practice requires an indubitable showing that the employer agreed to continue giving the benefits knowingly fully well that said employees are not covered by the law requiring payment thereof. 11 In the case at bar, respondent union failed to sufficiently establish that petitioner has been motivated or is wont to give these benefits out of pure generosity.

B. It remains undisputed that the implementation of the JE Program, the members of private respondent union were re-classified under levels S-5 S-8 which were considered under the program as managerial staff purposes of compensation and benefits, that they occupied re-evaluated positions, and that their basic pay was increased by an average of 50% of their basic salary prior to the JE Program. In other words, after the JE Program there was an ascent in position, rank and salary. This in essence is a promotion which is defined as the advancement from one position to another with an increase in duties and responsibilities as authorized by law, and usually accompanied by an increase in salary. 12

Quintessentially, with the promotion of the union members, they are no longer entitled to the benefits which attach and pertain exclusively to their positions. Entitlement to the benefits provided for by law requires prior compliance with the conditions set forth therein. With the promotion of the members of respondent union, they occupied positions which no longer met the requirements imposed by law. Their assumption of these positions removed them from the coverage of the law, ergo, their exemption therefrom.

As correctly pointed out by petitioner, if the union members really wanted to continue receiving the benefits which attach to their former positions, there was

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nothing to prevent them from refusing to accept their promotions and their corresponding benefits. As the sating goes by, they cannot have their cake and eat it too or, as petitioner suggests, they could not, as a simple matter of law and fairness, get the best of both worlds at the expense of NASUREFCO.

Promotion of its employees is one of the jurisprudentially-recognized exclusive prerogatives of management, provided it is done in good faith. In the case at bar, private respondent union has miserably failed to convince this Court that the petitioner acted implementing the JE Program. There is no showing that the JE Program was intended to circumvent the law and deprive the members of respondent union of the benefits they used to receive.

Not so long ago, on this particular score, we had the occasion to hold that:

". . . it is the prerogative of the management to regulate, according to its discretion and judgment, all aspects of employment. This flows from the established rule that labor law does not authorize the substitution of the judgment of the employer in the conduct of its business. Such management prerogative may be availed of without fear of any liability so long as it is exercised in good faith for the advancement of the employer's interest and not for the purpose of defeating on circumventing the rights of employees under special laws or valid agreement and are not exercised in a malicious, harsh, oppressive, vindictive or wanton manner or out of malice or spite." 13

WHEREFORE, the impugned decision and resolution of respondent National Labor Relations Commission promulgated on July 19, 1991 and August 30, 1991, respectively, are hereby ANNULLED and SET ASIDE for having been rendered and adopted with grave abuse of discretion, and the basic complaint of private respondent union is DISMISSED.

G.R. No. 94951 April 22, 1991

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APEX MINING COMPANY, INC., petitioner, vs.NATIONAL LABOR RELATIONS COMMISSION and SINCLITICA CANDIDO, respondents.

Bernabe B. Alabastro for petitioner.

Angel Fernandez for private respondent.

GANCAYCO, J.:p

Is the househelper in the staff houses of an industrial company a domestic helper or a regular employee of the said firm? This is the novel issue raised in this petition.

Private respondent Sinclita Candida was employed by petitioner Apex Mining Company, Inc. on May 18, 1973 to perform laundry services at its staff house located at Masara, Maco, Davao del Norte. In the beginning, she was paid on a piece rate basis. However, on January 17, 1982, she was paid on a monthly basis at P250.00 a month which was ultimately increased to P575.00 a month.

On December 18, 1987, while she was attending to her assigned task and she was hanging her laundry, she accidentally slipped and hit her back on a stone. She reported the accident to her immediate supervisor Mila de la Rosa and to the personnel officer, Florendo D. Asirit. As a result of the accident she was not able to continue with her work. She was permitted to go on leave for medication. De la Rosa offered her the amount of P 2,000.00 which was eventually increased to P5,000.00 to persuade her to quit her job, but she refused the offer and preferred to return to work. Petitioner did not allow her to return to work and dismissed her on February 4, 1988.

On March 11, 1988, private respondent filed a request for assistance with the Department of Labor and Employment. After the parties submitted their position papers as required by the labor arbiter assigned to the case on August 24, 1988 the latter rendered a decision, the dispositive part of which reads as follows:

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WHEREFORE, Conformably With The Foregoing, judgment is hereby rendered ordering the respondent, Apex Mining Company, Inc., Masara, Davao del Norte, to pay the complainant, to wit:

1 Salary

Differential –– P16,289.20

2. Emergency Living

Allowance –– 12,430.00

3. 13th Month Pay

Differential –– 1,322.32

4. Separation Pay

(One-month for

every year of

service [1973-19881) –– 25,119.30

or in the total of FIFTY FIVE THOUSAND ONE HUNDRED SIXTY ONE PESOS AND 42/100 (P55,161.42).

SO ORDERED. 1

Not satisfied therewith, petitioner appealed to the public respondent National Labor Relations Commission (NLRC), wherein in due course a decision was rendered by the Fifth Division thereof on July 20, 1989 dismissing the appeal for lack of merit and affirming the appealed decision. A motion for reconsideration thereof was denied in a resolution of the NLRC dated June 29, 1990.

Hence, the herein petition for review by certiorari, which appopriately should be a special civil action for certiorari, and which in the interest of justice, is hereby treated as such. 2 The main thrust of the petition is that private respondent should be treated as a mere househelper or domestic servant and not as a regular employee of petitioner.

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The petition is devoid of merit.

Under Rule XIII, Section l(b), Book 3 of the Labor Code, as amended, the terms "househelper" or "domestic servant" are defined as follows:

The term "househelper" as used herein is synonymous to the term "domestic servant" and shall refer to any person, whether male or female, who renders services in and about the employer's home and which services are usually necessary or desirable for the maintenance and enjoyment thereof, and ministers exclusively to the personal comfort and enjoyment of the employer's family. 3

The foregoing definition clearly contemplates such househelper or domestic servant who is employed in the employer's home to minister exclusively to the personal comfort and enjoyment of the employer's family. Such definition covers family drivers, domestic servants, laundry women, yayas, gardeners, houseboys and other similar househelps.

The definition cannot be interpreted to include househelp or laundrywomen working in staffhouses of a company, like petitioner who attends to the needs of the company's guest and other persons availing of said facilities. By the same token, it cannot be considered to extend to then driver, houseboy, or gardener exclusively working in the company, the staffhouses and its premises. They may not be considered as within the meaning of a "househelper" or "domestic servant" as above-defined by law.

The criteria is the personal comfort and enjoyment of the family of the employer in the home of said employer. While it may be true that the nature of the work of a househelper, domestic servant or laundrywoman in a home or in a company staffhouse may be similar in nature, the difference in their circumstances is that in the former instance they are actually serving the family while in the latter case, whether it is a corporation or a single proprietorship engaged in business or industry or any other agricultural or similar pursuit, service is being rendered in the staffhouses or within the premises of the business of the employer. In such instance, they are employees of the company or employer in the business concerned entitled to the privileges of a regular employee.

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Petitioner contends that it is only when the househelper or domestic servant is assigned to certain aspects of the business of the employer that such househelper or domestic servant may be considered as such as employee. The Court finds no merit in making any such distinction. The mere fact that the househelper or domestic servant is working within the premises of the business of the employer and in relation to or in connection with its business, as in its staffhouses for its guest or even for its officers and employees, warrants the conclusion that such househelper or domestic servant is and should be considered as a regular employee of the employer and not as a mere family househelper or domestic servant as contemplated in Rule XIII, Section l(b), Book 3 of the Labor Code, as amended.

Petitioner denies having illegally dismissed private respondent and maintains that respondent abandoned her work. This argument notwithstanding, there is enough evidence to show that because of an accident which took place while private respondent was performing her laundry services, she was not able to work and was ultimately separated from the service. She is, therefore, entitled to appropriate relief as a regular employee of petitioner. Inasmuch as private respondent appears not to be interested in returning to her work for valid reasons, the payment of separation pay to her is in order.

WHEREFORE, the petition is DISMISSED and the appealed decision and resolution of public respondent NLRC are hereby AFFIRMED. No pronouncement as to costs.

SO ORDERED.

G.R. No. L-18353 July 31, 1963

SAN MIGUEL BREWERY, INC., petitioner, vs.DEMOCRATIC LABOR ORGANIZATION, ET AL., respondents.

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Paredes, Poblador, Cruz and Nazareno for petitioner.Delfin N. Mercader for respondents.

BAUTISTA ANGELO, J.:

On January 27, 1955, the Democratic Labor Association filed complaint against the San Miguel Brewery, Inc. embodying 12 demands for the betterment of the conditions of employment of its members. The company filed its answer to the complaint specifically denying its material averments and answering the demands point by point. The company asked for the dismissal of the complaint.

At the hearing held sometime in September, 1955, the union manifested its desire to confine its claim to its demands for overtime, night-shift differential pay, and attorney's fees, although it was allowed to present evidence on service rendered during Sundays and holidays, or on its claim for additional separation pay and sick and vacation leave compensation.1äwphï1.ñët

After the case had been submitted for decision, Presiding Judge Jose S. Bautista, who was commissioned to receive the evidence, rendered decision expressing his disposition with regard to the points embodied in the complaint on which evidence was presented. Specifically, the disposition insofar as those points covered by this petition for review are concerned, is as follows:

1. With regard to overtime compensation, Judge Bautista held that the provisions of the Eight-Hour Labor Law apply to the employees concerned for those working in the field or engaged in the sale of the company's products outside its premises and consequently they should be paid the extra compensation accorded them by said law in addition to the monthly salary and commission earned by them, regardless of the meal allowance given to employees who work up to late at night.

2. As to employees who work at night, Judge Bautista decreed that they be paid their corresponding salary differentials for work done at night prior to January 1, 1949 with the present qualification: 25% on the basis of their salary to those who work from 6:00 to 12:00 p.m., and 75% to those who work from 12:01 to 6:00 in the morning.

3. With regard to work done during Sundays and holidays, Judge Bautista also decreed that the employees concerned be paid an additional

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compensation of 25% as provided for in Commonwealth Act No. 444 even if they had been paid a compensation on monthly salary basis.

The demands for the application of the Minimum Wage Law to workers paid on "pakiao" basis, payment of accumulated vacation and sick leave and attorney's fees, as well as the award of additional separation pay, were either dismissed, denied, or set aside.

Its motion for reconsideration having been denied by the industrial court en banc, which affirmed the decision of the court a quo with few exceptions, the San Miguel Brewery, Inc. interposed the present petition for review.

Anent the finding of the court a quo, as affirmed by the Court of Industrial Relations, to the effect that outside or field sales personnel are entitled to the benefits of the Eight-Hour Labor Law, the pertinent facts are as follows:

After the morning roll call, the employees leave the plant of the company to go on their respective sales routes either at 7:00 a.m. for soft drinks trucks, or 8:00 a.m. for beer trucks. They do not have a daily time record. The company never require them to start their work as outside sales personnel earlier than the above schedule.

The sales routes are so planned that they can be completed within 8 hours at most, or that the employees could make their sales on their routes within such number of hours variable in the sense that sometimes they can be completed in less than 8 hours, sometimes 6 to 7 hours, or more. The moment these outside or field employees leave the plant and while in their sales routes they are on their own, and often times when the sales are completed, or when making short trip deliveries only, they go back to the plant, load again, and make another round of sales. These employees receive monthly salaries and sales commissions in variable amounts. The amount of compensation they receive is uncertain depending upon their individual efforts or industry. Besides the monthly salary, they are paid sales commission that range from P30, P40, sometimes P60, P70, to sometimes P90, P100 and P109 a month, at the rate of P0.01 to P0.01-½ per case.

It is contended that since the employees concerned are paid a commission on the sales they make outside of the required 8 hours besides the fixed salary that is paid to them, the Court of Industrial Relations erred in ordering that they be paid

25

an overtime compensation as required by the Eight-Hour Labor Law for the reason that the commission they are paid already takes the place of such overtime compensation. Indeed, it is claimed, overtime compensation is an additional pay for work or services rendered in excess of 8 hours a day by an employee, and if the employee is already given extra compensation for labor performed in excess of 8 hours a day, he is not covered by the law. His situation, the company contends, can be likened to an employee who is paid on piece-work, "pakiao", or commission basis, which is expressly excluded from the operation of the Eight-Hour Labor Law.1

We are in accord with this view, for in our opinion the Eight-Hour Labor Law only has application where an employee or laborer is paid on a monthly or daily basis, or is paid a monthly or daily compensation, in which case, if he is made to work beyond the requisite period of 8 hours, he should be paid the additional compensation prescribed by law. This law has no application when the employee or laborer is paid on a piece-work, "pakiao", or commission basis, regardless of the time employed. The philosophy behind this exemption is that his earnings in the form of commission based on the gross receipts of the day. His participation depends upon his industry so that the more hours he employs in the work the greater are his gross returns and the higher his commission. This philosophy is better explained in Jewel Tea Co. v. Williams, C.C.A. Okla., 118 F. 2d 202, as follows:

The reasons for excluding an outside salesman are fairly apparent. Such 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.

True it is that the employees concerned are paid a fixed salary for their month of service, such as Benjamin Sevilla, a salesman, P215; Mariano Ruedas, a truck driver, P155; Alberto Alpaza and Alejandro Empleo, truck helpers, P125 each, and sometimes they work in excess of the required 8-hour period of work, but for their extra work they are paid a commission which is in lieu of the extra compensation to which they are entitled. The record shows that these employees

26

during the period of their employment were paid sales commission ranging from P30, P40, sometimes P60, P70, to sometimes P90, P100 and P109 a month depending on the volume of their sales and their rate of commission per case. And so, insofar is the extra work they perform, they can be considered as employees paid on piece work, "pakiao", or commission basis. The Department of Labor, called upon to implement, the Eight-Hour Labor Law, is of this opinion when on December 9, 1957 it made the ruling on a query submitted to it, thru the Director of the Bureau of Labor Standards, to the effect that field sales personnel receiving regular monthly salaries, plus commission, are not subject to the Eight-Hour Labor Law. Thus, on this point, said official stated:

. . . Moreover, when a fieldman receives a regular monthly salary plus commission on percentage basis of his sales, it is also the established policy of the Office to consider his commission as payment for the extra time he renders in excess of eight hours, thereby classifying him as if he were on piecework basis, and therefore, technically speaking, he is not subject to the Eight-Hour Labor Law.

We are, therefore, of the opinion that the industrial court erred in holding that the Eight-Hour Labor Law applies to the employees composing the outside service force and in ordering that they be paid the corresponding additional compensation.

With regard to the claim for night salary differentials, the industrial court found that claimants Magno Johnson and Jose Sanchez worked with the respondent company during the period specified by them in their testimony and that watchmen Zoilo Illiga, Inocentes Prescillas and Daniel Cayuca rendered night duties once every three weeks continuously during the period of the employment and that they were never given any additional compensation aside from their monthly regular salaries. The court found that the company started paying night differentials only in January, 1949 but never before that time. And so it ordered that the employees concerned be paid 25% additional compensation for those who worked from 6:00 to 12:00 p.m. and 75% additional compensation for those who worked from 12:01 to 6: 00 in the morning. It is now contended that this ruling is erroneous because an award for night shift differentials cannot be given retroactive effect but can only be entertained from the date of demand which was on January 27, 1953, citing in support thereof our ruling in Earnshaws Docks

27

& Honolulu Iron Works v. The Court of Industrial Relations, et al., L-8896, January 25, 1957.

This ruling, however, has no application here for it appears that before the filing of the petition concerning this claim a similar one had already been filed long ago which had been the subject of negotiations between the union and the company which culminated in a strike in 1952. Unfortunately, however, the strike fizzled out and the strikers were ordered to return to work with the understanding that the claim for night salary differentials should be settled in court. It is perhaps for this reason that the court a quo granted this claim in spite of the objection of the company to the contrary.

The remaining point to be determined refers to the claim for pay for Sundays and holidays for service performed by some claimants who were watchmen or security guards. It is contended that these employees are not entitled to extra pay for work done during these days because they are paid on a monthly basis and are given one day off which may take the place of the work they may perform either on Sunday or any holiday.

We disagree with this claim because it runs counter to law. Section 4 of Commonwealth Act No. 444 expressly provides that no person, firm or corporation may compel an employee or laborer to work during Sundays and legal holidays unless he is paid an additional sum of 25% of his regular compensation. This proviso is mandatory, regardless of the nature of compensation. The only exception is with regard to public utilities who perform some public service.

WHEREFORE, the decision of the industrial court is hereby modified as follows: the award with regard to extra work performed by those employed in the outside or field sales force is set aside. The rest of the decision insofar as work performed on Sundays and holidays covering watchmen and security guards, as well as the award for night salary differentials, is affirmed. No costs.

G.R. No. 96078 January 9, 1992

HILARIO RADA, petitioner, vs.

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NATIONAL LABOR RELATIONS COMMISSION (Second Division) and PHILNOR CONSULTANTS AND PLANNERS, INC., respondents.

Cabellero, Calub, Aumentado & Associates Law Offices for petitioner.

REGALADO, J.:

In this special civil action for certiorari, petitioner Rada seeks to annul the decision of respondent National Labor Relations Commission (NLRC), dated November 19, 1990, reversing the decision of the labor arbiter which ordered the reinstatement of petitioner with backwages and awarded him overtime pay. 1

The facts, as stated in the Comment of private respondent Philnor Consultants and Planners, Inc. (Philnor), are as follows:

Petitioner's initial employment with this Respondent was under a "Contract of Employment for a Definite Period" dated July 7, 1977, copy of which is hereto attached and made an integral part hereof as Annex A whereby Petitioner was hired as "Driver" for the construction supervision phase of the Manila North Expressway Extension, Second Stage (hereinafter referred to as MNEE Stage 2) for a term of "about 24 months effective July 1, 1977.

xxx xxx xxx

Highlighting the nature of Petitioner's employment, Annex A specifically provides as follows:

It is hereby understood that the Employer does not have a continuing need for the services of the Employee beyond the termination date of this contract and that the Employee's services shall automatically, and without notice, terminate upon the completion of the above specified phase of the project; and that it is further understood that the engagement of his/her services is coterminus with the same and not with the whole project or other phases thereof wherein other

29

employees of similar position as he/she have been hired. (Par. 7, emphasis supplied)

Petitioner's first contract of employment expired on June 30, 1979. Meanwhile, the main project, MNEE Stage 2, was not finished on account of various constraints, not the least of which was inadequate funding, and the same was extended and remained in progress beyond the original period of 2.3 years. Fortunately for the Petitioner, at the time the first contract of employment expired, Respondent was in need of Driver for the extended project. Since Petitioner had the necessary experience and his performance under the first contract of employment was found satisfactory, the position of Driver was offered to Petitioner, which he accepted. Hence a second Contract of Employment for a Definite Period of 10 months, that is, from July 1, 1979 to April 30, 1980 was executed between Petitioner and Respondent on July 7, 1979. . . .

In March 1980 some of the areas or phases of the project were completed, but the bulk of the project was yet to be finished. By that time some of those project employees whose contracts of employment expired or were about to expire because of the completion of portions of the project were offered another employment in the remaining portion of the project. Petitioner was among those whose contract was about to expire, and since his service performance was satisfactory, respondent renewed his contract of employment in April 1980, after Petitioner agreed to the offer. Accordingly, a third contract of employment for a definite period was executed by and between the Petitioner and the Respondent whereby the Petitioner was again employed as Driver for 19 months, from May 1, 1980 to November 30, 1981, . . .

This third contract of employment was subsequently extended for a number of times, the last extension being for a period of 3 months, that is, from October 1, 1985 to December 31, 1985, . . .

The last extension, from October 1, 1985 to December 31, 1985 (Annex E) covered by an "Amendment to the Contract of Employment with a Definite Period," was not extended any further

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because Petitioner had no more work to do in the project. This last extension was confirmed by a notice on November 28, 1985 duly acknowledged by the Petitioner the very next day, . . .

Sometime in the 2nd week of December 1985, Petitioner applied for "Personnel Clearance" with Respondent dated December 9, 1985 and acknowledged having received the amount of P3,796.20 representing conversion to cash of unused leave credits and financial assistance. Petitioner also released Respondent from all obligations and/or claims, etc. in a "Release, Waiver and Quitclaim" . . . 2

Culled from the records, it appears that on May 20, 1987, petitioner filed before the NLRC, National Capital Region, Department of Labor and Employment, a Complaint for non-payment of separation pay and overtime pay. On June 3, 1987, Philnor filed its Position Paper alleging, inter alia, that petitioner was not illegally terminated since the project for which he was hired was completed; that he was hired under three distinct contracts of employment, each of which was for a definite period, all within the estimated period of MNEE Stage 2 Project, covering different phases or areas of the said project; that his work was strictly confined to the MNEE Stage 2 Project and that he was never assigned to any other project of Philnor; that he did not render overtime services and that there was no demand or claim for him for such overtime pay; that he signed a "Release, Waiver and Quitclaim" releasing Philnor from all obligations and claims; and that Philnor's business is to provide engineering consultancy services, including supervision of construction services, such that it hires employees according to the requirements of the project manning schedule of a particular contract. 3

On July 2, 1987, petitioner filed an Amended Complaint alleging that he was illegally dismissed and that he was not paid overtime pay although he was made to render three hours overtime work form Monday to Saturday for a period of three years.

On July 7, 1987, petitioner filed his Position Paper claiming that he was illegally dismissed since he was a regular employee entitled to security of tenure; that he was not a project employee since Philnor is not engaged in the construction business as to be covered by Policy Instructions No. 20; that the contract of employment for a definite period executed between him and Philnor is against public policy and a clear circumvention of the law designed merely to evade any

31

benefits or liabilities under the statute; that his position as driver was essential, necessary and desirable to the conduct of the business of Philnor; that he rendered overtime work until 6:00 p.m. daily except Sundays and holidays and, therefore, he was entitled to overtime pay. 4

In his Reply to Respondent's Position Paper, petitioner claimed that he was a regular employee pursuant to Article 278(c) of the Labor Code and, thus, he cannot be terminated except for a just cause under Article 280 of the Code; and that the public respondent's ruling in Quiwa vs. Philnor Consultants and Planners, Inc. 5 is not applicable to his case since he was an administrative employee working as a company driver, which position still exists and is essential to the conduct of the business of Philnor even after the completion of his contract of employment. 6 Petitioner likewise avers that the contract of employment for a definite period entered into between him and Philnor was a ploy to defeat the intent of Article 280 of the Labor Code.

On July 28, 1987, Philnor filed its Respondent's Supplemental Position Paper, alleging therein that petitioner was not a company driver since his job was to drive the employees hired to work at the MNEE Stage 2 Project to and from the filed office at Sto. Domingo Interchange, Pampanga; that the office hours observed in the project were from 7:00 a.m. to 4:00 p.m. Mondays through Saturdays; that Philnor adopted the policy of allowing certain employees, not necessarily the project driver, to bring home project vehicles to afford fast and free transportation to and from the project field office considering the distance between the project site and the employees' residence, to avoid project delays and inefficiency due to employee tardiness caused by transportation problem; that petitioner was allowed to use a project vehicle which he used to pick up and drop off some ten employees along Epifanio de los Santos Avenue (EDSA), on his way home to Marikina, Metro Manila; that when he was absent or on leave, another employee living in Metro Manila used the same vehicle in transporting the same employees; that the time used by petitioner to and from his residence to the project site from 5:30 a.m. to 7:00 a.m. and from 4:00 p.m. to 6:00 p.m., or about three hours daily, was not overtime work as he was merely enjoying the benefit and convenience of free transportation provided by Philnor, otherwise without such vehicle he would have used at least four hours by using public transportation and spent P12.00 daily fare; that in the case of Quiwa vs. Philnor Consultants and Planners, Inc., supra, the NLRC upheld Philnor's position that Quiwa was a project employee and he was not entitled to termination pay under

32

Policy Instructions No. 20 since his employment was coterminous with the completion of the project.

On August 25, 1987, Philnor filed its Respondent's Reply/Comments to Complainant's Rejoinder and Reply, submitting therewith two letters dated January 5, 1985 and February 6, 1985, signed by MNEE Stage 2 Project employees, including herein petitioner, where they asked what termination benefits could be given to them as the MNEE Stage 2 Project was nearing completion, and Philnor's letter-reply dated February 22, 1985 informing them that they are not entitled to termination benefits as they are contractual/project employees.

On August 31, 1989, Labor Arbiter Dominador M. Cruz rendered a decision 7 with the following dispositive portion:

WHEREFORE, in view of all the foregoing considerations, judgment is hereby rendered:

(1) Ordering the respondent company to reinstate the complainant to his former position without loss of seniority rights and other privileges with full backwages from the time of his dismissal to his actual reinstatement;

(2) Directing the respondent company to pay the complainant overtime pay for the three excess hours of work performed during working days from January 1983 to December 1985; and

(3) Dismissing all other claims for lack of merit.

SO ORDERED.

Acting on Philnor's appeal, the NLRC rendered its assailed decision dated November 19, 1990, setting aside the labor arbiter's aforequoted decision and dismissing petitioner's complaint.

Hence this petition wherein petitioner charges respondent NLRC with grave abuse of discretion amounting to lack of jurisdiction for the following reasons:

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1. The decision of the labor arbiter, dated August 31, 1989, has already become final and executory;

2. The case of Quiwa vs. Philnor Consultants and Planners, Inc. is not binding nor is it applicable to this case;

3. The petitioner is a regular employee with eight years and five months of continuous services for his employer, private respondent Philnor;

4. The claims for overtime services, reinstatement and full backwages are valid and meritorious and should have been sustained; and

5. The decision of the labor arbiter should be reinstated as it is more in accord with the facts, the law and evidence.

The petition is devoid of merit.

1. Petitioner questions the jurisdiction of respondent NLRC in taking cognizance of the appeal filed by Philnor in spite of the latter's failure to file a supersedeas bond within ten days from receipt of the labor arbiter's decision, by reason of which the appeal should be deemed to have been filed out of time. It will be noted, however, that Philnor was able to file a bond although it was made beyond the 10-day reglementary period.

While it is true that the payment of the supersedeas bond is an essential requirement in the perfection of an appeal, however, where the fee had been paid although payment was delayed, the broader interests of justice and the desired objective of resolving controversies on the merits demands that the appeal be given due course. Besides, it was within the inherent power of the NLRC to have allowed late payment of the bond, considering that the aforesaid decision of the labor arbiter was received by private respondent on October 3, 1989 and its appeal was duly filed on October 13, 1989. However, said decision did not state the amount awarded as backwages and overtime pay, hence the amount of the supersedeas bond could not be determined. It was only in the order of the NLRC of February 16, 1990 that the amount of the supersedeas bond was specified and which bond, after an extension granted by the NLRC, was timely filed by private respondent.

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Moreover, as provided by Article 221 of the Labor Code, "in any proceeding before the Commission or any of the Labor Arbiters, the rules of evidence prevailing in Courts of law or equity shall not be controlling and it is the spirit and intention of this Code that the Commission and its members and the Labor Arbiters shall use every and all reasonable means to ascertain the facts in each case speedily and objectively without regard to technicalities of law or procedure, all in the interest of due process. 8 Finally, the issue of timeliness of the appeal being an entirely new and unpleaded matter in the proceedings below it may not now be raised for the first time before this Court. 9

2. Petitioner postulates that as a regular employee, he is entitled to security of tenure, hence he cannot be terminated without cause. Private respondent Philnor believes otherwise and asserts that petitioner is merely a project employee who was terminated upon the completion of the project for which he was employed.

In holding that petitioner is a regular employee, the labor arbiter found that:

. . . There is no question that the complainant was employed as driver in the respondent company continuously from July 1, 1977 to December 31, 1985 under various contracts of employment. Similarly, there is no dispute that respondent Philnor Consultant & Planner, Inc., as its business name connotes, has been engaged in providing to its client(e)le engineering consultancy services. The record shows that while the different labor contracts executed by the parties stipulated definite periods of engaging the services of the complainant, yet the latter was suffered to continue performing his job upon the expiration of one contract and the renewal of another. Under these circumstances, the complaint has obtained the status of regular employee, it appearing that he has worked without fail for almost eight years, a fraction of six months considered as one whole year, and that his assigned task as driver was necessary and desirable in the usual trade/business of the respondent employer. Assuming to be true, as spelled out in the employment contract, that the Employer has no "continuing need for the services of the Employe(e) beyond the termination date of this contract and that the Employee's services shall automatically, and without notice, terminate upon completion of the above specified phase of the project," still we cannot see our way clear why the complainant was hired and his

35

services engaged contract after contract straight from 1977 to 1985 which, to our considered view, lends credence to the contention that he worked as regular driver ferrying early in the morning office personnel to the company main office in Pampanga and bringing back late in the afternoon to Manila, and driving company executives for inspection of construction workers to the jobsites. All told, we believe that the complainant, under the environmental facts obtaining in the case at bar, is a regular employee, the provisions of written agreement to the contrary notwithstanding and regardless of the oral understanding of the parties . . . 10

On the other hand, respondent NLRC declared that, as between the uncorroborated and unsupported assertions of petitioners and those of private respondent which are supported by documents, greater credence should be given the latter. It further held that:

Complainant was hired in a specific project or undertaking as driver. While such project was still on-going he was hired several times with his employment period fixed every time his contract was renewed. At the completion of the specific project or undertaking his employment contract was not renewed.

We reiterate our ruling in the case of (Quiwa) vs. Philnor Consultants and Planners, Inc., NLRC RAB III 5-1738-84, it is being applicable in this case, viz.:

. . . While it is true that the activities performed by him were necessary or desirable in the usual business or trade of the respondent as consultants, planners, contractor and while it is also true that the duration of his employment was for a period of about seven years, these circumstances did not make him a regular employee in contemplation of Article 281 of (the) Labor Code. . . . 11

Our ruling in Sandoval Shipyards, Inc. vs. National Labor Relations Commission, et al. 12 is applicable to the case at bar. Thus:

36

We hold that private respondents were project employees whose work was coterminous with the project or which they were hired. Project employees, as distinguished from regular or non-project employees, are mentioned in section 281 of the Labor Code as those "where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee."

Policy Instructions No. 20 of the Secretary of Labor, which was issued to stabilize employer-employee relations in the construction industry, provides:

Project employees are those employed in connection with a particular construction project. Non-project (regular) employees are those employed by a construction company without reference to any particular project.

Project employees are not entitled to termination pay if they are terminated as a result of the completion of the project or any phase thereof in which they are employed, regardless of the number of projects in which they have been employed by a particular construction company. Moreover, the company is not required to obtain clearance from the Secretary of Labor in connection with such termination.

The petitioner cited three of its own cases wherein the National Labor Relations Commission, Deputy Minister of Labor and Employment Inciong and the Director of the National Capital Region held that the layoff of its project employees was lawful. Deputy Minister Inciong in TFU Case No. 1530, In Re Sandoval Shipyards, Inc. Application for Clearance to Terminate Employees, rendered the following ruling on February 26, 1979;

We feel that there is merit in the contention of the applicant corporation. To our mind, the employment of the employees concerned were fixed for a specific

37

project or undertaking.For the nature of the business the corporation is engaged into is one which will not allow it to employ workers for an indefinite period.

It is significant to note that the corporation does not construct vessels for sale or otherwise which will demand continuous productions of ships and will need permanent or regular workers. It merely accepts contracts for shipbuilding or for repair of vessels form third parties and, only, on occasion when it has work contract of this nature that it hires workers to do the job which, needless to say, lasts only for less than a year or longer.

The completion of their work or project automatically terminates their employment, in which case, the employer is, under the law, only obliged to render a report on the termination of the employment. (139-140, Rollo of G.R. No. 65689) (Emphasis supplied)

In Cartagenas, et al. vs. Romago Electric Company, Inc., et al., 13 we likewise held that:

As an electrical contractor, the private respondent depends for its business on the contracts it is able to obtain from real estate developers and builders of buildings. Since its work depends on the availability of such contracts or "projects," necessarily the duration of the employment's of this work force is not permanent but co-terminus with the projects to which they are assigned and from whose payrolls they are paid. It would be extremely burdensome for their employer who, like them, depends on the availability of projects, if it would have to carry them as permanent employees and pay them wages even if there are no projects for them to work on. (Emphasis supplied.)

It must be stressed herein that although petitioner worked with Philnor as a driver for eight years, the fact that his services were rendered only for a particular

38

project which took that same period of time to complete categorizes him as a project employee. Petitioner was employed for one specific project.

A non-project employee is different in that the employee is hired for more than one project. A non-project employee, vis-a-vis a project employee, is best exemplified in the case of Fegurin, et al. vs. National Labor Relations Commission, et al. 14 wherein four of the petitioners had been working with the company for nine years, one for eight years, another for six years, the shortest term being three years. In holding that petitioners are regular employees, this Court therein explained:

Considering the nature of the work of petitioners, that of carpenter, laborer or mason, their respective jobs would actually be continuous and on-going. When a project to which they are individually assigned is completed, they would be assigned to the next project or a phase thereof. In other words, they belonged to a "work pool" from which the company would draw workers for assignment to other projects at its discretion. They are, therefore, actually "non-project employees."

From the foregoing, it is clear that petitioner is a project employee considering that he does not belong to a "work pool" from which the company would draw workers for assignment to other projects at its discretion. It is likewise apparent from the facts obtaining herein that petitioner was utilized only for one particular project, the MNEE Stage 2 Project of respondent company. Hence, the termination of herein petitioner is valid by reason of the completion of the project and the expiration of his employment contract.

3. Anent the claim for overtime compensation, we hold that petitioner is entitled to the same. The fact that he picks up employees of Philnor at certain specified points along EDSA in going to the project site and drops them off at the same points on his way back from the field office going home to Marikina, Metro Manila is not merely incidental to petitioner's job as a driver. On the contrary, said transportation arrangement had been adopted, not so much for the convenience of the employees, but primarily for the benefit of the employer, herein private respondent. This fact is inevitably deducible from the Memorandum of respondent company:

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The herein Respondent resorted to the above transport arrangement because from its previous project construction supervision experiences, Respondent found out that project delays and inefficiencies resulted from employees' tardiness; and that the problem of tardiness, in turn, was aggravated by transportation problems, which varied in degrees in proportion to the distance between the project site and the employees' residence. In view of this lesson from experience, and as a practical, if expensive, solution to employees' tardiness and its concomitant problems, Respondent adopted the policy of allowing certain employees — not necessarily project drivers — to bring home project vehicles, so that employees could be afforded fast, convenient and free transportation to and from the project field office. . . . 15

Private respondent does not hesitate to admit that it is usually the project driver who is tasked with picking up or dropping off his fellow employees. Proof thereof is the undisputed fact that when petitioner is absent, another driver is supposed to replace him and drive the vehicle and likewise pick up and/or drop off the other employees at the designated points on EDSA. If driving these employees to and from the project site is not really part of petitioner's job, then there would have been no need to find a replacement driver to fetch these employees. But since the assigned task of fetching and delivering employees is indispensable and consequently mandatory, then the time required of and used by petitioner in going from his residence to the field office and back, that is, from 5:30 a.m. to 7:00 a.m. and from 4:00 p.m. to around 6:00 p.m., which the labor arbiter rounded off as averaging three hours each working day, should be paid as overtime work. Quintessentially, petitioner should be given overtime pay for the three excess hours of work performed during working days from January, 1983 to December, 1985.

WHEREFORE, subject to the modification regarding the award of overtime pay to herein petitioner, the decision appealed from is AFFIRMED in all other respects.

SO ORDERED.

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G.R. No. L-17068 December 30, 1961

NATIONAL SHIPYARDS AND STEEL CORPORATION, petitioner, vs.COURT OF INDUSTRIAL RELATIONS and DOMINADOR MALONDRAS, respondents.

N. C. Virata for petitioner.Mariano B. Tuason for respondent Court.Manuel P. Calanog for respondent Dominador Malondras.

REYES, J.B.L., J.:

Petition filed by the National Shipyards and Steel Corporation (otherwise known as the NASSCO) to review certain orders of the respondent Court of Industrial Relations requiring it to pay its bargeman Dominador Malondras overtime service of 16 hours a day for a period from January 1, 1954 to December 31, 1956, and from January 1, 1957 to April 30, 1957, inclusive.

The petitioner NASSCO, a government-owned and controlled corporation, is the owner of several barges and tugboats used in the transportation of cargoes and personnel in connection with its business of shipbuilding and repair. In order that its bargeman could immediately be called to duty whenever their services are needed, they are required to stay in their respective barges, for which reason they are given living quarters therein as well as subsistence allowance of P1.50 per day during the time they are on board. However, upon prior authority of their superior officers, they may leave their barges when said barges are idle.

On April 15, 1957, 39 crew members of petitioner's tugboat service, including therein respondent Dominador Malondras, filed with the Industrial Court a complaint for the payment of overtime compensation (Case No. 1059-V). In the course of the proceeding, the parties entered into a stipulation of facts wherein the NASSCO recognized and admitted —

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4. That to meet the exigencies of the service in the performance of the above work, petitioners have to work when so required in excess of eight (8) hours a day and/or during Sundays and legal holidays (actual overtime service is subject to determination on the basis of the logbook of the vessels, time sheets and other pertinent records of the respondent).

6. The petitioners are paid by the respondent their regular salaries and subsistence allowance, without additional compensation for overtime work;

Pursuant to the above stipulation, the Industrial Court, on November 22, 1957, issued an order directing the court examiner to compute the overtime compensation due the claimants.

On February 14, 1958, the court examiner submitted his report covering the period from January 1 to December 31, 1957. In said report, the examiner found that the petitioners in Case No. 1058-V, including herein respondent Dominador Malondras, rendered an average overtime service of five (5) hours each day for the period aforementioned, and upon approval of the report by the Court, all the claimants, including Malondras, were paid their overtime compensation by the NASSCO.

Subsequently, on April 30, 1958, the court examiner submitted his second partial report covering the period from January 1, 1954 to December 31, 1956, again giving each crewman an average of five (5) overtime hours each day. Respondent Malondras was not, however, included in this report as his daily time sheets were not then available. Again upon approval by the Court, the crewmen concerned were paid their overtime compensation.

Because of his exclusion from the second report of the examiner, and his time sheets having been located in the meantime, Dominador Malondras, on September 18, 1959, filed petitions in the same case asking for the compensation and payment of his overtime compensation for the period from January 1, 1954 to December 31, 1956, and from January to April 30, 1957 which, he alleged, was not included in the first report of the examiner because his time sheets for these months could not be found at the time. Malondras' petition was opposed by the

42

NASSCO upon the argument, among others, that its records do not indicate the actual number of working hours rendered by Malondras during the periods in question. Acting on the petition and opposition, the Industrial Court ordered the examiner to examine the log books, daily time sheets, and other pertinent records of the corporation for the purpose of determining and computing whatever overtime service Malondras had rendered from January 1, 1954 to December 31, 1956.

On January 15, 1960, the chief examiner submitted a report crediting Malondras with a total of 4,349 overtime hours from January 1, 1954 to December 31, 1956, at an average of five (5) overtime hours a day, and after deducting the aggregate amount of subsistence allowance received by Malondras during this period, recommended the payment to him of overtime compensation in the total sum of P2,790.90.

On February 20, 1960, the Court ordered the examiner to make a re-examination of the records with a view to determining Malondras' overtime service from January 1, 1954 to December 31, 1956, and from January 1, 1957 to April 30, 1957, but without deducting from the compensation to be paid to him his subsistence allowance. Pursuant to this last order, the examiner, on April 23, 1960, submitted an amended report giving Malondras an average of sixteen (16) overtime hours a day, on the basis of his time sheets, and recommending the payment to him of the total amount of P15,242.15 as overtime compensation during the periods covered by the report. This report was, over the NASSCO's vigorous objections, approved by the Court below on May 6, 1960. The NASSCO moved for reconsideration, which was denied by the Court en banc, with one judge dissenting. Whereupon, the NASSCO appealed to this Court.

There appears to be no question that respondent Malondras actually rendered overtime services during the periods covered by the examiner's report. This is admitted in the stipulation of facts of the parties in Case No. 1058-V; and it was on the basis of this admission that the Court below, in its order of November 22, 1957, ordered the payment of overtime compensation to all the petitioners in Case No. 1058-V, including respondent Dominador Malondras, after the overtime service rendered by them had been determined and computed on the basis of the log books, time sheets and other pertinent records of the petitioner corporation.

43

The only matter to be determined here is, therefore, the number of hours of overtime for which Malondras should be paid for the periods January 1, 1954 to December 31, 1956, and from January to April 30, 1957. Respondents urge that this is a question of fact and not subject to review by this Court, there being sufficient evidence to support the Industrial Court's ruling on this point. It appears, however, that in crediting Malondras with 16 hours of overtime service daily for the periods in question, the court examiner relied only on his daily time sheets which, although approved by petitioner's officers in charge and its auditors, do not show the actual number of hours of work rendered by him each day but only indicate, according to the examiner himself, that:

almost everyday Dominador Malondras was on "Detail" or "Detailed on Board". According to the officer in charge of Dominador Malondras, when he (Dominador Malondras) was on "Detail" or "Detailed on Board", he was in the boat for twenty-four (24) hours.

In other words, the court examiner interpreted the words "Detail" or "Detailed on Board" to mean that as long as respondent Malondras was in his barge for twenty-four hours, he should be paid overtime for sixteen hours a day or the time in excess of the legal eight working hours that he could not leave his barge. Petitioner NASSCO, upon the other hand, argues that the mere fact that Malondras was required to be on board his barge all day so that he could immediately be called to duty when his services were needed does not imply that he should be paid overtime for sixteen hours a day, but that he should receive compensation only for the actual service in excess of eight hours that he can prove. This question is clearly a legal one that may be reviewed and passed upon by this Court.lawphil.net

We can not agree with the Court below that respondent Malondras should be paid overtime compensation for every hour in excess of the regular working hours that he was on board his vessel or barge each day, irrespective of whether or not he actually put in work during those hours. Seamen are required to stay on board their vessels by the very nature of their duties, and it is for this reason that, in addition to their regular compensation, they are given free living quarters and subsistence allowances when required to be on board. It could not have been the purpose of our law to require their employers to pay them overtime even when they are not actually working; otherwise, every sailor on board a vessel would be entitled to overtime for sixteen hours each day, even if he had spent all those

44

hours resting or sleeping in his bunk, after his regular tour of duty. The correct criterion in determining whether or not sailors are entitled to overtime pay is not, therefore, whether they were on board and can not leave ship beyond the regular eight working hours a day, but whether they actually rendered service in excess of said number of hours. We have ruled to that effect in Luzon Stevedoring Co., Inc. vs. Luzon Marine Department Union, et al., L-9265, April 29, 1957:

I. Is the definition for "hours of work" as presently applied to dryland laborers equally applicable to seamen? Or should a different criterion be applied by virtue of the fact that the seaman's employment is completely different in nature as well as in condition of work from that of a dryland laborer?

Section 1 of Commonwealth Act No. 444, known as the Eight-Hour Labor Law, provides:

"SEC. 1. The legal working day for any person employed by another shall be of not more than eight hours daily. When the work is not continuous, the time during which the laborer is not working AND CAN LEAVE HIS WORKING PLACE and can rest completely, shall not be counted."

The requisites contained in this section are further implemented by contemporary regulations issued by administrative authorities (Sections 4 and 5 of Chapter III, Article 1, Code of Rules and Regulations to implement the Minimum Wage Law).

For the purposes of this case, we do not need to set for seamen a criterion different from that applied to laborers on land, for under the provisions of the above quoted section, the only thing to be done is to determine the meaning and scope of the term "working place" used therein. As we understand this term, alaborer need not leave the premises of the factory shop or boat in order that his period of rest shall not be counted, it being enough that he "cease to work", may rest completely and leave or may leave at his will the spot where he actually stays while working, to go somewhere else, whether within or outside the premises of said factory,

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shop or boat. If these requisites are complied with, the period of such rest shall not be counted. (Emphasis supplied)

While Malondras' daily time sheets do not show his actual working hours, nevertheless, petitioner has already admitted in the Stipulation of Facts in this case that Malondras and his co-claimants did render service beyond eight (8) hours a day when so required by the exigencies of the service; and in fact, Malondras was credited and already paid for five (5) hours daily overtime work during the period from May 1 to December 31, 1957, under the examiner's first report. Since Malondras has been at the same job since 1954, it can be reasonably inferred that the overtime service he put in whenever he was required to be aboard his barge all day from 1954 to 1957 would be more or less consistent. In truth, the other claimants who served with Malondras under the same conditions and period have been finally paid for an overtime of 5 hours a day, and no substantial difference exists between their case and the present one, which was not covered by the same award only because Malondras' time records not found until later.

The next question is whether or not the subsistence allowance received by Malondras for the periods covered by the report in question should be deducted from his overtime compensation. We do not think so, for the Stipulation of the Facts of the parties show that this allowance is independent of and has nothing to do with whatever additional compensation for overtime work was due the petitioner NASSCO's bargemen. According to the petitioner itself, the reason why their bargemen are given living quarters in their barges and subsistence allowance at the rate of P1.50 per day was because they were required to stay in their respective barges in order that they could be immediately called to duty when their services were needed (Petition, par. 5, p. 2). Petitioner having already paid Malondras and his companions overtime for 1957 without deduction of the subsistence allowances received by them during this period, and Malondras' companions having been paid overtime for the other years also without deducting their subsistence allowances, there is no valid reason why Malondras should be singled out now and his subsistence allowance deducted from the overtime compensation still due him.

The last question involves petitioner's claim that it was error for the examiner to base Malondras' overtime compensation for the whole year 1954 at P6.16 a day, when he was appointed in the tubgoat service only on October 1, 1954, and

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before that was a derrick man with a daily salary of P6.00. In answer, respondent Malondras asserts that the report of the examiner, based on his time sheets from January 1, 1954, show that he had already been rendering overtime service from that date. This answer does not, however, deny that Malondras started to get P6.16 a day only in October, 1954, and was before that time receiving only P6.00 daily, as claimed by petitioner. We think, therefore, that the records should be reexamined to find out Malondras' exact daily wage from January 1, 1954 to September, 1954, and his overtime compensation for these months computed on the basis thereof.

WHEREFORE, the order appealed from is modified in the sense that respondent Malondras should be credited five (5) overtime hours instead of sixteen (16) hours a day for the periods covered by the examiner's report. The court below is ordered to determine from the records the exact daily wage received by respondent Malondras from January 1, 1954 to September, 1954, and to compute accordingly his overtime compensation for th

G.R. No. 111359 August 15, 1995

CALTEX REGULAR EMPLOYEES AT MANILA OFFICE, LEGAZPI BULK DEPOT AND MARINDUQUE BULK DEPOT-(MACLU), petitioners, vs.CALTEX (PHILIPPINES), INC. and NATIONAL LABOR RELATIONS COMMISSION (FIRST DIVISION),respondents.

FELICIANO, J.:

In this petition for certiorari, petitioner Caltex Regular Employees Association at the Manila Office, Legazpi Bulk Depot and the Marinduque Bulk Depot (hereinafter referred to as "Union"), seeks to annul and set aside the decision of

47

the National Labor Relations Commission ("NLRC"), promulgated on 5 March 1993, which reversed the decision of Labor Arbiter Valentin Guanio.

On 12 December 1985, petitioner Union and private respondent Caltex (Philippines), Inc. ("Caltex") entered into a Collective Bargaining Agreement ("1985 CBA") which was to be in effect until midnight of 31 December 1988. The CBA included, among others, the following provision:

ARTICLE III

HOURS OF WORK

In conformity with Presidential Decree 442, otherwise known as the Labor Code of the Philippines, as amended, the regular work week shall consist of eight (8) hours per day, seven (7) days, Monday through Sunday, during which regular rates of pay shall be paid in accordance with Annex B and work on the employee's one "Day of Rest," shall be considered a special work day, during which "Day of Rest" rates of pay shall be paid as provided in Annex B. Daily working schedules shall be established by management in accordance with the requirements of efficient operations on the basis of eight (8) hours per day for any five (5) days. Provided, however employees required to work in excess of forty (40) hours in any week shall be compensated in accordance with Annex B of thisAgreement. 1 (Emphasis supplied).

Pertinent portions of Annex "B" of the 1985 CBA are also quoted here as follows:

Annex "B"

Computation of:

Regular Day PayOvertime PayNight Shift Differential PayDay Off PayExcess of 40 hours within a calendar weekSunday Premium PayHoliday Premium Pay

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Employee's Basic Hourly Wage Rate:

Monthly Base Pay

———————X = (21.667) (8)

A. Regular Pay

1) Hourly rate= X

2) OT Hourly Rate 12 MN= (X + 50% X)

3) NSD 6 PM - 12 MN= (X + 25% X)

4) OT Hourly Rate NSD 6 PM - 12 MN= (X + 25% X) + 50% (X + 25% X)

5) NSD 12 MN - 6 AM= (X + 50% X)

6) OT Hourly Rate NSD 12 MN - 6 AM= (X + 50% X) + 50% (X + 50% X)

B. Regular First Day Off

1. Hourly Rate= (X + 50% X)

2. OT Hourly Rate= (X + 50% X) + 50% (x + 50% X)

3. NSD 6 PM - 12 MN= [ (X + 50% X) + 25% (X + 50% X) ]

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4. OT Hourly Rate NSD 6 PM - 12 MN= [ (X + 50% X) + 25% (X + 50% X) ] +50% [ (X + 50% X) + 25% (X + 50%) ]

5. NSD 12 MN - 6 AM= [ (X + 50% X) + 50% (X + 50% X) ]

6. OT Hourly Rate NSD 12 MN - 6 AM= [ (X + 50% X) + 50% (X + 50% X) ] +50% [ (X + 50% X) + 50% (X + 50% X) ]

C. Regular Second Day Off

1. Hourly Rate= (X + 100% X)

2. OT Hourly Rate= (X + 100% X) + 50% (X + 100% X)

3. NSD 6 PM - 12MN= [ (X + 100% X) + 25% (X + 100%) ]

4. OT Hourly Rate NSD 6 PM - 12 MN= [ (X + 100% X) + 25% (X + 100% X) ] +50% [ (X + 100% X) + 25% (X + 100% X) ]

5. NSD 12 MN - 6 AM= [ (X + 100% X) + 50% (X + 100% X) ]

6. OT Hourly Rate NSD 12 MN - 6 AM= [ (X + 100% X) + 50% (X + 100% X) ] +50% [ (X + 100% X) + 50% (X + 100% X) ]

D. Excess of 40 Hours within a Calendar Week

1. Hourly Rate= (X + 50% X)

2. OT Hourly Rate= (X + 50% X) + 50% (X + 50% X)

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3. NSD 6 PM - 12MN= [ (X + 50% X) + 25% (X + 50% X) ]

4. OT Hourly Rate NSD 6 PM - 12 MN= [ (X + 50% X) + 25% (X + 50% X) ] +50% [ (X + 50% X) + 25% (X + 50% X) ]

5. NSD 12 MN - 6 AM= [ (X + 50% X) + 50% (X + 50% X) ]

6. OT Hourly Rate NSD 12 MN - 6 AM= [ (X + 50% X) + 50% (X + 50% X) ] +50% [ (X + 50% X) + 50% (X + 50% X) ]

E. Sunday as a Normal Work Day

1. Hourly Rate= (X + 100% X)

2. OT Hourly Rate= (X + 100% X) + 50% (X + 100% X)

3. NSD 6 PM - 12 MN= [ (X + 100% X) + 25% (X + 100% X) ]

4. OT Hourly Rate NSD 6 PM - 12 MN= [ (X + 100% X) + 25% (X + 100% X) ] +50% [ (X + 100% X) + 25% (X + 100% X) ]

5. NSD 12 MN - 6 AM= [ (X + 100% X) + 50% (X + 100% X) ]

6. OT Hourly Rate NSD 12 MN - 6 AM= [ (X + 100% X) + 50% (X + 100% X) ] +50% [ (X + 100% X) + 50% (X + 100% X) ]

F. Sunday as day off

1. Hourly Rate= (X + 100% X)

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2. OT Hourly Rate= (X + 100% X) + 50% (X + 100% X)

3. NSD 6 PM - 12 MN= [ (X + 100% X) + 25% (X+ 100% X) ]

4. OT Hourly Rate NSD 6 PM - 12 MN= [ (X + 100% X) + 25% (X + 100% X) ] +50% [ (X+ 100% X) + 25% (X + 100% X) ]

5. NSD 12 MN - 6 AM= [ (X + 100% X) + 50% (X + 100% X) ]

6. OT Hourly Rate NSD 12 MN - 6 AM= [ (X + 100% X) + 50% (X + 100% X) ] +50% [ (X + 100% X) + 50% (X + 100% X) ]

G. Holiday as Normal Work Day

1. Hourly Rate= (X + 150% X)

2. OT Hourly Rate= (X + 150% X) + 50% (X + 150% X)

3. NSD 6 PM - 12 MN= [ (X + 150% X) + 25% (X + 150% X) ]

4. OT Hourly Rate NSD 6 PM - 12 MN= [ (X + 150% X) + 25% (X + 150% X) ] +50% [ (X + 150% X) + 25% (X + 150% X) ]

5. NSD 12 MN - 6 AM= [ (X + 150% X) + 50% (X + 150% X) ]

6. OT Hourly Rate NSD 12 MN - 6 AM= [ (X + 150% X) + 50% (X + 150% X) ] +50% [ (X + 150% X) + 50% (X + 150% X) ]

H. Holiday as Day Off

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1. Hourly Rate= (X + 150% X)

2. OT Hourly Rate= (X + 150% X) + 50% (X + 150% X)

3. NSD 6 PM - 12 MN= [ (X + 150% X) + 25% (X + 150% X) ]

4. OT Hourly Rate NSD 6 PM - 12 MN= [ (X + 150% X) + 25% (X + 150% X) ] + 50%[ (X + 150% X) + 25% (X + 150% X) ]

5. NSC 12 MN - 6 AM= [ (X + 150% X) + 50% (X + 150% X) ]

6. OT Hourly Rate= [ (X + 150% X) + 50% (X + 150% X) ] + 50%[ (X + 150% X) + 50% (X + 150% X) ]

7. * Hourly Rate for less than 8 hours= (150% X)

* For work of less than 8 hours, the employee will receive his basic daily rate —

(Monthly Base Pay)

———————21.667

plus the hourly rate multiplied by the number of hours worked. 2

Sometime in August 1986, the Union called Caltex's attention to alleged violations by Caltex of Annex "B" of the 1985 CBA, e.g. non-payment of night-shift differential, non-payment of overtime pay and non-payment at "first day-off rates" for work performed on a Saturday.

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Caltex's Industrial Relations manager immediately evaluated petitioner's claims and accordingly informed petitioner Union that differential payments would be timely implemented. In the implementation of the re-computed claims, however, no differential payment was made with respect to work performed on the first 2 1/2 hours on a Saturday.

On 7 July 1987, the Union instituted a complaint for unfair labor practice against Caltex alleging violation of the provisions of the 1985 CBA. Petitioner Union charged Caltex with shortchanging its employees when Caltex compensated work performed on the first 2 1/2 hours of Saturday, an employees' day of rest, at regular rates, when it should be paying at "day of rest" or "day off" rates.

Caltex denied the accusations of the Union. It averred that Saturday was never designated as a day of rest, much less a "day-off". It maintained that the 1985 CBA provided only 1 day of rest for employees at the Manila Office, as well as employees similarly situated at the Legazpi and Marinduque Bulk Depots. This day of rest, according to Caltex, was Sunday.

In due time, the Labor Arbiter ruled in favor of petitioner Union, while finding at the same time that private respondent Caltex was not guilty of any unfair labor practice. Labor Arbiter Valentin C. Guanio, interpreting Article III and Annex "B" of the 1985 CBA, concluded that Caltex's employees had been given two (2) days (instead of one [1] day) of rest, with the result that work performed on the employee's first day of rest, viz. Saturday, should be compensated at "First day-off" rates.

On appeal by Caltex, public respondent NLRC set aside the decision of Labor Arbiter Guanio. The NLRC found that the conclusions of the Labor Arbiter were not supported by the evidence on record. The NLRC, interpreting the provisions of the 1985 CBA, concluded that that CBA granted only one (1) day of rest, e.g., Sunday. The Union's motion for reconsideration was denied on 9 June 1993.

The controversy we must address in this Petition for Certiorari relates to the appropriate interpretation of Article III in relation to Annex "B" of the parties' 1985 CBA.

After carefully examining the language of Article III, in relation to Annex "B" of the 1985 CBA, quoted in limine, as well as relevant portions of earlier CBAs between

54

the parties, we agree with the NLRC that the intention of the parties to the 1985 CBA was to provide the employees with only one (1) day of rest. The plain and ordinary meaning of the language of Article III is that Caltex and the Union had agreed to pay "day of rest" rates for work performed on "an employee's one day of rest". To the Court's mind, the use of the word "one" describing the phrase "day of rest [of an employee]" emphasizes the fact that the parties had agreed that only a single day of rest shall be scheduled and shall be provided to the employee.

It is useful to note that the contract clauses governing hours of work in previous CBAs executed between private respondent Caltex and petitioner Union in 1973, 1976, 1979 and 1982 contained provisions parallel if not identical to those set out in Article III of the 1985 CBA here before us.

Article III of the 1973 Collective Bargaining Agreement 3 provided as follows:

Article III

Hours of Work

Sec. 1. In conformity with Presidential Decree No. 143, the regular work week shall consist of eight (8) hours per day, seven (7) days, Monday through Sunday, during which regular rates of pay shall be paid in accordance with Article IV, Section 1 and work on the employee's one "Day of Rest" shall be paid as provided in Article IV, Section 8. Daily working schedules shall be established by management in accordance with the requirements of efficient operations on the basis of eight (8) hours per day for any five (5) days; provided, however, employees required to work in excess of forty (40) hours in any week shall be compensated in accordance with Article IV, Section 7 of this Agreement. (Emphasis supplied)

Article III of the 1976 Collective Bargaining Agreement 4 read:

Article III

Hours of Work

Sec. 1. In conformity with Presidential Decree No. 143, the regular work week shall consist of eight (8) hours per day, seven (7) days, Monday

55

through Sunday, during which regular rates of pay shall be paid in accordance with Article IV, Section 1 and work on the employee's one "Day of Rest" shall be paid as provided in Article IV, Section 8. Daily working schedules shall be established by management in accordance with the requirements of efficient operations on the basis of eight (8) hours per day for any five (5) days; provided, however, employees required to work in excess of forty (40) hours in any week shall be compensated in accordance with Article IV, Section 7 of this Agreement. (Emphasis supplied)

Article III of the 1979 Collective Bargaining Agreement 5 said:

Article III

Hours of Work

Sec. 1. In conformity with Presidential Decree 442, otherwise known as the Labor Code of the Philippines, as mended, the regular work week shall consist of eight (8) hours per day, seven (7) days, Monday thru Sunday during which regular rates of pay shall be paid in accordance with Article IV, Section 1 and work on the employee's one "Day of Rest" shall be paid as provided in Article IV, Section 7. Daily working schedules shall be established by management in accordance with the requirements of efficient operations on the basis of eight hours per day for any five (5) days; provided, however, employees required to work in excess of forty (40) hours in any week shall be compensated in accordance with Article IV, Section 6 of this Agreement. (Emphasis supplied).

Article III of the 1982 Collective Bargaining Agreement 6 also provided as follows:

Article III

Hours of Work

Sec. 1. In conformity with Presidential Decree 442, otherwise known as the Labor Code of the Philippines, as amended, the regular work week shall consist of eight (8) hours per day, seven (7) days, Monday thru Sunday, during which regular rates of pay shall be paid in accordance with Article IV, Section 1 and work on the employee's one "Day of Rest" shall be paid as provided in Article IV, Section 7. Daily working schedules shall be

56

established by management in accordance with the requirements of efficient operations on the basis of eight hours per day for any five (5) days;provided, however employees required to work in excess of forty (40) hours in any week shall be compensated in accordance with Article IV, Section 6 of this Agreement. (Emphasis supplied)

In all these CBAs (1973, 1976, 1979, 1982), Article III provide that only "work on an employee's one day of rest "shall be paid on the basis of "day of rest rates". The relevant point here is that petitioner Union had never suggested that more than 1 day of rest had been agreed upon, and certainly Caltex had never treated Article III or any other portion of the CBAs as providing two (2) days of rest. It is well settled that the contemporaneous and subsequent conduct of the parties may be taken into account by a court called upon to interpret and apply a contract entered into by them. 7

We note that Labor Arbiter Guanio surmised that the intention he implied from the contents of Annex "B" was in conflict with the intention expressed in Article III (which, the Labor Arbiter admitted, stipulated only one day of rest). According to the Labor Arbiter, when Annex "B" referred to "First Day-off Rates" and "Second Day-off Rates", these were meant to express an agreement that the parties intended to provide employees two (2) days of rest. He then declared that Annex "B" should prevail over Article III because the former was a more specific provision than the latter.

An annex expresses the idea of joining a smaller or subordinate thing with another, larger or of higher importance. 8 An annex has a subordinate role, without any independent significance separate from that to which it is tacked on. Annex "B," in the case at bar, is one such document. It is not a memorandum of amendments or a codicil containing additional or new terms or stipulations. Annex "B" cannot be construed as modifying or altering the terms expressed in the body of the agreement contained in the 1985 CBA. It did not confer any rights upon employees represented by petitioner Union; neither did it impose any obligations upon private respondent Caltex. In fact, the contents of Annex "B" have no intelligible significance in and of themselves when considered separately from the 1985 CBA.

Moreover, we are persuaded by private respondent's argument that Annex "B" was intended to serve as acompany wide guide in computing compensation for

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work performed by all its employees, including but not limited to the Manila Office employees represented by petitioner Union. Private respondent also points out that the mathematical formulae contained in Annex "B" are not all applicable to all classes of employees, there being some formulae applicable only to particular groups or classes of employees. Thus, "First Day-off rates" and "Second Day-off rates" are applicable only to employees stationed at the refinery and associated facilities like depots and terminals which must be in constant twenty-four (24) hours a day, seven (7) days a week, operation, hence necessitating the continuous presence of operations personnel. The work of such operations personnel required them to be on duty for six (6) consecutive days. Upon the other hand, "First Day-off rates" and "Second Day-off rates" are not applicable to personnel of the Manila Office which consisted of other groups or categories of employees (e.g., office clerks, librarians, computer operators, secretaries, collectors, etc.), 9 since the nature of their work did not require them to be on duty for six (6) consecutive days.

We find, under the foregoing circumstances, that the purported intention inferred from Annex "B" by the Labor Arbiter was based merely on conjecture and speculation.

We also note that the Labor Arbiter merely suspected that the parties agreed to provide two (2) days of rest on the ground that they had so stipulated in their 1970 CBA. 10 A principal difficulty with this view is that it disregards the fact that Article III of the 1985 CBA no longer contained a particular proviso found in the 1970 CBA. In fact, all the CBAs subsequent to 1970 (1973, 1976, 1979, 1982) had similarly deleted the proviso in the 1970 CBA providing for two (2) days-off. To the Court's mind, such deletion means only one thing — that is — the parties had agreed to remove such stipulation. Accordingly, the proviso found in Article III of the 1970 CBA ceased to be a demandable obligation. Petitioner Union cannot now unilaterally re-insert such a stipulation by strained inference from Annex "B." Upon the foregoing circumstances, we must hold that the Labor Arbiter's suspicion is without basis in the facts of record.

Petitioner Union also contended that private respondent Caltex in the instant petition was violating the statutory prohibition against off-setting undertime for overtime work on another day. 11 Union counsel attempted to establish this charge by asserting that the employees had been required to render "overtime

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work" on a Saturday but compensated only at regular rates of pay, because they had not completed the eight (8)-hour work period daily from Monday thru Friday.

The Court finds petitioner's contention bereft of merit. Overtime work consists of hours worked on a given day in excess of the applicable work period, which here is eight (8) hours. 12 It is not enough that the hours worked fall on disagreeable or inconvenient hours. In order that work may be considered as overtime work, the hours worked must be in excess of and in addition to the eight (8) hours worked during the prescribed daily work period, or the forty (40) hours worked during the regular work week Monday thru Friday.

In the present case, under the 1985 CBA, hours worked on a Saturday do not, by that fact alone, necessarily constitute overtime work compensable at premium rates of pay, contrary to petitioner's assertion. These are normal or regular work hours, compensable at regular rates of pay, as provided in the 1985 CBA; under that CBA, Saturday is not a rest day or a "day off". It is only when an employee has been required on a Saturday to render work in excess of the forty (40) hours which constitute the regular work week that such employee may be considered as performing overtime work on that Saturday. We consider that the statutory prohibition against offsetting undertime one day with overtime another day has no application in the case at bar. 13

Petitioner's counsel, in his final attempt to lay a basis for compelling private respondent to pay premium rates of pay for all hours worked on a Saturday, regardless of the number of hours actually worked earlier during the week, i.e., on Monday to Friday, insists that private respondent cannot require its employees to complete the 40-hour regular work week on a Saturday, after it has allowed its employees to render only 37-1/2 hours of work.

The company practice of allowing employees to leave thirty (30) minutes earlier than the scheduled off-time had been established primarily for the convenience of the employees most of whom have had to commute from work place to home and in order that they may avoid the heavy rush hour vehicular traffic. There is no allegation here by petitioner Union that such practice was resorted to by Caltex in order to escape its contractual obligations. This practice, while it effectively reduced to 37-1/2 the number of hours actually worked by employees who had opted to leave ahead of off-time, is not be construed as modifying the other terms of the 1985 CBA. As correctly pointed out by private respondent, the

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shortened work period did not result in likewise shortening the work required for purposes of determining overtime pay, as well as for purposes of determining premium pay for work beyond forty (40) hours within the calendar week. It follows that an employee is entitled to be paid premium rates, whether for work in excess of eight (8) hours on any given day, or for work beyond the forty (40)-hour requirement for the calendar week, only when the employee had, in fact already rendered the requisite number of hours — 8 or 40 — prescribed in the 1985 CBA.

In recapitulation, the parties' 1985 CBA stipulated that employees at the Manila Office, as well as those similarly situated at the Legazpi and Marinduque Bulk Depots, shall be provided only one (1) day of rest; Sunday, and not Saturday, was designated as this day of rest. Work performed on a Saturday is accordingly to be paid at regular rates of pay, as a rule, unless the employee shall have been required to render work in excess of forty (40) hours in a calendar week. The employee must, however, have in fact rendered work in excess of forty (40) hours before hours subsequently worked become payable at premium rates. We conclude that the NLRC correctly set aside the palpable error committed by Labor Arbiter Guanio, when the latter imposed upon one of the parties to the 1985 CBA, an obligation which it had never assumed.

WHEREFORE, petitioner Union having failed to show grave abuse of discretion amounting to lack or excess of jurisdiction on the part of public respondent National Labor Relations Commission in rendering its decision dated 5 March 1993, the Court Resolved to DISMISS the Petition for lack of merit.

SO ORDERED.

G.R. Nos. 85122-24 March 22, 1991

JULIO N. CAGAMPAN, SILVINO C. VICERA, JORGE C. DE CASTRO, JUANITO R. DE JESUS, ARNOLD J. MIRANDA, , MAXIMO O. ROSELLO & ANICETO L. BETANA, petitioners,

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vs.NATIONAL LABOR RELATIONS COMMISSION, & ACE MARITIME AGENCIES, INC., respondents.

Benjamin S. David for petitioners.

De Luna, Sumnoad and Gaerlan for private respondent.

PARAS, J.:p

Presented before Us for review is the decision of public respondent National Labor Relations Commission handed down on March 16, 1988 reversing the decision of the Philippine Oversees Employment Administration and correspondingly dismissing the cases for lack of merit. The POEA decision granted overtime pay to petitioners equivalent to 30% of their basic pay.

We do not dispute the facts as found by the Solicitor General. Thus:

On April 17 and 18,1985, petitioners, all seamen, entered into separate contracts of employment with the Golden Light Ocean Transport, Ltd., through its local agency, private respondent ACE MARITIME AGENCIES, INC. Petitioners, with their respective ratings and monthly salary rates, are as follows:

Petitioners Rating Salary per month

Julio Cagampan 2nd Engineer US$500.00

Silvino Vicera 2nd Engineer US$800.00

Juanito de Jesus Ordinary Seaman US$120.00

Jorge C. de Castro Ordinary Seaman US$160.00

Arnold Miranda 3rd Officer US$310.00

Maximo Rosello Cook US$230.00

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Aniceto Betana 3rd Engineer US$400.00

Petitioners were deployed on May 7, 1985, and discharged on July 12, 1986.

Thereafter, petitioners collectively and/or individually filed complaints for non-payment of overtime pay, vacation pay and terminal pay against private respondent. In addition, they claimed that they were made to sign their contracts in blank. Likewise, petitioners averred that although they agreed to render services on board the vessel Rio Colorado managed by Golden Light Ocean Transport, Ltd., the vessel they actually boarded was MV "SOIC I" managed by Columbus Navigation. Two (2) petitioners, Jorge de Castro and Juanito de Jesus, charged that although they were employed as ordinary seamen (OS), they actually performed the work and duties of Able Seamen (AB).

Private respondent was furnished with copies of petitioners' complaints and summons, but it failed to file its answer within the reglementary period. Thus, on January 12, 1987, an Order was issued declaring that private respondent has waived its right to present evidence in its behalf and that the cases are submitted for decision (Page 68, Records).

On August 5, 1987, the Philippine Overseas Employment Administration (POEA) rendered a Decision dismissing petitioners' claim for terminal pay but granted their prayer for leave pay and overtime pay. The dispositive portion of the Decision reads:

IN VIEW OF THE FOREGOING, judgment is hereby rendered ordering respondent (private respondent) Ace Maritime Agencies, Inc. to pay the following complainants (petitioners) in the amounts opposite their names:

1. Julio Cagampan—US$583.33 plus US$2,125.00 representing the 30% guaranteed overtime pay;

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2. Silvino Vicera—US$933.33 plus US$3,400.00 representing the 30% guaranteed overtime pay;

3. Jorge de Castro—US$233.33 plus US$850.00 representing the 30% guaranteed overtime pay;

4. Juanito de Jesus—US$233.33 plus US$850.00 representing the 30% guaranteed overtime pay;

5. Lauro Diongzon—US$233.33 plus US$850.00 representing the 30% guaranteed overtime pay;

6. Arnold Miranda—US$455.00 plus US$1,659.50 representing the 30% guaranteed overtime pay;

7. Maximo Rosello—US$303.33 plus US$1,105.00 representing the 30% guaranteed overtime pay; and

8. Aniceto Betana—US$583.33 plus US$2,125.00 representing the 30% guaranteed overtime pay.

The payments represent their leave pay equivalent to their respective salary (sic) of 35 days and should be paid in Philippine currency at the current rate of exchange at the time of actual payment. (pp. 81-82, Records)

Private respondent appealed from the POEA's Decision to the NLRC on August 24, 1987. On March 16, 1988, the NLRC promulgated a Decision, the dispositive portion of which reads:

WHEREFORE, premises considered, the appealed decision is hereby REVERSED and SET ASIDE and another one entered dismissing these cases for lack of merit. (p. 144, Records)

On May 8, 1988, petitioners filed an Urgent Motion for Reconsideration of the NLRC's Decision (p. 210, Records), but the

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same was denied by the NLRC for lack of merit in its Resolution dated September 12, 1988 (p. 212, Records).

Hence, this appeal from the decision and resolution of the respondent NLRC.

Petitioners allege that respondent Commission gravely abused its discretion or erred in deciding in favor of private respondent company by reason of the following:

1. Respondent NLRC overlooked the fact that private respondent company had repeatedly failed and refused to file its answer to petitioners' complaints with their supporting documents.

2. Respondent Commission erred in reversing and setting aside the POEA decision and correspondingly dismissing the appeal of petitioners, allegedly in contravention of law and jurisprudence.

Private respondent maritime company disclaims the aforesaid allegations of petitioners through these arguments:

1. As borne out by the records, its former counsel attended all the hearings before the POEA wherein he raised the basis objection that the complaint of petitioners was so generally couched that a more detailed pleading with supporting documents was repeatedly requested for the latter to submit.

2. The NLRC never abused its discretion in arriving at assailed decision considering that the same was based on the Memorandum on Appeal dated August 14, 1987 filed by private respondent.

3. In the hearings conducted by respondent Commission, all the arguments of both parties were properly ventilated and considered by said Commission in rendering its decision.

4. The Labor Code basically provides that the rules of evidence prevailing in courts of law or equity shall not be controlling and it is the spirit and intention of the Code that the Commission and its members and Labor Arbiters should use every and an reasonable means to ascertain the facts in each case speedily and objectively and without regard to technicalities of law and procedure, all in the interest of due process.

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5. Petitioners' motion for reconsideration of the NLRC decision did not invoke the merits of the case but merely raised purely technical and procedural matters. Even assuming that private respondent, technically speaking, waived the presentation of evidence, its appeal to the NLRC was valid since it involved merely a correct interpretation and clarification of certain provisions of the contract the validity of which has never been questioned.

The Solicitor General, arguing for public respondent NLRC, contends:

1. Petitioners' assumption that a party who is declared to have waived his right to present evidence also loses his right to appeal from an adverse judgment made against him is a falsity for, although the technical rules of evidence prevailing in the courts of law or equity do not bind labor tribunals, even the Rules of Court allows a party declared in default to appeal from said judgment by attaching the propriety of the relief awarded therein.

2. The NLRC did not abuse its discretion in the rendition of subject decision because the evidence presented by petitioners in support of their complaint is by itself sufficient to back up the decision. The issue of the disallowance of overtime pay stems from an interpretation of particular provisions of the employment contract.

We cannot sustain petitioners' position.

The failure of respondent to submit its responsive pleading was not fatal as to invalidate its case before the Phil. Overseas Employment Authority. Evidently, such formal or technical defect was rectified by the fact that the POEA proceeded with the hearings on the case where both parties were given sufficient leeway to ventilate their cases.

Petitioners' manifest pursuit of their claims before the POEA in the absence of the answer produced the effect of condoning the failure of private respondent to submit the said answer. Their submission to the POEA's authority without questioning its jurisdiction to continue the hearings further strengthens the fact that the alleged technical defect had already been cured. After all, what is there to complain of when the POEA handed down a decision favorable to petitioners with the allowance of the latter's leave pay and overtime pay.

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Notably, it was only when private respondent appealed the NLRC decision to this Court that petitioners suddenly unearth the issue of private respondent's default in the POEA case. Had the decision favoring them not been reversed by the NLRC, petitioners could have just clammed up. They resorted to bringing up a technical, not a substantial, defect in their desperate attempt to sway the Court's decision in their favor.

Private respondent has pointedly argued that the NLRC anchored its decision primarily upon the Memorandum on Appeal. In the case of Manila Doctors Hospital v. NLRC (153 SCRA 262) this Court ruled that the National Labor Relations Commission and the Labor Arbiter have authority under the Labor Code to decide a case based on the position papers and documents submitted without resorting to the technical rules of evidence.

On the issue of whether or not petitioners should be entitled to terminal pay, We sustain the finding of respondent NLRC that petitioners were actually paid more than the amounts fixed in their employment contracts. The pertinent portion of the NLRC decision reads as follows.

On this award for leave pay to the complainants (petitioners), the (private) respondent maintains that the actually they were paid much more than what they were legally entitled to under their contract.This fact has not been disputed by the complainants (petitioners.) Thus, as mentioned in (private) respondent's Memorandum on Appeal dated 14 August 1987, their overpayment is more than enough and sufficient to offset whatever claims for leave pay they filed in this case and for which the POEA favorably considered in their favor. For complainant (petitioner) Aniceto Betana, it appears that under the crew contract his monthly salary was US$400 while he was overpaid by US$100 as he actually received US$500. In fine, Betana had received at least US1,400 excess salary for a period of fourteen (14) months which was the period of his employment. In the case of complainant (petitioner) Jorge C.de Castro his stipulated monthly pay was US$160 but he actually received a monthly pay of US$200 or an overpayment of US$560 for the same period of service. For complainant (petitioner) Juanito R.de Jesus, his overpayment is US$1120. Complainant (petitioner) Arnold J. Miranda has also the same amount of excess payment as de Jesus.

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Indeed, We cannot simply ignore this material fact. It is our duty to prevent a miscarriage of justice for if We sustain the award for leave pay in the face of undisputed facts that the complainants (petitioners) were even paid much more than what they should receive by way of leave pay, then they would be enriching themselves at the expense of others. Accordingly, justice and equity compel Us to deny this award.

Even as the denial of petitioners' terminal pay by the NLRC has been justified, such denial should not have been applied to petitioners Julio Cagampan and Silvino Vicera. For, a deeper scrutiny of the records by the Solicitor General has revealed that the fact of overpayment does not cover the aforenamed petitioners since the amounts awarded them were equal only to the amounts stipulated in the crew contracts. Since petitioners Cagampan and Vicera were not overpaid by the company, they should be paid the amounts of US$583.33 and US$933.33, respectively. Further examination by the Solicitor General shows that petitioner Maximo Rosello was also overpaid in the amount of US$420.00.

Hence, with respect to petitioners Cagampan and Vicera, the NLRC decision must be modified correspondingly.

As regards the question of overtime pay, the NLRC cannot be faulted for disallowing the payment of said pay because it merely straightened out the distorted interpretation asserted by petitioners and defined the correct interpretation of the provision on overtime pay embodied in the contract conformably with settled doctrines on the matter. Notably, the NLRC ruling on the disallowance of overtime pay is ably supported by the fact that petitioners never produced any proof of actual performance of overtime work.

Petitioners have conveniently adopted the view that the "guaranteed or fixed overtime pay of 30% of the basic salary per month" embodied in their employment contract should be awarded to them as part of a "package benefit." They have theorized that even without sufficient evidence of actual rendition of overtime work, they would automatically be entitled to overtime pay. Their theory is erroneous for being illogical and unrealistic. Their thinking even runs counter to the intention behind the provision. The contract provision means that the fixed overtime pay of 30% would be the basis for computing the overtime pay if and when overtime work would be rendered. Simply, stated, the rendition of

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overtime work and the submission of sufficient proof that said work was actually performed are conditions to be satisfied before a seaman could be entitled to overtime pay which should be computed on the basis of 30% of the basic monthly salary. In short, the contract provision guarantees the right to overtime pay but the entitlement to such benefit must first be established. Realistically speaking, a seaman, by the very nature of his job, stays on board a ship or vessel beyond the regular eight-hour work schedule. For the employer to give him overtime pay for the extra hours when he might be sleeping or attending to his personal chores or even just lulling away his time would be extremely unfair and unreasonable.

We already resolved the question of overtime pay of a worker aboard a vessel in the case of National Shipyards and Steel Corporation v. CIR (3 SCRA 890). We ruled:

We can not agree with the Court below that respondent Malondras should be paid overtime compensation for every hour in excess of the regular working hours that he was on board his vessel or barge each day, irrespective of whether or not he actually put in work during those hours. Seamen are required to stay on board their vessels by the very nature of their duties, and it is for this reason that, in addition to their regular compensation, they are given free living quarters and subsistence allowances when required to be on board. It could not have been the purpose of our law to require their employers to pay them overtime even when they are not actually working; otherwise, every sailor on board a vessel would be entitled to overtime for sixteen hours each day, even if he spent all those hours resting or sleeping in his bunk, after his regular tour of duty. The correct criterion in determining whether or not sailors are entitled to overtime pay is not, therefore, whether they were on board and can not leave ship beyond the regular eight working hours a day, but whether they actually rendered service in excess of said number of hours. (Emphasis supplied)

The aforequoted ruling is a reiteration of Our resolution in Luzon Stevedoring Co., Inc. vs. Luzon Marine Department Union, et al. (G.R. No. 9265, April 29, 1957).

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WHEREFORE, the decision of the NLRC is hereby AFFIRMED with the modification that petitioners Cagampan and Vicera are awarded their leave pay according to the terms of the contract.

SO ORDERED.

ROMEO LAGATIC, petitioner,   vs. NATIONAL LABOR RELATIONS COMMISSION, CITYLAND DEVELOPMENT CORPORATION, STEPHEN ROXAS, JESUS GO, GRACE LIUSON, and ANDREW LIUSON, respondents.

D E C I S I O N

ROMERO, J.:

Petitioner seeks, in this petition for certiorari under Rule 65, the reversal of the resolution of the National Labor Relations Commission dated May 12, 1995, affirming the February 17, 1994, decision of Labor Arbiter Ricardo C. Nora finding that petitioner had been validly dismissed by private respondent Cityland Development Corporation (hereafter referred to as Cityland) and that petitioner was not entitled to separation pay, premium pay and overtime pay.

The facts of the case are as follows:

Petitioner Romeo Lagatic was employed in May 1986 by Cityland, first as a probationary sales agent, and later on as a marketing specialist. He was tasked with soliciting sales for the company, with the corresponding duties of accepting call-ins, referrals, and making client calls and cold calls. Cold calls refer to the practice of prospecting for clients through the telephone directory. Cityland, believing that the same is an effective and cost-efficient method of finding clients, requires all its marketing specialists to make cold calls. The number of cold calls depends on the sales generated by each: more sales mean less cold calls. Likewise, in order to assess cold calls made by the sales staff, as well as to determine the results thereof, Cityland requires the submission of daily progress reports on the same.

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On October 22, 1991, Cityland issued a written reprimand to petitioner for his failure to submit cold call reports for September 10, October 1 and 10, 1991. This notwithstanding, petitioner again failed to submit cold call reports for September 2, 5, 8, 10, 11, 12, 15, 17, 18, 19, 20, 22, and 28, as well as for October 6, 8, 9, 10, 12, 13 and 14, 1992. Petitioner was required to explain his inaction, with a warning that further non-compliance would result in his termination from the company. In a reply dated October 18, 1992, petitioner claimed that the same was an honest omission brought about by his concentration on other aspects of his job. Cityland found said excuse inadequate and, on November 9, 1992, suspended him for three days, with a similar warning.

Notwithstanding the aforesaid suspension and warning, petitioner again failed to submit cold call reports for February 5, 6, 8, 10 and 12, 1993. He was verbally reminded to submit the same and was even given up to February 17, 1993 to do so. Instead of complying with said directive, petitioner, on February 16, 1993, wrote a note, “TO HELL WITH COLD CALLS! WHO CARES?” and exhibited the same to his co-employees. To worsen matters, he left the same lying on his desk where everyone could see it.

On February 23, 1993, petitioner received a memorandum requiring him to explain why Cityland should not make good its previous warning for his failure to submit cold call reports, as well as for issuing the written statement aforementioned. On February 24, 1993, he sent a letter-reply alleging that his failure to submit cold call reports should not be deemed as gross insubordination. He denied any knowledge of the damaging statement, “TO HELL WITH COLD CALLS!”

Finding petitioner guilty of gross insubordination, Cityland served a notice of dismissal upon him on February 26, 1993. Aggrieved by such dismissal, petitioner filed a complaint against Cityland for illegal dismissal, illegal deduction, underpayment, overtime and rest day pay, damages and attorney’s fees. The labor arbiter dismissed the petition for lack of merit. On appeal, the same was affirmed by the NLRC; hence the present recourse.

Petitioner raises the following issues:

1. WHETHER OR NOT RESPONDENT NLRC GRAVELY ABUSED ITS DISCRETION IN NOT FINDING THAT PETITIONER WAS ILLEGALLY DISMISSED;

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2. WHETHER OR NOT RESPONDENT NLRC GRAVELY ABUSED ITS DISCRETION IN RULING THAT PETITIONER IS NOT ENTITLED TO SALARY DIFFERENTIALS, BACKWAGES, SEPARATION PAY, OVERTIME PAY, REST DAY PAY, UNPAID COMMISSIONS, MORAL AND EXEMPLARY DAMAGES AND ATTORNEY’S FEES.

The petition lacks merit.

To constitute a valid dismissal from employment, two requisites must be met, namely: (1) the employee must be afforded due process, and (2) the dismissal must be for a valid cause.[1] In the case at bar, petitioner contends that his termination was illegal on both substantive and procedural aspects. It is his submission that the failure to submit a few cold calls does not qualify as willful disobedience, as, in his experience, cold calls are one of the least effective means of soliciting sales. He thus asserts that a couple of cold call reports need not be accorded such tremendous significance as to warrant his dismissal for failure to submit them on time.

These arguments are specious. Petitioner loses sight of the fact that “(e)xcept as provided for, or limited by, special laws, an employer is free to regulate, according to his discretion and judgment, all aspects of employment.”[2] Employers may, thus, make reasonable rules and regulations for the government of their employees, and when employees, with knowledge of an established rule, enter the service, the rule becomes a part of the contract of employment.[3] It is also generally recognized that company policies and regulations, unless shown to be grossly oppressive or contrary to law, are generally valid and binding on the parties and must be complied with.[4] “Corollarily, an employee may be validly dismissed for violation of a reasonable company rule or regulation adopted for the conduct of the company business. An employer cannot rationally be expected to retain the employment of a person whose x x x lack of regard for his employer’s rules x x x has so plainly and completely been bared.”[5] Petitioner’s continued infraction of company policy requiring cold call reports, as evidenced by the 28 instances of non-submission of aforesaid reports, justifies his dismissal. He cannot be allowed to arrogate unto himself the privilege of setting company policy on the effectivity of solicitation methods. To do so would be to sanction oppression and the self-destruction of the employer.

Moreover, petitioner made it worse for himself when he wrote the statement, “TO HELL WITH COLD CALLS! WHO CARES?” When required to

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explain, he merely denied any knowledge of the same. Cityland, on the other hand, submitted the affidavits of his co-employees attesting to his authorship of the same. Petitioner’s only defense is denial. The rule, however, is that denial, if unsubstantiated by clear and convincing evidence, is negative and self-serving evidence which has no weight in law.[6] More telling, petitioner, while making much capital out of his lack of opportunity to confront the affiants, never, in all of his pleadings, categorically denied writing the same. He only denied knowledge of the allegation that he issued such a statement.

Based on the foregoing, we find petitioner guilty of willful disobedience. Willful disobedience requires the concurrence of at least two requisites: the employee’s assailed conduct must have been willful or intentional, the willfulness being characterized by a wrongful and perverse attitude; and the order violated must have been reasonable, lawful, made known to the employee and must pertain to the duties which he had been engaged to discharge.[7]

Petitioner’s failure to comply with Cityland’s policy of requiring cold call reports is clearly willful, given the 28 instances of his failure to do so, despite a previous reprimand and suspension. More than that, his written statement shows his open defiance and disobedience to lawful rules and regulations of the company. Likewise, said company policy of requiring cold calls and the concomitant reports thereon is clearly reasonable and lawful, sufficiently known to petitioner, and in connection with the duties which he had been engaged to discharge. There is, thus, just cause for his dismissal.

On the procedural aspect, petitioner claims that he was denied due process.

Well settled is the dictum that the twin requirements of notice and hearing constitute the elements of due process in the dismissal of employees. Thus, the employer must furnish the employee with two written notices before the termination of employment can be effected. The first apprises the employee of the particular acts or omissions for which his dismissal is sought; the second informs him of the employer’s decision to dismiss him.[8]

In the case at bar, petitioner was notified of the charges against him in a memorandum dated February 19, 1993, which he received on February 23, 1993. He submitted a letter-reply thereto on February 24, 1993, wherein he asked that his failure to submit cold call reports be not interpreted as gross insubordination.[9] He was given notice of his termination on February 26, 1993. This chronology

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of events clearly show that petitioner was served with the required written notices.

Nonetheless, petitioner contends that he has not been given the benefit of an effective hearing. He alleges that he was not adequately informed of the results of the investigation conducted by the company, nor was he able to confront the affiants who attested to his writing the statement, “TO HELL WITH COLD CALLS!” While we have held that in dismissing employees, the employee must be afforded ample opportunity to be heard, “ample opportunity” connoting every kind of assistance that management must afford the employee to enable him to prepare adequately for his defense,[10] it is also true that the requirement of a hearing is complied with as long as there was an opportunity to be heard, and not necessarily that an actual hearing be conducted.[11] Petitioner had an opportunity to be heard as he submitted a letter-reply to the charge. He, however, adduced no other evidence on his behalf. In fact, he admitted his failure to submit cold call reports, praying that the same be not considered as gross insubordination. As held by this Court in Bernardo vs. NLRC,[12] there is no necessity for a formal hearing where an employee admits responsibility for an alleged misconduct. As to the written statement, “TO HELL WITH COLD CALLS!,” petitioner merely denied knowledge of the same. He failed to submit controverting evidence thereon although the memorandum of February 19, 1993, clearly charged that he had shown said statement to several sales personnel. Denials are weak forms of defenses, particularly when they are not substantiated by clear and convincing evidence. Given the foregoing, we hold that petitioner’s constitutional right to due process has not been violated.

As regards the second issue, petitioner contends that he is entitled to amounts illegally deducted from his commissions, to unpaid overtime, rest day and holiday premiums, to moral and exemplary damages, as well as attorney’s fees and costs.

Petitioner anchors his claim for illegal deductions of commissions on Cityland’s formula for determining commissions, viz:

COMMISSIONS= Credits Earned (CE) less CUMULATIVE NEGATIVE (CN)

less AMOUNTS RECEIVED (AR)

= (CE – CN) – AR where CE = Monthly Sales Volume x

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Commission Rate (CR)

AR = Monthly Compensation/.75

CR = 4.5%

Under said formula, an increase in salary would entail an increase in AR, thus diminishing the amount of commissions that petitioner would receive. Petitioner construes the same as violative of the non-diminution of benefits clause embodied in the wage orders applicable to petitioner. Inasmuch as Cityland has paid petitioner commissions based on a higher AR each time there has been a wage increase, the difference between the original AR and the subsequent ARs have been viewed by petitioner as illegal deductions, to wit:

Wage Date of Amount of Corresponding Duration Total

Order Effectivity Increase Increase in Up To

Quota (AR) 2/26/93

----------- ------------- -------------- ----------------- ------------ ------------

RA 6640 1/1/88 P265.75 P 353.33 x 62 mos. P 21,906.46

RA 6727 7/1/89 780.75 1,040.00 x 44 mos. 45,760.00

NCR 01 11/1/90 785.75 1,046.67 x 28 mos. 29,306.76

NCR 01-A ------------

Grand Total P 96,973.22[13]

=======

Petitioner even goes as far as to claim that with the use of Cityland’s formula, he is indebted to the company in the amount of P 1,410.00, illustrated as follows:

Petitioner’s Basic Salary = P 4,230.00

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= 4,230.00/.75

A.R. = 5,640.00

Petitioner’s Basic Salary – AR = P 1,410.00

While it is true that an increase in salary would cause an increase in AR, with the same being deducted from credits earned, thus lessening his commissions, the fact remains that petitioner still receives his basic salary without deductions. Petitioner’s argument that he is indebted to respondent by P1,410.00 is fallacious as his basic salary remains the same and he continues to receive the same, regardless of his collections. The failure to attain a CE equivalent to the AR of P5,640.00 only means that the difference would be credited to his CN for the next month. Clearly, the purpose of the same is to encourage sales personnel to accelerate their sales in order for them to earn commissions.

Additionally, there is no law which requires employers to pay commissions, and when they do so, as stated in the letter-opinion of the Department of Labor and Employment dated February 19, 1993, “there is no law which prescribes a method for computing commissions. The determination of the amount of commissions is the result of collective bargaining negotiations, individual employment contracts or established employer practice.”[14] Since the formula for the computation of commissions was presented to and accepted by petitioner, such prescribed formula is in order. As to the allegation that said formula diminishes the benefits being received by petitioner whenever there is a wage increase, it must be noted that his commissions are not meant to be in a fixed amount. In fact, there was no assurance that he would receive any commission at all. Non-diminution of benefits, as applied here, merely means that the company may not remove the privilege of sales personnel to earn a commission, not that they are entitled to a fixed amount thereof.

With respect to petitioner’s claims for overtime pay, rest day pay and holiday premiums, Cityland maintains that Saturday and Sunday call-ins were voluntary activities on the part of sales personnel who wanted to realize more sales and thereby earn more commissions. It is their contention that sales personnel were clamoring for the “privilege” to attend Saturday and Sunday call-ins, as well as to entertain walk-in clients at project sites during weekends, that Cityland had to stagger the schedule of sales employees to give everyone a chance to do so. But simultaneously, Cityland claims that the same were optional because call-ins and

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walk-ins were not scheduled every weekend. If there really were a clamor on the part of sales staff to “voluntarily” work on weekends, so much so that Cityland needed to schedule them, how come no call-ins or walk-ins were scheduled on some weekends?

In addition to the above, the labor arbiter and the NLRC sanctioned respondent’s practice of offsetting rest day or holiday work with equivalent time on regular workdays on the ground that the same is authorized by Department Order 21, Series of 1990. As correctly pointed out by petitioner, said D. O. was misapplied in this case. The D. O. involves the shortening of the workweek from six days to five days but with prolonged hours on those five days. Under this scheme, non-payment of overtime premiums was allowed in exchange for longer weekends for employees. In the instant case, petitioner’s workweek was never compressed. Instead, he claims payment for work over and above his normal 5½ days of work in a week. Applying by analogy the principle that overtime cannot be offset by undertime, to allow off-setting would prejudice the worker. He would be deprived of the additional pay for the rest day work he has rendered and which is utilized to offset his equivalent time off on regular workdays. To allow Cityland to do so would be to circumvent the law on payment of premiums for rest day and holiday work.

Notwithstanding the foregoing discussion, petitioner failed to show his entitlement to overtime and rest day pay due, to the lack of sufficient evidence as to the number of days and hours when he rendered overtime and rest day work. Entitlement to overtime pay must first be established by proof that said overtime work was actually performed, before an employee may avail of said benefit.[15] To support his allegations, petitioner submitted in evidence minutes of meetings wherein he was assigned to work on weekends and holidays at Cityland’s housing projects. Suffice it to say that said minutes do not prove that petitioner actually worked on said dates. It is a basic rule in evidence that each party must prove his affirmative allegations.[16] This petitioner failed to do. He explains his failure to submit more concrete evidence as being due to the decision rendered by the labor arbiter without resolving his motion for the production and inspection of documents in the control of Cityland. Petitioner conveniently forgets that on January 27, 1994, he agreed to submit the case for decision based on the records available to the labor arbiter. This amounted to an abandonment of above-said motion, which was then pending resolution.

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Lastly, with the finding that petitioner’s dismissal was for a just and valid cause, his claims for moral and exemplary damages, as well as attorney’s fees, must fail.

WHEREFORE, premises considered, the assailed Resolution is AFFIRMED and this petition is hereby DISMISSED for lack of merit. Costs against petitioner.

SO ORDERED.

G.R. Nos. L-26890-92 May 29, 1970

NWSA CONSOLIDATED UNIONS, petitioner, vs.NATIONAL WATERWORKS AND SEWERAGE AUTHORITY, respondent, JESUS CENTENO, ET AL., intervenors. Cipriano Cid & Associates for petitioner.

The Government Corporate Counsel for respondent.

Jesus Centeno in his own behalf and for other intervenors.

REYES, J.B.L., J.:

Review of an order, dated 18 July 1966, ordering the payment of attorney's fees, in Case No. 19-IPA of the Court of Industrial Relations, and of its resolution en banc dated 22 September 1966, denying reconsideration.

Upon certification in 1957 by the President of the Philippines of the existence of a labor dispute, the case above-mentioned was filed by herein petitioner NWSA Consolidated Unions against herein respondent National Waterworks and Sewerage Authority demanding implementation of the 40-Hour Week Law (Republic Act No. 1880), and alleging violations of the collective bargaining agreement, dated 28 December 1956, concerning "distress pay"; minimum wage of P5.25; promotional appointments and filling of vacancies of newly created positions; additional compensation for night work; wage increases to some laborers, and employees; and strike duration pay. After hearing, the Court of

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Industrial Relations rendered judgment on 16 January 1961 for the petitioner, which, on appeal, was affirmed, with some modifications, by the Supreme Court in NAWASA vs. NWSA Consolidated Unions, L-18938, 31 August 1964, 11 SCRA 766.

The modified judgment was not implemented due, according to the respondent, to the huge outlay involved, which was about five (5) million pesos. Thus, the petitioner union again went on strike. Once more the dispute was certified by the President of the Philippines and the case was docketed as Case No. 66-IPA in the Court of Industrial Relations. In accordance with a partial decision of the court, based on an agreement of the parties that included the implementation of the decision in Case No. 19-IPA (Annex "I" to Petition), respondent NAWASA appropriated P300,000.00 in compliance therewith. Two lawyers of the petitioner union, Attys. Cipriano Cid and Israel Bocobo, who had participated in both Cases Nos. 19-IPA and 66-IPA, moved for the payment of their attorney's fees. On agreement of the parties, their fees were fixed and ordered paid by the court. A third lawyer, Atty. Atanacio Pacis, who did not appear in Case No. 66-IPA but was a counsel for the union in Case No. 19-IPA as member of the Cid Law firm, from which he later separated, also moved for his fees. His motion was granted in the appealed order of 18 July 1966, issued "pursuant, to the order of 27 November 1964," and allowing payment of attorney's fees to Atty. Atanacio E. Pacis "the sum of P18,000.00 corresponding to his 6% Attorney's fee on the P300,000.00 appropriated for payment to workers under the Decision in this case." The 1964 order stated the factual background, on the matter of attorney's fees, as follows:

Records further show that there exists a contract for professional services entered into, by and between the Consolidated Unions in the NWSA and Cipriano Cid and Associates, providing for a twenty per cent (20%) attorney's fee for the latter, for any and all sums that may be collected by the unions, in this case, ¼ or five (5%) of which shall be given to the general fund of the union.

On 28 July 1961, while the case is still pending motion for reconsideration, an order was issued by the trial judge the dispositive portion of which reads as follows:

'WHEREFORE, the claim of Attys. Cipriano Cid and Atanacio E. Pacis of Twenty Per centum (20%) attorney's

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fee is hereby approved and shall be noted as lien upon the amount of money that may be due and payable to the employees involved in the above-entitled case.'

Three days thereafter, on 21 September 1961, the petitioner union passed a resolution disauthorizing Atanacio E. Pacis, from handling this case, as a consequence of his Pacis separation from the law firm of 'Cipriano Cid and Associates.'

After the separation of Atty. Pacis from the law firm, Atty. Israel Bocobo another associate took over the prosecution of the case, when the resolution of the Court en banc was appealed by respondent to the Supreme Court.

It is, therefore, clear that the successful prosecution of the case has to be credited to Atty. Cipriano Cid, as Chief Counsel and to Attys. Atanacio E. Pacis and Israel Bocobo as associates.

Briefly, the participations of Attys. Cid, Pacis and Bocobo in the prosecution of this case may be given as follows. Atty. Cipriano Cid as chief counsel prepared the basic pleadings. (See Manifestations, dated 5 December 1957) He headed the union panel during the negotiation and he appeared on trial during the initial stage of the proceedings. Atty. Atanacio E. Pacis, on the other hand actively handled the prosecution of the case during the trial on the merits. He was the one who filed the opposition to the motion for reconsideration filed by the respondent against the decisions of the trial judge. And finally, when the resolution of the Court en banc affirming the decisions of the trial judge, was appealed by respondent to the Supreme Court, Atty Israel Bocobo, handled the appeal. ....

..., this Court is constrained to modify the order of the trial judge dated 26 July 1961, under its power granted under Section 17 Commonwealth Act 103. The previous award (20%) is hereby increased to twenty three percent (23%) to be distributed as follows:

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Atty. Cipriano Cid ..................................... 6% Atty. Atanacio E. Pacis ............................ 6% Atty. Israel Bocobo ................................... 6% NWSA Consolidated Unions .................. 5%

T o t a l ......................................................... 23%

Let these amounts therefore be segregated by respondent company from the awards thus granted under this case, and delivered to the persons and/or entity mentioned herein. (Annex "H" to Petition.)

This 1964 pronouncement was in effect a violation of the contract between the NWSA Consolidated Unions with their counsel, that provided only for 20% attorneys fees, of which 5 per cent was to go to the general fund of the Unions, as recognized in the order of 28 July 1961, and does not appear to have taken into consideration the circumstances that determine the fees of counsel (Rule 138, section 24) to avoid exploitation of laborers (See Meralco Workers' Union vs. CIR, L-24505, 15 May 1970); but as said order of 27 November 1964 was never appealed or reconsidered, it became final and unalterable. Nevertheless, the Unions appealed the order of 18 July 1966 ordering the payment of Atty. Pacis' share of P18,000.00 (being 6% of the P300,000.00 appropriated by the employer NWSA in partial satisfaction of the workers' claims). This appeal is grounded on the allegation that the action of NWSA was made by virtue of a partial decision in CIR Case No. 66-IPA, and, as Atty. Pacis admittedly had no intervention in said case, and only acted as counsel in the previous Case No. 16-IPA, the appealed order in effect deprived the Unions of property without due process of law.

We find no merit in the contention of appellant Unions. It is true that the employer appropriated the money pursuant to an agreement reached upon conciliation of the parties by the CIR in Case 66-IPA. But the conciliated stipulation makes it very clear that the appropriation was made to satisfy the Union claims under the Supreme Court's 1964 decision, in Case G.R. No. L-18938, that preceded CIR Case No. 66-IPA. As embodied in the partial decision of 9 March 1966, the conciliated agreement explicitly provided as follows:

4. As to Item IV: 'The NWSA agrees to implement immediately all courts decision pertaining to NWSA workers specifically G.R. No. L-

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18938, (CIR 19-IPA, 19-IPA(1) & (2), 27-IPA, 45-IPA and 52-IPA, more particularly relative to the following matters:

(1) 25% additional compensation for services rendered on Sundays & Holidays;

(2) 25% additional compensation for distress pay;

(3) Wage differential for those employees whose salaries were diminished in connection with the implementation of the 40-hour-5-day-a-week-law per CIR Case 19-IPA (1) (Re-7/5 wrong computation);' the parties agreed to the same, with the modification that the obligations roughly estimated as P800,000.00 will be paid in this manner: P300,000.00 would be paid at the end of March, 1966 and the balance of P500,000.00 would be paid on three (3) equal installments on quarterly basis, and that the current obligations are to be met accordingly.

xxx xxx xxx

It will be seen that the paragraph transcribed makes no reference to the "implementation" of Case No. 66-IPA, but explicitly refers to the award in Case No. 16-IPA. And this is logical, since Case No. 66-IPA had not yet been fully decided, and was still under consideration by the labor court. Hence, it is just that Atty. Pacis should share in the 23% counsel fees corresponding to the amounts appropriated by the NWSA under Item IV above-mentioned of the collective bargaining agreement since these were the claims adjudicated in the case wherein he acted as one of the attorneys. No error was, therefore, committed in the appealed order of 18 July 1966.

IN VIEW THEREOF, the appealed order is affirmed, with costs against appellants.

G.R. No. L-44169 December 3, 1985

ROSARIO A. GAA, petitioner, vs.

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THE HONORABLE COURT OF APPEALS, EUROPHIL INDUSTRIES CORPORATION, and CESAR R. ROXAS, Deputy Sheriff of Manila, respondents.

Federico C. Alikpala and Federico Y. Alikpala, Jr. for petitioner.

Borbe and Palma for private respondent. for she is presently undergoing MDRTB treatment.

PATAJO, J.:

This is a petition for review on certiorari of the decision of the Court of Appeals promulgated on March 30, 1976, affirming the decision of the Court of First Instance of Manila.

It appears that respondent Europhil Industries Corporation was formerly one of the tenants in Trinity Building at T.M. Kalaw Street, Manila, while petitioner Rosario A. Gaa was then the building administrator. On December 12, 1973, Europhil Industries commenced an action (Civil Case No. 92744) in the Court of First Instance of Manila for damages against petitioner "for having perpetrated certain acts that Europhil Industries considered a trespass upon its rights, namely, cutting of its electricity, and removing its name from the building directory and gate passes of its officials and employees" (p. 87 Rollo). On June 28, 1974, said court rendered judgment in favor of respondent Europhil Industries, ordering petitioner to pay the former the sum of P10,000.00 as actual damages, P5,000.00 as moral damages, P5,000.00 as exemplary damages and to pay the costs.

The said decision having become final and executory, a writ of garnishment was issued pursuant to which Deputy Sheriff Cesar A. Roxas on August 1, 1975 served 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. Said motion was denied by the lower Court in an order dated November 7, 1975. A motion for reconsideration of said order was likewise denied, and on January 26, 1976 petitioner filed with the Court of Appeals a petition for certiorari against

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filed with the Court of Appeals a petition for certiorari against said order of November 7, 1975.

On March 30, 1976, the Court of Appeals dismissed the petition for certiorari. In dismissing the petition, the Court of Appeals held that petitioner is not a mere laborer as contemplated under Article 1708 as the term laborer does not apply to one who holds a managerial or supervisory position like that of petitioner, but only to those "laborers occupying the lower strata." It also held that the term "wages" means the pay given" as hire or reward to artisans, mechanics, domestics or menial servants, and laborers employed in manufactories, agriculture, mines, and other manual occupation and usually employed to distinguish the sums paid to persons hired to perform manual labor, skilled or unskilled, paid at stated times, and measured by the day, week, month, or season," citing 67 C.J. 285, which is the ordinary acceptation of the said term, and that "wages" in Spanish is "jornal" and one who receives a wage is a "jornalero."

In the present petition for review on certiorari of the aforesaid decision of the Court of Appeals, petitioner questions the correctness of the interpretation of the then Court of Appeals of Article 1708 of the New Civil Code which reads as follows:

ART. 1708. The laborer's wage shall not be subject to execution or attachment, except for debts incurred for food, shelter, clothing and medical attendance.

It is beyond dispute that petitioner is not an ordinary or rank and file laborer but "a responsibly place employee," of El Grande Hotel, "responsible for planning, directing, controlling, and coordinating the activities of all housekeeping personnel" (p. 95, Rollo) so as to ensure the cleanliness, maintenance and orderliness of all guest rooms, function rooms, public areas, and the surroundings of the hotel. Considering the importance of petitioner's function in El Grande Hotel, it is undeniable that petitioner is occupying a position equivalent to that of a managerial or supervisory position.

In its broadest sense, the word "laborer" includes everyone who performs any kind of mental or physical labor, but as commonly and customarily used and understood, it only applies to one engaged in some form of manual or physical labor. That is the sense in which the courts generally apply the term as applied in

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exemption acts, since persons of that class usually look to the reward of a day's labor for immediate or present support and so are more in need of the exemption than are other. (22 Am. Jur. 22 citing Briscoe vs. Montgomery, 93 Ga 602, 20 SE 40;Miller vs. Dugas, 77 Ga 4 Am St Rep 192; State ex rel I.X.L. Grocery vs. Land, 108 La 512, 32 So 433; Wildner vs. Ferguson, 42 Minn 112, 43 NW 793; 6 LRA 338; Anno 102 Am St Rep. 84.

In Oliver vs. Macon Hardware Co., 98 Ga 249 SE 403, it was held that in determining whether a particular laborer or employee is really a "laborer," the character of the word he does must be taken into consideration. He must be classified not according to the arbitrary designation given to his calling, but with reference to the character of the service required of him by his employer.

In Wildner vs. Ferguson, 42 Minn 112, 43 NW 793, the Court also held that all men who earn compensation by labor or work of any kind, whether of the head or hands, including judges, laywers, bankers, merchants, officers of corporations, and the like, are in some sense "laboring men." But they are not "laboring men" in the popular sense of the term, when used to refer to a must presume, the legislature used the term. The Court further held in said case:

There are many cases holding that contractors, consulting or assistant engineers, agents, superintendents, secretaries of corporations and livery stable keepers, do not come within the meaning of the term. (Powell v. Eldred, 39 Mich, 554, Atkin v. Wasson, 25 N.Y. 482; Short v. Medberry, 29 Hun. 39; Dean v. De Wolf, 16 Hun. 186; Krausen v. Buckel, 17 Hun. 463; Ericson v. Brown, 39 Barb. 390; Coffin v. Reynolds, 37 N.Y. 640; Brusie v. Griffith, 34 Cal. 306; Dave v. Nunan,62 Cal. 400).

Thus, in Jones vs. Avery, 50 Mich, 326, 15 N.W. Rep. 494, it was held that a traveling salesman, selling by sample, did not come within the meaning of a constitutional provision making stockholders of a corporation liable for "labor debts" of the corporation.

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

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of work requiring mental skill or business capacity, and involving the exercise of intellectual faculties.

So, also in Wakefield vs. Fargo, 90 N.Y. 213, the Court, in construing an act making stockholders in a corporation liable for debts due "laborers, servants and apprentices" for services performed for the corporation, held that a "laborer" is one who performs menial or manual services and usually looks to the reward of a day's labor or services for immediate or present support. And in Weymouth vs. Sanborn, 43 N.H. 173, 80 Am. Dec. 144, it was held that "laborer" is a term ordinarily employed to denote one who subsists by physical toil in contradistinction to those who subsists by professional skill. And in Consolidated Tank Line Co. vs. Hunt, 83 Iowa, 6, 32 Am. St. Rep. 285, 43 N.W. 1057, 12 L.R.A. 476, it was stated that "laborers" are those persons who earn a livelihood by their own manual labor.

Article 1708 used the word "wages" and not "salary" in relation to "laborer" when it declared what are to be exempted from attachment and execution. The term "wages" as distinguished from "salary", applies to the compensation for manual labor, skilled or unskilled, paid at stated times, and measured by the day, week, month, or season, while "salary" denotes a higher degree of employment, or a superior grade of services, and implies a position of office: by contrast, the term wages " indicates considerable pay for a lower and less responsible character of employment, while "salary" is suggestive of a larger and more important service (35 Am. Jur. 496).

The distinction between wages and salary was adverted to in Bell vs. Indian Livestock Co. (Tex. Sup.), 11 S.W. 344, wherein it was said: "'Wages' are the compensation given to a hired person for service, and the same is true of 'salary'. The words seem to be synonymous, convertible terms, though we believe that use and general acceptation have given to the word 'salary' a significance somewhat different from the word 'wages' in this: that the former is understood to relate to position of office, to be the compensation given for official or other service, as distinguished from 'wages', the compensation for labor." Annotation 102 Am. St. Rep. 81, 95.

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

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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.

We find, therefore, and so hold that the Trial Court did not err in denying in its order of November 7, 1975 the motion of petitioner to lift the notice of garnishment against her salaries, commission and other remuneration from El Grande Hotel since said salaries, Commission and other remuneration due her from the El Grande Hotel do not constitute wages due a laborer which, under Article 1708 of the Civil Code, are not subject to execution or attachment.

IN VIEW OF THE FOREGOING, We find the present petition to be without merit and hereby AFFIRM the decision of the Court of Appeals, with costs against petitioner.

SO ORDERED.

LIDUVINO M. MILLARES, J. CAPISTRANO CORDITA, SHIRLEY P. UY, DIONISIO J. REQUINA, GABRIEL A. DEJERO, NELSON T. GOMONIT, IMELDA IMPEYNADO SULPICIO B. SUMILE, MA. CONSUELO AVIEL, SILVINO S. GUEVARRA, FIDEL DUMANHOG, NELFA T. POLOTAN, LEMUEL C. RISMA, JUANITO M. GONZALES, ROGELIO B. CABATUAN, EPIFANCIO E. GANANCIAL, DOMINADOR D. ATOK, CONRADO U. SERRANO, ISIDRO J. BARNAJA, ROMEO VIRTUDAZO, AVELINO NABLE, EDGAR TAMPOS, ERNESTO ORIAS, DALMACIO LEGARAY, ROMEO R . BULA, ROBERTO G. GARCIA, RUDOLFO SUZON, JERRY S. DANO, AUGUST G. ESCUDERO, OSCAR B. CATBAGAN, TEOFILO C. SISON, NARCISO BULASA, ALBERTO CORTEZ, LILIA C. CABRERA, NESTOR A. ACASO, BIENVENIDO MOZO, ISIDORO A. ALMENDAREZ, VICENTE M. PILONGO, ROBERTO N. LUMPOT, PATRICIO BANDOLA, MANUEL S. ESPINA, ISIDRO K. BALCITA, JR., EMMANUEL O. ABRAHAM, OLEGARIO A. EPIS, NESTOR D. PEREGRINO, RAMON A. USANAGA, PRESTO BARTOLOME, BRADY EMPEYNADO, PORFERIO N. CONDADO, AQUILLO V. CORDOVA, LEONARDO ESTOSI, PACIFICO B. DACORINA, PABLITO B. LLUBIT, ANTONIO DOZA, LEONITO LABADIA, EDGARDO BELLIZA, FEDENCIO P. GEBERTAS, VIRGILIO D. GULBE, MANUEL

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A. LERIO, JR., ROGELIO B. OCAMIA, RODOLFO A. CASTILLO, EDMUNDO L PLAZA, ROBERTO D. YAGONIA, JR., PETRONIO ESTELA, JR, CRISOLOGO A. LOGRONIO, ERNESTO T. MORIO, ROGELIO M. DAVID, BENJAMIN U. ARLIGUE, APOLONIO MUNDO, JR., NENE M. E NOSA, NILO B. BALAORO, GERONIMO S. CONVI, VICENTE R. TARAGOZA, YOLANDO A. SALAZAR, MANUEL A. NERI, ROGELIO C. TICAR, ROBERTO A. MACALAM, MIGUEL MACARIOLA, WALTERIO DAPADAP, SILVERIO CUAMAG, EUPARQUIO PLANOS, GILBERTO M. MIRA, REYNALDO BACSARSA, DIOSDADO B. ABING, ARISTARCO V. SALON, TOMAS N. CATACTE, RODOLFO MEMORIA, PAPENIANO CURIAS, JOSE S. CANDIA, DESIDERIO C. NAVARRO, EMMANUEL O. ABRAHAM, JOSELITO D. ARLAN, FRANCISCO S. SANCHEZ, MANSUETO B. LINGGO, ISIDRO BARNAJA, ROMEO S. CABRERA, LEODEGARIO CAINTIC, NESTOR G. BLANDO, FLORENCIO B. DELIZO, MILAN M. ETES, GONZALO C. PADILLO, LEONARDO CAGAKIT, JOSEFINO E. DULGUIME, PEPITO G. ARREZA, AMADOR G. CAGALAWAN, GAUDENCIO C. SARMIENTO, FLORENTINO J. BRACAMONTE, DOMINADOR H. TY, LEOPOLDO T. SUPIL, JOSE A. DOHINOG, ANIANO T. REYES, CARLITO G. UY, PLACIDO D. PADILLO, TERESITA C. ADRIANO, CANDIDO S. ADRIANO, and AVELINO G. VENERACION, petitioners,   vs. NATIONAL LABOR RELATIONS COMMISSION, (FIFTH DIVISION), and PAPER INDUSTRIES CORPORATION OF THE PHILIPPINES (PICOP), respondents.

D E C I S I O N

BELLOSILLO, J.:

Petitioners numbering one hundred sixteen (116)[1] occupied the positions of Technical Staff, Unit Manager, Section Manager, Department Manager, Division Manager and Vice President in the mill site of respondent Paper Industries Corporation of the Philippines (PICOP) in Bislig, Surigao del Sur. In 1992 PICOP suffered a major financial setback allegedly brought about by the joint impact of restrictive government regulations on logging and the economic crisis. To avert further losses, it undertook a retrenchment program and terminated the services of petitioners. Accordingly, petitioners received separation pay computed at the rate of 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.

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The allowances in question pertained to the following -

1. Staff/Manager's Allowance -

Respondent PICOP provides free housing facilities to supervisory and managerial employees assigned in Bislig. The privilege includes free water and electric consumption. Owing however to shortage of such facilities, it was constrained to grant Staff allowance instead to those who live in rented houses outside but near the vicinity of the mill site. But the allowance ceases whenever a vacancy occurs in the company's housing facilities. The former grantee is then directed to fill the vacancy. For Unit, Section and Department Managers, respondent PICOP gives an additional amount to meet the same kind of expenses called Manager's allowance.

2. Transportation Allowance -

To relieve respondent PICOP's motor pool in Bislig from a barrage of requests for company vehicles and to stabilize company vehicle requirements it grants transportation allowance to key officers and Managers assigned in the mill site who use their own vehicles in the performance of their duties. It is a conditional grant such that when the conditions no longer obtain, the privilege is discontinued. The recipients of this kind of allowance are required to liquidate it by submitting a report with a detailed enumeration of expenses incurred.

3. Bislig Allowance -

The Bislig Allowance is given to Division Managers and corporate officers assigned in Bislig on account of the hostile environment prevailing therein. But once the recipient is transferred elsewhere outside Bislig, the allowance ceases.

Applying Art.,97, par. (f), of the Labor Code which defines if wage," the Executive Labor Arbiter opined that the subject allowances, being customarily furnished by respondent PICOP and regularly received by petitioners, formed part of the latter's wages. Resolving the controversy from another angle, on the strength of the ruling in Santos v. NLRC[2] and Soriano v. NLRC[3] that in the computation of separation pay account should be taken not just of the basic salary but also of the regular allowances that the employee had been receiving, he concluded that the allowances should be included in petitioners' base pay. Thus respondent PICOP was ordered on 28 April 1994 to pay petitioners Four Million Four Hundred

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Eighty-One Thousand Pesos (P4,481,000.00) representing separation pay differentials plus ten per cent (10%) thereof as attorney's fees.[4]

The National Labor Relations Commission (NLRC) did not share the view of the Executive Labor Arbiter. On 7 October 1994 it set aside the assailed decision by decreeing that the allowances did not form part of the salary base used in computing separation pay.[5]

Its ruling was based on the finding that the cases relied upon by the Executive Labor Arbiter were inapplicable since they involved illegal dismissal where separation pay was granted in lieu of reinstatement which was no longer feasible. Instead, what it considered in point was Estate of the late Eugene J. Kneebone v. NLRC[6] where the Court held that representation and transportation allowances were deemed not part of salary and should therefore be excluded in the computation of separation benefits. Relating the present case with Art. 97, par. (f), of the Labor Code, the NLRC likewise found that petitioners' allowances were contingency-based and thus not included in their salaries. On 26 September 1995 reconsideration was denied.[7]

In this petition for certiorari, petitioners submit that their allowances are included in the definition of "facilities" in Art. 97, par. (f), of the Labor Code, being necessary and indispensable for their existence and subsistence. Furthermore they claim that their availment of the monetary equivalent of those "facilities" on a monthly basis was characterized by permanency, regularity and customariness. And to fortify their arguments they insist on the applicability of Santos,[8] Soriano,[9] The Insular Life Assurance Company,[10] Planters Products, Inc.[11] and Songco[12] which are all against the NLRC holding that the salary base in computing separation pay includes not just the basic salary but also the regular allowances.

There is no showing of grave abuse of discretion on the part of the NLRC. In case of retrenchment to prevent losses, Art. 283 of the the Labor Code imposes on the employer an obligation to grant to the affected employees separation pay equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. Since the law speaks of "pay," the question arises, "What exactly does the term connote?" We correlate Art. 283 with Art. 97 of the same Code on definition of terms. "Pay" is not defined therein but "wage." In Songco the Court explained that both words (as well as salary) generally refer to one and the same meaning, i.e., a reward or recompense for

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

We invite attention to the above-underlined clause. Stated differently, when an employer customarily furnishes his employee board, lodging or other facilities, the fair and reasonable value thereof, as determined by the Secretary of Labor and Employment, is included in "wage." In order to ascertain whether the subject allowances form part of petitioner's "wages," we divide the discussion on the following - "customarily furnished;" "board, lodging or other facilities;" and, "fair and reasonable value as determined by the Secretary of Labor."

"Customary" is founded on long-established and constant practice[13] connoting regularity.[14] The receipt of an allowance on a monthly basis does not ipso facto characterize it as regular and forming part of salary[15] because the nature of the grant is a factor worth considering. We agree with the observation of the Office of the Solicitor General- that the subject allowances were temporarily, not regularly, received by petitioners because -

In the case of the housing allowance, once a vacancy occurs in the company-provided housing accommodations, the employee concerned transfers to the company premises and his housing allowance is discontinued x x x x

On the other hand, the transportation allowance is in the form of advances for actual transportation expenses subject to liquidation x x x given only to employees who have personal cars.

The Bislig allowance is given to Division Managers and corporate officers assigned in Bislig, Surigao del Norte. Once the officer is transferred outside Bislig, the allowance stops.[16]

We add that in the availment of the transportation allowance, respondent PICOP set another requirement that the personal cars be used by the employees

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in the performance of their duties. When the conditions for availment ceased to exist, the allowance reached the cutoff point. The finding of the NLRC along the same line likewise merits concurrence, i.e., petitioners' continuous enjoyment of the disputed allowances was based on contingencies the occurrence of which wrote finis to such enjoyment.

Although it is quite easy to comprehend "board" and "lodging," it is not so with "facilities." Thus Sec. 5, Rule VII, Book III, of the Rules Implementing the Labor Code gives meaning to the term as including articles or services for the benefit of the employee or his family but excluding tools of the trade or articles or service primarily for the benefit of the employer or necessary to the conduct of the employer's business. The Staff /Manager's allowance may fall under "lodging" but the transportation and Bislig allowances are not embraced in "facilities" on the main consideration that they are granted as well as the Staff/Manager's allowance for respondent PICOP's benefit and convenience, i.e., to insure that petitioners render quality performance. In determining whether a privilege is a facility, the criterion is not so much its kind but its purpose. [17] That the assailed allowances were for the benefit and convenience of respondent company was supported by the circumstance that they were not subjected to withholding tax. Revenue Audit Memo Order No. 1-87 pertinently provides -

3.2 x x x x 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.[18]

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

The inevitable conclusion is that, as reached by the NLRC, subject allowances did not form part of petitioners' wages.

In Santos[19] the Court decreed that in the computation of separation pay awarded in lieu of reinstatement, account must be taken not only of the basic salary but also of transportation and emergency living allowances. Later, the Court in Soriano, citing Santos, was general in its holding that the salary base properly used in computing separation pay where reinstatement was no longer feasible should include not just the basic salary but also the regular allowances that the employee had been receiving. Insular merely reiterated the aforementioned rulings. The rationale is not difficult to discern. It is the obligation of the employer to pay an illegally dismissed employee the whole amount of his salaries plus all other benefits, bonuses and general increases to which he would have been normally entitled had he not been dismissed and had not stopped working.[20] The same holds true in case of retrenched employees. And thus we applied Insular and Soriano in Planters in the computation of separation pay of retrenched employees. Songco likewise involved retrenchment and was relied upon in Planters, Soriano and Santos in determining the proper amount of separation pay. As culled from the foregoing jurisprudence, separation pay when awarded to an illegally dismissed employee in lieu of reinstatement or to a retrenched employee should be computed based not only on the basic salary but also on theregular allowances that the employee had been receiving. But in view of the previous discussion that the disputed allowances were not regularly received by petitioners herein, there was no reason at all for petitioners to resort to the above cases.

Neither is Kneebone applicable, contrary to the finding of the NLRC, because of the difference in factual circumstances. In Kneebone, the Court was tasked to

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resolve the issue whether the representation and transportation allowances formed part of salary as to be considered in the computation of retirement benefits. The ruling was in the negative on the main ground that the retirement plan of the company expressly excluded such allowances from salary.

WHEREFORE, the petition is DISMISSED. The resolution of public respondent National Labor Relations Commission dated 7 October 1994 holding that the Staff /Manager's, transportation and Bislig allowances did not form part of the salary base used in computing the separation pay of petitioners, as well as its resolution dated 26 September 1995 denying reconsideration, is AFFIRMED. No costs.

SO ORDERED.

G.R. No. L-50999 March 23, 1990

JOSE SONGCO, ROMEO CIPRES, and AMANCIO MANUEL, petitioners, vsNATIONAL LABOR RELATIONS COMMISSION (FIRST DIVISION), LABOR ARBITER FLAVIO AGUAS, and F.E. ZUELLIG (M), INC., respondents.

Raul E. Espinosa for petitioners.

Lucas Emmanuel B. Canilao for petitioner A. Manuel.

Atienza, Tabora, Del Rosario & Castillo for private respondent.

MEDIALDEA, J.:

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This is a petition for certiorari seeking to modify the decision of the National Labor Relations Commission in NLRC Case No. RB-IV-20840-78-T entitled, "Jose Songco and Romeo Cipres, Complainants-Appellants, v. F.E. Zuellig (M), Inc., Respondent-Appellee" and NLRC Case No. RN- IV-20855-78-T entitled, "Amancio Manuel, Complainant-Appellant, v. F.E. Zuellig (M), Inc., Respondent-Appellee," which dismissed the appeal of petitioners herein and in effect affirmed the decision of the Labor Arbiter ordering private respondent to pay petitioners separation pay equivalent to their one month salary (exclusive of commissions, allowances, etc.) for every year of service.

The antecedent facts are as follows:

Private respondent F.E. Zuellig (M), Inc., (hereinafter referred to as Zuellig) filed with the Department of Labor (Regional Office No. 4) an application seeking clearance to terminate the services of petitioners Jose Songco, Romeo Cipres, and Amancio Manuel (hereinafter referred to as petitioners) allegedly on the ground of retrenchment due to financial losses. This application was seasonably opposed by petitioners alleging that the company is not suffering from any losses. They alleged further that they are being dismissed because of their membership in the union. At the last hearing of the case, however, petitioners manifested that they are no longer contesting their dismissal. The parties then agreed that the sole issue to be resolved is the basis of the separation pay due to petitioners. Petitioners, who were in the sales force of Zuellig received monthly salaries of at least P40,000. In addition, they received commissions for every sale they made.

The collective Bargaining Agreement entered into between Zuellig and F.E. Zuellig Employees Association, of which petitioners are members, contains the following provision (p. 71, Rollo):

ARTICLE XIV — Retirement Gratuity

Section l(a)-Any employee, who is separated from employment due to old age, sickness, death or permanent lay-off not due to the fault of said employee shall receive from the company a retirement gratuity in an amount equivalent to one (1) month's salary per year of service. One month of salary as used in this paragraph shall be deemed equivalent to the salary at date of retirement; years of service shall be deemed equivalent to total service credits, a fraction

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of at least six months being considered one year, including probationary employment. (Emphasis supplied)

On the other hand, Article 284 of the Labor Code then prevailing provides:

Art. 284. Reduction of personnel. — The termination of employment of any employee due to the installation of labor saving-devices, redundancy, retrenchment to prevent losses, and other similar causes, shall entitle the employee affected thereby to separation pay. In case of termination due to the installation of labor-saving devices or redundancy, the separation pay shall be equivalent to one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and other similar causes, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year. (Emphasis supplied)

In addition, Sections 9(b) and 10, Rule 1, Book VI of the Rules Implementing the Labor Code provide:

x x x

Sec. 9(b). Where the termination of employment is due to retrechment initiated by the employer to prevent losses or other similar causes, or where the employee suffers from a disease and his continued employment is prohibited by law or is prejudicial to his health or to the health of his co-employees, the employee shall be entitled to termination pay equivalent at least to his one month salary, or to one-half month pay for every year of service, whichever is higher, a fraction of at least six (6) months being considered as one whole year.

x x x

Sec. 10. Basis of termination pay. — The computation of the termination pay of an employee as provided herein shall be based on his latest salary rate, unless the same was reduced by the employer

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to defeat the intention of the Code, in which case the basis of computation shall be the rate before its deduction. (Emphasis supplied)

On June 26,1978, the Labor Arbiter rendered a decision, the dispositive portion of which reads (p. 78, Rollo):

RESPONSIVE TO THE FOREGOING, respondent should be as it is hereby, ordered to pay the complainants separation pay equivalent to their one month salary (exclusive of commissions, allowances, etc.) for every year of service that they have worked with the company.

SO ORDERED.

The appeal by petitioners to the National Labor Relations Commission was dismissed for lack of merit.

Hence, the present petition.

On June 2, 1980, the Court, acting on the verified "Notice of Voluntary Abandonment and Withdrawal of Petition dated April 7, 1980 filed by petitioner Romeo Cipres, based on the ground that he wants "to abide by the decision appealed from" since he had "received, to his full and complete satisfaction, his separation pay," resolved to dismiss the petition as to him.

The issue is whether or not earned sales commissions and allowances should be included in the monthly salary of petitioners for the purpose of computation of their separation pay.

The petition is impressed with merit.

Petitioners' position was that in arriving at the correct and legal amount of separation pay due them, whether under the Labor Code or the CBA, their basic salary, earned sales commissions and allowances should be added together. They cited Article 97(f) of the Labor Code which includes commission as part on one's salary, to wit;

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

Zuellig argues that if it were really the intention of the Labor Code as well as its implementing rules to include commission in the computation of separation pay, it could have explicitly said so in clear and unequivocal terms. Furthermore, in the definition of the term "wage", "commission" is used only as one of the features or designations attached to the word remuneration or earnings.

Insofar as the issue of whether or not allowances should be included in the monthly salary of petitioners for the purpose of computation of their separation pay is concerned, this has been settled in the case of Santos v. NLRC, et al., G.R. No. 76721, September 21, 1987, 154 SCRA 166, where We ruled that "in the computation of backwages and separation pay, account must be taken not only of the basic salary of petitioner but also of her transportation and emergency living allowances." This ruling was reiterated in Soriano v. NLRC, et al., G.R. No. 75510, October 27, 1987, 155 SCRA 124 and recently, in Planters Products, Inc. v. NLRC, et al., G.R. No. 78524, January 20, 1989.

We shall concern ourselves now with the issue of whether or not earned sales commission should be included in the monthly salary of petitioner for the purpose of computation of their separation pay.

Article 97(f) by itself is explicit that commission is included in the definition of the term "wage". It has been repeatedly declared by the courts that where the law speaks in clear and categorical language, there is no room for interpretation or construction; there is only room for application (Cebu Portland Cement Co. v. Municipality of Naga, G.R. Nos. 24116-17, August 22, 1968, 24 SCRA 708; Gonzaga v. Court of Appeals, G.R.No. L-2 7455, June 28,1973, 51 SCRA 381). A plain and

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unambiguous statute speaks for itself, and any attempt to make it clearer is vain labor and tends only to obscurity. How ever, it may be argued that if We correlate Article 97(f) with Article XIV of the Collective Bargaining Agreement, Article 284 of the Labor Code and Sections 9(b) and 10 of the Implementing Rules, there appears to be an ambiguity. In this regard, the Labor Arbiter rationalized his decision in this manner (pp. 74-76, Rollo):

The definition of 'wage' provided in Article 96 (sic) of the Code can be correctly be (sic) stated as a general definition. It is 'wage ' in its generic sense. A careful perusal of the same does not show any indication that commission is part of salary. We can say that commission by itself may be considered a wage. This is not something novel for it cannot be gainsaid that certain types of employees like agents, field personnel and salesmen do not earn any regular daily, weekly or monthly salaries, but rely mainly on commission earned.

Upon the other hand, the provisions of Section 10, Rule 1, Book VI of the implementing rules in conjunction with Articles 273 and 274 (sic) of the Code specifically states that the basis of the termination pay due to one who is sought to be legally separated from the service is 'his latest salary rates.

x x x.

Even Articles 273 and 274 (sic) invariably use 'monthly pay or monthly salary'.

The above terms found in those Articles and the particular Rules were intentionally used to express the intent of the framers of the law that for purposes of separation pay they mean to be specifically referring to salary only.

.... Each particular benefit provided in the Code and other Decrees on Labor has its own pecularities and nuances and should be interpreted in that light. Thus, for a specific provision, a specific meaning is attached to simplify matters that may arise there from. The general guidelines in (sic) the formation of specific rules for particular

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purpose. Thus, that what should be controlling in matters concerning termination pay should be the specific provisions of both Book VI of the Code and the Rules. At any rate, settled is the rule that in matters of conflict between the general provision of law and that of a particular- or specific provision, the latter should prevail.

On its part, the NLRC ruled (p. 110, Rollo):

From the aforequoted provisions of the law and the implementing rules, it could be deduced that wage is used in its generic sense and obviously refers to the basic wage rate to be ascertained on a time, task, piece or commission basis or other method of calculating the same. It does not, however, mean that commission, allowances or analogous income necessarily forms part of the employee's salary because to do so would lead to anomalies (sic), if not absurd, construction of the word "salary." For what will prevent the employee from insisting that emergency living allowance, 13th month pay, overtime, and premium pay, and other fringe benefits should be added to the computation of their separation pay. This situation, to our mind, is not the real intent of the Code and its rules.

We rule otherwise. The ambiguity between Article 97(f), which defines the term 'wage' and Article XIV of the Collective Bargaining Agreement, Article 284 of the Labor Code and Sections 9(b) and 10 of the Implementing Rules, which mention the terms "pay" and "salary", is more apparent than real. Broadly, the word "salary" means a recompense or consideration made to a person for his pains or industry in another man's business. Whether it be derived from "salarium," or more fancifully from "sal," the pay of the Roman soldier, it carries with it the fundamental idea of compensation for services rendered. Indeed, there is eminent authority for holding that the words "wages" and "salary" are in essence synonymous (Words and Phrases, Vol. 38 Permanent Edition, p. 44 citing Hopkins vs. Cromwell, 85 N.Y.S. 839,841,89 App. Div. 481; 38 Am. Jur. 496). "Salary," the etymology of which is the Latin word "salarium," is often used interchangeably with "wage", the etymology of which is the Middle English word "wagen". Both words generally refer to one and the same meaning, that is, a reward or recompense for services performed. Likewise, "pay" is the synonym of "wages" and "salary" (Black's Law Dictionary, 5th Ed.). Inasmuch as the words "wages", "pay" and "salary" have the same meaning, and commission is included in the

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definition of "wage", the logical conclusion, therefore, is, in the computation of the separation pay of petitioners, their salary base should include also their earned sales commissions.

The aforequoted provisions are not the only consideration for deciding the petition in favor of the petitioners.

We agree with the Solicitor General that granting, in gratia argumenti, that the commissions were in the form of incentives or encouragement, so that the petitioners would be inspired to put a little more industry on the jobs particularly assigned to them, still these commissions are direct remuneration services rendered which contributed to the increase of income of Zuellig . Commission is the recompense, compensation or reward of an agent, salesman, executor, trustees, receiver, factor, broker or bailee, when the same is calculated as a percentage on the amount of his transactions or on the profit to the principal (Black's Law Dictionary, 5th Ed., citing Weiner v. Swales, 217 Md. 123, 141 A.2d 749, 750). The nature of the work of a salesman and the reason for such type of remuneration for services rendered demonstrate clearly that commission are part of petitioners' wage or salary. We take judicial notice of the fact that some salesmen do not receive any basic salary but depend on commissions and allowances or commissions alone, are part of petitioners' wage or salary. We take judicial notice of the fact that some salesman do not received any basic salary but depend on commissions and allowances or commissions alone, although an employer-employee relationship exists. Bearing in mind the preceeding dicussions, if we adopt the opposite view that commissions, do not form part of wage or salary, then, in effect, We will be saying that this kind of salesmen do not receive any salary and therefore, not entitled to separation pay in the event of discharge from employment. Will this not be absurd? This narrow interpretation is not in accord with the liberal spirit of our labor laws and considering the purpose of separation pay which is, to alleviate the difficulties which confront a dismissed employee thrown the the streets to face the harsh necessities of life.

Additionally, in Soriano v. NLRC, et al., supra, in resolving the issue of the salary base that should be used in computing the separation pay, We held that:

The commissions also claimed by petitioner ('override commission' plus 'net deposit incentive') are not properly includible in such base

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figure since such commissions must be earned by actual market transactions attributable to petitioner.

Applying this by analogy, since the commissions in the present case were earned by actual market transactions attributable to petitioners, these should be included in their separation pay. In the computation thereof, what should be taken into account is the average commissions earned during their last year of employment.

The final consideration is, in carrying out and interpreting the Labor Code's provisions and its implementing regulations, the workingman's welfare should be the primordial and paramount consideration. This kind of interpretation gives meaning and substance to the liberal and compassionate spirit of the law as provided for in Article 4 of the Labor Code which states that "all doubts in the implementation and interpretation of the provisions of the Labor Code including its implementing rules and regulations shall be resolved in favor of labor" (Abella v. NLRC, G.R. No. 71812, July 30,1987,152 SCRA 140; Manila Electric Company v. NLRC, et al., G.R. No. 78763, July 12,1989), and Article 1702 of the Civil Code which provides that "in case of doubt, all labor legislation and all labor contracts shall be construed in favor of the safety and decent living for the laborer.

ACCORDINGLY, the petition is hereby GRANTED. The decision of the respondent National Labor Relations Commission is MODIFIED by including allowances and commissions in the separation pay of petitioners Jose Songco and Amancio Manuel. The case is remanded to the Labor Arbiter for the proper computation of said separation pay.

SO ORDERED.

G.R. No. L-30279 July 30, 1982

PHILIPPINE NATIONAL BANK, petitioner, vs.

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PHILIPPINE NATIONAL BANK EMPLOYEES ASSOCIATION (PEMA) and COURT OF INDUSTRIAL RELATIONS,respondents.

Conrado E. Medina, Edgardo M. Magtalas and Nestor Kalaw for petitioner.

Leon O. Ty, Gesmundo Fernandez & Zulueta, Oliver B. Gesmundo and Israel Bocobo for respondents.

BARREDO, J.:

Appeal by the Philippine National Bank from the decision of the trial court of the Court of Industrial Relations in Case No. IPA-53 dated August 5, 1967 and affirmed en banc by said court on January 15, 1968.

This case started on January 28, 1965 in consequence of the certification of the President of the Philippines of an industrial dispute between the Philippine National Bank Employees Association (PEMA, for short), on the one hand, and the Philippine National Bank (PNB, for short), on the other, which arose from no more than the alleged failure of the PNB to comply with its commitment of organizing a Committee on Personnel Affairs to take charge of screening and deliberating on the promotion of employees covered by the collective bargaining agreement then in force between the said parties. On January 28, 1965, the Industrial Court issued an order aimed at settling the dispute temporarily between the parties, which was certified by the President. Pertinent portions of the order read thus:

xxx xxx xxx

1. That in order to settle the strike and for the employees to return to work immediately starting January 29, 1965, the Committee on Personnel Affairs is hereby created to start functioning on February 1, 1965;

xxx xxx xxx

f. That in return for this concession, an injunction against future strikes or lockouts shall be issued by the Court to last for a period of six months but which shall terminate

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even before that period should all disputes of the parties be already resolved; (Page 84, Record.)

According to the very decision now on appeal, "on May 22, 1965, petitioner (private respondent herein) filed another pleading submitting to this Court for determination certain matters which it claims cannot be resolved by the parties, which are as follows:

First Cause of Action

a. In a Resolution No. 1162 dated September 16, 1957, the Respondent's Board of Directors approved a revision of the computation of overtime pay retroactive as of July 1, 1954, and authorized a recomputation of the regular one- hour and extra overtime already rendered by all officers and employees of the Respondent Bank.

The details of the benefits involved in said Resolution are contained in a Memorandum of the Respondent Bank dated September 18, 1957.

b. Since the grant of the benefits in question, the employees of the Respondent, represented by the petitioner, have always considered them to be a part of their salaries and/or fringe benefits; nevertheless, the Respondent, in 1963, without just cause, withdrew said benefits and in spite of repeated demands refused, and still refuses to reinstate the same up to the present.

Second Cause of Action

c. After the promulgation of the Decision in National Waterworks and Sewerage Authority vs. NAWASA Consolidated Unions, et al. G.R. No. L-18938, Aug. 31, 1964, the Petitioner has repeatedly requested Respondent that the cost of living allowance and longevity pay be taken into account in the computation of overtime pay, effective as of the grant of said benefits on January 1, 1958, in accordance with the ruling in said Decision of the Supreme Court.

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d. Until now Respondent has not taken any concrete steps toward the payment of the differential overtime and nighttime pays arising from the cost of living allowance and longevity pay.

xxx xxx xxx

Respondent in its answer of June 7, 1965 took exception to this mentioned petition on several grounds, namely, (1) the said alleged causes of action were not disputes existing between the parties, (2) the same are mere money claims and therefore not within this Court's jurisdiction, and (3) that the parties have not so stipulated under the collective bargaining agreement between them, or the same is premature as the pertinent collective bargaining agreement has not yet expired." (Pp. 84-86, Record.) 1

Resolving the issues of jurisdiction and prematurity thus raised by PNB, the court held:

As to the first ground, it is well to note that this Court in its Order of January 28, 1965 has enjoined the parties not to strike or lockout for a period of six (6) months starting from said date. In a very definite sense the labor disputes between the parties have been given a specific period for the settlement of their differences. The fact that thereafter the question of the manner of payment of overtime pay is being put in issue, appears to indicate that this was a part of the labor dispute. If we are to consider that this question, particularly the second cause of action, has in fact existed as early as 1958, shows the necessity of resolving the same now. And the same would indeed be an existing issue considering that the present certification came only in 1965.

It is further to be noted that the presidential certification has not limited specific areas of the labor dispute embraced within the said certification. It speaks of the existence of a labor dispute between the parties and of a strike declared by the PEMA, for which the Court has been requested to take immediate steps in the exercise of its powers under the law.

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Even on the assumption that the present issue is not one embraced by the presidential certification or it is an issue presented by one party on a cause arising subsequent to the certification, the same would still be subject to the jurisdiction of this Court. In "Apo Cement Workers Union versus Cebu Portland Cement", Case No. 11 IPA (G.R. No. L-12451, July 10, 1957), the Court en banc (where this Sala has taken an opposite view) upheld its jurisdiction under the circumstances just enumerated. It would seem that this question has been further settled by our Supreme Court in "National Waterworks & Sewerage Authority vs. NAWASA Consolidated Unions, et al." (supra), which we quote in part:

xxx xxx xxx

4. Petitioner's claim that the issue of overtime compensation not having been raised in the original case but merely dragged into it by intervenors, respondent Court cannot take cognizance thereof under Section 1, Rule 13 of the Rules of Court.

xxx xxx xxx

... The fact that the question of overtime payment is not included in the principal case in the sense that it is not one of the items of dispute certified to by the President is of no moment, for it comes within the sound discretion of the Court of Industrial Relations. Moreover, in labor disputes technicalities of procedure should as much as possible be avoided not only in the interest of labor but to avoid multiplicity of action. This claim has no merit.

xxx xxx xxx

As to the objection posed that the issues are mere money claims, there appears to be no ground for the same. In the first place, although the same involves a claim for additional compensation it is also a part of the labor dispute existing between the parties and subject to the compulsory arbitration powers of the Court, pursuant to Section 10 of Rep. Act No. 875. In the second place, on the basis of the so-called PRISCO doctrine (G.R. No. L- 13806, May 23,.1960),

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there is an existing and current employer-employee relationship between the respondent and the members of petitioner union, for whom the additional overtime compensation is claimed.

With respect to ground three of the answer on which objection is based, on C.A. 444, as amended, Section 6 thereof, provides as follows:

'Any agreement or contract between the employer and the laborer or employee contrary to the provisions of this Act shall be null and void ab initio'.

The instant action is partially subject to the provisions of Commonwealth Act 444, as amended. Even if, the parties have stipulated to the extent that overtime will not be paid, the same will not be binding. More so under the present circumstances, where the only question is the correctness of the computation of the overtime payments.

While the Court notes that the first cause of action has become moot and academic in view of the compliance by respondent, hence there is no further need to resolve the same (t.s.n., pp. 5-7, August 16, 1965), the settlement of said first cause of action further strengthens the view that the second cause of action is indeed an existing dispute between the parties. Both causes of fiction involve overtime questions. Both stem from dates well beyond and before the presidential certification of the present proceedings. If respondent has been fit to take steps to expedite and resolve, without court intervention, the first cause of action, it cannot deny the existence of the second cause of action as the first and second appear to be interrelated matters. (Pp. 86-89, Record)

And We agree that the foregoing holding is well taken. It would be more worthwhile to proceed to the basic issues immediately than to add anything more of Our own discourse to the sufficiently based disposition of the court a quo of the above- mentioned preliminary questions.

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After discussing the pros and cons on the issue involved in the second cause of action as to whether or not the cost-of-living allowance otherwise denominated as equity pay and longevity pay granted by the bank, the first beginning January 1, 1958 and the latter effective July 1, 1961, should be included in the computation of overtime-pay, the court granted the demands of PE MA, except the additional rate of work for night pay, and rendered the following judgment:

WHEREFORE, in view of the foregoing, this Court hereby promulgates the following:

1. The respondent Philippine National Bank is hereby required to pay overtime and nighttime rates to its employees from January 28, 1962; and such overtime compensation shall be based on the sum total of the employee's basic salary or wage plus cost of living allowance and longevity pay under the following schedule:

'a. Overtime services rendered shall be paid at the rate of time and one-third, but overtime work performed between 6:00 P.M. and 6- .00 A.M. shall be paid at the rate of 150% or 50% beyond the regular rate;

'b. The rate for work performed in the night shift, or during the period from 6:00 P.M. to 6:00 A.M. shall be compensated at the rate of 150% or 50% beyond the regular rate, provided the work performed involved a definite night shift and not merely a continuation by way of overtime of the regular and established hours of the respondent Bank.

2. The Chief of the Examining Division of the Court or any of his duly designated representatives is hereby ordered to compute the overtime rates due each employee of the respondent Bank from January 28, 1962, in accordance with the above determination; and to complete the same within a period of sixty (60) days from receipt of this Order. However, considering that the Philippine National Bank is a government depository, and renders and performs functions distinct and unique; and, while it may be a banking institution, its relationship with other government agencies and the public is such

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that it has no basis for comparison with other banking institutions organized under the corporation law or special charter. To require it to pay immediately the liability after the exact amount shall have been determined by the Court Examiner and duly approved by the Court, as in other cases, would work undue hardship to the whole government machinery, not to mention the outstanding foreign liabilities and outside commitments, if any. Moreover, the records show that this case was initiated long before the taking over of the incumbent bank officials.

Accordingly, the Court feels that the payment shall be subject to the negotiations by the parties as to time, amount, and duration.

The Court may intervene in said negotiations for the purpose of settling once and for all this case to maintain industrial peace pursuant to Section 13 of Commonwealth Act 103, as amended, if desired, however by the parties.

After all this is not an unfair labor practice case.

SO ORDERED. (Pp. 98-100, Record.)

In connection with the above decision, two interesting points appear at once to be of determinative relevance:

The first is that in upholding its jurisdiction to take cognizance of the demand in question about cost-of-living allowance and longevity pay, the Industrial Court carefully noted that it was not resolving a petition for declaratory relief in the light of the decision of this Court in NAWASA vs. NAWASA Consolidated Unions, G.R. No. L- 18938, August 31, 1964, 11 SCRA 766. Thus the decision under review states:

Incidentally, the present action is not one for declaratory relief as to the applicability of a judicial decision to the herein parties. A careful perusal of the pleadings indicates that what is being sought is the payment of differential overtime and nighttime pay based on existing law and jurisprudence. The cause of action is not anchored on any decision of any court but on provisions of the law which have been in effect at the time of the occurrence of the cause of the action in

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relation to a labor dispute. Hence, this is not a petition for declaratory relief. (Pp. 94-95, Record.)

The second refers to a subsequent decision of the same Industrial Court in Shell Oil Workers Union vs. Shell Co., et al., Case No. 2410-V and Shell & Affiliates Supervisors Union vs. Shell Company of the Philippines, et al., Case No. 2411- V, in which the court made an explanatory discourse of its understanding of the NAWASA ruling, supra, and on that basis rejected the claim of the workers. In brief, it held that (1) NAWASA does not apply where the collective bargaining agreement does not provide for the method of computation of overtime pay herein insisted upon by private respondent PEMA and (2) the fact-situation in the Shell cases differed from that of NAWASA, since the sole and definite ratio decidendi in NAWASA was merely that inasmuch as Republic Act 1880 merely fixed a 40-hour 5-day work for all workers, laborers and employees including government-owned corporations like NAWASA, the weekly pay of NAWASA workers working more than five days a week should remain intact; with overtime pay in excess of eight hours work and 25 % additional compensation on Sundays. There was no pronouncement at all therein regarding the basis of the computation of overtime pay in regard to bonuses and other fringe benefits.

For being commendably lucid and comprehensive, We deem it justified to quote from that Shell decision:

The main issue:

The Unions appear to have read the NAWASA case very broadly. They would want it held that in view of the said ruling of the Supreme Court, employers and employees must, even in the face of existing bargaining contracts providing otherwise, determine the daily and hourly rates of employees in this manner: Add to basic pay all the money value of all fringe benefits agreed upon or already received by the workers individually and overtime pay shall be computed thus —

Basic yearly Rate plus Value of all Fringe Benefits divided by number of days worked during the year equals daily wage; Daily wage divided by 8 equals hourly rate. Hourly rate plus premium rate equals hourly overtime rate.

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The NAWASA case must be viewed to determine whether it is that broad. NAWASA case must be understood in its setting. The words used by the Supreme Court in its reasoning should not be disengaged from the fact-situation with which it was confronted and the specific question which it was there required to decide. Above all care should be taken not to lose sight of the truth that the facts obtaining, the issue settled, and the law applied in the said case, and these, though extractable from the records thereof as material in the resolution herein, were, as they are, primarily declarative of the rights and liabilities of the parties involved therein.

Recourse to the records of the NAWASA case shows that the fact- situation, as far as can be materially connected with the instant case, is as follows:

In view of the enactment of Rep. Act 1880, providing that the legal hours of work for government employees, (including those in government-owned or controlled corporations) shall be eight (8) hours a day for five (5) days a week or forty (40) hours a week, its implementation by NAWASA was disputed by the Union. The workers affected were those who, for a period of three (3) months prior to or immediately preceding the implementation of Rep. Act 1880, were working seven (7) days a week and were continuously receiving 25% Sunday differential pay. The manner of computing or determining the daily rate of monthly salaried employees.

And the Supreme Court, specifically laid out the issue to be decided, as it did decide, in the NAWASA, as follows:

7. and 8. How is a daily wage of a weekly employee computed in the light of Republic Act 1880?'(G.R. L-18938)

Resolving the above issue, it was held;

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According to petitioner, the daily wage should be computed exclusively on the basic wage without including the automatic increase of 25% corresponding to the Sunday differential. To include said Sunday differential would be to increase the basic pay which is not contemplated by said Act. Respondent court disagrees with this manner of computation. lt holds that Republic Act 1880 requires that the basic weekly wage and the basic monthly salary should not be diminished notwithstanding the reduction in the number of working days a week. If the automatic increase corresponding to the salary differential should not be included there would be a diminution of the weekly wage of the laborer concerned. Of course, this should only benefit those who have been working seven days a week and had been regularly receiving 25% additional compensation for Sunday work before the effectivity of the Act.

It is thus necessary to analyze the Court's rationale in the said NAWASA case, 'in the light of Rep. Act 1880', and the 'specific corollaries' discussed preparatory to arriving at a final conclusion on the main issue. What was required to be done, by way of implementing R. A. 1880? The statute directs that working hours and days of government employees (including those of government owned and controlled proprietary corporations) shall be reduced to five days-forty hours a week. But, the same law carried the specific proviso, designed to guard against diminution of salaries or earnings of affected employees. The Supreme Court itself clearly spelled this out in the following language: 'It is evident that Republic Act 1880 does not intend to raise the wages of the employees over what they are actually receiving. Rather, its purpose is to limit the working days in a week to five days, or to 40 hours without however permitting any reduction in the weekly or daily wage of the compensation which was previously received. ...

If the object of the law was to keep intact, (not either to increase it or decrease it) it is but natural that the Court should concern itself, as it did, with the corollary, what is the weekly wage of worker who,

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prior to R.A. 1880, had been working seven (7) days a week and regularly receiving differential payments for work on Sundays or at night? It seems clear that the Court was only concerned in implementing correctly R.A. 1880 by ensuring that in diminishing the working days and hours of workers in one week, no diminution should result in the worker's weekly or daily wage. And, the conclusion reached by the Supreme Court was to affirm or recognize the correctness of the action taken by the industrial court including such differential pay in computing the weekly wages of these employees and laborers who worked seven days a week and were continuously receiving 25% Sunday differential for a period of three months immediately preceding the implementation of R.A. 1880.' Nothing was said about adding the money value of some other bonuses or allowances or money value of other fringe benefits, received outside the week or at some other periods. That was not within the scope of the issue before the Court. in fact, the limited application of the decision is expressed in the decision itself. The resolution of this particular issue was for the benefit of only a segment of the NAWASA employees. Said the Court 'Of course, this should only benefit those who have been working seven days a week and had been regularly receiving 25% additional compensation for Sunday work before the effectivity of the Act.'

Unions make capital of the following pronouncement of the Supreme Court in the NAWASA case:

It has been held that for purposes of computing overtime compensation a regular wage includes all payments which the parties have agreed shall be received during the work week, including piece-work wages, differential payments for working at undesirable times, such as at night or on Sundays and holidays, and the cost of board and lodging customarily furnished the employee (Walling v. Yangerman-Reynolds Hardwook Co., 325 U.S. 419; Walling v. Harischfeger Corp. 325 U.S. 427). The 'Regular rate of pay also ordinarily includes incentive bonus or profit- sharing payments made in addition to the normal basic pay (56 C.J.S., pp. 704-705),

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and it was also held that the higher rate for night, Sunday and holiday work is just as much as regular rate as the lower rate for daytime work. The higher rate is merely an inducement to accept employment at times which are not at desirable form a workman's standpoint (International L. Ass'n. Wise 50 F. Supp. 26, affirmed C.C.A. Carbunao v. National Terminals Corp. 139 F. 853).

But this paragraph in the decision appears to have been used and cited by the Court to sustain the action of the court a quo: that it was correct to include the 25% Sunday premium for the purpose of setting the weekly wage of specified workers whose weekly earnings before the passage of R.A. 1880 would be diminished, if said premium pay regularly received for three months were not included. It is significant that the citations therein used by the Supreme Court are excerpts from American decisions whose legislation on overtime is at variance with the law in this jurisdiction in this respect: the U.S. legislation considers work in excess of forty hours a week as overtime; whereas, what is generally considered overtime in the Philippines is work in excess 'of the regular 8-hours a day. It is understandably material to refer to precedents in the U.S. for purposes of computing weekly wages under a 40- hour a week rule, since the particular issue involved in NAWASA is the conversion of prior weekly regular earnings into daily rates without allowing diminution or addition.

No rule of universal application to other cases may, therefore, be justifiably extracted from the NAWASA case. Let it be enough that in arriving at just solution and correct application of R.A. 1880, an inference was drawn from other decisions that a regular wage includes payments 'agreed by the parties to be received during the week.' But to use this analogy in another fact- situation would unmitigatingly stretch its value as basis for legal reasoning, for analogies are not perfect and can bring a collapse if stretched far beyond their logical and reasoned efficacy. Neither would it be far to ascribe to the Supreme Court's citation of foreign jurisprudence, which was used for purposes of analogy, the force of statute law, for this would be the consequence if it were allowed to be used as

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authority for all fact-situations, even if different from the NAWASA case. This, because courts do not legislate. All they do is apply the law.

The above discussions impel the objective analyst to reject the proposition that the NAWASA decision is an embracing and can be used with the authority of a statute's effects on existing contracts.

It appears that the answer to dispute lies, not in the text of the NAWASA case but in the terms and conditions and practice in the implementation of, the agreement, an area which makes resolution of the issue dependent on the relation of the terms and conditions of the contract to the phraseology and purpose of the Eight-Hour Labor Law (Act 444).

The more we read the NAWASA case, the more we are convinced that the overtime computation set therein cannot apply to the cases at bar. For to do so would lead to unjust results, inequities between and among the employees themselves and absurd situations. To apply the NAWASA computation would require a different formula for each and every employee, would require reference to and continued use of individual earnings in the past, thus multiplying the administrative difficulties of the Company. It would be cumbersome and tedious a process to compute overtime pay and this may again cause delays in payments, which in turn could lead to serious disputes. To apply this mode of computation would retard and stifle the growth of unions themselves as Companies would be irresistibly drawn into denying, new and additional fringe benefits, if not those already existing, for fear of bloating their overhead expenses through overtime which, by reason of being unfixed, becomes instead a veritable source of irritant in labor relations.

One other reason why application of the NAWASA case should be rejected is that this Court is not prepared to accept that it can lay down a less cumbersome formula for a company-wide overtime pay other than that which is already provided in the collective bargaining agreement. Courts cannot make contracts for the parties themselves.

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Commonwealth Act 444 prescribes that overtime work shall be paid 'at the same rate as their regular wages or salary, plus at least twenty-five per centum additional' (Secs. 4 & 5). The law did not define what is a 'regular wage or salary'. What the law emphasized by way of repeated expression is that in addition to 'regular wage', there must be paid an additional 25% of that 'regular wage' to constitute overtime rate of pay. The parties were thus allowed to agree on what shag be mutually considered regular pay from or upon which a 25% premium shall be based and added to make up overtime compensation. This the parties did by agreeing and accepting for a very long period to a basic hourly rate to which a premium shall be added for purposes of overtime.

Also significant is the fact that Commonwealth Act 444 merely sets a minimum, a least premium rate for purposes of overtime. In this case, the parties agreed to premium rates four (4) or even six (6) times than that fixed by the Act. Far from being against the law, therefore, the agreement provided for rates 'commensurate with the Company's reputation of being among the leading employers in the Philippines' (Art. 1, Sec. 2, Coll. Barg. Agreement) at the same time that the Company is maintained in a competitive position in the market Coll. Barg. Agreement, lbid).

Since the agreed rates are way above prevailing statutory wages and premiums, fixed by themselves bona fide through negotiations favored by law, there appears no compelling reason nor basis for declaring the same illegal. A basic principle forming an important foundation of R.A. 875 is the encouragement given to parties to resort to peaceful settlement of industrial problems through collective bargaining. It behooves this Court, therefore, to help develop respect for those agreements which do not exhibit features of illegality This is the only way to build confidence in the democratic process of collective bargaining. Parties cannot be permitted to avoid the implications and ramifications of the agreement.

Although this Court has gone very far in resolving an doubts and in giving great weight to evidence and presumptions in favor of labor, it

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may not go as far as reconstruct the law to fit particular cases." (Pp. 174-181, Record)

Proof of the correctness of the aforequoted considerations, the appeal of the workers from the Industrial Court's decision did not prosper. Affirming the appealed decision, We held:

The theory, therefore, of the petitioners is to the effect that, notwithstanding the terms and conditions of their existing collective bargaining agreement with respondent Shell Company, particularly Exhibit 'A-l' for the Petitioners and Exhibit 'l-A' for the Respondent (which is Appendix 'B' of the Collective Bargaining Agreement of the parties), considering the ruling in the NAWASA case, a recomputation should be made of their basic wage by adding the money value of the fringe benefits enjoyed by them from whence the premium rates agreed upon shall be computed in order to arrive at the correct computation of their overtime compensation from the Company. On the other hand, respondent Shell Company maintains that the NAWASA case should not be utilized as the basis for the alteration of their mode of computing overtime rate of pay as set forth in their collective Bargaining Agreement. It insists that their collective bargaining agreement should be the law between them.

After a careful and thorough re-examination of the NAWASA case, supra, and a minute examination of the facts and the evidence of the case now before Us, We rule that the NAWASA case is not in point and, therefore, is inapplicable to the case at bar.

The ruling of this Court in the NAWASA case contemplates the regularity and continuity of the benefits enjoyed by the employees or workers (for at least three (3) months) as the condition precedent before such additional payments or benefits are taken into account. This is evident in the aforequoted ruling of this Court in the NAWASA case as well as in the hereinbelow cited authorities, to wit:

The 'regular rate' of pay on the basis of which overtime must be computed must reflect an payments which parties have agreed shall be received regularly during

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the work week, exclusive of overtime payments.' Walling v. Garlock Packing Co. C.C.A.N.Y., 159 F. 2d 44, 45. (Page 289, WORDS And PHRASES, Permanent Edition, Vol. 36A; Italics supplied); and

As a general rule the words 'regular rate' mean the hourly rate actually paid for the normal, non-overtime work week, and an employee's regular compensation is the compensation which regularly and actually reaches him, ... .' (56 C.J.S. 704; Emphasis supplied).

Even in the definition of wage under the Minimum Wage Law, the words 'customarily furnished' are used in referring to the additional payments or benefits, thus, -

'Wage' paid to any employee shag mean the remuneration or earnings, however designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, 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.' (Sec. 2 (g), R.A. No. 602).

Having been stipulated by the parties that ... the Tin Factory Incentive Pay has ceased in view of the closure of the factory in May 1966 the fringe benefits as described show that they are occasionally not regularly enjoyed and that not all employees are entitled to them', herein petitioners failed to meet the test laid down by this Court in the NAWASA case. Further, the collective bargaining agreement resorted to by the parties being in accordance with R.A. 875, with its provision on overtime pay far way beyond the premium rate provided for in Sections 4 and 5 of Commonwealth Act 444, the same should govern their relationship. Since this is their contract entered into by them pursuant to bargaining negotiations under existing laws, they are bound to respect it. It is the duty of this Court

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to see to it that contracts between parties, not tainted with infirmity or irregularity or illegality, be strictly complied with by the parties themselves. This is the only way by which unity and order can be properly attained in our society.

It should be noted in passing that Commonwealth Act 444 prescribes only a minimum of at least 25% in addition to the regular wage or salary of an employee to constitute his overtime rate of pay, whereas, under Appendix 'B', (Exhs. 'A-l', Petitioners and 'l-A', Respondent) of the Collective Bargaining Agreement of the parties, the premium rate of overtime pay is as high as l50% on regular working days up to 250 % on Sundays and recognized national holidays. (Shell Oil Workers Union vs. Shell Company of the Philippines, G.R. No. L-30658-59, March 31, 1976, 70 SCRA 242-243.)

In the instant case, on May 22, 1965 PEMA alleged in the court below the following cause of action as amended on June 7, 1965:

Since the start of the giving of cost of living allowance and longevity pay and reiterated, after the promulgation of the Decision in National Waterworks and Sewerage Authority vs. NAWASA Consolidated Unions et al., G.R. No. L-18938, August 31, 1964, the petitioner has repeatedly requested respondent that the cost of living allowance and longevity pay be taken into account in the computation of overtime pay, effective as of the grant of said benefits on January 1, 1958, in accordance with the ruling in said Decision of the Supreme Court. (Page 14, PNB's Brief.)

To be sure, there could be some plausibility in PNB's pose regarding the jurisdiction of the Industrial Court over the above cause of action. But, as We have already stated, We agree with the broader view adopted by the court a quo on said point, and We find that it is in the best interests of an concerned that this almost 25-year dispute be settled once and for all without the need of going through other forums only for the matter to ultimately come back to this Court probably years later, taking particular note as We do, in this regard, of the cases cited on pages 9-10 of PEMA's original memo, as follows:

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Realizing its error before in not considering the present case a certified labor dispute, the Bank now concedes that the case at bar 'belongs to compulsory arbitration'. Hence, the lawful powers of the CIR over the same. However, the Bank says 'overtime differential is but a money claim, (and) respondent court does not have jurisdiction to take cognizance of the same'.

But this is not a pure money claim (pp. 10-11, Opposition) because other factors are involved - certification by the President, the matter may likely cause a strike, the dispute concerns national interest and comes within the CIR's injunction against striking, and the employer-employee relationship between the Bank and the employees has not been severed. Besides, 'money claim' is embraced within the term 'compensation' and therefore falls squarely under the jurisdiction of the CIR in the exercise of its arbitration power (Sec. 4, CA 103; Please see also Republic vs. CIR, L- 21303, Sept. 23/68; Makalintal J., NWSA Case, L-26894-96, Feb. 28/69; Fernando, J.).

What confers jurisdiction on the Industrial Court, says Justice J.B.L. Reyes, is not the form or manner of certification by the President, but the referral to said court of the industrial dispute between the employer and the employees. (Liberation Steamship vs. CIR, etc., L-25389 & 25390, June 27/68).

In Phil. Postal Savings Bank, et al. vs. CIR, et al., L-24572, Dec. 20/67, this Honorable Court, speaking through Chief Justice Concepcion, held that the certification of the issue 'as a dispute affecting an industry indispensable to the national interest' leaves 'no room for doubt on the jurisdiction of the CIR to settle such dispute.'

Relatedly, however, it is to be noted that it is clear from the holding of the Industrial Court's decision We have earlier quoted, "the cause of action (here) is not on any decision of any court but on the provisions of the law which have been in effect at the time of the occurrence of the cause of action in relation to a labor dispute". Viewed from such perspective laid by the lower court itself, it can hardly be said that it indeed exercised purely its power of arbitration, which means laying down the terms and conditions that should govern the relationship between the employer and employees of an enterprise following its own

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appreciation of the relevant circumstances rather empirically. More accurately understood, the court in fact indulged in an interpretation of the applicable law, namely, CA 444, in the light of its own impression of the opinion of this Court in NAWASA and based its decision thereon.

Accordingly, upon the fact-situation of this case hereunder to be set forth, the fundamental question for Us to decide is whether or not the decision under appeal is in accordance with that law and the cited jurisprudence. In brief, as PEMA posits, is NAWASA four-square with this case? And even assuming, for a while, that in a sense what is before Us is an arbitration decision, private respondent itself admits in its above-mentioned memorandum that this Court is not without power and authority to determine whether or not such arbitration decision is against the law or jurisprudence or constitutes a grave abuse of discretion. Thus, in PEMA's memorandum, it makes the observation that "(F)urthermore, in the Shell cases, the unions are using the NAWASA decision as a source of right for recomputation, while in the PNB, the Union merely cites the NAWASA doctrine, not as a source of right, but as a legal authority or reference by both parties so the Union demand may be granted. " (Motion to Dismiss, p. 3.)

Obviously, therefore, the polestar to which Our mental vision must be focused in order that We may arrive at a correct legal and equitable determination of this controversy and, in the process make NAWASA better understood as We believe it should be, is none other than Sections 3 and 4 of Com. Act No. 444, the Eight Hour Labor Law, which pertinently provide thus:

SEC. 3. Work may be performed beyond eight hours a day in case of actual or impending emergencies caused by serious accidents, fire, flood, typhoon, earthquake, epidemic, or other disaster or calamity in order to prevent loss to life and property or imminent danger to public safety; or in case of urgent work to be performed on the machines, equipment, or installations in order to avoid a serious loss which the employer would otherwise suffer, or some other just cause of a similar nature; but in all such cases the laborers and employees shall be entitled to receive compensation for the overtime work performed at the same rate as their regular wages or salary, plus at least twenty-five per centum additional.

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In case of national emergency the Government is empowered to establish rules and regulations for the operation of the plants and factories and to determine the wages to be paid the laborers.

xxx xxx xxx

SEC. 4. No person, firm, or corporation, business establishment or place or center of labor shall compel an employee or laborer to work during Sundays and legal holidays, unless he is paid an additional sum of at least twenty-five per centum of his regular remuneration: Provided, however, that this prohibition shall not apply to public utilities performing some public service such as supplying gas, electricity, power, water, or providing means of transportation or communication.

The vital question is, what does "regular wage or salary" mean or connote in the light of the demand of PEMA?

In Our considered opinion, the answer to such question lies in the basic rationale of overtime pay. Why is a laborer or employee who works beyond the regular hours of work entitled to extra compensation called in this enlightened time, overtime pay? Verily, there can be no other reason than that he is made to work longer than what is commensurate with his agreed compensation for the statutorily fixed or voluntarily agreed hours of labor he is supposed to do. When he thus spends additional time to his work, the effect upon him is multi-faceted: he puts in more effort, physical and/or mental; he is delayed in going home to his family to enjoy the comforts thereof; he might have no time for relaxation, amusement or sports; he might miss important pre-arranged engagements; etc., etc. It is thus the additional work, labor or service employed and the adverse effects just mentioned of his longer stay in his place of work that justify and is the real reason for the extra compensation that he called overtime pay.

Overtime work is actually the lengthening of hours developed to the interests of the employer and the requirements of his enterprise. It follows that the wage or salary to be received must likewise be increased, and more than that, a special additional amount must be added to serve either as encouragement or inducement or to make up fop the things he loses which We have already referred to. And on this score, it must always be borne in mind that wage is

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indisputably intended as payment for work done or services rendered. Thus, in the definition of wage for purposes of the Minimum Wage Law, Republic Act No. 602, it is stated:

'Wage' paid to any employee shall mean the remuneration or earnings, however designated, capable of being expressed in terms of money, whether fixed or ascertained on a time task, piece, commission basis or other method of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of employment for work done or to be done or for services rendered or to be rendered and includes the fair and reasonable value as determined by the Secretary of Labor, of board, lodging or other facilities customarily furnished by the employer to the employee. 'Fair and reasonable value' shall not include a profit to the employer which reduces the wage received by the employee below the minimum wage applicable to the employee under this Act, nor shall any transaction between an employer or any person affiliated with the employer and the employee of the employer include any profit to the employer or affiliated person which reduces the employee's wage below the wage applicable to the employee under this Act.' 2 (Emphasis supplied).

As can be seen, wage under said law, in whatever means or form it is given to the worker, is "for work done or to be done or for services rendered or to be rendered" and logically "includes (only) 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".

Indeed, for the purpose of avoiding any misunderstanding or misinterpretation of the word "wage" used in the law and to differentiate it from "supplement", the Wage Administration Service to implement the Minimum Wage Law, defined the latter as:

extra remuneration or benefits received by wage earners from their employers and include but are not restricted to pay for vacation and holidays not worked; paid sick leave or maternity leave; overtime rate in excess of what is required by law; pension, retirement, and death benefits; profit-sharing, family allowances; Christmas, war risk

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and cost-of-living bonuses; or other bonuses other than those paid as a reward for extra output or time spent on the job. (Emphasis ours).

In these times when humane and dignified treatment of labor is steadily becoming universally an obsession of society, we, in our country, have reached a point in employer- employee relationship wherein employers themselves realize the indispensability of at least making the compensation of workers equal to the worth of their efforts as much as this case can be statistically determined. Thus, in order to meet the effects of uncertain economic conditions affecting adversely the living conditions of wage earners, employers, whenever the financial conditions of the enterprise permit, grant them what has been called as cost-of-living allowance. In other words, instead of leaving the workers to assume the risks of or drift by themselves amidst the cross -currents of country-wide economic dislocation, employers try their best to help them tide over the hardships and difficulties of the situation. Sometimes, such allowances are voluntarily agreed upon in collective bargaining agreements. At other times, it is imposed by the government as in the instances of Presidential Decrees Nos. 525, 928, 1123, 1389, 1614, 1678, 1751 and 1790; Letters of Instructions No. 1056 and Wage Order No. 1. Notably, Presidential Decree No. 1751 increased the statutory wage at all levels by P400 in addition to integrating the mandatory emergency living allowances under Presidential Decree No. 525 and Presidential Decree No. 1123 into the basic pay of all covered workers.

Going over these laws, one readily notices two distinctive features: First, it is evidently gratifying that the government, in keeping with the humanitarian trend of the times, always makes every effort to keep wages abreast with increased cost of living conditions, doing it as soon as the necessity for it arises. However, obviously, in order not to overdo things, except when otherwise provided, it spares from such obligation employers who by mutual agreement with their workers are already paying what the corresponding law provides (See Sec. 4 of P.D. No. 525; Section 2 of P.D. No. 851 until P.D. 1684 abolished all exemptions under P.D. No. 525, P.D. No. 1123, P.D. No. 851 and P.D. No. 928 among distressed employers who even though given sufficient lapse of time to make the necessary adjustment have not done so.)3

In the case at bar, as already related earlier, the cost-of-living allowance began to be granted in 1958 and the longevity pay in 1981. In other words, they were granted by PNB upon realizing the difficult plight of its labor force in the face of

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the unusual inflationary situation in the economy of the country, which, however acute, was nevertheless expected to improve. There was thus evident an inherently contingent character in said allowances. They were not intended to be regular, much less permanent additional part of the compensation of the employees and workers. To such effect were the testimonies of the witnesses at the trial. For instance, Mr. Ladislao Yuzon declared:

ATTORNEY GESMUNDO

Questioning ....

Q. Calling your attention to paragraph No. 1, entitled monthly living allowance, which has been marked as Exhibit 'A-l', will you kindly tell us the history of this benefit- monthly living allowance, why the same has been granted?

A. Well, in view of the increasing standard of living, we decided to demand from management in our set of demands ... included in our set of demands in 1957-1958 a monthly living allowance in addition to our basic salary. This benefit was agreed upon and granted to take effect as of January 1, 1958. That was the first time it was enjoyed by the employees of the Philippine National Bank. It started on a lesser amount but year after year we have been demanding for increases on this living allowance until we have attained the present amount of P 1 50.00 a month, starting with P40.00 when it was first granted. The same is still being enjoyed by the employees on a much higher amount. There were a few variations to that. (t. t.s.n., pp. 18-19, Hearing of August 16, 1965)

which testimony was affirmed by Mr. Panfilo Domingo, on cross- examination by counsel for the respondent, reading as follows:

ATTORNEY GESMUNDO:

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Q. Do you recall Mr. Domingo, that in denying the cost of living allowance and longevity pay for incorporation with the basic salary, the reason given by the management was that as according to you, it will mean an added cost and ' furthermore it will increase the contribution of the Philippine National Bank to the GSIS, is that correct?

A. This is one of the reasons, of the objections for the inclusion of the living allowance and longevity pay to form part of the basic pay, I mean among others, because the basic reason why management would object is the cost of living allowance is temporary in nature, the philosophy behind the grant of this benefit, Nonetheless, it was the understanding if I recall right that in the event that cost of living should go down then there should be a corresponding decrease in the cost of living allowance being granted I have to mention this because this is the fundamental philosophy in the grant of cost of living allowance. (Pp. 19-20, Record.)

Much less were they dependent on extra or special work done or service rendered by the corresponding recipient. Rather, they were based on the needs of their families as the conditions of the economy warranted. Such is the inexorable import of the pertinent provisions of the collective bargaining agreement:

MONTHLY LIVING ALLOWANCE

All employees of the Bank shall be granted a monthly living allowance of P140, plus P10 for each minor dependent child below 21 years of age, but in no case shall the total allowance exceed P200 or 25% of the monthly salary, whichever is higher, subject to the following conditions:

a) That this new basic allowance shall be applicable to all employees, irrespective of their civil status;

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b) That a widow or widower shall also enjoy the basic allowance of P140 a month, plus the additional benefit of P10 for each minor dependent child but not to exceed P200 or 25% of basic salary whichever is higher.

c) That in case the husband and wife are both employees in the Bank both shall enjoy this new basic monthly living allowance of P140 but only one of spouses shall be entitled to claim the additional benefit of P10 for each minor legitimate or acknowledged child. (Pp. 30-31, PNB's memo.)

So also with the longevity pay; manifestly, this was not based on the daily or monthly amount of work done or service rendered it was more of a gratuity for their loyalty, or their having been in the bank's employment for consideration periods of time. Indeed, with particular reference to the longevity pay, the then existing collective bargaining contract expressly provided: "... That this benefit shall not form part of the basic salaries of the officers so affected."

PEMA may contend that the express exclusion of the longevity pay, means that the cost-of-living allowance was not intended to be excluded. Considering, however, the contingent nature of the allowances and their lack of relation to work done or service rendered, which in a sense may be otherwise in respect to longevity pay PEMA's contention is untenable. The rule of exclusio unius, exclusio alterius would not apply here, if only because in the very nature of the two benefits in question, considerations and conclusions as to one of them could be non-sequitur as to the other.

Withal, there is the indisputable significant fact that after 1958, everytime a collective bargaining agreement was being entered into, the union always demanded the integration of the cost-of-living allowances and longevity pay, and as many times, upon opposition of the bank, no stipulation to such effect has ever been included in any of said agreements. And the express exclusion of longevity pay was continued to be maintained.

On this point, the respondent court held that under its broad jurisdiction, it was within the ambit of its authority to provide for what the parties could not agree upon. We are not persuaded to view the matter that way. We are not convinced

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that the government, thru the Industrial Court, then, could impose upon the parties in an employer-employee conflict, terms and conditions which are inconsistent with the existing law and jurisprudence, particularly where the remedy is sought by the actors more on such legal basis and not purely on the court's arbitration powers.

As pointed out earlier in this opinion, Our task here is two-fold: First, reviewing the decision under scrutiny as based on law and jurisprudence, the question is whether or not the rulings therein are correct. And second, reading such judgment as an arbitration decision, did the court a quo gravely abuse its discretion in holding, as it did, that cost-of-living allowance and longevity pay should be included in the computation of overtime pay?

In regard to the first question, We have already pointed out to start with, that as far as longevity pay is concerned, it is beyond question that the same cannot be included in the computation of overtime pay for the very simple reason that the contrary is expressly stipulated in the collective bargaining agreement and, as should be the case, it is settled that the terms and conditions of a collective bargaining agreement constitute the law between the parties. (Mactan Workers Union vs. Aboitiz, 45 SCRA 577. See also Shell Oil Workers Union et al. vs. Shell Company of the Philippines, supra) The contention of PEMA that the express provision in the collective bargaining agreement that "this benefit (longevity pay) shall not form part of the basic salaries of the officers so affected" cannot imply the same Idea insofar as the computation of the overtime pay is concerned defies the rules of logic and mathematics. If the basic pay cannot be deemed increased, how could the overtime pay be based on any increased amount at all?

However, the matter of the cost-of-living allowance has to be examined from another perspective, namely, that while PEMA had been always demanding for its integration into the basic pay, it never succeeded in getting the conformity of PNB thereto, and so, all collective bargaining agreements entered -4 into periodically by the said parties did not provide therefor. And it would appear that PEMA took the non-agreement of the bank in good grace, for the record does not show that any remedial measure was ever taken by it in connection therewith. In other words, the parties seemed to be mutually satisfied that the matter could be better left for settlement on the bargaining table sooner or later, pursuant to the spirit of free bargaining underlying Republic Act 875, the Industrial Peace Act then in force. Or, as observed by PEMA in its memorandum, (page 23), the parties

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"agreed to let the question remain open-pending decision of authorities that would justify the demand of the Union." Indeed, on pages 23-24 of said memorandum, the following position of PEMA is stated thus:

Thus the following proceeding took place at the Court a quo:

ATTY. GESMUNDO:

That is our position, Your Honor, because apparently there was an understanding reached between the parties as to their having to wait for authorities and considering that the issue or one of the issues then involved in the NAWASA case pending in the CIR supports the stand of the union, that the principle enunciated in connection with that issue is applicable to this case.

xxx xxx xxx

Q. Do we understand from you, Mister Yuson, that it was because of the management asking you for authorities in allowing the integration of the cost of living allowance with your basic salary and your failure to produce at the time such authorities that the union then did not bring any case to the Court?

A. Well, in the first place, it is not really my Idea to be bringing matters to the Court during my time but I would much prefer that we agree on the issue. Well, insofar as you said that the management was asking me, welt I would say that they were invoking (on) authorities that we can show in order to become as a basis for granting or for agreeing with us although we were aware of the existence of a pending case which is very closely similar to our demand, yet we decided to wait until this case should be decided by the Court so that we can avail of the decision to present to management as what they are asking for. (t.s.n., pp. 31-32, 35-36, Aug. 28,1965.)

Now, to complete proper understanding of the character of the controversy before Us, and lest it be felt by those concerned that We have overlooked a point

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precisely related to the matter touched in the above immediately preceding paragraph, it should be relevant to quote a portion of the "Stipulation of Facts" of the parties hereto:

1. This particular demand was among those submitted by Petitioner-Union in the current collective bargaining negotiations to the Respondent Bank. However, since this case was already filed in court on May 22, 1965, the parties agreed not to include this particular demand in the discussion, leaving the matter to the discretion and final judicial determination of the courts of justice." (Page 81, Rec.)

In fine, what the parties commonly desire is for this Court to construe CA 444 in the light of NAWASA, considering the fact- situation of the instant case.

In this respect, it is Our considered opinion, after mature deliberation, that notwithstanding the portions of the NAWASA's opinion relied upon by PEMA, there is nothing in CA 444 that could justify its posture that cost-of-living allowance should be added to the regular wage in computing overtime pay.

After all, what was said in NAWASA that could be controlling here? True, it is there stated that "for purposes of computing overtime compensation, regular wage includes all payments which the parties have agreed shall be received during the work week, including - differential payments for working at undesirable times, such as at night and the board and lodging customarily furnished the employee. ... The 'regular rate' of pay also ordinarily includes incentive bonus or profit-sharing payments made in addition to the normal basic pay (56 C.J.S., pp. 704-705), and it was also held that the higher rate for night, Sunday and holiday work is just as much a regular rate as the lower rate for daytime work. The higher rate is merely an inducement to accept employment at times which are not as desirable from a workmen's standpoint (International L. Ass'n vs. National Terminals Corp. C.C. Wise, 50 F. Supp. 26, affirmed C.C.A. Carbunoa v. National Terminals Corp. 139 F. 2d 853)." (11 SCRA, p. 783)

But nowhere did NAWASA refer to extra, temporary and contingent compensation unrelated to work done or service rendered, which as explained earlier is the very nature of cost-of- living allowance. Withal, in strict sense, what We have just quoted from NAWASA was obiter dictum, since the only issue before

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the Court there was whether or not "in computing the daily wage, (whether) the addition compensation for Sunday should be included. " (See No. 7 of Record)

In any event, as stressed by Us in the Shell cases, the basis of computation of overtime pay beyond that required by CA 444 must be the collective bargaining agreement, 4 for, to reiterate Our postulation therein and in Bisig ng Manggagawa, supra, it is not for the court to impose upon the parties anything beyond what they have agreed upon which is not tainted with illegality. On the other hand, where the parties fail to come to an agreement, on a matter not legally required, the court abuses its discretion when it obliges any 6f them to do more than what is legally obliged.

Doctrinally, We hold that, in the absence of any specific provision on the matter in a collective bargaining agreement, what are decisive in determining the basis for the computation of overtime pay are two very germane considerations, namely, (1) whether or not the additional pay is for extra work done or service rendered and (2) whether or not the same is intended to be permanent and regular, not contingent nor temporary and given only to remedy a situation which can change any time. We reiterate, overtime pay is for extra effort beyond that contemplated in the employment contract, hence when additional pay is given for any other purpose, it is illogical to include the same in the basis for the computation of overtime pay. This holding supersedes NAWASA.

Having arrived at the foregoing conclusions, We deem it unnecessary to discuss any of the other issues raised by the parties.

WHEREFORE, judgment is hereby rendered reversing the decision appealed from, without costs.

G.R. No. 107994 August 14, 1995

PHILIPPINE AGRICULTURAL COMMERCIAL AND INDUSTRIAL WORKERS UNION (PACIWU)-TUCP, petitioner, vs.

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NATIONAL LABOR RELATIONS COMMISSION AND VALLACAR TRANSIT, INC., respondents.

KAPUNAN, J.:

This is a petition for certiorari seeking to reverse the decision of the National Labor Relations Commission (NLRC) in NLRC Case No. V-0159-92 which dismissed the appeal of petitioner union and in effect, affirmed the decision of the Labor Arbiter ordering the dismissal of the complaint of petitioner for payment of 13th month pay to the drivers and conductors of respondent company.

Petitioner Philippine Agricultural Commercial and Agricultural Workers Union — TUCP is the exclusive bargaining agent of the rank and file employees of respondent Vallacar Transit, Inc. Petitioner union instituted a complaint with NLRC Regional Arbitration Branch No. VI, Bacolod City, for payment of 13th month pay in behalf of the drivers and conductors of respondent company's Visayan operation on the ground that although said drivers and conductors are compensated on a "purely commission" basis as described in their Collective Bargaining Agreement (CBA), they are automatically entitled to the basic minimum pay mandated by law should said commission be less than their basic minimum for eight (8) hours work. 1

In its position paper, respondent Vallacar Transit, Inc. contended that since said drivers and conductors are compensated on a purely commission basis, they are not entitled to 13th month pay pursuant to the exempting provisions enumerated in paragraph 2 of the Revised Guidelines on the Implementation of the Thirteenth Month Pay Law. 2 It further contended that Section 2 of Article XIV of the Collective Bargaining Agreement (CBA) concluded on October 17, 1988 expressly provided that "drivers and conductors paid on a purely commission are not legally entitled to 13th month pay." Said CBA, being the law between the parties, must be respected, respondent opined.

On May 22, 1992, Labor Arbiter Reynaldo Gulmatico rendered a decision dismissing the complaint. 3

The appeal of the petitioner to the National Labor Relations Commission was likewise dismissed 4 so was the motion for reconsideration of the said decision. 5

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Hence, the present petition.

The principal issue posed for consideration is whether or not the bus drivers and conductors of respondent Vallacar Transit, Inc. are entitled to 13th month pay.

We rule in the affirmative.

It may be recalled that on December 16, 1975, P.D. 851, otherwise known as the "13th Month Pay" Law, was promulgated. The same prescribed payment of 13th month pay in the following terms:

Sec. 1. All employers are hereby required to pay all their employees receiving a basic salary of not more than P1,000.00 a month, regardless of the nature of the employment, a 13th month pay not later than December 24 of every year.

Sec. 2. Employers already paying their employees a 13th month pay or its equivalent are not covered by this Decree.

The Rules and Regulations Implementing P.D. No. 851, issued by the then Secretary of Labor and Employment on December 22, 1975, defined the following basic terms:

xxx xxx xxx

(a) 13th month pay shall mean one-twelfth (1/12) of the basic salary of an employee within a calendar year;

(b) basic salary shall include all remunerations or earnings paid by an employer to an employer for services rendered, but may not include cost of living allowances granted pursuant to Presidential Decree No. 525 or Letter of Instructions No. 174, profitsharing 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.

xxx xxx xxx

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On August 13, 1986, President Corazon C. Aquino, exercising both executive and legislative authority, issued Memorandum Order No. 28 which provided as follows:

xxx xxx xxx

Sec.1. of Presidential Decree No. 851 is hereby modified to the extent that all employers are hereby required to pay all their rank-and-file employees a 13th month pay not later than December 24 of every year.

xxx xxx xxx

In connection with and in implementation of Memorandum Order No. 28, the then Minister of Labor and Employment issued MOLE Explanatory Bulletin No. 86-12 on November 24, 1986. Item No. 5 (a) of the said issuance read:

xxx xxx xxx

Employees who are paid a fixed or guaranteed wage plus commission are also entitled to the mandated 13th month pay, based on their total earning(s) during the calendar year, i.e., on both their fixed and guaranteed wage and commission.

xxx xxx xxx

(emphasis ours)

From the foregoing legal milieu, it is clear that every employee receiving a commission in addition to a fixed or guaranteed wage or salary, is entitled to a 13th month pay. For purposes of entitling rank and file employees a 13th month pay, it is immaterial whether the employees concerned are paid a guaranteed wage plus commission or a commission with guaranteed wage inasmuch as the botton line is that they receive a guaranteed wage. This is correctly construed in the MOLE Explanatory Bulletin No. 86-12.

In the case at bench, while the bus drivers and conductors of respondent company are considered by the latter as being compensated on a commission basis, they are not paid purely by what they receive as commission. As admitted by respondent company, the said bus drivers and conductors are automatically

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entitled to the basic minimum pay mandated by law in case the commissions they earned be less than their basic minimum for eight (8) hours work. 6 Evidently therefore, the commissions form part of the wage or salary of the bus drivers and conductors. A contrary interpretation would allow an employer to skirt the law and would result in an absurd situation where an employee who receives a guaranteed minimum basic pay cannot be entitled to a 13th month pay simply because he is technically referred to by his employer per the CBA as an employee compensated on a purely commission basis. Such would be a narrow interpretation of the law, certainly not in accord with the liberal spirit of our labor laws. Moreover, what is controlling is not the label attached to the remuneration that the employee receives but the nature of the remuneration 7 and the purpose for which the 13th month pay was given to alleviate the plight of the working masses who are receiving low wages. This is extant from the "WHEREASES" of PD 851, to wit:

WHEREAS, it is necessary to further protect the level of real wages from the ravage of world-wide inflation.

WHEREAS, there has been no increase in the legal minimum wage since 1970.

WHEREAS, the Christmas season is an opportune time for society to show its concern for the plight of the working masses so they may properly celebrate Christmas and New Year.

Misplaced legal hermeneutics cannot be countenanced to evade paying the rank and file what is due to them under the law.

Commission is the recompense, compensation, reward of an employee, agent, salesman, executor, trustee, receiver, factor, broker or bailee, when the same is calculated as a percentage on the amount of his transactions or on the profit of the principal. 8 While said commissions may be in the form of incentives or encouragement to inspire said bus drivers and conductors to put a little more zeal and industry on their jobs, still, it is safe to say that the same are direct remunerations for services rendered, given the small remuneration they receive for the services they render, 9 which is precisely the reason why private respondent allowed the drivers and conductors a guaranteed minimum wage. The conclusion is ineluctable that said commissions are part of their salary.

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InPhilippine Duplicators, Inc. v. National Labor Relations Commission, 10 we had the occasion to estate that:

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

(f) "Wage" paid to any employee shall mean the remuneration or earnings, however designated, capable of being expressed in term of money, 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 employee under a written or unwritten contract of employment for work done or to be done, or for services rendered or to be rendered, and includes the fair and reasonable value, as determined by the Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer to the employee. "Fair and reasonable value" shall not include any profit to the employer or to any person affiliated with the employer.

In the instant case, there is no question that the sales commissions earned by salesmen who make or close a sale of duplicating machines distributed by petitioner corporation, constitute part of the compensation or remuneration paid to salesmen for serving as salesmen, and hence as part of the "wage" or "salary" of petitioner's salesmen. Indeed, it appears that petitioner pays its salesmen a small fixed or guaranteed wage; the greater part of the salesmen's wages or salaries being composed of the sales or incentive commissions earned on actual sales closed by them. No doubt this particular salary structure was intended for the benefit of petitioner corporation, on the apparent assumption that thereby its salesmen would be moved to greater enterprise and diligence and close more sales in the expectation of increasing their sales commissions. This, however, does not detract from the character of such commissions as part of the salary or wage paid to each or its salesmen for rendering services to petitioner corporation. 11

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In sum, the 13th month pay of the bus drivers and conductors who are paid a fixed or guaranteed minimum wage in case their commissions be less than the statutory minimum, and commissions only in case where the same is over and above the statutory minimum, must be equivalent to one-twelfth (1/12) of their total earnings during the calendar year.

WHEREFORE, the petition is hereby GRANTED. The decision of respondent National Labor Relations Commission is hereby REVERSED and SET ASIDE. The case is remanded to the labor Arbiter for the proper computation of 13th month pay.

SO ORDERED.

LMG CHEMICALS CORPORATION, LMG CHEMICALS CORPORATION, petitioner, vs. THE SECRETARY OF THE DEPARTMENT OF LABOR AND EMPLOYMENT, THE HON. LEONARDO A. QUISUMBING, and CHEMICAL WORKER’S UNION, respondents.

D E C I S I O N

SANDOVAL-GUTIERREZ, J.:

Before us is a petition for certiorari with prayer for a temporary restraining order and a writ of preliminary injunction under Rule 65 of the 1997 Rules of Civil Procedure, as amended, seeking to nullify the orders dated October 7, 1996 and December 17, 1996, issued by the then Secretary of Labor and Employment, Hon. Leonardo A. Quisumbing,[1] in OS-AJ-05-10(1)-96, “IN RE: LABOR DISPUTE AT LMG CHEMICALS CORPORATION”

The facts as culled from the records are:

LMG Chemicals Corporation, (petitioner) is a domestic corporation engaged in the manufacture and sale of various kinds of chemical substances, including aluminum sulfate which is essential in purifying water, and technical grade sulfuric acid used in thermal power plants. Petitioner has three divisions, namely: the Organic Division, Inorganic Division and the Pinamucan Bulk Carriers. There are two unions within petitioner’s Inorganic Division. One union represents the

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daily paid employees and the other union represents the monthly paid employees. Chemical Workers Union, respondent, is a duly registered labor organization acting as the collective bargaining agent of all the daily paid employees of petitioner’s Inorganic Division.

Sometime in December 1995, the petitioner and the respondent started negotiation for a new Collective Bargaining Agreement (CBA) as their old CBA was about to expire. They were able to agree on the political provisions of the new CBA, but no agreement was reached on the issue of wage increase. The economic issues were not also settled.

The positions of the parties with respect to wage issue were:

“Petitioner Company

P40 per day on the first year

P40 per day on the second year

P40 per day on the third year

Respondent Union

P350 per day on the first 18 months, and

P150 per day for the next 18 months”

In the course of the negotiations, respondent union pruned down the originally proposed wage increase quoted above to P215 per day, broken down as follows:

“P142 for the first 18 months

P73 for the second 18 months”

With the CBA negotiations at a deadlock, on March 6, 1996, respondent union filed a Notice of Strike with the National Conciliation and Mediation Board, National Capital Region. Despite several conferences and efforts of the designated conciliator-mediator, the parties failed to reach an amicable settlement.

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On April 16, 1996, respondent union staged a strike. In an attempt to end the strike early, petitioner, on April 24, 1996, made an improved offer of P135 per day, spread over the period of three years, as follows:

“P55 per day on the first year;

P45 per day on the second year;

P35 per day on the third year.”

On May 9, 1996, another conciliation meeting was held between the parties. In that meeting, petitioner reiterated its improved offer of P135 per day which was again rejected by the respondent union.

On May 20, 1996, the Secretary of Labor and Employment, finding the instant labor dispute impressed with national interest, assumed jurisdiction over the same.

In compliance with the directive of the Labor Secretary, the parties submitted their respective position papers both dated June 21, 1996.

In its position paper, petitioner made a turn-around, stating that it could no longer afford to grant its previous offer due to serious financial losses during the early months of 1996. It then made the following offer:

Zero increase in the first year;

P30 per day increase in the second year; and

P20 per day increase in the third year.

In its reply to petitioner’s position paper, respondent union claimed it had a positive performance in terms of income during the covered period.

On October 7, 1996, the Secretary of Labor and Employment issued the first assailed order, pertinent portions of which read:

“xxx. In the light of the Company’s last offer and the Union’s last position, We decree that the Company’s offer of P135 per day wage increase be further increased to P140 per (day), which shall be incorporated in the new CBA, as follows:

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P90 per day for the first 18 months, and

P50 per day for the next 18 months.

After all, the Company had granted its supervisory employees an increase of P4,500 per month or P166 per day, more or less, if the period reckoned is 27 working days.

In regard to the division of the three-year period into two sub-periods of 18 months each, this office take cognizance of the same practice under the old CBA.

2. Other economic demands

Considering the financial condition of the Company, all other economic demands except those provided in No. 3 below are rejected. The provisions in the old CBA as well as those contained in the Company’s Employee’s Primer of Benefits as of Aug. 1, 1994 shall be retained and incorporated in the new CBA.

3. Effectivity of the new CBA

Article 253-A of the Labor Code, as amended, provides that when no new CBA is signed during a period of six months from the expiry date of the old CBA, the retroactivity period shall be according to the parties’ agreement. Inasmuch as the parties could not agree on this issue and since this Office has assumed jurisdiction, then this matter now lies at the discretion of the Secretary of Labor and Employment. Thus the new Collective Bargaining Agreement which the parties will sign pursuant to this Order shall retroact to January 1, 1996.

x x x

ACCORDINGLY, this Office now directs the parties to incorporate these dispositions in their new Collective bargaining Agreement effective January 1, 1996 to December 31, 1998.”

Forthwith, petitioner filed a motion for reconsideration but was denied by the Secretary in his order dated December 16, 1996.

Petitioner now contends that in issuing the said orders, respondent Secretary gravely abused his discretion, thus:

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I

“THE HONORABLE SECRETARY OF LABOR COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN DISREGARDING THE EVIDENCE OF PETITIONER’S FINANCIAL LOSSES AND IN GRANTING A P140.00 WAGE INCREASE TO THE RESPONDENT UNION.

II

THE HONORABLE SECRETARY OF LABOR COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN DECREEING THAT THE NEW COLLECTIVE BARGAINING AGREEMENT TO BE SIGNED BY THE PARTIES SHALL RETROACT TO JANUARY 1, 1996.”

Anent the first ground, petitioner asserts that the decreed amount of P140 wage increase has no basis in fact and in law. Petitioner insists that public respondent Secretary whimsically presumed that the company can survive despite the losses being suffered by its Inorganic Division and its additional losses caused by the strike held by respondent union. Petitioner further contends that respondent Secretary disregarded its evidence showing that for the first part of 1996, its Inorganic Division suffered serious losses amounting to P15.651 million. Hence, by awarding wage increase without any basis, respondent Secretary gravely abused his discretion and violated petitioner’s right to due process.

We are not persuaded.

As aptly stated by the Solicitor General in his comment on the petition dated July 1, 1997, respondent Secretary considered all the evidence and arguments adduced by both parties. In ordering the wage increase, the Secretary ratiocinated as follows:

“xxx

In the Company’s Supplemental Comment, it says that it has three divisions, namely: the Organic Division, Inorganic Division and the Pinamucan Bulk Carriers. The Union in this instant dispute represent the daily wage earners in the Inorganic Division. The respective income of the three divisions is shown in Annex B to the Company’s Supplemental Comment. The Organic Division posted an income of P369,754,000 in 1995. The Inorganic Division realized an

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income of P261,288,000 in the same period. The tail ender is the Pinamucan Bulk Carriers Division with annual income of P11,803,000 for the same period. Total Company income for the period was P642,845,000.

It is a sound business practice that a Company’s income from all sources are collated to determine its true financial condition. Regardless of whether one division or another losses or gains in its yearly operation is not material in reckoning a Company’s financial status. In fact, the loss in one is usually offset by the gains in the others. It is not a good business practice to isolate the employees or workers of one division, which incurred an operating loss for a particular period. That will create demoralization among its ranks, which will ultimately affect productivity. The eventual loser will be the company.

So, even if We believe the position of the company that its Inorganic Division lost last year and during the early months of this year, it would not be a good argument to deny them of any salary increase. When the Company made the offer of P135 per day for the three year period, it was presumed to have studied its financial condition properly, taking into consideration its past performance and projected income. In fact, the Company realized a net income of P10,806,678 for 1995 in all its operations, which could be one factor why it offered the wage increase package of P135 per day for the Union members.

Besides, as a major player in the country’s corporate field, reneging from a wage increase package it previously offered and later on withdrawing the same simply because this Office had already assumed jurisdiction over its labor dispute with the Union cannot be countenanced. It will be worse if the employer is allowed to withdraw its offer on the ground that the union staged a strike and consequently subsequently suffered business setbacks in its income projections. To sustain the Company’s position is like hanging the proverbial sword of Damocles over the Union’s right to concerted activities, ready to fall when the latter clamors for better terms and conditions of employment.

But we cannot also sustain the Union’s demand for an increase of P215 per day. If we add the overload factors such as the increase in SSS premiums, medicare and medicaid, and other multiplier costs, the Company will be saddled with additional labor cost, and its projected income for the CBS period may not be able to absorb the added cost without impairing its viability. xxx”

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Verily, petitioner’s assertion that respondent Secretary failed to consider the evidence on record lacks merit. It was only the Inorganic Division of the petitioner corporation that was sustaining losses. Such incident does not justify the withholding of any salary increase as petitioner’s income from all sources are collated for the determination of its true financial condition. As correctly stated by the Secretary, “the loss in one is usually offset by the gains in the others.”

Moreover, petitioner company granted its supervisory employees, during the pendency of the negotiations between the parties, a wage increase of P4,500 per month or P166 per day, more or less. Petitioner justified this by saying that the said increase was pursuant to its earlier agreement with the supervisors. Hence, the company had no choice but to abide by such agreement even if it was already sustaining losses as a result of the strike of the rank-and-file employees.

Petitioner’s actuation is actually a discrimination against respondent union members. If it could grant a wage increase to its supervisors, there is no valid reason why it should deny the same to respondent union members. Significantly, while petitioner asserts that it sustained losses in the first part of 1996, yet during the May 9, 1996 conciliation meeting, it made the offer of P135 daily wage to the said union members.

This Court, therefore, holds that respondent Secretary did not gravely abuse his discretion in ordering the wage increase. Grave abuse of discretion implies whimsical and capricious exercise of power which, in the instant case, is not obtaining.

On the second ground, petitioner contends that public respondent committed grave abuse of discretion when he ordered that the new CBA which the parties will sign shall retroact to January 1, 1996, citing the cases of Union of Filipro Employees vs. NLRC,[2] and Pier 8 Arrastre and Stevedoring Services, Inc. vs. Roldan Confesor.[3]

Invoking the provisions of Article 253-A of the Labor Code, petitioner insists that public respondent’s discretion on the issue of the date of the effectivity of the new CBA is limited to either: (1) leaving the matter of the date of effectivity of the new CBA to the agreement of the parties or (2) ordering that the terms of the new CBA be prospectively applied.

It must be emphasized that respondent Secretary assumed jurisdiction over the dispute because it is impressed with national interest. As noted by the Secretary, “the petitioner corporation was then supplying the sulfate

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requirements of MWSS as well as the sulfuric acid of NAPOCOR, and consequently, the continuation of the strike would seriously affect the water supply of Metro Manila and the power supply of the Luzon Grid.” Such authority of the Secretary to assume jurisdiction carries with it the power to determine the retroactivity of the parties’ CBA.

It is well settled in our jurisprudence that the authority of the Secretary of Labor to assume jurisdiction over a labor dispute causing or likely to cause a strike or lockout in an industry indispensable to national interest includes and extends to all questions and controversies arising therefrom. The power is plenary and discretionary in nature to enable him to effectively and efficiently dispose of the primary dispute.[4]

In St. Luke’s Medical Center, Inc. vs. Torres[5], a deadlock developed during the CBA negotiations between the management and the union. The Secretary of Labor assumed jurisdiction and ordered that their CBA shall retroact to the date of the expiration of the previous CBA. The management claimed that the Secretary of Labor gravely abused his discretion. This Court held:

“xxx

Finally, the effectivity of the Order of January 28, 1991, must retroact to the date of the expiration of the previous CBA, contrary to the position of the petitioner. Under the circumstances of the case, Art. 253-A cannot be properly applied to herein case. As correctly stated by public respondent in his assailed Order of April 12, 1991 -

‘Anent the alleged lack of basis for retroactivity provisions awarded, We would stress that the provision of law invoked by the Hospital, Article 253-A of the Labor Code, speaks of agreement by and between the parties, and not arbitral awards.’

Therefore in the absence of the specific provision of law prohibiting retroactivity of the effectivity of the arbitral awards issued by the Secretary of Labor pursuant to Article 263(g) of the Labor Code, such as herein involved, public respondent is deemed vested with plenary powers to determine the effectivity thereof.”

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Finally, to deprive respondent Secretary of such power and discretion would run counter to the well-established rule that all doubts in the interpretation of labor laws should be resolved in favor of labor. In upholding the assailed orders of respondent Secretary, this Court is only giving meaning to this rule. Indeed, the Court should help labor authorities in providing workers immediate benefits, without being hampered by arbitration or litigation processes that prove to be not only nerve-wracking but financially burdensome in the long run.

As we said in Maternity Children’s Hospital vs. Secretary of Labor[6]:

“Social Justice Legislation, to be truly meaningful and rewarding to our workers, must not be hampered in its application by long winded-arbitration and litigation. Rights must be asserted and benefits received with the least inconvenience. Labor laws are meant to promote, not to defeat, social justice.”

WHEREFORE, the instant petition is DENIED. The assailed orders of the Secretary of Labor dated October 7, 1996 and December 16, 1996 are AFFIRMED. Costs against petitioner.

SO ORDERED.

SPECIAL STEEL PRODUCTS, INC., petitioner, vs. LUTGARDO VILLAREAL AND FREDERICK SO, respondents.

D E C I S I O N

SANDOVAL-GUTIERREZ, J.:

May an employer withhold its employees’ wages and benefits as lien to protect its interest as a surety in the latter’s car loan and for expenses incurred in a training abroad? This is the basic issue for our resolution in the instant case.

At bar is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, assailing the Decision[1] dated October 29, 1999 and Resolution[2]dated May 8, 2000 of the Court of Appeals in CA-G.R. SP No. 50957,

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entitled “Special Steel Products, Inc. vs. National Labor Relations Commission, Lutgardo Villareal and Frederick So.”

The factual antecedents as borne by the records are:

Special Steel Products, Inc., petitioner, is a domestic corporation engaged in the principal business of importation, sale, and marketing of BOHLER steel products. Lutgardo C. Villareal and Frederick G. So, respondents, worked for petitioner as assistant sales manager and salesman, respectively.

Sometime in May 1993, respondent Villareal obtained a car loan from the Bank of Commerce, with petitioner as surety, as shown by a “continuing suretyship agreement” and “promissory note” wherein they jointly and severally agreed to pay the bank P786,611.60 in 72 monthly installments. On January 15, 1997, respondent Villareal resigned and thereafter joined Hi-Grade Industrial and Technical Products, Inc. as executive vice-president.

Sometime in August 1994, petitioner “sponsored” respondent Frederick So to attend a training course in Kapfenberg, Austria conducted by BOHLER, petitioner’s principal company. This training was a reward for respondent So’s outstanding sales performance. When respondent returned nine months thereafter, petitioner directed him to sign a memorandum providing that BOHLER requires trainees from Kapfenberg to continue working with petitioner for a period of three (3) years after the training. Otherwise, each trainee shall refund to BOHLER $6,000.00 (US dollars) by way of set-off or compensation. On January 16, 1997 or 2 years and 4 months after attending the training, respondent resigned from petitioner.

Immediately, petitioner ordered respondents to render an accounting of its various Christmas giveaways[3] they received. These were intended for distribution to petitioner’s customers.

In protest, respondents demanded from petitioner payment of their separation benefits, commissions, vacation and sick leave benefits, and proportionate 13th month pay. But petitioner refused and instead, withheld their 13th month pay and other benefits.

On April 16, 1997, respondents filed with the Labor Arbiter a complaint for payment of their monetary benefits against petitioner and its president, Augusto Pardo, docketed as NLRC NCR Case No. 04-02820-97.

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In due course, the Labor Arbiter rendered a Decision dated February 18, 1998, the dispositive portion of which reads:

“WHEREFORE, decision is hereby rendered ordering the respondents, Special Steel Products, Inc. and Mr. Augusto Pardo to pay, jointly and severally, complainants Frederick G. So and Lutgardo C. Villareal the amounts of Seventy One Thousand Two Hundred Seventy Nine Pesos and Fifty Eight Centavos (P71,279.58) and One Hundred Sixty Four Thousand Eight Hundred Seventy Three Pesos (P164,873.00), respectively, representing their commissions, retirement benefit (for Villareal), proportionate 13th month, earned vacation and sick leave benefits, and attorney’s fees.

x x x

SO ORDERED.”

On appeal, the National Labor Relations Commission (NLRC), in a Decision dated June 29, 1998, affirmed with modification the Arbiter’s Decision in the sense that Pardo, petitioner’s president, was exempted from any liability.

On September 11, 1998, petitioner filed a motion for reconsideration but was denied.

Hence, petitioner filed with the Court of Appeals a petition for certiorari.

On October 29, 1999, the Court of Appeals rendered a Decision dismissing the petition and affirming the assailed NLRC Decision, thus:

“At the outset, the Court notes that despite its Seventh Assignment of Error, petitioner does not question the NLRC’s decision affirming the labor arbiter’s award to private respondents of commissions, proportionate 13 th month pay, earned vacation and sick leave benefits and retirement benefit (for Villareal). It merely asserts that it was withholding private respondents’ claims by reason of their pending obligations.

Petitioner justifies its withholding of Villareal’s monetary benefits as a lien for the protection of its right as surety in the car loan. It asserts that it would release Villareal’s monetary benefits if he would cause its substitution as surety by Hi-Grade. It further asserts that since Villareal’s debt to the Bank is now due and demandable, it may, pursuant to Art. 2071 of the New Civil Code, ‘demand a

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security that shall protect him from any proceeding by the creditor and from the danger of insolvency of the debtor.’

Petitioner’s posture is not sanctioned by law. It may only protect its right as surety by instituting an ‘action x x x to demand a security’ (Kuenzle and Streiff vs. Tan Sunco, 16 Phil 670). It may not take the law into its own hands. Indeed, it is ‘unlawful for any person, directly or indirectly, to withhold any amount from the wages of a worker or induce him to give up any part of his wages by force, stealth, intimidation, threat or by any other means whatsoever without the worker’s consent’ (Art. 116, Labor Code).

Moreover, petitioner has made no payment on the car loan. Consequently, Villareal is not indebted to petitioner. On the other hand, petitioner owes Villareal for the decreed monetary benefits. The withholding of Villareal’s monetary benefits had effectively prevented him from settling his arrearages with the Bank.

With regard to So’s money claims. We find no cogent reason to disturb the findings of the NLRC. x x x.

So’s all-expense paid trip to Austria was a bonus for his outstanding sales performance. Before his sojourn to Austria, petitioner issued him a memorandum (or ‘memo’) stating that ‘Bohler is now imposing that trainees coming to Kapfenberg to stay with the local representative for at least three (3) years after training, otherwise, a lump sum compensation of not less than US $6,000.00 will have to be refunded to them by the trainee’. So did not affix his signature on the memo. However, nine (9) months after coming back from his training, he was made to sign the memo. In his letter to Augusto Pardo dated July 18, 1997, So stated that his signature was needed only as a formality and that he was left with no choice but to accommodate Augusto Pardo’s request. The labor arbiter gave credence to such explanation.

Assuming arguendo that the memo is binding on So, his more than two years post-training stay with petitioner is a substantial compliance with the condition. Besides, So tendered his resignation effectiveFebruary 16, 1997. Instead of asking So to defer his resignation until the expiration of the three-year period, petitioner advanced its effectivity by one month - as of January 16, 1997. This means that petitioner no longer needed So’s services, particularly

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the skill and expertise acquired by him from the training. More importantly, the party entitled to claim the US $6,000.00 liquidated damages is BOHLER and not petitioner. Consequently, petitioner has no right to insist on payment of the liquidated damages, much less to withhold So’s monetary benefits in order to exact payment thereof.

With regard to the Christmas giveaways. We agree with the findings of the labor arbiter (affirmed by the NLRC) ‘that there is no existing memorandum requiring the accounting of such giveaways and that no actual accounting has ever been required before, as in the case of then Sales Manager Benito Sayo whose resignation took effect on December 31, 1996 but was not required to account for the Christmas giveaways. To make So account now for said items would amount to discrimination.’ In any event, the matter of accounting of the giveaways may be ventilated in the proper forum.

Finally, petitioner may not offset its claims against private respondents’ monetary benefits. With respect to its being the surety of Villareal, two requisites of compensation are lacking, to wit: ‘that each one of the obligors be bound principally, and that he be at the same time a principal creditor of the other’ and ‘that (the two debts) be liquidated and demandable’ (Art. 1279 (1) and (4), New Civil Code). And in respect to its claim for liquidated damages against So, there can be no compensation because his ‘creditor’ is not petitioner but BOHLER (Art. 1278, New Civil Code).

Consequently, the NLRC committed no grave abuse of discretion.

WHEREFORE, the petition is DISMISSED while the assailed decision of the NLRC is AFFIRMED.

SO ORDERED.”

On December 15, 1999, petitioner filed a motion for reconsideration but was denied by the Appellate Court in a Resolution dated May 8, 2000.

Hence, this petition for review on certiorari. Petitioner contends that as a guarantor, it could legally withhold respondent Villareal’s monetary benefits as a preliminary remedy pursuant to Article 2071 of the Civil Code, as amended. [4] As to respondent So, petitioner, citing Article 113 of the Labor Code, as amended,[5] in relation to Article 1706 of the Civil Code, as amended, [6] maintains that it

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could withhold his monetary benefits being authorized by the memorandum he signed.

Article 116 of the Labor Code, as amended, provides:

“ART. 116. Withholding of wages and kickbacks prohibited. – It shall be unlawful for any person, directly or indirectly, to withhold any amount from the wages (and benefits) of a worker or induce him to give up any part of his wages by force, stealth, intimidation, threat or by any other means whatsoever without the worker’s consent.”

The above provision is clear and needs no further elucidation. Indeed, petitioner has no legal authority to withhold respondents’ 13th month pay and other benefits. What an employee has worked for, his employer must pay.[7] Thus, an employer cannot simply refuse to pay the wages or benefits of its employee because he has either defaulted in paying a loan guaranteed by his employer; or violated their memorandum of agreement; or failed to render an accounting of his employer’s property.[8]

Nonetheless, petitioner, relying on Article 2071 (earlier cited), contends that the right to demand security and obtain release from the guaranty it executed in favor of respondent Villareal may be exercised even without initiating a separate and distinct action.

There is no guaranty involved herein and, therefore, the provision of Article 2071 does not apply.

A guaranty is distinguished from a surety in that a guarantor is the insurer of the solvency of the debtor and thus binds himself to pay if the principal is unable to pay, while a surety is the insurer of the debt, and he obligates himself to pay if the principal does not pay.[9]

Based on the above distinction, it appears that the contract executed by petitioner and respondent Villareal (in favor of the Bank of Commerce) is a contract of surety. In fact, it is denominated as a “continuing suretyship agreement.” Hence, petitioner could not just unilaterally withhold respondent’s wages or benefits as a preliminary remedy under Article 2071. It must file an action against respondent Villareal. Thus, the Appellate Court aptly ruled that petitioner “may only protect its right as surety by instituting an ‘action to demand a security’.”

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As to respondent So, petitioner maintains that there can be a set-off or legal compensation between them. Consequently, it can withhold his 13th month pay and other benefits.

For legal compensation to take place, the requirements set forth in Articles 1278 and 1279 of the Civil Code, quoted below, must be present.

"ARTICLE 1278. Compensation shall take place when two persons, in their own right, are creditors and debtors of each other.

"ARTICLE 1279. In order that compensation may be proper, it is necessary:

(1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor of the other;

(2) That both debts consist in a sum of money, or if the things due are consumable, they be of the same kind, and also of the same quality if the latter has been stated;

(3) That the two debts be due;

(4) That they be liquidated and demandable;

(5) That over neither of them there be any retention or controversy, commenced by third persons and communicated in due time to the debtor."

In the present case, set-off or legal compensation cannot take place between petitioner and respondent So because they are not mutually creditor and debtor of each other.

A careful reading of the Memorandum[10] dated August 22, 1994 reveals that the “lump sum compensation of not less than US $6,000.00 will have to be refunded” by each trainee to BOHLER, not to petitioner.

In fine, we rule that petitioner has no legal right to withhold respondents’ 13th month pay and other benefits to recompense for whatever amount it paid as security for respondent Villareal’s car loan; and for the expenses incurred by respondent So in his training abroad.

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WHEREFORE, the petition is DENIED. The Decision dated October 29, 1999 and Resolution dated May 8, 2000 of the Court of Appeals in CA-G.R. SP No. 50957 are herebyAFFIRMED.

SO ORDERED.

MAYON HOTEL & RESTAURANT, PACITA O. PO and/or JOSEFA PO LAM, petitioners,   vs. ROLANDO ADANA, CHONA BUMALAY, ROGER BURCE, EDUARDO ALAMARES, AMADO ALAMARES, EDGARDO TORREFRANCA, LOURDES CAMIGLA, TEODORO LAURENARIA, WENEFREDO LOVERES, LUIS GUADES, AMADO MACANDOG, PATERNO LLARENA, GREGORIO NICERIO, JOSE ATRACTIVO, MIGUEL TORREFRANCA, and SANTOS BROÑOLA, respondents.

D E C I S I O N

PUNO, J.:

This is a petition for certiorari to reverse and set aside the Decision issued by the Court of Appeals (CA)[1] in CA-G.R. SP No. 68642, entitled “Rolando Adana, Wenefredo Loveres, et. al. vs. National Labor Relations Commission (NLRC), Mayon Hotel & Restaurant/Pacita O. Po, et al.,” and the Resolution [2] denying petitioners’ motion for reconsideration. The assailed CA decision reversed the NLRC Decision which had dismissed all of respondents’ complaints, [3] and reinstated the Joint Decision of the Labor Arbiter[4] which ruled that respondents were illegally dismissed and entitled to their money claims.

The facts, culled from the records, are as follows:[5]

Petitioner Mayon Hotel & Restaurant is a single proprietor business registered in the name of petitioner Pacita O. Po,[6] whose mother, petitioner Josefa Po Lam, manages the establishment.[7] The hotel and restaurant employed about sixteen (16) employees.

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Records show that on various dates starting in 1981, petitioner hotel and restaurant hired the following people, all respondents in this case, with the following jobs:[8]

1. Wenefredo Loveres Accountant and Officer-in-charge2. Paterno Llarena Front Desk Clerk3. Gregorio Nicerio Supervisory Waiter4. Amado Macandog Roomboy5. Luis Guades Utility/Maintenance Worker6. Santos Broñola Roomboy7. Teodoro Laurenaria Waiter8. Eduardo Alamares Roomboy/Waiter9. Lourdes Camigla Cashier10. Chona Bumalay Cashier11. Jose Atractivo Technician12. Amado Alamares Dishwasher and Kitchen Helper13. Roger Burce Cook14. Rolando Adana Waiter15. Miguel Torrefranca Cook16. Edgardo Torrefranca Cook

Due to the expiration and non-renewal of the lease contract for the rented space occupied by the said hotel and restaurant at Rizal Street, the hotel operations of the business were suspended on March 31, 1997.[9] The operation of the restaurant was continued in its new location at Elizondo Street, Legazpi City, while waiting for the construction of a new Mayon Hotel & Restaurant at Peñaranda Street, Legazpi City.[10] Only nine (9) of the sixteen (16) employees continued working in the Mayon Restaurant at its new site.[11]

On various dates of April and May 1997, the 16 employees filed complaints for underpayment of wages and other money claims against petitioners, as follows:[12]

Wenefredo Loveres, Luis Guades, Amado Macandog and Jose Atractivo for illegal dismissal, underpayment of wages, nonpayment of holiday and rest day pay; service incentive leave pay (SILP) and claims for separation pay plus damages;

Paterno Llarena and Gregorio Nicerio for illegal dismissal with claims for underpayment of wages; nonpayment of cost of living allowance (COLA) and

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overtime pay; premium pay for holiday and rest day; SILP; nightshift differential pay and separation pay plus damages;

Miguel Torrefranca, Chona Bumalay and Lourdes Camigla for underpayment of wages; nonpayment of holiday and rest day pay and SILP;

Rolando Adana, Roger Burce and Amado Alamares for underpayment of wages; nonpayment of COLA, overtime, holiday, rest day, SILP and nightshift differential pay;

Eduardo Alamares for underpayment of wages, nonpayment of holiday, rest day and SILP and night shift differential pay;

Santos Broñola for illegal dismissal, underpayment of wages, overtime pay, rest day pay, holiday pay, SILP, and damages;[13] and

Teodoro Laurenaria for underpayment of wages; nonpayment of COLA and overtime pay; premium pay for holiday and rest day, and SILP.

On July 14, 2000, Executive Labor Arbiter Gelacio L. Rivera, Jr. rendered a Joint Decision in favor of the employees. The Labor Arbiter awarded substantially all of respondents’ money claims, and held that respondents Loveres, Macandog and Llarena were entitled to separation pay, while respondents Guades, Nicerio and Alamares were entitled to their retirement pay. The Labor Arbiter also held that based on the evidence presented, Josefa Po Lam is the owner/proprietor of Mayon Hotel & Restaurant and the proper respondent in these cases.

On appeal to the NLRC, the decision of the Labor Arbiter was reversed, and all the complaints were dismissed.

Respondents filed a motion for reconsideration with the NLRC and when this was denied, they filed a petition for certiorari with the CA which rendered the now assailed decision.

After their motion for reconsideration was denied, petitioners now come to this Court, seeking the reversal of the CA decision on the following grounds:

I. THE HONORABLE COURT OF APPEALS ERRED IN REVERSING THE DECISION OF THE NATIONAL LABOR RELATIONS COMMISSION (SECOND DIVISION) BY HOLDING THAT THE FINDINGS OF FACT OF THE NLRC WERE NOT SUPPORTED BY SUBSTANTIAL EVIDENCE DESPITE AMPLE

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AND SUFFICIENT EVIDENCE SHOWING THAT THE NLRC DECISION IS INDEED SUPPORTED BY SUBSTANTIAL EVIDENCE;

II. THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THE JOINT DECISION OF THE LABOR ARBITER WHICH RULED THAT PRIVATE RESPONDENTS WERE ILLEGALLY DISMISSED FROM THEIR EMPLOYMENT, DESPITE THE FACT THAT THE REASON WHY PRIVATE RESPONDENTS WERE OUT OF WORK WAS NOT DUE TO THE FAULT OF PETITIONERS BUT TO CAUSES BEYOND THE CONTROL OF PETITIONERS.

III. THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THE AWARD OF MONETARY BENEFITS BY THE LABOR ARBITER IN HIS JOINT DECISION IN FAVOR OF THE PRIVATE RESPONDENTS, INCLUDING THE AWARD OF DAMAGES TO SIX (6) OF THE PRIVATE RESPONDENTS, DESPITE THE FACT THAT THE PRIVATE RESPONDENTS HAVE NOT PROVEN BY SUBSTANTIAL EVIDENCE THEIR ENTITLEMENT THERETO AND ESPECIALLY THE FACT THAT THEY WERE NOT ILLEGALLY DISMISSED BY THE PETITIONERS.

IV. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT PACITA ONG PO IS THE OWNER OF THE BUSINESS ESTABLISHMENT, PETITIONER MAYON HOTEL AND RESTAURANT, THUS DISREGARDING THE CERTIFICATE OF REGISTRATION OF THE BUSINESS ESTABLISHMENT ISSUED BY THE LOCAL GOVERNMENT, WHICH IS A PUBLIC DOCUMENT, AND THE UNQUALIFIED ADMISSIONS OF COMPLAINANTS-PRIVATE RESPONDENTS.[14]

In essence, the petition calls for a review of the following issues:

1. Was it correct for petitioner Josefa Po Lam to be held liable as the owner of petitioner Mayon Hotel & Restaurant, and the proper respondent in this case?

2. Were respondents Loveres, Guades, Macandog, Atractivo, Llarena and Nicerio illegally dismissed?

3. Are respondents entitled to their money claims due to underpayment of wages, and nonpayment of holiday pay, rest day premium, SILP, COLA, overtime pay, and night shift differential pay?

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It is petitioners’ contention that the above issues have already been threshed out sufficiently and definitively by the NLRC. They therefore assail the CA’s reversal of the NLRC decision, claiming that based on the ruling in Castillo v. NLRC,[15] it is non sequitur that the CA should re-examine the factual findings of both the NLRC and the Labor Arbiter, especially as in this case the NLRC’s findings are allegedly supported by substantial evidence.

We do not agree.

There is no denying that it is within the NLRC’s competence, as an appellate agency reviewing decisions of Labor Arbiters, to disagree with and set aside the latter’s findings.[16]But it stands to reason that the NLRC should state an acceptable cause therefore, otherwise it would be a whimsical, capricious, oppressive, illogical, unreasonable exercise of quasi-judicial prerogative, subject to invalidation by the extraordinary writ of certiorari.[17] And when the factual findings of the Labor Arbiter and the NLRC are diametrically opposed and this disparity of findings is called into question, there is, necessarily, a re-examination of the factual findings to ascertain which opinion should be sustained. [18] As ruled inAsuncion v. NLRC,[19]

Although, it is a legal tenet that factual findings of administrative bodies are entitled to great weight and respect, we are constrained to take a second look at the facts before us because of the diversity in the opinions of the Labor Arbiter and the NLRC. A disharmony between the factual findings of the Labor Arbiter and those of the NLRC opens the door to a review thereof by this Court.[20]

The CA, therefore, did not err in reviewing the records to determine which opinion was supported by substantial evidence.

Moreover, it is explicit in Castillo v. NLRC [21] that factual findings of administrative bodies like the NLRC are affirmed only if they are supported by substantial evidence that is manifest in the decision and on the records. As stated in Castillo:

[A]buse of discretion does not necessarily follow from a reversal by the NLRC of a decision of a Labor Arbiter. Mere variance in evidentiary assessment between the NLRC and the Labor Arbiter does not automatically call for a full review of the facts by this Court. The NLRC’s decision, so long as it is not bereft of substantial support from the records, deserves respect from this Court. As a rule, the original and exclusive jurisdiction to review a decision or resolution of respondent NLRC in

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a petition for certiorari under Rule 65 of the Rules of Court does not include a correction of its evaluation of the evidence but is confined to issues of jurisdiction or grave abuse of discretion. Thus, the NLRC’s factual findings, if supported by substantial evidence, are entitled to great respect and even finality, unless petitioner is able to show that it simply and arbitrarily disregarded the evidence before it or had misappreciated the evidence to such an extent as to compel a contrary conclusion if such evidence had been properly appreciated. (citations omitted)[22]

After careful review, we find that the reversal of the NLRC’s decision was in order precisely because it was not supported by substantial evidence.

1. Ownership by Josefa Po Lam

The Labor Arbiter ruled that as regards the claims of the employees, petitioner Josefa Po Lam is, in fact, the owner of Mayon Hotel & Restaurant. Although the NLRC reversed this decision, the CA, on review, agreed with the Labor Arbiter that notwithstanding the certificate of registration in the name of Pacita Po, it is Josefa Po Lam who is the owner/proprietor of Mayon Hotel & Restaurant, and the proper respondent in the complaints filed by the employees. The CA decision states in part:

[Despite] the existence of the Certificate of Registration in the name of Pacita Po, we cannot fault the labor arbiter in ruling that Josefa Po Lam is the owner of the subject hotel and restaurant. There were conflicting documents submitted by Josefa herself. She was ordered to submit additional documents to clearly establish ownership of the hotel and restaurant, considering the testimonies given by the [respondents] and the non-appearance and failure to submit her own position paper by Pacita Po. But Josefa did not comply with the directive of the Labor Arbiter. The ruling of the Supreme Court in Metropolitan Bank and Trust Company v. Court of Appeals applies to Josefa Po Lam which is stated in this wise:

When the evidence tends to prove a material fact which imposes a liability on a party, and he has it in his power to produce evidence which from its very nature must overthrow the case made against him if it is not founded on fact, and he

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refuses to produce such evidence, the presumption arises that the evidence[,] if produced, would operate to his prejudice, and support the case of his adversary.

Furthermore, in ruling that Josefa Po Lam is the real owner of the hotel and restaurant, the labor arbiter relied also on the testimonies of the witnesses, during the hearing of the instant case. When the conclusions of the labor arbiter are sufficiently corroborated by evidence on record, the same should be respected by appellate tribunals, since he is in a better position to assess and evaluate the credibility of the contending parties.[23] (citations omitted)

Petitioners insist that it was error for the Labor Arbiter and the CA to have ruled that petitioner Josefa Po Lam is the owner of Mayon Hotel & Restaurant. They allege that the documents they submitted to the Labor Arbiter sufficiently and clearly establish the fact of ownership by petitioner Pacita Po, and not her mother, petitioner Josefa Po Lam. They contend that petitioner Josefa Po Lam’s participation was limited to merely (a) being the overseer; (b) receiving the month-to-month and/or year-to-year financial reports prepared and submitted by respondent Loveres; and (c) visitation of the premises. [24] They also put emphasis on the admission of the respondents in their position paper submitted to the Labor Arbiter, identifying petitioner Josefa Po Lam as the manager, and Pacita Po as the owner.[25] This, they claim, is a judicial admission and is binding on respondents. They protest the reliance the Labor Arbiter and the CA placed on their failure to submit additional documents to clearly establish ownership of the hotel and restaurant, claiming that there was no need for petitioner Josefa Po Lam to submit additional documents considering that the Certificate of Registration is the best and primary evidence of ownership.

We disagree with petitioners. We have scrutinized the records and find the claim that petitioner Josefa Po Lam is merely the overseer is not borne out by the evidence.

First. It is significant that only Josefa Po Lam appeared in the proceedings with the Labor Arbiter. Despite receipt of the Labor Arbiter’s notice and summons, other notices and Orders, petitioner Pacita Po failed to appear in any of the proceedings with the Labor Arbiter in these cases, nor file her position paper.[26] It was only on appeal with the NLRC that Pacita Po signed the pleadings.[27] The apathy shown by petitioner Pacita Po is contrary to human experience as one would think that the owner of an establishment would naturally be concerned when ALL her employees file complaints against her.

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Second. The records of the case belie petitioner Josefa Po Lam’s claim that she is merely an overseer. The findings of the Labor Arbiter on this question were based on credible, competent and substantial evidence. We again quote the Joint Decision on this matter:

Mayon Hotel and Restaurant is a [business name] of an enterprise. While [petitioner] Josefa Po Lam claims that it is her daughter, Pacita Po, who owns the hotel and restaurant when the latter purchased the same from one Palanos in 1981, Josefa failed to submit the document of sale from said Palanos to Pacita as allegedly the sale was only verbal although the license to operate said hotel and restaurant is in the name of Pacita which, despite our Order to Josefa to present the same, she failed to comply (p. 38, tsn. August 13, 1998). While several documentary evidences were submitted by Josefa wherein Pacita was named therein as owner of the hotel and restaurant (pp. 64, 65, 67 to 69; vol. I, rollo)[,] there were documentary evidences also that were submitted by Josefa showing her ownership of said enterprise (pp. 468 to 469; vol. II, rollo). While Josefa explained her participation and interest in the business as merely to help and assist her daughter as the hotel and restaurant was near the former’s store, the testimonies of [respondents] and Josefa as well as her demeanor during the trial in these cases proves (sic) that Josefa Po Lam owns Mayon Hotel and Restaurant. [Respondents] testified that it was Josefa who exercises all the acts and manifestation of ownership of the hotel and restaurant like transferring employees from the Greatwall Palace Restaurant which she and her husband Roy Po Lam previously owned; it is Josefa to whom the employees submits (sic) reports, draws money for payment of payables and for marketing, attending (sic) to Labor Inspectors during ocular inspections. Except for documents whereby Pacita Po appears as the owner of Mayon Hotel and Restaurant, nothing in the record shows any circumstance or manifestation that Pacita Po is the owner of Mayon Hotel and Restaurant. The least that can be said is that it is absurd for a person to purchase a hotel and restaurant in the very heart of the City of Legazpi verbally. Assuming this to be true, when [petitioners], particularly Josefa, was directed to submit evidence as to the ownership of Pacita of the hotel and restaurant, considering the testimonies of [respondents], the former should [have] submitted the lease contract between the owner of the building where Mayon Hotel and Restaurant was located at Rizal St., Legazpi City and Pacita Po to clearly establish ownership by the latter of said enterprise. Josefa failed. We are not surprised why some employers employ schemes to mislead Us in order to evade liabilities. We therefore consider and hold Josefa Po Lam as the

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owner/proprietor of Mayon Hotel and Restaurant and the proper respondent in these cases.[28]

Petitioners’ reliance on the rules of evidence, i.e., the certificate of registration being the best proof of ownership, is misplaced. Notwithstanding the certificate of registration, doubts were cast as to the true nature of petitioner Josefa Po Lam’s involvement in the enterprise, and the Labor Arbiter had the authority to resolve this issue. It was therefore within his jurisdiction to require the additional documents to ascertain who was the real owner of petitioner Mayon Hotel & Restaurant.

Article 221 of the Labor Code is clear: technical rules are not binding, and the application of technical rules of procedure may be relaxed in labor cases to serve the demand of substantial justice.[29] The rule of evidence prevailing in court of law or equity shall not be controlling in labor cases and it is the spirit and intention of the Labor Code that the Labor Arbiter shall use every and all reasonable means to ascertain the facts in each case speedily and objectively and without regard to technicalities of law or procedure, all in the interest of due process.[30] Labor laws mandate the speedy administration of justice, with least attention to technicalities but without sacrificing the fundamental requisites of due process.[31]

Similarly, the fact that the respondents’ complaints contained no allegation that petitioner Josefa Po Lam is the owner is of no moment. To apply the concept of judicial admissions to respondents — who are but lowly employees - would be to exact compliance with technicalities of law that is contrary to the demands of substantial justice. Moreover, the issue of ownership was an issue that arose only during the course of the proceedings with the Labor Arbiter, as an incident of determining respondents’ claims, and was well within his jurisdiction.[32]

Petitioners were also not denied due process, as they were given sufficient opportunity to be heard on the issue of ownership.[33] The essence of due process in administrative proceedings is simply an opportunity to explain one’s side or an opportunity to seek reconsideration of the action or ruling complained of. [34] And there is nothing in the records which would suggest that petitioners had absolute lack of opportunity to be heard.[35] Obviously, the choice not to present evidence was made by petitioners themselves.[36]

But more significantly, we sustain the Labor Arbiter and the CA because even when the case was on appeal with the NLRC, nothing was submitted to negate the

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Labor Arbiter’s finding that Pacita Po is not the real owner of the subject hotel and restaurant. Indeed, no such evidence was submitted in the proceedings with the CA nor with this Court. Considering that petitioners vehemently deny ownership by petitioner Josefa Po Lam, it is most telling that they continue to withhold evidence which would shed more light on this issue. We therefore agree with the CA that the failure to submit could only mean that if produced, it would have been adverse to petitioners’ case.[37]

Thus, we find that there is substantial evidence to rule that petitioner Josefa Po Lam is the owner of petitioner Mayon Hotel & Restaurant.

2. Illegal Dismissal: claim for separation pay

Of the sixteen employees, only the following filed a case for illegal dismissal: respondents Loveres, Llarena, Nicerio, Macandog, Guades, Atractivo and Broñola.[38]

The Labor Arbiter found that there was illegal dismissal, and granted separation pay to respondents Loveres, Macandog and Llarena. As respondents Guades, Nicerio and Alamares were already 79, 66 and 65 years old respectively at the time of the dismissal, the Labor Arbiter granted retirement benefits pursuant to Article 287 of the Labor Code as amended.[39] The Labor Arbiter ruled that respondent Atractivo was not entitled to separation pay because he had been transferred to work in the restaurant operations in Elizondo Street, but awarded him damages. Respondents Loveres, Llarena, Nicerio, Macandog and Guades were also awarded damages.[40]

The NLRC reversed the Labor Arbiter, finding that “no clear act of termination is attendant in the case at bar” and that respondents “did not submit any evidence to that effect, but the finding and conclusion of the Labor Arbiter [are] merely based on his own surmises and conjectures.”[41] In turn, the NLRC was reversed by the CA.

It is petitioners contention that the CA should have sustained the NLRC finding that none of the above-named respondents were illegally dismissed, or entitled to separation or retirement pay. According to petitioners, even the Labor Arbiter and the CA admit that when the illegal dismissal case was filed by respondents on April 1997, they had as yet no cause of action. Petitioners therefore conclude that the filing by respondents of the illegal dismissal case was premature and should

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have been dismissed outright by the Labor Arbiter.[42] Petitioners also claim that since the validity of respondents’ dismissal is a factual question, it is not for the reviewing court to weigh the conflicting evidence.[43]

We do not agree. Whether respondents are still working for petitioners IS a factual question. And the records are unequivocal that since April 1997, when petitioner Mayon Hotel & Restaurant suspended its hotel operations and transferred its restaurant operations in Elizondo Street, respondents Loveres, Macandog, Llarena, Guades and Nicerio have not been permitted to work for petitioners. Respondent Alamares, on the other hand, was also laid-off when the Elizondo Street operations closed, as were all the other respondents. Since then, respondents have not been permitted to work nor recalled, even after the construction of the new premises at Peñaranda Street and the reopening of the hotel operations with the restaurant in this new site. As stated by the Joint Decision of the Labor Arbiter on July 2000, or more than three (3) years after the complaint was filed:[44]

[F]rom the records, more than six months had lapsed without [petitioner] having resumed operation of the hotel. After more than one year from the temporary closure of Mayon Hotel and the temporary transfer to another site of Mayon Restaurant, the building which [petitioner] Josefa allege[d] w[h]ere the hotel and restaurant will be transferred has been finally constructed and the same is operated as a hotel with bar and restaurant nevertheless, none of [respondents] herein who were employed at Mayon Hotel and Restaurant which was also closed on April 30, 1998 was/were recalled by [petitioner] to continue their services...

Parenthetically, the Labor Arbiter did not grant separation pay to the other respondents as they had not filed an amended complaint to question the cessation of their employment after the closure of Mayon Hotel & Restaurant on March 31, 1997.[45]

The above factual finding of the Labor Arbiter was never refuted by petitioners in their appeal with the NLRC. It confounds us, therefore, how the NLRC could have so cavalierly treated this uncontroverted factual finding by ruling that respondents have not introduced any evidence to show that they were illegally dismissed, and that the Labor Arbiter’s finding was based on conjecture.[46] It was a serious error that the NLRC did not inquire as to the legality of the cessation of employment. Article 286 of the Labor Code is clear — there is termination of employment when an otherwise bona fide suspension of work

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exceeds six (6) months.[47] The cessation of employment for more than six months was patent and the employer has the burden of proving that the termination was for a just or authorized cause.[48]

Moreover, we are not impressed by any of petitioners’ attempts to exculpate themselves from the charges. First, in the proceedings with the Labor Arbiter, they claimed that it could not be illegal dismissal because the lay-off was merely temporary (and due to the expiration of the lease contract over the old premises of the hotel). They specifically invoked Article 286 of the Labor Code to argue that the claim for separation pay was premature and without legal and factual basis.[49] Then, because the Labor Arbiter had ruled that there was already illegal dismissal when the lay-off had exceeded the six-month period provided for in Article 286, petitioners raise this novel argument, to wit:

It is the firm but respectful submission of petitioners that reliance on Article 286 of the Labor Code is misplaced, considering that the reason why private respondents were out of work was not due to the fault of petitioners. The failure of petitioners to reinstate the private respondents to their former positions should not likewise be attributable to said petitioners as the private respondents did not submit any evidence to prove their alleged illegal dismissal. The petitioners cannot discern why they should be made liable to the private respondents for their failure to be reinstated considering that the fact that they were out of work was not due to the fault of petitioners but due to circumstances beyond the control of petitioners, which are the termination and non-renewal of the lease contract over the subject premises. Private respondents, however, argue in their Comment that petitioners themselves sought the application of Article 286 of the Labor Code in their case in their Position Paper filed before the Labor Arbiter. In refutation, petitioners humbly submit that even if they invoke Article 286 of the Labor Code, still the fact remains, and this bears stress and emphasis, that the temporary suspension of the operations of the establishment arising from the non-renewal of the lease contract did not result in the termination of employment of private respondents and, therefore, the petitioners cannot be faulted if said private respondents were out of work, and consequently, they are not entitled to their money claims against the petitioners.[50]

It is confounding how petitioners have fashioned their arguments. After having admitted, in effect, that respondents have been laid-off since April 1997, they would have this Court excuse their refusal to reinstate respondents or grant

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them separation pay because these same respondents purportedly have not proven the illegality of their dismissal.

Petitioners’ arguments reflect their lack of candor and the blatant attempt to use technicalities to muddle the issues and defeat the lawful claims of their employees. First, petitioners admit that since April 1997, when hotel operations were suspended due to the termination of the lease of the old premises, respondents Loveres, Macandog, Llarena, Nicerio and Guades have not been permitted to work. Second, even after six months of what should have been just a temporary lay-off, the same respondents were still not recalled to work. As a matter of fact, the Labor Arbiter even found that as of the time when he rendered his Joint Decision on July 2000 — or more than three (3) years after the supposed “temporary lay-off,” the employment of all of the respondents with petitioners had ceased, notwithstanding that the new premises had been completed and the same operated as a hotel with bar and restaurant. This is clearly dismissal — or the permanent severance or complete separation of the worker from the service on the initiative of the employer regardless of the reasons therefor.[51]

On this point, we note that the Labor Arbiter and the CA are in accord that at the time of the filing of the complaint, respondents had no cause of action to file the case for illegal dismissal. According to the CA and the Labor Arbiter, the lay-off of the respondents was merely temporary, pending construction of the new building at Peñaranda Street.[52]

While the closure of the hotel operations in April of 1997 may have been temporary, we hold that the evidence on record belie any claim of petitioners that the lay-off of respondents on that same date was merely temporary. On the contrary, we find substantial evidence that petitioners intended the termination to be permanent. First, respondents Loveres, Macandog, Llarena, Guades, Nicerio and Alamares filed the complaint for illegal dismissal immediately after the closure of the hotel operations in Rizal Street, notwithstanding the alleged temporary nature of the closure of the hotel operations, and petitioners’ allegations that the employees assigned to the hotel operations knew about this beforehand. Second, in their position paper submitted to the Labor Arbiter, petitioners invoked Article 286 of the Labor Code to assert that the employer-employee relationship was merely suspended, and therefore the claim for separation pay was premature and without legal or factual basis. [53] But they made no mention of any intent to recall these respondents to work upon completion of the new premises. Third, the various pleadings on record show

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that petitioners held respondents, particularly Loveres, as responsible for mismanagement of the establishment and for abuse of trust and confidence. Petitioner Josefa Po Lam’s affidavit on July 21, 1998, for example, squarely blamed respondents, specifically Loveres, Bumalay and Camigla, for abusing her leniency and causing petitioner Mayon Hotel & Restaurant to sustain “continuous losses until it is closed.” She then asserts that respondents “are not entitled to separation pay for they were not terminated and if ever the business ceased to operate it was because of losses.”[54] Again, petitioners make the same allegation in their memorandum on appeal with the NLRC, where they alleged that three (3) years prior to the expiration of the lease in 1997, the operation of the Hotel had been sustaining consistent losses, and these were solely attributed to respondents, but most especially due to Loveres’s mismanagement and abuse of petitioners’ trust and confidence.[55] Even the petition filed in this court made reference to the separation of the respondents due to “severe financial losses and reverses,” again imputing it to respondents’ mismanagement. [56] The vehemence of petitioners’ accusation of mismanagement against respondents, especially against Loveres, is inconsistent with the desire to recall them to work. Fourth, petitioners’ memorandum on appeal also averred that the case was filed “not because of the business being operated by them or that they were supposedly not receiving benefits from the Labor Code which is true, but because of the fact that the source of their livelihood, whether legal or immoral, was stopped on March 31, 1997, when the owner of the building terminated the Lease Contract.”[57] Fifth, petitioners had inconsistencies in their pleadings (with the NLRC, CA and with this Court) in referring to the closure, [58] i.e., in the petition filed with this court, they assert that there is no illegal dismissal because there was “only a temporary cessation or suspension of operations of the hotel and restaurant due to circumstances beyond the control of petitioners, and that is, the non-renewal of the lease contract...”[59] And yet, in the same petition, they also assert that: (a) the separation of respondents was due to severe financial losses and reverses leading to the closure of the business; and (b) petitioner Pacita Po had to close shop and was bankrupt and has no liquidity to put up her own building to house Mayon Hotel & Restaurant.[60] Sixth, and finally, the uncontroverted finding of the Labor Arbiter that petitioners terminated all the other respondents, by not employing them when the Hotel and Restaurant transferred to its new site on Peñaranda Street.[61] Indeed, in this same memorandum, petitioners referred to all respondents as “former employees of Mayon Hotel & Restaurant.”[62]

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These factors may be inconclusive individually, but when taken together, they lead us to conclude that petitioners really intended to dismiss all respondents and merely used the termination of the lease (on Rizal Street premises) as a means by which they could terminate their employees.

Moreover, even assuming arguendo that the cessation of employment on April 1997 was merely temporary, it became dismissal by operation of law when petitioners failed to reinstate respondents after the lapse of six (6) months, pursuant to Article 286 of the Labor Code.

We are not impressed by petitioners’ claim that severe business losses justified their failure to reinstate respondents. The evidence to prove this fact is inconclusive. But more important, serious business losses do not excuse the employer from complying with the clearance or report required under Article 283 of the Labor Code and its implementing rules before terminating the employment of its workers.[63] In the absence of justifying circumstances, the failure of petitioners to observe the procedural requirements set out under Article 284, taints their actuations with bad faith, especially since they claimed that they have been experiencing losses in the three years before 1997. To say the least, if it were true that the lay-off was temporary but then serious business losses prevented the reinstatement of respondents, then petitioners should have complied with the requirements of written notice. The requirement of law mandating the giving of notices was intended not only to enable the employees to look for another employment and therefore ease the impact of the loss of their jobs and the corresponding income, but more importantly, to give the Department of Labor and Employment (DOLE) the opportunity to ascertain the verity of the alleged authorized cause of termination.[64]

And even assuming that the closure was due to a reason beyond the control of the employer, it still has to accord its employees some relief in the form of severance pay.[65]

While we recognize the right of the employer to terminate the services of an employee for a just or authorized cause, the dismissal of employees must be made within the parameters of law and pursuant to the tenets of fair play. [66] And in termination disputes, the burden of proof is always on the employer to prove that the dismissal was for a just or authorized cause.[67] Where there is no showing of a clear, valid and legal cause for termination of employment, the law considers the case a matter of illegal dismissal.[68]

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Under these circumstances, the award of damages was proper. As a rule, moral damages are recoverable where the dismissal of the employee was attended by bad faith or fraud or constituted an act oppressive to labor, or was done in a manner contrary to morals, good customs or public policy. [69] We believe that the dismissal of the respondents was attended with bad faith and meant to evade the lawful obligations imposed upon an employer.

To rule otherwise would lead to the anomaly of respondents being terminated from employment in 1997 as a matter of fact, but without legal redress. This runs counter to notions of fair play, substantial justice and the constitutional mandate that labor rights should be respected. If doubts exist between the evidence presented by the employer and the employee, the scales of justice must be tilted in favor of the latter — the employer must affirmatively show rationally adequate evidence that the dismissal was for a justifiable cause.[70]It is a time-honored rule that in controversies between a laborer and his master, doubts reasonably arising from the evidence, or in the interpretation of agreements and writing should be resolved in the former’s favor. [71] The policy is to extend the doctrine to a greater number of employees who can avail of the benefits under the law, which is in consonance with the avowed policy of the State to give maximum aid and protection of labor.[72]

We therefore reinstate the Labor Arbiter’s decision with the following modifications:

(a) Separation pay for the illegal dismissal of respondents Loveres, Macandog and Llarena; (Santos Broñola cannot be granted separation pay as he made no such claim);

(b) Retirement pay for respondents Guades, Nicerio, and Alamares, who at the time of dismissal were entitled to their retirement benefits pursuant to Article 287 of the Labor Code as amended;[73] and

(c) Damages for respondents Loveres, Macandog, Llarena, Guades, Nicerio, Atractivo, and Broñola.

3. Money claims

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The CA held that contrary to the NLRC’s ruling, petitioners had not discharged the burden of proving that the monetary claims of the respondents have been paid.[74] The CA thus reinstated the Labor Arbiter’s grant of respondents’ monetary claims, including damages.

Petitioners assail this ruling by repeating their long and convoluted argument that as there was no illegal dismissal, then respondents are not entitled to their monetary claims or separation pay and damages. Petitioners’ arguments are not only tiring, repetitive and unconvincing, but confusing and confused — entitlement to labor standard benefits is a separate and distinct concept from payment of separation pay arising from illegal dismissal, and are governed by different provisions of the Labor Code.

We agree with the CA and the Labor Arbiter. Respondents have set out with particularity in their complaint, position paper, affidavits and other documents the labor standard benefits they are entitled to, and which they alleged that petitioners have failed to pay them. It was therefore petitioners’ burden to prove that they have paid these money claims. One who pleads payment has the burden of proving it, and even where the employees must allege nonpayment, the general rule is that the burden rests on the defendant to prove nonpayment, rather than on the plaintiff to prove non payment.[75] This petitioners failed to do.

We also agree with the Labor Arbiter and the CA that the documents petitioners submitted, i.e., affidavits executed by some of respondents during an ocular inspection conducted by an inspector of the DOLE; notices of inspection result and Facility Evaluation Orders issued by DOLE, are not sufficient to prove payment.[76] Despite repeated orders from the Labor Arbiter,[77] petitioners failed to submit the pertinent employee files, payrolls, records, remittances and other similar documents which would show that respondents rendered work entitling them to payment for overtime work, night shift differential, premium pay for work on holidays and rest day, and payment of these as well as the COLA and the SILP – documents which are not in respondents’ possession but in the custody and absolute control of petitioners.[78] By choosing not to fully and completely disclose information and present the necessary documents to prove payment of labor standard benefits due to respondents, petitioners failed to discharge the burden of proof.[79] Indeed, petitioners’ failure to submit the necessary documents which as employers are in their possession, inspite of orders to do so, gives rise to the presumption that their presentation is prejudicial to its cause. [80] As aptly quoted by the CA:

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[W]hen the evidence tends to prove a material fact which imposes a liability on a party, and he has it in his power to produce evidence which from its very nature must overthrow the case made against him if it is not founded on fact, and he refuses to produce such evidence, the presumption arises that the evidence, if produced, would operate to his prejudice, and support the case of his adversary.[81]

Petitioners next claim that the cost of the food and snacks provided to respondents as facilities should have been included in reckoning the payment of respondents’ wages. They state that although on the surface respondents appeared to receive minimal wages, petitioners had granted respondents other benefits which are considered part and parcel of their wages and are allowed under existing laws.[82] They claim that these benefits make up for whatever inadequacies there may be in compensation.[83] Specifically, they invoked Sections 5 and 6, Rule VII-A, which allow the deduction of facilities provided by the employer through an appropriate Facility Evaluation Order issued by the Regional Director of the DOLE.[84] Petitioners also aver that they give five (5) percent of the gross income each month as incentives. As proof of compliance of payment of minimum wages, petitioners submitted the Notice of Inspection Results issued in 1995 and 1997 by the DOLE Regional Office.[85]

The cost of meals and snacks purportedly provided to respondents cannot be deducted as part of respondents’ minimum wage. As stated in the Labor Arbiter’s decision:[86]

While [petitioners] submitted Facility Evaluation Orders (pp. 468, 469; vol. II, rollo) issued by the DOLE Regional Office whereby the cost of meals given by [petitioners] to [respondents] were specified for purposes of considering the same as part of their wages, We cannot consider the cost of meals in the Orders as applicable to [respondents]. [Respondents] were not interviewed by the DOLE as to the quality and quantity of food appearing in the applications of [petitioners] for facility evaluation prior to its approval to determine whether or not [respondents] were indeed given such kind and quantity of food. Also, there was no evidence that the quality and quantity of food in the Orders were voluntarily accepted by [respondents]. On the contrary; while some [of the respondents] admitted that they were given meals and merienda, the quality of food serve[d] to them were not what were provided for in the Orders and that it was only when they filed these cases that they came to know about said Facility Evaluation

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Orders (pp. 100; 379[,] vol. II, rollo; p. 40, tsn[,] June 19, 1998). [Petitioner] Josefa herself, who applied for evaluation of the facility (food) given to [respondents], testified that she did not inform [respondents] concerning said Facility Evaluation Orders (p. 34, tsn[,] August 13, 1998).

Even granting that meals and snacks were provided and indeed constituted facilities, such facilities could not be deducted without compliance with certain legal requirements. As stated in Mabeza v. NLRC ,[87] the employer simply cannot deduct the value from the employee's wages without satisfying the following: (a) proof that such facilities are customarily furnished by the trade; (b) the provision of deductible facilities is voluntarily accepted in writing by the employee; and (c) the facilities are charged at fair and reasonable value. The records are clear that petitioners failed to comply with these requirements. There was no proof of respondents’ written authorization. Indeed, the Labor Arbiter found that while the respondents admitted that they were given meals and merienda, the quality of food served to them was not what was provided for in the Facility Evaluation Orders and it was only when they filed the cases that they came to know of this supposed Facility Evaluation Orders.[88] Petitioner Josefa Po Lam herself admitted that she did not inform the respondents of the facilities she had applied for.[89]

Considering the failure to comply with the above-mentioned legal requirements, the Labor Arbiter therefore erred when he ruled that the cost of the meals actually provided to respondents should be deducted as part of their salaries, on the ground that respondents have availed themselves of the food given by petitioners.[90] The law is clear that mere availment is not sufficient to allow deductions from employees’ wages.

More important, we note the uncontroverted testimony of respondents on record that they were required to eat in the hotel and restaurant so that they will not go home and there is no interruption in the services of Mayon Hotel & Restaurant. As ruled in Mabeza, food or snacks or other convenience provided by the employers are deemed as supplements if they are granted for the convenience of the employer. The criterion in making a distinction between a supplement and a facility does not so much lie in the kind (food, lodging) but the purpose.[91] 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

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petitioners’ business.[92] The deduction of the cost of meals from respondents’ wages, therefore, should be removed.

We also do not agree with petitioners that the five (5) percent of the gross income of the establishment can be considered as part of the respondents’ wages. We quote with approval the Labor Arbiter on this matter, to wit:

While complainants, who were employed in the hotel, receive[d] various amounts as profit share, the same cannot be considered as part of their wages in determining their claims for violation of labor standard benefits. Although called profit share[,] such is in the nature of share from service charges charged by the hotel. This is more explained by [respondents] when they testified that what they received are not fixed amounts and the same are paid not on a monthly basis (pp. 55, 93, 94, 103, 104; vol. II, rollo). Also, [petitioners] failed to submit evidence that the amounts received by [respondents] as profit share are to be considered part of their wages and had been agreed by them prior to their employment. Further, how can the amounts receive[d] by [respondents] be considered as profit share when the same [are] based on the gross receipt of the hotel[?] No profit can as yet be determined out of the gross receipt of an enterprise. Profits are realized after expenses are deducted from the gross income.

On the issue of the proper minimum wage applicable to respondents, we sustain the Labor Arbiter. We note that petitioners themselves have admitted that the establishment employs “more or less sixteen (16) employees,”[93] therefore they are estopped from claiming that the applicable minimum wage should be for service establishments employing 15 employees or less.

As for petitioners repeated invocation of serious business losses, suffice to say that this is not a defense to payment of labor standard benefits. The employer cannot exempt himself from liability to pay minimum wages because of poor financial condition of the company. The payment of minimum wages is not dependent on the employer’s ability to pay.[94]

Thus, we reinstate the award of monetary claims granted by the Labor Arbiter.

4. Conclusion

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There is no denying that the actuations of petitioners in this case have been reprehensible. They have terminated the respondents’ employment in an underhanded manner, and have used and abused the quasi-judicial and judicial processes to resist payment of their employees’ rightful claims, thereby protracting this case and causing the unnecessary clogging of dockets of the Court. They have also forced respondents to unnecessary hardship and financial expense. Indeed, the circumstances of this case would have called for exemplary damages, as the dismissal was effected in a wanton, oppressive or malevolent manner,[95] and public policy requires that these acts must be suppressed and discouraged.[96]

Nevertheless, we cannot agree with the Labor Arbiter in granting exemplary damages of P10,000.00 each to all respondents. While it is true that other forms of damages under the Civil Code may be awarded to illegally dismissed employees,[97] any award of moral damages by the Labor Arbiter cannot be based on the Labor Code but should be grounded on the Civil Code. [98] And the law is clear that exemplary damages can only be awarded if plaintiff shows proof that he is entitled to moral, temperate or compensatory damages.[99]

As only respondents Loveres, Guades, Macandog, Llarena, Nicerio, Atractivo and Broñola specifically claimed damages from petitioners, then only they are entitled to exemplary damages.[sjgs1]

Finally, we rule that attorney’s fees in the amount to P10,000.00 should be granted to each respondent. It is settled that in actions for recovery of wages or where an employee was forced to litigate and incur expenses to protect his rights and interest, he is entitled to an award of attorney's fees.[100] This case undoubtedly falls within this rule.

IN VIEW WHEREOF, the petition is hereby DENIED. The Decision of January 17, 2003 of the Court of Appeals in CA-G.R. SP No. 68642 upholding the Joint Decision of July 14, 2000 of the Labor Arbiter in RAB V Case Nos. 04-00079-97 and 04-00080-97 is AFFIRMED, with the following MODIFICATIONS:

(1) Granting separation pay of one-half (1/2) month for every year of service to respondents Loveres, Macandog and Llarena;

(2) Granting retirement pay for respondents Guades, Nicerio, and Alamares;

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(3) Removing the deductions for food facility from the amounts due to all respondents;

(4) Awarding moral damages of P20,000.00 each for respondents Loveres, Macandog, Llarena, Guades, Nicerio, Atractivo, and Broñola;

(5) Deleting the award of exemplary damages of P10,000.00 from all respondents except Loveres, Macandog, Llarena, Guades, Nicerio, Atractivo, and Broñola; and

(6) Granting attorney’s fees of P10,000.00 each to all respondents.

The case is REMANDED to the Labor Arbiter for the RECOMPUTATION of the total monetary benefits awarded and due to the employees concerned in accordance with the decision. The Labor Arbiter is ORDERED to submit his compliance thereon within thirty (30) days from notice of this decision, with copies furnished to the parties.

SO ORDERED.

G.R. No. 96169 September 24, 1991

EMPLOYERS CONFEDERATION OF THE PHILIPPINES, petitioner, vs.NATIONAL WAGES AND PRODUCTIVITY COMMISSION AND REGIONAL TRIPARTITE WAGES AND PRODUCTIVITY BOARD-NCR, TRADE UNION CONGRESS OF THE PHILIPPINES, respondents.

Sycip Salazar, Hernandez & Gatmaitan for petitioner.

Gilbert P. Lorenzo for private respondent.

SARMIENTO, J.:p

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The petition is given due course and the various pleadings submitted being sufficient to aid the Court in the proper resolution of the basic issues raised in this case, we decide it without further ado.

The Employers Confederation of the Philippines (ECOP) is questioning the validity of Wage Order No. NCR-01-A dated October 23, 1990 of the Regional Tripartite Wages and Productivity Board, National Capital Region, promulgated pursuant to the authority of Republic Act No. 6727, "AN ACT TO RATIONALIZE WAGE POLICY DETERMINATION BY ESTABLISHING THE MECHANISM AND PROPER STANDARDS THEREFORE, AMENDING FOR THE PURPOSE ARTICLE 99 OF, AND INCORPORATING ARTICLES 120, 121, 122, 123, 124, 126, AND 127 INTO, PRESIDENTIAL DECREE NO. 442 AS AMENDED, OTHERWISE KNOWN AS THE LABOR CODE OF THE PHILIPPINES, FIXING NEW WAGE RATES, PROVIDING WAGE INCENTIVES FOR INDUSTRIAL DISPERSAL TO THE COUNTRYSIDE, AND FOR OTHER PURPOSES," was approved by the President on June 9, 1989. Aside from providing new wage rates, 1 the "Wage Rationalization Act" also provides, among other things, for various Regional Tripartite Wages and Productivity Boards in charge of prescribing minimum wage rates for all workers in the various regions 2 and for a National Wages and Productivity Commission to review, among other functions, wage levels determined by the boards. 3

On October 15, 1990, the Regional Board of the National Capital Region issued Wage Order No. NCR-01, increasing the minimum wage by P17.00 daily in the National Capital Region. 4 The Trade Union Congress of the Philippines (TUCP) moved for reconsideration; so did the Personnel Management Association of the Philippines (PMAP). 5 ECOP opposed.

On October 23, 1990, the Board issued Wage Order No. NCR-01-A amending Wage Order No. NCR-01, as follows:

Section 1. Upon the effectivity of this Wage Order, all workers and employees in the private sector in the National Capital Region already receiving wages above the statutory minimum wage rates up to one hundred and twenty-five pesos (P125.00) per day shall also receive an increase of seventeen pesos (P17.00) per day.

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ECOP appealed to the National Wages and Productivity Commission. On November 6, 1990, the Commission promulgated an Order, dismissing the appeal for lack of merit. On November 14, 1990, the Commission denied reconsideration.

The Orders of the Commission (as well as Wage Order No. NCR-01-A) are the subject of this petition, in which. ECOP assails the board's grant of an "across-the-board" wage increase to workers already being paid more than existing minimum wage rates (up to P125. 00 a day) as an alleged excess of authority, and alleges that under the Republic Act No. 6727, the boards may only prescribe "minimum wages," not determine "salary ceilings." ECOP likewise claims that Republic Act No. 6727 is meant to promote collective bargaining as the primary mode of settling wages, and in its opinion, the boards can not preempt collective bargaining agreements by establishing ceilings. ECOP prays for the nullification of Wage Order No. NCR 01-A and for the "reinstatement" of Wage Order No. NCR-01.

The Court directed the Solicitor General to comment on behalf of the Government, and in the Solicitor General's opinion, the Board, in prescribing an across-the-board hike did not, in reality, "grant additional or other benefits to workers and employees, such as the extension of wage increases to employees and workers already receiving more than minimum wages ..." 6 but rather, fixed minimum wages according to the "salary-ceiling method."

ECOP insists, in its reply, that wage is a legislative function, and Republic Act No. 6727 delegated to the regional boards no more "than the power to grant minimum wage adjustments" 7 and "in the absence of clear statutory authority," 8 the boards may no more than adjust "floor wages." 9

The Solicitor General, in his rejoinder, argues that Republic Act No. 6727 is intended to correct "wage distortions" and the salary-ceiling method (of determining wages) is meant, precisely, to rectify wage distortions. 10

The Court is inclined to agree with the Government. In the National Wages and Productivity Commission's Order of November 6, 1990, the Commission noted that the determination of wages has generally involved two methods, the "floor-wage" method and the "salary-ceiling" method. We quote:

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Historically, legislation involving the adjustment of the minimum wage made use of two methods. The first method involves the fixing of determinate amount that would be added to the prevailing statutory minimum wage. The other involves "the salary-ceiling method" whereby the wage adjustment is applied to employees receiving a certain denominated salary ceiling. The first method was adopted in the earlier wage orders, while the latter method was used in R.A. Nos. 6640 and 6727. Prior to this, the salary-ceiling method was also used in no less than eleven issuances mandating the grant of cost-of-living allowances (P.D. Nos. 525, 1123, 1614, 1634, 1678, 1713 and Wage Order Nos. 1, 2, 3, 5 and 6). The shift from the first method to the second method was brought about by labor disputes arising from wage distortions, a consequence of the implementation of the said wage orders. Apparently, the wage order provisions that wage distortions shall be resolved through the grievance procedure was perceived by legislators as ineffective in checking industrial unrest resulting from wage order implementations. With the establishment of the second method as a practice in minimum wage fixing, wage distortion disputes were minimized. 11

As the Commission noted, the increasing trend is toward the second mode, the salary-cap method, which has reduced disputes arising from wage distortions (brought about, apparently, by the floor-wage method). Of course, disputes are appropriate subjects of collective bargaining and grievance procedures, but as the Commission observed and as we are ourselves agreed, bargaining has helped very little in correcting wage distortions. Precisely, Republic Act No. 6727 was intended to rationalize wages, first, by providing for full-time boards to police wages round-the-clock, and second, by giving the boards enough powers to achieve this objective. The Court is of the opinion that Congress meant the boards to be creative in resolving the annual question of wages without labor and management knocking on the legislature's door at every turn. The Court's opinion is that if Republic No. 6727 intended the boards alone to set floor wages, the Act would have no need for a board but an accountant to keep track of the latest consumer price index, or better, would have Congress done it as the need arises, as the legislature, prior to the Act, has done so for years. The fact of the matter is that the Act sought a "thinking" group of men and women bound by statutory standards. We quote:

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ART. 124. Standards / Criteria for Minimum Wage Fixing. — The regional minimum wages to be established by the Regional Board shall be as nearly adequate as is economically feasible to maintain the minimum standards of living necessary for the health, efficiency and general well-being of the employees within the framework of the national economic and social development program. In the determination of such regional minimum wages, the Regional Board shall, among other relevant factors, consider the following:

(a) The demand for living wages;

(b) Wage adjustment vis-a-vis the consumer price index;

(c) The cost of living and changes or increases therein;

(d) The needs of workers and their families;

(e) The need to induce industries to invest in the countryside;

(f) Improvements in standards of living;

(g) The prevailing wage levels;

(h) Fair return of the capital invested and capacity to pay of emphasis employers;

(i) Effects of employment generation and family income; and

(j) The equitable distribution of income and wealth along the imperatives of economic and social development.12

The Court is not convinced that the Regional Board of the National Capital Region, in decreeing an across-the-board hike, performed an unlawful act of legislation. It is true that wage-fixing, like rate constitutes an act Congress; 13 it is also true, however, that Congress may delegate the power to fix rates 14 provided that, as in all delegations cases, Congress leaves sufficient standards. As this Court has indicated, it is impressed that the above-quoted standards are sufficient, and in the light of the floor-wage method's failure, the Court believes that the Commission correctly upheld the Regional Board of the National Capital Region.

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Apparently, ECOP is of the mistaken impression that Republic Act No. 6727 is meant to "get the Government out of the industry" and leave labor and management alone in deciding wages. The Court does not think that the law intended to deregulate the relation between labor and capital for several reasons: (1) The Constitution calls upon the State to protect the rights of workers and promote their welfare; 15 (2) the Constitution also makes it a duty of the State "to intervene when the common goal so demands" in regulating property and property relations; 16 (3) the Charter urges Congress to give priority to the enactment of measures, among other things, to diffuse the wealth of the nation and to regulate the use of property; 17 (4) the Charter recognizes the "just share of labor in the fruits of production;" 18 (5) under the Labor Code, the State shall regulate the relations between labor and management; 19 (6) under Republic Act No. 6727 itself, the State is interested in seeing that workers receive fair and equitable wages; 20 and (7) the Constitution is primarily a document of social justice, and although it has recognized the importance of the private sector, 21 it has not embraced fully the concept of laissez faire 22 or otherwise, relied on pure market forces to govern the economy; We can not give to the Act a meaning or intent that will conflict with these basic principles.

It is the Court's thinking, reached after the Court's own study of the Act, that the Act is meant to rationalize wages, that is, by having permanent boards to decide wages rather than leaving wage determination to Congress year after year and law after law. The Court is not of course saying that the Act is an effort of Congress to pass the buck, or worse, to abdicate its duty, but simply, to leave the question of wages to the expertise of experts. As Justice Cruz observed, "[w]ith the proliferation of specialized activities and their attendant peculiar problems, the national legislature has found it more necessary to entrust to administrative agencies the power of subordinate legislation' as it is caned." 23

The Labor Code defines "wage" as follows:

"Wage" paid to any employee shall mean the remuneration or earnings, however designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis, or other method of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of employment for work done or to be done, or for services rendered or to be rendered and includes the fair and reasonably

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value, as determined by the Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer to the employee. "Fair and reasonable value" shall not include any profit to the employer or to any person affiliated with the employer. 24

The concept of "minimum wage" is, however, a different thing, and certainly, it means more than setting a floor wage to upgrade existing wages, as ECOP takes it to mean. "Minimum wages" underlies the effort of the State, as Republic Act No. 6727 expresses it, "to promote productivity-improvement and gain-sharing measures to ensure a decent standard of living for the workers and their families; to guarantee the rights of labor to its just share in the fruits of production; to enhance employment generation in the countryside through industry dispersal; and to allow business and industry reasonable returns on investment, expansion and growth," 25 and as the Constitution expresses it, to affirm "labor as a primary social economic force." 26 As the Court indicated, the statute would have no need for a board if the question were simply "how much". The State is concerned, in addition, that wages are not distributed unevenly, and more important, that social justice is subserved.

It is another question, to be sure, had Congress created "roving" boards, and were that the case, a problem of undue delegation would have ensued; but as we said, we do not see a Board (National Capital Region) "running riot" here, and Wage Order No. NCR-01-A as an excess of authority.

It is also another question whether the salary-cap method utilized by the Board may serve the purposes of Republic Act No. 6727 in future cases and whether that method is after all, a lasting policy of the Board; however, it is a question on which we may only speculate at the moment. At the moment, we find it to be reasonable policy (apparently, it has since been Government policy); and if in the future it would be perceptibly unfair to management, we will take it up then.

WHEREFORE, premises considered, the petition is DENIED. No pronouncement as to costs.

IT IS SO ORDERED.

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G.R. No. 86200 February 25, 1992

APEX MINING COMPANY, INC., petitioner, vs.NATIONAL LABOR RELATIONS COMMISSION and SANDIGAN NG MANGGAGAWANG PILIPINO, represented by RANULFO PEDRERA, President, respondents.

Gerardo C. Olaguer for petitioner.

Antonio Billiones, Sr. and Antonio Jolejole for private respondent.

FELICIANO, J.:

Respondent Sandigan ng Manggagawang Pilipino ("Sandigan") filed before the Labor Arbiter a claim for Emergency Cost of Living Allowance ("ECOLA") differential against petitioner Apex Mining Company, Inc. ("Apex") alleging that Apex had paid its employees in its Maco, Davao del Norte operations, between 1 November 1954 until 28 March 1985, an aggregate cumulative daily ECOLA of only P15.00 which was P2.00 below the cumulative minimum ECOLA of P17.00 (for non-agricultural workers) established under Wage Order No. 6; and that petitioner had belatedly granted the additional P2.00 starting on 29 March 1985 only.

Apex denied having failed to comply with Wage Order No. 6, contending that it had, by previous agreement, incorporated the alleged P2.00 deficiency into the basic salary of its employees. In turn, Sandigan denies that such an agreement had been made, but conceded that a P2.00 increase in basic salary had been made by Apex, in compliance with a provision of the Collective Bargaining Agreement ("CBA") then in force between Apex andSandigan, and not in fulfillment of Apex's obligation under Wage Order No. 6. Sandigan pointed out that Wage Order No. 6 had taken effect on 1 November 1984, several months

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after the P2.00 had been integrated by Apex into the basic salary of its employees.

In a supplemental memorandum, Apex reiterated that the daily salary increase of P2.00 provided for in the then current CBA, to take effect on 1 February 1984, had been subsequently credited as partial compliance with the P5.00 increment mandated by Wage Order No. 5 (which took effect on 16 June 1984). Thus, Apex, in compliance with Wage Order No. 5, accordingly increased the daily ECOLA of its workers by P3.00 only (from P9.00 to P12.00), or P2.00 less than the legislated ECOLA increase of P5.00 (which would have increased the total daily ECOLA from P9.00 to P14.00). Petitioner Apex added that the integration of P2.00 allowance into the basic salary provided for in the CBA had been conformed to by Vicente Arniego, National President of Sandigan, and that in any event, Wage Order No. 5 had itself authorized such integration. Since petitioner Apex had integrated P2.00 (out of the P5.00) ECOLA provided for in Wage Order No. 5, when Apex complied with the additional ECOLA increase mandated by Wage Order No. 6, the resulting figure for the total or cumulative ECOLA paid by Apex appeared to be only P15.00, until one took into account the P2.00 (out of the P5.00 ECOLA increase mandated by Wage Order No. 5) integrated into the employees' basic salary. Finally, petitioner Apex explained, it had granted members of Sandigan an additional P2.00 effective 29 March 1985 not as an admission that it had previously failed to pay something legally due, but only as a measure to diffuse the tense atmosphere between management and the union created by the misunderstanding over the ostensible (as distinguished from the real) total increase paid by petitioner Apex to its employees.

In a decision dated 19 May 1987, the Labor Arbiter held that the wage increase given in accordance with the CBA could not be credited as compliance with increases mandated in the Wage Orders, and ordered petitioner Apex to pay respondent Sandigan the claimed ECOLA differential of P2.00 for the period from 1 November 1984 until 28 March 1985.

On appeal, the National Labor Relations Commission ("NLRC") affirmed the Labor Arbiter's ruling.

There is no dispute that petitioner Apex, as the Labor Arbiter had found out, had paid a P2.00 wage increase effective on 1 February 1984. There is also no question that Apex raised the ECOLA of its workers by P3.00 starting on the

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effectivity date of Wage Order No. 6 on November 1984. The question to be resolved is whether or not Apex complied with the increases mandated by Wage Orders Nos. 5 and 6. Resolution of this issue in turn hinges on the question of whether or not the P2.00 per day increase in basic salary effective starting on 1 February 1984 granted by petitioner Apex pursuant to the CBA, was lawfully credited towards compliance with increases in ECOLA required under Wage Orders Nos. 5 and 6.

1. The P2.00 increase integrated in the basic salary of Apex's, employees, effective on and after 1 February 1984, was concededly given under the provisions of the CBA. Section 4 of Article VI of the CBA provided as follows:

It is understood that the grant of these general increases shall be as part of any increase in basic pay and/or allowance that may hereafter be decreed or imposed by law.

Both Wage Order No. 5 and Wage Order No. 6 expressly allowed the crediting of increases in wages or allowances granted under collective bargaining agreements towards compliance with increases in ECOLA requirements prescribed by those Wage Orders. Section 7 o f Wage Order No. 5 provided as follows:

All increases in wages and/or allowances granted by employers between February 1, 1984 and the effectivity of this order [16 June 1984] shall be credited as compliance with the minimum wage and allowance adjustments prescribed herein . . .

Such increases shall not include anniversary wage increases provided in collective bargaining agreements unless the agreements expressly provide otherwise.

xxx xxx xxx

(Emphasis and brackets supplied)

Section 4 of Wage Order No. 6 had very similar language:

All increases in wages and/or allowances granted by employers between June 17, 1984 and the effectivity of this order [November 1, 1984] shall be credited as compliance with the minimum wage and

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allowance adjustments prescribed herein, provided that where the increases are less than the applicable amount provided in this order, the employer shall pay the difference. Such increases shall not include anniversary wage increases provided in collective bargaining agreements unless the agreements expressly provide otherwise.

This Section shall not apply to merit wage increases and those resulting from the regularization or promotion of employees. (Emphasis and brackets supplied)

It is important to note that the creditability provisions in Wage Orders Nos. 5 and 6 (as well as the parallel provisions in Wage Orders Nos. 2, 3 and 4) are grounded in an important public policy. That public policy may be seen to be the encouragement of employers to grant wage and allowance increases to their employees higher than the minimum rates of increases prescribed by statute or administrative regulation. To obliterate the creditability provisions in the Wage Orders through interpretation or otherwise, and to compel employers simply to add on legislated increases in salaries or allowances without regard to what is already being paid, would be to penalize employers who grant their workers more than the statutorily prescribed minimum rates of increases. Clearly, this would be counter-productive so far as securing the interests of labor is concerned. The creditability provisions in the Wage Orders prevent the penalizing of employers who are industry leaders and who do not wait for statutorily prescribed increases in salary or allowances and pay their workers more than what the law or regulations require.

2. Sandigan, however, argues that to consider the P2.00 increase in basic salary effective 1 February 1984 provided by the CBA as compliance with the requirements of Wage Orders Nos. 5 and 6, would be to violate Article 100 of the Labor Code as well as Section 6 of the Rules Implementing Wage Order No. 6. These provisions read, respectively:

Art. 100. Prohibition against elimination or diminution of benefits — Nothing in (Book Three — Conditions of Employment) 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. (Emphasis supplied)

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Sec. 6. Non-diminution of benefits. — The statutory minimum wage rates shall be exclusive of whatever supplements and other benefits the workers are enjoying without cost at the time of the effectivity of this Order. (Emphasis supplied)

Clearly, the prohibition against elimination or diminution of benefits set out in Article 100 of the Labor Code is specifically concerned with benefits already enjoyed at the time of the promulgation of the Labor Code. Article 100 does not, in other words, purport to apply to situations arising after the promulgation date of the Labor Code. Section 6 of the Rules Implementing Wage Order No. 6 relates to "supplements and other benefits" which employees are already "enjoying without cost at the time of the effectivity of [Wage] Order [No. 6]." Such benefits which employees are already enjoying "without cost" could not, under Section 6, suddenly be ascribed monetary value so as to offset or diminish increases in the minimum wage rates prescribed by statute. Clearly, once more, Section 6 does not relate to the problem at hand.

3. Sandigan further contends that the 1 February 1984 P2.00 increase in basic salary was actually an "anniversary wage increase," and therefore not creditable under Section 7 of Wage Order No. 5 and under Section 4 of Wage Order No. 6.

The P2.00 increase was given by petitioner Apex under Section 3, Rule VI of the CBA which reads as follows:

Sec. 3. The COMPANY agrees to grant general wage increases to all employees within bargaining unit as follows:

a) Two Pesos (P2.00) general increase per day upon the effectivity of this Agreement (February 1, 1984);

b) One Peso and Fifty Centavos (P1.50) general increase per day effective on the first anniversary date of this Agreement (February 1, 1985);

c) One Peso and Fifty Centavos (P1.50) general increase per day effective on the second anniversary date of this Agreement (February 1, 1986). 1 (Emphasis supplied)

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It appears clear to the Court from an inspection of the above-quoted Section 3 that the P2.00 increase effective on 1 February 1984 was distinguishable from the two (2) increases of P1.50 each, the first being effective on the first anniversary date of the CBA (1 February 1985) and the second being effective on the second anniversary date (1 February 1986). In other words, the two (2) increases of 1.50 each, one being effective on 1 February 1985 and the second effective on 1 February 1986, were precisely the non-creditable "anniversary wage increases." Even if it be assumed, however, that the 1 February 1984 P2.00 increase were regarded (improperly) as an "anniversary wage increase" still that P2.00 increase would be creditable towards the statutorily mandated increases. For Wage Orders Nos. 5 and 6 themselves allowed crediting of "anniversary wage increases" stipulated in a CBA towards statutory increases, if the CBA itself (as here) expressly allowed such crediting. Section 4, Article VI of the CBA, quoted earlier, authorized the crediting of "general increases" towards statutorily mandated increases in basic pay or allowance. At the same time, Section 3 of Article VI of the CBA, quoted above, described the two (2) anniversary wage increases of P1.50 each, and the one-time P2.00 increase, as each constituting a "general increase."

4. What petitioner Apex did may perhaps be most economically presented in the following tabular form:

ECOLA Increases Statutorily Mandatedby Wage Orders Nos. 4, 5, and 6(For non-agricultural workers outsideMetro Manila)

Wage Mandatory Cumulated Apparent Actual ActualOrder Increase Increase Cumulated Cumulated DifferentialNo. (P0.00) (0.00) Increase 2 Increase 3 (0.00)(P0.00) (P0.00)

4 9 9 9 9 05 5 14 12 14 06 3 17 15 17 0

The respondent Sandigan did not question the fact that petitioner Apex was in compliance with the requirements of Wage Order No. 4.

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In respect of Wage Order No. 5, Apex credited the P2.00 increase in basic salary, effective 1 February 1984, towards compliance with the statutorily prescribed ECOLA increase of P5.00. Thus, the apparent cumulated increase in ECOLA, as shown in Apex's books, was only P12.00. However, the actual increases — the composite of basic salary and ECOLA — aggregated P14.00. Since such crediting was expressly allowed under Wage Order No. 5, it follows that petitioner Apex was in compliance with Wage Order No. 5. No differential was therefore due thereunder.

When Wage Order No. 6 was promulgated, it prescribed an increase of P3.00 in ECOLA. Apex paid this mandatory increase and denominated all of it as ECOLA. Thus, the apparent cumulated increase was P15.00. Since, however, Apex had previously increased the basic salary by P2.00 effective 1 February 1984, the aggregate actual increase (in basic salary plus ECOLA) was P17.00, the same total or cumulated increase contemplated by Wage Orders Nos. 5 and 6. Thus, again, Apex was actually in compliance with the requirements of Wage Order No. 6, with the result that no differential was actually due from it.

It remains only to note that Section 7 of Wage Order No. 5 and section 4 of Wage Order No. 6 expressly authorized the crediting of all the increases "in wages" or "allowances." Thus, the fact that Apex had denominated the P2.00 increase effective 1 February 1984, as an increase in basic salary, rather than in ECOLA, made no legal difference so far as concerns the creditability of such increase. Indeed, integration of the P2.00 into the basic salary of the employees was more beneficial to them than granting the P2.00 as part of their ECOLA: the integration increased the base wage for purposes of computation of such items as overtime and premium pay, fringe benefits and maternity pay. In fact, the Implementing Rules of Wage Order No. 5, and Wage Order No. 6 itself, 4 expressly authorized increases in basic salary in lieu of increases in ECOLA, provided the amounts thereof were not less than the amounts required by the Wage Orders.

5. Lastly, Sandigan invokes Filipino Pipe Workers Union (NLU) v. Batario, Jr., 5 where the Court, through its Third Division, made the broad statement that statutory wage increases are to be considered separate from increases granted through the medium of CBAs.

In Filipino Pipe Workers, the NLRC ordered the inclusion in its award in favor of the union of a wage increase of P3.00 per day mandated by Wage Order Nos. 2

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and 3, which took effect after the finality of the Labor Arbiter's decision but pending its execution. In sustaining the award of the NLRC, the Court, through former Chief Justice Fernan, said:

In his Comment on the petition, the Solicitor General stated that the said P3.00 a day increase was made pursuant to Wage Orders Nos. 2 and 3, which took effect after the finality of the Labor Arbiter's decision but pending its execution. A common section found in both Wage Orders Nos. 2 and 3, as well as in the subsequent Wage Orders Nos. 5 and 6 uniformly provides that all increases and/or allowances granted by employers within a specified period "shall be credited as compliance with the minimum wage and allowance adjustments prescribed herein, provided that where the increases are less than the applicable amount provided in this Order, the employer shall pay the difference. Such increases shall not include anniversary wage increases provided in collective bargaining agreementsunless the agreement expressly provide otherwise." (Emphasis in the original)

We interpret the above section to mean that every grant of daily increase in statutory minimum wage rates and living allowance must be considered as independent, separate or apart from the wage increases in the collective bargaining agreement and must be integrated into the salary scale of the employees to the end that the desired rates decreed by the National Wages Council are attained. 6 (Emphasis supplied)

It is apparent from the foregoing that the issue of creditability of an increase in basic salary or allowance given pursuant to a CBA towards compliance with a statutorily prescribed increase in emergency cost of living allowances (ECOLA) was not at all involved and that the Court was not striking down the creditability provisions in Wage Orders Nos. 2. 3, 5 and 6. All that the NLRC was saying was that a wage increase which had come into effect after the Labor Arbiter's decision could be included in the award and execution for the aggregate amounts due obtained. In fact, the above underscored paragraph was entirely obiter in character.

Petitioner Apex having lawfully credited the P2.00 increase in basic salary towards compliance of the increase in ECOLA prescribed by Wage Orders Nos. 5 and 6, it

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follows that respondent Sandigan's ,claim to a differential in ECOLA lacks basis in fact and in law.

ACCORDINGLY, the Court Resolved to GRANT the Petition for Certiorari. The Decision of the NLRC in Case No. 2915-MC-XI-86, dated 9 September 1988, and its Resolution dated 28 October 1988, denying petitioner's motion for reconsideration, are hereby SET ASIDE and ANNULLED. No pronouncement as to costs.

SO ORDERED.

PRUBANKERS ASSOCIATION, petitioner,   vs. PRUDENTIAL BANK & TRUST COMPANY, respondent.

D E C I S I O N

PANGANIBAN, J.:

Wage distortion presupposes an increase in the compensation of the lower ranks in an office hierarchy without a corresponding raise for higher-tiered employees in the same region of the country, resulting in the elimination or the severe diminution of the distinction between the two groups. Such distortion does not arise when a wage order gives employees in one branch of a bank higher compensation than that given to their counterparts in other regions occupying the same pay scale, who are not covered by said wage order. In short, the implementation of wage orders in one region but not in others does not in itself necessarily result in wage distortion.

The Case

Before us is a Petition for Review on Certiorari, challenging the November 6, 1997 Decision[1] of the Court of Appeals in CA-GR SP No. 42525. The dispositive portion of the challenged Decision reads:

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“WHEREFORE, the petition is GRANTED. The assailed decision of the Voluntary Arbitration Committee dated June 18, 1996 is hereby REVERSED and SET ASIDE for having been issued with grave abuse of discretion tantamount to lack of or excess of jurisdiction, and a new judgment is rendered finding that no wage distortion resulted from the petitioner’s separate and regional implementation of Wage Order No. VII-03 at its Cebu, Mabolo and P. del Rosario branches.”

The June 18, 1996 Decision of the Voluntary Arbitration Committee, [2] which the Court of Appeals reversed and set aside, disposed as follows:

“WHEREFORE, it is hereby ruled that the Bank’s separate and regional implementation of Wage Order No. VII-03 at its Cebu, Mabolo and P. del Rosario branches created a wage distortion in the Bank nationwide which should be resolved in accordance with Art. 124 of the Labor Code.”[3]

The Facts

The facts of the case are summarized by the Court of Appeals thus:

“On November 18, 1993, the Regional Tripartite Wages and Productivity Board of Region V issued Wage Order No. RB 05-03 which provided for a Cost of Living Allowance (COLA) to workers in the private sector who ha[d] rendered service for at least three (3) months before its effectivity, and for the same period [t]hereafter, in the following categories: SEVENTEEN PESOS AND FIFTY CENTAVOS (P17.50) in the cities of Naga and Legaspi; FIFTEEN PESOS AND FIFTY CENTAVOS (P15.50) in the municipalities of Tabaco, Daraga, Pili and the city of Iriga; and TEN PESOS (P10.00) for all other areas in the Bicol Region.

“Subsequently on November 23, 1993, the Regional Tripartite Wages and Productivity Board of Region VII issued Wage Order No. RB VII-03, which directed the integration of the COLA mandated pursuant to Wage Order No. RO VII-02-A into the basic pay of all workers. It also established an increase in the minimum wage rates for all workers and 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.

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“The petitioner then granted a COLA of P17.50 to its employees at its Naga Branch, the only branch covered by Wage Order No. RB 5-03, and integrated the P150.00 per month COLA into the basic pay of its rank-and-file employees at its Cebu, Mabolo and P. del Rosario branches, the branches covered by Wage Order No. RB VII-03.

“On June 7, 1994, respondent Prubankers Association wrote the petitioner requesting that the Labor Management Committee be immediately convened to discuss and resolve the alleged wage distortion created in the salary structure upon the implementation of the said wage orders. Respondent Association then demanded in the Labor Management Committee meetings that the petitioner extend the application of the wage orders to its employees outside Regions V and VII, claiming that the regional implementation of the said orders created a wage distortion in the wage rates of petitioner’s employees nationwide. As the grievance could not be settled in the said meetings, the parties agreed to submit the matter to voluntary arbitration. The Arbitration Committee formed for that purpose was composed of the following: public respondent Froilan M. Bacungan as Chairman, with Attys. Domingo T. Anonuevo and Emerico O. de Guzman as members. The issue presented before the Committee was whether or not the bank’s separate and regional implementation of Wage Order No. 5-03 at its Naga Branch and Wage Order No. VII-03 at its Cebu, Mabolo and P. del Rosario branches, created a wage distortion in the bank nationwide.

“The Arbitration Committee on June 18, 1996 rendered the questioned decision.”[4]

Ruling of the Court of Appeals

In ruling that there was no wage distortion, the Court of Appeals held that the variance in the salary rates of employees in different regions of the country was justified by RA 6727. It noted that “the underlying considerations in issuing the wage orders are diverse, based on the distinctive situations and needs existing in each region. Hence, there is no basis to apply the salary increases imposed by Wage Order No. VII-03 to employees outside of Region VII.” Furthermore, the Court of Appeals ruled that “the distinctions between each employee group in the region are maintained, as all employees were granted an increase in minimum wage rate.”[5]

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The Issues

In its Memorandum, petitioner raises the following issues:[6]

“I

Whether or not the Court of Appeals departed from the usual course of judicial procedure when it disregarded the factual findings of the Voluntary Arbitration Committee as to the existence of wage distortion.

II

Whether or not the Court of Appeals committed grave error in law when it ruled that wage distortion exists only within a region and not nationwide.

III

Whether or not the Court of Appeals erred in implying that the term ‘establishment’ as used in Article 125 of the Labor Code refers to the regional branches of the bank and not to the bank as a whole.”

The main issue is whether or not a wage distortion resulted from respondent’s implementation of the aforecited Wage Orders. As a preliminary matter, we shall also take up the question of forum-shopping.

The Court’s Ruling

The petition is devoid of merit.[7]

Preliminary Issue: Forum-Shopping

Respondent asks for the dismissal of the petition because petitioner allegedly engaged in forum-shopping. It maintains that petitioner failed to comply with Section 2 of Rule 42 of the Rules of Court, which requires that parties must certify under oath that they have not commenced any other action involving the same issues in the Supreme Court, the Court of Appeals, or different divisions thereof, or any other tribunal or agency; if there is such other action or proceeding, they must state the status of the same; and if they should thereafter learn that a similar action or proceeding has been filed or is pending before the said courts,

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they should promptly inform the aforesaid courts or any other tribunal or agency within five days therefrom. Specifically, petitioner accuses respondent of failing to inform this Court of the pendency of NCMB-NCR-RVA-04-012-97 entitled “In Re: Voluntary Arbitration between Prudential Bank and Prubankers Association” (hereafter referred to as “voluntary arbitration case”), an action involving issues allegedly similar to those raised in the present controversy.

In its Reply, petitioner effectively admits that the voluntary arbitration case was already pending when it filed the present petition. However, it claims no violation of the rule against forum-shopping, because there is no identity of causes of action and issues between the two cases.

We sustain the respondent. The rule on forum-shopping was first included in Section 17 of the Interim Rules and Guidelines issued by this Court on January 11, 1983, which imposed a sanction in this wise: “A violation of the rule shall constitute contempt of court and shall be a cause for the summary dismissal of both petitions, without prejudice to the taking of appropriate action against the counsel or party concerned.” Thereafter, the Court restated the rule in Revised Circular No. 28-91 and Administrative Circular No. 04-94. Ultimately, the rule was embodied in the 1997 amendments to the Rules of Court.

As explained by this Court in First Philippine International Bank v. Court of Appeals,[8] forum-shopping exists where the elements of litis pendentia are present, and where a final judgment in one case will amount to res judicata in the other. Thus, there is forum-shopping when, between an action pending before this Court and another one, there exist: “a) identity of parties, or at least such parties as represent the same interests in both actions, b) identity of rights asserted and relief prayed for, the relief being founded on the same facts, and c) the identity of the two preceding particulars is such that any judgement rendered in the other action, will, regardless of which party is successful amount to res judicata in the action under consideration; said requisites also constitutive of the requisites for auter action pendant or lis pendens.”[9] Another case elucidates the consequence of forum-shopping: “[W]here a litigant sues the same party against whom another action or actions for the alleged violation of the same right and the enforcement of the same relief is/are still pending, the defense of litis pendentia in one case is a bar to the others; and, a final judgment in one would constitute res judicata and thus would cause the dismissal of the rest.”[10]

The voluntary arbitration case involved the issue of whether the adoption by the Bank of regionalized hiring rates was valid and binding.

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On the other hand, the issue now on hand revolves around the existence of a wage distortion arising from the Bank’s separate and regional implementation of the two Wage Orders in the affected branches. A closer look would show that, indeed, the requisites of forum-shopping are present.

First, there is identity of parties. Both cases are between the Bank and the Association, acting on behalf of all its members. Second, although the respective issues and reliefs prayed for in the two cases are stated differently, both actions boil down to one single issue: the validity of the Bank’s regionalization of its wage structure based on RA 6727. Even if the voluntary arbitration case calls for striking down the Bank’s regionalized hiring scheme while the instant petition calls for the correction of the alleged wage distortion caused by the regional implementation of Wage Order No. VII-03, the ultimate relief prayed for in both cases is the maintenance of the Bank’s national wage structure. Hence, the final disposition of one would constitute res judicata in the other. Thus, forum-shopping is deemed to exist and, on this basis, the summary dismissal of both actions is indeed warranted.

Nonetheless, we deem it appropriate to pass upon the main issue on its merit in view of its importance.

Main Issue: Wage Distortion

The statutory definition of wage distortion is found in Article 124 of the Labor Code, as amended by Republic Act No. 6727, which reads:

“Article 124. Standards/Criteria for Minimum Wage Fixing - xxx

“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.”

Elaborating on this statutory definition, this Court ruled: “Wage distortion presupposes a classification of positions and ranking of these positions at various levels. One visualizes a hierarchy of positions with corresponding ranks basically

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in terms of wages and other emoluments. Where a significant change occurs at the lowest level of positions in terms of basic wage without a corresponding change in the other level in the hierarchy of positions, negating as a result thereof the distinction between one level of position from the next higher level, and resulting in a parity between the lowest level and the next higher level or rank, between new entrants and old hires, there exists a wage distortion. xxx. The concept of wage distortion assumes an existing grouping or classification of employees which establishes distinctions among such employees on some relevant or legitimate basis. This classification is reflected in a differing wage rate for each of the existing classes of employees”[11]

Wage distortion involves four elements:

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

4. The existence of the distortion in the same region of the country.

In the present case, it is clear that no wage distortion resulted when respondent implemented the subject Wage Orders in the covered branches. In the said branches, there was an increase in the salary rates of all pay classes. Furthermore, the hierarchy of positions based on skills, length of service and other logical bases of differentiation was preserved. In other words, the quantitative difference in compensation between different pay classes remained the same in all branches in the affected region. Put differently, the distinction between Pay Class 1 and Pay Class 2, for example, was not eliminated as a result of the implementation of the two Wage Orders in the said region. Hence, it cannot be said that there was a wage distortion.

Petitioner argues that a wage distortion exists because the implementation of the two Wage Orders has resulted in the discrepancy in the compensation of employees of similar pay classification indifferent regions. Hence, petitioner maintains that, as a result of the two Wage Orders, the employees in the affected regions have higher compensation than their counterparts of the same level in other regions. Several tables are presented by petitioner to illustrate that the employees in the regions covered by the Wage Orders are receiving more than their counterparts in the same pay scale in other regions.

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The Court is not persuaded. A wage parity between employees in different rungs is not at issue here, but a wage disparity between employees in the same rung but located in different regions of the country.

Contrary to petitioner’s postulation, a disparity in wages between employees holding similar positions but in different regions does not constitute wage distortion as contemplated by law. As previously enunciated, it is the hierarchy of positions and the disparity of their corresponding wages and other emoluments that are sought to be preserved by the concept of wage distortion. Put differently, a wage distortion arises when a wage order engenders wage parity between employees in different rungs of the organizational ladder of the same establishment. It bears emphasis that wage distortion involves a parity in the salary rates of different pay classes which, as a result, eliminates the distinction between the different ranks in the same region.

Different Regional Wages Mandated by RA 6727

Petitioner’s claim of wage distortion must also be denied for one other reason. The difference in wages between employees in the same pay scale in different regions is not the mischief sought to be banished by the law. In fact, Republic Act No. 6727 (the Wage Rationalization Act), recognizes “existing regional disparities in the cost of living.” Section 2 of said law provides:

“SEC 2. It is hereby declared the policy of the State to rationalize the fixing of minimum wages and to promote productivity-improvement and gain-sharing measures to ensure a decent standard of living for the workers and their families; to guarantee the rights of labor to its just share in the fruits of production; to enhance employment generation in the countryside through industry dispersal; and to allow business and industry reasonable returns on investment, expansion and growth.

“The State shall promote collective bargaining as the primary mode of settling wages and other terms and conditions of employment; and whenever necessary, the minimum wage rates shall be adjusted in a fair and equitable manner, considering existing regional disparities in the cost of living and other socio-economic factors and the national economic and social development plans.”

RA 6727 also amended Article 124 of the Labor Code, thus:

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“Art. 124. Standards/Criteria for Minimum Wage Fixing. - The regional minimum wages to be established by the Regional Board shall be as nearly adequate as is economically feasible to maintain the minimum standards of living necessary for the health, efficiency and general well-being of the employees within the frame work of the national economic and social development program. In the determination of such regional minimum wages, the Regional Board shall, among other relevant factors, consider the following:

‘(a) The demand for living wages;‘(b) Wage adjustment vis-a-vis the consumer price index;‘(c) The cost of living and changes or increases therein;‘(d) The needs of workers and their families;‘(e) The need to induce industries to invest in the countryside;‘(f) Improvements in standards of living;‘(g) The prevailing wage levels;‘(h) Fair return of the capital invested and capacity to pay of employers;‘(I) Effects on employment generation and family income; and

‘(j) The equitable distribution of income and wealth along the imperatives of social and economic development.”

From the above-quoted rationale of the law, as well as the criteria enumerated, a disparity in wages between employees with similar positions in different regions is necessarily expected. In insisting that the employees of the same pay class in different regions should receive the same compensation, petitioner has apparently misunderstood both the meaning of wage distortion and the intent of the law to regionalize wage rates.

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

Petitioner claims that it “does not insist that the Regional Wage Boards created pursuant to RA 6727 do not have the authority to issue wage orders based on the distinctive situations and needs existing in each region. So also, xxx it does not insist that the [B]ank should not implement regional wage

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orders. Neither does it seek to penalize the Bank for following Wage Order VII-03. xxx What it simply argues is that it is wrong for the Bank to peremptorily abandon a national wage structure and replace the same with a regionalized structure in violation of the principle of equal pay for equal work. And, it is wrong to say that its act of abandoning its national wage structure is mandated by law.”

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

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

Equal Pay for Equal Work

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

Meaning of “Establishment”

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Petitioner further contends that the Court of Appeals erred in interpreting the meaning of “establishment” in relation to wage distortion. It quotes the RA 6727 Implementing Rules, specifically Section 13 thereof which speaks of “workers working in branches or agencies of establishments in or outside the National Capital Region.” Petitioner infers from this that the regional offices of the Bank do not themselves constitute, but are simply branches of, the establishment which is the whole bank. In effect, petitioner argues that wage distortion covers the pay scales even of employees in different regions, and not only those of employees in the same region or branch. We disagree.

Section 13 provides that the “minimum wage rates of workers working in branches or agencies of establishments in or outside the National Capital Region shall be those applicable in the place where they are sanctioned.” The last part of the sentence was omitted by petitioner in its argument. Given the entire phrase, it is clear that the statutory provision does not support petitioner’s view that “establishment” includes all branches and offices in different regions.

Further negating petitioner’s theory is NWPC Guideline No. 1 (S. 1992) entitled “Revised Guidelines on Exemption From Compliance With the Prescribed Wage/Cost of Living Allowance Increases Granted by the Regional Tripartite Wages and Productivity Board,” which states that “establishment” “refers to an economic unit which engages in one or predominantly one kind of economic activity with a single fixed location.”

Management Practice

Petitioner also insists that the Bank has adopted a uniform wage policy, which has attained the status of an established management practice; thus, it is estopped from implementing a wage order for a specific region only. We are not persuaded. Said nationwide uniform wage policy of the Bank had been adopted prior to the enactment of RA 6727. After the passage of said law, the Bank was mandated to regionalize its wage structure. Although the Bank implemented Wage Order Nos. NCR-01 and NCR-02 nationwide instead of regionally even after the effectivity of RA 6727, the Bank at the time was still uncertain about how to follow the new law. In any event, that single instance cannot be constitutive of “management practice.”

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WHEREFORE, the petition is DENIED and the assailed Decision is AFFIRMED. Costs against petitioner.

SO ORDERED.

G.R. No. 116008 July 11, 1995

METRO TRANSIT ORGANIZATION, INC., petitioner, vs.THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION, Second Division; EDNA BONTO-PEREZ, Presiding Commissioner; DOMINGO H. ZAPANTA, Commissioner; ROGELIO I. RAYAZA, Commissioner; and THE SUPERVISORY EMPLOYEES ASSOCIATION OF METRO (SEAM), respondents.

FELICIANO, J.:

In this Petition for Certiorari, petitioner Metro Transit Organization, Inc. ("Metro") asks us to set aside the Decision and Resolution of the National Labor Relations Commission ("NLRC") dated 30 March and 22 June 1994 respectively in NLRC-NCR-CA No. 000042-92 ordering it to pay its supervisory employees amounts representing (i) a demanded wage increase based on company practice and (ii) a correction or adjustment of an underpayment of an annual wage increase granted in the collective bargaining agreement (CBA) between Metro and herein private respondent Supervisory Employees Association Metro ("SEAM").

Petitioner Metro is the operator and manager of the Light Railway Transit System in Metro Manila. It employs close to 1,000 rank-and-file and over 200 supervisory employees. Private respondent SEAM is a union composed of supervisory employees of petitioner Metro. In May 1989, SEAM was certified as the sole bargaining unit for the supervisory employees of Metro.

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On 1 December 1989, the first collective bargaining agreement between petitioner Metro and private respondent SEAM took effect. 1 Prior to December 1989, Metro had a CBA only with its rank-and-file employees. During the period when no CBA governed the terms and conditions of employment between Metro and its supervisory employees, whenever rank-and-file employees were paid a statutorily mandated salary increase, supervisory employees were, as a matter of practice, also paid the same amount plus P50.00.

On 17 April 1989, Metro paid its rank-and-file employees a salary increase of P500.00 per month in accordance with the terms of their CBA. 2 Metro, however, did not extend a corresponding salary increase to its supervisory employees.

On 1 December 1989, Metro, in compliance with its CBA with SEAM, paid its supervisory employees a salary increase of P800.00 per month.

On 17 April 1990, Metro paid its rank-and-file and supervisory employees a P600.00 monthly increase. The payment thus made to rank-and-file employees was in compliance with the second year salary increase provided in their CBA. On the other hand, the P600.00 per month paid to supervisory employees was advanced from their second year salary increase, provided in their CBA, of P1,000.00 per month effective 1 December 1990. On 1 December 1990, Metro paid its supervisory employees the remaining balance of P400.00 per month in addition to the P600.00 a month it had earlier started to pay.

The third year salary increases due rank-and-file and supervisory employees were paid on 17 April and 1 December 1991, respectively, as scheduled in their corresponding CBAs.

On 24 March 1992, private respondent SEAM filed a Notice of Strike before the National Conciliation and Mediation Board ("NCMB") charging petitioner Metro with (a) discrimination in terms of wages; (b) underpayment of salary increase per CBA for 1990 and/or adjustment of salaries for correction of disparity/inequity in pay with rank-and-file employees and (c) harassment and demotion of union officers. Conciliation and mediation efforts before the NCMB failed.

On 23 June 1992, acting on a petition filed by Metro, the Secretary of Labor assumed jurisdiction over the labor dispute and certified the same to public respondent NLRC for same compulsory arbitration.

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On 30 March 1994, the NLRC rendered its decision the dispositive portion of which reads:

WHEREFORE, the Company is hereby ordered to pay the amount of P550.00 per month wage increase effective April 17, 1989 and onwards to each supervisory employee and likewise pay the sum of P600.00 per month representing underpayment in the correction of inequities in pay or underpayment of CBA wage increase effective December 1, 1990 and onwards.

The charge of harassment and demotion was dismissed for "lack of basis."

On 22 June 1994, NLRC denied the motion for reconsideration filed by Metro.

The instant Petition for Certiorari was filed on 14 July 1994 accompanied by a prayer for issuance of a temporary restraining order to enjoin public respondents from enforcing their award.

On 31 August 1994, the Court, after an oral hearing, issued a Resolution encouraging petitioner Metro and private respondent SEAM to vigorously and earnestly exercise their best efforts to reach an amicable and mutually acceptable settlement of their claims and counterclaims. In the meantime, the disputants were to maintain thestatus quo, in particular, private respondent SEAM and public respondent NLRC were to refrain from seeking and granting, respectively, the issuance of a writ of execution in respect of the decision of the NLRC.

On 29 and 30 September 1994, petitioner Metro and private respondent SEAM respectively informed the Court that their efforts amicably to settle their dispute had failed. Cognizant of (a) the huge disparity between the financial capability of Metro and the amount awarded to SEAM, 3 (b) the essential public services being rendered by the parties and (c) in the interest of avoiding any disruption of these basic services, the Court reiterated its Order of 31 August 1994 enjoining respondents SEAM and the NLRC from seeking and granting a writ of execution until further orders from this Court.

The principal issues, to the mind of the Court, are: (a) whether or not a wage distortion existed in respect of the salaries of the rank-and-file and supervisory employees of petitioner Metro; and (b) assuming a wage distortion existed,

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whether or not it has been corrected by petitioner Metro in accordance with law. 4

Private respondent SEAM vigorously asserts that an already existing wage distortion in respect of the salaries of rank-and-file and supervisory employees was aggravated when Metro, on 17 April 1989, paid its rank-and-file employees their CBA-stipulated P500.00 increase but did not grant a corresponding increase (and a premium) to its supervisory employees. Furthermore, the advance by Metro of the P600.00 on 17 April 1990 only "artificially" reduced the existing distortion. The advance was, according to SEAM, extended merely to give the appearance of a reduction of the existing distortion in pay between the rank-and-file and supervisory employees. On 1 December 1990, when supervisory employees were paid the balance of P400.00 the distortion existing prior to 17 April 1990 was reinstated. Finally, SEAM claims, on top of the salary increases granted to supervisory employees by their CBA, they should be paid the increase corresponding to the P500.00 increase given rank-and-file employees not only for 1989 but also onwards.

Upon the other hand, petitioner Metro firmly maintains that its practice of giving higher increases to supervisory employees whenever rank-and-file employees were given increases, should not be regarded as compulsory. The grant of a corresponding increase to supervisory employees is a prerogative or discretionary act of generosity by management considering there is no law or company policy mandating it. Moreover, SEAM is estopped, Metro asserts, from claiming such an increase. Despite its awareness of the P500.00 increase paid to rank-and-file employees (pursuant to their CBA) on 17 April 1989, SEAM did not negotiate in SEAM's own CBA for the retroactive payment or pushing forward the effectivity date of its first increase of P800.00 to 17 April 1989. Finally, the demanded P550.00 wage increase should be deemed, according to Metro, included in the P800.00 salary increase paid supervisory employees on 1 December 1989.

In respect of the issue of underpayment, petitioner Metro denies that it underpaid its supervisory employees. Metro maintains (a) that the first increase of P800.00 effective 1 December 1989 as provided in its CBA with SEAM is higher than the P500.00 increase paid its rank-and-file employees; (b) that assuming arguendo a distortion in pay still existed, the same was corrected when the majority of the supervisory employees, in a referendum, voted to accept the advance payment of P600.00 out of the scheduled CBA increase of P1,000.00

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effective 1 December 1990; (c) it was actually SEAM who had proposed the advance payment of P600.00 from their scheduled second year increase of P1,000.00; (d) SEAM had further agreed that, come 1 December 1990, only the balance of P400.00 would have to be paid to supervisory employees; and (e) payment by Metro of the balance of P400.00 on 1 December 1990 was merely its compliance with the scheduled second year increase aligned with Metro's subsequent agreement with SEAM to advance the effectivity date of the first P600.00.

In its Comment, the Office of the Solicitor General argues, rather cursorily, that public respondent NLRC did not commit any grave abuse of discretion and that its findings of fact must be accorded respect and finality.

I

In respect of the issue of existence of a wage distortion, the Court finds and so holds that a wage distortion did occur when the salaries of rank-and-file employees were increased by P500.00 per month on 17 April 1989 as stipulated in their CBA and no corresponding increase was paid to the supervisory employees. This fact was admitted by Atty. Virgilio C. Abejo, counsel for petitioner Metro, during the oral hearing and Metro is bound by that admission. 5

In addition, Atty. Abejo explained that his client, as a matter of practice, granted its supervisory employees a salary increase (and a premium) whenever it paid its rank-and-file employees a salary increase. 6

The defense of management prerogative or discretion invoked by petitioner Metro in asserting that it is not obligated to grant supervisory employees a salary increase whenever rank-and-file employee are granted an increase is, in this case, unavailing.

Basically, Metro's argument is that such increase was merely a bonus given to supervisory employees. A "bonus" is an amount granted and paid to an employee for his industry and loyalty which contributed to the success of the employer's business and made possible the realization of profits. It is something given in addition to what is ordinarily received by or strictly due to therecipient. 7

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The general rule is that a bonus is a gratuity or an act of liberality which the recipient has no right to demand as a matter of right. 8 A bonus, however, is a demandable or enforceable obligation when it is made part of the wage or salary or compensation of the employee. 9 Whether or not a bonus forms part of wages depends upon the circumstances and conditions for its payment. If it is additional compensation which the employer promised andagreed to give without any conditions imposed for its payment, such as success of business or greater production or output, then it is part of the wage. But if it is paid only if profits are realized or if a certain level of productivity is achieved, it can not be considered part of the wage. Where it is not payable to all but only to some employees and only when their labor becomes more efficient or more productive, it is only an inducement for efficiency, a prize therefor, not a part of the wage. 10

In the case at bar, the increase of P550.00 sought by private respondent SEAM was neither an inducement nor was it contingent on (a) the success of the business of petitioner Metro; or (b) the increased production or work output of the company or (c) the realization of profits. The demand for this increase was based on a company practice, admitted by Metro, of granting a salary increase (and a premium) to supervisory employees whenever rank-and-file employees were granted a salary increase. That those increases were precisely designed to correct or minimize the wage distortion effects of increases given to rank-and-file employees (under their CBA or under Wage Orders), highlights the fact that those increases were part of the wage structure of supervisory employees. The demanded increase therefore is not a bonus that is generally not demandable as a matter of right. The demanded increase, in this instance, is an enforceable obligation so far as the supervisory employees of Metro are concerned.

We conclude that the supervisory employees, who then (i.e., on 17 April 1989) had, unlike the rank-and-file employees, no CBA governing the terms and conditions of their employment, had the right to rely on the company practice of unilaterally correcting the wage distortion effects of a salary increase given to the rank-and-file employees, by giving the supervisory employees a corresponding salary increase plus a premium. For reasons, however, shortly to be stated in the disposition of the second issue, we hold that the P550.00 increase is demandable by SEAM only in respect of the period beginning 17 April 1989 and ending on 30 November 1989.

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It is true enough that, in the present case, the wage distortion to be corrected by the award of P550.00 increase for supervisory employees beginning 17 April 1989, was due to the time gap between the effectivity date (17 April 1989) of the increase of P500.00 per month given to rank-and-file employees under their CBA and the effectivity date (1 December 1989) of the P800.00 increase given to supervisory employees under their own CBA. It is also true that had the P800.00 increase to supervisory employees been made retroactive to 17 April 1989 by an appropriate synchronizing provision in the Metro-SEAM CBA, no wage distortion would have arisen. The fact, however, remains that Metro and SEAM did not agree upon such remedy in their CBA and that the CBA increase given to rank-and-file employees did produce a distortion effect by obliterating or drastically reducing the previous gap between the salary rates of rank-and-file and supervisory employees. The point to be stressed is that considering the prior practice of petitioner Metro, its supervisory employees had the right to expect rectification of that distortion.

II

We turn to the issue of whether the wage distortion referred to above was effectively rectified by petitioner Metro in accordance with law.

This issue arises because, as already noted, the NLRC in its 30 March 1994 Decision decreed that Metro shall pay the "P550.00 per month wage increase effective April 17, 1989 and onwards" and similarly ordered the payment of P600.00 per month which it found to have been underpaid "effective December 1, 1990 and onwards."

It is helpful to recall the general principles laid down in National Federation of Labor v. National Labor Relations Commission, 11 where the Court discussed at some length the relatively obscure concept of wage distortion. Those principles may be summarily stated in the following manner:

(a) The concept of wage distortion assumes an existing grouping or classification of employees which establishes distinctions among such employees on some relevant or legitimate basis. This classification is

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reflected in a deferring wage rate for each of the existing classes of employees.

(b) Wage distortions have often been the result of government-decreed increases in minimum wages. There are, however, other causes of wage distortions, like the merger of two (2) companies (with differing classifications of employees and different wage rates) where the surviving company absorbs all the employees of the dissolved corporation. (In the present Metro case, as already noted, the wage distortion arose because the effectivity dates of wage increases given to each of the two (2) classes of employees (rank-and-file and supervisory) had not been synchronized in their respective CBAs.)

(c) Should a wage distortion exist, there is no legal requirement that, in the rectification of that distortion by re-adjustment of the wage rates of the differing classes of employees, the gap which had previously or historically existed be restored in precisely the same amount. In other words, correction of a wage distortion may be done by re-establishing a substantial orsignificant gap (as distinguished from the historical gap) between the wage rates of the differing classes of employees.

(d) The re-establishment of a significant difference in wage rates may be the result of resort to grievance procedures or collective bargaining negotiations.

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In the present case, the Court must confront the task of determining whether the CBA forged by Metro and SEAM had, along with the award of P550.00 per month from 17 April 1989 to 1 December 1989, referred to in Part I above, adequately corrected the wage distortion.

After careful examination of the provisions of the CBA between Metro and SEAM, in particular the provisions relating to anniversary salary increases every 1 December beginning 1989 to 1991, we believe and so hold that together with the increase of P550.00 referred to in Part I above, those provisions will have adequately rectified the wage distortion which arose in respect of rank-and-file and supervisory employees.

The CBA of supervisory employees granted them an aggregate monthly increase of P2,800.00 over three (3) years:

Table I

CBA EffectivityIncrease Date AmountYear I 1-Dec-89 P800.00Year II 1-Dec-90 P1,000.00Year III 1-Dec-91 P1,000.00

Upon the other hand, the CBA of the rank-and-file employees granted them monthly increases totalling P1,850.00 also over three (3) years:

Table II

CBA Effectivity AmountIncrease DateYear I 17-Apr-

89P500.00

Year II 17-Apr-90

P600.00

Year III 17-Apr-91

P750.00

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After all the above listed salary increases had become effective, the last being on 1 December 1991, supervisory employees as a group were receiving P950.00 more per month than rank-and-file employees as a group. Adding to this figure the amount of P550.00 per month which we in Part I (supra) have held petitioner Metro must pay, the increase in pay of supervisory employees would be P1,500.00 more per month than the increases in pay of rank-and-file employees:

Table III

CBA Effectivity Wage Increase

Wage Increase

Gap

Increase Date Rank and File Supervisory (PHP)Employees Employees(PHP) (PHP)

Year I 4/17/89 550.00 12 550.00 5012/1/89 - 0.00 800.00 850

Year II

4/17/90 600.00 13 600.00 850

12/1/90 - 0.00 400.00 1250Year III

4/17/91 750.00 550.00 500

12/1/91 - 0.00 1,000.00 1500

We consider the difference of P1,500.00 per month a significant differential that clearly distinguishes, on the basis of pay scales, a rank-and-file employee from a supervisory employee.

Applying the above increases to the actual salaries being received by rank-and-file and supervisory employees of Metro, we find that indeed the distortion caused by the CBA-stipulated wage increase granted rank-and-file employees on 17 April 1989 was rectified by 1 December 1991.

The record before us does not include the actual amounts of the rank-and-file and supervisory employees' salaries. In its position paper before the NCMB, however, private respondent SEAM stated:

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The highest salary of some rank-and-file employees at present (before adding the CBA increase) is P4,790.00 which is higher that some supervisors with [a] salary of P3,980.00. 14

Taking the above SEAM figures and adding to them the respective CBA-stipulated increases to the salary of thehighest paid rank-and-file employee and to the lowest paid supervisory employee, plus the P550.00 in wage already held due to all supervisory employees as of 17 April 1989, we find that the salary of the lowest paid supervisory employee was, by 1 December 1991, P690.00 more than the salary of the highest paid rank-and-file employee:

Table IV

CBA Effectivity Wage of Wage of GapIncrease Date Rank and Supervisory (PHP)

File Employees Employees(PHP) (PHP)4,790.00 3980.00 (810.00) 15

Year I 4/17/89 5,290.00 4,530.00 16 (760.00) 1712/1/89 5,290.00 5330.00 40.00

Year II 4/17/90 5,890.00 5,930.00 18 40.0012/1/90 5,890.00 6330.00 440.00

Year III 4/17/91 6,640.00 6330.00 (310.00) 1912/1/91 6640.00 7,330.00 690.00

The difference in monthly wage scales of P690.00 clearly and substantially distinguishes, on the basis of pay, a rank-and-file employee from a supervisory employee. 20 Since the above computation utilizes the salaries of highest paid rank-and-file employee and the lowest paid supervisory employee, figures supplied by SEAM, the differential of P690.00 represents merely the minimum difference or gap that was restored or established once implementation of the salary increases due to supervisory employees was completed on 1 December 1991. That differential would, of course, be significantly greater for average rank-and-file employees receiving a salary less than P4,790.00 and for average supervisory employees receiving a salary greater than P3,980.00.

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We turn to the related issue of whether the first year salary increase of P800.00 per month given to supervisory employees under their CBA covered or took the place of the P550.00 increase we ruled is due them in Part I (supra) by virtue of the previous unilateral practice of Metro.

Metro maintains that the P800.00 monthly salary increase paid to supervisory employees starting on 1 December 1989, should be deemed to cover or include the P550.00 in wage increase demanded by SEAM and held by us to be due to SEAM from 17 April 1989 to 1 December 1989. In other words, Metro argues that the wage distortion should be regarded as cured by the CBA-mandated increase of P800.00 starting 1 December 1989.

We note that the CBA of Metro and SEAM did not contain any provision stipulating that the P550.00 monthly increase would be credited against the P800.00 increase. There was no crediting provision apparently because the P550.00 monthly increase had not been provided for in the CBA with SEAM. Even so, we agree with petitioner Metro's position. The issue of whether increases in wages essential for correcting wage distortions may be credited against CBA-mandated increases, is not an issue of first impression. In National Federation of Labor v. National Labor Relations Commission, 21 the Court rejected the argument of the NLRC that wage increases resulting from collective bargaining negotiations should not be regarded as constituting compliance with the direction to correct wage distortions arising from the effectivity of Wage Orders. In National Federation of Labor, the Court, after quoting the following excerpt from Apex Mining Company, Inc. v. National Labor Relations Commission 22

It is important to note that the creditability provisions of Wage Orders Nos. 5 and 6 (as well as the parallel provisions in Wage Orders Nos. 2, 3 and 4) are grounded in an important public policy. The public policy may be seen to be the encouragement of employers to grant wage and allowance increases to their employeeshigher than the minimum rates of increases prescribed by statute or administrative regulation. To obliterate the creditability provisions in Wage Orders through interpretation or otherwise, and to compel employers simply to add legislated increases in salaries or allowances without regard to what is already being paid, would be to penalize employers who grant their workers more than the statutorily prescribed minimum rates of increases. Clearly, this would be

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counter-productive so far as securing the interests of labor is concerned. The creditability provisions in the Wage Orders prevent the penalizing of employers who are industry leaders and who do not wait for statutorily prescribed increases in salary or allowances and pay their workers more than what the law or regulations require. 23 (Emphasis partly in the original and partly supplied)

said:

We believe that the same public policy requires recognition and validation, as it were, of wage increases given by employers either unilaterally or as a result of collective bargaining negotiations, in the effort to correct wage distortions. 24 (Emphasis supplied)

In the instant case, the CBA-stipulated increase of P800.00 a month was intended as the countervailing increase for supervisory employees, the rank-and-file employees having already received their own increase approximately eight (8) months earlier. In other words, the wage distortion in the present case arose not because of a government-decreed increase in minimum wages or because Metro simply refused to treat its supervisory employees, differently from its rank-and-file workers, but rather because of a failure to synchronize the CBA-stipulated increases for rank-and-file and for supervisory employees. Moreover, as more than once pointed out above, the P800.00 monthly increase given to supervisory employees should be taken in conjunction with the P550.00 month increase already awarded to supervisory employees under Part I above. When these are taken together, the wage distortion which occurred on 17 April 1989 was completely and permanently corrected. There isno legal basis for requiring Metro to pay not only the P800.00 month increase, but also, on top thereof, the P550.00 monthly increase to supervisory employees, after 1 December 1989 and forever after.

From the foregoing, we conclude that beginning 1 December 1989, by the grant of the award of P550.00 to supervisory employees in Part I (supra) and by the operation of the Metro-SEAM CBA, the wage distortion which occurred on 17 April 1989 had been corrected. By 1 December 1991, a substantial gap or differential had been re-established between the salaries of the rank-and-file and supervisory employees of petitioner Metro. It was, therefore, grievous abuse of discretion for the NLRC to disregard such rectification and to rule that petitioner

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Metro was liable to its supervisory employees for P550.00 monthly increase beyond 1 December 1989 and "onwards." That distortion, as already pointed out, lasted only from 17 April 1989 up to 30 November 1989, since the following day, 1 December 1989, the CBA of Metro and SEAM went into effect.

Similarly, we believe that the NLRC committed a grave abuse of discretion in requiring Metro to pay the sum of P600.00 per month from 1 December 1990 and onwards, i.e., forever after. It will be recalled that Metro, upon request of SEAM, had agreed that of the P1,000.00 monthly increase originally scheduled to be effective under the CBA on 1 December 1990, P600.00 would take effect instead on 17 April 1990. Metro agreed to do so precisely to remedy the distortion that would otherwise have resulted (see Tables III and IV, supra) and so, starting 17 April 1990, supervisory employees received a monthly increase of P600.00; and starting 1 December 1990, they started receiving an additional P400.00 or the total stipulated CBA increase of P1,000.00 per month.

Again, for the same reasons set out earlier, we consider that these additional payments of P600.00 per month to supervisory employees from 17 April 1990 up to 1 December 1990 should be deemed included in the P1,000.00 monthly increase effective from 1 December 1990 and onwards. Compelling Metro to pay, starting 1 December 1990, not only the P1,000.00 per month increase stipulated in the CBA but also an additional P600.00 per month, amounts to allowing unjust enrichment of supervisory employees at the expense of their employer Metro.

Finally, the Court is aware of the existence of a job evaluation study prepared by Resources Consultants International, aimed at re-examining the wage structure of rank-and-file and supervisory employees of Metro. 25The decision we promulgate today is without prejudice to higher wages which rank-and-file and supervisory employees may be receiving by virtue of implementation of such report.

ACCORDINGLY, for all the foregoing, the Petition for Certiorari is hereby GRANTED DUE COURSE, and the Decision and Resolution of the NLRC dated 30 March and 22 June 1994, respectively, in NLRC-NCR-CA No. 000042-92 are hereby SET ASIDE. In place thereof, another Decision is hereby RENDERED requiring petitioner Metro Transit Organization, Inc. to pay to each of its supervisory employees the amount of Five Hundred Fifty Pesos (P550.00) for each month or fraction of a month, embraced within the period from 17 April 1989 to 1 December 1989, plus legal interest (six percent [6%] per annum) thereon computed from the various dates in

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1989 when such amount should have been paid during the aforementioned period. This Decision shall be without prejudice to any increase of wages already being enjoyed by supervisory employees at the time of promulgation hereof.

No pronouncement as to costs.

SO ORDERED.

BANKARD EMPLOYEES UNION-WORKERS ALLIANCE TRADE UNIONS, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and BANKARD, INC., respondents.

D E C I S I O N

CARPIO MORALES, J.:

The present Petition for Review on Certiorari under Rule 45 of the Rules of Court raises the issue of 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.

Bankard, Inc. (Bankard) classifies its employees by levels, to wit: Level I, Level II, Level III, Level IV, and Level V. On May 28, 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.

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Bankard’s move drew the Bankard Employees Union-WATU (petitioner), the duly certified exclusive bargaining agent of the regular rank and file employees of Bankard, to press for the increase in the salary of its old, regular employees.

Bankard took the position, however, 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.

As the continued request of petitioner for increase in the wages and salaries of Bankard’s regular employees remained unheeded, it filed a Notice of Strike on August 26, 1993 on the ground of discrimination and other acts of Unfair Labor Practice (ULP).

A director of the National Conciliation and Mediation Board treated the Notice of Strike as a “Preventive Mediation Case” based on a finding that the issues therein were “not strikeable”.

Petitioner filed another Notice of Strike on October 8, 1993 on the grounds of refusal to bargain, discrimination, and other acts of ULP - union busting. The strike was averted, however, when the dispute was certified by the Secretary of Labor and Employment for compulsory arbitration.

The Second Division of the NLRC, by Order of May 31, 1995, finding no wage distortion, dismissed the case for lack of merit.

Petitioner’s motion for reconsideration of the dismissal of the case was, by Resolution of July 28, 1995, denied.

Petitioner thereupon filed a petition for certiorari before this Court, docketed as G.R. 121970. In accordance with its ruling in St. Martin Funeral Homes v. NLRC,[1] the petition was referred to the Court of Appeals which, by October 28, 1999, denied the same for lack of merit.

Hence, the present petition which faults the appellate court as follows:

(1) It misapprehended the basic issues when it concluded that under Bankard’s new wage structure, the old salary gaps between the different classification or level of employees were “still reflected” by the adjusted salary rates[2]; and

(2) It erred in concluding that “wage distortion does not appear to exist”, which conclusion is manifestly contrary to law and jurisprudence.[3]

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Upon the enactment of R.A. No. 6727 (WAGE RATIONALIZATION ACT, amending, among others, Article 124 of the Labor Code) on June 9, 1989, 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.[4]

Prubankers Association v. Prudential Bank and Trust Company[5] 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.[6]

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.

Petitioner maintains that for purposes of wage distortion, the classification is not one based on “levels” or “ranks” but on two groups of employees, the newly hired and the old, in each and every level, and not between and among the different levels or ranks in the salary structure.

Public respondent National Labor Relations Commission (NLRC) refutes petitioner’s position, however. It, through the Office of the Solicitor General, essays in its Comment of April 12, 2000 as follows:

To determine the existence of wage distortion, the “historical” classification of the employees prior to the wage increase must be established. Likewise, it must be shown that as between the different classification of employees, there exists a “historical” gap or difference.

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x x x

The classification preferred by petitioner is belied by the wage structure of private respondent as shown in the new salary scale it adopted on May 28, 1993, retroactive to April 1, 1993, which provides, thus:

Hiring Minimum MaximumLevel From To From To From ToI 3,100 4,100 3,200 4,200 7,200 9,250II 3,200 4,100 3,300 4,200 7,500 9,500III 3,300 4,200 3,400 4,300 8,000 10,000IV 3,500 4,400 3,600 4,500 8,500 10,500V 3,700 4,700 3,800 4,800 9,000 11,000

Thus the employees of private respondent have been “historically” classified into levels, i.e. I to V, and not on the basis of their length of service. Put differently, the entry of new employees to the company ipso facto place[s] them under any of the levels mentioned in the new salary scale which private respondent adopted retroactive [to] April 1, 1993. Petitioner cannot make a contrary classification of private respondent’s employees without encroaching upon recognized management prerogative of formulating a wage structure, in this case, one based on level.[7] (Emphasis and underscoring supplied)

The issue of whether wage distortion exists being a question of fact that is within the jurisdiction of quasi-judicial tribunals,[8] and it being a basic rule that findings of facts of quasi-judicial agencies, like the NLRC, are generally accorded not only respect but at times even finality if they are supported by substantial evidence, as are the findings in the case at bar, they must be respected. For these agencies have acquired expertise, their jurisdiction being confined to specific matters.[9]

It is thus clear that there is no hierarchy of positions between the newly hired and regular employees of Bankard, hence, the first element of wage distortion provided inPrubankers is wanting.

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.

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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 across-the-board increase in salary.

As National Federation of Labor v. NLRC, et al.[10] teaches, the formulation of a wage structure through the classification of employees is a matter of management judgment and discretion.

[W]hether or not a new additional scheme of classification of employees for compensation purposes should be established by the Company (and the legitimacy or viability of the bases of distinction there embodied) is properly a matter of management judgment and discretion, and ultimately, perhaps, a subject matter for bargaining negotiations between employer and employees. It is assuredly something that falls outside the concept of “wage distortion.” [11] (Emphasis and underscoring supplied)

As did the Court of Appeals, this Court finds that the third element provided in Prubankers is also wanting. For, as the appellate court explained:

In trying to prove wage distortion, petitioner union presented a list of five (5) employees allegedly affected by the said increase:

Pay of Old/ Pay of Newly DifferenceRegular Employees Hired EmployeesA. Prior to April 1, 1993Level I P4,518.75

(Sammy Guce)P3,100 P1,418.75

Level II P6,242.00(Nazario Abello)

P3,200 P3,042.00

Level III P4,850.00(Arthur Chavez)

P3,300 P1,550.00

Level IV P5,339.00Melissa Cordero)

P3,500 P1,839.00

Level V P7,090.69(Ma. Lourdes Dee)

P3,700 P3,390.69

B. Effective April 1, 1993Level I P4,518.75

Sammy Guce)P4,100 P418.75

Level II P6,242.00 P4,100 P2,142.00

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(Nazario Abello)Level III P4,850.00

(Arthur Chavez)P4,200 P650.00

Level IV P5,330.00(Melissa Cordero)

P4,400 P939.00

Level V P7,090.69(Ma. Lourdes Dee)

P4,700 P2,390.69

Even assuming that there is a decrease in the wage gap between the pay of the old employees and the newly hired employees, to Our mind said gap is not significant as to obliterate or result in severe contraction of the intentional quantitative differences in the salary rates between the employee group. As already stated, the classification under the wage structure is based on the rank of an employee, not on seniority. For this reason, ,wage distortion does not appear to exist.[12] (Emphasis and underscoring supplied)

Apart from the findings of fact of the NLRC and the Court of Appeals that some of the elements of wage distortion are absent, petitioner cannot legally obligate Bankard to correct the alleged “wage distortion” as the increase in the wages and salaries of the newly-hired was not due to a prescribed law or wage order.

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.

x x x

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.

x x x (Italics and emphasis supplied)

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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.

Petitioner cites Metro Transit Organization, Inc. v. NLRC[13] to support its claim that the obligation to rectify wage distortion is not confined to wage distortion resulting from government decreed law or wage order.

Reliance on Metro Transit is however misplaced, as the obligation therein to rectify the wage distortion was not by virtue of Article 124 of the Labor Code, but on account of a then existing “company practice” that whenever rank-and-file employees were paid a statutorily mandated salary increase, supervisory employees were, as a matter of practice, also paid the same amount plus an added premium. Thus this Court held in said case:

We conclude that the supervisory employees, who then (i.e., on April 17, 1989) had, unlike the rank-and-file employees, no CBA governing the terms and conditions of their employment, had the right to rely on the company practice of unilaterally correcting the wage distortion effects of a salary increase given to the rank-and-file employees, by giving the supervisory employees a corresponding salary increase plus a premium. . . .[14] (Emphasis supplied)

Wage distortion is a factual and economic condition that may be brought about by different causes. In Metro Transit, the reduction or elimination of the

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normal differential between the wage rates of rank-and-file and those of supervisory employees was due to the granting to the former of wage increase which was, however, denied to the latter group of employees.

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.

Unlike in Metro Transit then where there existed a “company practice,” no such management practice is herein alleged to obligate Bankard to provide an across-the-board increase to all its regular employees.

Bankard’s right to increase its hiring rate, to establish minimum salaries for specific jobs, and to adjust the rates of employees affected thereby is embodied under Section 2, Article V (Salary and Cost of Living Allowance) of the parties’ Collective Bargaining Agreement (CBA), to wit:

Section 2. Any salary increase granted under this Article shall be without prejudice to the right of the Company to establish such minimum salaries as it may hereafter find appropriate for specific jobs, and to adjust the rates of the employees thereby affected to such minimum salaries thus established .[15] (Italics and underscoring supplied)

This CBA provision, which is based on legitimate business-judgment prerogatives of the employer, is a valid and legally enforceable source of rights between the parties.

In fine, absent any indication that the voluntary increase of salary rates by an employer was done arbitrarily and illegally for the purpose of circumventing the laws or was devoid of any legitimate purpose other than to discriminate against the regular employees, this Court will not step in to interfere with this management prerogative. Employees are of course not precluded from negotiating with its employer and lobby for wage increases through appropriate channels, such as through a CBA.

This Court, time and again, has shown concern and compassion to the plight of workers in adherence to the Constitutional provisions on social justice and has always upheld the right of workers to press for better terms and conditions of employment. It does not mean, however, that every dispute should be decided in favor of labor, for employers correspondingly have rights under the law which need to be respected.

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WHEREFORE, the present petition is hereby DENIED.

SO ORDERED.

G.R. No. 86227 January 19, 1994

DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs.THE NATIONAL LABOR RELATIONS COMMISSION and MALAYANG SAMAHAN NG MGA MANGAGAWA SA ATLAS TEXTILE DEVELOPMENT CORPORATION, respondents.

The Chief Legal Counsel, Development Bank of the Philippines for petitioner.

VITUG, J.:

This "petition for review on certiorari" ( in reality a petition for certiorari), filed by the Development Bank of the Philippines ("DBP"), seeks the reversal of the decision of the National Labor Relations Commission ("NLRC"), affirming that of the Labor Arbiter, which holds the petitioner, along with Atlas Textile Development Corporation ("ATLAS"), liable to the private respondents for wage differentials, "illegal" salary deductions, separation pay, and similar money claims.

The private respondents were employees of ATLAS, a textile firm, which hypothecated its certain assets to DBP. After ATLAS defaulted in its obligations, DBP foreclosed on the mortgage in March 1985. The latter acquired the mortgaged assets by virtue of the foreclosure sale.

The private respondents filed their aforementioned claim, on 30 October 1985, against both ATLAS and DBP. The Labor Arbiter ruled for the private respondents. On appeal by DBP, the decision was sustained by the NLRC.

Hence, the instant petition.

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The petitioner contends that it is error on the part of the public respondent to consider the workers' preference under Article 110 of the Labor Code over that of DBP's mortgage lien.

The issue has been put to fore in a number of cases brought to and decided by this Court.

In Republic vs. Peralta, 150 SCRA 37, the Court, through Mr. Justice Feliciano, ruled:

Article 110 of the Labor Code does not purport to create a lien in favor of workers or employees for unpaid wages either upon all of the properties or upon any particular property owned by their employer. Claims for unpaid wages does not therefore fall at all within the category of specially preferred claims established under Articles 2241 and 2242 of the Civil Code, except to the extent that such claims for unpaid wages are already covered by Article 2241, number 6: "claims for laborers' wages, on the goods manufactured or the work done;" or by Article 2242, number 3: "claims of laborers and other workers engaged in the construction, reconstruction or repair of buildings, canals and other works upon said buildings, canals or other works." To the extent that claims for unpaid wages fall outside the scope of Article 2241, number 6 and 2242, number 3, they would come within the ambit of the category of ordinary preferred credits under Article 2244. Applying Article 2241, number 6 to the instant case, the claims of the Unions for separation pay of their members constitute liens attaching to the processed leaf tobacco, cigars and cigarettes and other products produced or manufactured by Insolvent, but not to other assets owned by the Insolvent. And even in respect of such tobacco and tobacco products produced by Insolvent, the claims of the Unions may be given effect only after the Bureau of Internal Revenue's claim for unpaid tobacco inspection fees shall have been satisfied out of the products so manufactured by the Insolvent.

Article 110 of the Labor Code was later amended by Republic ActNo. 6715 which became effective on 21 march 1989. And so modified, the provision thenceforth provided:

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Article 110. Worker preference in case of bankruptcy. — In the event of bankruptcy or liquidation of an employer's business, his workers shall enjoy first preference as regards their unpaid wages and other monetary claims, any provision of law to the contrary notwithstanding. Such unpaid wages, and monetary claims shall be paid in full before the claims of the Government and other creditors may be paid.

The effects of the amendatory law were put to issue and passed upon in subsequent cases. In Development Bank of the Philippines vs. National Labor Relations Commission, 183 SCRA 328, the Court, through, Mme. Justice Melencio-Herrera, elucidated:

The amendment expands worker preference to cover not only unpaid wages but also other monetary claims to which even claims of the Government must be deemed subordinate.

xxx xxx xxx

Notably, the terms "declaration" of bankruptcy or "judicial" liquidation have been eliminated. Does this mean then that liquidation proceedings have been done away with?

We opine in the negative upon the following considerations:

1. Because of its impact on the entire system of credit,Article 110 of the labor Code cannot be viewed in isolation but must be read in relation to the Civil Code scheme on classification and preference of credits.

xxx xxx xxx

2. In the same way that the Civil Code provisions on classification of credits and the Insolvency Law have been brought into harmony, so also must the kindered provisions of the Labor Law be made to harmonize with those laws.

3. In the event of insolvency, a principal objective should be to effect an equitable distribution of the insolvent's property among his

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creditors. To accomplish this there must first be some proceeding where notice to all of the insolvent's creditors may be given and where the claims of preferred creditors may be bindingly adjudicated (De Baretto vs. Villanueva, No. L-14938, December 29, 1962, 6 SCRA 928). The rationale therefore has been expressed in the recent case of DBP vs. Secretary of Labor (G.R. No. 79351, 28 November 1989), . . .

4. A distinction should be made between a preference of credit and a lien. A preference applies only to claims which do not attach to specific properties. A lien creates a charge on a particular property. The right of first preference as regards unpaid wages recognized by Article 110 does not constitute a lien on the property of the insolvent debtor in favor of workers. It is but a preference of credit in their favor, a preference in application. It is a method adopted to determine and specify the order in which credits should be paid in the final distribution of the proceeds of the insolvent's assets. It is a right to a first preference in the discharge of the funds of the judgment debtor.

xxx xxx xxx

6. Even if Article 110 and its Implementing Rule, as amended, should be interpreted to mean "absolute preference," the same should be given only prospective effect in line with the cardinal rule that laws have no retroactive effect, unless the contrary is provided (Article 4, Civil Code). Thereby, any infringement on the constitutional guarantee on non-impairment of the obligation of contracts (Section 10, Article III, 1987 Constitution) is also avoided. In point of fact, DBP's mortgage credit antedated by several years the amendatory law, RA No. 6715. To give Article 110 retroactive effect would be to wipe out the mortgage in DBP's favor and expose it to a risk which is sought to protect itself against by requiring a collateral in the form of real property.

In fine, the right of preference given to workers under Article 110 of the Labor Code cannot exist in any effective way prior to the time of its presentation in distribution proceedings. It will find application

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when, in proceedings such as insolvency, such unpaid wages shall be paid in full before the "claims of the Government and other creditors" may be paid. But, for an orderly settlement of a debtor's assets, all creditors must be convened, their claims ascertained and inventoried, and thereafter the preferences determined in the course of judicial proceedings which have for their object the subjection of the property of the debtor of the payment of his debts and other lawful obligations. Thereby, an orderly determination of preference of creditors' claims is assured (Philippine Savings bank vs. Lantin, No. L-33929, September 2, 1983, 124 SCRA 476); the adjudication made will be binding on all parties-in-interest, since those proceedings are proceeding in rem; and the legal scheme of classification, concurrence and preference of credits in the Civil Code, the Insolvency Law, and the Labor Code is preserved in harmony.

The ruling was reiterated in Development Bank of the Philippines vs. National Labor Relations Commission, 186 SCRA 841, as well as cases thereafter, and just recently in Development Bank of the Philippines vs. NLRC, 218 SCRA 183.

The case at bench concerns monetary claims of workers that are not involved in judicial proceedings in rem in adjudication of claims of creditors vis-a-vis the assets of the debtor, nor have such claims accrued after the effectivity of Republic Act 6715. The petition thus raises issues heretofore squarely resolved in our aforequoted decisions. To recapitulate.

(1) Article 110 of the Labor Code, as amended, must be viewed and read in conjunction with the provisions of the Civil Code on concurrence and preferences of credits;

(2) The aforesaid provisions of the Civil Code, including Article 110 of the Labor Code, require judicial proceedings in rem in adjudication of creditors' claims against the debtor's assets to become operative;

(3) Republic Act No. 6715 has the effect of expanding the "worker preference" to cover not only unpaid wages but also other monetary claims of laborers, to which even claims of the Government must be deemed subordinate; and

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(4) The amendatory provisions of Republic Act 6715, which took effect on 21 march 1989, should only be given prospective application.

WHEREFORE, the petition is GRANTED. The assailed decision of public respondent, National Labor Relations Commission and that of the Labor Arbiter, insofar as the latter holds the petitioner liable for monetary claims of private respondents, are hereby REVERSED and SET ASIDE.

SO ORDERED.

G.R. No. 108031 March 1, 1995

DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs.NATIONAL LABOR RELATIONS COMMISSION and LEONOR A ANG, respondents.

BELLOSILLO, J.:

Is declaration of bankruptcy or judicial liquidation required before the worker's preference may be invoked under Art. 110 of the Labor Code?

On 21 March 1977 private respondent Leonor A. Ang started employment as Executive Secretary with Tropical Philippines Wood Industries, Inc. (TPWII), a corporation engaged in the manufacture and sale of veneer, plywood and sawdust panel boards. In 1982 she was promoted to the position of Personnel Officer.

In September 1983 petitioner Development Bank of the Philippines, as mortgagee of TPWII, foreclosed its plant facilities and equipment. Nevertheless TPWII continued its business operations interrupted only by brief shutdowns for the purpose of servicing its plant facilities and equipment. In January 1986 petitioner took possession of the foreclosed properties. From then on the company ceased

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its operations. As a consequence private respondent was on 15 April 1986 verbally terminated from the service.

On 14 December 1987 aggrieved by the termination of her employment, private respondent filed with the Labor Arbiter a complaint for separation pay, 13th month pay, vacation and sick leave pay, salaries and allowances against TPWII, its General Manager, and petitioner.

After hearing the Labor Arbiter found TPWII primarily liable to private respondent but only for her separation pay and vacation and sick leave pay because her claims for unpaid wages and 13th month pay were later paid after the complaint was filed. 1 The General Manager was absolved of any liability. But with respect to petitioner, it was held subsidiarily liable in the event the company failed to satisfy the judgment. The Labor Arbiter rationalized that the right of an employee to be paid benefits due him from the properties of his employer is superior to the right of the latter's mortgage, citing this Court's resolution in PNB v. Delta Motor Workers Union. 2

On 16 November 1992 public respondent National Labor Relations Commission affirmed the ruling of the Labor Arbiter. 3

The issue now before us is whether public respondent committed grave abuse of discretion in holding that Art. 110 of the Labor Code, as amended, which refers to worker preference in case of bankruptcy or liquidation of an employer's business is applicable to the present case notwithstanding the absence of any formal declaration of bankruptcy or judicial liquidation of TPWII.

Petitioner argues that the decision of public respondent runs counter to the consistent rulings of this Court in a long line of cases emphasizing that the application of Art. 110 of the Labor Code is contingent upon the institution of bankruptcy or judicial liquidation proceedings against the employer.

We hold that public respondent gravely abused its discretion in affirming the decision of the Labor Arbiter. Art. 110 should not be treated apart from other laws but applied in conjunction with the pertinent provisions of the Civil Code and the Insolvency Law to the extent that piece-meal distribution of the assets of the debtor is avoided. Art. 110, then prevailing, provides:

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Art. 110. Worker preference in case of bankruptcy. — In the event of bankruptcy or liquidation of an employer's business, his workers shall enjoy first preference as regards wages due them for services rendered during the period prior to the bankruptcy or liquidation, any provision to the contrary notwithstanding. Unpaid wages shall be paid in full before other creditors may establish any claim to a share in the assets of the employer.

Complementing Art. 110, Sec. 10, Rule VIII, Book III, of the Revised Rules and Regulations Implementing the Labor Code provides:

Sec. 10. Payment of wages in case of bankruptcy. — Unpaid wages earned by the employees before the declaration of bankruptcy or judicial liquidation of the employer's business shall be given first preference and shall be paid in full before other creditors may establish any claim to a share in the assets of the employer.

We interpreted this provision in Development Bank of the Philippines v. Santos 4 to mean that —

. . . a declaration of bankruptcy or a judicial liquidation must be present before the worker's preference may be enforced. Thus, Article 110 of the Labor Code and its implementing rule cannot be invoked by the respondents in this case absent a formal declaration of bankruptcy or a liquidation order . . . . (Emphasis supplied).

The rationale is that to hold Art. 110 to be applicable also to extrajudicial proceedings would be putting the worker in a better position than the State which could only assert its own prior preference in case of a judicial proceeding. 5 Art. 110, which was amended by R.A. 6715 effective 21 March 1989, now reads:

Art. 110. Worker preference in case of bankruptcy. — In the event of bankruptcy or liquidation of an employer's business, his workers shall enjoy first preference as regards their unpaid wages and other monetary claims, any provision of law to the contrary notwithstanding. Such unpaid wages and monetary claims shall be

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paid in full before the claims of the Government and other creditors may be paid.

Obviously, the amendment expanded the concept of "worker preference" to cover not only unpaid wages but also other monetary claims to which even claims of the Government must be deemed subordinate. The Rules and Regulations Implementing R.A. 6715, approved 24 May 1989, also amended the corresponding implementing rule, and now reads:

Sec. 10. Payment of wages and other monetary claims in case of bankruptcy. — In case of bankruptcy or liquidation of the employer's business, the unpaid wages and other monetary claims of the employees shall be given first preference and shall be paid in full before the claims of government and other creditors may be paid.

Although the terms "declaration" (of bankruptcy) or "judicial" (liquidation) have been notably eliminated, still inDevelopment Bank of the Philippines v. NLRC, 6 this Court did not alter its original position that the right to preference given to workers under Art. 110 cannot exist in any effective way prior to the time of its presentation in distribution proceedings. In effect, we reiterated our previous interpretation in Development Bank of the Philippines v. Santos where we said:

It (worker preference) will find application when, in proceedings such as insolvency, such unpaid wages shall be paid in full before the "claims of the Government and other creditors" may be paid. But, for an orderly settlement of a debtor's assets, all creditors must be convened, their claims ascertained and inventoried, and thereafter the preferences determined. In the course of judicial proceedings which have for their object the subjection of the property of the debtor to the payment of his debts or other lawful obligations. Thereby, an orderly determination of preference of creditors' claims is assured (Philippine Savings Bank vs. Lantin, No. L-33929, September 2, 1983, 124 SCRA 476); the adjudication made will be binding on all parties-in-interest since those proceedings are proceedings in rem; and the legal scheme of classification, concurrence and preference of credits in the Civil Code, the Insolvency Law, and the Labor Code is preserved in harmony. 7

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In ruling, as we did, in Development Bank of the Philippines v. Santos, we took into account the following pronouncements:

In the event of insolvency, a principal objective should be to effect an equitable distribution of the insolvents property among his creditors. To accomplish this there must first be some proceeding where notice to all of the insolvent's creditors may be given and where the claims of preferred creditors may be bindingly adjudicated. (De Barreto v. Villanueva, No. L-14938, December 29, 1962, 6 SCRA 928). The rationale therefore has been expressed in the recent case of DBP v. Secretary of Labor (G.R. No. 79351, 28 November 1989), which we quote:

A preference of credit bestows upon the preferred creditor an advantage of having his credit satisfied first ahead of other claims which may be established against the debtor. Logically, it becomes material only when the properties and assets of the debtors are insufficient to pay his debts in full; for if the debtor is amply able to pay his various creditors in full, how can the necessity exist to determine which of his creditors shall be paid first or whether they shall be paid out of the proceeds of the sale (of) the debtor's specific property. Indubitably, the preferential right of credit attains significance only after the properties of the debtor have been inventoried and liquidated, and the claims held by his various creditors have been established (Kuenzle & Sheriff (Ltd.) v. Villanueva, 41 Phil. 611 [1916]; Barretto v. Villanueva, G.R. No. 14938, 29 December 1962, 6 SCRA 928; Philippine Savings Bank v. Lantin, G.R. No. 33929, 2 September 1983, 124 SCRA 476).

In the present case, there is as yet no declaration of bankruptcy nor judicial liquidation of TPWII. Hence, it would be premature to enforce the worker's preference.

The additional ratiocination of public respondent that "under Article 110 of the Labor Code complainant enjoys a preference of credit over the properties of

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TPWII being held in possession by DBP," is a dismal misconception of the nature of preference of credit, a subject matter which we have already discussed in clear and simple terms and even distinguished from a lien in Development Bank of the Philippines v. NLRC 8 —

. . . A preference applies only to claims which do not attach to specific properties. A lien creates a charge on a particular property. The right of first preference as regards unpaid wages recognized by Article 110 does not constitute a lien on the property of the insolvent debtor in favor of workers. It is but a preference of credit in their favor, a preference in application. It is a method adopted to determine and specify the order in which credits should be paid in the final distribution of the proceeds of the insolvent's assets. It is a right to a first preference in the discharge of the funds of the judgment debtor . . . In the words of Republic v. Peralta, supra: Article 110 of the Labor Code does not purport to create a lien in favor of workers or employees for unpaid wages either upon all of the properties or upon any particular property owned by their employer. Claims for unpaid wages do not therefore fall at all within the category of specially preferred claims established under Articles 2241 and 2242 of the Civil Code, except to the extent that such claims for unpaid wages are already covered by Article 2241, number 6: "claims for laborers: wages, on the goods manufactured or the work done;" or by Article 2242, number 3, "claims of laborers and other workers engaged in the construction reconstruction or repair of buildings, canals and other works, upon said buildings, canals and other works . . . . To the extent that claims for unpaid wages fall outside the scope of Article 2241, number 6, and 22421 number 3, they would come within the ambit of the category of ordinary preferred credits under Article 2244.

The DBP anchors its claim on a mortgage credit. A mortgage directly and immediately subjects the property upon which it is imposed, whoever the possessor may be, to the fulfillment of the obligation for whose security it was constituted (Article 2176, Civil Code). It creates a real right which is enforceable against the whole world. It is a lien on an identified immovable property, which a preference is not. A recorded mortgage credit is a special preferred credit under Article

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2242 (5) of the Civil Code on classification of credits. The preference given by Article 1l0, when not falling within Article 2241 (6) and Article 2242 (3), of the Civil Code and not attached to any specific property, is all ordinary preferred credit although its impact is to move it from second priority to first priority in the order of preference established by Article 2244 of the Civil Code.

The present controversy could have been easily settled by public respondent had it referred to ample jurisprudence which already provides the solution. Stare decisions et non quiet movere. Once a case is decided by this Court as the final arbiter of any justifiable controversy one way, then another case involving exactly the same point at issue should be decided in the same manner. Public respondent had no choice on the matter. It could not have ruled any other way. This Court having spoken in a string of cases against public respondent, its duty is simply to obey judicial precedents. 9 Any further disregard, if not defiance, of our rulings will be considered a ground to hold public respondent in contempt.

WHEREFORE, the petition is GRANTED. The decision of public respondent National Labor Relations Commission affirming the decision of the Labor Arbiter insofar as it held petitioner Development Bank of the Philippines liable for the monetary claims of private respondent Leonor A. Ang is SET ASIDE. The temporary restraining order we issued on 8 February 1993 10 enjoining the execution of the decision of public respondent against petitioner is made PERMANENT.

SO ORDERED.

G.R. No. 95844 July 20, 1992

COMMANDO SECURITY AGENCY, petitioner, vs.NATIONAL LABOR RELATIONS COMMISSION and NEMESIO DECIERDO, respondents.

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GRIÑO-AQUINO, J.:

Petitioner assails the resolutions of the National Labor Relations Commission dated May 26, 1989 and September 25, 1990, affirming with modification the decision of the Labor Arbiter in NLRC Case No. 11-0200075-88.

Private respondent Nemesio Decierdo was a security guard of the petitioner since February 1981. In April 1987, petitioner entered into a contract to provide guarding services to the Alsons Development and Investment Corporation (ALSONS for brevity) at its Aldevinco Building on Claro M. Recto Avenue, Davao City, for a period of one year, i.e., from April 11, 1987 to April 10, 1988, unless renewed under such terms and conditions as may be mutually acceptable. The number of guards to be assigned by the petitioner would depend on ALSON's demand, sometimes two (2) guards on a daily shift, and sometimes four (4) guards. Decierdo was one of the guards assigned to the Aldevinco Building by the petitioner.

On February 9, 1988, Maria Mila D. Samonte, Properties Administration Head of ALSONS, requested the petitioner for a "periodic reshuffling" of guards. The pertinent portion of her letter reads:

Our corporation offers spaces to tenants including services of maintenance and security. The latter causes us to hire your agency's services. It is therefore clearly understood that Aldevinco assures tenants of security of their properties found in Aldevinco's compound, and likewise Commando Security Service Agency assures Aldevinco the same.

We hope that the above shall be clearly explained to the incoming guards, we requested for a period reshuffling. We do extend our gratitude to your immediate services in response to our request in the past. (pp. 45-A-46, Rollo.)

Pursuant to that reasonable request of its client, petitioner on February 10, 1988 served the following recall order on Decierdo:

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Report to this HQs for instruction. You are hereby recalled from your present post at Aldevinco Bldg. as per Rotation Policy Order by the management effective 11 February 1988. (p. 46. Rollo.)

On the same date, February 10, 1988, Detail Order 02-016 was issued to Decierdo assigning him to the Pacific Oil Company in Bunawan, Davao City, with instruction to report to the manager, but Decierdo refused to accept the assignment as shown by the annotation at the bottom of the Order, viz:

Refused to accept assignment he is going to rest for a while. (p. 54, Rollo.)

On February 11, 1988, which was the effective date of the detail order, Decierdo filed a complaint for illegal dismissal, unfair labor practice, underpayment of wages, overtime pay, night premium, 13th month pay, holiday pay, rest day pay and incentive leave pay.

On June 28, 1988, the Executive Labor Arbiter rendered a decision, the dispositive portion of which reads as follows:

WHEREFORE, in consideration of all the foregoing, judgment is hereby rendered:

1. Ordering respondent Commando Security Agency to pay complainant Nemesio Decierdo the total amount of THIRTY-THREE THOUSAND EIGHT HUNDRED SEVENTY-SEVEN AND 92/100 PESOS (P33,877.92), as salary, holiday and rest day pay differentials, 13th month pay differentials and service incentive leave pay; and

2. Dismissing the complaint for illegal dismissal, unfair labor practice, overtime pay and night premium for lack of merit. (pp. 19-20, Rollo.)

Petitioner appealed to the NLRC which on May 26, 1989, affirmed with modification the decision of the Labor Arbiter, to wit:

WHEREFORE, the appealed Decision is hereby AFFIRMED with the modification that the amount of P1,498.39 representing complainant's accountability with (sic) respondent is hereby ordered deducted from the total award. (p. 58, Rollo.)

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Hence, this petition for certiorari alleging that the NLRC gravely abused its discretion;

1. in failing to make a clear pronouncement that Decierdo had abandoned his employment as he went on AWOL and therefore is considered resigned;

2. in denying petitioner due process of law, or a right to be heard;

3. in not considering that Decierdo is in estoppel; and

4. in not holding that petitioner is entitled to a 25% share of his monthly salary as agreed between them.

The petition for certiorari is without merit.

The first ground of the petition is not well taken for the NLRC did find that Decierdo had given up his job and chose separation pay in lieu of reinstatement.

Anent the first issue, suffice it to state that there was no need for the Executive Labor Arbiter to fix a period within which to require complainant to report for work considering that the latter is no longer interested in his job and had claimed for separation benefits in lieu of reinstatement. Why respondent has begrudged the Labor Arbiter's "failure" to fix a return-to-work period escapes us considering that the Labor Arbiter practically found complainant to have abandoned his job and, besides, complainant's claims for separation pay was not granted. If there was anyone who should have been interested in being recalled to work, it should have been complainant himself and not respondent. (pp. 54-55, Rollo.)

As a result, the NLRC dismissed the charge of illegal dismissal and unfair labor practice against the petitioner and denied Decierdo's claim for separation pay.

Regarding the petitioner's allegation that it was denied due process, we have time and again pointed out that procedural due process merely requires notice and opportunity to be heard (Var Orient Shopping Company vs. Achacoso, 161 SCRA 732; Bermejo vs. Barrios, 31 SCRA 764) which the petitioner was given then it filed its position paper. The petitioner was properly notified and even took part in the

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conciliation conference for the amicable settlement of the case. It was made aware of the nature and specifics of the charges against it but failed to refute them expecting that a hearing would be called. However, the Labor Arbiter proceeded to decide the case based on the parties' position papers, the records submitted by petitioner, and the report and the computations made by the Corporate Auditing Examiner regarding the sums which Decierdo was entitled to recover. That procedure complied with the Revised Rules of the NLRC, particularly Sections 2 and 3, which provide:

Sec. 2. Submission of position papers. — During the initial conference/hearing, or immediately thereafter. the Labor Arbiter shall require the parties to simultaneously submit to him their respective verified position papers, which shall cover only the issues raised in the complaint, accompanied by all supporting documents then available to them and the affidavits of their witnesses which shall take the place of their direct testimony. The parties shall thereafter not be allowed to allege, or present evidence to prove, facts not referred to and any cause or causes of action not included in their complaint or position papers, affidavits and other documents. The parties shall furnish each other with copies of the position papers, together with the supporting affidavits and documents submitted by them.

Sec. 3. Determination of necessity of hearing. — Immediately after the submission by the parties of their position papers and supporting proofs, the Labor Arbiter shall determine whether there is a need for a formal hearing or investigation. At this state, he may, in his discretion, and for the purpose of making such determination, elicit pertinent facts or information, including documentary evidence, if any, from any party or witness to complete, as far as possible, the facts of the case. Facts or information so elicited may serve as basis for his clarification or simplication and limitation of the issues in the case, encouraging for this purpose the submission by the parties of admissions and stipulations of fact to abbreviate the proceedings. He shall participate actively in the preparation of such stipulations, making suggestions on what facts the parties need not prove. (Emphasis supplied)

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The NLRC correctly held that:

. . . the Executive Labor Arbiter did not err when she dispensed with a full blown hearing there being no necessity for one. Under Section 3 of the same rule as above-cited, the Labor Arbiter may, in his sound discretion, dispense with a hearing and require, instead, the parties to file their respective position papers together with all the supporting proofs. . . . all that respondent had to do was present its payrolls and other records which it is required to keep and maintain (see Sec. 6-12, Rule X, Book III of Omnibus Rules Implementing the Labor Code) and it could already be determined on the face thereof if complainant's monetary claims had actually been paid or not . . . complainant's entitlements were computed by the Corporate Auditing Examiner (p. 63, Records) on the basis of respondent's records which was secured by virtue of a subpoena duces tecum (p. 43, record). Respondent should have met bead-on the accuracy of correctness of the computations and not skirt the issue by dwelling merely on technicalities by complaining that the records were irregularly procured. (p. 56, Rollo.)

Petitioner's contention that Decierdo is estopped from complaining about the 25% deduction from his salary representing petitioner's share in procuring job placement for him, is not well taken. That provision of the employment contract was illegal and inequitous, hence, null and void.

The constitutional provisions on social justice (Sections 9 and 10,Article II) and protection to labor (Sec. 18, Article II) in the declaration of Principles and State Policies, impose upon the courts the duty to be ever vigilant in protecting the rights of workers who are placed in a contractually disadvantaged position and who sign waivers or provisions contrary to law and public policy (Mercury Drug Co. Inc. vs. Dayao, 117 SCRA 99, 116). We affirm the NLRC's ruling that:

It goes without saying that respondent may not deduct its so-called "share" from the salaries of its guards without the latter's express consent and if such deductions are not allowed by law. This is notwithstanding any previous agreement or understanding between them. Any such agreement or contract is void ab initio being contrary

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to law and public policy (Mercury Drug Co. vs. Nardo Dayao, G.R. No. 30432, September 30, 1982). (pp. 57-58, Rollo.)

WHEREFORE, finding no abuse of discretion on the part of the National Labor Relations Commission in rendering the assailed decision, the petition for certiorari is DISMISSED for lack at merit.

SO ORDERED.

SAN MIGUEL CORPORATION, petitioner,   vs. THE HONORABLE COURT OF APPEALS-FORMER THIRTEENTH DIVISION, HON. UNDERSECRETARY JOSE M. ESPAÑOL, JR., Hon. CRESENCIANO B. TRAJANO, and HON. REGIONAL DIRECTOR ALLAN M. MACARAYA, respondents.

D E C I S I O N

KAPUNAN, J.:

Assailed in the petition before us are the decision, promulgated on 08 May 2000, and the resolution, promulgated on 18 October 2000, of the Court of Appeals in CA G.R. SP-53269.

The facts of the case are as follows:

On 17 October 1992, the Department of Labor and Employment (DOLE), Iligan District Office, conducted a routine inspection in the premises of San Miguel Corporation (SMC) 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. [1] 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, Alan M. Macaraya, Director IV of DOLE Iligan District Office issued a compliance order, dated 17 December 1993, directing SMC to consider Muslim holidays as regular

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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 to the DOLE main office in Manila but its appeal was dismissed for having been filed late. The dismissal of the appeal for late filing was later on reconsidered in the order of 17 July 1998 after it was found that the appeal was filed within the reglementary period. However, the appeal was still dismissed for lack of merit and the order of Director Macaraya was affirmed.

SMC went to this Court for relief via a petition for certiorari, which this Court referred to the Court of Appeals pursuant to St. Martin Funeral Homes vs. NLRC.[2]

The appellate court, in the now questioned decision, promulgated on 08 May 2000, ruled, as follows:

WHEREFORE, the Order dated December 17, 1993 of Director Macaraya and Order dated July 17, 1998 of Undersecretary Español, Jr. is hereby MODIFIED with regards the payment of Muslim holiday pay from 200% to 150% of the employee's basic salary. Let this case be remanded to the Regional Director for the proper computation of the said holiday pay.

SO ORDERED.[3]

Its motion for reconsideration having been denied for lack of merit, SMC filed a petition for certiorari before this Court, alleging that:

PUBLIC RESPONDENTS SERIOUSLY ERRED AND COMMITTED GRAVE ABUSE OF DISCRETION WHEN THEY GRANTED MUSLIM HOLIDAY PAY TO NON-MUSLIM EMPLOYEES OF SMC-ILICOCO AND ORDERING SMC TO PAY THE SAME RETROACTIVE FOR ONE (1) YEAR FROM THE DATE OF THE PROMULGATION OF THE COMPLIANCE ORDER ISSUED ON DECEMBER 17, 1993, IT BEING CONTRARY TO THE PROVISIONS, INTENT AND PURPOSE OF P.D. 1083 AND PREVAILING JURISPRUDENCE.

THE ISSUANCE OF THE COMPLIANCE ORDER WAS TAINTED WITH GRAVE ABUSE OF DISCRETION IN THAT SAN MIGUEL CORPORATION WAS NOT ACCORDED DUE PROCESS OF LAW; HENCE, THE ASSAILED COMPLIANCE ORDER AND ALL SUBSEQUENT ORDERS, DECISION AND RESOLUTION OF PUBLIC RESPONDENTS WERE ALL ISSUED WITH GRAVE ABUSE OF DISCRETION AND ARE VOID AB INITIO.

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THE HON. COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT DECLARED THAT REGIONAL DIRECTOR MACARAYA, UNDERSECRETARY TRAJANO AND UNDERSECRETARY ESPAÑOL, JR., WHO ALL LIKEWISE ACTED WITH GRAVE ABUSE OF DISCRETION AND WITHOUT OR IN EXCESS OF THEIR JURISDICTION, HAVE JURISDICTION IN ISSUING THE ASSAILED COMPLIANCE ORDER AND SUBSEQUENT ORDERS, WHEN IN FACT THEY HAVE NO JURISDICTION OR HAS LOST JURISDICTION OVER THE HEREIN LABOR STANDARD CASE.[4]

At the outset, petitioner came to this Court via a petition for certiorari under Rule 65 instead of an appeal under Rule 45 of the 1997 Rules of Civil Procedure. In National Irrigation Administration vs. Court of Appeals,[5] the Court declared:

x x x (S)ince the Court of Appeals had jurisdiction over the petition under Rule 65, any alleged errors committed by it in the exercise of its jurisdiction would be errors of judgment which are reviewable by timely appeal and not by a special civil action of certiorari. If the aggrieved party fails to do so within the reglementary period, and the decision accordingly becomes final and executory, he cannot avail himself of the writ of certiorari, his predicament being the effect of his deliberate inaction.

The appeal from a final disposition of the Court of Appeals is a petition for review under Rule 45 and not a special civil action under Rule 65 of the Rules of Court, now Rule 45 and Rule 65, respectively, of the 1997 Rules of Civil Procedure. Rule 45 is clear that decisions, final orders or resolutions of the Court of Appeals in any case, i.e., regardless of the nature of the action or proceeding involved, may be appealed to this Court by filing a petition for review, which would be but a continuation of the appellate process over the original case. Under Rule 45 the reglementary period to appeal is fifteen (15) days from notice of judgment or denial of motion for reconsideration.

x x x

For the writ of certiorari under Rule 65 of the Rules of Court to issue, a petitioner must show that he has no plain, speedy and adequate remedy in the ordinary course of law against its perceived grievance. A remedy is considered "plain, speedy and adequate" if it will promptly relieve the petitioner from the injurious

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effects of the judgment and the acts of the lower court or agency. In this case, appeal was not only available but also a speedy and adequate remedy.[6]

Well-settled is the rule that certiorari cannot be availed of as a substitute for a lost appeal.[7] For failure of petitioner to file a timely appeal, the questioned decision of the Court of Appeals had already become final and executory.

In any event, the Court finds no reason to reverse the decision of the Court of Appeals.

Muslim holidays are provided under Articles 169 and 170, Title I, Book V, of Presidential Decree No. 1083,[8] otherwise known as the Code of Muslim Personal Laws, which states:

Art. 169. Official Muslim holidays. - The following are hereby recognized as legal Muslim holidays:

(a) ‘Amun Jadīd (New Year), which falls on the first day of the first lunar month of Muharram;

(b) Maulid-un-Nabī (Birthday of the Prophet Muhammad), which falls on the twelfth day of the third lunar month of Rabi-ul-Awwal;

(c) Lailatul Isrā Wal Mi’rāj (Nocturnal Journey and Ascension of the Prophet Muhammad), which falls on the twenty-seventh day of the seventh lunar month of Rajab;

(d) ‘Īd-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) ‘Īd-ūl-Adhā (Hari Raya Haji),which falls on the tenth day of the twelfth lunar month of Dhū’l-Hijja.

Art. 170. 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.

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The foregoing provisions should be read in conjunction with Article 94 of the Labor Code, which provides:

Art. 94. Right to holiday pay. -

(a) Every worker shall be paid his regular daily wage during regular holidays, except in retail and service establishments regularly employing less than ten (10) workers;

(b) The employer may require an employee to work on any holiday but such employee shall be paid a compensation equivalent to twice his regular rate; x x x.

Petitioner asserts that Article 3(3) of Presidential Decree No. 1083 provides that “(t)he provisions of this Code shall be applicable only to Muslims x x x.” However, there should be no distinction between Muslims and non-Muslims as regards payment of benefits for Muslim holidays. The Court of Appeals did not err in sustaining Undersecretary Español who stated:

Assuming arguendo that the respondent’s position is correct, then by the same token, Muslims throughout the Philippines are also not entitled to holiday pays on Christian holidays declared by law as regular holidays. We must remind 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 “x x x nothing herein shall be construed to operate to the prejudice of a non-Muslim.”

In addition, the 1999 Handbook on Workers’ Statutory Benefits, approved by then DOLE Secretary Bienvenido E. Laguesma on 14 December 1999 categorically stated:

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.[9]

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On the question regarding the jurisdiction of the Regional Director Allan M. Macaraya, Article 128, Section B of the Labor Code, as amended by Republic Act No. 7730, provides:

“Article 128. Visitorial and enforcement power. -

x x x

(b) Notwithstanding the provisions of Article 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 findings of labor employment and enforcement officers or industrial safety engineers made in the course of the inspection. The Secretary or his duly authorized representative 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.

x x x

In the case before us, Regional Director Macaraya acted as the duly authorized representative of the Secretary of Labor and Employment and it was within his power to issue the compliance order to SMC. In addition, the Court agrees with the Solicitor General that the petitioner did not deny that it was not paying Muslim holiday pay to its non-Muslim employees. Indeed, petitioner merely contends that its non-Muslim employees are not entitled to Muslim holiday pay. Hence, the issue could be resolved even without documentary proofs. In any case, there was no indication that Regional Director Macaraya failed to consider any documentary proof presented by SMC in the course of the inspection.

Anent the allegation that petitioner was not accorded due process, we sustain the Court of Appeals in finding that SMC was furnished a copy of the inspection order and it was received by and explained to its Personnel Officer. Further, a series of summary hearings were conducted by DOLE on 19 November 1992, 28

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May 1993 and 4 and 5 October 1993. Thus, SMC could not claim that it was not given an opportunity to defend itself.

Finally, as regards the allegation that the issue on Muslim holiday pay was already resolved in NLRC CA No. M-000915-92 (Napoleon E. Fernan vs. San Miguel Corporation Beer Division and Leopoldo Zaldarriaga),[10] the Court notes that the case was primarily for illegal dismissal and the claim for benefits was only incidental to the main case. In that case, the NLRC Cagayan de Oro City declared, in passing:

We also deny the claims for Muslim holiday pay for lack of factual and legal basis. Muslim holidays are legally observed within the area of jurisdiction of the present Autonomous Region for Muslim Mindanao (ARMM), particularly in the provinces of Maguindanao, Lanao del Sur, Sulu and Tawi-Tawi. It is only upon Presidential Proclamation that Muslim holidays may be officially observed outside the Autonomous Region and generally extends to Muslims to enable them the observe said holidays.[11]

The decision has no consequence to issues before us, and as aptly declared by Undersecretary Español, it “can never be a benchmark nor a guideline to the present case x x x.”[12]

WHEREFORE, in view of the foregoing, the petition is DISMISSED.

SO ORDERED.

G.R. No. L-49582 January 7, 1986

CBTC EMPLOYEES UNION, petitioner, vs.THE HONORABLE JACOBO C. CLAVE, Presidential Executive Assistant, and COMMERCIAL BANK & TRUST COMPANY OF THE PHILIPPINES, respondents.

Francisco F. Angeles for petitioner.

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Pacis, Reyes, De Leon & Cruz Law, Office for respondent CBTC.

Edmundo R. AbigaN, Jr. for respondent Union.

DE LA FUENTE, J.:

Petition for certiorari seeking to annul and set aside the decision of the respondent Presidential Executive Assistant 1affirming that of the Acting Secretary of Labor who reversed the decision of the National Labor Relations Comission which upheld the Voluntary Arbitrator's order directing the private respondent bank to pay its monthly paid employees their "legal holiday pay."

Petitioner Commercial Bank and Trust Company Employees' Union (Union for short) lodged a complaint with the Regional Office No. IV, Department of Labor, against private respondent bank (Comtrust) for non-payment of the holiday pay benefits provided for under Article 95 of the Labor Code in relation to Rule X, Book III of the Rules and Regulations Implementing the Labor Code.

Failing to arrive at an amicable settlement at conciliation level, the parties opted to submit their dispute for voluntary arbitration. The issue presented was: "Whether the permanent employees of the Bank within the collective bargaining unit paid on a monthly basis are entitled to holiday pay effective November 1, 1974, pursuant to Article 95 (now Article 94) of the Labor Code, as amended and Rule X (now Rule IV), Book III of the Rules and Regulations Implementing the Labor Code. "

In addition, the disputants signed a Submission Agreement stipulating as final, unappealable and executory the decision of the Arbitrator, including subsequent issuances for clarificatory and/or relief purposes, notwithstanding Article 262 of the Labor Code which allow appeal in certain instances. 2

In the course of the hearing, the Arbitrator apprised the parties of an interpretative bulletin on "holiday pay" about to be issued by the Department of Labor. Whereupon, the Union filed a Manifestation 3 which insofar as relevant stated:

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6. That complainant union . . . has manifested its apprehension on the contents of the said Interpretative Bulletin in view of a well-nigh irresistible move on the part of the employers to exclude permanent workers similarly situated as the employees of Comtrust from the coverage of the holiday pay benefit despite the express and self-explanatory provisions of the law, its implementing rules and opinions thereon . . . .

7. That in the event that said Interpretative Bulletin regarding holiday pay would be adverse to the present claim . . . in that it would in effect exclude the said employees from enjoyment of said benefit, whether wholly or partially, complainant union respectfully reserves the right to take such action as may be appropriate to protect its interests, a question of law being involved. . . . An Interpretative Bulletin which was inexistent at the time the said commitment was made and which may be contrary to the law itself should not bar the right of the union to claim for its holiday pay benefits.

On April 22, 1976, the Arbitrator handed down an award on the dispute. Relevant portions thereof read as follows:

The uncontroverted facts of this case are as follows:

(1) That the complainant Union is the recognized sole and exclusive collective bargaining representative of all the permanent rank-and-file employees of the Bank with an existing Collective Bargaining Agreement covering the period from July 1, 1974 up to June 30, 1977;

(2) That ... the standard workweek of the Bank generally consists of five (5) days of eight (8) hours each day which, . . . said five days are generally from Monday thru Friday; and, as a rule, Saturdays, Sundays and the regular holidays are not considered part of the standard workweek.

(3) That, in computing the equivalent daily rate of its employees covered by the CBA who are paid on a monthly basis, the following

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computation is used, as per the provisions of Section 4, Article VII, of the CBA (Annex "A"):

Daily Rate = Basic Monthly Salary plus CLA x 12 250

Basic Hourly Rate = Daily Rate 8

(4) That the divisor of '250', . . . was arrived at by subtracting the 52 Sundays, 52 Saturdays, the 10 regular holidays and December 31 (secured thru bargaining), or a total of 115 off-days from the 365 days of the year or a difference of 250 days.

Considering the above uncontroverted facts, the principal question to be resolved is whether or not the monthly pay of the covered employees already includes what Article 94 of the Labor Code requires as regular holiday pay benefit in the amount of his regular daily wage (100% if unworked or 200% if worked) during the regular holidays enumerated therein, i.e., Article 94(c) of the Labor Code.

In its latest Memorandum, filed on March 26, 1976, the Bank relies heavily on the provisions of Section 2, Rule IV, Book 111, of the Rules and Regulations implementing particularly Article 94 (formerly Article 208) of the Labor Code, which Section reads as follows:

SECTION 2. Status of employees paid by the month -Employees who are uniformly paid by the month, irrespective of the number of' working days therein with a salary of not less than the statutory or established minimum wage, shall be presumed to be paid for all days in the month whether worked or not.

For this purpose, the monthly minimum wage shall not be less than the statutory minimum wage multiplied by 365 days divided by twelve. (Emphasis supplied).

While admitting that there has virtually been no change effected by Presidential Decree No. 850, which amended the Labor Code, other than the re-numbering of the original Article 208 of said Code to what is now Article 94, the Bank, however, attaches a great deal of

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significance in the above-quoted Rule as to render the question at issue 'moot and academic'.

On the other hand, the Union maintains, in its own latest Memorandum, filed also on March 26, 1976, that the legal presumption established in the above-quoted Rule is merely a disputable presumption. This contention of the Union is now supported by a pronouncement categorically to that effect by no less than the National Labor Relations Commission (NLRC) in the case of The Chartered Bank Employees Association vs. The Chartered Bank. NLRC Case No. (s) RB-IV-1739-75 (RO4-5-3028-75), which reads, in part, as follows:

. . . A disputable presumption was sea in that it would be presumed the salary of monthly-paid employees may already include rest days, such as Saturdays, Sundays, special and legal holidays, worked or unworked, in effect connoting that evidence to the contrary may destroy such a supposed legal presumption. Indeed, the Rule merely sets a presumption. It does not conclusively presume that the salary of monthly-paid employees already includes unworked holidays. . . .

The practice of the Bank of paying its employees a sum equivalent to Base pay plus Premium on Saturdays, Sundays and special and legal holidays, destroys the legal presumption that monthly pay is for an days of the month. For if the monthly pay is payment for all days of the month, then why should the employee be paid again for working on such rest days. (Emphasis supplied)

There is no reason at present not to adopt the above ruling of the Honorable Comission, especially considering the fact that this Arbitrator, in asking a query on the nature of the presumption established by the above Rule, from the Director of Labor Standards in the PMAP Conference held at the Makati Hotel on March 13, 1976, was given the categorical answer that said presumption is merely

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disputable. This answer from the Labor Standards Director is significant inasmuch as it is his office, the Bureau of Labor Standards, that is reportedly instrumental in the preparation of the implementing Rules, particularly on Book III of the Labor Code on Conditions of Employment, to which group the present Rule under discussion belongs.

So, rather than rendering moot and academic the issue at hand, as suggested by the Bank, the more logical step to take is to determine whether or not there is sufficient evidence to overcome the disputable presumption established by the Rule.

It is unquestioned, and as provided for in the CBA itself, that the divisor used in determining the daily rate of the monthly-paid employees is '250'.

xxx xxx xxx

Against this backdrop, certain relevant and logical conclusions result, namely:

(A) The Bank maintains that, since its inception or start of operations in 1954, all monthly-paid employees in the Bank are paid their monthly salaries without any deduction for unworked Saturdays, Sundays, legals and special holidays. On the other hand, it also maitains that, as a matter of fact, 'always conscious of its employee who has to work, on respondent's rest days of Saturdays and Sundays or on a legal holiday, an employee who works overtime on any of said days is paid one addition regular pay for the day plus 50% of said regular pay (Bank's Memorandum, page 3, filed January 21, 1976). . . .

xxx xxx xxx

On the other hand, there is more reason to believe that, if the Bank has never made any deduction from its monthly-paid employees for unworked Saturdays, Sundays, legal and special holidays, it is because there is really nothing to deduct properly since the monthly, salary never really included pay for such unworked days-and which

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give credence to the conclusion that the divisor '250' is the proper one to use in computing the equivalent daily rate of the monthly-paid employees.

(B) The Bank further maintains that the holiday pay is intended only for daily-paid workers. In this regard, the NLRC has this to say , in the same above-quoted Chartered Bank case:

It is contended that holiday pay is primarily for daily wage earners. Let us examine the law, more specifically Article 95 (now Article 94) of the Labor Code to see whether it supports this contention. The words used in the Decree are 'every worker', while the framers of the Implementing Rules preferred the use of the phrase 'all employees.' Both the decree itself and the Rules mentioned enumerated the excepted workers. It is a basic rule of statutory construction that putting an exception limits or modifies the enumeration or meaning made in the law. it is thus easy to see that a mere reading of the Decree and of the Rules would show that the monthly-paid employees of the Bank are not expressly included in the enumeration of the exception.

Special notice is made of the fact that the criteria at once readable from the exception referred to is the nature of the job and the number of employees involved, and not whether the employee is a daily-wage earner or a regular monthly-paid employee.

There is no reason at all to digress from the above-quoted observation of the Honorable Commission for purposes of the present case.

xxx xxx xxx

Finally, inasmuch as Article 94 of the Labor Code is one of its so-called self-executing provisions, conjointly with its corresponding

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implementing Rules, it is to be taken to have taken effect, as of November 1, 1974, as per Section I (1), Rule IV, Book III , of the Implementing Rules.

WHEREAS, all the above premises considered, this Arbitrator rules that:

(1) All the monthly-paid employees of the Bank herein represented by the Union and as governed by their Collective Bargaining Agreement, are entitled to the holiday pay benefits as provided for in Article 94 of the labor Code and as implemented by Rule IV, Book III, of the corresponding implementing Rules, except for any day or any longer period designated by lawor holding a general election or referendum;

(2) Paragraph (1) hereof means that any covered employee who does not work on any of the regular holidays enumerated in Article 94 (c) of the Labor Code, except that which is designated for election or referendum purposes, is still entitled to receive an amount equivalent to his regular daily wage in addition to his monthly salary. If he work on any of the regular holidays, other than that which is designated for election or referendum purposes, he is entitled to twice, his regular daily wage in addition to his monthly salary. The 50% premium pay provided for in the CBA for working on a rest day (which has been interpreted by the parties to include the holidays) shall be deemed already included in the 200% he receives for working on a regular holiday. With respect to the day or any longer period designated by law for holding a general election or referendum, if the employee does not work on such day or period he shall no longer be entitled to receive any additional amount other than his monthly salary which is deemed to include already his regular daily wage for such day or period. If he works on such day or period, he shall be entitled to an amount equivalent to his regular daily wage (100%) for that day or period in addition to his monthly salary. The 50% premium pay provided for in the CBA for working on that day or period shall be deemed already included in the additional 100% he receives for working on such day or period; and

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(3) The Bank is hereby ordered to pay all the above employees in accordance with the above paragraphs (1) and (2), retroactive from November 1, 1974.

SO ORDERED.

April 22, 1976, Manila, Philippines. 4

The next day, on April 23, 1976, the Department of Labor released Policy Instructions No. 9, hereinbelow quoted:

The Rules implementing PD 850 have clarified the policy in the implementation of the ten (10) paid legal holidays. Before PD 850, the number of working days a year in a firm was considered important in determining entitlement to the benefit. Thus, where an employee was working for at least 313 days, he was considered definitely already paid. If he was working for less than 313, there was no certainty whether the ten (10) paid legal holidays were already paid to him or not.

The ten (10) paid legal holidays law, to start with, is intended to benefit principally daily employees. In the case of monthly, only those whose monthly salary did not yet include payment for the ten (10) paid legal holidays are entitled to the benefit.

Under the rules implementing PD 850, this policy has been fully clarified to eliminate controversies on the entitlement of monthly paid employees. The new determining rule is this: If the monthly paid employee is receiving not less than P 240, the maximum monthly minimum wage, and his monthly pay is uniform from January to December, he is presumed to be already paid the ten (10) paid legal holidays. However, if deductions are made from his monthly salary on account of holidays in months where they occur, then he is still entitled to the ten (10) paid legal holidays.

These new interpretations must be uniformly and consistently upheld.

This issuance shall take effect immediately.

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After receipt of a copy of the award, private respondent filed a motion for reconsideration, followed by a supplement thereto. Said motion for reconsideration was denied. A copy of the order of denial was received by private respondent on July 8, 1976.

Said private respondent interposed an appeal to the National Labor Relations Commission (NLRC), contending that the Arbitrator demonstrated gross incompetence and/or grave abuse of discretion when he entirely premised the award on the Chartered Bank case and failed to apply Policy Instructions No. 9. This appeal was dismissed on August 16, 1976, by the NLRC because it was filed way beyond the ten-day period for perfecting an appeal and because it contravened the agreement that the award shall be final and unappealable.

Private respondent then appealed to the Secretary of Labor. On June 30, 1977, the Acting Secretary of Labor reversed the NLRC decision and ruled that the appeal was filed on time and that a review of the case was inevitable as the money claim exceeded P100,000.00. 5 Regarding the timeliness of the appeal, it was pointed out that the labor Department had on several occasions treated a motion for reconsideration (here, filed before the Arbitrator) as an appeal to the proper appellate body in consonance with the spirit of the Labor Code to afford the parties a just, expeditious and inexpensive disposition of their claims, liberated from the strict technical rules obtaining in the ordinary courts.

Anent the issue whether or not the agreement barred the appeal, it was noted that the Manifestation, supra, "is not of slight significance because it has in fact abrogated complainant's commitment to abide with the decision of the Voluntary Arbitrator without any reservation" and amounted to a "virtual repudiation of the agreement vesting finality" 6 on the arbitrator's disposition.

And on the principal issue of holiday pay, the Acting Secretary, guided by Policy Instructions No. 9, applied thesame retrospectively, among other things.

In due time, the Union appealed to the Office of the President. In affirming the assailed decision, Presidential Executive Assistant Jacobo C. Clave relied heavily on the Manifestation and Policy Instructions No. 9.

Hence, this petition.

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On January 10, 1981, petitioner filed a motion to substitute the Bank of the Philippine Islands as private respondent, as a consequence of the Articles of Merger executed by said bank and Commercial Bank & Trust Co. which inter alia designated the former as the surviving corporate entity. Said motion was granted by the Court.

We find the petitioner impressed with merit.

In excluding the union members of herein petitioner from the benefits of the holiday pay law, public respondent predicated his ruling on Section 2, Rule IV, Book III of the Rules to implement Article 94 of the labor Code promulgated by the then Secretary of labor and Policy Instructions No. 9.

In Insular Bank of Asia and America Employees' Union (IBAAEU) vs. Inciong, 7 this Court's Second Division, speaking through former Justice Makasiar, expressed the view and declared that the aforementioned section and interpretative bulletin are null and void, having been promulgated by the then Secretary of Labor in excess of his rule-making authority. It was pointed out, inter alia, that in the guise of clarifying the provisions on holiday pay, said rule and policy instructions in effect amended the law by enlarging the scope of the exclusions. We further stated that the then Secretary of Labor went as far as to categorically state that the benefit is principally intended for daily paid employees whereas the law clearly states that every worker shall be paid their regular holiday pay-which is incompatible with the mandatory directive, in Article 4 of the Labor Code, that "all doubts in the implementation and interpretation of the provisions of Labor Code, including its implementing rules and regulations, shall be resolved in favor of labor." Thus, there was no basis at all to deprive the union members of their right to holiday pay.

In the more recent case of The Chartered Bank Employees Association vs. Hon. Ople, 8 this Court in an en banc decision had the occasion to reiterate the above-stated pronouncement. We added:

The questioned Section 2, Rule IV, Book III of the Integrated Rules and the Secretary's Policy Instruction No. 9 add another excluded group, namely, 'employees who are uniformly paid by the month'. While the additional exclusion is only in the form of a presumption that all monthly paid employees have already been paid holiday pay,

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it constitutes a taking away or a deprivation which must be in the law if it is to be valid. An administrative interpretation which diminishes the benefits of labor more than what the statute delimits or withholds is obviously ultra vires.

In view of the foregoing, the challenged decision of public respondent has no leg to stand on as it was premised principally on the same Section 2, Rule IV, Book III of the Implementing Rules and Policy Instructions No. 9. This being the decisive issue to be resolved, We find no necessity to pass upon the other issues raised, such as the effects of the Union's Manifestation and the propriety of applying Policy Instructions No. 9 retroactively to the instant case.

WHEREFORE, the questioned decisions of the respondent Presidential Executive Assistant and the Acting Secretary of labor are hereby set aside, and the award of the Arbitrator reinstated. Costs against the private respondent.

IT IS SO ORDERED.

G.R. No. 144664 March 15, 2004

ASIAN TRANSMISSION CORPORATION, petitioner, vs.The Hon. COURT OF APPEALS, Thirteenth Division, HON. FROILAN M. BACUNGAN as Voluntary Arbitrator, KISHIN A. LALWANI, Union, Union representative to the Panel Arbitrators; BISIG NG ASIAN TRANSMISSION LABOR UNION (BATLU); HON. BIENVENIDO T. LAGUESMA in his capacity as Secretary of Labor and Employment; and DIRECTOR CHITA G. CILINDRO in her capacity as Director of Bureau of Working Conditions, respondents.

D E C I S I O N

CARPIO-MORALES, J.:

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Petitioner, Asian Transmission Corporation, seeks via petition for certiorari under Rule 65 of the 1995 Rules of Civil Procedure the nullification of the March 28, 2000 Decision1 of the Court of Appeals denying its petition to annul 1) the March 11, 1993 "Explanatory Bulletin"2 of the Department of Labor and Employment (DOLE) entitled "Workers’ Entitlement to Holiday Pay on April 9, 1993, Araw ng Kagitingan and Good Friday", which bulletin the DOLE reproduced on January 23, 1998, 2) the July 31, 1998 Decision3 of the Panel of Voluntary Arbitrators ruling that the said explanatory bulletin applied as well to April 9, 1998, and 3) the September 18, 19984 Resolution of the Panel of Voluntary Arbitration denying its Motion for Reconsideration.

The following facts, as found by the Court of Appeals, are undisputed:

The Department of Labor and Employment (DOLE), through Undersecretary Cresenciano B. Trajano, issued an Explanatory Bulletin dated March 11, 1993 wherein it clarified, inter alia, that employees are entitled to 200% of their basic wage on April 9, 1993, whether unworked, which[,] apart from being Good Friday [and, therefore, a legal holiday], is also Araw ng Kagitingan [which is also a legal holiday]. The bulletin reads:

"On the correct payment of holiday compensation on April 9, 1993 which apart from being Good Friday is alsoAraw 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 x x x x

Despite the explanatory bulletin, petitioner [Asian Transmission Corporation] opted to pay its daily paid employees only 100% of their basic pay on April 9, 1998. Respondent Bisig ng Asian Transmission Labor Union (BATLU) protested.

In accordance with Step 6 of the grievance procedure of the Collective Bargaining Agreement (CBA) existing between petitioner and BATLU, the controversy was submitted for voluntary arbitration. x x x x On July 31, 1998,the Office of the

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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 Kagitignan and Maundy Thursday." (Emphasis and underscoring supplied)

Subject of interpretation in the case at bar is Article 94 of the Labor Code which reads:

ART. 94. Right to holiday pay. - (a) Every worker shall be paid his regular daily wage during regular holidays, except in retail and service establishments regularly employing less than ten (10) workers;

(b) The employer may require an employee to work on any holiday but such employee shall be paid a compensation equivalent to twice his regular rate; and

(c) As used in this Article, "holiday" includes: New Year’s Day, Maundy Thursday, Good Friday, the ninth of April, the first of May, the twelfth of June, the fourth of July, the thirtieth of November, the twenty-fifth and thirtieth of December and the day designated by law for holding a general election,

which was amended by Executive Order No. 203 issued on June 30, 1987, such that the regular holidays are now:

1. New Year’s Day January 1

2. Maundy Thursday Movable Date

3. Good Friday Movable Date

4. Araw ng Kagitingan April 9 (Bataan and Corregidor Day)

5. Labor Day May 1

6. Independence Day June 12

7. National Heroes Day Last Sunday of August

8. Bonifacio Day November 30

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9. Christmas Day December 25

10. Rizal Day December 30

In deciding in favor of the Bisig ng Asian Transmission Labor Union (BATLU), 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."

In the assailed decision, the Court of Appeals upheld the findings of the Voluntary Arbitrator, holding that the Collective Bargaining Agreement (CBA) between petitioner and BATLU, the law governing the relations between them, clearly recognizes their intent to consider Araw ng Kagitingan and Maundy Thursday, on whatever date they may fall in any calendar year, as paid legal holidays during the effectivity of the CBA and that "[t]here is no condition, qualification or exception for any variance from the clear intent that all holidays shall be compensated."5

The Court of Appeals further held that "in the absence of an explicit provision in law which provides for [a] reduction of holiday pay if two holidays happen to fall on the same day, any doubt in the interpretation and implementation of the Labor Code provisions on holiday pay must be resolved in favor of labor."

By the present petition, petitioners raise the following issues:

I

WHETHER OR NOT THE RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN ERRONEOUSLY INTERPRETING THE TERMS OF THE COLLECTIVE BARGAINING AGREEMENT BETWEEN THE PARTIES AND SUBSTITUTING ITS OWN JUDGMENT IN PLACE OF THE AGREEMENTS MADE BY THE PARTIES THEMSELVES

II

257

WHETHER OR NOT THE RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN HOLDING THAT ANY DOUBTS ABOUT THE VALIDITY OF THE POLICIES ENUNCIATED IN THE EXPLANATORY BULLETIN WAS LAID TO REST BY THE REISSUANCE OF THE SAID EXPLANATORY BULLETIN

III

WHETHER OR NOT THE RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN UPHOLDING THE VALIDITY OF THE EXPLANATORY BULLETIN EVEN WHILE ADMITTING THAT THE SAID BULLEITN WAS NOT AN EXAMPLE OF A JUDICIAL, QUASI-JUDICIAL, OR ONE OF THE RULES AND REGULATIONS THAT [Department of Labor and Employment] DOLE MAY PROMULGATE

IV

WHETHER OR NOT THE SECRETARY OF THE DEPARTMENT OF LABOR AND EMPLOYMENT (DOLE) BY ISSUING EXPLANATORY BULLETIN DATED MARCH 11, 1993, IN THE GUISE OF PROVIDING GUIDELINES ON ART. 94 OF THE LABOR CODE, COMMITTED GRAVE ABUSE OF DISCRETION, AS IT LEGISLATED AND INTERPRETED LEGAL PROVISIONS IN SUCH A MANNER AS TO CREATE OBLIGATIONS WHERE NONE ARE INTENDED BY THE LAW

V

WHETHER OR NOT THE RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN SUSTAINING THE SECRETARY OF THE DEPARTMENT OF LABOR IN REITERATING ITS EXPLANATORY BULLETIN DATED MARCH 11, 1993 AND IN ORDERING THAT THE SAME POLICY OBTAINED FOR APRIL 9, 1998 DESPITE THE RULINGS OF THE SUPREME COURT TO THE CONTRARY

VI

WHETHER OR NOT RESPONDENTS’ ACTS WILL DEPRIVE PETITIONER OF PROPERTY WITHOUT DUE PROCESS BY THE "EXPLANATORY BULLETIN" AS WELL AS EQUAL PROTECTION OF LAWS

The petition is devoid of merit.

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At the outset, it bears noting that instead of assailing the Court of Appeals Decision by petition for review oncertiorari under Rule 45 of the 1997 Rules of Civil Procedure, petitioner lodged the present petition for certiorari under Rule 65.

[S]ince the Court of Appeals had jurisdiction over the petition under Rule 65, any alleged errors committed by it in the exercise of its jurisdiction would be errors of judgment which are reviewable by timely appeal and not by a special civil action of certiorari. If the aggrieved party fails to do so within the reglementary period, and the decision accordingly becomes final and executory, he cannot avail himself of the writ of certiorari, his predicament being the effect of his deliberate inaction.

The appeal from a final disposition of the Court of Appeals is a petition for review under Rule 45 and not a special civil action under Rule 65 of the Rules of Court, now Rule 45 and Rule 65, respectively, of the 1997 Rules of Civil Procedure. Rule 45 is clear that the decisions, final orders or resolutions of the Court of Appeals in any case, i.e., regardless of the nature of the action or proceeding involved, may be appealed to this Court by filing a petition for review, which would be but a continuation of the appellate process over the original case. Under Rule 45 the reglementary period to appeal is fifteen (15) days from notice of judgment or denial of motion for reconsideration.

x x x

For the writ of certiorari under Rule 65 of the Rules of Court to issue, a petitioner must show that he has no plain, speedy and adequate remedy in the ordinary course of law against its perceived grievance. A remedy is considered "plain, speedy and adequate" if it will promptly relieve the petitioner from the injurious effects of the judgment and the acts of the lower court or agency. In this case, appeal was not only available but also a speedy and adequate remedy.6

The records of the case show that following petitioner’s receipt on August 18, 2000 of a copy of the August 10, 2000 Resolution of the Court of Appeals denying its Motion for Reconsideration, it filed the present petition for certiorari on September 15, 2000, at which time the Court of Appeals decision had become final and executory, the 15-day period to appeal it under Rule 45 having expired.

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Technicality aside, this Court finds no ground to disturb the assailed decision.

Holiday pay is a legislated benefit enacted as part of the Constitutional imperative that the State shall afford protection to labor.7 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. 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, affords a worker the enjoyment of ten paid regular holidays.9 The provision is mandatory,10 regardless of whether an employee is paid on a monthly or daily basis.11Unlike a bonus, which is a management prerogative,12 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.

It is elementary, under the rules of statutory construction, that when the language of the law is clear and unequivocal, the law must be taken to mean exactly what it says.13 In the case at bar, there is nothing in the law which provides or indicates that the entitlement to ten days of holiday pay shall be reduced to nine when two holidays fall on the same day.

Petitioner’s assertion that Wellington v. Trajano14 has "overruled" the DOLE March 11, 1993 Explanatory Bulletin does not lie. In Wellington, the issue was whether monthly-paid employees are entitled to an additional day’s pay if a holiday falls on a Sunday. This Court, in answering the issue in the negative,

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observed that in fixing the monthly salary of its employees, Wellington took into account "every working day of the year including the holidays specified by law and excluding only Sunday." In the instant case, the issue is whether daily-paid employees are entitled to be paid for two regular holidays which fall on the same day.15

In any event, Art. 4 of the Labor Code provides that all doubts in the implementation and interpretation of its provisions, including its implementing rules and regulations, shall be resolved in favor of labor. For the working man’s welfare should be the primordial and paramount consideration.16

Moreover, Sec. 11, Rule IV, Book III of the Omnibus Rules to Implement the Labor Code provides that "Nothing in the law or the rules shall justify an employer in withdrawing or reducing any benefits, supplements or payments for unworked regular holidays as provided in existing individual or collective agreement or employer practice or policy."17

From the pertinent provisions of the CBA entered into by the parties, petitioner had obligated itself to pay for the legal holidays as required by law. Thus, the 1997-1998 CBA incorporates the following provision:

ARTICLE XIVPAID LEGAL HOLIDAYS

The following legal holidays shall be paid by the COMPANY as required by law:

1. New Year’s Day (January 1st)

2. Holy Thursday (moveable)

3. Good Friday (moveable)

4. Araw ng Kagitingan (April 9th)

5. Labor Day (May 1st)

6. Independence Day (June 12th)

7. Bonifacio Day [November 30]

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8. Christmas Day (December 25th)

9. Rizal Day (December 30th)

10. General Election designated by law, if declared public non-working holiday

11. National Heroes Day (Last Sunday of August)

Only an employee who works on the day immediately preceding or after a regular holiday shall be entitled to the holiday pay.

A paid legal holiday occurring during the scheduled vacation leave will result in holiday payment in addition to normal vacation pay but will not entitle the employee to another vacation leave.

Under similar circumstances, the COMPANY will give a day’s wage for November 1st and December 31st whenever declared a holiday. When required to work on said days, the employee will be paid according to Art. VI, Sec. 3B hereof.18

WHEREFORE, the petition is hereby DISMISSED.

SO ORDERED.

NORTH DAVAO MINING CORPORATION and ASSET PRIVATIZATION TRUST, petitioners,   vs. NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER ANTONIO M. VILLANUEVA and WILFREDO GUILLEMA, respondents.

D E C I S I O N

PANGANIBAN, J.:

Is a company which is forced by huge business losses to close its business, legally required to pay separation benefits to its employees at the time of its closure in an amount equivalent to the separation pay paid to those who were separated when the company was still a going concern? This is the main question brought before this Court in this petition for certiorari under Rule 65 of the

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Revised Rules of Court, which seeks to reverse and set aside the Resolutions dated July 29, 1993[1] and September 27, 1993[2] of the National Labor Relations Commision[3] (NLRC) in NLRC-CA No. M-001395-93.

The Resolution dated July 29, 1993 affirmed in tow the decision of the Labor Arbiter in RAB-1 1-08-00672-92 and RAB- 11-08-00713-92 ordering petitioners to pay the complainants therein certain monetary claims.

The Resolution dated September 27, 1993 denied the motion for reconsideration of the said July 29, 1993 Resolution.

The Facts

Petitioner North Davao Mining Corporation (North Davao) was incorporated in 1974 as a 100% privately-owned company. Later, the Philippine National Bank (PNB) became part owner thereof as a result of a conversion into equity of a portion of loans obtained by North Davao from said bank. On June 30, 1986, PNB transferred all its loans to and equity in North Davao in favor of the national government which, by virtue of Proclamation No. 50 dated December 8, 1986, later turned them over to petitioner Asset Privatization Trust (APT). As of December 31, 1990 the national government held 81.8% of the common stock and 100% of the preferred stock of said company.[4]

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, and who were the complainants in the cases before the respondent labor arbiter.

On May 31, 1992, petitioner North Davao completely ceased operations due to serious business reverses. From 1988 until its closure in 1992, North Davao suffered net losses averaging three billion pesos (P3,000,000,000.00) per year, for each of the five years prior to its closure. All told, as of December 31, 1991, or five months prior to its closure, its total liabilities had exceeded its assets by 20.392 billion pesos, as shown by its financial statements audited by the Commission on Audit. When it ceased operations, its remaining employees were separated and given the equivalent of 12.5 days’ pay for every year of service, computed on their basic monthly pay, in addition to the commutation to cash of their unused vacation and sick leaves. However, 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’

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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.

Subsequently, a complaint was filed with respondent labor arbiter by respondent Wilfredo Guillema and 271 other seperated employees for: (1) additional separation pay of 17.5 days for every year of service; (2) back wages equivalent to two days a month; (3) transportation allowance; (4) hazard pay; (5) housing allowance; (6) food allowance; (7) post-employment medical clearance; and (8) future medical allowance, all of which amounted to P58,022,878.31 as computed by private respondent.[5]

On May 6, 1993, respondent Labor Arbiter rendered a decision ordering petitioner North Davao to pay the complainants the following:

“(a) Additional separation pay of 17.5 days for every year of service;

(b) Backwages equivalent to two (2) days a month times the number of years of service but not to exceed three (3) years;

(c) Transportation allowance at P80 a month times the number of years of service but not to exceed three (3) years.”

The benefits awarded by respondent Labor Arbiter amounted to P10,240,517.75. Attorney’s fees equivalent to ten percent (10%) thereof were also granted.[6]

On appeal, respondent NLRC affirmed the decision in toto. Petitioner North Davao’s motion for reconsideration was likewise denied. Hence, this petition.

The Parties’ Submissions and the Issues

In affirming the Labor Arbiter’s decision, respondent NLRC ruled that “since (North Davao) has been paying its employees separation pay equivalent to thirty (30) days pay for every year of service,” knowing fully well that the law provides for a lesser separation pay, then such company policy “has ripened into an obligation,” and therefore, depriving now the herein private respondent and

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others similarly situated of the same benefits would be discriminatory. [7] Quoting from Businessday Information Systems and Services. Inc. (BISSI) vs. NLRC. [8] it said that petitioners “may not pay separation benefits unequally for such discrimination breeds resentment and ill-will among those who have been treated less generously than others.” It also cited Abella vs. NLRC,[9] as authority for saying that Art. 283 of the Labor Code protects workers in case of the closure of the establishment.

To justify the award of two days a month in backwages and P80 per month of transportation allowance, respondent Commission ruled:

“As to the appellants’ claim that complainants-appeallees’ time spent in collecting their wages at Tagum, Davao is not compensable allegedly because it was on official time can not be given credence. No iota of evidence has been presented to back up said contention. The same is true with appellants’ assertion that the claim for transportation expenses is without basis since they were incurred by the complainants. Appellants should have submitted the payrolls to prove that complainants-appellees were not the ones who personally collected their wages and/or the bus/jeep trip tickets or vouchers to show that the complainants-appellees were provided with free transportation as claimed.”

Petitioner, through the Government Corporate Counsel, raised the following grounds for the allowance of the petition:

“1. The NLRC acted with grave abuse of discretion in affirming without legal basis the award of additional separation pay to private respondents who were separated due to serious business losses on the part of petitioner.

2. The NLRC acted with grave abuse of discretion in affirming without sufficient factual basis the award of backwages and transportation expenses to private respondents.

3. There is no appeal, nor any plain, speedy and adequate remedy in the ordinary course of the law.”

and the following issues:

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“1. Whether or not an employer whose business operations ceased due to serious business losses or financial reverses is obliged to pay separation pay to its employees separated by reason of such closure.

2. 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.

3. Whether or not private respondents are entitled to transportation expenses in the absence of evidence that these expenses were incurred.”

The First Issue: Separation Pay

To resolve this issue, it is necessary to revisit the provision of law adverted to by the parties in their submissions, namely Art. 283 of the Labor Code, which reads as follows:

“Art. 283. Closure of establishment and reduction of personnel. - The employer may also terminate the employment of any employee due to the installation of labor saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or under-taking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof. In case of termination due to the installation of labor saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (½) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year.” (italics supplied)

The underscored portion of Art. 283 governs the grant of seperation benefits “in case of closures or cessation of operation” of business establishments “NOT due to serious business losses or financial reverses x x x”. Where, however, the

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closure was due to business losses - as in the instant case, in which the aggregate losses amounted to over P20 billion - the Labor Code does not impose any obligation upon the employer to pay separation benefits, for obvious reasons. There is no need to belabor this point. Even the public respondents, in their Comment[10] filed by the Solicitor General, impliedly concede this point.

However, respondents tenaciously insist on the award of separation pay, anchoring their claim solely on petitioner North Davao’s long-standing policy of giving separation pay benefits equivalent to 30- days’ pay, which policy had been in force in the years prior to its closure. Respondents contend that, by denying the same separation benefits to private respondent and the others similarly situated, petitioners discriminated against them. They rely on this Court’s ruling in Businessday Information Systems and Services, Inc. (BISSI) vs. NLRC, (supra). In said case, petitioner BISSI, after experiencing financial reverses, decided “as a retrenchment measure” to lay-off some employees on May 16, 1988 and gave them separation pay equivalent to one-half (½) month pay for every year of service. BISSI retained some employees in an attempt to rehabilitate its business as a trading company. However, barely two and a half months later, these remaining employees were likewise discharged because the company decided to cease business operations altogether. Unlike the earlier terminated employees, the second batch received separation pay equivalent to a full month’s salary for every year of service, plus a mid-year bonus. This Court ruled that “there was impermissible discrimination against the private respondents in the payment of their separation benefits. The law requires an employer to extend equal treatment to its employees. It may not, in the guise of exercising management prerogatives, grant greater benefits to some and less to others. x x x”

In resolving the present case, it bears keeping in mind at the outset that the factual circumstances of BISSI are quite different from the current case. The Court noted that BISSI continued to suffer losses even after the retrenchment of the first batch of employees; clearly, business did not improve despite such drastic measure. That notwithstanding, when BISSI finally shut down, it could well afford to (and actually did) pay off its remaining employees with MORE separation benefits as compared with those earlier laid off; obviously, then, there was no reason for BISSI to skimp on separation pay for the first batch of discharged employees. That it was able to pay one-month separation benefit for employees at the time of closure of its business meant that it must have been also in a position to pay the same amount to those who were separated prior to closure. That it did not do so was a wrongful exercise of management

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prerogatives. That is why the Court correctly faulted it with “impermissible discrimination.” Clearly, it exercised its management prerogatives contrary to “general principles of fair play and justice.”

In the instant case however, the company’s practice of giving one month’s pay for every year of service could no longer be continued precisely because the company could not afford it anymore. It was forced to close down on account of accumulated losses of over P20 billion. This could not be said of BISSI. In the case of North Davao, it gave 30-days’ separation pay to its employees when it was still a going concern even if it was already losing heavily. As a going concern, its cash flow could still have sustained the payment of such separation benefits. But when a business enterprise completely ceases operations, i.e., upon its death as a going business concern, its vital lifeblood -its cashflow - literally dries up. Therefore, the fact that less separation benefits were granted when the company finally met its business death cannot be characterized as discrimination. Such action was dictated not by a discriminatory management option but by its complete inability to continue its business life due to accumulated losses. Indeed, one cannot squeeze blood out of a dry stone. Nor water out of parched land.

As already stated, Art. 283 of the Labor Code does not obligate an employer to pay separation benefits when the closure is due to losses. In the case before us, the basis for the claim of the additional separation benefit of 17.5 days is alleged discrimination, i.e., unequal treatment of employees, which is proscribed as an unfair labor practice by Art. 248 (e) of said Code. Under the facts and circumstances of the present case, the grant of a lesser amount of separation pay to private respondent was done, not by reason of discrimination, but rather, out of sheer financial bankruptcy - a fact that is not controlled by management prerogatives. Stated differently, the total cessation of operation due to mind-boggling losses was a supervening fact that prevented the company from continuing to grant the more generous amount of separation pay. The fact that North Davao at the point of its forced closure voluntarily paid any separation benefits at all - although not required by law - and 12.5-days’ worth at that, should have elicited admiration instead of condemnation. But to require it to continue being generous when it is no longer in a position to do so would certainly be unduly oppressive, unfair and most revolting to the conscience. As this Court held in Manila Trading & Supply Co. vs. Zulueta,[11] and reiterated in San Miguel Corporation vs. NLRC[12] and later, in Allied Banking Corporation vs. Castro,[13] “(t)he law, in protecting the rights of the laborer, authorizes neither oppression nor self-destruction of the employer.”

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At this juncture, we note that the Solicitor General in his Comment challenges the petitioners assertion that North Davao, having closed down, no longer has the means to pay for the benefits. The Solicitor General stresses that North Davao was among the assets transferred by PNB to the national government, and that by virtue of Proclamation No. 50 dated December 8, 1986, the APT was constituted trustee of this government asset. He then concludes that “(i)t would, therefore, be incongruous to declare that the National Government, which should always be presumed to be solvent, could not pay now private respondents’ money claims.” Such argumentation is completely misplaced. Even if the national government owned or controlled 81.8% of the common stock and 100% of the preferred stock of North Davao, it remains only a stockholder thereof, and under existing laws and prevailing jurisprudence, a stockholder as a rule is not directly, individually and/or personally liable for the indebtedness of the corporation. The obligation of North Davao cannot be considered the obligation of the national government, hence, whether the latter be solvent or not is not material to the instant case. The respondents have not shown that this case constitutes one of the instances where the corporate veil may be pierced. [14] From another angle, the national government is not the employer of private respondent and his co-complainants, so there is no reason to expect any kind of bailout by the national government under existing law and jurisprudence.

The Second and Third Issues:Back Wages and Transportation Allowance

Anent the award of back wages and transportation allowance, the issues raised in connection therewith are factual, the determination of which is best left to the respondent NLRC. It is well settled that this Court is bound by the findings of fact of the NLRC, so long as said findings are supported by substantial evidence.[15]

As the Solicitor General pointed out in his comment:

“It is undisputed that because of security reasons, from the time of its operations, petitioner NDMC maintained its policy of paying its workers at a bank in Tagum, Davao del Norte, which usually took the workers about two and a half (2 1/2) hours of travel from the place of work and such travel time is not official.

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Records also show that on February 12,1992, when an inspection was conducted by the Department of Labor and Employment at the premises of petitioner NDMC at Amacan, Maco, Davao del Norte, it was found out that petitioners had violated labor standards law, one of which is the place of payment of wages (p.109, Vol. 1, Record).

Section 4, Rule VIII, Book III of the Omnibus Rules Implementing the Labor Code provides that:

‘Section 4. Place of payment. - (a) As a general rule, the place of payment shall be at or near the place of undertaking. Payment in a place other than the workplace shall be permissible only under the following circumstances:

(1) When payment cannot be effected at or near the place of work by reason of the deterioration of peace and order conditions, or by reason of actual or impending emergencies caused by fire, flood, epidemic or other calamity rendering payment thereat impossible;

(2) When the employer provides free transportation to the employees back and forth; and

(3) Under any analogous circumstances; provided that the time spent by the employees in collecting their wages shall be considered as compensable hours worked.

(b) xxx xxx xxx.’

(Italics supplied)

Accordingly, in his Order dated April 14, 1992 (p. 109, Vol. 1, Record), the Regional Director, Regional Office No. XI, Department of Labor and Employment, Davao City, ordered petitioner NDMC, among others, as follows:

‘WHEREFORE, x x x. Respondent is further ordered to pay its workers salaries at the plantsite at Amacan, New Leyte, Maco, Davao del Norte or whenever not possible, through the bank in Tagum, Davao del Norte as already been practiced subject, however to the provisions of Section 4 of Rule VIII, Book III of the rules implementing the Labor Code as amended.’

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Thus, public respondent Labor Arbiter Antonio M. Villanueva correctly held that:

‘From the evidence on record, we find 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 to the above findings, and for equitable reasons, we likewise hold respondents liable for the transportation expenses incurred by complainants at P40.00 round trip fare during pay days.’

(p. 10, Decision; p. 207, Vol. 1, Record)

On the contrary, it will be petitioners’ burden or duty to present evidence of compliance of the law on labor standards, rather than for private respondents to prove that they were not paid/provided by petitioners of their backwages and transportation expenses.”

Other than the bare denials of petitioners, the above findings stands uncontradicted. Indeed we are not at liberty to set aside findings of facts of the NLRC, absent any capriciousness, arbitrariness, or abuse or complete lack of basis. In Maya Farms Employees Organizations vs. NLRC,[16] we held:

“This Court has consistently ruled that 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 respect but even finality and 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 disregard of the evidence on record.”

WHEREFORE, judgment is hereby rendered MODIFYING the assailed Resolution by SETTING ASIDE and deleting the award for “additional separation pay of 17.5 days for every year of service,” and AFFIRMING it in all other aspects. No costs.

SO ORDERED.

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G.R. No. 115394 September 27, 1995

FE S. SEBUGUERO, CARLOS ONG, NENE MANAOG, JUANITO CUSTODIO, CRISANTA LACSAM, SATURNINO GURAL, WILMA BALDERA, LEONILA VALDEZ, FATIMA POTESTAD, EVANGELINE AGNADO, RESTITUTO GLORIOSO, JANESE DE LOS REYES, RODOLFO SANCHEZ, WILMA ORBELLO, DAISY PASCUA, and ALEX MASAYA, petitioners, vs.NATIONAL LABOR RELATIONS COMMISSION, G.T.I. SPORTSWEAR CORPORATION and/or BENEDICTO YUJUICO, respondents.

DAVIDE, JR., J.:

This is a special civil action for certiorari under Rule 65 of the Rules of Court to set aside for having been rendered with grave abuse of discretion the decision of 29 November 1993 1 and resolution of 9 February 1994 2of public respondent National Labor Relations Commission (NLRC) in NLRC NCR CA Case No. 004673-93. The former modified the decision of 26 February 1993 of the Labor Arbiter 3 by setting aside the award of back wages, proportionate 13th month pay for 1991 and attorney's fees, while the latter denied the motion to reconsider the former.

The antecedent facts as disclosed by the decisions of the Labor Arbiter and the NLRC, as well as by the pleadings of the parties, are not complicated.

The petitioners were among the thirty-eight (38) regular employees of private respondent GTI Sportswear Corporation (hereinafter GTI), a corporation engaged in the manufacture and export of ready-to-wear garments, who were given "temporary lay-off" notices by the latter on 22 January 1991 due to alleged lack of work and heavy losses caused by the cancellation of orders from abroad and by the garments embargo of 1990.

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Believing that their "temporary lay-off" was a ploy to dismiss them, resorted to because of their union activities and was in violation of their right to security of tenure since there was no valid ground therefor, the 38 laid-off employees filed with the Labor Arbiter's office in the National Capital Region complaints for illegal dismissal, unfair labor practice, underpayment of wages under Wage Orders Nos. 01 and 02, and non-payment of overtime pay and 13th month pay. 4

Private respondent GTI denied the claim of illegal dismissal and asserted that it was its prerogative to lay-off its employees temporarily for a period not exceeding six months to prevent losses due to lack of work or job orders from abroad, and that the lay-off affected both union and non-union members. It justified its failure to recall the 38 laid-off employees after the lapse of six months because of the subsequent cancellations of job orders made by its foreign principals, a fact which was communicated to the petitioners and the other complainants who were all offered severance pay. Twenty-two (22) of the 38 complainants accepted the separation pay. The petitioners herein did not.

The cases then involving those who accepted the separation pay were pro tanto dismissed with prejudice.

In his decision of 26 February 1993 with respect to the claims of the petitioners, Labor Arbiter Pablo C. Espiritu, Jr. found for them and disposed as follows:

WHEREFORE, above premises considered, judgment is hereby rendered finding Respondent, G.T.I. Sportswear Corporation, liable for constructive dismissal, underpayment of wages under NCR 01 and 02, and 13th-month pay differentials and concomitantly, Respondent corporation is hereby ordered:

a. To pay the following complainants backwages from the time of their constructive dismissal (July 22, 1991) till promulgation considering that reinstatement is no longer decreed: . . .

b. To pay complainants separation pay of 1/2 month for every year of service in lieu of reinstatement in the following amounts: . . .

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c. To pay complainants 13th-month pay differentials arising out of underpayment of wages and proportionate 13th-month pay for 1991 in the following amounts: . . .

d. To pay complainants underpayment of wages under NCR Wage 01 and NCR Wage 02 in the following amounts: . . .

e. To pay complainants the amount of P120,618.87 representing 10% attorney's fees based on the total judgment award of P1,326,807.63.

The claims for unfair labor practice, nonpayment of overtime pay, moral damages, and exemplary damages are hereby denied for lack of merit.

SO ORDERED. 5

In support of the disposition, the Labor Arbiter made the following ratiocinations:

On the validity of the temporary lay-off, this Arbitration Branch finds that there was ample justification on the part of Respondent company to lay-off temporarily some of its employees to prevent losses as a result of the reduction of the garment quota allocated to Respondent company due to the garment embargo of 1990. In fact, in the months of March, April, and May of 1991 respondent company received several messages/correspondence from its foreign principals informing them (Respondent) that they are canceling/transferring some of their quotas/orders to other countries. The evidence presented by Respondent company proves this fact (Exhibits "12", "13", "14", "15", "15-A", "16", "17" and Annexes "5", "6", "7", showing the different documentary evidence on cancellation of orders and forced leave schedules of workers due to lack of work). This is sustainable, as in this case, where the Respondent found it unnecessary to continue employing some of its workers because of business recession, lack of materials to work on

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due to government controls (garments embargo) and due to the lack of the demand for export quota from its principal foreign buyers.

Although, as a general rule, Respondent company has the prerogative and right to resort to temporary lay-off, such right is likewise limited to a period of six (6) months applying Art. 286 of the Labor Code on suspension of employer-employee relationship not exceeding six (6) months.

In this case, respondent company was justified in the temporary lay-off of some of its employees. However, Respondent company should have recalled them after the end of the six month period or at the least reasonably informed them (complainants) that the Respondent company is still not in a position to recall them due to the continuous drop of demand in the export market (locally or internationally), thereby extending the temporary lay-off with a definite period of recall and if the same cannot be met, then the company should implement retrenchment and pay its employees separation pay. Failing in this regard, respondent company chose not to recall nor send notice to the complainants after the lapse of the six (6) month period. Hence, there is in this complaint a clear case of constructive dismissal. While there is a valid reason for the temporary lay-off, the same is also limited to a duration of six months. Thereafter the employees, complainants herein, are entitled under the law (Art. 286) to be recalled back to work. As result thereof, the temporary lay-off of the complainants from January 22, 1991 (date of lay-off) to July 22, 1991 is valid, however, thereafter complainants are already entitled to backwages, in view of constructive dismissal, due to the fact that they were no longer recalled back to work. Complainants cannot be placed on temporary lay-off forever. The limited period of six (6) months is based provisionally too prevent circumvention on the right to security of tenure and to prevent grave abuse of discretion on the part of the employer. However, since during the trial it was proven, as testified by the Vice-President for marketing and personnel manager, that the lack of work and selection of personnel continued to persist and considering the antagonism and hostility displayed by both litigants, as observed by this Arbiter, during the trial of this case and in view of the strained relations

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between the parties, reinstatement of the complainants would not be prudent. (Divine Word High School vs. NLRC, G.R. 72207, 6 Aug. 1986; Esmalin vs. NLRC, G.R. 67880, 15 Sept. 1989; Hernandez vs. NLRC, G.R. 34302, 10 Aug. 1989). Hence, separation pay of 1/2 month for every year of service in lieu of reinstatement is in order. . . .

On the issue of monetary claims this Arbitration Branch finds that Respondent is liable for underpayment of wages under NCR Wage Order 01 and 02 considering that respondent failed to rebut the claims of the complainants. Respondent failed to show proof by means of payrolls to disprove the claim of the complainants. Complainants are also entitled to their proportionate 13th-month pay differentials as a result of the underpayment of wages under NCR-01 and 02 and likewise to their proportionate 13th-month pay for 1991 for the month of January 1991. . . .

However, complainants are entitled to reasonable attorney's fees considering they were forced to engage the services of counsel in order to fully ventilate their rights and grievances in accordance with the Labor Code as amended. 6

The Labor Arbiter found no sufficient evidence to prove the petitioners' charges of unfair labor practice, overtime pay, and for moral and exemplary damages.

Private respondent GTI seasonably appealed the aforesaid decision to the NLRC, which docketed the appeal as NLRC NCR CA Case No. 004673-93.

In its challenged decision, the NLRC concurred with the findings of the Labor Arbiter that there was a valid lay-off of the petitioners due to lack of work, but disagreed with the latter's ruling granting back wages after 22 July 1991. The NLRC justified its postulation as follows:

However, we cannot sustain the findings of the Labor Arbiter in awarding the complainants backwages after July 22, 1991 in view of constructive dismissal, it being acknowledged by him that ". . . during the trial it was proven, as testified by the Vice-President for marketing and personnel manager, that the lack of work and

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selection of personnel continued to persist . . ." Besides, it was not denied by the complainants that during the proceeding of the case, the respondents conveyed to the complainants the impossibility of having them recalled in view of the continued unavailability of work as the economic recession of the respondent's principal market persisted. In fact, the respondent company offered to complainants payment of their separation pay which offer [w]as accepted by 22 out of 38 complainants.

Having established lack of work, it necessarily follow[s] that retrenchment did take place and not constructive dismissal. Dismissal by its term, presuppose that there was still work available and that the employer terminated the services of the employee therefrom. The same cannot be said of the case at bar. The complainants did not question the evidence of lack of work on account of reduction of government quota or cancellation of orders.

Art. 286 of the Labor Code is precised [sic] in this regards when it provided that:

Art. 286. When employment not deemed terminated. — The bona fide suspension of the operation of a business or undertaking for a period not exceeding six (6) months, . . . shall not terminate employment . . . .

It is only after the six months period that an employee can be presumed to have been terminated. 7

It thus set aside the awards for back wages, proportionate 13th month pay for 1991, and for attorney's fees which it found to be without basis, and disposed as follows:

WHEREFORE, premises considered the decision of the Labor Arbiter dated February 26, 1993 is hereby modified by deleting the award of backwages, the proportionate 13th month pay for 1991 and attorney's fees for lack of legal basis and direct, the payment of separation pay equal to one-half month salary for every year of service as of July 22, 1991. 8

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Unable to accept the NLRC judgment, the petitioners filed this special civil action for certiorari. They contend that the NLRC acted without or in excess of jurisdiction or with grave abuse of discretion when it: (a) ruled that there was a valid and legal reduction of business and in sustaining the theory of redundancy in justifying the dismissal of the petitioners; (b) failed to apply in full the provisions of law and of jurisprudence as to the full payment of back wages in cases of illegal dismissal; and (c) deleted the award of attorney's fees.

We gave due course to this petition after the filing of the separate comments to the petition by the public and private respondents and the petitioners' reply to the public respondent's comment.

The petitioners' first contention is based on a wrong premise or on a miscomprehension of the statement of the NLRC. What the NLRC sustained and affirmed is not redundancy, but retrenchment as a ground for termination of employment. They are not synonymous but distinct and separate grounds under Article 283 of the Labor Code, as amended. 9

Redundancy exists where the services of an employee are in excess of what is reasonably demanded by the actual requirements of the enterprise. 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 overhiring of workers, decreased volume of business, or dropping of a particular product line or service activity previously manufactured or undertaken by the enterprise. 10

Retrenchment, on the other hand, is used interchangeably with the term "lay-off." It is the termination of employment initiated by the employer through no fault of the employee's and without prejudice to the latter, resorted to by management during periods of business recession, industrial depression, or seasonal fluctuations, or during lulls occasioned by lack of orders, shortage of materials, conversion of the plant for a new production program or the introduction of new methods or more efficient machinery, or of automation. 11 Simply put, it is an act of the employer of dismissing employees because of losses in the operation of a business, lack of work, and considerable reduction on the volume of his business, a right consistently recognized and affirmed by this Court.12

Article 283 of the Labor code which covers retrenchment, reads as follows:

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Art. 283. Closure of establishment and reduction of personnel. — The employer may also terminate the employment of any employee due to the installation of labor saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by servicing a written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof. In case of termination due to the installation of labor saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closure or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year.

This provision, however, speaks of a permanent retrenchment as opposed to a temporary lay-off as is the case here. There is no specific provision of law which treats of a temporary retrenchment or lay-off and provides for the requisites in effecting it or a period or duration therefor. These employees cannot forever be temporarily laid-off. To remedy this situation or fill the hiatus, Article 286 may be applied but only by analogy to set a specific period that employees may remain temporarily laid-off or in floating status. 13 Six months is the period set by law that the operation of a business or undertaking may be suspended thereby suspending the employment of the employees concerned. The temporary lay-off wherein the employees likewise cease to work should also not last longer than six months. After six months, the employees should either be recalled to work or permanently retrenched following the requirements of the law, and that failing to comply with this would be tantamount to dismissing the employees and the employer would thus be liable for such dismissal.

To determine, therefore, whether the petitioners were validly retrenched or were illegally dismissed, we must determine whether there was compliance with the

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law regarding a valid retrenchment at anytime within the six month-period that they were temporarily laid-off.

Under the aforequoted Article 283 of the Labor Code, there are three basic requisites for a valid retrenchment:

(1) the retrenchment is necessary to prevent losses and such losses are proven;

(2) written notice to the employees and to the Department of Labor and Employment at least one month prior to the intended date of retrenchment; and

(3) payment of separation pay equivalent to one month pay or at least 1/2 month pay for every year of service, whichever is higher.

As for the first requisite, whether or not an employer would imminently suffer serious or substantial losses for economic reasons is essentially a question of fact for the Labor Arbiter and the NLRC to determine. 14 Here, both the Labor Arbiter and the NLRC found that the private respondent was suffering and would continue to suffer serious losses, thereby justifying the retrenchment of some of its employees, including the petitioners. We are not prepared to disregard this finding of fact. It is settled that findings of quasi-judicial agencies which have acquired expertise in the matters entrusted to their jurisdiction are accorded by this Court not only with respect but with finality if they are supported by substantial evidence. 15 The latter means that amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion. 16 In the instant case, no claim was made by any of the parties that such a finding was not supported by substantial evidence. Furthermore, the petitioners did not appeal the finding of the Labor Arbiter that their temporary lay-off to prevent losses was amply justified. They cannot now question this finding that there is a valid ground to lay-off or retrench them.

The requirement of notice to both the employees concerned and the Department of Labor and Employment (DOLE) is mandatory and must be written and given at least one month before the intended date of retrenchment. In this case, it is undisputed that the petitioners were given notice of the temporary lay-off. There is, however, no evidence that any written notice to permanently retrench them

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was given at least one month prior to the date of the intended retrenchment. The NLRC found that GTI conveyed to the petitioners the impossibility of recalling them due to the continued unavailability of work. 17 But what the law requires is a written notice to the employees concerned and that requirement is mandatory. 18 The notice must also be given at least one month in advance of the intended date of retrenchment to enable the employees to look for other means of employment and therefore to ease the impact of the loss of their jobs and the corresponding income. 19 That they were already on temporary lay-off at the time notice should have been given to them is not an excuse to forego the one-month written notice because by this time, their lay-off is to become permanent and they were definitely losing their employment.

There is also nothing in the records to prove that a written notice was ever given to the DOLE as required by law. GTI's position paper, 20 offer of exhibits, 21 Comment to the Petition, 22 and Memorandum 23 in this case do not mention of any such written notice. The law requires two notices — one to the employee/s concerned and another to the DOLE — not just one. The notice to the DOLE is essential because the right to retrench is not an absolute prerogative of an employer but is subject to the requirement of law that retrenchment be done to prevent losses. The DOLE is the agency that will determine whether the planned retrenchment is justified and adequately supported by facts. 24

With respect to the payment of separation pay, the NLRC found that GTI offered to give the petitioners their separation pay but that the latter rejected such offer which was accepted only by 22 out of the 38 original complainants in this case. 25 As to when this offer was made was not, however, proven. All that the parties, the Labor Arbiter and the NLRC stated in their respective pleadings and decisions was that the offer and payment were made during the pendency of the illegal dismissal case with the Labor Arbiter. But with or without this offer of separation pay, our conclusion would remain the same: that the retrenchment of the petitioners is defective in the face of our finding that the required notices to both the petitioners and the DOLE were not given.

The lack of written notice to the petitioners and to the DOLE does not, however, make the petitioners' retrenchment illegal such that they are entitled to the payment of back wages and separation pay in lieu of reinstatement as they contend. Their retrenchment, for not having been effected with the required notices, is merely defective. In those cases where we found the retrenchment to

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be illegal and ordered the employees' reinstatement and the payment of back wages, the validity of the cause for retrenchment, that is the existence of imminent or actual serious or substantial losses, was not proven. 26 But here, such a cause is present as found by both the Labor Arbiter and the NLRC. There is only a violation by GTI of the procedure prescribed in Article 283 of the Labor Code in effecting the retrenchment of the petitioners.

It is now settled that where the dismissal of an employee is in fact for a just and valid cause and is so proven to be but he is not accorded his right to due process, i.e., he was not furnished the twin requirements of notice and the opportunity to be heard, the dismissal shall be upheld but the employer must be sanctioned for non-compliance with the requirements of or for failure to observe due process. The sanction, in the nature of indemnification or penalty, depends on the facts of each case and the gravity of the omission committed by the employer and has ranged from P1,000.00 as in the cases of Wenphil vs. National Labor Relations Commission, 27 Seahorse Maritime Corp. vs. National Labor Relations Commission, 28 Shoemart, Inc. vs. National Labor Relations Commission, 29 Rubberworld (Phils.), Inc. vs. National Labor Relations Commission, 30 Pacific Mills, Inc. vs.Alonzo, 31 and Aurelio vs. National Labor Relations Commission 32 to P10,000.00 in Reta vs. National Labor Relations Commission 33 and Alhambra Industries, Inc. vs. National Labor Relations Commission. 34 More recently, in Worldwide Papermills, Inc. vs. National Labor Relations Commission, 35 the sum of P5,000.00 was awarded to the employee as indemnification for the employer's failure to comply with the requirements of procedural due process.

Accordingly, we affirm the deletion by the NLRC of the award of back wages. But because the required notices of the petitioners' retrenchment were not served upon the petitioners and the DOLE, GTI must be sanctioned for such failure and thereby required to indemnify each of the petitioners the sum of P2,000.00 which we find to be just and reasonable under the circumstances of this case.

As for the award of the 13th-month pay made by the Labor Arbiter and deleted by the NLRC, we do not find anything in the decision of the NLRC to support the deletion of this award other than its opinion that there is lack of legal basis to support such an award, without, however, furnishing any explanation for this finding. Thus, the award of the 13th-month pay made and sufficiently justified by the Labor Arbiter must be reinstated as prayed for by the petitioners.

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Also, the petitioners are entitled to an award for attorney's fees pursuant to paragraph 7, Article 2208 of the Civil Code which must, however, be reasonable. The award of P120,618.87, which is equivalent to ten percent (10%) of the amounts recovered, as attorney's fees should be reduced to P25,000.00, an amount we find to be reasonable. The ten percent (10%) attorney's fees provided for in Article 111 of the Labor Code and Section 11, Rule VIII, Book III of the Implementing Rules is the maximum; hence, any amount less than that may be awarded as the circumstances of the case may warrant.

WHEREFORE, the instant petition is partially GRANTED and the challenged decision of public respondent National Labor Relations Commission in NLRC NCR CA Case No. 004673-93 is modified by reversing and setting aside its deletion of the awards in the Labor Arbiter's decision of proportionate 13th month pay for 1991 and attorney's fees, the latter being reduced to P25,000.00. Separation pay equivalent to one-half (1/2) month pay for every year of service shall be computed from the dates of the commencement of the petitioners' respective employment until the end of their six-month temporary lay-off which is 22 July 1991. In addition, private respondent G.T.I. Sportswear Corporation is ordered to pay each of the petitioners the sum of P2,000.00 as indemnification for its failure to observe due process in effecting the retrenchment.

Costs against the private respondent.

SO ORDERED.

G.R. No. L-58639 August 12, 1987

CEBU ROYAL PLANT (SAN MIGUEL CORPORATION), petitioner, vs.THE HONORABLE DEPUTY MINISTER OF LABOR and RAMON PILONES, respondents.

CRUZ, J.:

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The private respondent was removed by the petitioner and complained to the Ministry of Labor. His complaint was dismissed by the regional director, who was, however, reversed by the public respondent. Required to reinstate the separated employee and pay him back wages, the petitioner has come to us, faulting the Deputy Minister with grave abuse of discretion. We have issued in the meantime a temporary restraining order. 1

The public respondent held that Ramon Pilones, the private respondent, was already a permanent employee at the time of his dismissal and so was entitled to security of tenure. The alleged ground for his removal, to wit, "pulmonary tuberculosis minimal," was not certified as incurable within six months as to justify his separation. 2Additionally, the private respondent insists that the petitioner should have first obtained a clearance, as required by the regulations then in force, for the termination of his employment.

The petitioner for its part claims that the private respondent was still on probation at the time of his dismissal and so had no security of tenure. His dismissal was not only in conformity with company policy but also necessary for the protection of the public health, as he was handling ingredients in the processing of soft drinks which were being sold to the public. It is also argued that the findings of the regional director, who had direct access to the facts, should not have been disturbed on appeal. For these same reasons, it contends, the employee's reinstatement as ordered by the public respondent should not be allowed.

The original findings were contained in a one-page order 3 reciting simply that "complainant was employed on a probationary period of employment for six (6) months. After said period, he underwent medical examination for qualification as regular employee but the results showed that he is suffering from PTB minimal. Consequently, he was informed of the termination of his employment by respondent." The order then concluded that the termination was "justified." That was all.

As there is no mention of the basis of the above order, we may assume it was the temporary payroll authority 4submitted by the petitioner showing that the private respondent was employed on probation on February 16, 1978. Even supposing that it is not self- serving, we find nevertheless that it is self-defeating. The six-month period of probation started from the said date of appointment and so

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ended on August 17, 1978, but it is not shown that the private respondent's employment also ended then; on the contrary, he continued working as usual. Under Article 282 of the Labor Code, "an employee who is allowed to work after a probationary period shall be considered a regular employee." Hence, Pilones was already on permanent status when he was dismissed on August 21, 1978, or four days after he ceased to be a probationer.

The petitioner claims it could not have dismissed the private respondent earlier because the x-ray examination was made only on August 17, 1978, and the results were not immediately available. That excuse is untenable. We note that when the petitioner had all of six months during which to conduct such examination, it chose to wait until exactly the last day of the probation period. In the light of such delay, its protestations now that reinstatement of Pilones would prejudice public health cannot but sound hollow and hypocritical. By its own implied admission, the petitioner had exposed its customers to the employee's disease because of its failure to examine him before entrusting him with the functions of a "syrup man." Its belated concern for the consuming public is hardly persuasive, if not clearly insincere and self-righteous.

There is proof in fact that the private respondent was first hired not on February 16, 1978, but earlier in 1977. This is the 1977 withholding tax statement 5 issued for him by the petitioner itself which it does not and cannot deny. The petitioner stresses that this is the only evidence of the private respondent's earlier service and notes that he has not presented any co-worker to substantiate his claim. This is perfectly understandable. Given the natural reluctance of many workers to antagonize their employers, we need not wonder why none of them testified against the petitioner.

We are satisfied that whether his employment began on February 16, 1978, or even earlier as he claims, the private respondent was already a regular employee when he was dismissed on August 21, 1978. As such, he could validly claim the security of tenure guaranteed to him by the Constitution and the Labor Code.

The applicable rule on the ground for dismissal invoked against him is Section 8, Rule I, Book VI, of the Rules and Regulations Implementing the Labor Code reading as follows:

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Sec. 8. Disease as a ground for dismissal. — Where the employee suffers from a disease and his continued employment is prohibited by law or prejudicial to his health or to the health of his co-employees, the employer shall not terminate his employment unless there is a certification by a competent public health authority that the disease is of such nature or at such a stage that it cannot be cured within a period of six (6) months even with proper medical treatment. If the disease or ailment can be cured within the period, the employer shall not terminate the employee but shall ask the employee to take a leave. The employer shall reinstate such employee to his former position immediately upon the restoration of his normal health.

The record does not contain the certification required by the above rule. The medical certificate offered by the petitioner came from its own physician, who was not a "competent public health authority," and merely stated the employee's disease, without more. We may surmise that if the required certification was not presented, it was because the disease was not of such a nature or seriousness that it could not be cured within a period of six months even with proper medical treatment. If so, dismissal was unquestionably a severe and unlawful sanction.

It is also worth noting that the petitioner's application for clearance to terminate the employment of the private respondent was filed with the Ministry of Labor only on August 28, 1978, or seven days after his dismissal. 6 As the NLRC has repeatedly and correctly said, the prior clearance rule (which was in force at that time) was not a "trivial technicality." It required "not just the mere filing of a petition or the mere attempt to procure a clearance" but that "the said clearance be obtained prior to the operative act of termination. 7

We agree that there was here an attempt to circumvent the law by separating the employee after five months' service to prevent him from becoming a regular employee, and then rehiring him on probation, again without security of tenure. We cannot permit this subterfuge if we are to be true to the spirit and mandate of social justice. On the other hand, we have also the health of the public and of the dismissed employee himself to consider. Hence, although we must rule in favor of his reinstatement, this must be conditioned on his fitness to resume his work, as certified by competent authority.

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We take this opportunity to reaffirm our concern for the lowly worker who, often at the mercy of his employers, must look up to the law for his protection. Fittingly, that law regards him with tenderness and even favor and always with faith and hope in his capacity to help in shaping the nation's future. It is error to take him for granted. He deserves our abiding respect. How society treats him will determine whether the knife in his hands shall be a caring tool for beauty and progress or an angry weapon of defiance and revenge. The choice is obvious, of course. If we cherish him as we should, we must resolve to lighten "the weight of centuries" of exploitation and disdain that bends his back but does not bow his head.

WHEREFORE, the petition is DISMISSED and the temporary restraining order of November 18, 1981, is LIFTED. The Order of the public respondent dated July 14, 1981, is AFFIRMED, but with the modification that the backwages shall be limited to three years only and the private respondent shall be reinstated only upon certification by a competent public health authority that he is fit to return to work. Costs against the petitioner.

SO ORDERED.

JOSE T. CAPILI, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, and UNIVERSITY OF MINDANAO, respondents.

D E C I S I O N

DAVIDE, JR., J.:

The pivotal issue in this petition is whether an instructor of a private educational institution may be compelled to retire at the age of sixty years. A corollary issue is whether his subsequent acceptance of retirement benefits would estop him from pursuing his complaint questioning the validity of his forced retirement.

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Petitioner Jose T. Capili, Jr., was employed by private respondent University of Mindanao (hereafter, UM) as a college instructor in November 1982. On 2 July 1993, the private respondent informed the petitioner that under the law and UM's retirement program he would be eligible for retirement when he would reach the age of 60 years on 18 August 1993. In his answer of 5 August 1993, the petitioner informed UM that pursuant to Section 4, Rule II, Book VI of the Rules Implementing the Labor Code, the that he was not opting to retire but would continue to serve until he reaches the compulsory retirement age of 65. In its reply of 10 August 1993 to the petitioner, UM reiterated its position that under the university’s retirement plan, it could retire him. It argued that under Section 4 cited by the petitioner, the employee has the option only in the absence of a retirement plan.

Perceiving the school’s insistence as constructive dismissal, and recalling at least four other faculty members who were allowed to teach beyond their sixtieth birth anniversary, the petitioner filed a complaint[1] for illegal dismissal before the Regional Arbitration Branch No. XI of the NLRC in Davao City. He sought his reinstatement to his former position without loss of seniority rights with full back wages, wage differential, 13th month differential, moral and exemplary damages, and attorney’s fees.[2]

In its position paper,[3] UM invoked 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. It contended that it has a retirement plan, known as the University of Mindanao & Associated Enterprises Retirement Plan, under which it could retire the petitioner upon his reaching the age of 60. UM also cited Policy Instruction No. 25 issued by the Secretary of Labor, which provides that in the absence of a retirement plan any teacher or other employee in a private educational institution may retire or be retired from the service upon reaching the age of 60 years.

In his position paper[4] the petitioner maintained that private respondent’s retirement plan applies only to members thereof, pursuant to Articles II and III of its Rules and Regulations,[5] and that since he is not a member of the Plan, he is not covered by it. He further contended that Policy Instruction No. 25, issued on 1 June 1977, was abrogated by Republic Act No. 7641, which took effect on 7 January 1993; and that pursuant to the new Rule II, Book VI of the Omnibus Rules

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Implementing the Labor Code,[6] which also took effect on 7 January 1993, he has the option whether or not to retire upon attaining the age of 60 years.

On 18 April 1994,[7] Labor Arbiter Newton Sancho held for UM and dismissed the complaint. He ruled:

There is no question that UM [University of Mindanao] has an existing retirement plan which fixed 60 years as an age for “normal retirement.” It applies to all its employees and that of its associated enterprises, including the non-members thereof as a matter of school policy. As such, the option to retire complainant lies on the administration of UM.

Complainant’s reliance on R.A. No. 7641 is evidently misplaced. It only provides for retirement pay to qualified private sector employees in the absence of any retirement plan of the establishment. Given UM’s retirement plan or school policy of retiring its teachers upon reaching the age of 60, said law does not clearly operate in his favor.

That at least four (4) teachers had been allowed to work beyond their 60th birthday does not make them an exception to UM’s policy on the matter. They did so on a case-to-case and semestral basis to which UM consented in the exercise of its management prerogative.

The charge that he was discriminated against through "forced" retirement because of his propensity to question certain school policies or regulations cannot be given credence. For want of corroborative evidence, it is simply self-serving!

Ditto his money claims. UM has proofs that he had been fully paid thereof.

The petitioner appealed[8] from the decision to the respondent Commission on 10 May 1994, or thirteen days after he received the Labor Arbiter’s decision. He argued that the Labor Arbiter erred in ruling that private respondent’s retirement plan applies to all its employees and that he had been fully paid his monetary claims.

The private respondent moved to dismiss the appeal[9] for having been filed out of time, as the same should have been filed within ten days from petitioner’s receipt of the Arbiter’s decision, or, at the latest, on 7 May 1994.

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On 21 November 1994, the private respondent filed a Manifestation with Motion[10] alleging that on 6 October 1994, the petitioner “received his retirement pay and other accrued benefits” due from the private respondent, thus making the appeal moot and academic. The petitioner filed a Counter-Manifestation[11] wherein he alleged that his “partial acceptance” of retirement benefits did not render the case moot and academic, and that having "long and unjustly been denied of his retirement benefits since August 18, 1993 [he could not] be expected to remain idle."

On 19 January 1995, the respondent NLRC dismissed the appeal for having been filed out of time, it appearing that since the petitioner received a copy of the assailed decision on 27 April 1994, he had only until 7 May 1994 to file his appeal; however, considering that 7 May 1994 was a Saturday, he had until 9 May 1994, the next working day, to file the appeal. He filed the appeal only on 10 May 1994.[12]

The petitioner moved for the reconsideration[13] of the order, alleging that he could not have filed his appeal on 9 May 1994 which was a non-working holiday, as the barangay elections were held on the said date.

In its resolution of 31 March 1995,[14] the NLRC reconsidered the order of 19 January 1995 and decided the case on its merits. In disposing of the appeal, it made the following observations and conclusions:

After a careful review of the respective arguments of the parties, We find no serious inconsistency between the company retirement plan of the university and the provision of Article 287 of the Labor Code, as amended by R.A. 7641. Both speak of fixing the normal retirement age at 60 in the absence of a retirement plan or agreement. The retirement plan of the university allows retirement at a later or beyond 60 by mutual assent and on a case-to-case basis. Whereas, R.A. 7641, has fixed 65 as the compulsory retirement date.

Except therefore for the fixing of a maximum retirement age of 65 or the compulsory retirement date, Section 14, Rule I, Book VI of the Implementing Rules of Article 287 prior to its amendment by R.A. 7641, has equally fixed the retirement benefit to at least one-half (1/2) month for every year of service.

The contention of complainant that respondent's retirement plan is inapplicable for being a non-member is beside the point. Respondent has expressly assented to the extension of the retirement plan to complainant thereby serving as the

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"consensual basis" for the applicability of the retirement plan to complainant. (See Llora Motors, Inc. vs. Drilon, 179 SCRA 176, November 7, 1989, citing Allied Investigation Bureau, Inc. vs. Ople, 91 SCRA 265).

The ultimate question, however, is that will complainant be forced by the respondent to retire at age 60 or on his 60th birthday if he refuses to accept the same.

It is Our well discerned view that respondent may not force complainant to retire at age 60, unless there are other justifiable reason to compel complainant to accept the same. This is so because the law (R.A. 7641) has fixed age 65 as the compulsory age of retirement.

It, however, appears that this particular issue has become moot and academic. During the pendency of the case, complainant has accepted and received from respondent university his retirement benefits (Annex "1" to Respondent's Manifestation).

Complainant's counter-manifestation that this was only "partial acceptance" of his retirement benefits is belied by the computation of his retirement benefits based on his length of service in the sum ofP67,344.42, plus other fringe benefits or in the total sum of P75,338.10. Deducting therefrom the sum of P60,015.45 which was partially released to him, he received the balance of his retirement benefits in the sum of P15,322.65 as shown by his signature appearing on the Journal Voucher dated October 4, 1994 (Annex "2", ibid).

Except for the notation on the exclusion of incremental proceeds of his benefits which is still subject of conciliation, there is nothing on Annex "1" indicating that complainant only received partial payment of his retirement benefits or a reservation that receipt of the balance of his retirement was without prejudice to his claims in the instant case.

Complainant therefore by his own act of accepting the proceeds of his retirement benefits as originally offered to him by respondent is now estopped from further pursuing his claims in the instant case. Besides, the main cause of action of complainant in suing respondent is the charge of illegal or constructive dismissal. There being no concrete and convincing proof that complainant was illegally dismissed, the present action must equally fail. Thus, the issue as to whether or

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not complainant was forced to prematurely retire by respondent is now moot and academic in view of the subsequent acceptance by complainant of his retirement benefits from respondent.

It then dismissed the appeal for lack of merit and affirmed the Labor Arbiter’s decision, subject to the foregoing modification.

Petitioner’s motion for reconsideration[15] of the above resolution having been denied in the resolution[16] of 31 May 1995, the petitioner filed this petition. He alleges that the respondent Commission committed grave abuse of discretion amounting to excess or lack of jurisdiction

(i) ... WHEN IT RENDERED ITS RESOLUTIONS IN A MANNER VIOLATIVE OF SUBSTANTIAL DUE PROCESS.

(ii) ...WHEN IT RENDERED THE QUESTIONED RESOLUTION... DISMISSING THE APPEAL IN CONTRAVENTION TO THE RULING OF THE SUPREME COURT IN THE CASE OF ZURBANO, SR. VS. NLRC (229 SCRA 563) AND OTHERS.

(iii) ...IN HOLDING THAT THE PETITIONER BY ACCEPTING THE PROCEEDS OF HIS RETIREMENT BENEFITS IS ESTOPPED FROM PURSUING HIS CLAIMS.

The first assigned error consists of the last two errors, which boil down to the issue of whether the petitioner, by his acceptance of retirement benefits, is estopped from pursuing his claim of illegal dismissal arising from his forced retirement before the age of 65.

In its comment, the Office of the Solicitor General agrees with the petitioner that the latter’s acceptance of retirement benefits does not amount to estoppel or render the appeal moot and academic, and hence, the NLRC committed reversible error and grave abuse of discretion in perfunctorily dismissing petitioner’s appeal solely on the ground of estoppel. It nevertheless disagreed with the NLRC’s conclusion that the petitioner could not be forced to retire at age 60. It is of the view that petitioner’s forced retirement at the age of 60 is valid and that petitioner’s not being a member of the retirement plan is of no moment, since all employees of UM are covered by it. These notwithstanding, the OSG concurred in the dispositive portion of the NLRC’s resolution.

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On the other hand, the private respondent submits that the NLRC was correct in holding that petitioner’s voluntarily acceptance of his retirement benefits amounted to a waiver of his claims, and that his retirement was in accordance with UM’s retirement policy.

We resolved to give due course to the petition and required the parties to submit their respective memoranda. Only the petitioner and private respondent submitted their memoranda. The OSG manifested that it be excused from filing a memorandum and that its comment be treated as its memorandum.

The applicable law on the matter is Article 287 of the Labor Code of the Philippines, as amended by R.A. No. 7641, which took effect on 7 January 1993.[17] As amended, the Article reads as follows:

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 agreement and other agreements: Provided, however, That an employee’s retirement benefits under any collective bargaining agreement 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.

The article 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

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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.

It may be noted that before the effectivity of R.A. No. 7641, Article 287 of the Labor Code did not specifically provide for the retirable age of employees in the private sector, thus:

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 other collective bargaining or other agreement.

Section 13, Rule I, Book VI of the Omnibus Rules Implementing the Labor Code provided:

Sec. 13. In the absence of any collective bargaining agreement or other applicable agreement concerning terms and conditions of employment which provides for retirement at an older age, an employee may retire upon reaching the age of sixty (60) years.

Notably, the option to retire at 60 years was the employee’s prerogative. However, the Department of Labor and Employment had provided a separate rule for employees of private educational institutions. Policy Instruction No. 25 promulgated on 1 June 1977 by the Secretary of Labor provided as follows:

For purposes of applying the retirement provisions of the Labor Code in private educational institutions, and in consideration of the unique characteristics and peculiar problems and work situations of such institutions, the following rules are hereby issued for the information and guidance of all concerned:

I - If there is a retirement plan under a collective agreement or employer policy in private educational institutions, any teacher and/or employee who retires or is retired from the service pursuant to the same shall be entitled to all the retirement benefits provided therein.

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II - In the absence of any such company policy or collective agreement providing for a retirement plan for teachers and other employees in private educational institutions, any teacher and/or employee may retire or be retired from the service upon reaching the age of sixty (60) years and shall be paid the equivalent of at least one month salary or one-half month salary for every year of service, whichever is higher, a fraction of at least six (6) months being considered as one whole year.

It is clear therefrom that in the absence of a collective bargaining agreement or company policy providing for a retirement plan, the option to retire at age 60 could be exercised by either the employee or the employer. This power of the employer no longer exists under R.A. No. 7641, which unequivocally provides that the option to retire upon reaching the age of 60 years or more but not beyond 65 is the exclusive prerogative of the employee if there is no provision on retirement in a collective bargaining agreement or any other agreement or if the employer has no retirement plan.

The foregoing brings us to the next point of inquiry, viz., whether private respondent UM has a retirement plan or collective bargaining agreement or other agreement vesting upon UM the prerogative to retire an employee who reaches 60 years. UM insists that it has a retirement plan under the title University of Mindanao & Associated Enterprises Retirement Plan,[18] which became effective on 1 July 1968, and that the petitioner is covered by it. On the other hand, the petitioner contends that the Plan covers only those who opted to become members thereof.

We agree with the petitioner. Indeed, under UM’s Retirement Plan only members are covered by it. It defines Member as

an employee, as herein defined, who chooses to contribute to the Fund as provided for in Article IV, Section 1 hereof. Only Members shall be entitled to any of the benefits provided for under this Plan and to any of the Company’s contributions as provided for in Articles IV and V hereof.[19]

As to eligibility for membership therein of employees hired after the effectivity of the Plan, it explicitly provides as follows:

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[A]ny employee hired after the effective date may become a Member of the Plan on the date he becomes a permanent full-time employee if he chooses to contribute to the Fund in accordance with Article IV, Section 1, hereof.[20]

Nothing could be clearer from the above provisions of the Plan than that it is not applicable to all employees of UM and its associated enterprises. It applies only to those who opted to become members thereof. Contracts take effect only between the parties thereto.[21] Since the Plan was prepared and approved only by the responsible officials of UM and its associated enterprises, namely, the Presidents of UM, Mt. Apo Science Foundation, and Davao Savings and Loan Association,[22] the Plan may thus be described as a contract of adhesion. Hence, the above provisions on requirements of membership and eligibility must be strictly construed against UM and its associated enterprises.[23] UM cannot now be heard to claim that the plan applies to all its employees or to those who did not even opt to become members thereof.

The validity then of UM’s “retirement” of the petitioner upon the latter’s 60th birth anniversary on 18 August 1993 could only be based on proof that the petitioner became a member of its Retirement Plan at any time after his employment in 1982 but before 18 August 1993. The burden to prove such a fact was on UM, but the record fails to show that UM has discharged that burden.

UM’s belated attempt to prove that it is a school policy to retire employees who reach the age of 60, pursuant to UM’s Retirement Policies dated 16 December 1990[24] and Updated Retirement Policy dated 3 August 1993,[25] cannot sway this Court in UM’s favor. These documents are mere scraps of paper, they being only xerox copies. They have not been certified to be true copies or offered in evidence before the Labor Arbiter and the NLRC. Neither have they even been referred to in UM’s comment in this case.

The foregoing notwithstanding, a supervening event worked against the petitioner. On 30 April 1994, after receiving the Labor Arbiter’s decision but before filing his appeal from that decision, the petitioner received partial payment of his retirement pay and other accrued benefits from respondent UM. [26] During the pendency of his appeal with the NLRC, specifically, on 6 October 1994, he received full payment of his retirement benefits. In his Counter-Manifestation[27] he declared:

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COMPLAINANT-APPELLANT ... most respectfully maintains that the partial acceptance of the retirement benefits does not render the instant case moot and academic. The complainant-appellant who had long and unjustly been denied of his retirement benefits since August 18, 1993 cannot be expected to remain idle.

By his acceptance of retirement benefits the petitioner is deemed to have opted to retire under the third paragraph of Article 287 of the Labor Code, as amended by R.A. No. 7641. Thereunder he could choose to retire upon reaching the age of 60 years, provided it is before reaching 65 years, which is the compulsory age of retirement.

Also worth noting is his statement that he “had long and unjustly been denied of his retirement benefits since August 18, 1993.” Elsewise stated, he was entitled to retirement benefits as early as 18 August 1993 but was denied thereof without justifiable reason. This could only mean that he has already acceded to his retirement, effective on such date - when he reached the age of 60 years.

WHEREFORE, the 31 March 1995 and 31 May 1995 Resolutions of the National Labor Relations Commission in NLRC CA No. M-002096-94 are AFFIRMED subject to the modification that the petitioner is hereby declared to be not covered by respondent University of Mindanao’s Retirement Plan but is, nevertheless, deemed to have opted to retire when he reached the age of sixty years, pursuant to Article 287 of the Labor Code, as amended by R.A. No. 7641.

No pronouncement as to costs.

SO ORDERED.

J.V. ANGELES CONSTRUCTION CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER ARIEL CADIENTE SANTOS and PEDRO SANTOS, respondents.

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D E C I S I O N

PURISIMA, J.:

In this special civil action for certiorari with prayer for Temporary Restraining Order, petitioner seeks to set aside and reverse the Decision[1] promulgated on May 31, 1996 and the Resolution issued on July 10, 1996 by the National Labor Relation Commission (NLRC), denying petitioner's Partial Motion for Reconsideration in a case, entitled "Pedro Santos, et al., vs. J.V. Angeles Construction Corporation, et al.", on the ground that the NLRC acted with grave abuse of discretion and/or in excess of jurisdiction.

The facts that matter are, as follows:

Private respondent Pedro Santos was employed in 1969, as a carpenter, by the petitioner, J.V. Angeles Construction Corporation (Corporation). In 1973, he was promoted to the position of foreman which he held until his retirement in February 1992 when he was sixty-two (62) years old.

On October 25, 1993, he brought a complaint for retirement benefits and service incentive leave pay before the NLRC, National Capital Region Arbitration Branch, against the corporation. After the parties failed to reach an amicable settlement during the conciliatory proceedings of the case, they were required to submit their respective position papers. On July 25, 1995, Labor Arbiter Ariel Cadiente Santos came out with a decision for private respondent, disposing thus:

"WHEREFORE, premises considered, respondents are hereby directed to pay complainant Pedro Santos his retirement pay equivalent to 1/2 month pay for every year of service including the five (5) days service incentive leave pay three (3) years prior to the filing of this case and 1/2 of the 13th month pay.

x x x"[2]

Petitioner's appeal filed with the NLRC on August 14, 1995, assailed the said ruling of the Labor Arbiter granting retirement benefits to the herein private respondent, by giving Rep. Act. No. 7641 (Retirement Pay Law) a retroactive application although respondent Pedro Santos had retired almost a year prior to the effectivity of said law on January 7, 1993. It is petitioner's submission that what is applicable is the ruling laid down in Llora Motors, Inc. v. Drilon[3] wherein the Court held that in the absence of a collective bargaining agreement or other employment contract, there is no obligation on the part of the employer to set up

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a retirement scheme over and above that already established under existing laws. Since Santos has been receiving his retirement benefits from the Social Security System (SSS), he cannot anymore ask for additional benefits from his employer in the absence of company practice, policy or contract granting such benefits.

On May 31, 1996, the Third Division of the NLRC came out with the questioned decision, upholding the labor Arbiter's grant of retirement benefits to Pedro Santos, and disposing thus:

"We sustain the award of the retirement benefits to Santos. Respondents objection thereto is premised on the fact that complainant retired almost a year before the effectivity of R.A. 7641. In the case of Oro Enterprises vs. NLRC.  G.R. No. 110861. Nov 14, 1994, the Supreme Court ruled in favor of retroactive application of law considering that claim for benefits was filed when law already took effect. We apply said ruling to instant claim. xxx"[4]

Dissatisfied with the aforesaid decision below, petitioner found its way to this Court via the petition under consideration, contending that the NLRC gravely abused its discretion in affirming the decision of the Labor Arbiter awarding retirement benefits to private respondent Pedro Santos, by giving retroactive application to the provisions of R.A. 7641.

The petition is impressed with merit.

The pertinent law is Article 287 of the Labor Code, as amended by R.A. 7641:

"Article 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 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

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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 13 th month pay and the cash equivalent of not more than five (5) days of service incentive leaves.

x x x

Violation of this provision is hereby declared unlawful and subject to the penal provisions provided under article 288 of this Code."

In Oro Enterprises, Inc. v. NLRC,[5] the court held that R.A. 7641 can be applied retroactively, rationalizing thus:

"R.A. 7641 is undoubtedly, a social legislation. The law has been enacted as a labor protection measure and as a curative statue that - absent a retirement plan devised by, an agreement with, or a voluntary grant from an employer – can respond, in part at least to the financial well-being of workers during their twilight years soon following their life of labor. There should be little doubt about the fact that the law can apply to labor contracts still existing at the time the statute has taken effect, and that its benefits can be reckoned not only from the date of the law’s enactment but retroactively to the time said employment contracts have started. xxx” (underscoring supplied)

In CJC Trading Inc. v. NLRC,[6] the aforecited doctrine was elaborated upon by enumerating the circumstances which must occur before the law could be given retroactive effect, to wit: (1) the claimant for retirement benefits was still the employee of the employer at the time the statute took effect; and (2) the claimant has complied with the requirements for eligibility under the statute for such retirement benefits.

In the recent case of Philippine Scout Veterans Security and Investigation Agency, et al v. NLRC et. al.[7] the Court had occasion to apply the Oro and CJC rulings. In the said case, private respondent Mariano Federico resigned as a security guard of the security agency on September 16, 1991. Thereafter, he sought alternative reliefs from his employer, such as

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termination pay corresponding to his years of service or retirement benefits. PSVSIA rejected his claim for termination pay on the ground that he had voluntarily resigned. The alternative claim for retirement benefits was likewise denied because there was no collective or individual agreement providing for retirement benefits. When subject claims were formally brought to the Labor Arbiter, the latter sustained the stand of petitioners but directed them to pay the respondent the previously offered financial assistance in the amount of P10,000.00. The NLRC reversed the said judgment by giving a retroactive application to the provisions of R.A. 7641.

When it was elevated to this Court on certiorari, the court found that although respondent Federico had reached the minimum retirement age under the statute, he was no longer an employee of petitioner PSVSIA when the law took effect. R.A. 7641 could not be applied retroactively in his favor in the absence of the first circumstance. Consequently, he could not seek the beneficial provisions of the law and must settle for the petitioner’s offer of financial assistance.

In the case under scrutiny, private respondent Santos retired and ceased to be an employee of petitioner on February 1992, eleven (11) months before the effectivity of R.A. 7641, and he brought his complaint on October 23, 1993, nine (9) months after the law’s effectivity. It is thus decisively clear that the provisions of R.A. 7641 could not be given retroactive effect in his favor. Consequently, the NLRC erred in upholding the Labor Arbiter’s award of retirement benefits to private respondent.

WHEREFORE, the petition is GRANTED; the Decision, dated May 31, 1996, and Resolution, dated July 10, 1996, of respondent National Labor Relations Commission are hereby REVERSED and SET ASIDE and the TEMPORARY RESTRAINING ORDER issued on November 27, 1996 made PERMANENT. No pronouncement as to costs.

SO ORDERED.

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RUFINA PATIS FACTORY, and JESUS LUCAS, SR. petitioners, vs. JUAN ALUSITAIN, respondent.

D E C I S I O N

CARPIO MORALES, J.:

From the June 23, 2000 Decision[1] of the Court of Appeals in CA-G.R. SP No. 54722 affirming that of the National Labor Relations Commission (NLRC) awarding retirement benefits in the amount of P88,595.00 to respondent Juan Alusitain (Alusitain), petitioners Rufina Patis Factory and Jesus Lucas, Sr. (Lucas) come to this Court on a petition for review on certiorari.

The antecedent facts are as follows:

In 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 or on February 19, 1991, Alusitain admittedly tendered his letter of resignation which is quoted verbatim:

February 19, 1991

TO: MR. JESUS LUCAS, JR.ASSISTANT MANAGERRUFINA PATIS FACTORY

Gentlemen:

I would like to tender my separation letter as a laborer, from your good company effective this 20th of February 1991. May I take this opportunity to extent my heartfelt thanks to you for having given me the chance to commit myself to work in your factory from which I owe varied experiences that has made a part of me and be what I am today. Anticipating your outmost consideration on this matter. I remain.

VERY TRULY YOURS,

(Signed) JUAN A. ALUSITAIN

RECEIVED THE ABOVE SEPARATION LETTER ON THIS DAY, FEBRUARY 20, 1991.

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(Signed)BY: JESUS R. LUCAS, JR.

Assistant Manager[2]

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). The affidavit reads:

Republic of the Philippines )SSS

Quezon City )

AFFIDAVIT OF SEPARATION FROM EMPLOYMENT

I, JUAN ASERAS ALUSITAIN of legal age, 63, Filipino and residing at Int. 18 Flores St., Mal. Mla, after having [been] sworn to in accordance with law hereby depose and state;

1. That I am [a] bonafide member of the Social Security System with SSS Number 03-0107252-0

2. That I was separated from my last employer RUFINA PATIS FACTORY with address at 290 C. Arellano St., Malabon, Metro Manila on 2-20-91 and thereafter, I was never again re-employed.

3. That I cannot secure a certification of separation from my last employer because I have not reached the company applicable age of retirement.

4. That I am executing this affidavit to attest to the truth of the foregoing facts and to support my retirement paper.

FURTHER AFFIANT SAYETH NAUGHT.

(Signed)

Affiant[3]

On January 7, 1993, Republic Act No. 7641 (R.A. 7641),[4] “AN ACT AMENDING ARTICLE 287 OF PRESIDENTIAL DECREE NO. 442, AS AMENDED OTHERWISE

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KNOWN AS THE LABOR CODE OF THE PHILIPPINES, BY PROVIDING FOR RETIREMENT PAY TO QUALIFIED PRIVATE SECTOR EMPLOYEES IN THE ABSENCE OF ANY RETIRMENT PLAN IN THE ESTABLISHMENT,” took effect[5] 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.

x x x

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.

x x x

Violation of this provision is hereby declared unlawful and subject to the penal provisions under Article 288 of this Code.[6]

Sometime in 1995, Alusitain, claiming that he retired from the company on January 31, 1995, having reached the age of 65[7] 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[8] broken down as follows:

Retirement Benefits = ½ month salary for every year of service

One-half month salary = P1,885.00

Years of Service = 47 years

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Retirement Benefits = P86,710.00[9]

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. The complaint was docketed as NLRC Case No. 00-11-07474-95.

Petitioners maintained that Alusitain had resigned from the company on February 19, 1991 per his letter of resignation and the Affidavit of Separation dated May 22, 1991.[10]

On the other hand, while respondent admitted having tendered his letter of resignation on February 19, 1991 and executed the Affidavit of Separation on May 22, 1991,[11] he 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.[12]

By Decision[13] of February 6, 1997, Executive Labor Arbiter Valentin C. Guanio upheld Alusitain’s position in this wise:

After carefully considering the respective submissions of the parties and the evidence they adduced in support of their opposing claims, this Office rules in favor of the complainant.

To substantiate his allegation that he had continued working for the respondents even after his supposed resignation on February 19, 1991, the complainant submitted in evidence his sworn statement and that of his eldest daughter, Gloria Alusitain. In his affidavit, the complainant swore that: “Bagamat ako ay pensionado ng SSS, ako ay patuloy na naglilingkod/nagtratrabaho sa kompanya ng Rufina Patis Factory hanggang noong buwan ng Enero 1995.” By way of corroboration, his daughter on the other hand, stated under oath that since elementary school (sic), she was the one who brought food to her father at work in the Rufina Patis Factory; and that the last time she brought him food at the said factory was in the month of January 1995.

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While the foregoing statements may appear to be self-serving, still they have the ring of truth. From experience, it is quite common that the eldest daughter would be tasked with the duty of taking lunch to her father at work. Besides, the respondents failed to controvert these sworn declarations by submitting their counter-affidavits. If it is true that the complainant had in fact stopped working on February 1991, the respondents could have produced a number of witnesses who could have attested to this. Hence, their failure to submit even a single affidavit does not speak well of their credibility in this regard.

Thus, this Office finds that the complainant had executed the letter of resignation and affidavit of separation from employment in 1991 only for the purpose of securing a pension from the SSS, but that despite this he remained in the employ of the respondents until his actual retirement on January 31, 1995, two years after the effectivity of Republic Act 7641 on January 7, 1993. At the time of his retirement, the complainant was already sixty-five (65) years of age and had served the respondent company for forty-seven (47) years and therefore, he is legally entitled to the retirement benefits granted by R.A. 7641 which is one-half (1/2) month salary for every year of service which as computed will amount to a total of P88,595.00 (P1,885.00 x 47 years).

WHEREFORE, in view of the foregoing, judgment is hereby rendered ordering the respondents “Rufina Patis Factory” and Jesus Lucas, Sr., jointly and severally to pay complainant Juan Alusitain his retirement benefits in the amount of P88,595.00.

SO ORDERED.[14]

On appeal, the NLRC, by Resolution[15] of May 17, 1999, affirmed the Labor Arbiter’s decision.

Aggrieved by the NLRC resolution, petitioners brought the case on certiorari[16] to the Court of Appeals which, by the assailed decision, dismissed it, holding that the NLRC committed no error much less any grave abuse of discretion[17] as Alusitain was able to sufficiently establish that his letter of resignation and Affidavit of Separation were executed only for the purpose of securing a pension from the SSS and that he remained in the employ of petitioners.[18]

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Their motion for reconsideration having been denied by the Court of Appeals by Resolution[19] of December 6, 2000, petitioners lodged the present petition.[20]

Petitioners argue that the appellate court erred when it did not give weight and probative value to Alusitain’s letter of resignation and Affidavit of Separation, choosing instead to give credence to his self-serving sworn statement and that of his daughter that he remained in the employ of petitioners until January 31, 1995.

Petitioners assert that the Affidavit of Separation, being a public document, is entitled to full faith and credit upon its face, and proof is required to assail and controvert the same, citing Cacho v. Court of Appeals [21] and Arrieta v. Llosa.[22]

Petitioners further assert that the appellate court erred in applying retroactively R.A. 7641 as said law does not expressly provide for such retroactive application and to do so would defeat the clear intent of Congress. Furthermore, petitioners insist that the case of Oro Enterprises, Inc. v. NLRC[23] is inapplicable and submit that what is controlling is the case of J.V. Angeles Construction Corp. v. NLRC [24] where this Court held that before R.A. 7641 could be given retroactive effect, the claimant should still be an employee of the employer at the time the said law took effect,.

The petition is impressed with merit.

This Court held in Oro[25] that R.A. 7641 should be given retroactive effect, viz:

R.A. 7641 is undoubtedly a social legislation. The law has been enacted as a labor protection measure and as a curative statute that – absent a retirement plan devised by, an agreement with, or a voluntary grant from, an employer – can respond, in part at least, to the financial well-being of workers during their twilight years soon following their life of labor. There should be little doubt about the fact that the law can apply to labor contracts still existing at the time the statute has taken effect, and that its benefits can be reckoned not only from the date of the law’s enactment but retroactively to the time said employment contracts have started. . .[26] (Underscoring supplied)

The doctrine enunciated in Oro has been clarified in several cases. In CJC Trading, Inc. v. NLRC,[27] this Court, speaking through Justice Florentino Feliciano, held that R.A. 7641 may be given retroactive 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 had complied with the requirements for eligibility under the statute for such retirement benefits. [28] These twin

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requirements for the retroactive application of R.A. 7641 have been reiterated in Philippine Scout Veterans Security and Investigation Agency v. NLRC,[29] Cabcaban v. NLRC,[30] J.V. Angeles Construction Corporation v. NLRC , [31] and Manuel L. Quezon University v. NLRC.[32]

It is thus clear that in order for respondent to claim retirement benefits from petitioner Rufina Patis Factory, he has to prove that he was its employee at the time R.A. 7641 took effect.

As a general rule, the factual findings and conclusions of quasi-judicial agencies such as the NLRC are, on appeal, accorded great weight and even finality, unless petitioners are able to show that the NLRC arbitrarily disregarded the evidence before it or misapprehended evidence of such nature as to compel a contrary conclusion if properly appreciated.[33]

In affirming the decision of the NLRC and the Labor Arbiter, the Court of Appeals disregarded Alusitain’s letter of resignation and Affidavit of Separation and gave weight to his and his daughter’s sworn statements that he remained in the employ of petitioners until January 31, 1995.

It is a basic rule in evidence, however, that the burden of proof is on the part of the party who makes the allegations[34] – ei incumbit probatio, qui dicit, non qui negat.[35] If he claims a right granted by law, he must prove his claim by competent evidence, relying on the strength of his own evidence and not upon the weakness of that of his opponent.

In the case at bar, it was incumbent on Alusitain to prove that he retired on January 31, 1995 and not on February 20, 1991 as indicated on his letter of resignation. As the following discussion will show, he utterly failed to discharge the onus.

Respondent’s letter of resignation and May 22, 1991 Affidavit of Separation which he admittedly voluntarily executed constitute admissions against his own interest.[36] The said documents belie his claim that he retired on January 31, 1995. Being an admission against interest, the documents are the best evidence which affords the greatest certainty of the facts in dispute. [37] The rationale for the rule is based on the presumption that no man would declare anything against himself unless such declaration was true.[38] Thus, it is fair to presume that the declaration corresponds with the truth, and it is his fault if it does not.[39]

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While these two documents may have facilitated the release of Alusitain’s retirement benefits from the SSS, hence, beneficial to him at that time, they may still be considered admissions against interest since the disserving quality of the admission is judged as of the time it is used or offered in evidence and not when such admission is made.[40] Thus, it matters not that the admission is self-serving when it was made, so long as it is against respondent’s present claim.[41]

No doubt, admissions against interest may be refuted by the declarant. [42] It bears stressing, however, that Alusitain’s Affidavit of Separation filed with the SSS is a notarial document,[43] hence, prima facie evidence[44] of the facts expressed therein.[45]

Since notarial documents have in their favor the presumption of regularity, to contradict the facts stated therein, there must be evidence that is clear, convincing and more than merely preponderant.[46]

Alusitain explains through his subsequent sworn statement that he only executed these two documents in order to obtain his retirement benefits from the SSS. His daughter, also by sworn statement, corroborates his explanation. His position does not persuade.

In order for a declarant to impugn a notarial document which he himself executed, it is not enough for him to merely execute a subsequent notarial document. What the law requires in order to contradict the facts stated in a notarial document is clear and convincing evidence. The subsequent notarial documents executed by respondent and his daughter fall short of this standard.

The case of Reyes v. Zaballero[47] is instructive. In said case, the creditor executed on December 1, 1944 a notarial document stating that he was releasing a real estate mortgage as the debtor had already paid his debt. On even date, the creditor subsequently executed an affidavit without the debtor’s knowledge stating that he had accepted the payment under protest and “obligado por las circunstancias actuales.” This Court held that the creditor’s statement in his affidavit that he received the money “obligado por las circunstancias actuales” is self-serving evidence.[48]

A contrary rule would undermine the confidence of the public in the integrity of notarial documents. In Dequito v. Llamas,[49] this Court held:

After executing the affidavit voluntarily wherein he made admissions and declarations against his own interest under the solemnity of an oath, he cannot

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be allowed to spurn them and undo what he has done. He cannot, even “with great repentance, retrieve the body he forsook and now wishes to live.”[50]

Neither is the sworn statement of Alusitain’s daughter sufficient to prove that he indeed retired on January 31, 1995. The February 6, 1997 Decision of Labor Arbiter Guanio relates the material portion of the sworn statement of Alusitain’s daughter as follows:

. . . By way of corroboration, his daughter on the other hand, stated under oath that since elementary school (sic), she was the one who brought food to her father at work in the Rufina Patis Factory; and that the last time she brought him food at the said factory was in the month of January 1995 .[51] (Emphasis and underscoring supplied)

Alusitain’s daughter did not state, however, that her father worked for petitioner Rufina Patis Factory until his alleged retirement on January 31, 1995. All she said was that the last time she brought him food at the factory was in January 1995. To conclude that Alusitain was still employed on January 1995 from the mere fact that his daughter brought him food at the Rufina Patis Factory is non sequitur.

Lastly, while it is evident that Alusitain’s subsequent sworn statement is in the nature of a retraction of his May 22, 1991 Affidavit of Separation, such retraction does not necessarily negate the affidavit. For retractions are generally unreliable and looked upon with considerable disfavor by the courts as they can easily be fabricated. Thus, before accepting a retraction, it is necessary to examine the circumstances surrounding it and possible motives for reversing the previous declaration, as these motives may not necessarily be in consonance with the truth. To automatically adopt them hook, line and sinker would allow unscrupulous individuals to throw wide open the doors to fraud.

In the case at bar, Alusitain’s retraction is highly suspect. Other than his bare and self-serving allegations and the sworn statement of his daughter which, as reflected above, cannot be relied upon, he has not shown any scintilla of evidence that he was employed with petitioner Rufina Patis Factory at the time R.A. 7641 took effect. He did not produce any documentary evidence such as pay slips, income tax return, his identification card, or any other independent evidence to substantiate his claim.

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While the NLRC and its Labor Arbiters are not bound by technical rules of procedure and evidence in the adjudication of cases,[52] this should not be construed as a license to disregard fundamental rules on evidence in proving one’s allegations.[53]

In fine, Alusitain having failed to prove that he was an employee of petitioner at the time R.A. 7641 took effect, his claim for retirement benefits thereunder must be disallowed.

WHEREFORE, the petition is GRANTED. The Court of Appeals June 23, 2000 Decision and December 6, 2000 Resolution in CA-G.R. SP No. 54722 are REVERSED andSET ASIDE.

SO ORDERED.

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.

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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 Court made 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 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)

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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 further voluntary 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. Leogardo, Jr., decided on October 23, 1982 3 -where a collective bargaining agreement imposed on the employer the obligation to pay "a year-end productivity bonus equivalent to ten (10) days of ... (the employee's) basic daily wage" if a stipulated level of production were attained, and the first bonus was in fact given on December 11, 1975-this Court 4 adverted to the NFSW decision as binding norm and went on to say.

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Tested against this norm, it becomes clear that the year-end productivity bonus granted by petitioner to private respondents pursuant to their CBA is, in legal contemplation, an integral part of their 13th month pay, notwithstanding its conditional nature. When, therefore, petitioner, in order to comply with the mandate of PD 851, credited the year-end productivity bonus as part of the 13th month pay and adopted the procedure of paying only the difference between said bonus and 1/12 of the worker's yearly basic salary, it acted well within the letter and spirit of the law and its implementing rules. For in the event that "an employer pays less than one twelfth of the employees' basic salary, all that said employer is required to do under the law is to pay the difference.

To hold otherwise would be to impose an unreasonable and undue burden upon those employers who had demonstrated their sensitivity and concern for the welfare of their employees. A contrary stance would indeed create an absurd situation whereby an employer who started giving his employees the 13th month pay only because of the unmistakable force of the law would be in a far better position than another who, by his own magnanimity or by mutual agreement, had long been extending to his employees the benefits contemplated under PD 851, by whatever nomenclature these benefits have come to be known. Indeed, PD No. 851, a legislation benevolent in its purpose, never intended to bring about such oppressive situation.

This Court is now called upon to answer the same question again, this time at the instance of petitioner Brokenshire Memorial Hospital, which initiated the special civil action of certiorari at bar to annul the resolution of the National Labor Relations Commission (Second Division) affirming the decision of a Labor Arbiter of Regional Arbitration Branch XI of the Ministry of Labor and Employment in NLRC Case No. 64-LS-XI-82 entitled "Brokenshire Memorial Hospital Employees and Workers Union FFW v. Brokenshire Memorial Hospital." The affirmed decision required the hospital to pay its employees a yearly Christmas bonus in addition to the 13th month pay under PD 85l. 5 The answer to the question will be the same. The hospital can not be obliged to bear the "double burden" of giving its employees not only the 13th month pay required by PD 851 but also the

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Christmas bonus it had theretofore been granting. The decisions in question will have to be reversed.

At the time that PD 851 became effective on December 16, 1975, the hospital had for many years been giving its employees an annual Christmas bonus. It continued to do so afterwards. But after 1979 the hospital stopped giving the bonus because avowedly its poor financial condition no longer made this possible.

Protesting the discontinuance, respondent union filed a complaint 6 against the hospital for unlawful diminution of benefits, alleging a violation of Article 100 of the Labor Code and Section 10 of PD 851. 7 In response, 8 the hospital asserted that the giving of the bonus was not an established and continuing obligation on its part but was contingent and entirely dependent on its financial condition in any given year. This is why the matter of the bonus was not dealt with at all in the Collective Bargaining Agreement between it and the union. At any rate, it further claimed, it should not be made to bear the double burden of giving both 13th month pay and bonus, in the light of the decision in National Federation of Sugar Workers (NFSW) vs. Ethelwoldo R. Ovejera, et al., G.R. No. 59743, rendered in the context of Section 2, PD 851, and Section 3(c) of the Rules and Regulations Implementing PD 851, declaring said decree inapplicable to "employers already paying their employees a 13th month pay or its equivalent.

On March 23, 1983, the Labor Arbiter promulgated judgment requiring the hospital "to pay all its employees, as it had done in 1979, an extra Christmas bonus of P100.00 per year, for 1980, 1981, and 1982." 9 The hospital appealed. On December 14, 1984, the National Labor Relations Commission affirmed the labor Arbiter's decision.10

It is difficult to understand why the Labor Arbiter took no account whatever of this Court's decision in NFSW vs. Ovejera despite its having been explicitly brought to his attention. He never mentioned the case in his decision at all. Instead, he occupied Himself with a discussion of the financial condition of the hospital, declaring that his reading of the hospital's financial statement for 1980 revealed a "surplus available for expenditure" from which the employees' bonuses could be drawn.

Equally difficult to understand is the refusal of the National Labor Relations Commission to apply the NFSW vs. Ovejera ruling. According to the Commission-

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Respondent's (the hospital's) reliance on the La Carlota case, GR No. 59743, is unavailing. We are not persuaded to view the matter that way. For in the La Carlota case, the NFSW union is claiming entitlement to a 13th month pay, on top of Christmas bonuses already given, whereas, in the instant case, respondent discontinued and eliminated a favorable practice being enjoyed by the employee at the time of promulgation of the rules implementing PD No. 851 on December 22, 1975 which, as fixed below, amounts to P100 christmas bonus, on top of the 13th month pay.

The distinction sought to be drawn by the Commission between the case at bar and NFSW vs. Ovejera is insubstantial and unjustifiable. The message of NFSW vs. Ovejera is clear and unequivocal: An employer may not be obliged to assume a "double burden" of paying the 13th month pay in addition to bonuses or other pecuniary benefits given by way of fringe benefits aside from the employees' basic salaries or wages; PD 851 accorded to him the option either to exempt himself from the obligation to give 13th month pay or discontinue the payment of the bonuses or fringe benefits deemed to be the equivalent of said 13th month pay. In any event, whatever doubt might have existed regarding this option on the employer's part should have been dispelled by this Court's decision in Dole Phils., Inc. vs. Leogardo, Jr. promulgated on October 23, 1982, 11 more than two (2) years before the rendition of the resolution of the National Labor Relations Commission on December 14, 1984. In Dole, this Court declared that when an employer, in order to comply with the mandate of PD 851, credits the bonus being paid by him as part of his employees' 13th month pay and adopts the procedure of paying only the difference between said bonus and 1/12 of the employees' yearly basic salary, said employer acts well within the letter and spirit of the law and its implementing rules; for in the event that "an employer pays less than one twelfth of the employees' basic salary, all that said employer is required to do under the law is to pay the difference."

Prescinding from these legal considerations, it would appear that the ratiocinations of the Labor Arbiter based on his own interpretation of the financial statements of petitioner hospital for 1980 were quite erroneous. Where those financial statements, to an accountant, or one familiar with accountancy, should have shown a deficit, to the Labor Arbiter they showed a surplus.

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Be this as it may, the fact is that as early as November 5, 1984, the hospital sent to the Minister of Labor and Employment a notice of closure 12 because of its "critically grave" financial condition. 13 And on March 2, 1985 the hospital finally ceased to operate for lack of operating capital 14 resulting from the garnishment of its bank deposits amounting to P163,047.50. 15

Whether or not this unhappy eventuality would have come to pass had the decision of the Labor Arbiter or that of the National Labor Relations Commission correctly applied the doctrine enunciated by this Court in NFSW vs. Ovejera and Dole Phils., Inc. vs. Leogardo, Jr., is a question that perhaps is incapable of a fair and realistic answer. But the mere possibility that closure, with the consequent loss of work for so many, was caused or hastened by the questioned decisions should be enough to give pause and provide an object lesson to address such matters more studiously and with greater circumspection in the future.

WHEREFORE, the Decision of the Labor Arbiter dated March 23, 1983 and the Resolution of the National Labor Relation Commission in affirmance thereof, dated December 14, 1984, are hereby reversed and set aside, and the complaint filed by respondent union is hereby dismissed, with costs against said private respondent.

SO ORDERED.

SEVILLA TRADING COMPANY, petitioner, vs. A.V.A. TOMAS E. SEMANA, SEVILLA TRADING WORKERS UNION–SUPER, respondents.

D E C I S I O N

PUNO, J.:

On appeal is the Decision[1] of the Court of Appeals in CA-G.R. SP No. 63086 dated 27 November 2001 sustaining the Decision[2] of Accredited Voluntary

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Arbitrator Tomas E. Semana dated 13 November 2000, as well as its subsequent Resolution[3] dated 06 March 2002 denying petitioner’s 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;

(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:

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“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 months

where:

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

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Workers Union – SUPER (Union, for short), a duly organized 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 13 th-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 its computation 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 entitled employees;

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.

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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 the extent 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]

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

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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 Telecommunications Commission, 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 January 19, 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 one’s 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

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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.

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 petitioner’s stance of mistake or error in the computation of the thirteenth month pay is unmeritorious. Petitioner’s 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 Union’s contention of company practice, we ruled that:

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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 be considered 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. Inciong[8] 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 13 th-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;

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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 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 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

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special holidays, pay for regular holidays and night differentials. As such they are deemed not part of the basic salary and shall not be considered in the computation of the 13th-month pay. If they were not so excluded, it is hard to find any “earnings and other remunerations” expressly excluded in the computation of the 13th-month pay. Then the exclusionary provision would prove to be idle and with no purpose.

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 petitioner’s 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 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

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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 policy which 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. 63086 dated 27 November 2001 and its Resolution dated 06 March 2002 are hereby AFFIRMED.

SO ORDERED.

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HONDA PHILS., INC., petitioner, vs. SAMAHAN NG MALAYANG MANGGAGAWA SA HONDA, respondent.

D E C I S I O N

YNARES-SANTIAGO, J.:

This petition for review under Rule 45 seeks the reversal of the Court of Appeals’ decision[1] dated September 14, 2000[2] and its resolution[3] dated October 18, 2000, in CA-G.R. SP No. 59052. The appellate court affirmed the decision dated May 2, 2000 rendered by the Voluntary Arbitrator who ruled that petitioner Honda Philippines, Inc.’s (Honda) pro-rated payment of the 13th and 14th month pay and financial assistance to its employees was invalid.

As found by the Court of Appeals, the case stems from the Collective Bargaining Agreement (CBA) forged between petitioner Honda and respondent union Samahan ng Malayang Manggagawa sa Honda (respondent union) which contained the following provisions:

Section 3. 13th Month Pay

The COMPANY shall maintain the present practice in the implementation [of] the 13th month pay.

Section 6. 14th Month Pay

The COMPANY shall grant a 14th Month Pay, computed on the same basis as computation of 13th Month Pay.

Section 7. The COMPANY agrees to continue the practice of granting, in its discretion, financial assistance to covered employees in December of each year, of not less than 100% of basic pay.

This CBA is effective until year 2000. In the latter part of 1998, the parties started re-negotiations for the fourth and fifth years of their CBA. When the talks between the parties bogged down, respondent union filed a Notice of Strike on the ground of bargaining deadlock. Thereafter, Honda filed a Notice of Lockout. On March 31, 1999, then Department of Labor and Employment (DOLE) Secretary Laguesma assumed jurisdiction over the labor dispute and ordered the parties to

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cease and desist from committing acts that would aggravate the situation. Both parties complied accordingly.

On May 11, 1999, however, respondent union filed a second Notice of Strike on the ground of unfair labor practice alleging that Honda illegally contracted out work to the detriment of the workers. Respondent union went on strike and picketed the premises of Honda on May 19, 1999. On June 16, 1999, DOLE Acting Secretary Felicisimo Joson, Jr. assumed jurisdiction over the case and certified the same to the National Labor Relations Commission (NLRC) for compulsory arbitration. The striking employees were ordered to return to work and the management accepted them back under the same terms prior to the strike staged.

On November 22, 1999, the management of Honda issued a memorandum[4] announcing 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 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.

Respondent union opposed the pro-rated computation of the bonuses in a letter dated November 25, 1999. Honda sought the opinion of the Bureau of Working Conditions (BWC) on the issue. In a letter dated January 4, 2000,[5] the BWC agreed with the pro-rata payment of the 13th month pay as proposed by Honda.

The matter was brought before the Grievance Machinery in accordance with the parties’ existing CBA but when the issue remained unresolved, it was submitted for voluntary arbitration. In his decision[6] dated May 2, 2000, Voluntary Arbitrator Herminigildo C. Javen invalidated Honda’s computation, to wit:

WHEREFORE, in view of all foregoing premises being duly considered and evaluated, it is hereby ruled that the Company’s implementation of pro-rated 13th Month pay, 14th Month pay and Financial Assistance [is] invalid. The Company is thus ordered to compute each provision in full month basic pay and pay the amounts in question within ten (10) days after this Decision shall have become final and executory.

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The three (3) days Suspension of the twenty one (21) employees is hereby affirmed.

SO ORDERED.[7]

Honda’s Motion for Partial Reconsideration was denied in a resolution dated May 22, 2000. Thus, a petition was filed with the Court of Appeals, however, the petition was dismissed for lack of merit.

Hence, the instant petition for review on the sole issue of whether the pro-rated computation of the 13th month pay and the other bonuses in question is valid and lawful.

The petition lacks merit.

A collective bargaining agreement refers to the negotiated contract between a legitimate labor organization and the employer concerning wages, hours of work and all other terms and conditions of employment in a bargaining unit. [8] As in all contracts, the parties in a CBA may establish such stipulations, clauses, terms and conditions as they may deem convenient provided these are not contrary to law, morals, good customs, public order or public policy. [9] Thus, where the CBA is clear and unambiguous, it becomes the law between the parties and compliance therewith is mandated by the express policy of the law.[10]

In some instances, however, the provisions of a CBA may become contentious, as in this case. Honda wanted to implement a pro-rated computation of the benefits based on the “no work, no pay” rule. According to the company, the phrase “present practice” as mentioned in the CBA refers to the manner and requisites with respect to the payment of the bonuses, i.e., 50% to be given in May and the other 50% in December of each year. Respondent union, however, insists that the CBA provisions relating to the implementation of the 13th month pay necessarily relate to the computation of the same.

We agree with the findings of the arbitrator that the assailed CBA provisions are far from being unequivocal. A cursory reading of the provisions will show that they did not state categorically whether the computation of the 13 th 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.[11] The Court of Appeals affirmed the arbitrator’s finding and added that the computation of the 13th month pay should

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be based on the length of service and not on the actual wage earned by the worker.

We uphold the rulings of the arbitrator and the Court of Appeals. Factual findings of labor officials, who are deemed to have acquired expertise in matters within their respective jurisdiction, are generally accorded not only respect but even finality, and bind us when supported by substantial evidence. It is not our function to assess and evaluate the evidence all over again, particularly where the findings of both the arbiter and the Court of Appeals coincide.[12]

Presidential Decree No. 851, otherwise known as the 13th Month Pay Law, which required all employers to pay their employees a 13th month pay, was issued to protect the level of real wages from the ravages of worldwide inflation. It was enacted on December 16, 1975 after it was noted that there had been no increase in the minimum wage since 1970 and the Christmas season was an opportune time for society to show its concern for the plight of the working masses so that they may properly celebrate Christmas and New Year.[13]

Under the Revised Guidelines on the Implementation of the 13 th month pay issued on November 16, 1987, the salary ceiling of P1,000.00 under P.D. No. 851 was removed. It further provided that the minimum 13th month pay required by law shall not be less than one-twelfth (1/12) of the total basic salary earned by an employee within a calendar year. The guidelines pertinently provides:

The “basic salary” of an employee for the purpose of computing the 13th month pay shall include all remunerations or earnings paid by his employer for services rendered but does not include allowances and monetary benefits which are not considered or integrated as part of the regular or basic salary, such as the cash equivalent of unused vacation and sick leave credits, overtime premium, night differential and holiday pay, and cost-of-living allowances.[14] (Emphasis supplied)

For employees receiving regular wage, we have interpreted “basic salary” to mean, not the amount actually received by an employee, but 1/12 of their standard monthly wage multiplied by their length of service within a given calendar year. Thus, we exclude from the computation of “basic salary” payments for sick, vacation and maternity leaves, night differentials, regular holiday pay and premiums for work done on rest days and special holidays.[15] In Hagonoy Rural Bank v. NLRC,[16] St. Michael Academy v. NLRC,[17]Consolidated Food Corporation v. NLRC,[18] and similar cases, the 13th month pay due an

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employee was computed based on the employee’s basic monthly wage multiplied by the number of months worked in a calendar year prior to separation from employment.

The revised guidelines also provided for a pro-ration of this benefit only in cases of resignation or separation from work. As the rules state, under these circumstances, an employee is entitled to a pay in proportion to the length of time he worked during the year, reckoned from the time he started working during the calendar year.[19] The Court of Appeals thus held that:

Considering the foregoing, 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. In the present case, there being no gap in the service of the workers during the calendar year in question, the computation of the 13th month pay should not be pro-rated but should be given in full.[20] (Emphasis supplied)

More importantly, it has not been refuted that Honda has not implemented any pro-rating of the 13th month pay before the instant case. Honda did not adduce evidence to show that the 13th month, 14th month and financial assistance benefits were previously subject to deductions or pro-rating or that these were dependent upon the company’s financial standing. As held by the Voluntary Arbitrator:

The Company (Honda) explicitly accepted that it was the strike held that prompt[ed] them to adopt a pro-rata computation, aside [from] being in [a] state of rehabilitation due to 227M substantial losses in 1997, 114M in 1998 and 215M lost of sales in 1999 due to strike. This is an implicit acceptance that prior to the strike, a full month basic pay computation was the “present practice” intended to be maintained in the CBA.[21]

The memorandum dated November 22, 1999 which Honda issued shows that it was the first time a pro-rating scheme was to be implemented in the company. It was a convenient coincidence for the company that the work stoppage held by the employees lasted for thirty-one (31) days or exactly one month. This enabled them to devise a formula using 11/12 of the total annual salary as base amount for computation instead of the entire amount for a 12-month period.

That a full month payment of the 13th month pay is the established practice at Honda is further bolstered by the affidavits executed by Feliteo Bautista and

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Edgardo Cruzada. Both attested that when they were absent from work due to motorcycle accidents, and after they have exhausted all their leave credits and were no longer receiving their monthly salary from Honda, they still received the full amount of their 13th month, 14th month and financial assistance pay.[22]

The case of Davao Fruits Corporation v. Associated Labor Unions, et al.[23] presented an example of a voluntary act of the employer that has ripened into a company practice. In that case, the employer, from 1975 to 1981, freely and continuously included in the computation of the 13 th month pay those items that were expressly excluded by the law. We have held that this act, which was favorable to the employees though not conforming to law, has ripened into a practice and therefore can no longer be withdrawn, reduced, diminished, discontinued or eliminated. Furthermore, in Sevilla Trading Company v. Semana,[24] we stated:

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, the company practice lasted for six (6) years. In another case, Davao Integrated Port Stevedoring Services vs. Abarquez, 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. 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   policy   which   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.[25] (Emphasis supplied)

Lastly, the foregoing interpretation of law and jurisprudence is more in keeping with the underlying principle for the grant of this benefit. It is primarily given to alleviate the plight of workers and to help them cope with the exorbitant

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increases in the cost of living. To allow the pro-ration of the 13th month pay in this case is to undermine the wisdom behind the law and the mandate that the workingman’s welfare should be the primordial and paramount consideration.[26] What is more, the factual milieu of this case is such that to rule otherwise inevitably results to dissuasion, if not a deterrent, for workers from the free exercise of their constitutional rights to self-organization and to strike in accordance with law.[27]

WHEREFORE, the instant petition is DENIED. The decision and the resolution of the Court of Appeals dated September 14, 2000 and October 18, 2000, respectively, in CA-G.R. SP No. 59052, affirming the decision rendered by the Voluntary Arbitrator on May 2, 2000, are hereby AFFIRMED in toto.

SO ORDERED.

JPL MARKETING G.R. No. 151966PROMOTIONS, Petitioner, Present: PUNO, J.,

Chairman, - versus - AUSTRIA-MARTINEZ, CALLEJO, SR., TINGA, andCOURT OF APPEALS, NATIONAL CHICO-NAZARIO, JJ.LABOR RELATIONS COMMISSION, NOEL GONZALES, RAMON ABESA

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III and FAUSTINO ANINIPOT, Respondents. Promulgated:

July 8, 2005 x-------------------------------------------------------------------x D E C I S I O N TINGA, J.: This is a petition for review of the Decision[1] of the Court of Appeals in CA-G.R. SP No. 62631 dated 03 October 2001 and itsResolution[2] dated 25 January 2002 denying petitioner’s Motion for Reconsideration, affirming the Resolution of the National Labor Relations Commission (NLRC), Second Division, dated 27 July 2000, awarding separation pay, service incentive leave pay, and 13thmonth pay to private respondents. JPL Marketing and Promotions (hereinafter referred to as “JPL”) is a domestic corporation engaged in the business of recruitment and placement of workers. On the other hand, private respondents Noel Gonzales, Ramon Abesa III and Faustino Aninipot were employed by JPL as merchandisers on separate dates and assigned at different establishments in Naga City and Daet, Camarines Norte as attendants to the display of California Marketing Corporation (CMC), one of petitioner’s clients. On 13 August 1996, JPL notified private respondents that CMC would stop its direct merchandising activity in the Bicol Region, Isabela, and Cagayan Valley effective 15 August 1996.[3] They were advised to wait for further notice as they would be transferred to other clients. However, on 17 October 1996,[4] private respondents Abesa and Gonzales filed before the National Labor Relations Commission Regional Arbitration Branch (NLRC) Sub V complaints for illegal dismissal, praying for separation pay, 13th month pay, service incentive leave pay and payment for moral damages.[5] Aninipot filed a similar case thereafter.

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After the submission of pertinent pleadings by all of the parties and after some clarificatory hearings, the complaints were consolidated and submitted for resolution. Executive Labor Arbiter Gelacio L. Rivera, Jr. dismissed the complaints for lack of merit.[6] The Labor Arbiter found that Gonzales and Abesa applied with and were employed by the store where they were originally assigned by JPL even before the lapse of the six (6)-month period given by law to JPL to provide private respondents a new assignment. Thus, they may be considered to have unilaterally severed their relation with JPL, and cannot charge JPL with illegal dismissal.[7] The Labor Arbiter held that it was incumbent upon private respondents to wait until they were reassigned by JPL, and if after six months they were not reassigned, they can file an action for separation pay but not for illegal dismissal.[8] The claims for 13th month pay and service incentive leave pay was also denied since private respondents were paid way above the applicable minimum wage during their employment.[9]

Private respondents appealed to the NLRC. In its Resolution,[10] the Second Division of the NLRC agreed with the Labor Arbiter’s finding that when private respondents filed their complaints, the six-month period had not yet expired, and that CMC’s decision to stop its operations in the areas was beyond the control of JPL, thus, they were not illegally dismissed. However, it found that despite JPL’s effort to look for clients to which private respondents may be reassigned it was unable to do so, and hence they are entitled to separation pay. [11] Setting aside the Labor Arbiter’s decision, the NLRC ordered the payment of:

1. Separation pay, based on their last salary rate and counted

from the first day of their employment with the respondent JPL up to the finality of this judgment; 2. Service Incentive Leave pay, and 13th month pay, computed as in No.1 hereof.[12]

Aggrieved, JPL filed a petition for certiorari under Rule 65 of the Rules of Court with the Court of Appeals, imputing grave abuse of discretion on the part of

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the NLRC. It claimed that private respondents are not by law entitled to separation pay, service incentive leave pay and 13th month pay. The Court of Appeals dismissed the petition and affirmed in toto the NLRC resolution. While conceding that there was no illegal dismissal, it justified the award of separation pay on the grounds of equity and social justice. [13] The Court of Appeals rejected JPL’s argument that the difference in the amounts of private respondents’ salaries and the minimum wage in the region should be considered as payment for their service incentive leave and 13th month pay.[14] Notwithstanding the absence of a contractual agreement on the grant of 13th month pay, compliance with the same is mandatory under the law. Moreover, JPL failed to show that it was exempt from paying service incentive leave pay. JPL filed a motion for reconsideration of the said resolution, but the same was denied on 25 January 2002.[15]

In the instant petition for review, JPL claims that the Court of Appeals committed reversible error in rendering the assailedDecision and Resolution.[16] The instant case does not fall under any of the instances where separation pay is due, to wit: installation of labor-saving devices, redundancy, retrenchment or closing or cessation of business operation,[17] or disease of an employee whose continued employment is prejudicial to him or co-employees,[18] or illegal dismissal of an employee but reinstatement is no longer feasible. [19] Meanwhile, an employee who voluntarily resigns is not entitled to separation unless stipulated in the employment contract, or the collective bargaining agreement, or is sanctioned by established practice or policy of the employer. [20] It argues that private respondents’ good record and length of service, as well as the social justice precept, are not enough to warrant the award of separation pay. Gonzales and Aninipot were employed by JPL for more than four (4) years, while Abesa rendered his services for more than two (2) years, hence, JPL claims that such short period could not have shown their worth to JPL so as to reward them with payment of separation pay.[21]

In addition, even assuming arguendo that private respondents are entitled to the benefits awarded, the computation thereof should only be from their first day of employment with JPL up to 15 August 1996, the date of termination of CMC’s contract, and not up to the finality of the 27 July 2000 resolution of the NLRC. [22]

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To compute separation pay, 13th month pay, and service incentive leave pay up to 27 July 2000 would negate the findings of both the Court of Appeals and the NLRC that private respondents were not unlawfully terminated.[23] Additionally, it would be erroneous to compute service incentive leave pay from the first day of their employment up to the finality of the NLRC resolution since an employee has to render at least one (1) year of service before he is entitled to the same. Thus, service incentive leave pay should be counted from the second year of service.[24]

On the other hand, private respondents maintain that they are entitled to the benefits being claimed as per the ruling of this Court in Serrano v. NLRC, et al.[25] They claim that their dismissal, while not illegal, was tainted with bad faith. [26] They allege that they were deprived of due process because the notice of termination was sent to them only two (2) days before the actual termination. [27] Likewise, the most that JPL offered to them by way of settlement was the payment of separation pay of seven (7) days for every year of service.[28]

Replying to private respondents’ allegations, JPL disagrees that the notice it sent to them was a notice of actual termination. The said memo merely notified them of the end of merchandising for CMC, and that they will be transferred to other clients.[29] Moreover, JPL is not bound to observe the thirty (30)-day notice rule as there was no dismissal to speak of. JPL counters that it was private respondents who acted in bad faith when they sought employment with another establishment, without even the courtesy of informing JPL that they were leaving for good, much less tender their resignation.[30] In addition, the offer of seven (7) days per year of service as separation pay was merely an act of magnanimity on its part, even if private respondents are not entitled to a single centavo of separation pay.[31]

The case thus presents two major issues, to wit: whether or not private respondents are entitled to separation pay, 13th month pay and service incentive leave pay, and granting that they are so entitled, what should be the reckoning point for computing said awards.

Under Arts. 283 and 284 of the Labor Code, separation pay is authorized only in cases of dismissals due to any of these reasons: (a) installation of labor saving devices; (b) redundancy; (c) retrenchment; (d) cessation of the employer's

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business; and (e) when the employee is suffering from a disease and his continued employment is prohibited by law or is prejudicial to his health and to the health of his co-employees. However, separation pay shall be allowed as a measure of social justice in those cases where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character, but only when he was illegally dismissed.[32] In addition, Sec. 4(b), Rule I, Book VI of the Implementing Rules to Implement the Labor Code provides for the payment of separation pay to an employee entitled to reinstatement but the establishment where he is to be reinstated has closed or has ceased operations or his present position no longer exists at the time of reinstatement for reasons not attributable to the employer. The common denominator of the instances where payment of separation pay is warranted is that the employee was dismissed by the employer. [33] In the instant case, there was no dismissal to speak of. Private respondents were simply not dismissed at all, whether legally or illegally. What they received from JPL was not a notice of termination of employment, but a memo informing them of the termination of CMC’s contract with JPL. More importantly, they were advised that they were to be reassigned. At that time, there was no severance of employment to speak of. Furthermore, Art. 286 of the Labor Code allows the bona fide suspension of the operation of a business or undertaking for a period not exceeding six (6) months, wherein an employee/employees are placed on the so-called “floating status.” When that “floating status” of an employee lasts for more than six months, he may be considered to have been illegally dismissed from the service. Thus, he is entitled to the corresponding benefits for his separation, and this would apply to suspension either of the entire business or of a specific component thereof.[34]

As clearly borne out by the records of this case, private respondents sought employment from other establishments even before the expiration of the six (6)-month period provided by law. As they admitted in their comment, all three of them applied for and were employed by another establishment after they received the notice from JPL.[35] JPL did not terminate their employment; they

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themselves severed their relations with JPL. Thus, they are not entitled to separation pay. The Court is not inclined in this case to award separation pay even on the ground of compassionate justice. The Court of Appeals relied on the cases[36] wherein the Court awarded separation pay to legally dismissed employees on the grounds of equity and social consideration. Said cases involved employees who were actually dismissed by their employers, whether for cause or not. Clearly, the principle applies only when the employee is dismissed by the employer, which is not the case in this instance. In seeking and obtaining employment elsewhere, private respondents effectively terminated their employment with JPL. In addition, the doctrine enunciated in the case of Serrano[37] cited by private respondents has already been abandoned by our ruling in Agabon v. National Labor Relations Commission.[38] There we ruled that an employer is liable to pay indemnity in the form of nominal damages to a dismissed employee if, in effecting such dismissal, the employer failed to comply with the requirements of due process. However, private respondents are not entitled to the payment of damages considering that there was no violation of due process in this case. JPL’s memo dated 13 August 1996 to private respondents is not a notice of termination, but a mere note informing private respondents of the termination of CMC’s contract and their re-assignment to other clients. The thirty (30)-day notice rule does not apply. Nonetheless, JPL cannot escape the payment of 13th month pay and service incentive leave pay to private respondents. Said benefits are mandated by law and should be given to employees as a matter of right. Presidential Decree No. 851, as amended, requires an employer to pay its rank and file employees a 13th month pay not later than 24 December of every year. However, employers not paying their employees a 13th month pay or its equivalent are not covered by said law.[39] The term “its equivalent” was defined by the law’s implementing guidelines as including Christmas bonus, mid-year bonus, cash bonuses and other payment amounting to not less than 1/12 of the

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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.[40]

On the other hand, service incentive leave, as provided in Art. 95 of the Labor Code, is a yearly leave benefit of five (5) days with pay, enjoyed by an employee who has rendered at least one year of service. Unless specifically excepted, all establishments are required to grant service incentive leave to their employees. The term “at least one year of service” shall mean service within twelve (12) months, whether continuous or broken reckoned from the date the employee started working.[41] The Court has held in several instances that “service incentive leave is clearly demandable after one year of service.”[42]

Admittedly, private respondents were not given their 13th month pay and service incentive leave pay while they were under the employ of JPL. Instead, JPL provided salaries which were over and above the minimum wage. The Court rules that the difference between the minimum wage and the actual salary received by private respondents cannot be deemed as their 13th month pay and service incentive leave pay as such difference is not equivalent to or of the same import as the said benefits contemplated by law. Thus, as properly held by the Court of Appeals and by the NLRC, private respondents are entitled to the 13th month pay and service incentive leave pay. However, the Court disagrees with the Court of Appeals’ ruling that the 13th month pay and service incentive leave pay should be computed from the start of employment up to the finality of the NLRC resolution. While computation for the 13th month pay should properly begin from the first day of employment, the service incentive leave pay should start a year after commencement of service, for it is only then that the employee is entitled to said benefit. On the other hand, the computation for both benefits should only be up to 15 August 1996, or the last day that private respondents worked for JPL. To extend the period to the date of finality of the NLRC resolution would negate the absence of illegal dismissal, or to be more precise, the want of dismissal in this case. Besides, it would be unfair to require JPL to pay private respondents the said benefits beyond 15 August 1996 when they did not render any service to JPL beyond that date. These benefits are given by law on the basis of the service actually rendered

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by the employee, and in the particular case of the service incentive leave, is granted as a motivation for the employee to stay longer with the employer. There is no cause for granting said incentive to one who has already terminated his relationship with the employer.

The law in protecting the rights of the employees authorizes neither oppression nor self-destruction of the employer. It should be made clear that when the law tilts the scale of justice in favor of labor, it is but recognition of the inherent economic inequality between labor and management. The intent is to balance the scale of justice; to put the two parties on relatively equal positions. There may be cases where the circumstances warrant favoring labor over the interests of management but never should the scale be so tilted if the result is an injustice to the employer. Justitia nemini neganda est (Justice is to be denied to none).[43]

WHEREFORE, the petition is GRANTED IN PART. The Decision

and Resolution of the Court of Appeals in CA-G.R. SP No. 62631 are hereby MODIFIED. The award of separation pay is deleted. Petitioner is ordered to pay private respondents their 13thmonth pay commencing from the date of employment up to 15 August 1996, as well as service incentive leave pay from the second year of employment up to 15 August 1996. No pronouncement as to costs.

SO ORDERED.

G.R. No. L-79436-50 January 17, 1990

EASTERN ASSURANCE & SURETY CORPORATION, petitioner, vs.SECRETARY OF LABOR, PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION, ELVIRA VENTURA, ESTER TRANGUILLAN, et al., respondents.

Tanjuatco, Oreta, Tanjuatco, Berenguer & San Vicente for petitioner.

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NARVASA, J.:

In connection with the application with the Philippine Overseas Employment Administration (POEA) of J & B Manpower Specialist, Inc. for a license to engage in business as a recruitment agency, a surety bond was filed on January 2, 1985 by the applicant and the Eastern Assurance and Surety Corporation, herein petitioner, in virtue of which they both held themselves —

. . . firmly bound unto (said) Philippine Overseas Employment Administration, Ministry of Labor in the penal sum of PESOS ONE HUNDRED FIFTY THOUSAND ONLY . . . (Pl50,000.00) for the payment of which will and truly to be made, . . . (they bound themselves, their) heirs, executors, administrators, successors and assigns, jointly and severally . .

The bond stipulated that:

a) it was "conditioned upon the true and faithful performance and observance of the . . . principal (J & B Manpower Specialist, Inc.) of its duties and obligations in accordance with all the rules and regulations promulgated by the Ministry of Labor Philippine Overseas Employment Administration and with the terms and conditions stipulated in the License;

b) the liability of the . . . Surety (petitioner) shall in no case exceed the sum of PESOS ONE HUNDRED FIFTY THOUSAND (P150,000.00) ONLY, PHILIPPINE CURRENCY; 1

c) notice to the Principal is also a notice to the Surety; and

d) LIABILITY of the surety . . . shall expire on JANUARY 02, 1986 and this bond shall be automatically cancelled ten (10) days after its expiration and the surety shall not be liable for any claim not discovered and presented to it in writing within said period of . . . from expiration and the obligee hereby expressly waives the rights to file any court action against the Surety after termination of said period of . . . . above cited. 2

As narrated by respondent Secretary of Labor, the facts are as follows: 3

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From June 1983 to December 1985 . . . thirty three (33) . . . (persons) applied for overseas employment with . . . (J & B). In consideration of promised deployment, complainants paid respondent various amounts for various fees. Most of' the receipts issued were sighed by Mrs. Baby Bundalian, Executive Vice-President of . . . (J & B).

Because of non-deployment . . . (the applicants) filed separate complaints with the Licensing and Regulation Office of POEA against . . . (J & B) for violation of Articles 32 and 34 (a) of the Labor Code between the months of April to October 1985.

Despite summons/notices of hearing,, . . . (J & B) failed to file Answer nor appear in the hearings conducted.

In its separate Answer, . . . EASCO essentially disclaimed liability on the ground that the claims were not expressly covered by the bond, that POEA had no jurisdiction to order forfeiture of the bond, that some of the claims were paid beyond or prior to the period of effectivity of the bond.

On September 8, 1986, the POEA Administrator issued the Order in favor of complainants ruling thus:

After careful evaluation, we find that the receipts and testimonies of complainants, in the absence of controverting evidence substantially establish that respondent charged and collected fees from them in amounts exceeding what is prescribed by this Administration. Complainants' non-deployment strongly indicates that there was no employment obtained for them. Hence, violation of Articles 32 and 34 (a) of the Labor Code, as amended, is established against respondent. The claims of complainants having arose (arisen) out of acts of the principal covered under the surety (bond), the respondent surety is equally liable therefor.

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Except for complainants Ramos, Samson, de Leon and Rizada, whose claims were transacted prior to the effectivity of the bond, . . . EASCO was declared jointly and severally liable with . . . (J & B) to twenty-nine (29) complainants.

(The dispositive portion of the POEA Administrator's Order also contained the following statement and direction, viz.:

Respondent was suspended on May 23, 1985, June 26, 1985 and January 17, 1986 all for illegal exaction. Considering its track record of illegal exaction activities and considering further the gross violation of recruitment rules and regulations established against it in the instant cases, and the expiration of its license on February 15, 1985, it is hereby forever banned from participation in the overseas employment program. It is ordered to cease and desist from further engaging in recruitment activities otherwise it shall be prosecuted for illegal recruitment.')

(J & B filed a motion for reconsideration). On December 19, 1986, the then deputy Minister of Labor and Employment denied the . . . Motion for Reconsideration for lack of merit and affirmed the findings in the Order of the POEA Administrator finding no reversible error therein.

On appeal by EASCO — J & B having as aforestated taken no part in the proceeding despite due service of summons — the judgment was modified by the Secretary of Labor, by Order dated July 1, 1987, disposing as follows: 4

WHEREFORE, in view of the foregoing, the Resolution of the then Deputy Minister of Labor dated December 19, 1986 affirming the Order of the POEA Administrator dated September 8, 1986 is hereby MODIFIED. Respondent J & B Manpower Specialist is directed to refund all thirty-three (33) complainants as listed in the Order of September 8, 1986 in the amounts listed thereto with the modification that complainants Lucena Cabasal and Felix Rivero are both entitled only to P15,980 and not P15,980 each. Respondent

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Eastern Assurance and Surety Corporation is hereby found jointly and severally liable with respondent J & B Manpower Specialist to refund nineteen (19) complainants in the modified amounts . . . (particularly specified).

The other findings in the Order of the POEA Administrator dated September 8, 1986 affirmed in the Resolution of the then Deputy Minister . . . are also hereby AFFIRMED. This Order is FINAL. No further Motion for Reconsideration hereof shall be entertained.

It is noteworthy that EASCO's liability for the refund, jointly and severally with its principal, was limited to 19 named complainants (in contrast to verdicts of the POEA and the Deputy Minister which both ordered payment to no less than 33 complainants) and was correspondingly reduced from P308,751.75 and US $ 400.00 5 to the aggregate amount of P 140,817.75. 6

The special civil action of certiorari at bar was thereafter instituted by EASCO 7 praying for the nullification of the POEA Administrator's Order of September 8, 1986, the Resolution of the Deputy Minister of Labor of' December 19, 1986, and the Order of the Secretary of Labor of July 1, 1987, It theorizes that:

1) the POEA had no jurisdiction over the claims for refund filed by non-employees;

2) neither did the Secretary of Labor have jurisdiction of the claims;

3) assuming they had jurisdiction, both the POEA and Secretary of Labor also committed legal errors and acted with grave abuse of discretion when they ruled that petitioner is liable on the claims.

EASCO contends that the POEA had no "adjudicatory jurisdiction" over the monetary claims in question because the same "did not arise from employer-employee relations." Invoked in support of the argument is Section 4 (a) of EO 797 providing in part 8 that the POEA has —

. . . original and exclusive jurisdiction over all cases, including money claims, involving employer-employee relations arising out of or by virtue of any law or contract involving Filipino workers for overseas employment including seamen . . .

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The complaints are however for violation of Articles 32 and 34 a) of the Labor Code. Article 32 and paragraph (a) of Article 34 read as follows:

Art. 32. Fees to be paid by workers.—Any person applying with a private fee-charging employment agency for employment assistance shall not be charged any fee until he has obtained employment through its efforts or has actually commenced employment. Such fee shall be always covered with the approved receipt clearly showing the amount paid. The Secretary of Labor shall promulgate a schedule of allowable fees.

Art. 34. Prohibited practices.—It shall be unlawful for any individual, entity, licensee, or holder of authority:

a) To charge or accept, directly or indirectly, any amount greater than that specified in the schedule of allowable fees prescribed by the Secretary of Labor, or to make a worker pay any amount greater than actually received by him as a loan or advance; . . .

The penalties of suspension and cancellation of license or authority are prescribed for violations of the above quoted provisions, among others. And the Secretary of Labor has the power under Section 35 of the law to apply these sanctions, as well as the authority, conferred by Section 36, not only, to "restrict and regulate the recruitment and placement activities of all agencies," but also to "promulgate rules and regulations to carry out the objectives and implement the provisions" governing said activities. Pursuant to this rule-making power thus granted, the Secretary of Labor gave the POEA 9 "on its own initiative or upon filing of a complaint or report or upon request for investigation by any aggrieved person, . . . (authority to) conduct the necessary proceedings for the suspension or cancellation of the license or authority of any agency or entity" for certain enumerated offenses including —

1) the imposition or acceptance, directly or indirectly, of any amount of money, goods or services, or any fee or bond in excess of what is prescribed by the Administration, and

2) any other violation of pertinent provisions of the Labor Code and other relevant laws, rules and regulations. 10

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The Administrator was also given the power to "order the dismissal of the case or the suspension of the license or authority of the respondent agency or contractor or recommend to the Minister the cancellation thereof." 11

Implicit in these powers is the award of appropriate relief to the victims of the offenses committed by the respondent agency or contractor, specially the refund or reimbursement of such fees as may have been fraudulently or otherwise illegally collected, or such money, goods or services imposed and accepted in excess of what is licitly prescribed. It would be illogical and absurd to limit the sanction on an offending recruitment agency or contractor to suspension or cancellation of its license, without the concomitant obligation to repair the injury caused to its victims. It would result either in rewarding unlawful acts, as it would leave the victims without recourse, or in compelling the latter to litigate in another forum, giving rise to that multiplicity of actions or proceedings which the law abhors.

Even more untenable is EASCO's next argument that the recruiter and its victims are in pari delicto — the former for having required payment, and the latter for having voluntarily paid, "prohibited recruitment fees" — and therefore, said victims are barred from obtaining relief. The sophistical, if not callous, character of the argument is evident upon the most cursory reading thereof; it merits no consideration whatever.

The Court is intrigued by EASCO's reiteration of its argument that it should not be held liable for claims which accrued prior to or after the effectivity of its bond, considering that the respondent Secretary had conceded the validity of part of said argument, at least. The Secretary ruled that EASCO's "contention that it should not be held liable for claims/payments made to respondent agency before the effectivity of the surety bond on January 2, 1985 is well taken." According to the Secretary: 12

. . . A close examination of the records reveal(s) that respondent EASCO is not jointly and severally liable with respondent agency to refund complainants Lucena Cabasal, Felix Rivero, Romulo del Rosario, Rogelio Banzuela, Josefina Ogatis, Francisco Sorato, Sonny Quiazon, Josefina Dictado, Mario del Guzman and Rogelio Mercado (10 in all). These complainants paid respondent agency in 1984, or

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before the effectivity of the bond on January 2, 1985 as evidence by the reciept and their testimonies.

The related argument, that it is also not liable for claims filed after the expiry (on January 2, 1986) of the period stipulated in the surety bond for the filing of claims against the bond, must however be rejected, as the Secretary did. The Court discerns no grave abuse of discretion in the Secretary's statement of his reasons for doing so, to wit:

. . . While it may be true that respondent EASCO received notice of their claims after the ten (10) day expiration period from cancellation or after January 12, 1986 as provided in the surety bond, records show that . . . EASCO's principal, respondent agency, was notified/ summoned prior to the expiration period or before January 12, 1986. Respondent agency received summons on July 24, 1985 with respect to claims of complainants Penarroyo, dela Cruz and Canti. It also received summons on November 26, 1985 with respect to Giovanni Garbillons' claim. Respondent agency was likewise considered constructively notified of the claims of complainants Calayag, Danuco Domingo and Campena on October 6, 1985. In this connection, it may be stressed that the surety bond provides that notice to the principal is notice to the surety. Besides, it has been held that the contract of a compensated surety like respondent EASCO is to be interpreted liberally in the interest of the promises and beneficiaries rather than strictly in favor of the surety (Acoustics Inc. v. American Surety, 74 Nev-6, 320 P2d. 626, 74 Am. Jur. 2d).

So, too, EASCO's claim that it had not been properly served with summons as regards a few of the complaints must be rejected, the issue being factual, and the Court having been cited to no grave error invalidating the respondent Secretary's conclusion that summons had indeed been duly served.

Finally, EASCO's half-hearted argument that its liability should be limited to the maximum amount set in its surety bond, i.e., P150,000.00, is palpably without merit, since the aggregate liability imposed on it, P140,817.75, supra, does not in fact exceed that limit.

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WHEREFORE, the petition is DISMISSED for lack of merit, and this decision is declared to be immediately executory. Costs against petitioner.

SO ORDERED.

G.R. No. 91096 April 3, 1990

CAPRICORN INTERNATIONAL TRAVEL AND TOURS, INC., petitioner, vs.COURT OF APPEALS and SAMEER OVERSEAS PLACEMENT AGENCY, respondents.

Antonio V. Ferrer for petitioner.

Gaspar V. Tagala for private respondent.

R E S O L U T I O N

CORTES, J.:

The sole issue in this petition to review the decision of the Court of Appeals is whether or not the cash bond posted by a recruitment agency in the Philippine Overseas Employment Administration (POEA) may be garnished by a judgment creditor of the agency.

In Civil Case No. 86-36195 of the Regional Trial Court of Manila, judgment was rendered in favor of petitioner and against private respondent, ordering the latter to pay Ninety-one Thousand Two Hundred Sixteen Pesos and Sixty Centavos (P91,216.60) with legal interest from the filing of the complaint, 10% attorney's fees, and costs. A writ of execution was issued and a notice of garnishment of the cash bond posted by private respondent was served on the POEA.

The POEA, through its officials, was against delivering the amount of private respondent's cash bond to the sheriff, but subsequently, left with no other recourse but to comply with the trial court's orders, the POEA delivered a check

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for One Hundred Thousand Pesos (P100,000.00) representing the amount of the cash bond to petitioner's counsel.

In the meantime, private respondent moved to quash the notice of garnishment, but this was denied by the trial court. A motion for reconsideration was filed, but this was also denied.

Private respondent filed a petition for certiorari with the Court of Appeals, alleging that the trial court judge gravely abused his discretion when he denied the motion to quash the notice of garnishment. The Court of Appeals granted the petition and annulled the trial court's orders relative to the notice of garnishment. It also permanently enjoined petitioner from attaching, levying and garnishing private respondent's cash bond and ordered petitioner to return it to the POEA, if still unreturned.

Hence, this petition.

1. Relative to the State's regulation of recruitment and overseas placement activities, the Labor Code provides:

Art. 31. Bonds. — All applicants for license or authority shall post such cash and surety bonds as determined by the Secretary of Labor to guarantee compliance with prescribed recruitment procedures, rules and regulations, and terms and conditions of employment as appropriate.

Implementing this provision, Book II, Rule II of the POEA Rules and Regulations provides:

Section 4. Payment of Fees and Posting of Bonds. — Upon approval of the application by the Minister, the applicant shall pay an annual license fee of P6,000.00. It shall also post a cash bond of P100,000.00 and a surety bond of P150,000.00 from a bonding company acceptable to the Administration duly accredited by the Office of the Insurance Commission. The bonds shall answer for all valid and legal claims arising from violations of the conditions for the grant and use of the license or authority and contracts of employment, The bonds shall likewise guarantee compliance with the provisions of the Labor Code and its implementing rules and regulations relating to

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recruitment and placement, the rules of the Administration and relevant issuances of the Ministry and all liabilities which the Administration may impose. The surety bonds shall include the condition that notice of garnishment to the principal is notice to the surety.

Section 5. Issuance of License or Authority. — The Administration shall issue the corresponding license or authority upon payment in full of the required fees and posting of bonds.

xxx xxx xxx

Section 15. Renewal of License. — Within forty-five (45) days before the expiry date of the license, an agency, or entity shall submit an application for the renewal thereof to the Administration. Such application shall be supported by the following documents:

xxx xxx xxx

e. Replenishment of the cash bond in case such or any part thereof is garnished;

xxx xxx xxx

Section 19. Replenishment of Cash or Surety Bonds. — Within thirty (30) days from notice by the Administration that the bonds or any part thereof had been garnished, the agency or entity shall replenish the same. Failure to replenish shall cause the suspension or cancellation of the license or authority.

Section 20. Refund of Cash Bond. —A licensed agency or entity which voluntarily surrenders its license or authority shall be entitled to the refund of its cash bond only after posting a surety bond of similar amount valid for three (3) years.

2. Explicit from the provisions abovequoted are:

(a) that the cash bond is a requisite for the issuance and renewal of a license or authority to engage in the business of recruitment and overseas placement;

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(b) that the cash bond is to answer for the liabilities of the agency arising from violations of the conditions for the grant or use of the license or authority or the contracts of employment, the Labor Code, the POEA rules and Labor Department issuances and all liabilities that the POEA may impose;

(c) that the amount of the cash bond must be maintained during the lifetime of the license or authority; and

(d) that the amount of the cash bond shall be returned to the agency only when it surrenders its license or authority, and only upon posting of a surety bond of the same amount valid for three (3) years.

It must also be added that the requirement for the posting of a cash bond is also an indispensable adjunct to the requirement that the agency undertakes to assume joint and solidary liability with the employer for all claims and liabilities which may arise in connection with the implementation of the contract of overseas employment and to guarantee compliance with existing labor and social legislation of the Philippines and the country of employment [POEA Rules and Regulations, Book II, Rule II secs. l(d), (3) and (4)].

On a broader scale, the undertaking to assume joint and solidary liability and to guarantee compliance with labor laws, and the consequent posting of cash and surety bonds, may be traced all the way back to the constitutional mandate for the State to "afford full protection to labor, local and overseas" [Art. XIII, sec. 3]. The peculiar nature of overseas employment makes it very difficult for the Filipino overseas worker to effectively go after his foreign employer for employment-related claims and, hence, public policy dictates that, to afford overseas workers' protection from unscrupulous employers, the recruitment or placement agency in the Philippines be made to share in the employer's responsibility.

3. Considering the rationale for requiring the posting of a cash bond and its nature, it cannot therefore be argued that the cash bond is not exempt from execution by a judgment creditor simply because it is not one of those enumerated in Rule 39, sec. 12 of the Rules of Court. To accede to such an argument would be tantamount to turning a blind eye to the clear intent of the law to reserve the cash bond for the employment-related claims of overseas workers and for violations of labor laws.

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4. From a different angle, neither may it be argued that petitioner's judgment credit, pertaining as it does to the value of airline tickets ostensibly used by private respondent to transport overseas workers abroad, this one of those for which the cash bond should answer. Private respondent's liability to petitioner relates to a purely contractual obligation arising from the purchase and sale of airline tickets. While the liability may have been incurred in connection with the business of recruiting or placing overseas workers, it is definitely not one arising from violations of the conditions for the grant and use of the license or authority and contracts of employment. Nor is it one arising from the violation of labor laws.

5. Thus, it cannot be said that the Court of Appeals erred when it annulled the assailed orders of respondent judge, enjoined petitioner from garnishing the cash bond, and ordered it to return the amount of the bond to the POEA if it had not yet done so.

ACCORDINGLY, after deliberating on the Petition, Comment and Reply, the Court Resolved to DENY the petition for lack of merit.

G.R. No. 88050 January 30, 1992

STRONGHOLD INSURANCE COMPANY, INC., petitioner, vs.HON. COURT OF APPEALS and ADRIANO URTESUELA, respondents.

T.J. Sumawang & Associates for petitioner.

Linsangan Law Office for private respondent.

CRUZ, J.:

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The petitioner invokes due process to escape liability on a surety bond executed for the protection of a Filipino seaman. It is a familiar argument that will be denied, in light of the following findings.

Acting on behalf of its foreign principal, Qatar National Fishing Co., Pan Asian Logistics and Trading, a domestic recruiting and placement agency, hired Adriano Urtesuela as captain of the vessel M/V Oryx for the stipulated period of twelve months. The required surety bond, in the amount of P50,000.00, was submitted by Pan Asian and Stronghold Insurance Co., Inc., the herein petitioner, to answer for the liabilities of the employer. Urtesuela assumed his duties on April 18, 1982, but three months later his services were terminated and he was repatriated to Manila. He thereupon filed a complaint against Pan Asian and his former employer with the Philippine Overseas Employment Administration for breach of contract and damages.

In due time, the POEA rendered a decision in his favor for the amount of P6,374.94, representing his salaries for the unexpired portion of his contract and the cash value of his unused vacation leave, plus attorney's fees and costs, which the respondents were required to pay. The judgment eventually became final and executory, not having been appealed on time. Pursuant thereto, a writ of execution was issued against Pan Asian but could be enforced only against its cash bond of P10,000.00, the company having ceased to operate. Urtesuela then filed a complaint with the Insurance Commission against Stronghold on the basis of the aforementioned surety bond and prayed for the value thereof plus attorney's fees and litigation costs.

Under the bond, the petitioner and Pan Asian undertook —

To answer for all liabilities which the Philippine Overseas Employment Administration may adjudge/impose against the Principal in connection with the recruitment of Filipino seamen.

It is understood that notice to the Principal is notice to the surety. (Exh. "I-2").

WHEREAS, the liability of the surety under this Bond shall in no case exceed the sum of PESOS: FIFTY THOUSAND ONLY (P50,000.00) Philippine Currency.

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After hearing, the Insurance Commission held that the complaint should be reformed because the provisions in the surety bond were not stipulations pour autrui to entitle Urtesuela to bring the suit himself. It held that the proper party was the POEA. 1 This ruling was reversed on appeal by the respondent court in its decision dated April 20, 1989. 2 It was there declared that, as the actual beneficiary of the surety bond, Urtesuela was competent to sue Stronghold, which as surety was solidarily liable with Pan Asian for the judgment rendered against the latter by the POEA.

The petitioner asks for reversal of the Court of Appeals. It submits that the decision of the POEA is not binding upon it because it was not impleaded in the complaint; it was not notified thereof nor did it participate in the hearing; and it was not specifically directed to pay the damages awarded to the complainant.

In support of its posture, the petitioner cites abundant jurisprudence, particularly Aguasin v. Velasquez, 3 where the Court held:

If the surety is to be bound by his undertaking, it is essential according to Section 10 of Rule 62 in connection with Section 20 of Rule 59 of the Rules of Court that the damages be awarded upon application and after proper hearing and included in the judgment. As a corollary to these requirements, due notice to the plaintiff and his surety setting forth the facts showing his right to damages and the amount thereof under the bond is indispensable. This has to be so if the surety is not to be condemned or made to pay without due process of law. It is to be kept in mind that the surety in this case was not a party to the action and had no notice of or intervention in the trial. It seems elementary that before being condemned to pay, it was the elementary right of the surety to be heard and to be informed that the party seeking indemnity would hold it liable and was going to prove the grounds and extent of its liability. This case is different from those in which the surety, by law and/or by the terms of his contract, has promised to abide by the judgment against the principal and renounced the right to be sued or cited.

The Court has gone over the decision and finds that the petitioner is "hoist by its own petard." For as the quoted excerpt itself says, the case is "different from those in which the surety, by law and/or by the terms of his contract, has

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promised to abide by the judgment against the principal and renounced the right to be sued or cited."

In the surety bond, the petitioner unequivocally bound itself:

To answer for all liabilities which the Philippine Overseas Employment Administration may adjudge/impose against the Principal in connection with the recruitment of Filipino seamen.

Strictly interpreted, this would mean that the petitioner agreed to answer for whatever decision might be rendered against the principal, whether or not the surety was impleaded in the complaint and had the opportunity to defend itself. There is nothing in the stipulation calling for a direct judgment against the surety as a co-defendant in an action against the principal. On the contrary, the petitioner agreed "to answer for all liabilities" that "might be adjudged or imposed by the POEA against the Principal."

But even if this interpretation were rejected, considering the well-known maxim that "the surety is a favorite of the law," the petitioner would still have to explain its other agreement that "notice to the Principal is notice to the surety." This was in fact another special stipulation typewritten on the printed form of the surety bond prepared by the petitioner. Under this commitment, the petitioner is deemed, by the implied notice, to have been given an opportunity to participate in the litigation and to present its side, if it so chose, to avoid liability. If it did not decide to intervene as a co-defendant (and perhaps also as cross-claimant against Pan Asian), it cannot be heard now to complain that it was denied due process.

The petitioner contends, however, that the said stipulation is unconstitutional and contrary to public policy, because it is "a virtual waiver" of the right to be heard and "opens wide the door for fraud and collusion between the principal and the bond obligee" to the prejudice of the surety. Hence, disregarding the stipulation, the petitioner should be deemed as having received no notice at all of the complaint and therefore deprived of the opportunity to defend itself.

The Court cannot agree. The argument assumes that the right to a hearing is absolute and may not be waived in any case under the due process clause. This is not correct. As a matter of fact, the right to be heard is as often waived as it is

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invoked, and validly as long as the party is given an opportunity to be heard on his behalf. 4

The circumstance that the chance to be heard is not availed of does not disparage that opportunity and deprive the person of the right to due process. This Court has consistently held in cases too numerous to mention that due process is not violated where a person is not heard because he has chosen, for whatever reason, not to be heard. It should be obvious that if he opts to be silent where he has a right to speak, he cannot later be heard to complain that he was unduly silenced.

Neither is public policy offended on the wicked ground of fraud and collusion imagined by the petitioner. For one thing, the speculation contravenes without proof the presumption of good faith and unreasonably imputes dishonest motives to the principal and the obligee. For another, it disregards the fiduciary relationship between the principal and the surety, which is the legal and also practical reason why the latter is willing to answer for the liabilities of the former.

In a familiar parallel, notice to the lawyer is considered notice to the client he represents even if the latter is not actually notified. It has not been suspected that this arrangement might result in a confabulation between the counsel and the other party to the client's prejudice.

At any rate, it is too late now for the petitioner to challenge the stipulation. If it believed then that it was onerous and illegal, what it should have done was object when its inclusion as a condition in the surety bond was required by the POEA. Even if the POEA had insisted on the condition, as now claimed, there was still nothing to prevent the petitioner from refusing altogether to issue the surety bond. The petitioner did neither of these. The fact is that, whether or not the petitioner objected, it in the end filed the surety bond with the suggested condition. The consequence of its submission is that it cannot now argue that it is not bound by that condition because it was coerced into accepting it.

This Court has always been receptive to complaints against the denial of the right to be heard, which is the very foundation of a free society. This right is especially necessary in the court of justice, where cases are decided after the parties shall have been given an opportunity to present their respective positions, for evaluation by the impartial judge. Nevertheless, a party is not compelled to speak

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if it chooses to be silent. If it avails itself of the right to be heard, well and good; but if not, that is also its right. In the latter situation, however, it cannot later complain that, because it was not heard, it was deprived of due process.

Worthy of consideration also is the private respondent's contention that he sought to enforce the petitioner's liability not in NSB Case No. 3810-82 as decided by the POEA, but in another forum. What he did was file an independent action for that purpose with the Insurance Commission on the basis of the surety bond which bound the petitioner to answer for whatever liabilities might be adjudged against Qatar National Fishing Co. by the POEA. In the proceedings before the Commission, the petitioner was given full opportunity (which it took) to present its side, in its answer with counterclaim to the complaint, in its testimony at the hearings, in its motion to dismiss the complaint, and in its 10-page memorandum. There is absolutely no question that in that proceeding, the petitioner was actually and even extensively heard.

The surety bond required of recruitment agencies 5 is intended for the protection of our citizens who are engaged for overseas employment by foreign companies. The purpose is to insure that if the rights of these overseas workers are violated by their employers, recourse would still be available to them against the local companies that recruited them for the foreign principal. The foreign principal is outside the jurisdiction of our courts and would probably have no properties in this country against which an adverse judgment can be enforced. This difficulty is corrected by the bond, which can be proceeded against to satisfy that judgment.

Given this purpose, and guided by the benign policy of social justice, we reject the technicalities raised by the petitioner against its established legal and even moral liability to the private respondent. These technicalities do not impair the rudiments of due process or the requirements of the law and must be rejected in deference to the constitutional imperative of justice for the worker.

WHEREFORE, the petition is DENIED and the challenged decision of the Court of Appeals AFFIRMED in toto. The respondent court is directed to ENFORCE payment to the private respondent in full, and with all possible dispatch of the amount awarded to him by the POEA in its decision dated May 13, 1983. It is so ordered.

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PHIL. EMPLOY SERVICES and RESOURCES, INC., petitioner, vs. JOSEPH PARAMIO, RONALD NAVARRA, ROMEL SARMIENTO, RECTO GUILLERMO, FERDINAND BAUTISTA and APOLINARIO CURAMENG, JR., respondents.

D E C I S I O N

CALLEJO, SR., J.:

This is a petition for review of the Decision[1] of the Court of Appeals in CA-G.R. SP No. 54744 and its Resolution denying the petitioner’s motion for reconsideration therefrom.

As culled from the records, the antecedents are as follows:

On different dates from April 1996 to October 1996, respondents Joseph Paramio, Ronald Navarra, Romel Sarmiento, Recto Guillermo, Ferdinand Bautista and Apolinario Curameng, Jr. applied for employment in Taiwan[2] with petitioner, Phil. Employ Services and Resources, Inc. (PSRI for brevity), a domestic corporation engaged in the recruitment and deployment of Filipino Workers Overseas.[3] Their applications were processed along with the requisite papers and documents in support thereof, and they paid P19,000 each as placement fee.[4] Thereafter, they executed in the Philippines separate one-year contracts of employment with their employer in Taiwan, Kuan Yuan Fiber Co., Ltd. Hsei-Chang. The respondents were deployed in Taiwan as operators on different dates[5] and each of them had a monthly salary of NT$15,360 (New Taiwan Dollars), with free food and accommodation.[6]

After the orientation given by their employer, the respondents were told that their schedule of work was up to 9:00 p.m.,[7] except for respondent Navarra who was made to work up to 12:00 midnight.[8] The respondents were downhearted when they discovered that, upon their arrival in their quarters, they had no beddings, pillows and blankets.[9] They encountered worse problems in the course of their employment, viz.:

a). Irregular and deliberate charging of deductions which were not fully accounted such as the blankets issued, charging of penalties amounting to 400 NT to all employees for a littering violation attributable only to one employee;

b). Mandatory imposition of overtime work exceeding 10 hours without just overtime compensation and night shift differentials;

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c). Failure to comply with some stipulations stated in the Employment Contract particularly those relating to the accommodation and lodging of the contracted workers;

d). Lack of observance of safety precautions at work area.[10]

The respondents brought their problems to the attention of the management. In March of 1997, Fabian Chua, local manager of the petitioner PSRI, made a surprise visit to Kuan Yuan in Taiwan and was apprised of the said complaints. However, instead of solving the problems, Chua cautioned the respondents not to air their complaints and to simply forget about whatever plans they had in mind.[11] Disappointed, the respondents, along with their co-workers, contacted the Overseas Workers Welfare Administration (OWWA) in Taiwanand sought the latter’s assistance, only to be frustrated when their requests were not favorably acted upon.[12]

Sometime in April of 1997, through the intercession of Chih-Hung, the manager of the new broker Chen Dard Manpower Co. Ltd., Long Island International Trade Co., Ltd, the overtime rate of the respondents was increased from 55NT$ to 85NT$. The respondents discovered, however, that work in the factory increased because of the increased volume of orders. [13] Moreover, their working conditions did not improve.

On May 10, 1997, respondent Navarra and another employee, Pio Gabito, were summoned by the management and told that they were to be repatriated, without specifying the ground or cause therefor. They pleaded that they be informed of the cause or causes for their repatriation, but their requests were rejected.[14] Worse, the manager of their employer summoned the police, who arrived and escorted them to the airport. They were even given time to pack all their personal belongings.

Upon respondent Navarra’s arrival in Manila, the petitioner sought to settle his complaints.[15] After the negotiations, the petitioner agreed to pay P49,000 to the said respondent but, in consideration thereof, the latter executed a quitclaim releasing the petitioner from any or all liabilities for his repatriation.[16]

Meanwhile, when the other respondents learned that Navarra and Gabito were repatriated, they were disheartened at their fate. The respondents also decided to go home, but their employer and their broker told them [17] that they would be repatriated two days later, or on May 12, 1997. They were ready to leave on the aforesaid date, but were informed that they would have to pay their

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employer NT$30,000; otherwise, they would not be allowed to go home. As they were unable to pay the NT$30,000, the respondents failed to return to thePhilippines.[18]

The management and broker gave the respondents two (2) options: (a) imprisonment for their refusal to pay NT$30,000.00; or (b) sign separate agreements with their employer. The respondents had no other recourse but to sign agreements[19] authorizing their employer to (a) deduct the amount of NT$30,000 from their salaries; (b) remit their salaries to thePhilippines; and, (c) deduct NT$10,000 from their salaries as “bond.”[20] However, the respondents were still not repatriated. The next day, or on May 13, 1997, their employer issued a regulation that overtime of ten hours or more would be implemented.[21] Thus, the conditions in the respondents’ workplace worsened.

On May 14, 1997, respondent Paramio got ill as a result of the employer’s failure to give breakfast on the said date and dinner the night before. [22] His manager still ordered him to work. When he pleaded that he be allowed to take some rest, the manager refused. Respondent Paramio was, instead, made to carry a container weighing around 30 kilograms. Due to his condition, the container slipped from his hands and he injured his thumb. He was brought to the hospital where he was operated on and treated for his wound. [23] Instead of giving him financial assistance for his hospital bills, his employer told him a week after his release from the hospital that it would be better for him to go home to the Philippines to recuperate. An official from the Taiwanese Labor Department intervened for respondent Paramio and his employer was told that it had no right to repatriate the respondent because the accident which caused the injury happened while the latter was at work.[24]

Although his wound had not yet healed, respondent Paramio was made to report for work. After eight hours of working, his broker advised him that as per the doctor’s orders, he was still on sick leave from May 14 to June 30, 1997. Hence, he could not yet be compelled to work. The respondent then stayed in his quarters to recuperate.

On June 5, 1997, respondent Paramio received his paycheck, but was flabbergasted when he discovered that his employer had deducted NT$4,300 from his salary, representing his plane ticket back to the Philippines. Furthermore, his sick leave from May 14 to June 5 were not included in his check.[25] Still, he was not repatriated. On July 1, 1997, he reported back to work, only to be assigned to do the second hardest job in the company,

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carrying containers weighing about 30 kilograms in the dyeing department.[26] Although his thumb hurt, respondent Paramio had to endure the pain to earn more money.[27]

After a week, respondent Paramio was transferred to the Lupo Department, the hardest job in the factory, where he was made to carry about 200 meters of maong cloth. He then set it and carried the same to the dyeing department. When he could no longer bear the pain in his thumb, he took a break. When the manager saw him resting, he was ordered to return to work. Respondent Paramio refused and contended that he could not resume work because of his thumb injury. Incensed, the manager told him that he had to stop working and would just have to wait for his plane ticket for his repatriation. The respondent did as he was told.

The next day, Fabian Chua, the local representative of the petitioner PSRI, arrived and asked the respondent why he did not report for work. Respondent Paramio explained that his thumb injury made it impossible for him to perform his assigned tasks. On September 23, 1997, he was given his paycheck and a plane ticket to the Philippines. He was told that the amount of NT$3,700 was deducted from his paycheck because he neglected his duty. At around eight o’clock that evening, respondent Paramio was repatriated to thePhilippines.[28]

Meanwhile, PSRI representative Fabian Chua renewed his warning to the remaining respondents/employees not to complain about the working conditions. But respondents Sarmiento, Guillermo, Bautista and Curameng, Jr. could no longer bear the worsening working conditions. In October 1997, they decided to go home. Their employer agreed to have them repatriated and to return their respective bonds, but required them to write letters of resignation. Respondents Sarmiento and Bautista did as they were told and wrote the said letters.[29] Respondent Curameng, Jr., for his part, signed a mimeographed form where he agreed to return to the Philippines.[30] On October 10, 1997, the said respondents were repatriated, but were required to pay for their own plane tickets.[31]

On October 22, 1997, respondents Sarmiento, Guillermo, Curameng, Jr. and Bautista, together with respondents Paramio and Navarra, filed separate complaints before the NLRC Arbitration Branch against Bayani Fontanilla for illegal dismissal, non-payment of overtime pay, refund of placement fee, tax refund, refund of plane fares, attorney’s fees and litigation expenses. The cases were docketed as NLRC-OFW Cases No. (L) 97-10-4332 to 97-10-4335.[32]

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In their position paper, the respondents raised the issue of whether or not the petitioner PSRI and Bayani Fontanilla were liable for the reimbursement of their respective placement fees, nightshift differentials, overtime pay and damages, and their salaries for the unexpired portion of their respective contracts.[33]

The respondents argued that under Section 10, Republic Act No. 8042, otherwise known as the Migrant Workers and Overseas Filipinos Act of 1995, PSRI was solidarily liable with Kuan Yuan for their claims. Since they were repatriated prior to the expiration of their respective contracts for no valid reason, PSRI was liable to pay their salaries for the unexpired portion of their contracts.

The petitioner denied any liability on the respondents’ claims and asserted that the latter were validly dismissed. It averred that respondent Paramio was dismissed pursuant to Nos. 5 and 6, Article VIII of his employment contract. According to the petitioner, the said clauses allow the termination of a contract of employment prior to its expiration when the employee is (a) suffering from HIV positive antibody or other diseases; (b) heavily wounded or has stool parasite and cannot be cured within one month; or (c) found to have lost the ability to work. It averred that since complainant Paramio could no longer do his job because of his thumb injury, the termination of his contract was valid, and his dismissal proper.[34]

Anent respondent Navarra’s claim, the petitioner PSRI ratiocinated that the termination of his services was for a valid cause because of an altercation he had with his supervisor. The petitioner further averred that respondent Navarra had demanded that he be paid the amount of P50,000 and after some negotiation, agreed to receive P49,000. Respondent Navarra received the said amount and executed on May 23, 1997, a deed of release and quitclaim in favor of the petitioner.[35]

As for the claims of the other respondents, the petitioner alleged that the respondents Guillermo, Bautista and Curameng, Jr. voluntarily resigned, as evidenced by their respective letters and agreement with the petitioner.[36] Moreover, the termination of their employment was legal, and their repatriation based on valid grounds. The petitioner contended that the respondents were not entitled to a refund of their plane fare.[37]

With respect to the claims for tax refund for amounts withheld by their employer, the petitioner averred that the respondents were not entitled thereto, as the law of Taiwanmandated such withholding of taxes. If, indeed, the

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respondents were entitled to a refund of the said taxes, the same should be coursed through the Bureau of Internal Revenue, the appropriate governmental agency.[38]

On October 29, 1998, Labor Arbiter Felipe P. Pati rendered a decision declaring that the dismissal of the respondents was illegal. The dispositive portion states, thus:

WHEREFORE, judgment is hereby rendered declaring complainants’ dismissal to be illegal and respondents are ordered to pay to complainants as follows:

1. Ronald Navarra – NT$46,080 or its peso equivalent; P75,000.00 refund of placement fee; and P4,300 refund of plane fare less P49,000.

2. Recto Guillermo – NT$15,360 or its peso equivalent; P75,000.00 refund of placement fee; and P4,300 refund of air fare.

3. Joseph Paramio – NT$46,080 or its peso equivalent; P75,000.00 refund of placement fee; and P4,300 refund air fare.

4. Apolinario Curameng, Jr. – NT$23,040 or its peso equivalent; P75,000 refund of placement fee and P4,300 refund of air fare.

5. Ferdinand Bautista – NT$46,080 or its peso equivalent; P75,000.00 refund of placement fee; and P4,300 refund of air fare; and

6. Romel Sarmiento – NT$ or its peso equivalent P75,000.00 refund of placement fee; and P4,300 refund of air fare.

The claim for tax refund is dismissed for not having been substantiated.[39]

In declaring respondent Navarra’s dismissal illegal, the labor arbiter held that the petitioner failed to substantiate its claim that the said respondent had an altercation with his supervisor. As such, respondent Navarra was entitled to the payment of the salaries due him for the unexpired portion of his contract, subject to the deduction of the amount already advanced to him under the deed of release and quitclaim he had executed in favor of the petitioner.[40]

The labor arbiter likewise ruled that the dismissal of complainant Paramio was illegal. Considering that he had a thumb injury, his employer should have given him a lighter job instead of repatriating him. The dismissal of the remaining complainants was also adjudged illegal. According to the labor arbiter, the

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petitioner’s defense that its employees (respondents) voluntarily resigned deserved scant consideration.

Considering that the dismissal of the respondents was illegal, the labor arbiter awarded the salaries due them for the unexpired portion of their contracts, as well as the refund of their plane fare. Recognizing that the usual placement fee of workers for deployment in Taiwan was approximately P100,000, more or less, the labor arbiter granted each of them a refund of their placement fee in the amount of P75,000.[41]

Aggrieved, the petitioner appealed before the National Labor Relations Commission (NLRC), docketed as NLRC NCR CA 017927-99. It raised the following grounds:

GRAVE ABUSE OF DISCRETION, AND SERIOUS ERROR IN THE FINDING OF FACTS WHICH IF NOT CORRECTED WOULD CAUSE GRAVE AND IRREPARABLE DAMAGE TO THE RESPONDENT[42]

The petitioner insisted that the dismissal of the complainants was anchored on valid and legal grounds; as such, the labor arbiter erred in ruling for the respondents and awarding a refund of their airfares, placement fees and payment of salaries for the unexpired portion of their respective contracts of employment.

On March 29, 1999, the NLRC issued a resolution[43] finding that the respondents were legally dismissed and set aside the decision of the labor arbiter. The decretal portion of the decision reads as follows:

WHEREFORE, premises considered, the Decision appealed from is hereby SET ASIDE and the instant case dismissed for lack of merit.[44]

In reversing the decision of the labor arbiter, the NLRC made the following findings: (a) respondent Navarra did not refute the allegation of the petitioner that he had an altercation with his supervisor; (b) respondent Navarra’s execution of a deed of release and quitclaim released the petitioner from any or all liability on account of his repatriation; (c) the repatriation of complainant Paramio was sanctioned by Article VIII, paragraphs 5 and 6 of his employment contract; and, (d) the written documents executed by the remaining respondents showed that they voluntarily resigned from their employment.

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Dissatisfied, the respondents filed a motion for reconsideration[45] of the resolution, but the NLRC denied the motion in a Resolution dated May 17, 1999.[46]

The respondents filed a petition for certiorari under Rule 65 of the Rules of Court against the petitioner before the Court of Appeals, docketed as CA-G.R. SP No. 54744. The respondents (petitioners therein) raised the following issues:

1. WHETHER OR NOT THE PETITIONERS WERE ILLEGALLY DISMISSED WHEN THEY WERE REPATRIATED TO THE PHIL. BY THEIR TAIWAN EMPLOYER.

2. WHETHER OR NOT THE THUMB INJURY SUFFERED BY JOSEPH PARAMIO WHILE AT WORK [SHOULD] BE CONSIDERED A LEGAL GROUND FOR HIS REPATRIATION.

3. WHETHER OR NOT RONALD NAVARRA’S REPATRIATION AND EXECUTION OF QUITCLAIM AND RECEIPT OF P49,000 BE SUFFICIENT GROUND TO CONCLUDE HIS WAIVER OF RIGHT AGAINST ILLEGAL DISMISSAL.

4. WHETHER OR NOT PETITIONERS ARE ENTITLED TO THEIR MONEY CLAIMS.[47]

The petitioners prayed, thus:

WHEREFORE, premises considered, it is most respectfully prayed of this Honorable Court that this Petition be given due course and after its due consideration, REVERSE and SET ASIDE the Resolution of the public respondent National Labor Relations Commission dated March 29, 1999 and May 17, 1999 and a new one rendered REINSTATING the Decision of the Labor Arbiter Felipe P. Pati dated August 29, 1998 with modification for the reward of moral and exemplary damages.

Petitioners further pray for such other reliefs and remedies deemed just and equitable in the premises.[48]

On May 29, 2000, the CA rendered a decision partly granting the petition in that it nullified the March 29 and May 17, 1999 Resolutions of the NLRC and reinstated the decision of the labor arbiter with modification. The decretal portion of the decision reads:

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WHEREFORE, premises considered, the instant petition is partly granted insofar as the public respondent’s Resolutions dated March 29, 1999 and May 17, 1999 are set aside and the labor arbiter’s Decision dated August 29, 1998 is reinstated with modification on the award of refunds for placement fees. The petitioners’ claims for moral and exemplary damages are denied for lack of merit.[49]

The CA held that respondents Curameng, Bautista, Sarmiento and Guillermo were constructively dismissed, as the petitioner failed to substantiate its claim that the aforesaid petitioners voluntarily resigned from work.

The CA also ruled that the repatriation of respondent Paramio was in violation of his employment contract. It declared that paragraph 8.2, Nos. 5 and 6, Article VIII of the said contract applied only to illnesses already existing and discovered during employment. The “loss of ability to work” under the contract could not be used as a ground for respondent Paramio’s termination because his thumb injury was work-related.

As to respondent Navarra, the CA ruled that his alleged confrontation with his supervisor did not amount to serious misconduct which would justify his dismissal. It stated that the deed of release executed by respondent Navarra barred him from instituting the said complaint. However, the CA agreed that the money he was able to collect from the petitioner by reason of the execution of a deed of release and quitclaim should be considered as an advance on the amount he was entitled to.

Considering that the dismissal of the respondents was illegal, the petitioner, as the local agent of Kuan Yuan, was declared solidarily liable with the latter for the payment of the respondents’ salaries for the unexpired portion of their respective contracts and other awards, pursuant to Section 10, paragraph 2 of Rep. Act No. 8042.

The CA reduced the award of refund of placement fee to the respondents from P75,000 to P19,000, which was the amount substantiated by the petitioners.

The petitioner PSRI filed a motion for reconsideration but the appellate court denied the said motion.[50] Dissatisfied, the petitioner filed this instant petition against the respondents, alleging that:

I

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THE FINDINGS OF FACTS BY THE COURT OF APPEALS ARE CONTRARY TO THE FINDINGS OF FACTS BY THE NATIONAL LABOR RELATIONS COMMISSION.

II

THE APPELLATE COURT DECIDED THE CASE NOT IN ACCORD WITH THE APPLICABLE DECISION OF THE SUPREME COURT[51]

The issues for resolution are the following: (a) whether or not the respondents were illegally dismissed; and (b) whether or not the deed of release and quitclaim executed by respondent Navarra was valid.

Ordinarily, factual findings of labor officials who are deemed to have acquired expertise in matters within their respective jurisdictions are generally accorded not only respect but even finality, and are binding upon this Court.[52] However, when the findings of the labor arbiter and the NLRC are inconsistent, there is a need to review the records to determine which of them should be preferred as more conformable to the evidentiary facts.[53] Considering that the CA’s findings of fact clash with those of the NLRC, this Court is compelled to go over the records of the case, as well as the submissions of the parties.[54]

Anent the first issue, the petitioner insists that the dismissal of the respondents was based on valid and legal grounds. Consequently, the award of salaries for the unexpired portion of their respective contracts, and the refund of placement fee and airfare was barren of factual and legal basis.

We rule that the respondents’ dismissal was not based on just, valid and legal grounds.

Preliminarily, it bears stressing that the respondents who filed complaints for illegal dismissal against the petitioner were overseas Filipino workers whose employment contracts were approved by the Philippine and Overseas Employment Administration (POEA) and were entered into and perfected here in the Philippines. As such, the rule lex loci contractus(the law of the place where the contract is made) governs. Therefore, the Labor Code, its implementing rules and regulations, and other laws affecting labor, apply in this case.[55]

In order to effect a valid dismissal of an employee, the law requires that there be just and valid cause as provided in Article 282[56] and that the employee was afforded an opportunity to be heard and to defend himself. [57] Dismissal may also

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be based on any of the authorized causes provided for in Articles 283 and 284 of the Labor Code.[58]

The petitioner contends that the termination of respondent Paramio’s employment was sanctioned by paragraph 8.2, Nos. 5 and 6, Article VIII of the employment contract. The aforesaid provisions are herein reproduced:

8.2 In the event the Employee is found offend (sic) one of the following prohibitions during his/her employment, Employer may terminate this Employment contract and repatriate him/her to his/her country of origin. Employee shall comply immediately without objection and assume the cost of round-trip transportation by air to and from R.O.C. unconditionally. In the event Employer or any other person pay the airfare for the Employee, Employee shall reimburse the fare to the person who paid it.

…

(5) During the period of employment, being found out suffering HIV positive anti-body or other disease, heavily wounded or stool parasite, which cannot be cured within one month.

(6) Being found losing ability to work.

The foregoing provision is akin to Article 284 of the Labor Code, which provides:

Art. 284. Disease as a ground for termination – An employer may terminate the services of an employee who has been found to be suffering from any disease and whose continued employment is prohibited by law or prejudicial to his health as well as the health of his co-employees: …

Furthermore, Section 8, Rule 1, Book VI of the Omnibus Rules Implementing the Labor Code provides, thus:

Sec. 8. Disease as a ground for dismissal - Where the employee suffers from a disease and his continued employment is prohibited by law or prejudicial to his health or to the health of his co-employees, the employer shall not terminate his employment unless there is a certification by competent public authority that the disease is of such nature or at such a stage that it cannot be cured within a period of six (6) months with proper medical treatment. If the disease or ailment can be

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cured within the period, the employer shall not terminate the employee but shall ask the employee to take a leave. The employer shall reinstate such employee to his former position immediately upon the restoration of his normal health.

Applying the law and the rule, the employer is burdened to prove that the employee was suffering from a disease which prevented his continued employment, or that the employee’s wound prevented his continued employment. Section 8, Rule 1, Book VI of the Omnibus Rules Implementing the Labor Code requires a certification from competent public authority [59] that the employee was heavily wounded and had lost the ability to work.

In the case at bar, the petitioner did not adduce in evidence a certification from a public authority to the effect that respondent Paramio had been heavily wounded. It also failed to show that by reason of his thumb injury, he lost the ability to work. Respondent Paramio was not, for a time, able to perform the backbreaking tasks required by his manager. However, despite his injury, he managed to perform the other tasks assigned to him, including carrying of 30-kilogram containers with the exception of the work in the Lupo Department.[60] The fact that respondent Paramio was assigned to perform the second hardest and heaviest task in the company shows the heartlessness of the company’s manager. Despite his wound, the respondent tried to accomplish the work assigned to him. The least the manager should have done was to assign the respondent to a lighter task, until such time that the latter’s wound had completely healed. It must be stressed where there is no showing of a clear, valid and legal cause for the termination of employment, the law considers the matter a case of illegal dismissal.[61] Consequently, respondent Paramio is entitled to the full reimbursement of his placement fee with interest at twelve percent (12%) per annum, plus his salaries for the unexpired portion of his employment contract for three months for every year of the unexpired term, whichever is less under paragraph 5, Section 10 of Rep. Act No. 8042.

Section 10. Money Claims –

…

In case of termination of overseas employment without just, valid or authorized cause as defined by law or contract, the worker shall be entitled to the full reimbursement of his placement fee with interest at twelve percent (12%) per

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annum, plus his salaries for the unexpired portion of his employment contract or three (3) months for every year of the unexpired term, whichever is less.[62]

In Skippers Pacific, Inc. v. Mira,[63] we ruled that an overseas Filipino worker who is illegally terminated shall be entitled to his salary equivalent to the unexpired portion of his employment contract if such contract is less than one year. However, if his contract is for a period of at least one year, he is entitled to receive his salaries equivalent to the unexpired portion of his contract, or three months’ salary for every year of the unexpired term, whichever is lower.

In Marsaman Manning Agency, Inc. v. NLRC,[64] involving Section 10 of Rep. Act No. 8042, we held:

… [W]e cannot subscribe to the view that private respondent is entitled to three (3) months salary loan only. A plain reading of Sec. 10 clearly reveals that the choice of which amount to award an illegally dismissed overseas contract worker, i.e., whether his salaries for the unexpired portion of his employment contract or three (3) months salary for every year of the unexpired term, whichever is less, comes into play only when the employment contract concerned has a term of at least one (1) year or more. This is evident from the words “for every year of the unexpired term” which follows the words “salaries x x x for three months.” To follow petitioners’ thinking that private respondent is entitled to three (3) months salary only simply because it is the lesser amount is to completely disregard and overlook some words used in the statute while giving effect to some. This is contrary to the well-established rule in legal hermeneutics that interpreting a statute, care should be taken that every part or word thereof be given effect since the lawmaking body is presumed to know the meaning of the words employed in the statute and to have used them advisedly. Ut res magis valeat quam pereat.

Respondent Paramio was deployed on December 6, 1996.[65] His contract was for a period of twelve months or one year.[66] He was repatriated on September 23, 1997, approximately two months from the expiration of his contract. [67] Since the termination of his employment was not based on any valid or legal ground, he is entitled to the payment of his salary equivalent to the unexpired portion of his contract. He is likewise entitled to full reimbursement of his placement fee. Based on the record, respondent Paramio paid a placement fee of P19,000.[68] Thus, he should be reimbursed the amount of P19,000 with 12% interest per annum.

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Similarly, the petitioner failed to substantiate its claim that respondent Navarra’s repatriation was based on a valid, legal and just cause. The petitioner merely alleged that it was made clear to respondent Navarra that his repatriation was due to the fight he had with his supervisor.[69] Contrary to the allegation of the petitioner, respondent Navarra denied this in his affidavit, as well as in his reply to the position paper of the petitioner. Respondent Navarra asserted that he merely enforced his rights under the employment contract when he requested, time and again, that the provisions of his contract regarding the accommodation be fulfilled.[70] The claim of petitioner that respondent Navarra shouted invectives against his supervisor[71] was, likewise, unsubstantiated. The petitioner did not even present an affidavit of the superior with whom the respondent reportedly fought. Indeed, while fighting a supervisor may constitute serious misconduct[72] and may, consequently, be considered a ground for dismissal, in light of the petitioner’s failure to adduce substantial evidence to prove its claim that respondent Navarra fought his supervisor, this ground cannot be used to justify the dismissal. Thus, the termination of respondent Navarra’s employment was without factual and legal basis.

Respondent Navarra was deployed on November 6, 1996.[73] He was repatriated on May 10, 1997, approximately five months prior to the expiration of his one-year contract. Considering our ruling in Marsamman Manning Agency v. NLRC,[74] he shall be entitled to an amount equivalent to three months’ salary, or NT$46,080. Similarly, having admitted that he paid a placement fee of P19,000[75] only, he is entitled to be fully reimbursed therefore, plus 12% interest per annum.

As to the other respondents, the petitioner alleges that they refused to go to work and, in fact, voluntarily resigned. It appended the daily time records[76] of respondents Apolinario, Sarmiento, Ferdinand (Bautista) and Recto (Guillermo), as well as the resignation letters of Bautista and Sarmiento,[77] and Curameng, Jr.’s written agreement with their employer.

We do not agree. The records reveal that the three respondents agreed to execute the foregoing because they could no longer bear the working conditions in their place of employment. Despite protestations to their employer and the attempt to seek help from the OWWA in Taiwan, they were victims to the following acts/omissions of their employer:

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a). Irregular and deliberate charging of deductions which were not fully accounted such as the blankets issued, charging of penalties amounting to 400 NT to all employees for a littering violation attributable only to one employee;

b). Mandatory imposition of overtime work exceeding 10 hours without just overtime compensation and night shift differentials;

c). Failure to comply with some stipulations stated in the Employment Contract particularly those relating to the accommodation and lodging of the contracted workers;

d). Lack of observance of safety precautions at work area[78].

…

1. They don’t give us day off.

2. They feed us once a day.

3. They even let us work without rest.

4. Their (sic) were so many deductions in our salaries like payment for our boarding house, electricity and garbage fee.

5. The money they were sending to the Philippines was also reduced with the amount ranging from P2000 to P5000.[79]

The petitioner failed to adduce substantial evidence to overcome the evidence of the respondents as contained in their respective affidavits. Contrary to the petitioner’s claim, the said affidavits are not hearsay evidence. The respondents were the victims of the abuses of their employer; as such, they had personal knowledge of the contents of their affidavits. Moreover, when there is a doubt between the evidence presented by the employer and the employee, such doubt should be resolved in favor of labor.[80]

On the letters of resignation of respondents Sarmiento, Bautista and the agreement of Curameng, Jr., we agree with the ruminations of the appellate court, viz:

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It is not necessary that there be an express termination of one’s services before a case of illegal dismissal can exist. In the landmark case of Philippine Japan Active Carbon Corporation vs. National Labor Relations Commission, et al (171 SCRA 164) the Supreme Court ruled that “a constructive discharge is defined as: “A quitting because continued employment is rendered impossible, unreasonable or unlikely.” In the case at bar, the petitioners were made to suffer unbearable conditions in the workplace and the inhuman treatment of their employer until they were left with no choice but to quit. Thus, it cannot be said that the resignation and repatriation of complainants Curameng, Bautista, Sarmienta and Guillermo was voluntary.

It was held in the case of Valdez vs. NLRC, 286 SCRA 87:

“It would have been illogical for herein petitioner to resign and then file a complaint for illegal dismissal. Resignation is inconsistent with the filing of said complaint.”

Indeed, unlike the Valdez case where there was no pronouncement of resignation on the part of the complainant, there were written resignations submitted by the said petitioners in the case at bar. The more important consideration is whether such written resignations were made voluntarily. Based on the foregoing circumstances, it cannot be gainsaid that the instant complaint for illegal dismissal indicates that the resignations and repatriations of the petitioners were not done freely on their part. It is highly unlikely that these workers, after having invested so much time, effort and money to secure their employment abroad would just quit even before the expiration of their contract.

We have more reason to rule that the repatriations of petitioners Paramio and Navarra were not voluntary.[81]

We thus rule that the respondents were constructively dismissed from their employment. 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.[82] 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.”[83]

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We find it incredible that, after all the expenses and the trouble they went through in seeking greener pastures and financial upliftment, and the concomitant tribulations of being separated from their families, the respondents would suddenly and without reason decide to resign, return home and be jobless once again. The respondents had no choice but to agree to their employer’s demand to sign and execute the respective agreements. They were stranded in a foreign land, with their remunerations considerably diminished by numerous illegal deductions. Their plight was all the more made unbearable by the inhumane working conditions.

We note that the agreement signed by respondent Curameng, Jr. was mimeographed and prepared by his employer. Except for his handwritten name, the words “I’m go (sic) very verry (sic)” and his signature at the bottom of the document, the rest of the spaces to be filled up were all blank. Most of the contents of the agreement were even in Chinese characters.

In sum, there can be no other conclusion than that the aforementioned respondents were illegally dismissed, and their employment contract illegally terminated.

Under Section 10, paragraph 5 of Rep. Act No. 8042, respondents Sarmiento, Bautista, Curameng and Guillermo are entitled to the full reimbursement of their placement fees. Since each of the respondents remitted only P19,000 to the petitioner, each of them is entitled to P19,000, plus 12% interest per annum.

According to Section 10, paragraph 2 of Rep. Act No. 8042,[84] the agency which deployed the employees whose employment contract were adjudged illegally terminated, shall be jointly and solidarily liable with the principal for the money claims awarded to the aforesaid employees. Consequently, the petitioner, as the agency of the respondents, is solidarily liable with its principal Kuan Yuan for the payment of the salaries due to the respondents corresponding to the unexpired portion of their contract, as well as the reimbursement of their placement fees.

Under Section 15 of the same Act, the repatriation of the worker and the transport of his personal belongings shall be the primary responsibility of the agency which recruited or deployed the overseas contract worker. All the costs attendant thereto shall be borne by the agency concerned and/or its principal.[85] Consequently, the petitioner is obliged to refundP4,300 to each of the respondents, representing their airfare.

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Anent the second issue, we rule that the deed of release executed by respondent Navarra did not completely release the petitioner from its liability on the latter’s claim. As a rule, quitclaims, waivers or releases are looked upon with disfavor and are commonly frowned upon as contrary to public policy and ineffective to bar claims for the measure of a worker’s legal rights. [86] If (a) there is clear proof that the waiver was wangled from an unsuspecting or gullible person; or (b) the terms of the settlement are unconscionable, and on their face invalid,[87] such quitclaims must be struck down as invalid or illegal.

The records reveal that respondent Navarra executed a deed of release and waiver for and in consideration of only P49,000.[88] There is no evidence that he was informed that he was entitled to much more than the said amount, including a refund for the placement fee he paid to the petitioner. Respondent Navarra started working on November 7, 1996. His employment contract was for a period of one year. He was repatriated on May 10, 1997, or after a little over six months. The unexpired portion of his contract is, thus, five months and 27 days. Per Section 10, paragraph 5 of Rep. Act No. 8042, he is entitled to the payment of three months’ salary or NT$46,080[89] and P19,000 placement fee, plus interest at twelve percent (12%) per annum. We, thus, agree with the ruling of the appellate court, viz.:

With regard to the deed of quitclaim and acceptance, it is a well-settled principle that the law does not consider as valid any agreement to receive less compensation than what a worker is entitled to recover nor prevent him from demanding benefits to which he is entitled. Quitclaims executed are ineffective to bar recovery for the full measure of the worker’s rights (Medina vs. Consolidated Broadcasting System (CBS)-DZWX, 222 SCRA 707). The reason why quitclaims are commonly frowned upon as contrary to public policy and they are ineffective to bar claims for the full measure of the worker’s legal rights is because the employer and employee do not stand on the same footing, such that quitclaims usually take the form of contracts of adherence, not of choice. (Wyeth-Suaco Laboratories, Inc. vs. NLRC, 219 SCRA 356). Assuming arguendo that the quitclaim was executed voluntarily, still, it cannot diminish petitioner’s entitlement to the full compensation provided in their contract. At the most, such amount can be considered an advance on his claim.[90]

In sum, we rule that the termination of the respondents’ respective contracts of employment was illegal. Pursuant to Section 10, paragraph 5, Rep. Act No.

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8042, each of them is entitled to the full reimbursement of the placement fee of P19,000, and interest at 12% per annum. Respondent Navarra is, likewise, entitled to the payment of an amount equivalent to three (3) months’ salary. All the remaining respondents are entitled to payment of their salaries, equivalent to three months.

Pursuant to Section 15 of Rep. Act No. 8042, the petitioner should refund the amount of P4,300 to each of the respondents representing the expenses they incurred for their repatriation.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 54744 is AFFIRMED WITH MODIFICATIONS. The petitioner is ordered to pay the following:

(1) The amount of NT$46,080 or its peso equivalent to respondent Ronald Navarra minus the amount of P49,000 already advanced to him;

(2) To the respondents Romel Sarmiento, Recto Guillermo, Ferdinand Bautista, Apolinario Curameng, Jr. and Joseph Paramio, their respective salaries corresponding to the unexpired portion of their respective contracts;

(3) The amount of the placement fees as indicated in the respective official receipts issued to each of the respondents, with interest of 12% per annum, in conformity with Section 10, paragraph 5 of Rep. Act No. 8042;

(4) To each of the respondents, the amount of P4,300 representing the expenses they incurred for their return to the Philippines.

SO ORDERED.

G.R. Nos. L-58674-77 July 11, 1990

PEOPLE OF THE PHILIPPINES, petitioner, vs.HON. DOMINGO PANIS, Presiding Judge of the Court of First Instance of Zambales & Olongapo City, Branch III and SERAPIO ABUG, respondents.

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CRUZ, J:

The basic issue in this case is the correct interpretation of Article 13(b) of P.D. 442, otherwise known as the Labor Code, reading as follows:

(b) Recruitment and placement' refers to any act of canvassing, enlisting, contracting, transporting, hiring, or procuring workers, and includes referrals, contract services, promising or advertising for employment, locally or abroad, whether for profit or not: Provided, That any person or entity which, in any manner, offers or promises for a fee employment to two or more persons shall be deemed engaged in recruitment and placement.

Four informations were filed on January 9, 1981, in the Court of First Instance of Zambales and Olongapo City alleging that Serapio Abug, private respondent herein, "without first securing a license from the Ministry of Labor as a holder of authority to operate a fee-charging employment agency, did then and there wilfully, unlawfully and criminally operate a private fee charging employment agency by charging fees and expenses (from) and promising employment in Saudi Arabia" to four separate individuals named therein, in violation of Article 16 in relation to Article 39 of the Labor Code. 1

Abug filed a motion to quash on the ground that the informations did not charge an offense because he was accused of illegally recruiting only one person in each of the four informations. Under the proviso in Article 13(b), he claimed, there would be illegal recruitment only "whenever two or more persons are in any manner promised or offered any employment for a fee. " 2

Denied at first, the motion was reconsidered and finally granted in the Orders of the trial court dated June 24 and September 17, 1981. The prosecution is now before us on certiorari. 3

The posture of the petitioner is that the private respondent is being prosecuted under Article 39 in relation to Article 16 of the Labor Code; hence, Article 13(b) is not applicable. However, as the first two cited articles penalize acts of recruitment and placement without proper authority, which is the charge

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embodied in the informations, application of the definition of recruitment and placement in Article 13(b) is unavoidable.

The view of the private respondents is that to constitute recruitment and placement, all the acts mentioned in this article should involve dealings with two or mre persons as an indispensable requirement. On the other hand, the� petitioner argues that the requirement of two or more persons is imposed only where the recruitment and placement consists of an offer or promise of employment to such persons and always in consideration of a fee. The other acts mentioned in the body of the article may involve even only one person and are not necessarily for profit.

Neither interpretation is acceptable. We fail to see why the proviso should speak only of an offer or promise of employment if the purpose was to apply the requirement of two or more persons to all the acts mentioned in the basic rule. For its part, the petitioner does not explain why dealings with two or more persons are needed where the recruitment and placement consists of an offer or promise of employment but not when it is done through "canvassing, enlisting, contracting, transporting, utilizing, hiring or procuring (of) workers.

As we see it, the proviso was intended neither to impose a condition on the basic rule nor to provide an exception thereto but merely to create a presumption. The presumption is that the individual or entity is engaged in recruitment and placement whenever he or it is dealing with two or more persons to whom, in consideration of a fee, an offer or promise of employment is made in the course of the "canvassing, enlisting, contracting, transporting, utilizing, hiring or procuring (of) workers. "

The number of persons dealt with is not an essential ingredient of the act of recruitment and placement of workers. Any of the acts mentioned in the basic rule in Article 13(b) win constitute recruitment and placement even if only one prospective worker is involved. The proviso merely lays down a rule of evidence that where a fee is collected in consideration of a promise or offer of employment to two or more prospective workers, the individual or entity dealing with them shall be deemed to be engaged in the act of recruitment and placement. The words "shall be deemed" create that presumption.

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This is not unlike the presumption in article 217 of the Revised Penal Code, for example, regarding the failure of a public officer to produce upon lawful demand funds or property entrusted to his custody. Such failure shall beprima facie evidence that he has put them to personal use; in other words, he shall be deemed to have malversed such funds or property. In the instant case, the word "shall be deemed" should by the same token be given the force of a disputable presumption or of prima facie evidence of engaging in recruitment and placement. (Klepp vs. Odin Tp., McHenry County 40 ND N.W. 313, 314.)

It is unfortunate that we can only speculate on the meaning of the questioned provision for lack of records of debates and deliberations that would otherwise have been available if the Labor Code had been enacted as a statute rather than a presidential decree. The trouble with presidential decrees is that they could be, and sometimes were, issued without previous public discussion or consultation, the promulgator heeding only his own counsel or those of his close advisers in their lofty pinnacle of power. The not infrequent results are rejection, intentional or not, of the interest of the greater number and, as in the instant case, certain esoteric provisions that one cannot read against the background facts usually reported in the legislative journals.

At any rate, the interpretation here adopted should give more force to the campaign against illegal recruitment and placement, which has victimized many Filipino workers seeking a better life in a foreign land, and investing hard- earned savings or even borrowed funds in pursuit of their dream, only to be awakened to the reality of a cynical deception at the hands of theirown countrymen.

WHEREFORE, the Orders of June 24, 1981, and September 17, 1981, are set aside and the four informations against the private respondent reinstated. No costs.

SO ORDERED.

G.R. No. 91896 November 21, 1991

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AURORA T. AQUINO, petitioner, vs.COURT OF APPEALS and PEOPLE OF THE PHILIPPINES, respondents.

Juan A. De Vera for petitioner.

GUTIERREZ, JR., J.:p

This is a petition for review seeking the reversal of the November 15, 1989 decision of the Court of Appeals, which affirmed a trial court decision finding the accused-petitioner, Aurora Aquino, guilty of illegal recruitment.

The information filed against the accused-petitioner reads:

That on or about and during the period comprised between May 23, 1974 to May, 1975, both dates inclusive, in the City of Manila, Philippines, the said accused did then and there wilfully, unlawfully and knowingly, being then a private individual, recruit workers for employment abroad without first obtaining the required license or authority from the Ministry of Labor, in violation of the said Article 25, Presidential Decree 442. (Rollo, pp. 17-18)

Upon arraignment, the accused pleaded not guilty. Thereupon the trial ensued.

The facts according to the prosecution are as follows:

1. Sometime in January of 1973, Rodrigo Nicolas, a laborer from Sta. Cruz, Manila, met appellant Aurora Aquino when he applied at her Manila Hotel Office in response to a published notice of alleged recruitment of workers for Guam. At such meeting, he applied for the position of carpenter. One week later, he gave appellant Pl,000.00 as part payment of the P1,500.00 required of him (pp. 9-11, TSN, June 20, 1979). A second payment of the P500.00 was made by Nicolas to appellant on September 24, 1974 (pp. 35-36, TSN, ibid.). Of the total Pl,500.00 Nicolas paid, Pl,000.00 was later refunded directly to him by appellant (pp. 12-14, TSN, ibid.) and the balance of P500.00

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was included in an alleged "group refund check" for P5,270 which could not be cashed for lack of funds (pp. 34-35, TSN,ibid).

2. On or about March 12, 1973, Braulio Sapitula, a farmer from Agoo, La Union, having learned that Mrs. Aurora T. Aquino, (known hereafter as Appellant) was recruiting applicants for employment in Guam, likewise applied for the position of carpenter at appellant's Manila Hotel Office and plunked down FIVE HUNDRED (P500.00) PESOS as his initial payment of the recruitment fees. A second payment of ONE THOUSAND (Pl,000.00) PESOS was delivered to the appellant by Sapitula on February 5, 1975 (p. 1, Decision).

3. Sometime in May of 1973, Aurelio Costales, a resident of Sampaloc, Manila, met appellant at the Greenwich Travel Agency, where Costales likewise applied for a job in Guam and made a partial payment of P800.00 for the usual Pl,500.00 recruitment fees appellant charged job applicants (pp. 5-6, TSN, Jan. 4, 1980). A second payment of P550.00 was given by Costales to appellant on September 24, 1974 (pp. 35-36, Ibid). Later on, Costales, disappointed at not being able to go to Guam, asked for a refund of his money. He was paid P700.00 by appellant, and the balance of P650.00 was allegedly part of the alleged "group refund check" for P5,270.00 issued by appellant which was dishonored for lack of funds (pp. 15-17, Ibid.)

4. Sometime in June, 1974, Benito Vertudez, a resident of Gen. Trias, Cavite, applied for a Guam job at appellant's agency. At such time he filled out an application form and paid P70.00 for "mailing expenses" (pp. 39-44, TSN, June 14, 1979). Thereafter, in the course of following up his application to work in Guam, Vertudez paid appellant P500.00 in September, 1974, and another P500.00 in September, 1974 (pp. 51-52, Ibid). Due to appellant's inability to get him a job in Guam, Vertudez asked for the return of his money. He was issued a check for the amount of Pl,070.00 by appellant, but said check like the alleged "group refund check" was dishonored for lack of funds (p. 54, Ibid.)

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5. On November 2, 1978, a complaint was filed against appellant for violation of the Provisions of Article 24, of P.D. No. 442, otherwise known as the Labor Code of the Philippines, before the Regional Trial Court of Manila, Branch VIII. (Rollo, pp. 44-48)

The accused-appellant's version, on the other hand, shows that:

Aurora T. Aquino, 51 years old businesswoman, disclosed that in 1973, she was a licensed contractor authorized to hire laborers as evidenced by a Labor Contractor's License (New) dated 22 May, 1973, Exh. 5, page 257, record; 21-22 tsn, July 24, 1984; said license was issued after payment of P6,000.00 for the year 1973-1974 (Exh. 5-A, page 256, record); in the recruitment of workers, she was appointed by several employers of Guam and London as their representative in the Philippines, like the Special Power of Attorney executed by George J. Viegas, dated November 29, 1973, in the territory of Agana, Guam (Exh. 6, page 258, record) authorizing her to recruit Filipinos for Guam and likewise, for London (Exh. 7, 7-A, page 260, record); she knows Benito Vertudez of General Trias, Cavite being one of the applicants for Guam and also Braulio Sapitula of Sta. Fe, Agoo, La Union include (sic) Alfredo Empredo of Pasay City, Rodrigo Nicolas of Sta. Cruz, Manila (30-31, tsn, ibid.) all of them having applied in 1973 for employment for abroad, hence, she processed their application and submitted thereafter, their application to her employer abroad, George J. Viegas (32 tsn, ibid); they were not able to leave for Guam because her employer had some trouble with his contract with the government of Guam (33 tsn, ibid); she refunded P500.00 to Sapitula (Exh. 1; 34 tsn. ibid); she refunded Alfredo Empredo on Jan. 28, 1974 P300.00 Exh. 8, page 261, record), refunded P500.00 to Benito Vertudes (Exh. 9, page 262, record), of the amount of P2,200.00 in the form of check (Exh. 10, page 265, record), handwritten receipt of P5,270.00 (Exh. 11, page 264, ibid) which was received by Aurelio Costales (41-42, TSN, Ibid); she refunded them when she said applicants cannot leave for Guam by issuing Exh. 11 for amounts indicated in the receipts (Exhs. 8, 9, 10 (44 TSN, ibid); she does not violated (sic) Art. 25, P.D. 442 for illegal recruitment because she is a duly licensed labor contractor because when she acted on the applications of the complaining witnesses,

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she acted as representative in the Philippines of her employer George Viegas (45 TSN, Ibid) and the money covered by the personal check (Exh. 11) belongs to the complainants; the receipts which she issued dated October 24, 1973, August 15, 1973, December 15, 1973, August 14, 1974 and June 19, 1974 show that on said dates she was a duly licensed contractor (47-48 TSN, Ibid); on its expiration on 18 May, 1974, she applied for a renewal of her license by writing a letter to the Bureau of Labor addressed to Minister Blas Ople (Exh. 12, dated Feb. 4, 1975; page 265, record; 5 TSN, August 14, 1984); which was a follow up of her renewal letter dated July 4, 1974 and was just waiting for the renewal of her license, so that meanwhile, she was able to talk with Under-Secretary Amado Inciong concerning said renewal's delay at the time, Sec. Ople was in Italy, hence, she was told by said Under-Secretary Inciong to proceed with her operation "until such time as the Secretary will go home." (6-7 TSN, Ibid); when she did not receive any reply to her Feb. 12, 1975 renewal communication she next made another follow-up letter dated March 3, 1975 addressed Minister to Ople (Exh. 13, NOTE: 3 TSN, October 29, 1985 not submitted and offered) and another letter dated April 29, 1975 [Exh. 14; Note: not submitted and offered, 3 TSN, October 29, 1985); she next waited for the renewal, but was not submitted and offered, 3 TSN, October 29, 1985); she next waited for the renewal, but was not able to receive any reply from the Department of Labor, hence, she stopped operations (13-14 TSN,Ibid) in 1976 (p.15 TSN, Ibid); applicants Benito Vertudes, Sapitula, Empredo, Nicolas, were not able to leave for Guam (15-16 TSN, Ibid); (Decision, pp. 4-5, Record, pp. 294-295). (Rollo, pp. 19-22)

After trial, the lower court found the accused guilty, the positive portion of its decision reads:

WHEREFORE, in view of the foregoing, the Court finds accused Aurora T. Aquino, GUILTY beyond reasonable doubt of Illegal Recruitment in violation of Art. 25, PD 442 and penalized under Art. 39 par. (b), Labor Code, sans mitigating circumstance, and applying the Indeterminate Sentence Law, hereby sentences her to an indeterminate imprisonment of FOUR (4) YEARS up to SEVEN (7) YEARS and fine of P20,000.00, with the accessory penalties of the

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law; to indemnify the complainants in the total amount of P5,270.00 with the legal rate of interest reckoned from the filing of instant information on Dec. 1, 1978 until fully paid, but without subsidiary imprisonment in case of insolvency; and finally, to pay the cost of the proceeding.

Due to the gravity of the sentence, it is further ordered that accused serves her imprisonment at the National Penitentiary at Muntinlupa, Rizal. (Rollo, p. 22)

The accused-petitioner appealed the decision of the lower court to the Court of Appeals. After submission of memorandums, the Court of Appeals affirmed the decision of the lower court.

The dispositive portion of the decision reads:

WHEREFORE, the guilt of appellant of the crime charged having been established beyond reasonable doubt, the appealed decision is hereby AFFIRMED in all aspects. No costs. (Rollo, p. 25)

The petition for review was initially denied by this Court on March 21, 1990. A motion for reconsideration was filed by the petitioner on April 5, 1990. On May 9, 1990, we gave due course to the motion for reconsideration.

The petitioner relies on the following reasons for the allowance of her petition:

I

The Court of Appeals erred in not dismissing the case for want of jurisdiction by the Regional Trial Court of Manila.

II

The Court of Appeals erred in holding that the accused illegally recruited the complaints after her license expired on May 18, 1974.

III

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Even if the Regional Trial Court of Manila had jurisdiction, the Court of Appeals erred in sustaining the indemnification by the accused petitioner of the sum of P5,270.00 in favor of the complainants.

The jurisdiction of a Court is determined by the allegations of the information as to the situs of the crime. If the information alleges that the crime was committed in the place where the court is seated, then the court has jurisdiction, in the first instance, to hear the case. (Colmenares v. Villar, 33 SCRA 186 [1970]; People v. Galano, 75 SCRA 193 [1977])

In this case, the then accused never raised the ground of lack of jurisdiction in the proceedings before the lower court and before the Court of Appeals. Only after she received the decision of the Court of Appeals affirming the decision of the lower court, did the appellant question the jurisdiction of the court a quo.

In the interest of sound administration of justice, such practice cannot be tolerated. If we are to sanction this argument, then all the proceedings had before the lower court and the Court of Appeals while valid in all other respects would simply become useless.

In the landmark case of Tijam v. Sibonghanoy (23 SCRA 29 [1968]), we held that a party who has affirmed and invoked the jurisdiction of a court to secure an affirmative relief, may not afterwards deny that same jurisdiction to escape a penalty. A party's active participation in the proceedings before the court without jurisdiction will estop the party from assailing such lack of jurisdiction. (Echaus v. Blanco, 179 SCRA 704 [1989]; Crisostomo v. Court of Appeals, 32 SCRA 54 [1970]; Libudan v. Gil, 45 SCRA 17 [1972]; and People v. Casuga y Munar, 53 SCRA 278 [1973])

Anent the second issue, the Court on the basis of the evidence on record finds the accused-petitioner not guilty of illegal recruitment.

Although as a general rule, the findings of fact of the Court of Appeals are conclusive upon the Supreme Court, this is, however, not without exceptions.

In certain instances, the Supreme Court may review the findings of fact of the Court of Appeals as when the inference made is manifestly mistaken or when the judgment is based on misapprehension of facts or when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties and

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which if properly considered, would justify a different conclusion. (Moran v. Court of Appeals, 133 SCRA 88 [1984]; Sacay v. Sandiganbayan, 142 SCRA 593 [1986]; Manlapaz v. Court of Appeals, 147 SCRA 236 [1987])

There are relevant factual circumstances which the Court of Appeals manifestly misconstrued, thus, necessitating the Court to re-examine the facts.

The information charges the accused-petitioner with violating Article 25 of the Labor Code which provides:

Travel agencies prohibited to recruit. — Travel agencies are prohibited from engaging in the business of recruitment and placement of workers for overseas employment whether for profit or not.

The Secretary of Labor shall issue rules and regulations establishing the requirements and the procedures for the issuance of a license or authority.

Every existing authority or license to hire or recruit workers on the date of effectivity of this Code shall remain valid for the duration indicated therein unless sooner cancelled, revoked, or suspended for cause by the Secretary of Labor. However, said authority or license to hire or recruit may be renewed provided that the holders thereof shall comply with all applicable provisions of this Code and its implementing rules and regulations.

While the charge is for a violation of Article 25, the Solicitor General states that it was really Article 24 which was violated (Rollo, pp. 43, 53-54). Article 24 reads:

Authority or license to recruit. — No individual or entity may engage in the business of a private fee-charging employment agency without first obtaining a license from the Department of Labor.

No individual or entity may operate a private non-fee charging employment agency without first obtaining an authority from the Department of Labor.

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There is no dispute that the accused-petitioner had a valid license before May 18, 1974. She contends that her license was not renewed, not because of any violations, but because of a Ministry of Labor policy phasing out allprivate recruitment agencies. She never received any letter from the Labor Ministry about any illegal activities and never was her office raided. She claims that her activities were above-board and states that the Ministry was merely implementing a policy that no new application for a license to operate shall be entertained upon the effectivity of the Code and that all private employment agencies would be phased out within four years from that date. She argued that the phrase "no new application" should not include renewal of old applications.

The information was filed against Ms. Aquino because she "wilfully, unlawfully, and knowingly . . . recruit(ed) workers for employment abroad without first obtaining the required license or authority . . ." The Solicitor General contends that when Ms. Aquino continued to charge and collect fees from her applicants/recruits after May 18, 1974, she engaged in illegal recruitment violative of Article 24 of the Labor Code.

We must emphasize that this case involves a criminal prosecution for a violation of a penal provision. We are not concerned with whether or not the accused-petitioner's license should be renewed nor with the administrative actions taken by the Labor Department against recruitment agencies. By no stretch of the imagination should an acquittal in this case mean that the Court does not support the legitimate activities of the Government against illegal recruiters preying on the gullibility of poor laborers, seamen, domestics, and other workers who see employment abroad as the only way out of their grinding poverty. We simply apply the principles of Criminal Law that an accused is presumed innocent until proven guilty and that the burden of establishing guilt must be satisfactorily met by the prosecution beyond reasonable doubt.

Does the receipt of payments, after the expiration of the license, for services rendered before said expiration constitute illegal recruitment? We believe that it does not, at least not for purposes of criminal prosecutions.

Recruitment refers to the offering of inducements to qualified personnel to enter a particular job or employment. The advertising, the promise of future employment and other come-ons took place while Ms. Aquino was still licensed. True, the payments for services rendered are necessary consequences of the

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applications for overseas employment. However, it is asking too much to expect a licensed agency to absolutely at the stroke of midnight stop all transactions on the day its license expires and refuse to accept carry-over payments after the agency is closed. In any business, there has to be a winding-up after it ceases operations. The collection of unpaid accounts should not be the basis of a criminal prosecution.

Thus, in the case of the complainant Braulio Sapitula, the recruitment took place at the very latest on February 12, 1973, when Sapitula went to the office of the petitioner at the annex of Manila Hotel, and correspondingly, filed his application papers for overseas employment (Rollo, p. 28); as for Rodrigo Nicolas when he met the petitioner in January, 1973 (Rollo, p. 30); and Aurelio Costales, when sometime in May, 1973, he submitted his application papers for overseas employment at the office of the accused at the Manila Hotel annex. (Rollo, pp. 30-31) Other than receipt of carry-over payments, there is no evidence of recruiting activities after May 18, 1974.

It has been suggested that once a license expires, the recruiter should turn over all continuing activities such as collections of unpaid accounts to another licensed agency in order to give teeth to the campaign against illegal recruiters. There is nothing to prevent the law from being amended to avoid the problem exemplified by this case but certainly no speculations on what could have been done should enter into the resolution of a criminal case.

The Government did not question the legality of the payment as such. The prosecution is based on the date of the prohibited activity, not on the payments being illegal exactions even if effected during the correct period. The payments are necessary in order to defray the expenses entailed in any overseas contract of employment. They are intended for administrative and business expenses and for the travelling expenses of the applicants once cleared for overseas travel.

In the case of one complainant, Benito Vertudes, the prosecution alleges that he filed his application paper sometime in June of 1974, a month after the expiration of Aquino's license to operate (Rollo, p. 47). On the other hand, the petitioner in her testimony before the lower court stated that Vertudes applied in 1973, within the period when her license to operate the employment agency had not yet expired. (Rollo, p. 20)

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This accusation against the petitioner constitutes a negative allegation where the negative fact of recruiting without a license forms an essential element of the crime charged. Hence, it was incumbent upon the prosecution to satisfactorily establish the date when Vertudes was recruited.

It has not been clearly established that the petitioner is guilty of recruiting Benito Vertudes after May 18, 1974.

The prosecution relied on the sole testimony of Benito Vertudes, that he applied sometime in June of 1974. His testimony was flatly denied by the petitioner who gave an earlier date. No other evidence was proferred by the prosecution particularly in relation to the recruitment of Benito Vertudes. (Rollo, pp. 29-30)

In the absence of any corroborating evidence to support such particular fact, and considering that the prosecution's main theory is that collection of carry-over payments constitutes recruitment, the Court is constrained to resolve the issue in favor of the accused consistent with the rule on the construction of penal laws, that they are strictly construed against the government and liberally in favor of the accused. (See People v. Yu Hai, 99 Phil. 725 [1956])

Article 25 (it should be Article 24) of the Labor Code, the violation of which was imputed to Aurora Aquino, states only that no person may operate a private fee — charging employment agency without the necessary license.

Inferentially, it is the operation of this kind of employment agency without the proper license which constitutes the act of illegal recruitment.

If the factual circumstances are otherwise, as when the accused does not operate any employment agency, then all activities including the acceptance of the application papers and the collection of payment would constitute acts of recruitment within the meaning of the law. Or if the accused continued to operate as before, even after the license is denied renewal, this would be punishable under the law.

The facts of this case, however, conspicuously show that the recruitment activities, namely the continued operation of the Greenwich Travel Agency, the advertisements that the agency was recruiting workers for overseas employment

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and the active solicitation of workers ceased upon the non-renewal of Aurora Aquino's license to operate the said agency.

After May 18, 1974, Aquino closed her office at the Manila Hotel Annex and settled in her residential home in Quezon City from where she conducted the winding-up of her business.

Two of the complainants, namely, Aurelio Costales and Rodrigo Nicolas filed affidavits of desistance although these affidavits were not filed in the case at bar but in another criminal case of estafa filed against the petitioner.

This notwithstanding, the causes of action of the two criminal cases arose from the same factual circumstances. The importance of these affidavits cannot just be ignored.

As a rule, affidavits of desistance should not be given too much credit. Under the circumstances of this case, however, they serve to create serious doubts as to the criminal liability of the petitioner. At the very least, they call for a second look at the records of the case and the basis for the judgment of conviction. (People v. Lim, 190 SCRA 706 [1990])

Anent the final argument questioning the order of the trial court, affirmed by the Court of Appeals, which required Aquino to pay the complainants the sum of P5,270.00 as reimbursements of the payments made by the latter, the court after considering the records of the case resolved to affirm the order of the Court of Appeals with modification.

The petitioner professes that she has reimbursed the complainants by issuing them a group-check in the amount of P5,270.00. She states that if indeed the check bounced as alleged by the complainants, then why did not the complainants present the dishonored check or the bank's return slip to show that the checks were not encashed. (Rollo, p.12)

If that be the case, then the resultant query would be: why did the petitioner not produce the check issued by her to the complainants to show that it had been honored by the drawee bank and correspondingly deducted from her account, evidencing therefore, the fact of payment?

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The petitioner issued a check to reimburse the complainants for the sums of money paid the latter by virtue of the "failed" overseas contract.

The controversy arose when the check was dishonored by the drawee bank due to lack of funds. The petitioner, on the other hand, claims full satisfaction of the sum owed by her since she already issued a check in favor of the complainants.

The argument of the petitioner is unconvincing.

It has been the consistent ruling of this Court that the issuance of a check has been encashed. Although a check, as a negotiable instrument, is regarded as a substitute for money, it is not money. Hence, its mere delivery does not, by itself, operate as payment. (PAL v. Court of Appeals, 181 SCRA 557 [1990])

To this end, it was de rigueur for the petitioner to have presented the check she issued to the complainants which had been honored by the drawee bank in order to show that the amount covered by the check has been received evidencing, therefore, full satisfaction of the sums of money owed to the complainants.

The records reveal nothing of this sort. Nowhere during the proceedings before the lower court did the accused present any evidence showing that the checks was actually encashed. In the absence of any evidence regarding this matter, the conclusion of the Court of Appeals must be sustained.

In view, however, of the affidavits of desistance executed by Aurelio Costales and Rodrigo Nicolas where both admitted that the petitioner had satisfied her monetary obligations to them (Rollo, pp. 107-108), in the amount of P650.00 and P500.00 respectively, these sums should be deducted from the total amount of P5,270.00. (Rollo, p. 18)

WHEREFORE, the judgment of conviction is hereby REVERSED and accused-petitioner Aurora Aquino is ACQUITTED of the crime of illegal recruitment. The accused-petitioner is, however, ordered to pay to the remaining complainants the sum of FOUR THOUSAND ONE HUNDRED SEVENTY PESOS (P4,170.00), with legal rate of interest reckoned from the filing of the information on December 1, 1978 until fully paid.

SO ORDERED.

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G.R. No. 113917 July 17, 1995

PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs.FELICIA CABACANG Y MAZAMBIQUE, accused-appellant.

PUNO, J.:

An Illegal Recruitment case was filed against appellant FELICIA MAZAMBIQUE CABACANG for allegedly committing the following act:

That in or about and during the period comprised from March 22, 1990 to April 27, 1990, both dates inclusive, in the City of Manila, Philippines, the said accused, representing herself to have the capacity to contract, enlist and transport Filipino workers for employment abroad, did then and there willfully and unlawfully, for a fee, recruit and promise employment/job placement abroad to the following persons: Romeo Eguia, Ronnie Reyes, Armando Castro and Dante Eguia, without first having secured the required license or authority from the Department of Labor and Employment. 1

The case was raffled off to Branch 5 of the Regional Trial Court of Manila, 2 and docketed as Criminal Case No. 91-93606. A not guilty plea was entered upon her arraignment on July 17, 1991.

The records reveal that the four private complainants are related. DANTE 3 and ROMEO EGUIA are brothers, and RONNIE REYES 4 and ARMANDO CASTRO are their brothers-in-law. RAMON EGUIA and prosecution witness WILMA GREGORIO 5 are Dante's and Romeo's siblings.

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The prosecution evidence show that appellant who is not a recruiter licensed by the Philippine Overseas Employment Administration (POEA), 6 handled the processing of the papers of cousins Ramon Eguia and Edgardo Santos. In June, 1988, the two were deployed to Abu Dhabi for employment as janitors. 7 Private complainants were encouraged by their employment, and decided to apply for overseas janitorial work as well. 8

According to private complainant Ronnie Reyes, he was approached in Lipa by appellant who represented herself as the Assistant Manager of the Lakas Agency Management Corporation located near Robinson's Department Store in Ermita, Manila. Appellant informed him that there would be a second batch of overseas workers to be deployed to Abu Dhabi. Ronnie relayed the information to Wilma, who made further inquiries and verifications from appellant about the job opportunity. 9 Wilma then directly worked out with appellant, the overseas job applications of private complainants.

Private complainants filed their applications and appellant assured them that they would be able to leave for Abu Dhabi after the processing of their paper. 10 She instructed them to pay their processing fees 11 directly to her. During the period from March 3, 1990 to April 27, 1990, inclusive, private complainants through Wilma paid appellant a total of THIRTY-TWO THOUSAND FIVE HUNDRED PESOS (P32,500.00). 12

Appellant assured private complainants they could leave for Abu Dhabi on May 10, 1990, at 8:00 p.m. 13 The date of departure came without private complainants leaving Philippine soil. Thereafter, appellant told them to stay put and wait for the arrival in the Philippines of their prospective Middle Eastern employer. However, no employer arrived, and the four complainants failed to be deployed by appellant overseas. 14

Private complainants and Wilma returned to the Lakas Agency to look for appellant. They did not find her. It was then that they found out from the agency's Manager, MR. NARCISO DELA FUENTE, that appellant was merely renting a table in the office and was not, employed with Lakas. 15 The revelation moved private complainants to file a complaint against appellant with the National Bureau of Investigation (NBI). 16

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The NBI was able to work out a settlement between the parties. Appellant agreed in writing to pay back the processing fees of private complainants. 17 Nonetheless, appellant did not fully fulfill her obligation under the agreement. She only refunded a total of SIX THOUSAND SEVEN HUNDRED PESOS (P6,700.00) to private complainants. 18

For her part, appellant admits that she received from private complainants, through Wilma Gregorio, the sum of THIRTY-TWO THOUSAND FIVE HUNDRED PESOS (P32,500.00). 19 She, however, denied that she was merely renting a table at the office of the Lakas Agency Management Corporation. She insisted that she was an employee of that recruitment office owned and managed by Mr. Narciso dela Fuente, 20 and that she acted as its liaison officer and messenger. As liaison officer, she assisted applicants in the processing of their documents in the POEA. She also signed documents and receipts in behalf of the recruitment agency. 21

According to appellant, it is the Lakas Agency's policy that each applicant be charged FIVE THOUSAND PESOS (P5,000.00) as processing fee, and that the airline fare of FIFTEEN THOUSAND PESOS (P15,000.00) in cases of deployment to Abu Dhabi be shouldered by the applicant. 22 The agency adopted the policy as a result of its alleged unfortunate experience with Ramon Eguia and Edgardo Santos. The two, she claimed, refused to pay back the cost of their tickets (THIRTY THOUSAND PESOS [P30,000.00]) which was advanced by the agency. 23

Appellant blamed private complainants for their failure to leave for Abu Dhabi as they were unable to produce the money for their air fare. 24 Allegedly, Wilma insisted that the SIXTY THOUSAND PESOS (60,000.00) for private complainants' tickets be advanced by Lakas Agency and be repaid by the four once they start working in Abu Dhabi. Her proposal did not sit well with the recruitment agency, resulting in the shelving of private complainants' deployment abroad. 25

Appellant further testified that private complainant Ronnie Reyes later withdrew his application and demanded the refund of his processing fees, plus SEVEN HUNDRED PESOS (P700.00) to cover miscellaneous expenses. 26Since private complainants' papers had already been processed in the POEA, Ronnie was informed that the agency was not obliged to make the refund to him. He was, however, insistent, so appellant took it upon herself to pay him back. 27 As guarantee for her promise to make the refund, Ronnie allegedly took her Sony stereo worth FOUR THOUSAND SEVEN HUNDRED PESOS (P4,700.00), which he

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never returned to her even after she had given him SIX THOUSAND SEVEN HUNDRED PESOS (P6,700.00). 28

Appellant also alleged that no similar refunds were made to the three other private complainants. Their processing fees were merely off-set against the existing obligation of Romeo Eguia and Edgardo Santos with the Lakas Agency. 29

At trial's end, appellant was found guilty of illegal recruitment and sentenced as follows:

WHEREFORE, premises considered, judgment is hereby rendered finding the accused Felicia Cabacang y Mosambique (sic) guilty beyond reasonable doubt of illegal recruitment and hereby sentences her to suffer the penalty of LIFE IMPRISONMENT and a fine of One Hundred Thousand (P100,000.00) Pesos. 30

Appellant now assails the trial court's Decision with the following arguments:

1. The court a quo erred by failing to appreciate the facts (1) that (appellant) never represented herself as licensed by the Department of Labor and Employment — Philippine Overseas Employment Administration as labor recruiter, (2) that what she represented to the applicants is that her employer LAKAS MANAGEMENT AGENCY is a duly licensed recruitment agency with principals-employers abroad, and (3) that the accused told applicants that she can help them get employed with the same employer of their relatives who are now working there through her help.

2. The court a quo erred in finding (appellant) at fault and liable for the failure or negligence of her employer LAKAS MANAGEMENT AGENCY to register her

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name as its employee at the Philippine Overseas Employment Administration.

3. The court a quo erred in finding (appellant) at fault or liable for the decision/policy of her employer, LAKAS MANAGEMENT AGENCY, or requiring the four (4) complaining witnesses to pay the cost of their plane tickets from Manila to the jobsite (Abu Dhabi, UAE);

4. The court a quo erred in finding (appellant) guilty of illegal recruitment based on (appellant's) receipt of the P32,000.00 from Wilma Eguia Gregorio intended as placement fees of the four (4) complaining witnesses.

We affirm appellant's conviction with modifications.

The centerpiece of appellant's defense is two-fold: (1) that she cannot be held liable for illegal recruitment since she never represented herself to private complainants as a POEA-licensed recruiter; and (2) that she was not the one responsible for the recruitment of private complainants nor for their non-deployment for work abroad, since she was merely an employee of the POEA-licensed Lakas Agency Management Corporation. We reject these contentions.

Firstly, it is incorrect to maintain that to be liable for illegal recruitment, one must represent himself/herself to the victims as a duly-licensed recruiter. Illegal recruitment is defined in Article 38 (a) of the Labor Code, as amended, as "(a)ny recruitment activities, including the prohibited practices enumerated under Article 34 of this Code, to be undertaken by non-licensees or non-holders of authority." Article 13 (b) of the same Code defines "recruitment and placement" as referring to:

(A)ny act of canvassing, enlisting, contracting, transporting, utilizing, hiring or procuring workers, and includes referrals, contract services,

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promising or advertising for employment, locally or abroad, whether for profit or not: Provided, That any person or entity which in any manner, offers or promises for a fee employment to two or more persons shall be deemed engaged in recruitment and placement.

Clearly, to prove illegal recruitment, only two elements need to be shown, viz.: (1) the person charged with the crime must have undertaken recruitment activities (or any of the activities enumerated in Article 34 of the Labor Code, as amended); and (2) said person does not have a license 31 or authority 32 to do so. It is not required that it be shown that such person wrongfully represented himself as a licensed recruiter.

Secondly, appellant cannot successfully contend she merely performed her duties as an employee of a licensed recruitment agency. Apart from her uncorroborated testimony on the matter, she failed to present credible evidence to buttress her claim of employment. Thus, she failed to follow the immutable rule on burden of proof that "each party must prove his own affirmative allegations by the amount of evidence required by law. 33

On the other hand, the documentary evidence of the prosecution show that appellant received private complainants' processing fees from Wilma Gregorio in her own behalf. The wordings of Exhibits "C" to "G", inclusive, are strongly persuasive on this factual issue.

They read, as follows:

Exh. "C": "Received from Wilma Gregorio the amount of 5,000 only";

Exh. "D": "Received from Romeo Eguia amount 5,000";

Exh. "E": "Received from Wilma the amount of 5,000 Wilma — only"

Exh. "F": "Received from Wilma Gregorio amount 7,500 pesos only"; and

Exh. "G": "Received the amount of 10,000 pesos from Wilma Gregorio as Deposit, 4 applicants."

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These receipts — which are not written on Lakas agency stationary — show no indication that the payments were accepted by appellant in behalf of the Lakas Agency Management Corporation. Exh. "J", which is the Commitment/Agreement executed and signed by appellant before the NBI further proves that she was acting in her own behalf in receiving Wilma's payment. For, why else would she personally "promise to return to Wilma Gregorio . . . the amount of P32,500.00" if said sum was for the benefit of the Lakas Agency?

More importantly, the prosecution demonstrated reasonable doubt that appellant performed recruitment activities without any license to do so. She informed private complainant Ronnie Reyes that there would be a second batch of janitors to be deployed to Abu Dhabi. After she accepted private complainants' job applications, she assured them that they would be able to fly to that Middle Eastern nation after their papers are processed by the POEA. She told them, through Wilma, to pay their processing fees directly to her, and later personally received the same, in the total amount of THIRTY-TWO THOUSAND PESOS (P32,000.00). She issued and signed the receipts evidencing payment to her of such fees. She processed private complainants' papers at the POEA, and she assured them that they were to fly to Abu Dhabi on May 10, 1990, at 8:00 p.m. Throughout the entire transaction, private complainants and Wilma Gregorio dealt with appellant, and with appellant alone. The only time they talked to the manager of the Lakas Agency was after their aborted flight to Abu Dhabi, when they were trying to locate the whereabouts of appellant.

Clearly, it was appellant who directly recruited private complainants within the meaning of Article 38 (a) and (b) the Labor Code. Since it is undisputed that appellant is not a holder of a license or authority to recruit from the Department of Labor, through the POEA, her acts constitute illegal recruitment.

Illegal recruitment carries with it the penalty of life imprisonment, and a fine which varies by degrees in accordance with the enumeration made in Article 39 of the Labor Code, as amended. In the case at bench, since appellant was charged with and convicted of illegally recruiting four (4) people, her crime is classified as having been committed in large scale. 34 As such, it is considered as involving economic sabotage, and carries with it a fine of ONE HUNDRED THOUSAND PESOS (P100,000.00). 35 In addition to these penalties, appellant must

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also be ordered to indemnify private complainants the unrefunded portion of their processing fees.

IN VIEW WHEREOF, the Decision, dated January 25, 1994, of the Regional Trial Court of Manila, Branch 5, in Criminal Case No. 91-93606 is AFFIRMED, subject to the modification that, in addition to being sentenced to suffer LIFE IMPRISONMENT and pay a fine of ONE HUNDRED THOUSAND PESOS (P100,000.00), appellant Felicia Mazambique Cabacang is likewise ordered to indemnify private complainants in the amount of TWENTY-FIVE THOUSAND EIGHT HUNDRED PESOS (P25,800.00). Costs against appellant.

SO ORDERED.

G.R. No. L-58011-12 July 20, 1982

VIR-JEN SHIPPING AND MARINE SERVICES, INC., petitioner, vs.NATIONAL LABOR RELATIONS COMMISSION, ROGELIO BISULA, RUBEN ARROZA, JUAN GACUTNO, LEONILO ATOK, NILO CRUZ, ALVARO ANDRADA, NEMESIO ADUG, SIMPLICIO BAUTISTA, ROMEO ACOSTA, and JOSE ENCABO, respondents.

Maximo A. Savellano, Jr., for petitioner.

Solicitor General and Romeo M. Devera for respondents.

BARREDO, J.:

Petition for certiorari seeking the annulment or setting aside, on the grounds of excess of jurisdiction and grave abuse of discretion, of the decision of the National Labor Relations Commission in consolidated NSB Cases Nos. 2250-79 and 2252-79 thereof, 1 the dispositive portion of which reads thus:

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WHEREFORE, the Decision appealed from should be, as it is hereby modified in this wise:

Respondent Vir-jen Shipping and Marine Services, Inc., is hereby ordered to pay the following to the complainant Seamen who have not withdrawn from the case, namely: Capt. Rogelio H. Bisula, Ruben Arroza, Juan Gacutno, Leonilo Atok, Nilo Cruz, Alvaro Andrada, Nemesio Adug, Simplicio Bautista, Romeo Acosta and Jose Encabo:

1. their earned wages corresponding to the period from 16 to 19 April 1979;

2. the wages corresponding to the unexpired portion of their contracts, as adjusted by the respondent Company effective 1 March 1979;

3. the adjusted representation allowances of the complainant Seamen who served as officers and who have not withdrawn from the case, namely: Capt. Rogelio Bisula, Ruben Arroza, Juan Gacutno, Leonilo Atok and Nilo Cruz;

4. their vacation pay equivalent to one-half (½) month's pay after six (6) months of service and another one-half (½) month's pay after the completion of the one-year contract;

5. their tanker service bonus equivalent to one-half (½) month's pay; and

6. their earned overtime pay from l to l9 April 1979.

The Secretariat of the National Seamen Board is also hereby directed to issue within five (5) days from receipt of this Decision the necessary clearances to the suspended Seamen. (pp. 86-87, Record.)

The factual and legal background of these cases is related most comprehensively in the "Manifestation and Comment" filed by the Solicitor General. It is as follows:

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The records show that private respondents have a manning contract for a period of one (1) year with petitioner in representation of its principal Kyoei Tanker Co. Ltd. The terms and conditions of said contract were based on the standard contract of the NSB. The manning contract was approved by the NSB. Aware of the problem that vessels not paying rates imposed by the International Transport Workers Federation (ITF) would be detained or interdicted in foreign ports controlled by the ITF, petitioner and private respondents executed a side contract to the effect that should the vessel M/T Jannu be required to pay ITF rates when it calls on any ITF controlled foreign port, private respondents would return to petitioner the amounts so paid to them.

On March 23, 1979, the master of the vessel who is one of the private respondents sent a cable to petitioner, while said vessel was en route to Australia which is an ITF controlled port, stating that private respondents were not contented with the salary and benefits stipulated in the manning contract, and demanded that they be given 50% increase thereof, as the "best and only solution to solve ITF problem." Apparently, reference to "ITF" in private respondents' cable made petitioner apprehensive since the vessel at that time was en route to Australia, an ITF port, and would be interdicted and detained thereat, should private respondents denounce the existing manning contract to the ITF and should petitioner refuse or be unable to pay the ITF rates, which represent more than 100% of what is stipulated in the manning contract. Placed under such situation, petitioner replied by cable dated March 24, 1979 to private respondents, as follows:

... WE ARE SURPRISED WITH THIS SUDDEN CHANGE OF ATTITUDE AND DEMANDS FOR WE HAVE THOROUGHLY EXPLAINED AND DISCUSSED ALL MATTERS PERTAINING TO YOUR PRESENT EMPLOYMENT AND BELIEVED THAT WE FULLY UNDERSTOOD EACH OTHER ... WE SHALL SUFFER AND ABSORB CONSIDERABLE AMOUNT OF LOSSES WITH YOUR DEMAND OF FIFTY PERCENT AS WE ARE ALREADY COMMITTED TO PRINCIPALS THEREFORE TO MINIMIZE OUR LOSSES WE PROPOSE AN INCREASE

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OF TWENTY FIVE PERCENT ON YOUR BASIC PAYS PLUS THE SPECIAL COMPENSATION FOR THIS PARTICULAR VOYAGE ... (p. 7 Comment)

On March 26, 1979, petitioner wrote a letter to the NSB denouncing the conduct of private respondents as follows:

This is to inform you that on March 24, 1979, we received a cable from Capt. Rogelio Bisula, Master of the above-reference vessel reading as follows:

URINFO ENTIRE JANNU OFFICERS AND CREW NOT CONTENTED WITH PRESENT SALARY BASED ON VOLUME OF WORK TYPE OF SHIP WITH HAZARDOUS CARGO AND REGISTERED IN A WORLDWIDE TRADE STOP WHAT WE DEMAND IS ONLY FIFTY PERCENT INCREASE BASED ON PRESENT BASIC SALARY STOP THIS DEMAND THE BEST AND ONLY SOLUTION TO SOLVE PROBLEM DUE YOUR PRESENT RATES ESPECIALLY TANKERS VERY FAR IN COMPARISON WITH OTHER SHIPPING AGENCIES IN MANILA.

to which we replied on March 24, 1979, as follows:

WE ARE SURPRISED WITH SUDDEN CHANGE, OF ATTITUDE AND DEMANDS FOR WE HAVE THOROUGHLY EXPLAINED AND DISCUSSED ALL MATTERS PERTAINING TO YOUR PRESENT EMPLOYMENT AND BELIEVED THAT WE FULLY UNDERSTOOD EACH OTHER STOP FRANKLY SPEAKING WE SHALL SUFFER AND ABSORB CONSIDERABLE AMOUNT OF LOSSES WITH YOUR DEMAND OF FIFTY PERCENT AS WE ARE COMMITTED TO PRINCIPALS THEREFORE TO MINIMIZE OUR LOSSES WE PROPOSE AN INCREASE OF TWENTY FIVE PERCENT ON YOUR BASIC PAY STOP YOUR UNDERSTANDING AND FULL COOPERATION WILL BE VERY MUCH APPRECIATED STOP PLS CONFIRM SOONEST.

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On March 25, 1979 we received the following communication from the Master of said vessel:

OFFICERS AND CREW HESITATING TO GIVE UP DEMAND OF FIFTY PERCENT INCREASE BUT FOR THE GOOD AND HARMONIOUS RELATIONSHIP ON BOARD AND RECONSIDERING YOUR SUPPOSED TO BE LOSSES IN CASE WE CONDITIONALLY COOPERATE WITH YOUR PROPOSED INCREASE AND TWENTY FIVE PERCENT BASED ON INDIVIDUAL BASIC PAY WITH THE FOLLOWING TERMS AND CONDITION STOP EFFECTIVITY OF TWENTY FIVE PERCENT INCREASE MUST BE MARCH/79 STOP INCREASE MUST BE COLLECTIBLE ON BOARD EFFECTIVE ABOVE DATE UNTIL DISEMBARKATION STOP ALLOTMENT TO ALLOTEES REMAIN AS IS STOP REASONABLE REPALLOWS FOR ALL OFFICERS BE GIVEN EFFECTIVE MARCH/79 STOP BONUS FOR 6 MONTHS SERVICES RENDERED BE COLLECTIBLE ON BOARD STOP OFFICERS/CREW 30PCT O/T SHUD BE BASED NEW UPGRADED SALARY SCALE STOP MASTER/CHENGR/CHMATE SPECIAL COMPENSATION GIVE BY YOUR COMPANY PRIOR DEPARTURE MANILA REMAIN AS IS.

to which we replied on March 25, 1979, as follows:

WE AGREE ALL CONDITIONS AND CONFIRM IT SHALL BE PROPERLY ENFORCED STOP WILL PREPARE ALL REQUIRED DOCUMENTS AND WILL BE DELIVERED ON BOARD.

For your further information and guidance, the abovementioned demands of the officers and crew (25% increase in basic pay, increase in overtime pay and increase in representation allowance) involve an additional amount of US$3,096.50 per month, which our company is not in a position to shoulder.

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We are, therefore, negotiating with our Principals, Messrs. Kyoei Tanker Company, Limited, for the amendment of our agency agreement in the sense that our monthly fee be increased correspondingly. We have sent our Executive Vice-President, Mr. Ericson M. Marquez, to Japan to represent us in said negotiation and we will inform you of the results thereof. (Annex "E" of Petition)

In view of private respondents' conduct and breach of contract, petitioner's principal, Kyoei Tanker Co., Ltd. terminated the manning contract in a letter dated April 4, 1979, which reads in part;

This is with reference to your letter of March 26, 1979 and our conference with Mr. Ericson Marquez in Tokyo on March 29, 1979, regarding the unexpected and unreasonable demand for salary increase of your officers and crew on the above vessel.

Frankly speaking, we fully agree with you that this action taken by your officers and crew in demanding increase in their salaries and overtime after being on board for only three months was very unreasonable. Considering the circumstances when the demand was made, we believe that their action was definitely abusive and plain blackmail.

We regret to advise you that since this vessel is only under our management, we also cannot afford to grant your request for an increase of US$3,096.50 effective March 1, 1979, as demanded by your crew. Your crew should respect their employment contracts which was approved by your government and your National Seamen Board should make sure that all seamen should follow their contracts.

For your information, we have discussed this matter with the owners of the vessel, particularly the attitude and mentality of your crew on board. Our common and final decision is not to grant your request but also to

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terminate our Manning Agreement effective upon crew's change when the vessel arrives at Japan or at any possible port about end April, 1979.

We regret that we have to take this drastic step in order to protect ourselves from further problem if we continue with your present officers and crew because if their demand is granted, there is no guarantee that they will not demand further increase in salaries in the future when they have chance. Also, as you know the present freight market is very bad and we cannot afford an unexpected increase in cost of operations and more so with a troublesome and unreliable crew that you have on board.

In view of the circumstances mentioned above, please consider this letter as our official notice of cancellation of our Manning Agreement effective upon the date of crew's change. (Annex "F" of Petition).

On April 6, 1979, petitioner wrote the NSB asking permission to cancel the manning contract with petitioner, said letter reading as follows:

This is with reference to our letter of March 26, 1979, informing you of the sudden and unexpected demands of the officers and crew of the above vessel for a twenty five percent (25%) increase in their basic salaries and overtime, plus an increase of the officers' representation allowances, involving a total of US$3,096.50 per month.

As we have advised in our afore-mentioned letter, we have negotiated with our Principals, Messrs. Kyoei Tanker Co., Ltd., to amend our Agency Agreement by increasing our monthly fee by US$3,096.50, and attached herewith is copy of our letter dated March 26, 1979 duly received by our Principals on March 31, 1979.

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In this connection, we wish to inform your good office that our Principals have refused to consider our request for an increase and have also advised us of their final decision to terminate our Manning Agreement effective upon vessel's arrival in Japan on or about April 17, 1979.

For your further information, we enclose herewith xerox copy of the Kyoei Tanker Co., Ltd. letter dated April 4, 1979, which we just received today via airfreight.

This is the first time that a cancellation of this nature has been made upon us, and needless to say, we feel very embarrassed and disappointed but we have no other alternative but to accept the said cancellation.

In view of the foregoing, we respectfully request your authority to cancel our Contracts of Employment and to disembark the entire officers and crew upon vessel's arrival in Japan on or about 17th April, 1979. (Annex "G", of Petition).

On April 10, 1979, the NSB through its Executive Director Cresencio C. Dayao wrote petitioner authorizing it to cancel the manning contract. The NSB letter to petitioner reads:

We have for acknowledgment your letter of 6 April 1979 in connection with the above-captioned subject.

Considering the circumstances enumerated in your letter under reply (and also in your letter of March 1979), we authorize you to cancel your contracts of employment with the crew/members of the M/T "Jannu" and you may now disembark the whole compliment upon the vessel's arrival in Japan on or about April 17, 1979.

We trust that you will not encounter any difficulty in connection with the disembarkation of the crew/members. (Annex "H" of Petition).

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The seamen were accordingly disembarked in Japan and repatriated to Manila. They then filed a complaint with the NSB for illegal dismissal and non-payment of wages. After trial, the NSB found that the termination of the services of the seamen before the expiration of their employment contract was justified "when they demanded and in fact received from the company wages over and above the contracted rates which in effect was an alteration and modification of a valid and existing contract ..." (Annex "D", Petition). The seamen appealed the decision to the NLRC which reversed the decision of the NSB and required the petitioner to pay the wages and other monetary benefits corresponding to the unexpired portion of the manning contract on the ground that the termination of the said contract by petitioner was without valid cause. Hence, the present petition. (Pp. 2-9, Manifestation & Comment)

In its petition which contains practically the same facts and circumstances above-quoted, petitioner submits for Our resolution the following issues:

I. That the respondent NLRC acted without or in excess of its jurisdiction, or with grave abuse of discretion in said NSB Cases Nos. 2250-79 and 2252-79 when it adjudged the petitioner Vir-jen liable to the respondents-seamen for terminating its employment contracts with them despite the fact that prior authorization to terminate or cancel said employment contracts and to disembark the said respondents was first secured from and was granted by, the National Seamen Board, the government agency primarily charged with the supervision and discipline of seamen and the approval and enforcement of employment contracts;

II. That the respondent NLRC acted with grave abuse of discretion, or without or in excess of its jurisdiction, or contrary to law and the evidence when it concluded that "there is nothing on record to show that respondents-seamen made any threat that they would complain or report to the ITF their low wage rates if their demand or proposal for a wage increase was not met", despite the fact that in their cable of March 23, 1979 to the petitioner, the said respondents made the following threats and impositions: "WHAT WE DEMAND IS ONLY 50 PERCENT INCREASE BASED ON PRESENT BASIC SALARY STOP THIS

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DEMAND THE BEST AND ONLY SOLUTION TO SOLVE ITF PROBLEMS", that there are other substantial and conclusive evidence to support the existence of such threats and intimidation which the respondent NLRC failed and refused to consider; and that the evidence substantially and conclusively shows that the petitioner Vir-jen was, in fact, threatened and intimidated into giving such salary increases due to such cabled threats and intimidation of the private respondents;

III. That the respondent NLRC acted with grave abuse of discretion or without or in excess of jurisdiction when it concluded, in effect, that the respondents-seamen acted within their rights when they imposed upon their employer, the herein petitioner, their demands for salary and wages increases, in disregard of their existing NSB-approved contracts of employment, notwithstanding the substantial and conclusive findings of the NSB, the trier of facts which is in the best position to assess the special circumstances of the case, that the said respondents breached their respective contracts of employment with the petitioner, without securing the prior approval of the NSB as required by the New Labor Code, as amended, and with the use of threats, intimidation and coercion, when they demanded and, in fact, received from the petitioner salaries or wages over and above their contracted rates which the petitioner was "constrained to make" in order "to prevent the vessel from being interdicted and/or detained by the ITF because at the time the demand for salary increase was made the vessel was en route to Kwinana, Australia (via Senipah, Indonesia), a port were the ITF is strong and militant," "for in the event the vessel would be detained and/or interdicted the company (petitioner) would suffer more losses than paying the seamen 25 % increase of their salary";

IV. That respondent NLRC committed a grave abuse of discretion or exceeded its jurisdiction or acted contrary to law when it failed and refused to admit and take into account the ADDENDUM AGREEMENT, dated December 27, 1978, entered into between the petitioner and the private respondents, which would have further enlightened the respondent NLRC on the "ITF PROBLEMS" insinuated by the private respondents in their cable of March 23, 1979 to

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threaten and intimidate the petitioner into granting the salary increases in question;

V. That respondent NLRC committed a grave abuse of discretion or acted without or in excess of its jurisdiction or contrary to law when it ordered the petitioner Vir-jen to pay, among others, to the private respondents their "wages corresponding to the unexpired portion of their contracts" the said petitioner having already lost its trust and confidence on the private respondents; that the employer cannot be legally compelled to continue with the employment of persons in whom it has already lost its trust and confidence; that payment to the private respondents of their wages corresponding to the unexpired portion of their contract would be tantamount to retaining their services after their employer, petitioner herein, had already lost its faith and trust in them;

VI. That the respondent NLRC committed a grave abuse of discretion or exceeded its jurisdiction in still including and considering ROMEO ACOSTA as one of the appellants in the two (2) aforementioned NSB cases and making him a beneficiary of its decision, dated July 8, 1981, modifying the NSB decision, dated July 2, 1980, despite the fact that way back on October 23, 1980, Acosta had already filed in said NSB cases a pleading, entitled "SATISFACTION OF JUDGMENT" in which he manifested that he was not appealing the NSB decision anymore as the judgment in his favor was already fully satisfied by the petitioner Vir-jen;

VII. That the respondent NLRC had no more jurisdiction to entertain private respondents' appeal because the NSB decision became final and executory for failure of said respondents to serve on he petitioner a copy of their "APPEAL AND MEMORANDUM OF APPEAL" within the ten (10) day reglementary period for appeal and even after the expiration of said period;

VIII. That the respondent NLRC had no jurisdiction to entertain the appeal by the private respondents based on the supposedly verified "APPEAL AND MEMORANDUM OF APPEAL" because the supposed signature of the person purportedly verifying the same is forged; and

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that the new counsel appearing for the private respondents on appeal was not even authorized by some of the private respondents to appear for them;

IX. That the respondent NLRC committed a grave abuse of discretion or acted without or in excess of jurisdiction or contrary to law when it misconstrued, misinterpreted and misapplied to the instant case the ruling of this Honorable Supreme Court in Wallem Philippines Shipping, Inc. vs. The Hon. Minister of Labor, et al., G.R No. 50734, prom. February 20, 1981, despite distinct and fundamental differences in facts between the Wallem Case and the instant case;

X. That the respondent NLRC committed a grave abuse of discretion or acted without or in excess of its jurisdiction or acted contrary to law when it failed and refused to consider and pass upon the substantial issues of jurisdiction, law and facts and matters of public interests raised by the petitioner in its URGENT MOTION/APPELLEE'S MEMORANDUM ON APPEAL, dated April 24, 1981, and in its MOTION FOR RECONSIDERATION AND/OR NEW TRIAL, dated July 20, 1981, filed in the two (2) cases;

XI. That the respondent NLRC committed a grave abuse of discretion or acted without or in excess of jurisdiction or contrary to law when it failed and refused to reconsider and set aside its decision subject-matter of this petition for certiorari, considering Chat if allowed to stand, the said decision will open the floodgates for Filipino seamen to disregard NSB-approved contracts of employment with impunity, leading to the destruction of the Philippine manning industry, which is a substantial source of revenue for the Philippine government, as well as the image of the Filipino seamen who will undoubtedly become known far and wide as one prone to violate the solemnity of employment contracts, compounded with the use of threats, intimidation and blackmail, thereby necessitating a policy decision by this Honorable Supreme Court on the matter for the survival of the manning industry. (Pp. 5-9, Record.)

We shall deal first with the jurisdictional issue (No. VII above) to the effect that the appeal of private respondents from the decision of the National Seamen's

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Board against them was filed out of time, considering that copy of said decision was received by them on July 9, 1980 and they filed their memorandum of appeal only on July 23, 1980 or fourteen (14) days later, whereas under article 223 of the Labor Code which governs appeals from the National Seamen's Board to the National Labor Relations Commission per Article 20(b) of the Code provides that such appeals must be made within ten (10) days.

In this connection, it is contended in the comment of private respondents that petitioner has overlooked that under Section 7, Rule XIII,, Book V of the Implementing Rules of the Labor Code, the ten-day period specified in Article 223 refers to working days and that this Court has already upheld such construction and manner of computation in Fabula vs. NLRC, G.R. No. 54247, December 19, 1980. Now, computing the number of working days from July 9 to July 23, 1980 We find that there were exactly ten (10) days, hence, if We adhere to Fabula, the appeal in question must be held to have been made on time.

But petitioner herein maintains that the Minister of Labor may not, under the guise of issuing implementing rules of a law as authorized by the law itself, go beyond the clear and unmistakable language of the law and expand it at his discretion. In other words, since Article 223 of the Labor Code literally provides thus:

Appeal. — Decisions, awards, or orders of the Labor Arbiters or compulsory arbitrators are final and executory unless appealed to the Commission by any or both of the parties within ten (10) days from receipt of such awards, orders, or decisions. Such appeal may be entertained only on any of the following grounds:

(a) If there is a prima facie evidence of abuse of discretion on the part of the labor Arbiter or compulsory arbitrator;

(b) If the decision, order, or award was secured through fraud or coercion, including graft and corruption;

(c) If made purely on questions of law; and

(d) If serious errors in the findings of facts are raised which would cause grave or irreparable damage or injury to the appellant.

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To discourage frivolous or dilatory appeals, the Commission or the Labor Arbiter shall impose reasonable penalty, including fines or censures, upon the erring parties.

the implementing rules may not provide that the said period should be computed on the basis of working days. This, indeed, is a legal issue not brought up nor passed upon squarely in Fabula, and petitioner prays that this Court rule on the point once and for all.

After mature and careful deliberation, We have arrived at the conclusion that the shortened period of ten (10) days fixed by Article 223 contemplates calendar days and not working days. We are persuaded to this conclusion, if only because We believe that it is precisely in the interest of labor that the law has commanded that labor cases be promptly, if not peremptorily, dispose of. Long periods for any acts to be done by the contending parties can be taken advantage of more by management than by labor. Most labor claims are decided in their favor and management is generally the appellant. Delay, in most instances, gives the employers more opportunity not only to prepare even ingenious defenses, what with well-paid talented lawyers they can afford, but even to wear out the efforts and meager resources of the workers, to the point that not infrequently the latter either give up or compromise for less than what is due them.

All the foregoing notwithstanding, and bearing in mind the peculiar circumstances of this case, particularly, the fact that private respondents must have been misled by the implementing rules aforementioned. We have opted to just the same pass on the merits of the substantial issues herein, even as We admonish all concerned to henceforth act in accordance with our foregoing view. Verily, the Minister of Labor has no legal power to amend or alter in any material sense whatever the law itself unequivocally specifies or fixes.

We need not ponder long on the contention of petitioner regarding the alleged forgery of the signature of respondent Rogelio Bisula and the alleged lack of authority of the new counsel of respondents, Atty. B. C. Gonzales, to appear for them. Resolution of these minor points, considering their highly controversial nature, so much so that they could rationally to our mind, be decided either way, may be dispensed with in order that We may go to the more transcendentally important main issues before Us.

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As far as issue No. VI above regarding the inclusion of Romeo Acosta among the beneficiaries of the decision herein in question, there can be no reason why petitioner should not be sustained. It is undenied that Acosta has filed a formal satisfaction of judgment. Indeed, it is quite relevant to mention at this point that originally, there were twenty-eight (28) claimants against petitioner, This number was first reduced to fifteen (15) then to ten (10) and finally to nine (9) now, by withdrawal of the claimants themselves. These series of withdrawals lend no little degree to added enlightenment of the discussion hereunder of the adverse positions of the remaining claimants, on the one hand, and the petitioner, on the other.

To begin with, let it be borne in mind that seamen's contracts of the nature We have before Us now are not ordinary ones. There are specie, laws and rules governing them precisely due to the peculiar circumstances that surround them. Relatedly, We quote from the Manifestation and Comment of the Solicitor General:

The employment contract in question is unlike any ordinary contract of employment, for the reason that a manning contract involves the interests not only of the signatories thereto, such as the local Filipino recruiting agent (herein petitioner), the foreign owner of the vessel, and the Filipino crew members (private respondents), but also those of other Filipino seamen in general as well as the country itself. Accordingly, Article 12 of the Labor Code provides that it is the policy of the State not only "to insure and regulate the movement of workers in conformity with the national interest" but also "to insure careful selection of Filipino workers for overseas employment in order to protect the good name of the Philippines abroad". The National Seamen Board (NSB), which is the agency created to implement said state policies, is thus empowered pursuant to Article 20 of the Labor Code "to secure the best possible terms and conditions of employment for seamen, and to insure compliance thereof" not only on the part of the owners of the vessel but also on the part of the crew members themselves.

Conformably to the power vested in the NSB, the law requires that all manning contracts shall be approved by said agency. It likewise provides that "it shall be unlawful to substitute or alter any

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previously approved and certified employment contract without the approval of NSB" (Section 35, Rules and Regulations in the recruitment and placement of Filipino seamen aboard foreign going ships) and authorizes the employer or owner of the vessel to terminate such contract for just causes (Section 32, Ibid). Among such just causes for termination are "bad conduct and unwanted presence prejudicial to the safety of the ship" (Guidebook for shipping employers, page 8) and material breach of said contract.

The stringent rules governing Filipino seamen aboard foreign, going ships are dictated by national interest. There are about 120,000 registered seamen with the NSB. Only about 50,000 of them are employed and 70,000 or so are still hoping to be employed. Those Filipino seamen already employed on board foreign-going ships should accordingly conduct themselves with utmost propriety and abide strictly with the terms and conditions of their employment contract, and the NSB should see to that, in order that owners of foreignowned vessels will not only be encouraged to renew their employment contract but will moreover be induced to hire other Filipino seamen as against other competing foreign sailors. (Pp. 15-17, Manifestation & Comment of the Solicitor General)

Pertinently, the Labor Code of the Philippines provides for the creation of a National Seamen Board (NSB) thus:

ART. 20. National Seamen Board.—(a) A National Seamen Board is hereby created which shall developed and maintain a comprehensive program for Filipino seamen employed overseas. It shall have the power and duty:

(1) To provide free placement services for seamen;

(2) To regulate and supervise the activities of agents or representatives of shipping companies in the hiring of seamen for overseas employment; and secure the best possible terms of employment for contract seamen workers and secure compliance therewith; and

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(3) To maintain a complete registry of all Filipino seamen.

(b) The Board shall have original and exclusive jurisdiction over all matters or cases including money claims, involving employer-employee relations, arising out of or by virtue of any law or contracts involving Filipino seamen for overseas employment. The decision of the Board shall be appealable to the National Labor Relations Commission upon the same grounds provided in Article 223 hereof. The decisions of the National Labor Relations Commission shall be final and inappealable.

The finality and unappealability of the decisions of the National Labor Relations Commission conferred by the above provisions in cases of the nature now before Us necessarily limits Our power in the premises to the exercise of Our plenary certiorari jurisdiction. And under the scheme of said Article 20, in relation to Article 223 of the same Code, the reviewing authority of the Commission is limited only to the following instances:

Appeal.—Decisions, awards, or orders of the Labor Arbiters or compulsory arbitrators are final and executory unless appealed to the Commission by any or both of the parties within ten (10) days from receipt of such awards, orders, or decisions. Such appeal may be entertained only on any of the following grounds:

(a) If there is prima facie evidence of abuse of discretion on the part of the Labor Arbiter or compulsory arbitrator;

(b) If the decision, order or award was secured through fraud or coercion, including graft and corruption;

(c) If made purely on questions of law;and

(d) If serious errors in the findings of facts are raised which would cause grave or irreparable damage or injury to the appellant.

To discourage frivolous or dilatory appeals, the Commission or the Labor Arbiter shall impose reasonable penalty, including fines or censures, upon the erring parties.

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In all cases, the appellant shall furnish a copy of the memorandum of appeals to the other party who shall file an answer not later than ten (10) days from receipt thereof.

xxx xxx xxx

In the light of the foregoing perspective of law and policy, all the other issues raised by petitioner may be disposed of together. Anyway they revolve basically around the following questions:

1. In the event of conflict in the conclusions of the National Seamen Board, on the one hand, and the National Labor Relations Commission on the other, on a matter that is fundamentally an issue of fact, which one should prevail?

2. Under the facts of this case, was it legally proper for the Commission to disregard the permission granted by the NSB to the petitioner to disembark and discontinue the employment of herein respondents?

3. As a matter of fact, did respondent breach their contract with petitioner, so as to entitle the latter to take the punitive action herein complained of?

4. Was the conformity of petitioner to pay respondents additional compensation of 25% secured by said respondents thru threats of grave injury to petitioner who, therefore, acceded to such increase involuntarily?

We feel that the resolution of the instant controversy hinges on whether or not it was violative of law and policy in the light of the peculiar nature of the contracts in question as already explained at the outset of this opinion, for the respondents to make the demand for an increase of 50% of their respective wages stipulated in their NSB approved contracts while they were already in the midst of the voyage to Kwinana, Australia (an ITF controlled post), pointedly mentioning in their cablegram that such "demand (was) the best and only solution to solve ITF problem"?

On these questions, the NSB found and held:

1. Whether or not the Seamen breached their respective employment contracts;

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2. Whether or not the Seamen were illegally dismissed by the Company;

3. Whether or not the monetary claims of the seamen are valid and meritorious;

4. Whether or not the monetary claims of the Company are valid and meritorious;

5. Whether or not disciplinary action should be taken against the Seamen.

With respect to the first issue, the Board believes that the answer should be in the affirmative. This is so for the Seamen demanded and in fact received from the Company wages over and above their contracted rates, which in effect is an alteration or modification of a valid and subsisting contract; and the same not having been done thru mutual consent and without the prior approval of the Board the alteration or modification is contrary to the provisions of the New Labor Code, as amended, more particularly Art. 34 (i) thereof which states that:

Art. 34. Prohibited practices.—It shall be unlawful for any individual, entity, licensee or holder of authority:

xxx xxx xxx

(i) To substitute or alter employment contracts approved and verified by the Department of Labor from the time of actual signing thereof by the parties up to and including the period of expiration of the same without the approval of the Department of Labor;

xxx xxx xxx

The revision of the contract was not done thru mutual consent for the Company did not voluntarily agree to an increase of wage, but was only constrained to make a counter-proposal of 25% increase to prevent the vessel from being interdicted and/or detained by the ITF because at the time the demand for salary increase was made the

419

vessel was enroute to Kwinana, Australia (via Senipah, Indonesia), a port where the ITF is strong and militant. However, a perusal of the Cables (Exhs. "D" & "F", "3" & "5") coming from the Seamen addressed to the Company would show the threatening manner by which the desire for a salary increase was manifested, contrary to their claim that it was merely a request. Aforesaid cables are hereby quoted for ready reference:

RYCV-11-12-13-14 RECEIVED URINFO ENTIRE JANNU OFFICERS AND CREW NOT AGREEABLE WITH YOUR SUGGESTIONS THEY ARE NOT CONTENTED WITH PRESENT SALARY BASED IN VOLUME OF WORKS TYPE OF SHIP WITH HAZARDOUS CARGO AND REGISTERED IN A WORLD WIDE TRADE STOP REGARDING URCABV-14 OFFICERS AND CREW NOT INTERESTED IN ITF MEMBERSHIP IF NOT ACTUALLY PAID WITH ITF RATE STOP WHAT WE DEMAND IS ONLY 50 PERCENT INCREASE BASED ON PRESENT BASIC SALARY STOP THIS DEMAND THE BEST AND ONLY SOLUTION TO SOLVE ITF PROBLEM DUE YOUR PRESENT RATE ESPECIALLY IN TANKERS VERY FAR IN COMPARISON WITH OTHER SHIPPING AGENCIES IN MANILA STOP LET US SHARE EQUALLY THE FRUITS OF LONELINESS SACRIFICES AND HARDSHIP WE ARE ENCOUNTERING ON BOARD WE REMAIN ...

REURVIR-JEN-15 OFFICERS AND CREW HESITATING TO GIVE UP DEMAND OF 50 PERCENT INCREASE BUT FOR GOOD AND HARMONIOUS RELATIONSHIP ONBOARD AND RECONSIDERING YOUR SUPPOSE TO BE LOSSES IN CASE WE CONDITIONALLY COOPERATE WITH YOUR PROPOSE INCREASE OF 25 PERCENT BASED ON INDIVIDUAL MONTHLY BASIC PAY WITH FOLLOWING TERMS AND CONDITIONS AA EFFECTIVITY OF 25 PERCENT INCREASE MUST BE MARCH/79 PLUS SPECIAL COMPENSATION MENTIONED URCAB VIRJEN-14 BB NEW COMPANY CIRCULAR ON UPGRADED NEW SALARY SCALE DULY SIGNED AND APPROVED BE FORWARDED KWINANA AUSTRALIA OR HANDCARRIED BY YOUR REPRESENTATIVE TO DISCUSS MATTERS OFFICIALLY CC 25 PERCENT INCREASE MUST BE COLLECTABLE ONBOARD EFFECTIVE ABOVE DATE UNTIL

420

DISEMBARKATION STOP ALLOTMENT TO ALLOTTEES REMAIN AS IS DD REASONABLE REPALLOWS FOR ALL OFFICERS BE GIVEN EFFECTIVE MARCH/79 EE BONUS FOR 6 MONTHS SERVICE RENDERED BE COLLECTIBLE ONBOARD FF OFFICERS/CREW 30 PERCENT' OT SHOULD BE BASED NEW UPGRADED SALARY SCALE GG MASTER/CHENGR/CHMATE SPECIAL COMPENSATION GIVE BY YOUR COMPANY PRIOR DEPARTURE MANILA BE REMAIN AS IS STOP THE ABOVE TERMS AND CONDITIONS SHOULD BE PROPERLY ENFORCE AND DOCUMENTED ALSO COPIES AND FORWARDED ONBOARD ON ARRIVAL KWINANA AUSTRALIA CONFIRM ...

While the Board recognizes the rights of the Seamen to seek higher wages provided the increase is arrived at thru mutual consent, it could not however, sanction the same if the consent of the employer is secured thru threats, intimidation or force. In the case at bar, the Company was compelled to accede to the demand of the Seamen for a salary increase to forestall the possibility of the vessel being interdicted by the ITF at Kwinana, Australia, for in the event the vessel would be detained and/or interdicted the Company would suffer more losses than paying the Seamen 25% increase of their

With respect to the second issue, the Board believes that the termination of the services of the Seamen was legal and in accordance with the provisions of their respective employment contracts. Considering the findings of the Board that the Seamen breached their contracts, their subsequent repatriation was justified. While it may be true that the Seamen were hired for a definite period their services could be terminated prior to the completion of the fun term thereof for a just and valid cause.

It may be stated in passing that Vir-jen Shipping & Marine Services, Inc., despite the fact that it was compelled to accede to a 25% salary increase for the Seamen, tried to convince its principal Kyoei Tanker, Ltd. to an adjustment in their agency fee to answer for the 25% increase, but the latter not only denied the request but likewise

421

terminated their Manning, Agreement. The Seamen's breach of their employment contracts and the subsequent termination of the Manning Agreement of Vir-jen Shipping & Marine Services, Inc. with the Kyoei Tanker, Ltd., justified the termination of the Seamen's services.

With respect to the third issue the following are the findings of the Board:

As regards the claim of the Seamen for the payment of their salaries for the unexpired portion of their employment contracts the same should be denied. This is so because of the findings of the Board that their dismissal was legal and for a just cause. Awards of this nature is proper only in cases where a seafarer is illegally dismissed. (Pp. 148-151, Record)

Disagreeing with the foregoing findings of the NSB, the NLRC held:

The more important issue to be resolved in this case, however, is the question of whether the Seamen violated their employment contracts when they demanded or proposed and in fact accepted wages over and above their contracted rates. Stated otherwise, could the Seamen rightfully demand or propose the revision of their employment contracts? While they concede that they are bound by their contracts, the Seamen claim that their cable asking for the revision of their contract rates was a valid exercise of their right to grievance.

The right to grievance is recognized in this jurisdiction even if there is a valid and subsisting contract, especially where there are supervening facts or events of which a party to the contract was not apprised at the time of its conclusion. As pointed out by the Supreme Court in the Wallem case, supra, it "is a basic right of all working men to seek greater benefits not only for themselves but for their families as well ..." and the "Constitution itself guarantees the promotion of social welfare and protection to labor." In this care, records show that it was impressed on the Seamen that their vessel would be trading only in Caribbean ports. This was admitted by the Company in

422

its cable to the Seamen on 10 January 1979. After the conclusion of their contracts, however, and after they had boarded the vessel, the principals of the Company directed the vessel to can at different ports or to engage in "worldwide trade" which is admittedly more difficult and hazardous than trading in only one maritime area. This is a substantial change in the original understanding of the parties. Thus, in their cable asking for a wage increase, the Seamen expressed their dissatisfaction by informing the Company that they were "not contented with (their) present salary based on volume of work, type of ship with hazardous cargo and registered in world wide trade."(emphasis supplied.) With such change in the original agreement of the parties, we find that the Seamen were well within their rights in demanding for the revision of their contract rates.

We also note that the Company was not exactly in good faith in contracting the service of the Seamen. During his briefing in Manila, the Company instructed the master of the vessel, complainant Bisula, to prepare two (2) sets of payrolls, one set reflecting the actual salary rates of the Seamen and the other showing higher rates based on Panamanian Shipping articles which approximate those prescribed by ITF for its member seafarers. In compliance with this instruction, Bisula prepared the latter payrolls. These payrolls were intended for the consumption of ITF if and when the vessel called on ports where ITF rates were operational, the evident purpose being to show ITF that the Company was paying the same rates prescribed by said labor federation and thereby prevent the interdiction of the vessel. And when the vessel was en route to Australia, an ITF-controlled port, the Company arranged for the Seamen's membership with ITF and actually paid their membership fees without their knowledge and consent, thereby exposing them to the danger of being disciplined by the NSB Secretariat for having affiliated with ITF. All these have to be mentioned here to better understand the feelings of the Seamen when they asked for the revision of their wage rates. 2 (Pp. 83-85, Record)

Comparing these two decisions, We do not hesitate to hold that the NLRC overstepped the boundaries of its reviewing authority and was overlenient. Whether or not respondents had breached their contract wit petitioner is a

423

factual issue, the peculiar nuances of which were better known to the NSB, the fact-finding authority. Indeed, even if it was nothing more than the interpretation of the cablegram sent by respondents to petitioner on March 23, 1979 that were the only question to be resolved, that is, whether or not it carried with it or connoted a threat which naturally panicked petitioner, which, to be sure, could be a question of law, still, as We see it, the conclusion of the NLRC cannot be justified.

The NLRC ruled that in the exercise of their right to present any grievances they had and in their desire to alleviate their condition, it was but well and proper for respondents to make a proposal for increase of their wages, which petitioner could accept or reject. We do not see it that way.

Definitely, the reference in the cablegram to the conformity of petitioner to respondents' demand was "the best and only solution to ITF problem" had an undertone which naturally placed petitioner hardly in a position to answer them with a flat denial. It would be the acme of naivete for Us to go along with the contention that the cablegram of March 23, 1979 was a mere proposal and had no trace nor tint of threat at all. Indeed, it is alleged in the petition and there is no denial thereof that on April 23, 1979, Chief Mate Jacobo Catabay of the M/T Jannu, who was among the claimants at first, revealed that:

On April 23, 1979, Chief Mate Jacobo H. Catabay of the M/T Jannu, in a signed statement-report to the petitioner, marked and admitted in evidence as Exh. "10-A" during the trial stated, as follows:

On our departure at Keelung, we did not have destination until three (3) days later that Harman cabled us to proceed to Senipah, Indonesia to load fun cargo to be discharged at Kwinana , Australia. Captain told everyone that if only we stayed so long with the ship, he will report to ITF personally in order to get back wages. In view that we only worked for three months so the back wages is so small and does not worth. From that time on, Chief Engr. and Captain have a nightly closed door conference they arrived at the conclusion to ask for 50% salary increase and they have modified a certain platforms. They certainly believe that Vir-jen have no

424

choice because the vessel is going to ITF port so they called a general meeting conducted at the bridge during my duty hours in the afternoon. All engine and deck personnel were present in that meeting. (Pp. 19-20, Record.)

Well taken, indeed, is the Solicitor General's observation that:

Private respondents'conduct is uncalled for. While employees may be free to request their employers to increase their wages, they should not use threat of such a nature and in such a situation as to put the employer at their complete mercy and with no choice but to accede to their demands or to face bankruptcy. This is what private respondents did, which is an act of bad conduct prejudicial to the vessel, and a material breach of the existing manning contract. It has adverse consequences that led not only to the termination of the existing manning contract but to the rejection by Kyoei Tanker Co. Ltd. of petitioner's offer to supply crew members to three other vessels, thereby depriving unemployed Filipino seamen of the opportunity to work on said vessels. Thus, in a letter dated May 17, 1979, Kyoei Tanker Co. Ltd. wrote petitioner as follows:

This is with reference to your letter of Feb. 23, 1979, submitting your manning offers on our three (3) managed vessels for delivery as follows:

1. M/V "Maya" — crew,delivery end May, 1979,

2. M/T "Cedar" — 28 crew, delivery end June, 1979,

3. M/T "Global Oath" — 30 crew, delivery end, June 1979.

In this connection, we wish to advise you that, as a result of our unpleasant experience with your crew on the M/T "Jannu", owners have decided to give the manning contracts on the above three vessels to other foreign crew instead of your company.

We deeply regret that although your crew performance on our other four (4) vessels have been satisfactory, we were unable to persuade

425

owners to consider your Philippine crew because of the bad attitude and actuation of your crew manned on board M/T "Jannu".

As we have already advised you, owners have spent more than US$30,000.00 to replace the crew of M/T "Jannu" in Japan last April 19, 1979 which would have been saved if your crew did not violate their employment contracts.(Annex "K"of Petition),

In the light of all the foregoing and the law and policy on the matter, it is submitted that there was valid justification on the part of petitioner and/or its principal to terminate the manning contract. (Pp. 12-14, Manifestation and Comment of the Solicitor General.)

At first glance it might seem that the judgment of the NLRC should have more weight than that of NSB. Having in view, however, the set up and relationship of these two entities framed by the Labor Code, the NSB is not only charged directly with the administration of shipping companies in the hiring of seamen for overseas employment by seeing to it that our seamen "secure the best possible terms of employment for contract seamen workers and secure compliance therewith." Its composition as of the time this controversy arose is worth noting—for it is made up of the Minister of Labor as Chairman, the Deputy Minister as Vice Chairman, and a representative each of the Ministries of Foreign Affairs, National Defense, Education and Culture, the Central Bank, the Bureau of Employment Service, a worker's organization and an employee's organization and the Executive Director of the Overseas Employment Development Board. (Article 23, Labor Code) It is such a board that has to approve all contracts of Filipino seamen (Article 18, Labor Code). And after such approval, the contract becomes unalterable, it being "unlawful" under Article 34 of the Code "for any individual, entity, licensee or holder of authority: (i) to substitute or alter employment contracts approved and verified by Department of Labor from the time of actual signing thereof by the parties up to and including the period of expiration of the same without the approval of the Department of Labor." In other words, it is not only that contracts may not be altered or modified or amended without mutual consent of the parties thereto; it is further necessary to have the change approved by the Department, otherwise, the guilty parties would be penalized.

The power of the NLRC in relation to the works and actuations of the NSB is only appellate, according to Article 20 (b), read in relation to Article 223, principally,

426

over questions of law, since as to factual matters, it may exercise such appellate jurisdiction only "if errors in the findings of fact are raised which would cause grave or irreparable damage or injury to the appellant." (par. d)

The NLRC has noted in its decision that respondents were originally made to believe that their ship would go only to the Caribbean ports and yet after completing trips to Inchon, Korea and Kuwait and Keelung, Taiwan, it was suddenly directed to call at Kwinana, Australia, an ITF controlled port. The record shows that this imputation is more apparent than real, for respondents knew from the very moment they were hired that world-wide voyages or destinations were contemplated in their agreement. So much so that corresponding steps had to be taken to avoid interference of or trouble about the ITF upon the ship's arrival at ITF controlled ports. As already stated earlier, the ITF requires the seamen working on any vessel calling at ports controlled by them to be paid the rates fixed by the ITF which are much higher than those provided in the contract's signed here, to the extent of causing tremendous loss if not bankruptcy of the employer.

And so, as revealed to the NLRC later, in anticipation precisely of such peril to the employer and ultimate unemployment of the seamen, in the instant case, the usual procedure undeniably known to respondents of having two payroll's, one containing the actually agreed rates and the other ITF rates, the latter to be shown to the ITF in order that the ship may not be detained or interdicted in Kwinana, was followed. But according to the NLRC, this practice constitutes deception and bad faith, and worse, it is an effect within the prohibition against alteration of contracts approved by the NSB, considering there is nothing to show that NSB was made aware of the so-called addendum or side agreement to the effect that should the ship manned by respondents be made to call an any ITF controlled port, the contract with ITF rates would be shown and, if for any reason, the respondents are required to be actually paid higher rates and they are so paid, the excess over the rates agreed in the NSB contract shall be returned to petitioner later.

It is of insubstantial moment that the side agreement or addendum was not made known to or presented as evidence before the NSB. We are persuaded that more or less the NSB knows that the general practice is to have such side contracts. More importantly, the said side contracts are not meant at all to alter or modify the contracts approved by the NSB. Rather, they are precisely purported to

427

enforce them to the letter, making it clearer that even if the ships have to call at ITF controlled ports, the same shall remain to be the real and binding agreement between the parties, in intentional disregard of whatever the ITF may exact.

We hold that there was no bad faith in having said side contracts, the intent thereof being to put into effect the NSB directed arrangements that would protect the ship manning industry from unjust and ruinning effects of ITF intervention. Indeed, examining the said side agreements, it is not correct to say that the respondents were caught unaware, or by surprise when they were advised that the ship would proceed to Kwinana, Australia, even assuming they had been somehow informed that they would sail to the Caribbean. Said side agreements textually provide:

KNOW ALL MEN BY THESE PRESENTS:

This Addendum Agreement entered into by and between KYOEI TANKER CO., LTD., Principals, of the vessel M.T. "JANNU", represented herein by VIR-JEN SHIPPING & MARINE SERVICES, INC., Manila, Philippines, as Manning Agents (hereinafter referred to as the Company),

— and —

The herein-mentioned officers and crew, and engaged by the Company as crewmembers of the vessel M/T "JANNU" with their positions, seaman certificate numbers and signatures (hereinafter referred to as the Crewmember), hereunder shown:

W I T N E S S E T H that:

1. WHEREAS, the Crewmember is hired and recruited as a member of the crew on board the vessel M/T "JANNU" with the corresponding Contracts of Employment submitted to, verified and duly approved by the National Seamen Board; that the employment contract referred to, has clearly defined the rate of salary, wages, and/or employment benefits for a period of one (1) year (or twelve (12) months), and any extension thereof.

428

2. WHEREAS, the parties hereby further agree and covenant that should the above-mentioned vessel enter, dock or drop anchor in ports of other countries, the Crewmember shall not demand, ask or receive, and the Company shall have no obligation to pay the Crewmember, salaries,, wages and/or benefits over and above those provided for in the employment contract submitted to, verified and approved by the National Seamen Board, which shall remain in full force and effect between the parties. The Company as well as the Owners,, Charterers, Agents shall neither be held accountable nor liable for any amount other than what is agreed upon and stipulated in the aforesaid NSB-approved Contracts of Employment.

3. WHEREAS, the parties likewise agree that should the vessel enter, dock or drop anchor in any foreign port, and in the event that the Company (and/or its Owners, Charterers, Agents), are forced, pressured, coerced or compelled, in any way and for whatever cause or reason, to pay the Crewmember either directly or thru their respective allottees or other persons, salaries and benefits higher than those rates imposed in the NSB-approved contract, the Crewmember hereby agrees and binds himself to receive the said payment in behalf of, and in trust for, the Company (and/or its Owners, Charterers, Agents), and to return the said amount in full to the Company or to its agent/s in Manila, Philippines immediately upon his and/or his allottees receipt thereof; the Crewmember hereby waives formal written demand by the Company or its agent/s for the return thereof. The Crewmember hereby fully understands that failure or refusal by him to return to the Company the said amount, will render him criminally liable for Estafa, as provided for in the Revised Penal Code of the Philippines, and in such case, the parties hereby agree that any criminal and/or civil action in connection therewith shall be within the exclusive jurisdiction of Philippine Courts.

4. WHEREAS, if, in order to avoid delays to the vessels, the Company is forced, pressured, coerced or compelled to sign a Collective Bargaining Agreement or any other Agreement with any foreign union, particularly ITF or ITF affiliated unions, and to sign new crews' contract of employment stipulating higher wages, salaries or benefits

429

than the NSB-approved contract, the said agreements and contracts shall be void from the beginning and the Crewmember shall be deemed to have automatically waived the increased salaries and benefits stipulated in the said agreements and employment contracts unto and in favor of the Company, and shall remain unalterably bound by the rates, terms, and conditions of the NSB-approved contract.

5. WHEREAS, the parties also agree that should the Company, as a precautionary or anticipatory measure for the purpose of avoiding costly delays to the vessel prejudicial to its own interest, decide to negotiate and/or enter into any agreement in advance with any foreign based union, particularly ITF or ITF affiliated unions, in any foreign port where the vessel involved herein may enter, dock or drop anchor, whatever increases in salaries or benefits to the Crewmember that the Company may be compelled to give, over and above those stipulated in the NSB-approved employment contracts of the Crewmember, shag, likewise, be deemed ineffective or void from the beginning as far as the Crewmember is concerned, and any such increases in salaries or benefits which the Crewmember shall receive pursuant thereto shall be held by the Crewmembers in trust for the Company with the obligation to return the same immediately upon receipt thereof, at the Company's or its agent's office at Manila, Philippines. It is fully understood that the rates of pay and all other terms and conditions embodied in the NSB-approved employment contracts shall be of continuing validity and effectivity between the parties, irrespective of the countries or ports where the said vessel shall enter, dock or drop anchor, and irrespective of any agreement which the Company may enter or may have entered into with any union, particularly ITF or ITF affiliated unions.

6. WHEREAS, it is likewise agreed that any undertaking made by the Company and/or the National Seamen Board upon the request of the Company, imposed by any foreign union, particularly ITF or ITF affiliated unions, which will negate or render in effective any provisions of this agreement, shall also be considered null and void from the beginning.

430

7. WHEREAS, lastly, this Addendum Agreement is entered into for the mutual interest of both parties in line with the Company's desire to continue the service of the Filipino crewmembers on board their vessel and the Crewmembers'desire to keep their employment on board the subject vessel, thus maintaining the good image of the Filipino seamen and contributing to the development of the Philippine manning industry.

8. That both the Company and the Crewmember agree and bind themselves that this Agreement shall be considered an addendum to, or as part of, the NSB-approved employment contract entered into by the Company and the Crewmember.

IN WITNESS WHEREOF, we have hereunto affixed our signatures this December 28, 1978 at Manila, Philippines.

THE COMPANY VIR-JEN SHIPPING & MARINE SERVICES, INC.

By:

(SGD.) CAPT. RUBEN R. BALTAZAR Operations Dept.

THE CREWMEMBERS

Name

Position

SC#

Signature

1. Ruben Arroza

2nd Mate

104728

SGD.

431

2. Cresenciano Abrazaldo

3rd Mate

91663

SGD.

3. Salvador Caunan

Third Engr.

84995

SGD.

4. Nilo Cruz

4th Engr.

157762

SGD.

5. Pacifico Labios

A/B

139045

SGD.

6. Ramon Javier

A/B

170545

SGD.

7. Joaquin Cordero

A/B

96556

SGD.

432

8. Rodolfo Crisostomo

O/S

162121

SGD.

9. Renato Oliveros

O/S

137132

SGD.

10.

Rogelio Saraza

O/S

149635

SGD.

11.

Nemesio Adug

Pumpman

157215

SGD.

12.

Francisco Benemerito

Oiler

89467

SGD.

13.

Rufino Gutierrez

Oiler

17366

SGD.

433

3

14.

Juol Ram Maul

Oiler

84934

SGD.

15.

Steve Mariño

Wiper

146096

SGD.

16.

Simplicio Bautista

Chief Cook

169142

SGD.

17.

Romeo Acosta

Second Cook

159960

SGD.

18.

Delfin Dagohoy

Messman

144096

SGD.

19.

Jose Encabo

Messma

179

SGD.

434

n 551

(Pp. 99-103, Annex D-1 of Petition)

The NLRC has cited Wallem Philippine Shipping Inc. vs. The Minister of Labor, G. R. No. 50734-37, February 20, 1981 (102 SCRA 835). No less than the Solicitor General maintains that said cited case is not controlling:

A careful examination of Wallem Philippine Shipping Inc. vs. The Minister of Labor, G. R. No. 50734-37, February, 20, 1981 shows that the same is dissimilar to the case at bar. In the Wallem case, there was an express agreement between the employer and the ITF representative, under which said employer bound itself to pay the crew members salary rates similar to those of ITF. When the crew members in the Wallem case demanded that they be paid ITF rates, they were merely asking their employer to comply with what had been agreed upon with the ITF representative, which conduct on their part cannot be said to be a violation of contract but an effort to urge performance thereof. Such is not the situation in the case at bar. In the case at bar, petitioner and private respondents had a side agreement, whereby private respondents agreed to return to petitioner whatever amounts petitioner would be required to pay under ITF rates. In other words, petitioner and private respondents agreed that petitioner would not pay the ITF rate. When private respondents used ITF as threat to secure increase in salary, they violated the manning contract. Moreover, in the case at bar, petitioner terminated the manning contract only after the NSB authorized it to do so, after it found the grounds therefor to be valid. On the other hand, the termination of the manning contract in the Wallem case was without prior authorization from the NSB.

It will be noted that private respondents sent a cable to petitioner demanding an increase of 50% of their basic salary as the only solution to the ITF problem at a time when the vessel M/T JANNU was enroute to Australia, an ITF port. The fact that private respondents mentioned ITF in their cable clearly shows that if

435

petitioner would not accede to their demands, they would denounce petitioner to ITF. Thus, Chief Mate Jacobo Catabay in his report dated April 23, 1979 (Exh. 10-A) stated:

On our departure at Keelung, we did not have destination until three days later that Harman cabled us to proceed to Senipah, Indonesia to load fun cargo to be discharged at Kwinana, Australia. Captain told everyone that if only we stayed so long with the ship, he will report to ITF personally in order to get back wages. In view that we only worked for three months so the back wages is so small and does not worth. From that time on, Chief Engr. and Captain have a nightly closed door conference until they arrived at the conclusion to ask for 50% salary increase and they have modified a certain platforms. They certainly believe that Vir-jen have no choice because the vessel is going to ITF port so they called a general meeting conducted at the bridge during my duty hours in the afternoon. All engines and deck personnel were present in that meeting. (Emphasis supplied)

Reporting the wage scheme to the ITF would mean that the vessel would be interdicted and detained in Australia unless petitioner pay the ITF rates, which represent more than 100% of what is stipulated in the manning contract. Petitioner was thus forced to grant private respondents an increase of 25% in their basic salary. That such grant of a 25% increase was not voluntary is shown by the fact that petitioner immediately denounced the seamen's conduct to NSB and subsequently asked said agency authority to terminate the manning contract. (Pp. 10-12, Manifestation & Comment of Solicitor General)

Summarizing, We are convinced that since the NSB, considering its official role in matters like those now before Us, is the fact-finding body, and there is no sufficient cogency in the NLRC's finding that there was no threat employed by respondents on petitioner, and, it appearing further that the well prepared Manifestation and Comment of the Solicitor General supports the decision of the NSB, which body, to Our mind, was in a better position than the NLRC to appraise

436

the relevant nuances of the actuations of both parties, We are of the considered view that the decision of the NLRC under question constitutes grave abuse of discretion and should be set aside in favor of the NSB's decision.

In El Hogar Filipino Mutual Building and Loan Association vs. Building Employees Inc., 107 Phil. 473, citing San Miguel Brewery vs. National Labor Union, 97 Phil. 378, We emphasized:

Much as we should expand beyond economic orthodoxy, we hold that an employer cannot be legally compelled to continue with the employment of a person who admittedly was guilty of misfeasance or malfeasance towards his employer, and whose continuance in the service of the latter is patently inimical to his interest. The law in protecting the rights of the laborer, authorizes neither the oppression nor self-destruction of the employer. (Page 3, Record) (Emphasis supplied)

It is timely to add here in closing that situations wherein employers are practically laid in ambush or placed in a position not unlike those in a highjack whether in the air, land or midsea must be considered to be what they really are: acts of coercion, threat and intimidation against which the victim has generally no recourse but to yield at the peril of irreparable loss. And when such happenings affect the national economy, as pointed out by the Solicitor General, they must be treated to be in the nature of economic sabotage. They should not be tolerated. This Court has to be careful not to sanction them.

WHEREFORE, the petition herein is granted and the decision of the NLRC complained of hereby set aside; the decision of the NSB should stand.

No costs.

G.R. Nos. L-57999, 58143-53 August 15, 1989

437

RESURRECCION SUZARA, CESAR DIMAANDAL, ANGELITO MENDOZA, ANTONIO TANEDO, AMORSOLO CABRERA, DOMINADOR SANTOS, ISIDRO BRACIA, RAMON DE BELEN, ERNESTO SABADO, MARTIN MALABANAN, ROMEO HUERTO and VITALIANO PANGUE, petitioners, vs.THE HON. JUDGE ALFREDO L. BENIPAYO and MAGSAYSAY LINES, INC., respondents.

G.R. Nos. L-64781-99 August 15, 1989

RESURRECCION SUZARA, CESAR DIMAANDAL, ANGELITO MENDOZA, ANTONIO TANEDO, RAYMUNDO PEREZ, AMORSOLO CABRERA, DOMINADOR SANTOS, ISIDRO BRACIA, CATALINO CASICA, VITALIANO PANGUE, RAMON DE BELEN, EDUARDO PAGTALUNAN, ANTONIO MIRANDA, RAMON UNIANA, ERNESTO SABADO, MARTIN MALABANAN, ROMEO HUERTO and WILFREDO CRISTOBAL, petitioners, vs.THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION, THE NATIONAL SEAMEN BOARD (now the Philippine Overseas Employment Administration), and MAGSAYSAY LINES, INC., respondents.

Quasha, Asperilla, Ancheta, Peñ;a and Nolasco for petitioners.

Samson S. Alcantara for private respondent.

GUTIERREZ, JR., J.:

These petitions ask for a re-examination of this Court's precedent — setting decision in Vir-Jen Shipping and Marine Services Inc. v. National Labor Relations Commission, et al. (125 SCRA 577 [1983]). On constitutional, statutory, and factual grounds, we find no reason to disturb the doctrine in Vir-Jen Shipping and to turn back the clock of progress for sea-based overseas workers. The experience gained in the past few years shows that, following said doctrine, we should neither deny nor diminish the enjoyment by Filipino seamen of the same rights and freedoms taken for granted by other working-men here and abroad.

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The cases at bar involve a group of Filipino seamen who were declared by the defunct National Seamen Board (NSB) guilty of breaching their employment contracts with the private respondent because they demanded, upon the intervention and assistance of a third party, the International Transport Worker's Federation (ITF), the payment of wages over and above their contracted rates without the approval of the NSB. The petitioners were ordered to reimburse the total amount of US$91,348.44 or its equivalent in Philippine Currency representing the said over-payments and to be suspended from the NSB registry for a period of three years. The National Labor Relations Commission (NLRC) affirmed the decision of the NSB.

In a corollary development, the private respondent, for failure of the petitioners to return the overpayments made to them upon demand by the former, filed estafa charges against some of the petitioners. The criminal cases were eventually consolidated in the sala of then respondent Judge Alfredo Benipayo. Hence, these consolidated petitions, G.R. No. 64781-99 and G.R. Nos. 57999 and 58143-53, which respectively pray for the nullification of the decisions of the NLRC and the NSB, and the dismissal of the criminal cases against the petitioners.

The facts are found in the questioned decision of the NSB in G.R. No. 64781-99.

From the records of this case it appears that the facts established and/or admitted by the parties are the following: that on different dates in 1977 and 1978 respondents entered into separate contracts of employment (Exhs. "B" to "B-17", inclusive) with complainant (private respondent) to work aboard vessels owned/operated/manned by the latter for a period of 12 calendar months and with different rating/position, salary, overtime pay and allowance, hereinbelow specified: ...; that aforesaid employment contracts were verified and approved by this Board; that on different dates in April 1978 respondents (petitioners) joined the M/V "GRACE RIVER"; that on or about October 30, 1978 aforesaid vessel, with the respondents on board, arrived at the port of Vancouver, Canada; that at this port respondent received additional wages under rates prescribed by the Intemational Transport Worker's Federation (ITF) in the total amount of US$98,261.70; that the respondents received the amounts appearing opposite their names, to wit: ...; that aforesaid amounts were over and above the rates of pay of

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respondents as appearing in their employment contracts approved by this Board; that on November 10, 1978, aforesaid vessel, with respondent on board, left Vancouver, Canada for Yokohama, Japan; that on December 14, 1978, while aforesaid vessel, was at Yura, Japan, they were made to disembark. (pp. 64-66, Rollo)

Furthermore, according to the petitioners, while the vessel was docked at Nagoya, Japan, a certain Atty. Oscar Torres of the NSB Legal Department boarded the vessel and called a meeting of the seamen including the petitioners, telling them that for their own good and safety they should sign an agreement prepared by him on board the vessel and that if they do, the cases filed against them with NSB on November 17, 1978 would be dismissed. Thus, the petitioners signed the. "Agreement" dated December 5, 1978. (Annex C of Petition) However, when they were later furnished xerox copies of what they had signed, they noticed that the line "which amount(s) was/were received and held by CREWMEMBERS in trust for SHIPOWNERS" was inserted therein, thereby making it appear that the amounts given to the petitioners representing the increase in their wages based on ITF rates were only received by them in trust for the private respondent.

When the vessel reached Manila, the private respondent demanded from the petitioners the "overpayments" made to them in Canada. As the petitioners refused to give back the said amounts, charges were filed against some of them with the NSB and the Professional Regulations Commission. Estafa charges were also filed before different branches of the then Court of First Instance of Manila which, as earlier stated, were subsequently consolidated in the sala of the respondent Judge Alfredo Benipayo and which eventually led to G.R. Nos. 57999 and 58143-53.

In G.R. Nos. 64781-99, the petitioners claimed before the NSB that contrary to the private respondent's allegations, they did not commit any illegal act nor stage a strike while they were on board the vessel; that the "Special Agreement" entered into in Vancouver to pay their salary differentials is valid, having been executed after peaceful negotiations. Petitioners further argued that the amounts they received were in accordance with the provision of law, citing among others, Section 18, Rule VI, Book I of the Rules and Regulations Implementing the Labor Code which provides that "the basic minimum salary of seamen shall not be less than the prevailing minimum rates established by the International Labor Organization (ILO) or those prevailing in the country whose flag the employing

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vessel carries, whichever is higher ..."; and that the "Agreement" executed in Nagoya, Japan had been forced upon them and that intercalations were made to make it appear that they were merely trustees of the amounts they received in Vancouver.

On the other hand, the private respondent alleged that the petitioners breached their employment contracts when they, acting in concert and with the active participations of the ITF while the vessel was in Vancouver, staged an illegal strike and by means of threats, coercion and intimidation compelled the owners of the vessel to pay to them various sums totalling US$104,244.35; that the respondent entered into the "Special Agreement" to pay the petitioners' wage differentials because it was under duress as the vessel would not be allowed to leave Vancouver unless the said agreement was signed, and to prevent the shipowner from incurring further delay in the shipment of goods; and that in view of petitioners' breach of contract, the latter's names must be removed from the NSB's Registry and that they should be ordered to return the amounts they received over and above their contracted rates.

The respondent NSB ruled that the petitioners were guilty of breach of contract because despite subsisting and valid NSB-approved employment contracts, the petitioners sought the assistance of a third party (ITF) to demand from the private respondent wages in accordance with the ITF rates, which rates are over and above their rates of pay as appearing in their NSB-approved contracts. As bases for this conclusion, the NSB stated:

1) The fact that respondents sought the aid of a third party (ITF) and demanded for wages and overtime pay based on ITF rates is shown in the entries of their respective Pay-Off Clearance Slips which were marked as their Exhs. "1" to "18", and we quote "DEMANDED ITF WAGES, OVERTIME, DIFFERENTIALS APRIL TO OCTOBER 1978". Respondent Suzara admitted that the entries in his Pay-Off Clearance Slip (Exh. "1") are correct (TSN., p. 16, Dec. 6, 1979).lâwphî1.ñèt Moreover, it is the policy (reiterated very often) by the ITF that it does not interfere in the affairs of the crewmembers and masters and/or owners of a vessel unless its assistance is sought by the crewmembers themselves. Under this pronounced policy of the ITF, it is reasonable to assume that the representatives of the ITF

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in Vancouver, Canada assisted and intervened by reason of the assistance sought by the latter.

2) The fact that the ITF assisted and intervened for and in behalf of the respondents in the latter's demand for higher wages could be gleaned from the answer of the respondents when they admitted that the ITF acted in their behalf in the negotiations for increase of wages. Moreover, respondent Cesar Dimaandal admitted that the ITF differential pay was computed by the ITF representative (TSN, p. 7, Dec. 12, 1979)

3) The fact that complainant and the owner/operator of the vessel were compelled to sign the Special Agreement (Exh. "20") and to pay ITF differentials to respondents in order not to delay the departure of the vessel and to prevent further losses is shown in the "Agreement" (Exhs. "R-21") ... (pp. 69-70, Rollo)

The NSB further said:

While the Board recognizes the rights of the respondents to demand for higher wages, provided the means are peaceful and legal, it could not, however, sanction the same if the means employed are violent and illegal. In the case at bar, the means employed are violent and illegal for in demanding higher wages the respondents sought the aid of a third party and in turn the latter intervened in their behalf and prohibited the vessel from sailing unless the owner and/or operator of the vessel acceded to respondents' demand for higher wages. To avoid suffering further incalculable losses, the owner and/or operator of the vessel had no altemative but to pay respondents' wages in accordance with the ITF scale. The Board condemns the act of a party who enters into a contract and with the use of force/or intimidation causes the other party to modify said contract. If the respondents believe that they have a valid ground to demand from the complainant a revision of the terms of their contracts, the same should have been done in accordance with law and not thru illegal means. (at p. 72, Rollo).

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Although the respondent NSB found that the petitioners were entitled to the payment of earned wages and overtime pay/allowance from November 1, 1978 to December 14, 1978, it nevertheless ruled that the computation should be based on the rates of pay as appearing in the petitioners' NSB-approved contracts. It ordered that the amounts to which the petitioners are entitled under the said computation should be deducted from the amounts that the petitioners must return to the private respondent.

On appeal, the NLRC affirmed the NSB's findings. Hence, the petition in G.R. Nos. 64781-99.

Meanwhile, the petitioners in G.R. Nos. 57999 and 58143-53 moved to quash the criminal cases of estafa filed against them on the ground that the alleged crimes were committed, if at all, in Vancouver, Canada and, therefore, Philippine courts have no jurisdiction. The respondent judge denied the motion. Hence, the second petition.

The principal issue in these consolidated petitions is whether or not the petitioners are entitled to the amounts they received from the private respondent representing additional wages as determined in the special agreement. If they are, then the decision of the NLRC and NSB must be reversed. Similarly, the criminal cases of estafa must be dismissed because it follows as a consequence that the amounts received by the petitioners belong to them and not to the private respondent.

In arriving at the questioned decision, the NSB ruled that the petitioners are not entitled to the wage differentials as determined by the ITF because the means employed by them in obtaining the same were violent and illegal and because in demanding higher wages the petitioners sought the aid of a third party, which, in turn, intervened in their behalf and prohibited the vessel from sailing unless the owner and/or operator of the vessel acceded to respondents' demand for higher wages. And as proof of this conclusion, the NSB cited the following: (a) the entries in the petitioners Pay-Off Clearance Slip which contained the phrase "DEMANDED ITF WAGES ..."; (b) the alleged policy of the ITF in not interfering with crewmembers of a vessel unless its intervention is sought by the crewmembers themselves; (c), the petitioners' admission that ITF acted in their behalf; and (d) the fact that the private respondent was compelled to sign the special agreement at Vancouver, Canada.

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There is nothing in the public and private respondents' pleadings, to support the allegations that the petitioners used force and violence to secure the special agreement signed in Vancouver. British Columbia. There was no need for any form of intimidation coming from the Filipino seamen because the Canadian Brotherhood of Railways and Transport Workers (CBRT), a strong Canadian labor union, backed by an international labor federation was actually doing all the influencing not only on the ship-owners and employers but also against third world seamen themselves who, by receiving lower wages and cheaper accommodations, were threatening the employment and livelihood of seamen from developed nations.

The bases used by the respondent NSB to support its decision do not prove that the petitioners initiated a conspiracy with the ITF or deliberately sought its assistance in order to receive higher wages. They only prove that when ITF acted in petitioners' behalf for an increase in wages, the latter manifested their support. This would be a logical and natural reaction for any worker in whose benefit the ITF or any other labor group had intervened. The petitioners admit that while they expressed their conformity to and their sentiments for higher wages by means of placards, they, nevertheless, continued working and going about their usual chores. In other words, all they did was to exercise their freedom of speech in a most peaceful way. The ITF people, in turn, did not employ any violent means to force the private respondent to accede to their demands. Instead, they simply applied effective pressure when they intimated the possibility of interdiction should the shipowner fail to heed the call for an upward adjustment of the rates of the Filipino seamen. Interdiction is nothing more than a refusal of ITF members to render service for the ship, such as to load or unload its cargo, to provision it or to perform such other chores ordinarily incident to the docking of the ship at a certain port. It was the fear of ITF interdiction, not any action taken by the seamen on board the vessel which led the shipowners to yield.

The NSB's contusion that it is ITF's policy not to intervene with the plight of crewmembers of a vessel unless its intervention was sought is without basis. This Court is cognizant of the fact that during the period covered by the labor controversies in Wallem Philippines Shipping, Inc. v. Minister of Labor (102 SCRA 835 [1981]; Vir-Jen Shipping and Marine Services, Inc. v. NLRC (supra) and these consolidated petitions, the ITF was militant worldwide especially in Canada, Australia, Scandinavia, and various European countries, interdicting foreign vessels and demanding wage increases for third world seamen. There was no

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need for Filipino or other seamen to seek ITF intervention. The ITF was waiting on its own volition in all Canadian ports, not particularly for the petitioners' vessel but for all ships similarly situated. As earlier stated, the ITF was not really acting for the petitioners out of pure altruism. The ITF was merely protecting the interests of its own members. The petitioners happened to be pawns in a higher and broader struggle between the ITF on one hand and shipowners and third world seamen, on the other. To subject our seamen to criminal prosecution and punishment for having been caught in such a struggle is out of the question.

As stated in Vir-Jen Shipping (supra):

The seamen had done no act which under Philippine law or any other civilized law would be termed illegal, oppressive, or malicious. Whatever pressure existed, it was mild compared to accepted and valid modes of labor activity. (at page 591)

Given these factual situations, therefore, we cannot affirm the NSB and NLRC's finding that there was violence, physical or otherwise employed by the petitioners in demanding for additional wages. The fact that the petitioners placed placards on the gangway of their ship to show support for ITF's demands for wage differentials for their own benefit and the resulting ITF's threatened interdiction do not constitute violence. The petitioners were exercising their freedom of speech and expressing sentiments in their hearts when they placed the placard We Want ITF Rates." Under the facts and circumstances of these petitions, we see no reason to deprive the seamen of their right to freedom of expression guaranteed by the Philippine Constitution and the fundamental law of Canada where they happened to exercise it.

As we have ruled in Wallem Phil. Shipping Inc. v. Minister of Labor, et al. supra:

Petitioner claims that the dismissal of private respondents was justified because the latter threatened the ship authorities in acceding to their demands, and this constitutes serious misconduct as contemplated by the Labor Code. This contention is now well-taken. The records fail to establish clearly the commission of any threat. But even if there had been such a threat, respondents' behavior should not be censured because it is but natural for them to employ some means of pressing their demands for petitioner, who

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refused to abide with the terms of the Special Agreement, to honor and respect the same. They were only acting in the exercise of their rights, and to deprive them of their freedom of expression is contrary to law and public policy. ... (at page 843)

We likewise, find the public respondents' conclusions that the acts of the petitioners in demanding and receiving wages over and above the rates appearing in their NSB-approved contracts is in effect an alteration of their valid and subsisting contracts because the same were not obtained through. mutual consent and without the prior approval of the NSB to be without basis, not only because the private respondent's consent to pay additional wages was not vitiated by any violence or intimidation on the part of the petitioners but because the said NSB-approved form contracts are not unalterable contracts that can have no room for improvement during their effectivity or which ban any amendments during their term.

For one thing, the employer can always improve the working conditions without violating any law or stipulation.

We stated in the Vir-Jen case (supra) that:

The form contracts approved by the National Seamen Board are designed to protect Filipino seamen not foreign shipowners who can take care of themselves. The standard forms embody the basic minimums which must be incorporated as parts of the employment contract. (Section 15, Rule V, Rules and Regulations Implementing the Labor Code).lâwphî1.ñèt They are not collective bargaining agreements or immutable contracts which the parties cannot improve upon or modify in the course of the agreed period of time. To state, therefore, that the affected seamen cannot petition their employer for higher salaries during the 12 months duration of the contract runs counter to estabhshed principles of labor legislation. The National Labor Relations Commission, as the appellate tribunal from the decisions of the National Seamen Board, correctly ruled that the seamen did not violate their contracts to warrant their dismissal. (at page 589)

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It is impractical for the NSB to require the petitioners, caught in the middle of a labor struggle between the ITF and owners of ocean going vessels halfway around the world in Vancouver, British Columbia to first secure the approval of the NSB in Manila before signing an agreement which the employer was willing to sign. It is also totally unrealistic to expect the petitioners while in Canada to exhibit the will and strength to oppose the ITF's demand for an increase in their wages, assuming they were so minded.

An examination of Annex C of the petition, the agreement signed in Japan by the crewmembers of the M/V Grace River and a certain M. Tabei, representative of the Japanese shipowner lends credence to the petitioners' claim that the clause "which amount(s) was received and held by CREWMEMBERS in trust for SHIPOWNER" was an intercalation added after the execution of the agreement. The clause appears too closely typed below the names of the 19 crewmen and their wages with no similar intervening space as that which appears between all the paragraphs and the triple space which appears between the list of crewmembers and their wages on one hand and the paragraph above which introduces the list, on the other. The verb "were" was also inserted above the verb "was" to make the clause grammatically correct but the insertion of "were" is already on the same line as "Antonio Miranda and 5,221.06" where it clearly does not belong. There is no other space where the word "were" could be intercalated. (See Rollo, page 80).

At any rate, the proposition that the petitioners should have pretended to accept the increased wages while in Vancouver but returned them to the shipowner when they reached its country, Japan, has already been answered earlier by the Court:

Filipino seamen are admittedly as competent and reliable as seamen from any other country in the world. Otherwise, there would not be so many of them in the vessels sailing in every ocean and sea on this globe. It is competence and reliability, not cheap labor that makes our seamen so greatly in demand. Filipino seamen have never demanded the same high salaries as seamen from the United States, the United Kingdom, Japan and other developed nations. But certainly they are entitled to government protection when they ask for fair and decent treatment by their employer and when they exercise the right to petition for improved terms of employment,

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especially when they feel that these are sub-standard or are capable of improvement according to internationally accepted rules. In the domestic scene, there are marginal employers who prepare two sets of payrolls for their employees — one in keeping with minimum wages and the other recording the sub-standard wages that the employees really receive. The reliable employers, however, not only meet the minimums required by fair labor standards legislation but even go away above the minimums while earning reasonable profits and prospering. The same is true of international employment. There is no reason why this court and the Ministry of Labor and Employment or its agencies and commissions should come out with pronouncements based on the standards and practices of unscrupulous or inefficient shipowners, who claim they cannot survive without resorting to tricky and deceptive schemes, instead of Government maintaining labor law and jurisprudence according to the practices of honorable, competent, and law-abiding employers, domestic or foreign. (Vir-Jen Shipping, supra, pp. 587-588)

It is noteworthy to emphasize that while the Intemational Labor Organization (ILO) set the minimum basic wage of able seamen at US$187.00 as early as October 1976, it was only in 1979 that the respondent NSB issued Memo Circular No. 45, enjoining all shipping companies to adopt the said minimum basic wage. It was correct for the respondent NSB to state in its decision that when the petitioners entered into separate contracts between 1977-1978, the monthly minimum basic wage for able seamen ordered by NSB was still fixed at US$130.00. However, it is not the fault of the petitioners that the NSB not only violated the Labor Code which created it and the Rules and Regulations Implementing the Labor Code but also seeks to punish the seamen for a shortcoming of NSB itself.

Article 21(c) of the Labor Code, when it created the NSB, mandated the Board to "(O)btain the best possible terms and conditions of employment for seamen."

Section 15, Rule V of Book I of the Rules and Regulations Implementing the Labor Code provides:

Sec. 15. Model contract of employment. — The NSB shall devise a model contract of employment which shall embody all the

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requirements of pertinent labor and social legislations and the prevailing standards set by applicable International Labor Organization Conventions. The model contract shall set the minimum standards of the terms and conditions to govern the employment of Filipinos on board vessels engaged in overseas trade. All employers of Filipinos shall adopt the model contract in connection with the hiring and engagement of the services of Filipino seafarers, and in no case shall a shipboard employment contract be allowed where the same provides for benefits less than those enumerated in the model employment contract, or in any way conflicts with any other provisions embodied in the model contract.

Section 18 of Rule VI of the same Rules and Regulations provides:

Sec. 18. Basic minimum salary of able-seamen. — The basic minimum salary of seamen shall be not less than the prevailing minimxun rates established by the International Labor Organization or those prevailing in the country whose flag the employing vessel carries, whichever is higher. However, this provision shall not apply if any shipping company pays its crew members salaries above the minimum herein provided.

Section 8, Rule X, Book I of the Omnibus Rules provides:

Section 8. Use of standard format of service agreement. — The Board shall adopt a standard format of service agreement in accordance with pertinent labor and social legislation and prevailing standards set by applicable International Labor Organization Conventions. The standard format shall set the minimum standard of the terms and conditions to govern the employment of Filipino seafarers but in no case shall a shipboard employment contract (sic), or in any way conflict with any other provision embodied in the standard format.

It took three years for the NSB to implement requirements which, under the law, they were obliged to follow and execute immediately. During those three years, the incident in Vancouver happened. The terms and conditions agreed upon in Vancouver were well within ILO rates even if they were above NSB standards at the time.

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The sanctions applied by NSB and affirmed by NLRC are moreover not in keeping with the basic premise that this Court stressed in the Vir-Jen Shipping case (supra) that the Ministry now the Department of Labor and Employment and all its agencies exist primarily for the workingman's interest and the nation's as a whole.

Implicit in these petitions and the only reason for the NSB to take the side of foreign shipowners against Filipino seamen is the "killing the goose which lays the golden eggs" argument. We reiterate the ruling of the Court in Vir-Jen Shipping (supra)

There are various arguments raised by the petitioners but the common thread running through all of them is the contention, if not the dismal prophecy, that if the respondent seamen are sustained by this Court, we would in effect "kill the hen that lays the golden egg." In other words, Filipino seamen, admittedly among the best in the world, should remain satisfied with relatively lower if not the lowest, international rates of compensation, should not agitate for higher wages while their contracts of employment are subsisting, should accept as sacred, iron clad, and immutable the side contracts which require: them to falsely pretend to be members of international labor federations, pretend to receive higher salaries at certain foreign ports only to return the increased pay once the ship leaves that port, should stifle not only their right to ask for improved terms of employment but their freedom of speech and expression, and should suffer instant termination of employment at the slightest sign of dissatisfaction with no protection from their Government and their courts. Otherwise, the petitioners contend that Filipinos would no longer be accepted as seamen, those employed would lose their jobs, and the still unemployed would be left hopeless.

This is not the first time and it will not be the last where the threat of unemployment and loss of jobs would be used to argue against the interests of labor; where efforts by workingmen to better their terms of employment would be characterized as prejudicing the interests of labor as a whole.

xxx xxx xxx

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Unionism, employers' liability acts, minimum wages, workmen's compensation, social security and collective bargaining to name a few were all initially opposed by employers and even well meaning leaders of government and society as "killing the hen or goose which lays the golden eggs." The claims of workingmen were described as outrageously injurious not only to the employer but more so to the employees themselves before these claims or demands were established by law and jurisprudence as "rights" and before these were proved beneficial to management, labor, and the national as a whole beyond reasonable doubt.

The case before us does not represent any major advance in the rights of labor and the workingmen. The private respondents merely sought rights already established. No matter how much the petitioner-employer tries to present itself as speaking for the entire industry, there is no evidence that it is typical of employers hiring Filipino seamen or that it can speak for them.

The contention that manning industries in the Philippines would not survive if the instant case is not decided in favor of the petitioner is not supported by evidence. The Wallem case was decided on February 20, 1981. There have been no severe repercussions, no drying up of employment opportunities for seamen, and none of the dire consequences repeatedly emphasized by the petitioner. Why should Vir-Jen be an exception?

The wages of seamen engaged in international shipping are shouldered by the foreign principal. The local manning office is an agent whose primary function is recruitment and who usually gets a lump sum from the shipowner to defray the salaries of the crew. The hiring of seamen and the determination of their compensation is subject to the interplay of various market factors and one key factor is how much in terms of profits the local manning office and the foreign shipowner may realize after the costs of the voyage are met. And costs include salaries of officers and crew members. (at pp. 585-586)

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The Wallem Shipping case, was decided in 1981. Vir-Jen Shipping was decided in 1983. It is now 1989. There has'been no drying up of employment opportunities for Filipino seamen. Not only have their wages improved thus leading ITF to be placid and quiet all these years insofar as Filipinos are concerned but the hiring of Philippine seamen is at its highest level ever.

Reporting its activities for the year 1988, the Philippine Overseas Employment Administration (POEA) stated that there will be an increase in demand for seamen based overseas in 1989 boosting the number to as high as 105,000. This will represent a 9.5 percent increase from the 1988 aggregate. (Business World, News Briefs,January 11, 1989 at page 2) According to the POEA, seabased workers numbering 95,913 in 1988 exceeded by a wide margin of 28.15 percent the year end total in 1987. The report shows that sea-based workers posted bigger monthly increments compared to those of landbased workers. (The Business Star, Indicators, January 11, 1988 at page 2)

Augmenting this optimistic report of POEA Administrator Tomas Achacoso is the statement of Secretary of Labor Franklin M. Drilon that the Philippines has a big jump over other crewing nations because of the Filipinos' abilities compared with any European or westem crewing country. Drilon added that cruise shipping is also a growing market for Filipino seafarers because of their flexibility in handling odd jobs and their expertise in handling almost all types of ships, including luxury liners. (Manila Bulletin, More Filipino Seamen Expected Development, December 27, 1988 at page 29).lâwphî1.ñèt Parenthetically, the minimum monthly salary of able bodied seamen set by the ILO and adhered to by the Philippines is now $276.00 (id.) more than double the $130.00 sought to be enforced by the public respondents in these petitions.

The experience from 1981 to the present vindicates the finding in Vir-Jen Shipping that a decision in favor of the seamen would not necessarily mean severe repercussions, drying up of employment opportunities for seamen, and other dire consequences predicted by manning agencies and recruiters in the Philippines.

From the foregoing, we find that the NSB and NLRC committed grave abuse of discretion in finding the petitioners guilty of using intimidation and illegal means in breaching their contracts of employment and punishing them for these alleged

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offenses. Consequently, the criminal prosecutions for estafa in G.R. Nos. 57999 and 58143-53 should be dismissed.

WHEREFORE, the petitions are hereby GRANTED. The decisions of the National Seamen Board and National Labor Relations Commission in G. R. Nos. 64781-99 are REVERSED and SET ASIDE and a new one is entered holding the petitioners not guilty of the offenses for which they were charged. The petitioners' suspension from the National Seamen Board's Registry for three (3) years is LIFTED. The private respondent is ordered to pay the petitioners their earned but unpaid wages and overtime pay/allowance from November 1, 1978 to December 14, 1978 according to the rates in the Special Agreement that the parties entered into in Vancouver, Canada.

The criminal cases for estafa, subject matter of G. R. Nos. 57999 and 58143-53, are ordered DISMISSED.

SO ORDERED.

G.R. No. 82252 February 28, 1989

SEAGULL MARITIME CORP. AND PHILIMARE SHIPPING & EQUIPMENT SUPPLY, petitioners vs.NERRY D. BALATONGAN, NATIONAL LABOR RELATIONS COMMISSION AND PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION, respondents.

Tanjuatco, Oreta, Tanjuatco, Berenguer & San Vicente for petitioners.

The Solicitor General for public respondent.

Benjamin B. Vergara for private respondent

GANCAYCO, J.:

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On November 2, 1982, a "crew Agreement" was entered into by private respondent Nerry D. Balatongan and Philimare Shipping and Equipment Supply (hereinafter called Philimare) whereby the latter employed the former as able seaman on board its vessel "Santa Cruz" (renamed "Turtle Bay") with a monthly salary of US $ 300.00. Said agreement was processed and approved by the National Seaman's Board (NSB) on November 3, 1982. 1

While on board said vessel the said parties entered into a supplementary contract of employment on December 6, 1982 2 which provides among others:

1. The employer shall be obliged to insure the employee during his engagement against death or permanent invalidity caused by accident on board up to:

US $ 40,000 - for death caused by accident

US $ 50,000 - for permanent total disability caused by accident. 3

On October 6, 1983 Balatongan met an accident in the Suez Canal, Egypt as a result of which he was hospitalized at the Suez Canal Authority Hospital. Later, he was repatriated to the Philippines and was hospitalized at the Makati Medical Center from October 23, 1983 to March 27, 1984. On August 19, 1985 the medical certificate was issued describing his disability as "permanent in nature."

Balatongan demanded payment for his claim for total disability insurance in the amount of US $ 50,000.00 as provided for in the contract of employment but his claim was denied for having been submitted to the insurers beyond the designated period for doing so.

Thus, Balatongan filed on June 21, 1985 a complaint against Philimare and Seagull Maritime Corporation (hereinafter called Seagull) in the Philippine Overseas Employment Administration (POEA) for non-payment of his claim for permanent total disability with damages and attorney's fees.

After the parties submitted their respective position papers with the corresponding documentary evidence, the officer-in-charge of the Workers Assistance and Adjudication Office of the POEA rendered a decision on May 2, 1986, the dispositive part of which reads as follows:

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WHEREFORE, premises considered, respondents are hereby ordered to pay complainant the amount of US $ 50,000.00 representing permanent total disability insurance and attorney's fees at 10% of the award. Payment should be made in this Office within ten (10) days from receipt hereof at the prevailing rate of exchange. This Office cannot however rule on damages, having no jurisdiction on the matter.

SO ORDERED. 4

Seagull and Philimare appealed said decision to the National Labor Relations Commission (NLRC) on June 4, 1986. Pending resolution of their appeal because of the alleged transfer of the agency of Seagull to Southeast Asia Shipping Corporation, Seagull filed on April 28, 1987 a Motion For Substitution/Inclusion of Party Respondent which was opposed by Balatongan. 5 This was followed by an ex-parte motion for leave to file third party complaint on June 4, 1987 by Seagull. A decision was promulgated on December 7, 1987 denying both motions and dismissing the appeal for lack of merit. 6 A motion for reconsideration of said decision was denied for lack of merit in a resolution dated February 26, 1988. 7

Hence, Seagull and Philimare filed this petition for certiorari with a prayer for the issuance of a temporary restraining order based on the following grounds:

1. Respondent POEA erred in applying the Supplemental Contract;

2. Respondents POEA and NLRC acted with grave abuse of discretion in holding that the Supplemental Contract was signed on board MV Santa Cruz by and between private respondent and your petitioner; and

3. Respondent NLRC acted with grave abuse of discretion in not giving due course to your petitioners' Motion for Leave to File Third Party Complaint as well as their Motion for Inclusion/Substitution of respondents. 8

On March 21, 1988, the Court issued a temporary restraining order enjoining respondents from enforcing the questioned decision and resolution of public respondents.

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Petitioners argue that prior to private respondent's departure he executed a crew agreement on November 2, 1982 which was duly approved by the POEA; that the supplementary contract of employment that was entered into on board the vessel "Turtle Bay" which provides for a US $ 50,000.00 insurance benefit in case of permanent disability was neither approved nor verified by respondent POEA; and that the same violates Article 34(i) of the Labor Code, as amended, which provides as follows:

Art. 34. Prohibited Practices. - It shall be unlawful for any individual, entity, licensee, or holder of authority:

xxx xxx xxx

xxx xxx xxx

(i) to substitute or alter employment contracts approved and verified by the Department of Labor from the time of actual signing thereof by the parties up to and including the period of expiration of the same without the approval of the Department of Labor.

Petitioners also call attention to Article VIII, paragraph 2 of the Supplementary Contract which provides as follows:

2. Notwithstanding his claim against the insurers the employee hereby expressly waives all claims of his own or his heirs for compensation of damages due to death or permanent invalidity which he suffered during his engagement against the employers ... unless his death or permanent invalidity has been caused by willful act of any of the above-named persons. 9

Petitioners stress that while public respondents upheld the applicability of said supplementary contract insofar as it increased the benefits to private respondent, public respondents considered the provision on the waiver against all claims by private respondent to be contrary to public policy.

In its questioned decision dated December 7, 1987, the respondent NLRC made the following disquisition:

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The focal issue for determination is the validity and enforceability of the second contract of employment entered into by and between complainant and respondents on board the vessel where the former had served as a member of its complement despite the absence of NSB verification or approval. With respect to the findings of facts in the appealed decision, We consider the same as duly supported by substantial evidence and the admissions of the parties in their pleadings.

Much stress and emphasis are made by the respondents in their appeal that this claim has no legal basis or footing inasmuch as the second contract of employment containing a total disability insurance benefit of US $ 50,000.00, much more than that embodied in the first contract of employment which was approved by the defunct NSB, was not verified or approved by the latter. Accordingly, the respondents posit the argument that subject claim may not prosper pursuant to the provisions of Art. 34(i) of the Labor Code, as amended, which provides that it shall be unlawful for any individual, entity, licensee, or holder of authority '(T)o substitute or alter employment contracts approved and verified by the Department of Labor from the time of actual signing thereof by the parties up to and including the period of expiration of the same without the approval of the Department of Labor.

Did the POEA commit a reversible error when it considered the second contract of employment as valid sans any verification or approval thereof by the NSB? Our answer to this query is in the negative. Apparently, the intention of the law when Art. 34 of the Labor Code was enacted is to provide for the prohibited and unlawful practices relative to recruitment and placement. As shown in the 'Explanatory Note' of Parliamentary Bill No. 4531, pertaining to Art. 34 (supra), thus:

Many of the provisions are already existing and were simply restated. Some however were restated with modifications and new ones were introduced to reflect what in the past have been noted to be pernicious practices which tend to place workers at a disadvantage.'

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it is indubitably clear that the purpose of having overseas contracts of employment approved by the NSB(POEA) is whether or not such contracts conform to the minimum terms and conditions prescribed by the NSB (POEA). In other words, the law did not at all prohibit any alteration which provided for increases in wages or other benefits voluntarily granted by the employer. Precisely, under Section 2, Rule 1, Book V of the Rules and Regulations of the POEA, '(t)he standard format of employment contracts shall set the minimum standards of the terms and conditions of employment. All employers and principals shall adopt the model contract in connection with the hiring of workers without prejudice to their adopting other terms and conditions of employment over and above the minimum standards of the Administration.' Where, as here, it is admitted that the second contract although not verified or approved by the NSB (POEA) granted more benefits by way of total disability insurance to the complainant, the respondents may not be allowed to disvow their own voluntary acts by insisting that such beneficial contract in favor of the seaman is null and void. (Emphasis supplied.) 10

We agree.

The supplementary contract of employment was entered into between petitioner and private respondent to modify the original contract of employment The reason why the law requires that the POEA should approve and verify a contract under Article 34(i) of the Labor Code is to insure that the employee shall not thereby be placed in a disadvantageous position and that the same are within the minimum standards of the terms and conditions of such employment contract set by the POEA. This is why a standard format for employment contracts has been adopted by the Department of Labor. However, there is no prohibition against stipulating in a contract more benefits to the employee than those required by law. Thus, in this case wherein a "supplementary contract" was entered into affording greater benefits to the employee than the previous one, and although the same was not submitted for the approval of the POEA, the public respondents properly considered said contract to be valid and enforceable. Indeed, said pronouncements of public respondents have the effect of an approval of said contract. Moreover, as said contract was voluntarily entered into by the parties the same is binding between them. 11 Not being contrary to law, morals, good customs, public policy or public order, its validity must be sustained. 12 By the

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same token, the court sustains the ruling of public respondents that the provision in the supplementary contract whereby private respondent waives any claim against petitioners for damages arising from death or permanent disability is against public policy, oppressive and inimical to the rights of private respondent. The said provision defeats and is inconsistent with the duty of petitioners to insure private respondent against said contingencies as clearly stipulated in the said contract.

Petitioners however argue that they could not have entered into said supplementary contract of employment as Philimare was a mere manning agent in the Philippines of the shipping company managed by Navales Shipping Management and Marine Consultant (Pte) Ltd., its principal. Petitioners assert that the said supplementary contract was entered into by private respondent with their principal, Navales Shipping Management and Marine Consultant (Pte) Ltd. on board the vessel Turtle Bay so petitioners cannot be held responsible thereunder.

This Court is not a trier of facts and the findings of the public respondents are conclusive in this proceeding. Public respondents found that petitioner Philimare and private respondent entered into said supplementary contract of employment on December 6, 1982. Assuming for the sake of argument that it was petitioners' principal which entered into said contract with private respondent, nevertheless petitioner, as its manning agent in the Philippines, is jointly responsible with its principal thereunder. 13

There is no question that under the said supplementary contract of employment, it is the duty of the employer, petitioners herein, to insure the employee, during his engagement, against death and permanent invalidity caused by accident on board up to $ 50,000.00. Consequently, it is also its concomitant obligation to see to it that the claim against the insurance company is duly filed by private respondent or in his behalf, and within the time provided for by the terms of the insurance contract.

In this case, the private respondent met the accident on October 6, 1983. Since then, he was hospitalized at the Suez Canal Authority Hospital and thereafter be was repatriated to the Philippines wherein he was also hospitalized from October 22, 1983 to March 27, 1984. It was only on August 19, 1985 that he was issued a medical certificate describing his disability to be permanent in nature. It was not

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possible for private respondent to file a claim for permanent disability with the insurance company within the one-year period from the time of the injury, as his disability was ascertained to be permanent only thereafter. Petitioners did not exert any effort to assist private respondent to recover payment of his claim from the insurance company. They did not even care to dispute the finding of the insurer that the claim was not flied on time. 14 Petitioners must, therefore, be held responsible for its omission, if not negligence, by requiring them to pay the claim of private respondent.

The Court finds that the respondent NLRC did not commit a grave abuse of discretion in denying petitioners, motion for leave to file third-party complaint and substitution inclusion of party respondent. Such motion is largely addressed to the discretion of the said Commission. Inasmuch as the alleged transfer of interest took place only after the POEA had rendered its decision, the denial of the motion so as to avoid further delay in the settlement of the claim of private respondent was well-taken. At any rate, petitioners may pursue their claim against their alleged successor-in-interest in a separate suit.

WHEREFORE, the petition is hereby DISMISSED for lack of merit and the temporary restraining order issued by this Court on March 21, 1988 is hereby LIFTED. No costs. This decision is immediately executory.

SO ORDERED.

OCEAN EAST AGENCY CORP., EUROPEAN NAVIGATION, INC. & STANDARD INSURANCE CO., INC., petitioners,vs. THE NATIONAL LABOR RELATIONS COMMISSION (NLRC-FIRST DIVISION), and CAPT. PEPITO M. GUCOR, respondents.

D E C I S I O N

ROMERO, J.:

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On September 28, 1991, respondent Capt. Pepito M. Gucor was hired by petitioner Ocean East Agency Corp. (Ocean East), the manning agent of herein co-petitioner European Navigation, Inc. (ENI), as master of M/V “Alpine” for a period of one (1) year with a monthly salary of US$840.00. Sometime in February 1992, while the M/V “Alpine” was anchored at the Port of Havana, Cuba, respondent was informed of his repatriation for his subsequent transfer to another vessel.

Perceiving the transfer as an insult to his professional competence, Capt. Gucor signified that, unless his full benefits are accorded him, he shall refuse to leave the vessel knowing the cause for his repatriation to be unreasonable. In an effort to assuage his fears, petitioners Ocean East and ENI advised him that his services were not terminated at all, the repatriation being solely for documentation purposes. On February 29, 1992, after his demands were fully settled, respondent agreed to be repatriated. Petitioner alleged that in view of respondent’s earlier refusal to be repatriated and to man the newly-acquired MV “Havre de Grace,” it was compelled to assign another master to the said vessel. Thereafter, the company decided to assign him to MV “Eleptheria-K,” whose master was going on leave on February 27, which, however, respondent likewise missed for failure to disembark when ordered to do so.

On the ground of serious misconduct or willful disobedience, petitioner terminated the services of respondent. In a complaint for illegal dismissal, on December 1, 1993, Philippine Overseas Employment Administration (POEA), through Administrator Felicisimo O. Joson, dismissed the said complaint for lack of merit finding respondent’s apprehension as premature and that petitioners were merely acting in the exercise of their management prerogative.

On appeal, this decision was reversed by the National Labor Relations Commission (NLRC) in its decision dated November 29, 1994, the dispositive portion of which reads:

“WHEREFORE, the appealed decision is hereby set aside. The respondents are hereby directed to jointly and severally pay complainant his salary, overtime pay, vacation leave and other benefits corresponding to the unexpired portion of his contract.

SO ORDERED.”[1]

Its motion for reconsideration having been denied, petitioners filed the instant petition.

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The principal issue in this case is whether or not the transfer clause of the Standard Employment Contract (SEC)[2] is violative of Article 34(i) of the Labor Code.

Said clause provides that:

“The CREWMEMBER agrees to be transferred at any port to any vessel owned or operated, manned or managed by the same employer provided it is accredited to the same manning agent and provided further that the rating of the crewmember and the rate of his wages and terms of service are in no way inferior and the total period of employment shall not exceed that originally agreed upon.”

Article 34(i) of the Labor Code, on the other hand, reads:

“(i) It shall be unlawful for ‘any individual, entity, licensee or holder of authority to substitute or alter employment contract approved and verified by the Department of Labor from the time of actual signing thereof by the parties up to and including the periods of expiration of the same without the approval of the Secretary of Labor.”

The NLRC, in setting aside the decision of the POEA, ruled that the intended transfer of Capt. Gucor to another vessel was in effect an alteration of his original contract which could not be done without the approval of the Secretary of Labor.

The NLRC’s ruling does not persuade.

It must be noted that the standard employment contract was adopted and approved conformably with Section 3, Rule II, Book V of the POEA Rules and Regulations which reads as follows:

“Section 3. - Standard Employment Contract. The Administration shall undertake development and/or periodic review of region, country and skills specific employment contracts for landbased workers and conduct regular review of standard employment contracts (SEC) for seafarers. These contracts shall provide for minimum employment standards herein enumerated under Section 2[3] of this Rule and shall recognize the prevailing labor and social legislations at the site of employment and international conventions. The SEC shall set the minimum terms and conditions of employment. All employers and principals shall adopt the SEC in connection with the hiring of workers without prejudice to their adoption of

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other terms and conditions of employment over and above the minimum standards of the Administration.”

On the other hand, elucidating the rationale behind Article 34 (i), this Court held in Seagull Maritime Corp., et al. v. Balatongan, et al.,[4] thus:

“The reason why the law requires that the POEA should approve and verify a contract under Article 34(i) of the Labor Code is to insure that the employee shall not thereby be placed in a disadvantageous position and that the same are within the minimum standards of the terms and conditions of such employment contract set by the POEA. This is why a standard format for employment contracts has been adopted by the Department of Labor.” (Underscoring supplied)

Apparently, there is no inconsistency between Article 34(i) of the Labor Code and the transfer clause under the SEC. On the contrary, the latter even complements the other by way of resolving the complex demands of seafarers whose services may entail occasional transfer from one vessel to another. Obviously, the transfer clause is not without limitations. Thus, a transfer is sanctioned only if it is to any vessel owned or operated, manned or managed by the same employer provided it is accredited to the same manning agent and that the rating of the crewmember, his wages and terms of service are in no way inferior and the total period of employment shall not exceed that originally agreed upon. In the instant case, respondent’s assignment to another vessel owned by European Navigation and accredited to the same manning agent, therefore, under no circumstance, violated Article 34(i) of the Labor Code. The transfer clause is deemed incorporated into the original contract; hence, the approval of the Secretary of Labor is no longer necessary.

Accordingly, we conclude that petitioners merely availed of what the employment contract allows. Indeed, it was nothing more than an application of the subject provision.

With regard to the finding of illegal dismissal, the pertinent provision of the Labor Code states:

“Art. 282. Termination by employer.

An employer may terminate an employment for any of the following causes:

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a. Serious misconduct or wilful disobedience by the employer of the lawful orders of his employer or representative in connection with his work;

x x x x x x x x x.”

In AHS Philippines, Inc. v. Court of Appeals,[5] we held that in order that an employer may terminate an employee on the ground of willful disobedience to the former’s order, regulations or instructions, it must be established that the said orders, regulation or instructions are (a) reasonable and lawful, (b) sufficiently known to the employee, and (c) in connection with the duties which the employee has been engaged to discharge.

In the instant case, petitioners have conscientiously apprised respondent that his repatriation was solely for documentation purposes preliminary to his transfer to another vessel which the management believes him to be more familiar with. Respondent’s defiance of a lawful order posed serious and considerable prejudice to the business of the employer. This Court finds that petitioner’s order was made within the sphere of its management prerogative. “The exercise of an employer to regulate all aspects of employment must be in keeping with good faith and not be used as a pretext for defeating the rights of employees under the laws and applicable contracts.”[6] A perusal of the records shows a clear, valid and legal cause for the termination of respondent’s employment. As correctly viewed by the Solicitor General:

“Capt. Gucor’s refusal to disembark and turn over command of his vessel to its new master when instructed to do so caused great pecuniary damage to his employer. The vessel was at anchorage for a long time disrupting its schedule. Not only that. He was not able to take command of the M/V Havre de Grace, forcing European Navigation to make the arrangements and assign a new master to it. European Navigation, exercising maximum tolerance in spite of Capt. Gucor’s insubordination, even went as far as assigning him to the M/V Eleptheria-K after he missed the M/V Havre de Grace. He likewise missed this assignment. All this because he believed that his transfer was an insult to his personal and professional capacity.

Capt. Gucor willfully disobeyed a lawful order of his employer. This act of insubordination is a valid ground for dismissal.”[7]

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WHEREFORE, the instant petition is hereby GRANTED. The decision of the National Labor Relations Commission dated November 29, 1994 is vacated and the resolution of the POEA Administrator is REINSTATED. No costs.

SO ORDERED.

G.R. No. 109808 March 1, 1995

ESALYN CHAVEZ, petitioner, vs.HON. EDNA BONTO-PEREZ, HON. ROGELIO T. RAYALA, HON. DOMINGO H. ZAPANTA, HON. JOSE N. SARMIENTO, CENTRUM PROMOTIONS PLACEMENT CORPORATION, JOSE A. AZUCENA, JR., and TIMES SURETY & INSURANCE COMPANY, INC. respondents.

PUNO, J.:

One of the anguished cries in our society today is that while our laws appear to protect the poor, their interpretation is sometimes anti-poor. In the case at bench, petitioner, a poor, uncounselled entertainment dancer signed a contract with her Japanese employer calling for a monthly salary of One Thousand Five Hundred U.S. Dollars (US$1,500) but later had to sign an immoral side agreement reducing her salary below the minimum standard set by the POEA. Petitioner invoked the law to collect her salary differentials, but incredibly found public respondent straining the seams of our law to disfavor her. There is no greater disappointment to the poor like petitioner than to discover the ugly reality behind the beautiful rhetoric of laws. We will not allow this travesty.

This is a petition for certiorari to review the Decision of the National Labor Relations Commission (NLRC), 1 dated December 29, 1992, which affirmed the

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Decision of public respondent Philippine Overseas Employment Agency (POEA) Administrator Jose N. Sarmiento, dated February 17, 1992, dismissing petitioner's complaint for unpaid salaries amounting to Six Thousand Dollars (US$6,000.00).

The facts are undisputed.

On December 1, 1988, petitioner, an entertainment dancer, entered into a standard employment contract for overseas Filipino artists and entertainers with Planning Japan Co., Ltd., 2 through its Philippine representative, private respondent Centrum Placement & Promotions Corporation. The contract had a duration of two (2) to six (6) months, and petitioner was to be paid a monthly compensation of One Thousand Five Hundred Dollars (US$1,5000.00). On December 5, 1888, the POEA approved the contract. Subsequently, petitioner executed the following side agreement with her Japanese employer through her local manager, Jaz Talents Promotion:

Date: Dec. 10, 1988

SUBJECT: Salary DeductionMANAGERIAL COMMISSION

DATE OF DEPARTURE: _________________

ATTENTION: MR. IWATA

I, ESALYN CHAVEZ, DANCER, do hereby with my own free will and voluntarily have the honor to authorize your good office to please deduct the amount of TWO HUNDRED FIFTY DOLLARS ($250) from my contracted monthly salary of SEVEN HUNDRED FIFTY DOLLARS ($750) as monthly commission for my Manager, Mr. Jose A. Azucena, Jr.

That, my monthly salary (net) is FIVE HUNDRED DOLLARS ($500).

(sgd. by petitioner) 3

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On December 16, 1988, petitioner left for Osaka, Japan, where she worked for six (6) months, until June 10, 1989. She came back to the Philippines on June 14, 1989.

Petitioner instituted the case at bench for underpayment of wages with the POEA on February 21, 1991. She prayed for the payment of Six Thousand U.S. Dollars (US$6,000.00), representing the unpaid portion of her basic salary for six months. Charged in the case were private respondent Centrum Promotions and Placement Corporation, the Philippine representative of Planning Japan, Co., Inc., its insurer, Times Surety and Insurance Co., Inc., and Jaz Talents Promotion.

The complaint was dismissed by public respondent POEA Administrator on February 17, 1992. He ratiocinated,inter alia:

. . . Apparently and from all indications, complainant (referring to petitioner herein) was satisfied and did not have any complaint (about) anything regarding her employment in Japan until after almost two (2) years (when) she filed the instant complaint on February 21, 1991. The records show that after signing the Standard Employment Contract on December 1, 1988, she entered into a side agreement with the Japanese employer thru her local manager, Jaz Talents Promotion consenting to a monthly salary of US$750.00 which she affirmed during the conference of May 21, 1991. Respondent agency had no knowledge nor participation in the said agreement such that it could not be faulted for violation of the Standard Employment Contract regarding the stipulated salary. We cannot take cognizance of such violation when one of the principal party (sic) thereto opted to receive a salary different from what has been stipulated in their contract, especially so if the contracting party did not consent/participate in such arrangement. Complainant (petitioner) cannot now demand from respondent agency to pay her the salary based (on) the processed Employment Contract for she is now considered in bad faith and hence, estopped from claiming thereto thru her own act of consenting and agreeing to receive a salary not in accordance with her contract of employment. Moreover, her self-imposed silence for a long period of time worked to her own disadvantage as she allowed laches to prevail which barred respondent from doing something at the outset. Normally, if a

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person's right (is) violated, she/he would immediately react to protect her/his rights which is not true in the case at bar.

The term laches has been defined as one's negligence or failure to assert his right in due time or within reasonable time from the accrual of his cause of action, thus, leading another party to believe that there is nothing wrong with his own claim. This resulted in placing the negligent party in estoppel to assert or enforce his right. . . . Likewise, the Supreme Court in one case held that not only is inaction within reasonable time to enforce a right the basic premise that underlies a valid defense of laches but such inaction evinces implied consent or acquiescence to the violation of the right . . .

Under the prevailing circumstances of this case, it is outside the regulatory powers of the Administration to rule on the liability of respondent Jaz Talents Promotions, if any, (it) not being a licensed private agency but a promotion which trains entertainers for abroad.

xxx xxx xxx

(Citations omitted.)

On appeal, the NLRC upheld the Decision, thus:

We fail to see any conspiracy that the complainant (petitioner herein) imputes to the respondents. She has, to put it bluntly, not established and/or laid the basis for Us to arrive at a conclusion that the respondents have been and should be held liable for her claims.

The way We see it, the records do not at all indicate any connection between respondents Centrum Promotion & Placement Corporation and Jaz Talents Promotion.

There is, therefore, no merit in the appeal. Hence, We affirmed. 4

Dissatisfied with the NLRC's Decision, petitioner instituted the present petition, alleging that public respondents committed grave abuse of discretion in finding: that she is guilty of laches; that she entered into a side contract on December 10,

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1988 for the reduction of her basic salary to Seven Hundred Fifty U.S. Dollars (US$750.00) which superseded, nullified and invalidated the standard employment contract she entered into on December 1, 1988; and that Planning Japan Co., Ltd. and private respondents are not solidarily liable to her for Six Thousand US Dollars (US$6,000.00) in unpaid wages. 5

The petition is meritorious.

Firstly, we hold that the managerial commission agreement executed by petitioner to authorize her Japanese Employer to deduct Two Hundred Fifty U.S. Dollars (US$250.00) from her monthly basic salary is void because it is against our existing laws, morals and public policy. It cannot supersede the standard employment contract of December 1, 1988 approved by the POEA with the following stipulation appended thereto:

It is understood that the terms and conditions stated in this Employment Contract are in conformance with the Standard Employment Contract for Entertainers prescribed by the POEA under Memorandum Circular No. 2, Series of 1986. Any alterations or changes made in any part of this contract without prior approval by the POEA shall be null and void; 6 (Emphasis supplied.)

The stipulation is in line with the provisions of Rule II, Book V and Section 2(f), Rule I, Book VI of the 1991 Rules and Regulations Governing Overseas Employment, thus:

Book V, Rule II

Sec. 1. Employment Standards. The Administration shall determine, formulate and review employment standards in accordance with the market development and welfare objectives of the overseas employment program and the prevailing market conditions.

Sec. 2. Minimum Provisions for Contract. The following shall be considered the minimum requirements for contracts of employment:

a. Guaranteed wages for regular working hours and overtime pay for services rendered beyond regular

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working hours in accordance with the standards established by the Administration;

xxx xxx xxx

Sec. 3. Standard Employment Contract. The administration shall undertake development and/or periodic review of region, country and skills specific employment contracts for landbased workers and conduct regular review of standard employment contracts (SEC) for seafarers. These contracts shall provide for minimum employment standards herein enumerated under Section 2, of this Rule and shall recognize the prevailing labor and social legislations at the site of employment and international conventions. The SEC shall set the minimum terms and conditions of employment. All employers and principals shall adopt the SEC in connection with the hiring of workers without prejudice to their adoption of other terms and conditions of employment over and above the minimum standards of the Administration. (Emphasis supplied.)

and

BOOK VI, RULE I

Sec. 2. Grounds for suspension/cancellation of license.

xxx xxx xxx

f. Substituting or altering employment contracts and other documents approved and verified by the Administration from the time of actual signing thereof by the parties up to and including the period of expiration of the same without the Administration's approval.

xxx xxx xxx

(Emphasis supplied.)

Clearly, the basic salary of One Thousand Five Hundred U.S. Dollars (US$1,500.00) guaranteed to petitioner under the parties' standard employment contract is in

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accordance with the minimum employment standards with respect to wages set by the POEA, Thus, the side agreement which reduced petitioner's basic wage to Seven Hundred Fifty U.S. Dollars (US$750.00) is null and void for violating the POEA's minimum employment standards, and for not having been approved by the POEA. Indeed, this side agreement is a scheme all too frequently resorted to by unscrupulous employers against our helpless overseas workers who are compelled to agree to satisfy their basic economic needs.

Secondly. The doctrine of laches or "stale demands"' cannot be applied to petitioner. Laches has been defined as the failure or neglect for an unreasonable and unexplained length time to do that which, by exercising due diligence, could or should have been done earlier, 7 thus giving rise to a presumption that the party entitled to assert it either has abandoned or declined to assert it. 8 It is not concerned with mere lapse of time; the fact of delay, standing alone, is insufficient to constitute laches. 9

The doctrine of laches is based upon grounds of public policy which requires, for the peace of society, the discouragement of stale claims, and is principally a question of the inequity or unfairness of permitting a right or claim to be enforced or asserted. 10 There is no absolute rule as to what constitutes laches; each case is to be determined according to its particular circumstances. The question of laches is addressed to the sound discretion of the court, and since it is an equitable doctrine, its application is controlled by equitable considerations. It cannot be worked to defeat justice or to perpetrate fraud and injustice. 11

In the case at bench, petitioner filed her claim well within the three-year prescriptive period for the filing of money claims set forth in Article 291 of the Labor Code. 12 For this reason, we hold the doctrine of laches inapplicable to petitioner. As we ruled in Imperial Victory Shipping Agency v. NLRC, 200 SCRA 178 (1991):

. . . Laches is a doctrine in equity while prescription is based on law. Our courts are basically courts of law not courts of equity. Thus, laches cannot be invoked to resist the enforcement of an existing legal right. We have ruled in Arsenal v. Intermediate Appellate Court . . . that it is a long standing principle that equity follows the law. Courts exercising equity jurisdiction are bound by rules of law and have no arbitrary discretion to disregard them. In Zabat, Jr. v. Court

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of Appeals . . ., this Court was more emphatic upholding the rules of procedure. We said therein:

As for equity, which has been aptly described as a "justice outside legality," this applied only in the absence of, and never against, statutory law or, as in this case, judicial rules of procedure. Aequetas nunguam contravenit legis. The pertinent positive rules being present here, they should pre-empt and prevail over all abstract arguments based only on equity.

Thus, where the claim was filed within the three-year statutory period, recovery therefore cannot be barred by laches. Courts should never apply the doctrine of laches earlier than the expiration of time limited for the commencement of actions at law.

xxx xxx xxx

(Emphasis supplied. Citations omitted.)

Thirdly, private respondents Centrum and Times as well as Planning Japan Co., Ltd. — the agency's foreign principal — are solidarily liable to petitioner for her unpaid wages. This is in accordance with stipulation 13.7 of the parties' standard employment contract which provides:

13.7. The Employer (in this case, Planning Japan Co., Ltd. ) and its locally (sic) agent/promoter/representative (private respondent Centrum Promotions & Placement Corporation) shall be jointly and severally responsible for the proper implementation of the terms and conditions in this Contract. 13 (Emphasis supplied.)

This solidary liability also arises from the provisions of Section 10(a)(2), Rule V, Book I of the Omnibus Rules Implementing the Labor Code, as amended, thus:

Sec. 10. Requirement before recruitment. — Before recruiting any worker, the private employment agency shall submit to the Bureau the following documents:

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a) A formal appointment or agency contract executed by a foreign-based employer in favor of the license holder to recruit and hire personnel for the former . . . . Such formal appointment or recruitment agreement shall contain the following provisions, among others:

xxx xxx xxx

2. Power of the agency to sue and be sued jointly and solidarily with the principal or foreign based employer for any of the violations of the recruitment agreement and the contracts of employment.

xxx xxx xxx

(Emphasis supplied.)

Our overseas workers constitute an exploited class. Most of them come from the poorest sector of our society. They are thoroughly disadvantaged. Their profile shows they live in suffocating slums, trapped in an environment of crime. Hardly literate and in ill health, their only hope lies in jobs they can hardly find in our country. Their unfortunate circumstance makes them easy prey to avaricious employers. They will climb mountains, cross the seas, endure slave treatment in foreign lands just to survive. Out of despondence, they will work under sub-human conditions and accept salaries below the minimum. The least we can do is to protect them with our laws in our land. Regretfully, respondent public officials who should sympathize with the working class appear to have a different orientation.

IN VIEW WHEREOF, the petition is GRANTED. The Decisions of respondent POEA Administrator and NLRC Commissioners in POEA Case No. Adj. 91-02-199 (ER), respectively dated February 17 and December 29, 1992, and the Resolution of the NLRC, dated March 23, 1993, are REVERSED and SET ASIDE. Private respondents are held jointly and severally liable to petitioner for the payment of SIX THOUSAND US DOLLARS (US$6,000.00) in unpaid wages. Costs against private respondents.

SO ORDERED.

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