Labor Midterm 10

Manila Electric v. QuisumbingG.R. No. 127598 February 22, 2000

Facts: Members of the Private respondent union were dissatisfied with the terms of a CBA with petitioner. The parties in this case were ordered by the Sec. of Labor to execute a collective bargaining agreement (CBA) wherein.The CBA allowed for the increase in the wages of the employees concerned. The petitioner argues that if such increase were allowed, it would pass off such to the consumers.

Issue: W/N matters of salary are part of management prerogative

RULING: Yes. There is no need to consult the Secretary of Labor in cases involving contracting out for 6 months or more as it is part of management prerogative. However, a line must be drawn with respect to management prerogatives on business operations per se and those which affect the rights of the workers. Employers must see to it that that employees are properly informed of its decisions to attain harmonious labor relations and enlighten the worker as to their rights.

The contracting out business or services is an exercise of business judgment if it is for the promotion of efficiency and attainment of economy. Management must be motivated by good faith and contracting out should not be done to circumvent the law. Provided there was no malice or that it was not done arbitrarily, the courts will not interfere with the exercise of this judgment.___________________________________________

Republic of the PhilippinesSUPREME COURT

Manila

SPECIAL FIRST DIVISION

G.R. No. 127598 February 22, 2000

MANILA ELECTRIC COMPANY, petitioner, vs.Hon. SECRETARY OF LABOR LEONARDO QUISUMBING and MERALCO EMPLOYEES and WORKERS ASSOCIATION (MEWA), respondent.

R E S O L U T I O N

YNARES-SANTIAGO, J.:

In the Decision promulgated on January 27, 1999, the Court disposed of the case as follows:

WHEREFORE, the petition is granted and the orders of public respondent Secretary of Labor dated August 19, 1996 and December 28, 1996 are set aside to the extent set forth above. The parties are directed to execute a Collective Bargaining Agreement incorporating the terms and conditions contained in the unaffected portions of the Secretary of Labor's orders of August 19, 1996 and December 28, 1996, and

the modifications set forth above. The retirement fund issue is remanded to the Secretary of Labor for reception of evidence and determination of the legal personality of the MERALCO retirement fund.1

The modifications of the public respondent's resolutions include the following:

January 27, 1999 decision

Secretary's resolution

Wages - P1,900.00 for 1995-96 P2,200.00

X'mas bonus - modified to one month 2 months

Retirees - remanded to the Secretary granted

Loan to coops - denied granted

GHSIP, HMP and Housing loans -

granted up to P60,000.00 granted

Signing bonus - denied granted

Union leave - 40 days (typo error) 30 days

High voltage/pole

- not apply to those who are not exposed to the risk

members of a team

Collectors - no need for cash bond, no need to reduce quota and MAPL

CBU -exclude confidential employees

include

Union security - maintenance of

membership closed shop

Contracting out - no need to

consult union consult first

All benefits - existing terms and conditions all terms

Retroactivity - Dec. 28, 1996-Dec. 27, 199(9)

from Dec. 1, 1995

Dissatisfied with the Decision, some alleged members of private respondent union (Union for brevity) filed a motion for intervention and a motion for reconsideration of the said Decision. A separate intervention was likewise made by the supervisor's union (FLAMES2) of petitioner corporation alleging that it has bona fide legal interest in the outcome of the case.3 The Court required the "proper parties" to file a comment to the three motions for reconsideration but the Solicitor-General asked that he be excused from filing the comment because the "petition filed in the instant case was granted" by the Court.4

Consequently, petitioner filed its own consolidated comment. An "Appeal Seeking Immediate

1 LABOR STANDARDS CASES MIDTERM

Reconsideration" was also filed by the alleged newly elected president of the Union.5 Other subsequent pleadings were filed by the parties and intervenors.

The issues raised in the motions for reconsideration had already been passed upon by the Court in the January 27, 1999 decision. No new arguments were presented for consideration of the Court. Nonetheless, certain matters will be considered herein, particularly those involving the amount of wages and the retroactivity of the Collective Bargaining Agreement (CBA) arbitral awards.

Petitioner warns that if the wage increase of P2,200.00 per month as ordered by the Secretary is allowed, it would simply pass the cost covering such increase to the consumers through an increase in the rate of electricity. This is a non sequitur. The Court cannot be threatened with such a misleading argument. An increase in the prices of electric current needs the approval of the appropriate regulatory government agency and does not automatically result from a mere increase in the wages of petitioner's employees. Besides, this argument presupposes that petitioner is capable of meeting a wage increase. The All Asia Capital report upon which the Union relies to support its position regarding the wage issue cannot be an accurate basis and conclusive determinant of the rate of wage increase. Section 45 of Rule 130 Rules of Evidence provides:

Commercial lists and the like. — Evidence of statements of matters of interest to persons engaged in an occupation contained in a list, register, periodical, or other published compilation is admissible as tending to prove the truth of any relevant matter so stated if that compilation is published for use by persons engaged in that occupation and is generally used and relied upon by them therein.

Under the afore-quoted rule, statement of matters contained in a periodical, may be admitted only "if that compilation is published for use by persons engaged in that occupation and is generally used and relied upon by them therein." As correctly held in our Decision dated January 27, 1999, the cited report is a mere newspaper account and not even a commercial list. At most, it is but an analysis or opinion which carries no persuasive weight for purposes of this case as no sufficient figures to support it were presented. Neither did anybody testify to its accuracy. It cannot be said that businessmen generally rely on news items such as this in their occupation. Besides, no evidence was presented that the publication was regularly prepared by a person in touch with the market and that it is generally regarded as trustworthy and reliable. Absent extrinsic proof of their accuracy, these reports are not admissible.6 In the same manner, newspapers containing stock quotations are not admissible in evidence when the source of the reports is available.7 With more reason, mere analyses or projections of such reports cannot be admitted. In particular, the source of the report in this case can be easily made available considering that the same is necessary for compliance with certain governmental requirements.

Nonetheless, by petitioner's own allegations, its actual total net income for 1996 was P5.1 billion.8 An estimate by the All Asia financial analyst stated that petitioner's net operating income for the same year was about P5.7 billion, a figure which the Union relies on to support its claim. Assuming without admitting the truth thereof, the

figure is higher than the P4.171 billion allegedly suggested by petitioner as its projected net operating income. The P5.7 billion which was the Secretary's basis for granting the P2,200.00 is higher than the actual net income of P5.1 billion admitted by petitioner. It would be proper then to increase this Court's award of P1,900.00 to P2,000.00 for the two years of the CBA award. For 1992, the agreed CBA wage increase for rank-and-file was P1,400.00 and was reduced to P1,350.00; for 1993; further reduced to P1,150.00 for 1994. For supervisory employees, the agreed wage increase for the years 1992-1994 are P1,742.50, P1,682.50 and P1,442.50, respectively. Based on the foregoing figures, the P2,000.00 increase for the two-year period awarded to the rank-and-file is much higher than the highest increase granted to supervisory employees.9 As mentioned in the January 27, 1999 Decision, the Court does "not seek to enumerate in this decision the factors that should affect wage determination" because collective bargaining disputes particularly those affecting the national interest and public service "requires due consideration and proper balancing of the interests of the parties to the dispute and of those who might be affected by the dispute."10 The Court takes judicial notice that the new amounts granted herein are significantly higher than the weighted average salary currently enjoyed by other rank-and-file employees within the community. It should be noted that the relations between labor and capital is impressed with public interest which must yield to the common good.11

Neither party should act oppressively against the other or impair the interest or convenience of the public.12

Besides, matters of salary increases are part of management prerogative.13

On the retroactivity of the CBA arbitral award, it is well to recall that this petition had its origin in the renegotiation of the parties' 1992-1997 CBA insofar as the last two-year period thereof is concerned. When the Secretary of Labor assumed jurisdiction and granted the arbitral awards, there was no question that these arbitral awards were to be given retroactive effect. However, the parties dispute the reckoning period when retroaction shall commence. Petitioner claims that the award should retroact only from such time that the Secretary of Labor rendered the award, invoking the 1995 decision in Pier 8 case14 where the Court, citing Union of Filipino Employees v. NLRC,15

said:

The assailed resolution which incorporated the CBA to be signed by the parties was promulgated on June 5, 1989, the expiry date of the past CBA. Based on the provision of Section 253-A, its retroactivity should be agreed upon by the parties. But since no agreement to that effect was made, public respondent did not abuse its discretion in giving the said CBA a prospective effect. The action of the public respondent is within the ambit of its authority vested by existing law.

On the other hand, the Union argues that the award should retroact to such time granted by the Secretary, citing the 1993 decision of St. Luke's.16

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 petitioner. Under the circumstances of the case, Article 253-A cannot be properly applied to herein case. As correctly stated by public respondent in his assailed Order of April 12,


1991 dismissing petitioner's Motion for Reconsideration —

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

Therefore, in the absence of a specific provision of law prohibiting retroactivity of the effectivity of 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 and discretionary powers to determine the effectivity thereof.

In the 1997 case of Mindanao Terminal,17 the Court applied the St. Luke's doctrine and ruled that:

In St. Luke's Medical Center v. Torres, a deadlock also developed during the CBA negotiations between management and the union. The Secretary of Labor assumed jurisdiction and ordered the retroaction of the CBA to the date of expiration of the previous CBA. As in this case, it was alleged that the Secretary of Labor gravely abused its discretion in making his award retroactive. In dismissing this contention this Court held:

Therefore, in the absence of a specific provision of law prohibiting retroactive of the effectivity of 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 and discretionary powers to determine the effectivity thereof.

The Court in the January 27, 1999 Decision, stated that the CBA shall be "effective for a period of 2 years counted from December 28, 1996 up to December 27, 1999." Parenthetically, this actually covers a three-year period. Labor laws are silent as to when an arbitral award in a labor dispute where the Secretary had assumed jurisdiction by virtue of Article 263 (g) of the Labor Code shall retroact. In general, a CBA negotiated within six months after the expiration of the existing CBA retroacts to the day immediately following such date and if agreed thereafter, the effectivity depends on the agreement of the parties.18 On the other hand, the law is silent as to the retroactivity of a CBA arbitral award or that granted not by virtue of the mutual agreement of the parties but by intervention of the government. Despite the silence of the law, the Court rules herein that CBA arbitral awards granted after six months from the expiration of the last CBA shall retroact to such time agreed upon by both employer and the employees or their union. Absent such an agreement as to retroactivity, the award shall retroact to the first day after the six-month period following the expiration of the last day of the CBA should there be one. In the absence of a CBA, the Secretary's determination of the date of retroactivity as part of his discretionary powers over arbitral awards shall control.

It is true that an arbitral award cannot per se be categorized as an agreement voluntarily entered into by the parties because it requires the interference and imposing power of the State thru the Secretary of Labor when he assumes jurisdiction. However, the arbitral award can be considered as an approximation of a collective bargaining agreement which would otherwise have been entered into by the parties.19 The terms or periods set forth in Article 253-A pertains explicitly to a CBA. But there is nothing that would prevent its application by analogy to an arbitral award by the Secretary considering the absence of an applicable law. Under Article 253-A: "(I)f any such agreement is entered into beyond six months, the parties shall agree on the duration of retroactivity thereof." In other words, the law contemplates retroactivity whether the agreement be entered into before or after the said six-month period. The agreement of the parties need not be categorically stated for their acts may be considered in determining the duration of retroactivity. In this connection, the Court considers the letter of petitioner's Chairman of the Board and its President addressed to their stockholders, which states that the CBA "for the rank-and-file employees covering the period December 1, 1995 to November 30, 1997 is still with the Supreme Court,"20 as indicative of petitioner's recognition that the CBA award covers the said period. Earlier, petitioner's negotiating panel transmitted to the Union a copy of its proposed CBA covering the same period inclusive.21 In addition, petitioner does not dispute the allegation that in the past CBA arbitral awards, the Secretary granted retroactivity commencing from the period immediately following the last day of the expired CBA. Thus, by petitioner's own actions, the Court sees no reason to retroact the subject CBA awards to a different date. The period is herein set at two (2) years from December 1, 1995 to November 30, 1997.

On the allegation concerning the grant of loan to a cooperative, there is no merit in the union's claim that it is no different from housing loans granted by the employer. The award of loans for housing is justified because it pertains to a basic necessity of life. It is part of a privilege recognized by the employer and allowed by law. In contrast, providing seed money for the establishment of the employee's cooperative is a matter in which the employer has no business interest or legal obligation. Courts should not be utilized as a tool to compel any person to grant loans to another nor to force parties to undertake an obligation without justification. On the contrary, it is the government that has the obligation to render financial assistance to cooperatives and the Cooperative Code does not make it an obligation of the employer or any private individual.22

Anent the 40-day union leave, the Court finds that the same is a typographical error. In order to avoid any confusion, it is herein declared that the union leave is only thirty (30) days as granted by the Secretary of Labor and affirmed in the Decision of this Court.

The added requirement of consultation imposed by the Secretary in cases of contracting out for six (6) months or more has been rejected by the Court. Suffice it to say that the employer is allowed to contract out services for six months or more. However, a line must be drawn between management prerogatives regarding business operations per se and those which affect the rights of employees, and in treating the latter, the employer should see to it that its employees are at least properly informed of its decision or modes of action in order to attain a harmonious labor-management relationship and


enlighten the workers concerning their rights.23 Hiring of workers is within the employer's inherent freedom to regulate and is a valid exercise of its management prerogative subject only to special laws and agreements on the matter and the fair standards of justice.24 The management cannot be denied the faculty of promoting efficiency and attaining economy by a study of what units are essential for its operation. It has the ultimate determination of whether services should be performed by its personnel or contracted to outside agencies. While there should be mutual consultation, eventually deference is to be paid to what management decides.25

Contracting out of services is an exercise of business judgment or management prerogative.26 Absent proof that management acted in a malicious or arbitrary manner, the Court will not interfere with the exercise of judgment by an employer.27 As mentioned in the January 27, 1999 Decision, the law already sufficiently regulates this matter.28 Jurisprudence also provides adequate limitations, such that the employer must be motivated by good faith and the contracting out should not be resorted to circumvent the law or must not have been the result of malicious or arbitrary actions.29 These are matters that may be categorically determined only when an actual suit on the matter arises.

WHEREFORE, the motion for reconsideration is PARTIALLY GRANTED and the assailed Decision is MODIFIED as follows: (1) the arbitral award shall retroact from December 1, 1995 to November 30, 1997; and (2) the award of wage is increased from the original amount of One Thousand Nine Hundred Pesos (P1,900.00) to Two Thousand Pesos (P2,000.00) for the years 1995 and 1996. This Resolution is subject to the monetary advances granted by petitioner to its rank-and-file employees during the pendency of this case assuming such advances had actually been distributed to them. The assailed Decision is AFFIRMED in all other respects.1âwphi1.nêt

SO ORDERED.


Manila

SECOND DIVISION

G.R. No. 156367 May 16, 2005


AUTO BUS TRANSPORT SYSTEMS, INC., petitioner, vs.ANTONIO BAUTISTA, respondent.

D E C I S I O N

CHICO-NAZARIO, J.:

Before Us is a Petition for Review on Certiorari assailing the Decision1 and Resolution2 of the Court of Appeals affirming the Decision3 of the National Labor Relations Commission (NLRC). The NLRC ruling modified the Decision of the Labor Arbiter (finding respondent entitled to the award of 13th month pay and service incentive leave pay) by deleting the award of 13th month pay to respondent.

THE FACTS

Since 24 May 1995, respondent Antonio Bautista has been employed by petitioner Auto Bus Transport Systems, Inc. (Autobus), as driver-conductor with travel routes Manila-Tuguegarao via Baguio, Baguio- Tuguegarao via Manila and Manila-Tabuk via Baguio. Respondent was paid on commission basis, seven percent (7%) of the total gross income per travel, on a twice a month basis.

On 03 January 2000, while respondent was driving Autobus No. 114 along Sta. Fe, Nueva Vizcaya, the bus he was driving accidentally bumped the rear portion of Autobus No. 124, as the latter vehicle suddenly stopped at a sharp curve without giving any warning.

Respondent averred that the accident happened because he was compelled by the management to go back to Roxas, Isabela, although he had not slept for almost twenty-four (24) hours, as he had just arrived in Manila from Roxas, Isabela. Respondent further alleged that he was not allowed to work until he fully paid the amount of P75,551.50, representing thirty percent (30%) of the cost of repair of the damaged buses and that despite respondent’s pleas for reconsideration, the same was ignored by management. After a month, management sent him a letter of termination.

Thus, on 02 February 2000, respondent instituted a Complaint for Illegal Dismissal with Money Claims for nonpayment of 13th month pay and service incentive leave pay against Autobus.

Petitioner, on the other hand, maintained that respondent’s employment was replete with offenses involving reckless imprudence, gross negligence, and dishonesty. To support its claim, petitioner presented copies of letters, memos, irregularity reports, and warrants of arrest pertaining to several incidents wherein respondent was involved.

Furthermore, petitioner avers that in the exercise of its management prerogative, respondent’s employment was terminated only after the latter was provided with an opportunity to explain his side regarding the accident on 03 January 2000.

On 29 September 2000, based on the pleadings and supporting evidence presented by the parties, Labor

Arbiter Monroe C. Tabingan promulgated a Decision,4 the dispositive portion of which reads:

WHEREFORE, all premises considered, it is hereby found that the complaint for Illegal Dismissal has no leg to stand on. It is hereby ordered DISMISSED, as it is hereby DISMISSED.

However, still based on the above-discussed premises, the respondent must pay to the complainant the following:

a. his 13th month pay from the date of his hiring to the date of his dismissal, presently computed at P78,117.87;

b. his service incentive leave pay for all the years he had been in service with the respondent, presently computed at P13,788.05.

All other claims of both complainant and respondent are hereby dismissed for lack of merit.5

Not satisfied with the decision of the Labor Arbiter, petitioner appealed the decision to the NLRC which rendered its decision on 28 September 2001, the decretal portion of which reads:

[T]he Rules and Regulations Implementing Presidential Decree No. 851, particularly Sec. 3 provides:

"Section 3. Employers covered. – The Decree shall apply to all employers except to:

xxx xxx xxx

e) employers of those who are paid on purely commission, boundary, or task basis, performing a specific work, irrespective of the time consumed in the performance thereof. xxx."

Records show that complainant, in his position paper, admitted that he was paid on a commission basis.

In view of the foregoing, we deem it just and equitable to modify the assailed Decision by deleting the award of 13th month pay to the complainant.

…

WHEREFORE, the Decision dated 29 September 2000 is MODIFIED by deleting the award of 13th

month pay. The other findings are AFFIRMED.6

In other words, the award of service incentive leave pay was maintained. Petitioner thus sought a reconsideration of this aspect, which was subsequently denied in a Resolution by the NLRC dated 31 October 2001.


http://www.lawphil.net/judjuris/juri2005/may2005/gr_156367_2005.html#fnt6






Displeased with only the partial grant of its appeal to the NLRC, petitioner sought the review of said decision with the Court of Appeals which was subsequently denied by the appellate court in a Decision dated 06 May 2002, the dispositive portion of which reads:

WHEREFORE, premises considered, the Petition is DISMISSED for lack of merit; and the assailed Decision of respondent Commission in NLRC NCR CA No. 026584-2000 is hereby AFFIRMED in toto. No costs.7

Hence, the instant petition.

ISSUES

1. Whether or not respondent is entitled to service incentive leave;

2. Whether or not the three (3)-year prescriptive period provided under Article 291 of the Labor Code, as amended, is applicable to respondent’s claim of service incentive leave pay.

RULING OF THE COURT

The disposition of the first issue revolves around the proper interpretation of Article 95 of the Labor Code vis-à-vis Section 1(D), Rule V, Book III of the Implementing Rules and Regulations of the Labor Code which provides:

Art. 95. RIGHT TO SERVICE INCENTIVE LEAVE

(a) Every employee who has rendered at least one year of service shall be entitled to a yearly service incentive leave of five days with pay.

Book III, Rule V: SERVICE INCENTIVE LEAVE

SECTION 1. Coverage. – This rule shall apply to all employees except:

…

(d) Field personnel and other employees whose performance is unsupervised by the employer including those who are engaged on task or contract basis, purely commission basis, or those who are paid in a fixed amount for performing work irrespective of the time consumed in the performance thereof; . . .

A careful perusal of said provisions of law will result in the conclusion that the grant of service incentive leave has been delimited by the Implementing Rules and Regulations of the Labor Code to apply only to those employees not explicitly excluded by Section 1 of Rule V. According to the Implementing Rules, Service Incentive Leave shall not apply to employees classified as "field personnel." The phrase "other employees whose performance is unsupervised by the employer" must not be understood as a separate classification of employees to which service incentive leave shall not be granted. Rather, it serves as an amplification of the interpretation

of the definition of field personnel under the Labor Code as those "whose actual hours of work in the field cannot be determined with reasonable certainty."8

The same is true with respect to the phrase "those who are engaged on task or contract basis, purely commission basis." Said phrase should be related with "field personnel," applying the rule on ejusdem generis that general and unlimited terms are restrained and limited by the particular terms that they follow.9 Hence, employees engaged on task or contract basis or paid on purely commission basis are not automatically exempted from the grant of service incentive leave, unless, they fall under the classification of field personnel.

Therefore, petitioner’s contention that respondent is not entitled to the grant of service incentive leave just because he was paid on purely commission basis is misplaced. What must be ascertained in order to resolve the issue of propriety of the grant of service incentive leave to respondent is whether or not he is a field personnel.

According to Article 82 of the Labor Code, "field personnel" shall refer to non-agricultural employees who regularly perform their duties away from the principal place of business or branch office of the employer and whose actual hours of work in the field cannot be determined with reasonable certainty. This definition is further elaborated in the Bureau of Working Conditions (BWC), Advisory Opinion to Philippine Technical-Clerical Commercial Employees Association10 which states that:

As a general rule, [field personnel] are those whose performance of their job/service is not supervised by the employer or his representative, the workplace being away from the principal office and whose hours and days of work cannot be determined with reasonable certainty; hence, they are paid specific amount for rendering specific service or performing specific work. If required to be at specific places at specific times, employees including drivers cannot be said to be field personnel despite the fact that they are performing work away from the principal office of the employee. [Emphasis ours]

To this discussion by the BWC, the petitioner differs and postulates that under said advisory opinion, no employee would ever be considered a field personnel because every employer, in one way or another, exercises control over his employees. Petitioner further argues that the only criterion that should be considered is the nature of work of the employee in that, if the employee’s job requires that he works away from the principal office like that of a messenger or a bus driver, then he is inevitably a field personnel.

We are not persuaded. At this point, it is necessary to stress that the definition of a "field personnel" is not merely concerned with the location where the employee regularly performs his duties but also with the fact that the employee’s performance is unsupervised by the employer. As discussed above, field personnel are those who regularly perform their duties away from the principal place of business of the employer and whose actual hours of work in the field cannot be determined with reasonable certainty. Thus, in order to conclude whether an employee is a field employee, it is also necessary to ascertain if actual hours of work in the field






can be determined with reasonable certainty by the employer. In so doing, an inquiry must be made as to whether or not the employee’s time and performance are constantly supervised by the employer.

As observed by the Labor Arbiter and concurred in by the Court of Appeals:

It is of judicial notice that along the routes that are plied by these bus companies, there are its inspectors assigned at strategic places who board the bus and inspect the passengers, the punched tickets, and the conductor’s reports. There is also the mandatory once-a-week car barn or shop day, where the bus is regularly checked as to its mechanical, electrical, and hydraulic aspects, whether or not there are problems thereon as reported by the driver and/or conductor. They too, must be at specific place as [sic] specified time, as they generally observe prompt departure and arrival from their point of origin to their point of destination. In each and every depot, there is always the Dispatcher whose function is precisely to see to it that the bus and its crew leave the premises at specific times and arrive at the estimated proper time. These, are present in the case at bar. The driver, the complainant herein, was therefore under constant supervision while in the performance of this work. He cannot be considered a field personnel.11

We agree in the above disquisition. Therefore, as correctly concluded by the appellate court, respondent is not a field personnel but a regular employee who performs tasks usually necessary and desirable to the usual trade of petitioner’s business. Accordingly, respondent is entitled to the grant of service incentive leave.

The question now that must be addressed is up to what amount of service incentive leave pay respondent is entitled to.

The response to this query inevitably leads us to the correlative issue of whether or not the three (3)-year prescriptive period under Article 291 of the Labor Code is applicable to respondent’s claim of service incentive leave pay.

Article 291 of the Labor Code states that all money claims arising from employer-employee relationship shall be filed within three (3) years from the time the cause of action accrued; otherwise, they shall be forever barred.

In the application of this section of the Labor Code, the pivotal question to be answered is when does the cause of action for money claims accrue in order to determine the reckoning date of the three-year prescriptive period.

It is settled jurisprudence that a cause of action has three elements, to wit, (1) a right in favor of the plaintiff by whatever means and under whatever law it arises or is created; (2) an obligation on the part of the named defendant to respect or not to violate such right; and (3) an act or omission on the part of such defendant violative of the right of the plaintiff or constituting a breach of the obligation of the defendant to the plaintiff.12

To properly construe Article 291 of the Labor Code, it is essential to ascertain the time when the third element of a cause of action transpired. Stated differently, in the computation of the three-year prescriptive period, a determination must be made as to the period when the act constituting a violation of the workers’ right to the benefits being claimed was committed. For if the cause of action accrued more than three (3) years before the filing of the money claim, said cause of action has already prescribed in accordance with Article 291.13

Consequently, in cases of nonpayment of allowances and other monetary benefits, if it is established that the benefits being claimed have been withheld from the employee for a period longer than three (3) years, the amount pertaining to the period beyond the three-year prescriptive period is therefore barred by prescription. The amount that can only be demanded by the aggrieved employee shall be limited to the amount of the benefits withheld within three (3) years before the filing of the complaint.14

It is essential at this point, however, to recognize that the service incentive leave is a curious animal in relation to other benefits granted by the law to every employee. In the case of service incentive leave, the employee may choose to either use his leave credits or commute it to its monetary equivalent if not exhausted at the end of the year.15 Furthermore, if the employee entitled to service incentive leave does not use or commute the same, he is entitled upon his resignation or separation from work to the commutation of his accrued service incentive leave. As enunciated by the Court in Fernandez v. NLRC:16

The clear policy of the Labor Code is to grant service incentive leave pay to workers in all establishments, subject to a few exceptions. Section 2, Rule V, Book III of the Implementing Rules and Regulations provides that "[e]very employee who has rendered at least one year of service shall be entitled to a yearly service incentive leave of five days with pay." Service incentive leave is a right which accrues to every employee who has served "within 12 months, whether continuous or broken reckoned from the date the employee started working, including authorized absences and paid regular holidays unless the working days in the establishment as a matter of practice or policy, or that provided in the employment contracts, is less than 12 months, in which case said period shall be considered as one year." It is also "commutable to its money equivalent if not used or exhausted at the end of the year." In other words, an employee who has served for one year is entitled to it. He may use it as leave days or he may collect its monetary value. To limit the award to three years, as the solicitor general recommends, is to unduly restrict such right.17

[Italics supplied]

Correspondingly, it can be conscientiously deduced that the cause of action of an entitled employee to claim his service incentive leave pay accrues from the moment the employer refuses to remunerate its monetary equivalent if the employee did not make use of said leave credits but instead chose to avail of its commutation. Accordingly, if the employee wishes to accumulate his leave credits and opts for its commutation upon his resignation or separation from employment, his cause of action to claim the whole amount of his accumulated service incentive leave shall arise when the employer fails to pay such









amount at the time of his resignation or separation from employment.

Applying Article 291 of the Labor Code in light of this peculiarity of the service incentive leave, we can conclude that the three (3)-year prescriptive period commences, not at the end of the year when the employee becomes entitled to the commutation of his service incentive leave, but from the time when the employer refuses to pay its monetary equivalent after demand of commutation or upon termination of the employee’s services, as the case may be.

The above construal of Art. 291, vis-à-vis the rules on service incentive leave, is in keeping with the rudimentary principle that in the implementation and interpretation of the provisions of the Labor Code and its implementing regulations, the workingman’s welfare should be the primordial and paramount consideration.18

The policy is to extend the applicability of the decree 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 to labor.19

In the case at bar, respondent had not made use of his service incentive leave nor demanded for its commutation until his employment was terminated by petitioner. Neither did petitioner compensate his accumulated service incentive leave pay at the time of his dismissal. It was only upon his filing of a complaint for illegal dismissal, one month from the time of his dismissal, that respondent demanded from his former employer commutation of his accumulated leave credits. His cause of action to claim the payment of his accumulated service incentive leave thus accrued from the time when his employer dismissed him and failed to pay his accumulated leave credits.

Therefore, the prescriptive period with respect to his claim for service incentive leave pay only commenced from the time the employer failed to compensate his accumulated service incentive leave pay at the time of his dismissal. Since respondent had filed his money claim after only one month from the time of his dismissal, necessarily, his money claim was filed within the prescriptive period provided for by Article 291 of the Labor Code.

WHEREFORE, premises considered, the instant petition is hereby DENIED. The assailed Decision of the Court of Appeals in CA-G.R. SP. No. 68395 is hereby AFFIRMED. No Costs.

SO ORDERED.

Jose Rizal College vs. NLRC December 1, 1987

156 SCRA 27 – Labor Law – Labor Standards – Working Conditions and Rest Periods – Holiday Pay

The National Alliance of Teachers sued Jose Rizal College for alleged nonpayment of unworked holidays from 1975 to 1977. The members of the Alliance concerned are




faculty members who are paid on the basis of student contract hour.

ISSUE: Whether or not the school faculty are entitled to unworked holiday pay.

HELD: As far as unworked regular holidays are concerned, the teachers are not entitled to holiday pay. Regular holidays specified as such by law are known to both school and faculty members as no class days;” certainly the latter do not expect payment for said unworked days, and this was clearly in their minds when they entered into the teaching contracts.

On the other hand, the teachers are entitled to be paid for unworked special holidays. Otherwise stated, the faculty member, although forced to take a rest, does not earn what he should earn on that day. Be it noted that when a special public holiday is declared, the faculty member paid by the hour is deprived of expected income, and it does not matter that the school calendar is extended in view of the days or hours lost, for their income that could be earned from other sources is lost during the extended days. Similarly, when classes are called off or shortened on account of typhoons, floods, rallies, and the like, these faculty members must likewise be paid, whether or not extensions are ordered.

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Manila

FIRST DIVISION

G.R. No. L-65482 December 1, 1987

JOSE RIZAL COLLEGE, petitioner, vs.NATIONAL LABOR RELATIONS COMMISSION AND NATIONAL ALLIANCE OF TEACHERS/OFFICE WORKERS, respondents.

PARAS, J.:

This is a petition for certiorari with prayer for the issuance of a writ of preliminary injunction, seeking the annulment of the decision of the National Labor Relations Commission * in NLRC Case No. RB-IV 23037-78 (Case No. R4-1-1081-71) entitled "National Alliance of Teachers and Office Workers and Juan E. Estacio, Jaime Medina, et al. vs. Jose Rizal College" modifying the decision of the Labor Arbiter as follows:

WHEREFORE, in view of the foregoing considerations, the decision appealed from is MODIFIED, in the sense that teaching personnel paid by the hour are hereby declared to be entitled to holiday pay.

SO ORDERED.

The factual background of this case which is undisputed is as follows:

Petitioner is a non-stock, non-profit educational institution duly organized and existing under the laws of the Philippines. It has three groups of employees categorized as follows: (a) personnel on monthly basis, who receive their monthly salary uniformly throughout the year, irrespective of the actual number of working days in a month without deduction for holidays; (b) personnel on daily basis who are paid on actual days worked and they receive unworked holiday pay and (c) collegiate faculty who are paid on the basis of student contract hour. Before the start of the semester they sign contracts with the college undertaking to meet their classes as per schedule.

Unable to receive their corresponding holiday pay, as claimed, from 1975 to 1977, private respondent National Alliance of Teachers and Office Workers (NATOW) in behalf of the faculty and personnel of Jose Rizal College filed with the Ministry of Labor a complaint against the college for said alleged non-payment of holiday pay, docketed as Case No. R04-10-81-72. Due to the failure of the parties to settle their differences on conciliation, the case was certified for compulsory arbitration where it was docketed as RB-IV-23037-78 (Rollo, pp. 155-156).

After the parties had submitted their respective position papers, the Labor Arbiter ** rendered a decision on February 5, 1979, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered as follows:

1. The faculty and personnel of the respondent Jose Rizal College who are paid their salary by the month uniformly in a school year, irrespective of the number of working days in a month, without deduction for holidays, are presumed to be already paid the 10 paid legal holidays and are no longer entitled to separate payment for the said regular holidays;

2. The personnel of the respondent Jose Rizal College who are paid their wages daily are entitled to be paid the 10 unworked regular holidays according to the pertinent provisions of the Rules and Regulations Implementing the Labor Code;

3. Collegiate faculty of the respondent Jose Rizal College who by contract are paid compensation per student contract hour are not entitled to unworked regular holiday pay considering that these regular holidays have been excluded in the programming of the student contact hours. (Rollo. pp. 26-27)

On appeal, respondent National Labor Relations Commission in a decision promulgated on June 2, 1982, modified the decision appealed from, in the sense that teaching personnel paid by the hour are declared to be entitled to holiday pay (Rollo. p. 33).


Hence, this petition.

The sole issue in this case is whether or not the school faculty who according to their contracts are paid per lecture hour are entitled to unworked holiday pay.

Labor Arbiter Julio Andres, Jr. found that faculty and personnel employed by petitioner who are paid their salaries monthly, are uniformly paid throughout the school year regardless of working days, hence their holiday pay are included therein while the daily paid employees are renumerated for work performed during holidays per affidavit of petitioner's treasurer (Rollo, pp. 72-73).

There appears to be no problem therefore as to the first two classes or categories of petitioner's workers.

The problem, however, lies with its faculty members, who are paid on an hourly basis, for while the Labor Arbiter sustains the view that said instructors and professors are not entitled to holiday pay, his decision was modified by the National Labor Relations Commission holding the contrary. Otherwise stated, on appeal the NLRC ruled that teaching personnel paid by the hour are declared to be entitled to holiday pay.

Petitioner maintains the position among others, that it is not covered by Book V of the Labor Code on Labor Relations considering that it is a non- profit institution and that its hourly paid faculty members are paid on a "contract" basis because they are required to hold classes for a particular number of hours. In the programming of these student contract hours, legal holidays are excluded and labelled in the schedule as "no class day. " On the other hand, if a regular week day is declared a holiday, the school calendar is extended to compensate for that day. Thus petitioner argues that the advent of any of the legal holidays within the semester will not affect the faculty's salary because this day is not included in their schedule while the calendar is extended to compensate for special holidays. Thus the programmed number of lecture hours is not diminished (Rollo, pp. 157- 158).

The Solicitor General on the other hand, argues that under Article 94 of the Labor Code (P.D. No. 442 as amended), holiday pay applies to all employees except those in retail and service establishments. To deprive therefore employees paid at an hourly rate of unworked holiday pay is contrary to the policy considerations underlying such presidential enactment, and its precursor, the Blue Sunday Law (Republic Act No. 946) apart from the constitutional mandate to grant greater rights to labor (Constitution, Article II, Section 9). (Reno, pp. 76-77).

In addition, respondent National Labor Relations Commission in its decision promulgated on June 2, 1982, ruled that the purpose of a holiday pay is obvious; that is 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. It is no excuse therefore that the school calendar is extended whenever holidays occur, because such happens only in cases of special holidays (Rollo, p. 32).

Subject holiday pay is provided for in the Labor Code (Presidential Decree No. 442, as amended), which reads:

Art. 94. Right to holiday pay — (a) Every worker shall be paid his regular daily wage during regular holidays, except in retail and service establishments regularly employing less than ten (10) workers;

(b) The employer may require an employee to work on any holiday but such employee shall be paid a compensation equivalent to twice his regular rate; ... "

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

SEC. 8. Holiday pay of certain employees. — (a) Private school teachers, including faculty members of colleges and universities, may not be paid for the regular holidays during semestral vacations. They shall, however, be paid for the regular holidays during Christmas vacations. ...

Under the foregoing provisions, apparently, the petitioner, although a non-profit institution is under obligation to give pay even on unworked regular holidays to hourly paid faculty members subject to the terms and conditions provided for therein.

We believe that the aforementioned implementing rule is not justified by the provisions of the law which after all is silent with respect to faculty members paid by the hour who because of their teaching contracts are obliged to work and consent to be paid only for work actually done (except when an emergency or a fortuitous event or a national need calls for the declaration of special holidays). Regular holidays specified as such by law are known to both school and faculty members as no class days;" certainly the latter do not expect payment for said unworked days, and this was clearly in their minds when they entered into the teaching contracts.

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

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

Petitioner alleges that it was deprived of due process as it was not notified of the appeal made to the NLRC against the decision of the labor arbiter.


The Court has already set forth what is now known as the "cardinal primary" requirements of due process in administrative proceedings, to wit: "(1) the right to a hearing which includes the right to present one's case and submit evidence in support thereof; (2) the tribunal must consider the evidence presented; (3) the decision must have something to support itself; (4) the evidence must be substantial, and substantial evidence means such evidence as a reasonable mind might accept as adequate to support a conclusion; (5) the decision must be based on the evidence presented at the hearing, or at least contained in the record and disclosed to the parties affected; (6) the tribunal or body of any of its judges must act on its or his own independent consideration of the law and facts of the controversy, and not simply accept the views of a subordinate; (7) the board or body should in all controversial questions, render its decisions in such manner that the parties to the proceeding can know the various issues involved, and the reason for the decision rendered. " (Doruelo vs. Commission on Elections, 133 SCRA 382 [1984]).

The records show petitioner JRC was amply heard and represented in the instant proceedings. It submitted its position paper before the Labor Arbiter and the NLRC and even filed a motion for reconsideration of the decision of the latter, as well as an "Urgent Motion for Hearing En Banc" (Rollo, p. 175). Thus, petitioner's claim of lack of due process is unfounded.

PREMISES CONSIDERED, the decision of respondent National Labor Relations Commission is hereby set aside, and a new one is hereby RENDERED:

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

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

SO ORDERED.


Manila

EN BANC

G.R. No. 79255 January 20, 1992

UNION OF FILIPRO EMPLOYEES (UFE), petitioner, vs.BENIGNO VIVAR, JR., NATIONAL LABOR RELATIONS COMMISSION and NESTLÉ PHILIPPINES, INC. (formerly FILIPRO, INC.), respondents.

Jose C. Espinas for petitioner.


Siguion Reyna, Montecillo & Ongsiako for private respondent.

GUTIERREZ, JR., J.:

This labor dispute stems from the exclusion of sales personnel from the holiday pay award and the change of the divisor in the computation of benefits from 251 to 261 days.

On November 8, 1985, respondent Filipro, Inc. (now Nestle Philippines, Inc.) filed with the National Labor Relations Commission (NLRC) a petition for declaratory relief seeking a ruling on its rights and obligations respecting claims of its monthly paid employees for holiday pay in the light of the Court's decision in Chartered Bank Employees Association v. Ople (138 SCRA 273 [1985]).

Both Filipro and the Union of Filipino Employees (UFE) agreed to submit the case for voluntary arbitration and appointed respondent Benigno Vivar, Jr. as voluntary arbitrator.

On January 2, 1980, Arbitrator Vivar rendered a decision directing Filipro to:

pay its monthly paid employees holiday pay pursuant to Article 94 of the Code, subject only to the exclusions and limitations specified in Article 82 and such other legal restrictions as are provided for in the Code. (Rollo, p. 31)

Filipro filed a motion for clarification seeking (1) the limitation of the award to three years, (2) the exclusion of salesmen, sales representatives, truck drivers, merchandisers and medical representatives (hereinafter referred to as sales personnel) from the award of the holiday pay, and (3) deduction from the holiday pay award of overpayment for overtime, night differential, vacation and sick leave benefits due to the use of 251 divisor. (Rollo, pp. 138-145)

Petitioner UFE answered that the award should be made effective from the date of effectivity of the Labor Code, that their sales personnel are not field personnel and are therefore entitled to holiday pay, and that the use of 251 as divisor is an established employee benefit which cannot be diminished.

On January 14, 1986, the respondent arbitrator issued an order declaring that the effectivity of the holiday pay award shall retroact to November 1, 1974, the date of effectivity of the Labor Code. He adjudged, however, that the company's sales personnel are field personnel and, as such, are not entitled to holiday pay. He likewise ruled that with the grant of 10 days' holiday pay, the divisor should be changed from 251 to 261 and ordered the reimbursement of overpayment for overtime, night differential, vacation and sick leave pay due to the use of 251 days as divisor.

Both Nestle and UFE filed their respective motions for partial reconsideration. Respondent Arbitrator treated the

two motions as appeals and forwarded the case to the NLRC which issued a resolution dated May 25, 1987 remanding the case to the respondent arbitrator on the ground that it has no jurisdiction to review decisions in voluntary arbitration cases pursuant to Article 263 of the Labor Code as amended by Section 10, Batas Pambansa Blg. 130 and as implemented by Section 5 of the rules implementing B.P. Blg. 130.

However, in a letter dated July 6, 1987, the respondent arbitrator refused to take cognizance of the case reasoning that he had no more jurisdiction to continue as arbitrator because he had resigned from service effective May 1, 1986.

Hence, this petition.

The petitioner union raises the following issues:

1) Whether or not Nestle's sales personnel are entitled to holiday pay; and

2) Whether or not, concomitant with the award of holiday pay, the divisor should be changed from 251 to 261 days and whether or not the previous use of 251 as divisor resulted in overpayment for overtime, night differential, vacation and sick leave pay.

The petitioner insists that respondent's sales personnel are not field personnel under Article 82 of the Labor Code. The respondent company controverts this assertion.

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

The controversy centers on the interpretation of the clause "whose actual hours of work in the field cannot be determined with reasonable certainty."

It is undisputed that these sales personnel start their field work at 8:00 a.m. after having reported to the office and come back to the office at 4:00 p.m. or 4:30 p.m. if they are Makati-based.

The petitioner maintains that the period between 8:00 a.m. to 4:00 or 4:30 p.m. comprises the sales personnel's working hours which can be determined with reasonable certainty.

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

We concur with the following disquisition by the respondent arbitrator:

The requirement for the salesmen and other similarly situated employees to


report for work at the office at 8:00 a.m. and return at 4:00 or 4:30 p.m. is not within the realm of work in the field as defined in the Code but an exercise of purely management prerogative of providing administrative control over such personnel. This does not in any manner provide a reasonable level of determination on the actual field work of the employees which can be reasonably ascertained. The theoretical analysis that salesmen and other similarly-situated workers regularly report for work at 8:00 a.m. and return to their home station at 4:00 or 4:30 p.m., creating the assumption that their field work is supervised, is surface projection. Actual field work begins after 8:00 a.m., when the sales personnel follow their field itinerary, and ends immediately before 4:00 or 4:30 p.m. when they report back to their office. The period between 8:00 a.m. and 4:00 or 4:30 p.m. comprises their hours of work in the field, the extent or scope and result of which are subject to their individual capacity and industry and which "cannot be determined with reasonable certainty." This is the reason why effective supervision over field work of salesmen and medical representatives, truck drivers and merchandisers is practically a physical impossibility. Consequently, they are excluded from the ten holidays with pay award. (Rollo, pp. 36-37)

Moreover, the requirement that "actual hours of work in the field cannot be determined with reasonable certainty" must be read in conjunction with Rule IV, Book III of the Implementing Rules which provides:

Rule IV Holidays with Pay

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

xxx xxx xxx

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

While contending that such rule added another element not found in the law (Rollo, p. 13), the petitioner nevertheless attempted to show that its affected members are not covered by the abovementioned rule. The petitioner asserts that the company's sales personnel are strictly supervised as shown by the SOD (Supervisor of the Day) schedule and the company circular dated March 15, 1984 (Annexes 2 and 3, Rollo, pp. 53-55).

Contrary to the contention of the petitioner, the Court finds that the aforementioned rule did not add another element to the Labor Code definition of field personnel. The clause "whose time and performance is unsupervised by the employer" did not amplify but merely interpreted and expounded the clause "whose actual hours of work in the field cannot be determined with reasonable

certainty." The former clause is still within the scope and purview of Article 82 which defines field personnel. Hence, in deciding whether or not an employee's actual working hours in the field can be determined with reasonable certainty, query must be made as to whether or not such employee's time and performance is constantly supervised by the employer.

The SOD schedule adverted to by the petitioner does not in the least signify that these sales personnel's time and performance are supervised. The purpose of this schedule is merely to ensure that the sales personnel are out of the office not later than 8:00 a.m. and are back in the office not earlier than 4:00 p.m.

Likewise, the Court fails to see how the company can monitor the number of actual hours spent in field work by an employee through the imposition of sanctions on absenteeism contained in the company circular of March 15, 1984.

The petitioner claims that the fact that these sales personnel are given incentive bonus every quarter based on their performance is proof that their actual hours of work in the field can be determined with reasonable certainty.

The Court thinks otherwise.

The criteria for granting incentive bonus are: (1) attaining or exceeding sales volume based on sales target; (2) good collection performance; (3) proper compliance with good market hygiene; (4) good merchandising work; (5) minimal market returns; and (6) proper truck maintenance. (Rollo, p. 190).

The above criteria indicate that these sales personnel are given incentive bonuses precisely because of the difficulty in measuring their actual hours of field work. These employees are evaluated by the result of their work and not by the actual hours of field work which are hardly susceptible to determination.

In San Miguel Brewery, Inc. v. Democratic Labor Organization (8 SCRA 613 [1963]), the Court had occasion to discuss the nature of the job of a salesman. Citing the case of Jewel Tea Co. v. Williams, C.C.A. Okla., 118 F. 2d 202, the Court stated:

The reasons for excluding an outside salesman are fairly apparent. Such a salesman, to a greater extent, works individually. There are no restrictions respecting the time he shall work and he can earn as much or as little, within the range of his ability, as his ambition dictates. In lieu of overtime he ordinarily receives commissions as extra compensation. He works away from his employer's place of business, is not subject to the personal supervision of his employer, and his employer has no way of knowing the number of hours he works per day.

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


The petitioner union also assails the respondent arbitrator's ruling that, concomitant with the award of holiday pay, the divisor should be changed from 251 to 261 days to include the additional 10 holidays and the employees should reimburse the amounts overpaid by Filipro due to the use of 251 days' divisor.

Arbitrator Vivar's rationale for his decision is as follows:

. . . The new doctrinal policy established which ordered payment of ten holidays certainly adds to or accelerates the basis of conversion and computation by ten days. With the inclusion of ten holidays as paid days, the divisor is no longer 251 but 261 or 262 if election day is counted. This is indeed an extremely difficult legal question of interpretation which accounts for what is claimed as falling within the concept of "solutio indebti."

When the claim of the Union for payment of ten holidays was granted, there was a consequent need to abandon that 251 divisor. To maintain it would create an impossible situation where the employees would benefit with additional ten days with pay but would simultaneously enjoy higher benefits by discarding the same ten days for purposes of computing overtime and night time services and considering sick and vacation leave credits. Therefore, reimbursement of such overpayment with the use of 251 as divisor arises concomitant with the award of ten holidays with pay. (Rollo, p. 34)

The divisor assumes an important role in determining whether or not holiday pay is already included in the monthly paid employee's salary and in the computation of his daily rate. This is the thrust of our pronouncement in Chartered Bank Employees Association v. Ople (supra). In that case, We held:

It is argued that even without the presumption found in the rules and in the policy instruction, the company practice indicates that the monthly salaries of the employees are so computed as to include the holiday pay provided by law. The petitioner contends otherwise.

One strong argument in favor of the petitioner's stand is the fact that the Chartered Bank, in computing overtime compensation for its employees, employs a "divisor" of 251 days. The 251 working days divisor is the result of subtracting all Saturdays, Sundays and the ten (10) legal holidays from the total number of calendar days in a year. If the employees are already paid for all non-working days, the divisor should be 365 and not 251.

In the petitioner's case, its computation of daily ratio since September 1, 1980, is as follows:

monthly rate x 12 months

———————————

251 days

Following the criterion laid down in the Chartered Bank case, the use of 251 days' divisor by respondent Filipro indicates that holiday pay is not yet included in the employee's salary, otherwise the divisor should have been 261.

It must be stressed that the daily rate, assuming there are no intervening salary increases, is a constant figure for the purpose of computing overtime and night differential pay and commutation of sick and vacation leave credits. Necessarily, the daily rate should also be the same basis for computing the 10 unpaid holidays.

The respondent arbitrator's order to change the divisor from 251 to 261 days would result in a lower daily rate which is violative of the prohibition on non-diminution of benefits found in Article 100 of the Labor Code. To maintain the same daily rate if the divisor is adjusted to 261 days, then the dividend, which represents the employee's annual salary, should correspondingly be increased to incorporate the holiday pay. To illustrate, if prior to the grant of holiday pay, the employee's annual salary is P25,100, then dividing such figure by 251 days, his daily rate is P100.00 After the payment of 10 days' holiday pay, his annual salary already includes holiday pay and totals P26,100 (P25,100 + 1,000). Dividing this by 261 days, the daily rate is still P100.00. There is thus no merit in respondent Nestle's claim of overpayment of overtime and night differential pay and sick and vacation leave benefits, the computation of which are all based on the daily rate, since the daily rate is still the same before and after the grant of holiday pay.

Respondent Nestle's invocation of solutio indebiti, or payment by mistake, due to its use of 251 days as divisor must fail in light of the Labor Code mandate that "all doubts in the implementation and interpretation of this Code, including its implementing rules and regulations, shall be resolved in favor of labor." (Article 4). Moreover, prior to September 1, 1980, when the company was on a 6-day working schedule, the divisor used by the company was 303, indicating that the 10 holidays were likewise not paid. When Filipro shifted to a 5-day working schebule on September 1, 1980, it had the chance to rectify its error, if ever there was one but did not do so. It is now too late to allege payment by mistake.

Nestle also questions the voluntary arbitrator's ruling that holiday pay should be computed from November 1, 1974. This ruling was not questioned by the petitioner union as obviously said decision was favorable to it. Technically, therefore, respondent Nestle should have filed a separate petition raising the issue of effectivity of the holiday pay award. This Court has ruled that an appellee who is not an appellant may assign errors in his brief where his purpose is to maintain the judgment on other grounds, but he cannot seek modification or reversal of the judgment or affirmative relief unless he has also appealed. (Franco v. Intermediate Appellate Court, 178 SCRA 331 [1989], citing La Campana Food Products, Inc. v. Philippine Commercial and Industrial Bank, 142 SCRA


394 [1986]). Nevertheless, in order to fully settle the issues so that the execution of the Court's decision in this case may not be needlessly delayed by another petition, the Court resolved to take up the matter of effectivity of the holiday pay award raised by Nestle.

Nestle insists that the reckoning period for the application of the holiday pay award is 1985 when the Chartered Bank decision, promulgated on August 28, 1985, became final and executory, and not from the date of effectivity of the Labor Code. Although the Court does not entirely agree with Nestle, we find its claim meritorious.

In Insular Bank of Asia and America Employees' Union (IBAAEU) v. Inciong, 132 SCRA 663 [1984], hereinafter referred to as the IBAA case, the Court declared that Section 2, Rule IV, Book III of the implementing rules and Policy Instruction No. 9, issued by the then Secretary of Labor on February 16, 1976 and April 23, 1976, respectively, and which excluded monthly paid employees from holiday pay benefits, are null and void. The Court therein reasoned that, in the guise of clarifying the Labor Code's provisions on holiday pay, the aforementioned implementing rule and policy instruction amended them by enlarging the scope of their exclusion. The Chartered Bank case reiterated the above ruling and added the "divisor" test.

However, prior to their being declared null and void, the implementing rule and policy instruction enjoyed the presumption of validity and hence, Nestle's non-payment of the holiday benefit up to the promulgation of the IBAA case on October 23, 1984 was in compliance with these presumably valid rule and policy instruction.

In the case of De Agbayani v. Philippine National Bank, 38 SCRA 429 [1971], the Court discussed the effect to be given to a legislative or executive act subsequently declared invalid:

xxx xxx xxx

. . . It does not admit of doubt that prior to the declaration of nullity such challenged legislative or executive act must have been in force and had to be complied with. This is so as until after the judiciary, in an appropriate case, declares its invalidity, it is entitled to obedience and respect. Parties may have acted under it and may have changed their positions. What could be more fitting than that in a subsequent litigation regard be had to what has been done while such legislative or executive act was in operation and presumed to be valid in all respects. It is now accepted as a doctrine that prior to its being nullified, its existence as a fact must be reckoned with. This is merely to reflect awareness that precisely because the judiciary is the government organ which has the final say on whether or not a legislative or executive measure is valid, a period of time may have elapsed before it can exercise the power of judicial review that may lead to a declaration of nullity. It would be to deprive the law of its quality of fairness and justice then, if

there be no recognition of what had transpired prior to such adjudication.

In the language of an American Supreme Court decision: "The actual existence of a statute, prior to such a determination of [unconstitutionality], is an operative fact and may have consequences which cannot justly be ignored. The past cannot always be erased by a new judicial declaration. The effect of the subsequent ruling as to invalidity may have to be considered in various aspects, — with respect to particular relations, individual and corporate, and particular conduct, private and official." (Chicot County Drainage Dist. v. Baxter States Bank, 308 US 371, 374 [1940]). This language has been quoted with approval in a resolution in Araneta v. Hill (93 Phil. 1002 [1952]) and the decision in Manila Motor Co., Inc. v. Flores (99 Phil. 738 [1956]). An even more recent instance is the opinion of Justice Zaldivar speaking for the Court in Fernandez v. Cuerva and Co. (21 SCRA 1095 [1967]. (At pp. 434-435)

The "operative fact" doctrine realizes that in declaring a law or rule null and void, undue harshness and resulting unfairness must be avoided. It is now almost the end of 1991. To require various companies to reach back to 1975 now and nullify acts done in good faith is unduly harsh. 1984 is a fairer reckoning period under the facts of this case.

Applying the aforementioned doctrine to the case at bar, it is not far-fetched that Nestle, relying on the implicit validity of the implementing rule and policy instruction before this Court nullified them, and thinking that it was not obliged to give holiday pay benefits to its monthly paid employees, may have been moved to grant other concessions to its employees, especially in the collective bargaining agreement. This possibility is bolstered by the fact that respondent Nestle's employees are among the highest paid in the industry. With this consideration, it would be unfair to impose additional burdens on Nestle when the non-payment of the holiday benefits up to 1984 was not in any way attributed to Nestle's fault.

The Court thereby resolves that the grant of holiday pay be effective, not from the date of promulgation of the Chartered Bank case nor from the date of effectivity of the Labor Code, but from October 23, 1984, the date of promulgation of the IBAA case.

WHEREFORE, the order of the voluntary arbitrator in hereby MODIFIED. The divisor to be used in computing holiday pay shall be 251 days. The holiday pay as above directed shall be computed from October 23, 1984. In all other respects, the order of the respondent arbitrator is hereby AFFIRMED.

SO ORDERED.



Manila

FIRST DIVISION

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

ROSARIO A. GAA, petitioner, vs.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.

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 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 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 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 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.

Honda Philippines vs. Samahan ng Malayang Manggagawa sa

Honda

Facts: Honda Phils, Inc (company) and Samahan ng Malayang Manggagawa sa Honda (union) started renegotiations of their CBA. When there was a bargaining deadlock, the union filed a notice of strike. The company likewise filed a notice of lockout. SOLE assumed jurisdiction and ordered both parties to desist from their strike and lockout.

However, the union subsequently filed a second notice of strike on the ground of unfair labor practice, alleging that the company illegally contracted out work to the detriment of the workers. The union went on strike. SOLE assumed jurisdiction and certified the case to NLRC for compulsory arbitration. The striking employees were ordered to return to work and management accepted them back.

Honda then issued a memorandum announcing its new computation of the 13th and 14th month pay whereby the 31-day strike shall be considered unworked days for the purpose of computing said benefits. The amount equivalent to 1/12 of the employees’ basic salary shall be deducted from the bonuses (because they did not work for 1 month). Furthermore, Honda wanted a pro-rata payment of the 13th month pay.

The union opposed said computation because it was contrary to the Sections 3 and 6 in their current CBA which mandates that “the company shall maintain the present practice in the implementation of the 13th month


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pay” and that the 14th month pay shall be computed in the same way as the former.

The Bureau of Working Conditions (BWC) sided with the company. But the issue was unresolved by the grievance machinery, so it was submitted for voluntary arbitration. The Voluntary Arbiter invalidated Honda’s computation and ordered the computation of the benefits based on the full month basic pay.

CA affirmed, hence this petition.

Issues:(1) Whether or not there is ambiguity in the CBA provisions concerning the 13th and 14th month pay

(2) Whether or not the proposed computation of Honda deducting 1/12 of the employee’s basic salary from the 13th and 14th month pay and its pro-rata payment are valid

Held:(1) YES. 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. The parties in a CBA may establish such stipulations, clauses, terms and conditions as they may deem convenient as long as they are not contrary to law, morals, good customs, public order or public policy. Where the CBA is clear and unambiguous, it becomes the law between the parties.

However, there are times when the CBA provisions may become contentious. In this case, Honda wanted to implement a pro-rated computation based on the “no work, no pay” rule. Honda argues that the phrase “present practice” in the CBA refers to the manner of payment of the bonuses (50% in May and 50% in December). The union, on the other hand, insists that the CBA provisions necessarily relate to the computation of the benefits.

As the voluntary arbitrator has correctly observed, there is ambiguity in the assailed CBA provisions because they did not categorically state whether the computation of the 13th and 14th month pay would be based on a one full month’s basic salary of the employees, or pro-rated based on the compensation actually received.

(2) NO. The ambiguity in the CBA provisions was correctly resolved by the arbitrator by relying on 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 of the laborer.” CA is also correct in ruling that the computation of the 13th month pay should be based on the length of service and not on the actual wage earned by the worker.

PD 851 or the 13th Month Pay Law was issued to protect the level of wages of workers from worldwide inflation. Under the IRR of said law, the minimum 13th month pay shall not be less than 1/12 of the total basic salary earned by an employee within a calendar year. The Court has 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.

The IRR also provide for a pro-ration of this benefit ONLY in cases of resignation or separation from work. In the present case, there being no resignation/separation, the computation of the 13th month pay should not be pro-rated but should be given in full.

Moreover, it has not been proven that Honda has been implementing pro-rating of the 13th month pay before the present case. It is not a company practice. In fact, there was an implicit acceptance that prior to the strike, a full month basic pay computation was the “present practice” intended in the CBA. It was the second strike that prompted the company to adopt the pro-rata computation.________________________________________________________________


Manila

FIRST DIVISION

G.R. No. 145561 June 15, 2005

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’ decision1 dated September 14, 20002 and its resolution3 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,


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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 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 memorandum4 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 decision6 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.

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 13th month pay, 14th month pay and the financial assistance would be based on one full month’s basic salary of the employees, or pro-rated based on the compensation actually received. The arbitrator thus properly resolved the ambiguity in favor of labor as mandated by Article 1702 of the Civil Code.11 The Court of Appeals affirmed the arbitrator’s finding and added that the computation of the 13th month pay should be based on the length of service and not on the actual wage earned by the worker.

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 13th 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 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 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 13th 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 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.






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SO ORDERED.


Manila

THIRD DIVISION

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

DAVAO INTEGRATED PORT STEVEDORING SERVICES, petitioner, vs. RUBEN V. ABARQUEZ, in his capacity as an accredited Voluntary Arbitrator and THE ASSOCIATION OF TRADE UNIONS (ATU-TUCP), respondents.

Libron, Gaspar & Associates for petitioner.

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

SYLLABUS

1. LABOR LAWS AND SOCIAL LEGISLATION; LABOR RELATIONS; COLLECTIVE BARGAINING AGREEMENT; DEFINED; NATURE THEREOF; CONSTRUCTION TO BE PLACED THEREON. — A collective bargaining agreement (CBA), as used in Article 252 of the Labor Code, refers to a contract executed upon request of either the employer or the exclusive bargaining representative incorporating the agreement reached after negotiations with respect to wages, hours of work and all other terms and conditions of employment, including proposals for adjusting any grievances or questions arising under such agreement. While the terms and conditions of a CBA constitute the law between the parties, it is not, however, an ordinary contract to which is applied the principles of law governing ordinary contracts. A CBA, as a labor contract within the contemplation of Article 1700 of the Civil Code of the Philippines which governs the relations between labor and capital, is not merely contractual in nature but impressed with public interest, thus, it must yield to the common good. As such, it must be construed liberally


rather than narrowly and technically, and the courts must place a practical and realistic construction upon it, giving due consideration to the context in which it is negotiated and purpose which it is intended to serve.

2. ID.; ID.; ID.; ID.; ID.; ID.; CASE AT BAR. — It is thus erroneous for petitioner to isolate Section 1, Article VIII of the 1989 CBA from the other related section on sick leave with pay benefits, specifically Section 3 thereof, in its attempt to justify the discontinuance or withdrawal of the privilege of commutation or conversion to cash of the unenjoyed portion of the sick leave benefit to regular intermittent workers. The manner they were deprived of the privilege previously recognized and extended to them by petitioner-company during the lifetime of the CBA of October 16, 1985 until three (3) months from its renewal on April 15, 1989, or a period of three (3) years and nine (9) months, is not only tainted with arbitrariness but likewise discriminatory in nature. It must be noted that the 1989 CBA has two (2) sections on sick leave with pay benefits which apply to two (2) distinct classes of workers in petitioner's company, namely: (1) the regular non-intermittent workers or those workers who render a daily eight-hour service to the company and are governed by Section 1, Article VIII of the 1989 CBA; and (2) intermittent field workers who are members of the regular labor pool and the present regular extra labor pool as of the signing of the agreement on April 15, 1989 or those workers who have irregular working days and are governed by Section 3, Article VIII of the 1989 CBA. It is not disputed that both classes of workers are entitled to sick leave with pay benefits provided they comply with the conditions set forth under Section 1 in relation to the last paragraph of Section 3, to wit: (1) the employee-applicant must be regular or must have rendered at least one year of service with the company; and (2) the application must be accompanied by a certification from a company-designated physician. the phrase "herein sick leave privilege," as used in the last sentence of Section 1, refers to the privilege of having a fixed 15-day sick leave with pay which, as mandated by Section 1, only the non-intermittent workers are entitled to. This fixed 15-day sick leave with pay benefit should be distinguished from the variable number of days of sick leave, not to exceed 15 days, extended to intermittent workers under Section 3 depending on the number of hours of service rendered to the company, including overtime pursuant to the schedule provided therein. It is only fair and reasonable for petitioner-company not to stipulate a fixed 15-day sick leave with pay for its regular intermittent workers since, as the term "intermittent" implies, there is irregularity in their work-days. Reasonable and practical interpretation must be placed on contractual provisions. Interpetatio fienda est ut res magis valeat quam pereat. Such interpretation is to be adopted, that the thing may continue to have efficacy rather than fail.

3. ID.; ID.; ID.; SICK LEAVE BENEFITS; NATURE AND PURPOSE. — Sick leave benefits, like other economic benefits stipulated in the CBA such as maternity leave and vacation leave benefits, among others, are by their nature, intended to be replacements for regular income which otherwise would not be earned because an employee is not working during the period of said leaves. They are non-contributory in nature, in the sense that the employees contribute nothing to the operation of the benefits. By their nature, upon agreement of the parties, they are intended to alleviate the economic condition of the workers.

4. ID.; ID.; JURISDICTION OF VOLUNTARY ARBITRATOR; CASE AT BAR. — Petitioner-company's objection to the

authority of the Voluntary Arbitrator to direct the commutation of the unenjoyed portion of the sick leave with pay benefits of intermittent workers in his decision is misplaced. Article 261 of the Labor Code is clear. The questioned directive of the herein public respondent is the necessary consequence of the exercise of his arbitral power as Voluntary Arbitrator under Article 261 of the Labor Code "to hear and decide all unresolved grievances arising from the interpretation or implementation of the Collective Bargaining Agreement." We, therefore, find that no grave abuse of discretion was committed by public respondent in issuing the award (decision). Moreover, his interpretation of Sections 1 and 3, Article VIII of the 1989 CBA cannot be faulted with and is absolutely correct.

5. ID.; CONDITIONS OF EMPLOYMENT; PROHIBITION AGAINST ELIMINATION OR DIMINUTION OF BENEFITS; BENEFITS GRANTED PURSUANT TO COMPANY PRACTICE OR POLICY CANNOT BE PEREMPTORILY WITHDRAWN. — Whatever doubt there may have been early on was clearly obliterated when petitioner-company recognized the said privilege and paid its intermittent workers the cash equivalent of the unenjoyed portion of their sick leave with pay benefits during the lifetime of the CBA of October 16, 1985 until three (3) months from its renewal on April 15, 1989. Well-settled is it that the said privilege of commutation or conversion to cash, being an existing benefit, the petitioner-company may not unilaterally withdraw, or diminish such benefits. It is a fact that petitioner-company had, on several instances in the past, granted and paid the cash equivalent of the unenjoyed portion of the sick leave benefits of some intermittent workers. Under the circumstances, these may be deemed to have ripened into company practice or policy which cannot be peremptorily withdrawn.

D E C I S I O N

ROMERO, J p:

In this petition for certiorari, petitioner Davao Integrated Port Services Corporation seeks to reverse the Award 1 issued on September 10, 1991 by respondent Ruben V. Abarquez, in his capacity as Voluntary Arbitrator of the National Conciliation and Mediation Board, Regional Arbitration Branch XI in Davao City in Case No. AC-211-BX1-10-003-91 which directed petitioner to grant and extend the privilege of commutation of the unenjoyed portion of the sick leave with pay benefits to its intermittent field workers who are members of the regular labor pool and the present regular extra pool in accordance with the Collective Bargaining Agreement (CBA) executed between petitioner and private respondent Association of Trade Unions (ATU-TUCP), from the time it was discontinued and henceforth.

The facts are as follows:

Petitioner Davao Integrated Port Stevedoring Services (petitioner-company) and private respondent ATU-TUCP (Union), the exclusive collective bargaining agent of the rank and file workers of petitioner-company, entered into a collective bargaining agreement (CBA) on October 16, 1985 which, under Sections 1 and 3, Article VIII thereof, provide for sick leave with pay benefits each year to its employees who have rendered at least one (1) year of service with the company, thus:

"ARTICLE VIII


Section 1. Sick Leaves — The Company agrees to grant 15 days sick leave with pay each year to every regular non-intermittent worker who already rendered at least one year of service with the company. However, such sick leave can only be enjoyed upon certification by a company designated physician, and if the same is not enjoyed within one year period of the current year, any unenjoyed portion thereof, shall be converted to cash and shall be paid at the end of the said one year period. And provided however, that only those regular workers of the company whose work are not intermittent, are entitled to the herein sick leave privilege.

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Section 3. — All intermittent field workers of the company who are members of the Regular Labor Pool shall be entitled to vacation and sick leaves per year of service with pay under the following schedule based on the number of hours rendered including overtime, to wit:

Hours of Service Per Vacation Sick Leave

Calendar Year Leave

Less than 750 NII NII

751 — 825 6 days 6 days

826 — 900 7 7

901 — 925 8 8

926 — 1,050 9 9

1,051 — 1,125 10 10

1,126 — 1,200 11 11

1,201 — 1,275 12 12

1,276 — 1,350 13 13

1,351 — 1,425 14 14

1,426 — 1,500 15 15

The conditions for the availment of the herein vacation and sick leaves shall be in accordance with the above provided Sections 1 and 2 hereof, respectively."

Upon its renewal on April 15, 1989, the provisions for sick leave with pay benefits were reproduced under Sections 1 and 3, Article VIII of the new CBA, but the coverage of the said benefits was expanded to include the "present Regular Extra Labor Pool as of the signing of this Agreement." Section 3, Article VIII, as revised, provides, thus:

"Section 3. — All intermittent field workers of the company who are members of the Regular Labor Pool and present Regular Extra Labor Pool as of the signing of this agreement shall be entitled to vacation and sick leaves per year of service with pay under the following schedule

based on the number of hours rendered including overtime, to wit:

Hours of Service Per Vacation Sick Leave

Calendar Year Leave

Less than 750 NII NII

751 — 825 6 days 6 days

826 — 900 7 7

901 — 925 8 8

926 — 1,050 9 9

1,051 — 1,125 10 10

1,126 — 1,200 11 11

1,201 — 1,275 12 12

1,276 — 1,350 13 13

1,351 — 1,425 14 14

1,426 — 1,500 15 15

The conditions for the availment of the herein vacation and sick leaves shall be in accordance with the above provided Sections 1 and 2 hereof, respectively."

During the effectivity of the CBA of October 16, 1985 until three (3) months after its renewal on April 15, 1989, or until July 1989 (a total of three (3) years and nine (9) months), all the field workers of petitioner who are members of the regular labor pool and the present regular extra labor pool who had rendered at least 750 hours up to 1,500 hours were extended sick leave with pay benefits. Any unenjoyed portion thereof at the end of the current year was converted to cash and paid at the end of the said one-year period pursuant to Sections 1 and 3, Article VIII of the CBA. The number of days of their sick leave per year depends on the number of hours of service per calendar year in accordance with the schedule provided in Section 3, Article VIII of the CBA.

The commutation of the unenjoyed portion of the sick leave with pay benefits of the intermittent workers or its conversion to cash was, however, discontinued or withdrawn when petitioner-company under a new assistant manager, Mr. Benjamin Marzo (who replaced Mr. Cecilio Beltran, Jr. upon the latter's resignation in June 1989), stopped the payment of its cash equivalent on the ground that they are not entitled to the said benefits under Sections 1 and 3 of the 1989 CBA.

The Union objected to the said discontinuance of commutation or conversion to cash of the unenjoyed sick leave with pay benefits of petitioner's intermittent workers contending that it is a deviation from the true intent of the parties that negotiated the CBA; that it would violate the principle in labor laws that benefits already extended shall not be taken away and that it


would result in discrimination between the non-intermittent and the intermittent workers of the petitioner-company.

Upon failure of the parties to amicably settle the issue on the interpretation of Sections 1 and 3, Article VIII of the 1989 CBA, the Union brought the matter for voluntary arbitration before the National Conciliation and Mediation Board, Regional Arbitration Branch XI at Davao City by way of complaint for enforcement of the CBA. The parties mutually designated public respondent Ruben Abarquez, Jr. to act as voluntary arbitrator.

After the parties had filed their respective position papers, 2 public respondent Ruben Abarquez, Jr. issued on September 10, 1991 an Award in favor of the Union ruling that the regular intermittent workers are entitled to commutation of their unenjoyed sick leave with pay benefits under Sections 1 and 3 of the 1989 CBA, the dispositive portion of which reads:

"WHEREFORE, premises considered, the management of the respondent Davao Integrated Port Stevedoring Services Corporation is hereby directed to grant and extend the sick leave privilege of the commutation of the unenjoyed portion of the sick leave of all the intermittent field workers who are members of the regular labor pool and the present extra pool in accordance with the CBA from the time it was discontinued and henceforth.

SO ORDERED."

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

Petitioner-company argued that it is clear from the language and intent of the last sentence of Section 1, Article VIII of the 1989 CBA that only the regular workers whose work are not intermittent are entitled to the benefit of conversion to cash of the unenjoyed portion of sick leave, thus: ". . . And provided, however, that only those regular workers of the Company whose work are not intermittent are entitled to the herein sick leave privilege."

Petitioner-company further argued that while the intermittent workers were paid the cash equivalent of their unenjoyed sick leave with pay benefits during the previous management of Mr. Beltran who misinterpreted Sections 1 and 3 of Article VIII of the 1985 CBA, it was well within petitioner-company's rights to rectify the error it had committed and stop the payment of the said sick leave with pay benefits. An error in payment, according to petitioner-company, can never ripen into a practice.

We find the arguments unmeritorious.

A collective bargaining agreement (CBA), as used in Article 252 of the Labor Code, refers to a contract executed upon request of either the employer or the exclusive bargaining representative incorporating the agreement reached after negotiations with respect to wages, hours of work and all other terms and conditions of employment, including proposals for adjusting any grievances or questions arising under such agreement.

While the terms and conditions of a CBA constitute the law between the parties, 3 it is not, however, an ordinary contract to which is applied the principles of law

governing ordinary contracts. 4 A CBA, as a labor contract within the contemplation of Article 1700 of the Civil Code of the Philippines which governs the relations between labor and capital, is not merely contractual in nature but impressed with public interest, thus, it must yield to the common good. As such, it must be construed liberally rather than narrowly and technically, and the courts must place a practical and realistic construction upon it, giving due consideration to the context in which it is negotiated and purpose which it is intended to serve. 5

It is thus erroneous for petitioner to isolate Section 1, Article VIII of the 1989 CBA from the other related section on sick leave with pay benefits, specifically Section 3 thereof, in its attempt to justify the discontinuance or withdrawal of the privilege of commutation or conversion to cash of the unenjoyed portion of the sick leave benefit to regular intermittent workers. The manner they were deprived of the privilege previously recognized and extended to them by petitioner-company during the lifetime of the CBA of October 16, 1985 until three (3) months from its renewal on April 15, 1989, or a period of three (3) years and nine (9) months, is not only tainted with arbitrariness but likewise discriminatory in nature. Petitioner-company is of the mistaken notion that since the privilege of commutation or conversion to cash of the unenjoyed portion of the sick leave with pay benefits is found in Section 1, Article VIII, only the regular non-intermittent workers and no other can avail of the said privilege because of the proviso found in the last sentence thereof.

It must be noted that the 1989 CBA has two (2) sections on sick leave with pay benefits which apply to two (2) distinct classes of workers in petitioner's company, namely: (1) the regular non-intermittent workers or those workers who render a daily eight-hour service to the company and are governed by Section 1, Article VIII of the 1989 CBA; and (2) intermittent field workers who are members of the regular labor pool and the present regular extra labor pool as of the signing of the agreement on April 15, 1989 or those workers who have irregular working days and are governed by Section 3, Article VIII of the 1989 CBA.

It is not disputed that both classes of workers are entitled to sick leave with pay benefits provided they comply with the conditions set forth under Section 1 in relation to the last paragraph of Section 3, to wit: (1) the employee-applicant must be regular or must have rendered at least one year of service with the company; and (2) the application must be accompanied by a certification from a company-designated physician.

Sick leave benefits, like other economic benefits stipulated in the CBA such as maternity leave and vacation leave benefits, among others, are by their nature, intended to be replacements for regular income which otherwise would not be earned because an employee is not working during the period of said leaves. 6 They are non-contributory in nature, in the sense that the employees contribute nothing to the operation of the benefits. 7 By their nature, upon agreement of the parties, they are intended to alleviate the economic condition of the workers.

After a careful examination of Section 1 in relation to Section 3, Article VIII of the 1989 CBA in light of the facts and circumstances attendant in the instant case, we find and so hold that the last sentence of Section 1, Article VIII of the 1989 CBA, invoked by petitioner-company does not


bar the regular intermittent workers from the privilege of commutation or conversion to cash of the unenjoyed portion of their sick leave with pay benefits, if qualified. For the phrase "herein sick leave privilege," as used in the last sentence of Section 1, refers to the privilege of having a fixed 15-day sick leave with pay which, as mandated by Section 1, only the non-intermittent workers are entitled to. This fixed 15-day sick leave with pay benefit should be distinguished from the variable number of days of sick leave, not to exceed 15 days, extended to intermittent workers under Section 3 depending on the number of hours of service rendered to the company, including overtime pursuant to the schedule provided therein. It is only fair and reasonable for petitioner-company not to stipulate a fixed 15-day sick leave with pay for its regular intermittent workers since, as the term "intermittent" implies, there is irregularity in their work-days. Reasonable and practical interpretation must be placed on contractual provisions. Interpetatio fienda est ut res magis valeat quam pereat. Such interpretation is to be adopted, that the thing may continue to have efficacy rather than fail. 8

We find the same to be a reasonable and practical distinction readily discernible in Section 1, in relation to Section 3, Article VIII of the 1989 CBA between the two classes of workers in the company insofar as sick leave with pay benefits are concerned. Any other distinction would cause discrimination on the part of intermittent workers contrary to the intention of the parties that mutually agreed in incorporating the questioned provisions in the 1989 CBA.

Public respondent correctly observed that the parties to the CBA clearly intended the same sick leave privilege to be accorded the intermittent workers in the same way that they are both given the same treatment with respect to vacation leaves - non-commutable and non-cumulative. If they are treated equally with respect to vacation leave privilege, with more reason should they be on par with each other with respect to sick leave privileges. 9 Besides, if the intention were otherwise, during its renegotiation, why did not the parties expressly stipulate in the 1989 CBA that regular intermittent workers are not entitled to commutation of the unenjoyed portion of their sick leave with pay benefits?

Whatever doubt there may have been early on was clearly obliterated when petitioner-company recognized the said privilege and paid its intermittent workers the cash equivalent of the unenjoyed portion of their sick leave with pay benefits during the lifetime of the CBA of October 16, 1985 until three (3) months from its renewal on April 15, 1989. Well-settled is it that the said privilege of commutation or conversion to cash, being an existing benefit, the petitioner-company may not unilaterally withdraw, or diminish such benefits. 10 It is a fact that petitioner-company had, on several instances in the past, granted and paid the cash equivalent of the unenjoyed portion of the sick leave benefits of some intermittent workers. 11 Under the circumstances, these may be deemed to have ripened into company practice or policy which cannot be peremptorily withdrawn. 12

Moreover, petitioner-company's objection to the authority of the Voluntary Arbitrator to direct the commutation of the unenjoyed portion of the sick leave with pay benefits of intermittent workers in his decision is misplaced. Article 261 of the Labor Code is clear. The questioned directive of the herein public respondent is the necessary consequence of the exercise of his arbitral power as Voluntary Arbitrator under Article 261 of the Labor Code

"to hear and decide all unresolved grievances arising from the interpretation or implementation of the Collective Bargaining Agreement." We, therefore, find that no grave abuse of discretion was committed by public respondent in issuing the award (decision). Moreover, his interpretation of Sections 1 and 3, Article VIII of the 1989 CBA cannot be faulted with and is absolutely correct.

WHEREFORE, in view of the foregoing, the petition is DISMISSED. The award (decision) of public respondent dated September 10, 1991 is hereby AFFIRMED. No costs.

SO ORDERED.


Manila

EN BANC

G.R. No. L-44717 August 28, 1985

THE CHARTERED BANK EMPLOYEES ASSOCIATION, petitioner, vs.HON. BLAS F. OPLE, in his capacity as the Incumbent Secretary of Labor, and THE CHARTERED BANK, respondents.

GUTIERREZ, JR., J.:

This is a petition for certiorari seeking to annul the decision of the respondent Secretary, now Minister of Labor which denied the petitioner's claim for holiday pay and its claim for premium and overtime pay differentials. The petitioner claims that the respondent Minister of Labor acted contrary to law and jurisprudence and with grave abuse of discretion in promulgating Sec. 2, Rule IV, Book III of the Integrated Rules and in issuing Policy Instruction No. 9, both referring to holidays with pay.

On May 20, 1975, the Chartered Bank Employees Association, in representation of its monthly paid employees/members, instituted a complaint with the Regional Office No. IV, Department of Labor, now Ministry of Labor and Employment (MOLE) against private respondent Chartered Bank, for the payment of ten (10) unworked legal holidays, as well as for premium and overtime differentials for worked legal holidays from November 1, 1974.

The memorandum for the respondents summarizes the admitted and/or undisputed facts as follows:


l. The work force of respondent bank consists of 149 regular employees, all of whom are paid by the month;

2. Under their existing collective bargaining agreement, (Art. VII thereof) said monthly paid employees are paid for overtime work as follows:

Section l. The basic work week for all employees excepting security guards who by virtue of the nature of their work are required to be at their posts for 365 days per year, shall be forty (40) hours based on five (5) eight (8) hours days, Monday to Friday.

Section 2. Time and a quarter hourly rate shall be paid for authorized work performed in excess of eight (8) hours from Monday through Friday and for any hour of work performed on Saturdays subject to Section 5 hereof.

Section 3. Time and a half hourly rate shall be paid for authorized work performed on Sundays, legal and special holidays.

xxx xxx xxx

xxx xxx xxx

Section 5. The provisions of Section I above notwithstanding the BANK may revert to the six (6) days work week, to include Saturday for a four (4) hour day, in the event the Central Bank should require commercial banks to open for business on Saturday.

3. In computing overtime pay and premium pay for work done during regular holidays, the divisor used in arriving at the daily rate of pay is 251 days although formerly the divisor used was 303 days and this was when the respondent bank was still operating on a 6-day work week basis. However, for purposes of computing deductions corresponding to absences without pay the divisor used is 365 days.

4. All regular monthly paid employees of respondent bank are receiving salaries way beyond the statutory or minimum rates and are among the highest paid employees in the banking industry.

5. The salaries of respondent bank's monthly paid employees suffer no deduction for holidays occurring within the month.

On the bases of the foregoing facts, both the arbitrator and the National Labor Relations Commission (NLRC) ruled in favor of the petitioners ordering the respondent

bank to pay its monthly paid employees, holiday pay for the ten (10) legal holidays effective November 1, 1974 and to pay premium or overtime pay differentials to all employees who rendered work during said legal holidays. On appeal, the Minister of Labor set aside the decision of the NLRC and dismissed the petitioner's claim for lack of merit basing its decision on Section 2, Rule IV, Book Ill of the Integrated Rules and Policy Instruction No. 9, which respectively provide:

Sec. 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.

POLICY INSTRUCTION NO. 9

TO: All Regional Directors

SUBJECT: PAID LEGAL HOLIDAYS

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 P240, 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.

The issues are presented in the form of the following assignments of errors:

First Error

Whether or not the Secretary of Labor erred and acted contrary to law in promulgating Sec. 2, Rule IV, Book III of the Integrated Rules and Policy Instruction No. 9.

Second Error

Whether or not the respondent Secretary of Labor abused his discretion and acted contrary to law in applying Sec. 2, Rule IV of the Integrated Rules and Policy Instruction No. 9 abovestated to private respondent's monthly-paid employees.

Third Error

Whether or not the respondent Secretary of Labor, in not giving due credence to the respondent bank's practice of paying its employees base pay of 100% and premium pay of 50% for work done during legal holidays, acted contrary to law and abused his discretion in denying the claim of petitioners for unworked holidays and premium and overtime pay differentials for worked holidays.

The petitioner contends that the respondent Minister of Labor gravely abused his discretion in promulgating Section 2, Rule IV, Book III of the Integrated Rules and Policy Instruction No. 9 as guidelines for the implementation of Articles 82 and 94 of the Labor Code and in applying said guidelines to this case. It maintains that while it is true that the respondent Minister has the authority in the performance of his duty to promulgate rules and regulations to implement, construe and clarify the Labor Code, such power is limited by provisions of the statute sought to be implemented, construed or clarified. According to the petitioner, the so-called "guidelines" promulgated by the respondent Minister totally

contravened and violated the Code by excluding the employees/members of the petitioner from the benefits of the holiday pay, when the Code itself did not provide for their expanding the Code's clear and concise conclusion and notwithstanding the Code's clear and concise phraseology defining those employees who are covered and those who are excluded from the benefits of holiday pay.

On the other hand, the private respondent contends that the questioned guidelines did not deprive the petitioner's members of the benefits of holiday pay but merely classified those monthly paid employees whose monthly salary already includes holiday pay and those whose do not, and that the guidelines did not deprive the employees of holiday pay. It states that the question to be clarified is whether or not the monthly salaries of the petitioner's members already includes holiday pay. Thus, the guidelines were promulgated to avoid confusion or misconstruction in the application of Articles 82 and 94 of the Labor Code but not to violate them. Respondent explains that the rationale behind the promulgation of the questioned guidelines is to benefit the daily paid workers who, unlike monthly-paid employees, suffer deductions in their salaries for not working on holidays. Hence, the Holiday Pay Law was enacted precisely to countervail the disparity between daily paid workers and monthly-paid employees.

The decision in Insular Bank of Asia and America Employees' Union (IBAAEU) v. Inciong (132 SCRA 663) resolved a similar issue. Significantly, the petitioner in that case was also a union of bank employees. We ruled that Section 2, Rule IV, Book III of the Integrated Rules and Policy Instruction No. 9, are contrary to the provisions of the Labor Code and, therefore, invalid This Court stated:

It is elementary in 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. In the case at bar, the provisions of the Labor Code on the entitlement to the benefits of holiday pay are clear and explicit it provides for both the coverage of and exclusion from the benefit. In Policy Instruction No. 9, the then Secretary of Labor went as far as to categorically state that the benefit is principally intended for daily paid employees, when the law clearly states that every worker shall be paid their regular holiday pay. This is flagrant violation of the mandatory directive of Article 4 of the Labor Code, which states that 'All doubts in the implementation and interpretation of the provisions of this Code, including its implementing rules and regulations, shall be resolved in favor of labor.' Moreover, it shall always be presumed that the legislature intended to enact a valid and permanent statute which would have the most beneficial effect that its language permits (Orlosky v. Hasken, 155 A. 112)

Obviously, the Secretary (Minister) of Labor had exceeded his statutory authority granted by Article 5 of the Labor Code authorizing him to


promulgate the necessary implementing rules and regulations.

We further ruled:

While it is true that the contemporaneous construction placed upon a statute by executive officers whose duty is to enforce it should be given great weight by the courts, still if such construction is so erroneous, as in the instant case, the same must be declared as null and void. It is the role of the Judiciary to refine and, when necessary correct constitutional (and/or statutory) interpretation, in the context of the interactions of the three branches of the government, almost always in situations where some agency of the State has engaged in action that stems ultimately from some legitimate area of governmental power (The Supreme Court in Modern Role, C.B. Swisher 1958, p. 36).

xxx xxx xxx

In view of the foregoing, Section 2, Rule IV, Book III of the Rules to implement the Labor Code and Policy Instruction No. 9 issued by the then Secretary of Labor must be declared null and void. Accordinglyl public respondent Deputy Minister of Labor Amado G. Inciong had no basis at all to deny the members of petitioner union their regular holiday pay as directed by the Labor Code.

Since the private respondent premises its action on the invalidated rule and policy instruction, it is clear that the employees belonging to the petitioner association are entitled to the payment of ten (10) legal holidays under Articles 82 and 94 of the Labor Code, aside from their monthly salary. They are not among those excluded by law from the benefits of such holiday pay.

Presidential Decree No. 850 states who are excluded from the holiday provisions of that law. It states:

ART. 82. Coverage. The provision 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. (Emphasis supplied).

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, 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.

It is argued that even without the presumption found in the rules and in the policy instruction, the company practice indicates that the monthly salaries of the employees are so computed as to include the holiday pay provided by law. The petitioner contends otherwise.

One strong argument in favor of the petitioner's stand is the fact that the Chartered Bank, in computing overtime compensation for its employees, employs a "divisor" of 251 days. The 251 working days divisor is the result of subtracting all Saturdays, Sundays and the ten (10) legal holidays from the total number of calendar days in a year. If the employees are already paid for all non-working days, the divisor should be 365 and not 251.

The situation is muddled somewhat by the fact that, in computing the employees' absences from work, the respondent bank uses 365 as divisor. Any slight doubts, however, must be resolved in favor of the workers. This is in keeping with the constitutional mandate of promoting social justice and affording protection to labor (Sections 6 and 9, Article II, Constitution). The Labor Code, as amended, itself provides:

ART. 4. Construction in favor of labor. All doubts in the implementation and interpretation of the provisions of this Code, including its implementing rules and regulations, shall be resolved in favor of labor.

Any remaining doubts which may arise from the conflicting or different divisors used in the computation of overtime pay and employees' absences are resolved by the manner in which work actually rendered on holidays is paid. Thus, whenever monthly paid employees work on a holiday, they are given an additional 100% base pay on top of a premium pay of 50%. If the employees' monthly pay already includes their salaries for holidays, they should be paid only premium pay but not both base pay and premium pay.

The contention of the respondent that 100% base pay and 50% premium pay for work actually rendered on holidays is given in addition to monthly salaries only because the collective bargaining agreement so provides is itself an argument in favor of the petitioner stand. It shows that the Collective Bargaining Agreement already contemplated a divisor of 251 days for holiday pay computations before the questioned presumption in the Integrated Rules and the Policy Instruction was formulated. There is furthermore a similarity between overtime pay, which is computed on the basis of 251 working days a year, and holiday pay, which should be similarly treated notwithstanding the public respondents' issuances. In both cases overtime work and holiday work- the employee works when he is supposed to be resting. In the absence of an express provision of the CBA or the law to the contrary, the computation should be similarly handled.

We are not unmindful of the fact that the respondent's employees are among the highest paid in the industry. It is not the intent of this Court to impose any undue burdens on an employer which is already doing its best


for its personnel. we have to resolve the labor dispute in the light of the parties' own collective bargaining agreement and the benefits given by law to all workers. When the law provides benefits for "employees in all establishments and undertakings, whether for profit or not" and lists specifically the employees not entitled to those benefits, the administrative agency implementing that law cannot exclude certain employees from its coverage simply because they are paid by the month or because they are already highly paid. The remedy lies in a clear redrafting of the collective bargaining agreement with a statement that monthly pay already includes holiday pay or an amendment of the law to that effect but not an administrative rule or a policy instruction.

WHEREFORE, the September 7, 1976 order of the public respondent is hereby REVERSED and SET ASIDE. The March 24, 1976 decision of the National Labor Relations Commission which affirmed the October 30, 1975 resolution of the Labor Arbiter but deleted interest payments is REINSTATED.

SO ORDERED. National Sugar Refineries Corp v NLRC (220 SCRA 452) 1993

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.

_________________________________________________________________________


Manila

SECOND DIVISION

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

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 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 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.

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.

"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.)

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'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:

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(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

(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

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;

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.

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 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 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.


Manila

THIRD DIVISION

G.R. No. 75510 October 27, 1987

RUFINA SORIANO, petitioner, vs.THE NATIONAL LABOR RELATIONS COMMISSION and KINGLY COMMODITIES TRADERS AND MULTI-RESOURCES, INC., respondents.

R E S O L U T I O N

FELICIANO, J.:

Petitioner started working with respondent commodities trading Corporation in November 1977 as Investment Counselor and eventually became Vice-President, Marketing. On 18 September 1984, petitioner was charged with allowing or failing to supervise and monitor certain activities of investment counselors in her department, which included the signing of a contract opening an account for a client by an investment counselor without authority from the client, transfers of funds from one account to another without the knowledge and authority of the clients involved, unauthorized transactions in foreign currency with clients of the respondent Corporation, unauthorized approval of leave for members of her department, and resulting in loss of confidence in petitioner. Petitioner was preventively suspended and required to explain her acts or failure to act. Two (2) days later, petitioner submitted her detailed answer or explanation. On 27 September, 1984, the Executive Vice-President and General Manager of respondent Corporation found petitioner's written explanation unsatisfactory and notified petitioner that the Corporation had lost confidence on her ability to discharge the functions of her office and accordingly terminated her services.

Petitioner filed a complaint for illegal suspension and dismissal against respondent Corporation and Mr. Guil Rivera, Senior Vice-President, and Mr. Richard Tan, Executive Vice-President and General Manager. She asked for reinstatement with backwages, as well as moral and exemplary damages, medical expenses, attorney's fees and other litigation expenses.


On 8 July 1985, Labor Arbiter A.L Sevilla rendered a Decision requiring the respondent Corporation to pay petitioner: (1) separation pay in the amount of P10,500.00; (2) six (6) months backwages in the amount of P120,000.00; (3) moral damages in the amount of P500,000.00; (4) exemplary damages in the amount of P100,000.00; and (5) attorney's fees equivalent to 10% of the award.

On appeal by the private respondents, public respondent NLRC, in a Decision dated 10 March 1986, modified the Labor Arbiter's award by deleting the award of moral and exemplary damages and requiring respondent Corporation to pay: (1) separation pay amounting to P21,000.00; (2) three (3) months backwages without qualification and deduction amounting to P9,000.00; and (3) 10% of the award as attorney's fees.

Both the Labor Arbiter and respondent NLRC found that because of the strained relations between petitioner and respondent Corporation, reinstatement of petitioner was not feasible. Respondent Corporation had alleged that petitioner had immediately found employment with Onapal Philippines Commodities, which had not been denied or refuted by petitioner. Because respondent Corporation had failed to specify the definite date of her employment, respondent NLRC granted petitioner three (3) months backwages without qualification and deduction.

In the present Petition for Certiorari, petitioner seeks the annulment of the Decision of respondent NLRC dated 10 March 1986 and the revival or reinstatement of the Decision of Iabor Arbiter Sevilla dated 8 July 1985.

Petitioner claims that respondent Corporation acted in bad faith in suspending and terminating her services. Petitioner asserts that:

1. respondent Corporation had violated her right to due process by suspending her immediately without the benefit of hearing. She argues that the notice of preventive suspension served her on 18 September 1986 was "living proof" that the corporation had already concluded she was guilty of the charges levelled against her even before she could submit her written explanation.

2. the "true reason" for her "illegal dismissal" was the "personal grudge which Rivera harbored against her.

3. respondent Corporation's bad faith was also demonstrated in discrimination against her in relation to other employees of the Corporation who had been in the past similarly charged with alleged infractions of the corporation's rules. More specifically, petitioner asserts discrimination against herself consisting of the failure of the respondent Corporation to dismiss the two (2) immediate supervisors of the investment counselor who had carried out the unauthorized manipulations of clients' accounts in petitioner's department.

4. petitioner also charges respondent Corporation with having misrepresented the extent of her participation in or the scope of her duties in respect of unauthorized acts and transactions of her subordinates in the marketing department of respondent company.

The Court considers that petitioner has failed to show a grave abuse of discretion, or an act performed without or in excess of jurisdiction, on the part of the respondent NLRC.

In respect of Item 1, preventive suspension does not in itself prove that the company had prejudged that petitioner was guilty of the charges she was asked to answer and explain. Preventive suspension may be necessary for the protection of the company, its operations and assets, pending investigation of the alleged malfeasance or misfeasance on the part of officers or employees of the company and pending a decision on the part of the company (See Sec. 3 of Rule XIV, Book V, of the Omnibus Rules Implementing the Labor Code). Considering the very senior and sensitive character of petitioner's position as head of a Department, a fine position as distinguished from a staff or planning position, and considering the unauthorized transactions then just discovered by the respondent Corporation, we do not believe that the preventive suspension was an arbitrary and capricious act amounting to bad faith on the part of the respondent Corporation.

In respect of Item 2, the alleged personal motive behind petitioner's dismissal-personal envy or feelings of personal insecurity on the part of Guil Rivera, Senior Vice-President, respondent NLRC found that petitioner had not sufficiently established her assertion. Petitioner's assertion on this point appears no more than a conjecture or supposition and does not afford an adequate basis for overturning respondent NLRC's finding on this point. Further, if petitioner had clearly proven such personal ill-will on the part of Mr. Rivera, a serious question would arise as to whether the respondent Corporation (as distinguished from Mr. Rivera) could be held liable at all for Mr. Rivera's acts in the absence of clear authorization for, or approval or adoption of, such act by the respondent Corporation with knowledge of the personal malice on the part of Mr. Rivera.

In respect of Item 3, respondent NLRC's decision was silent. The Court believes, however, that respondent Corporation must be accorded reasonable latitude in determining who among erring officers or employees should be punished by the company and to what extent. In the instant case, respondent Corporation presumably found it was not necessary to terminate the services also of the two (2) section heads in petitioner's department, who clearly are much lower in the corporate hierarchy than petitioner.

With respect to the last and most important of the above listed items, the scope of petitioner's responsibility for the operations of her department and the extent of her supervisory authority over her subordinates in the marketing department, respondent NLRC set forth the following discussion and evaluation:

Appellants stressed the point that complainant, as vice president, marketing, is actually a department


head of one of the company's sales department (sic). As such, her basic function is the supervision and monitoring the daily activities of her department and the employees she supervises (sic). By the nature of the company's business, complainant as a department head should see to it that the clients' trust and confidence in the company is upheld through above-board transactions, untainted relations, satisfactory servicing and unquestioned integrity of its officers and staff, aside from the promotion of cordial employee relations among her personnel through unbiased and uniform implementation of company policies affecting employee benefits and welfare.

According to the appellants, the finding of the Labor Arbiter that 'complainant is not expected to keep an eye or be aware of all day-to-day transactions of her workers particularly Investment Consultants in her department' does not conform to the facts prevailing in this case.

In the Panemanglor case, which is the crucial point at issue, Panemanglor opened an account with the respondent corporation on June 28, 1984 by depositing the amount of P50,000.00 through Sofia Nazareno, investment counselor. Instead of the client signing the Customers Agreement, it was Nazareno who signed the agreement and the signature card in the name of the client, which is highly irregular. Had she exercised prudence in the supervision of her investment consultants, the irregularity could hate been earlier detected. As a result, the sum of P25,000.00 from Panemanglor's account was transferred by Nazareno to the account of Ramon Lopez, without the knowledge of Panemanglor on July 9, 1984. On July 13, 1984 the said client withdrew the sum of P25,000.00 through a Payment Instruction Form that was approved by the complainant. On August 6, 1964, the amount of P4,052.59 was transferred by Nazareno to the account of Panemanglor from the account of Ramon Lopez. This transaction was with the approval of the complainant. On September 3, 1984, Panemanglor demanded the payment of the balance of P25,000.00 from the respondent company to close his account and the letter of Panemanglor was referred to complainant by respondent Guil Rivera for necessary action. In her memorandum to senior vice president Guil Rivera complainant confirmed the irregularity in the handling of the account of Panemanglor, but she failed to take appropriate action against the erring employee which was within her power to discipline employees under her supervision ater on February 4, 1985, a complaint was filed before the

Securities and Exchange Commission by Panemanglor for the recovery of the P25,000.00 plus damages against the respondent corporation, contrary to her claim that the client will not file a recovery suit against the corporation since the obligation was purely personal to Nazareno.

Respondents contend that complainant could have immediately discovered the unauthorized signature of Sofia Nazareno that led to the illegal transfers of fund, had she followed the company procedure and practice for her to be personally acquainted with new clients and her admission that she was not aware of the complained acts has brought to light that she was remiss in her supervisory and monitoring function. On top of this, she failed to institute disciplinary action

xxx xxx xxx

As head of one of the company's sales department (sic) and a managerial employee at that, complainant is expected to monitor the daily activities of the investment counselors and the transactions of clients in her department. As a matter of practice and procedure, complainant, as vice-president marketing, is always informed of new clients for her to be personally acquainted with the client. We agree with the appellants that had the complainant adhered to this procedure, she could have immediately noticed the unauthorized signature by Sofia Nazareno that enabled her to transfer funds from one account to another. Likewise, since the complainant approved the payment instruction for P25,000.00 on July 13, 1984, the transfer of P4,052.59 on August 6, 1984 from the account of Ramon Lopez to Panemanglor's account, and the withdrawal of the transferred amount on August 7, 1984, she could have easily suspected that something was irregular with the transaction Yet, it took several months before she knew of the anomaly and it took her superior, respondent Guil Rivera, to bring the matter to her attention. Under the circumstances, it cannot be truthfully said that complainant has not been without any fault whatsoever. For this reason, the basis for the award of the moral and exemplary damages has not been suffiiciently or satisfactorily against the erring employee. gently or satisfactorily established by the complainant. And besides the dismissal of the complainant by the respondent was done in good faith. ... (Emphasis supplied)

Petitioner's argument that, because she was head of the entire marketing (sales) department, she could not be expected to monitor the detailed or day-to-day acts and


behaviour of the staff members of her department, does not address what appears to be the thrust of the respondent NLRC's decision, And that is, that as head of the department, it was her responsibility to adopt ways and means of keeping herself sufficiently informed of the activities of her staff members so as to prevent or at least discover at an early stage, e.g., unauthorized or illegal transactions and manipulation of clients' accounts. On the one hand, the above position taken by the respondent NLRC cannot be regarded as so obviously unreasonable and despotic as to constitute a grave abuse of discretion, given the character of the business of a commodities trading company and the fact that very substantial sums of money are handled daily by petitioner's department. Upon the other hand, petitioner's logic would lead to the conclusion that the more senior the management position, the slighter the responsibility for malfeasance or nonfeasance that can be laid upon the position holder; the chief executive officer of a corporation would effectively have, under this logic, little or no responsibility at all.

Turning to the specific award made by respondent NLRC, the salary base properly used in computing the separation pay and the backwages due to petitioner should include not just the basic salary but also the regular allowances that petitioner had been receiving (See Santos v. National Labor Relations Commission G.R. No. 76721, 21 September 1987). In petitioner's case, the base figure properly includes her: (a) basic salary of P3,000.00 a month; and (b) living allowance of P2,400 a month (petitioner's Affidavit, dated 12 April 1985, Exhibit "G", Rollo, p. 105). The commissions also claimed by petitioner ("override commission" plus "net deposit incentive") are not properly includible in such base figure since such commissions must be earned by actual market transactions attributable to petitioner. Neither should "travels equivalent" [an unusual and unexplained term; P10,000.00 a month] and "commission in trading personal clients" P3,000.00 a month] be included in such base figure. Considering that the charge of bad faith on the part of private respondents was not proven, the respondent NLRC having, on the contrary, made a finding that petitioner's dismissal was made in good faith there appears no real basis for the award of attorney's fees (Art. 2208 5 Civil Code). This award should not exceed a nominal amount which we set at P1,500.00.

Thus, the appropriate computation would be:

A. Separationpay-P5,400.00/month 7 = P37,800.00 (in view of petitioner's seven (7) years of service)

B. Backwages-P5,400.00/month x 3 mos. = P16,200.00

Sub-Total P54,000.00

plus nominal attorney's fees 1,500.00

TOTAL P55,500.00

ACCORDINGLY, the Court Resolved to DISMISS the Petition for certiorari for lack of merit. The Decision of the respondent NLRC dated 10 March 1986 is modified so as to award petitioner the following items: a) separation pay in the amount of P37,800.00; b) backwages for three (3) months in the amount of P16,200.00; and c) attorney's fees of P1,500.00, making a total of P55,500.00.

SO ORDERED.


Documents

Labor Midterm 10