G.R. No. 177524
July 23, 2014
NATIONAL UNION OF WORKERS IN HOTEL RESTAURANT AND ALLIED INDUSTRIES
(NUWHRAIN-APL-IUF), PHILIPPINE PLAZA CHAPTER, Petitioner,
vs.
PHILIPPINE PLAZA HOLDINGS, INC., Respondent.
DECISION
BRION, J.:
We resolve the petition for review on certiorari,1 challenging the January 31, 2007 decision2 and the
April 20, 2007 resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 93698.
This CA decision reversed the July 4, 2005 decision4 of the National Labor Relations Commission
(NLRC) in NLRC NCR CA No. 031977-02 (NLRC NCR-30-05-02011-01) that in tum, reversed and set
aside the April 30, 2002 decision5 of the Labor Arbiter (LA).
The LA dismissed the complaint for non-payment of service charges filed by petitioner National Union
of Workers in Hotel Restaurant and Allied Industries (NUWHRAIN-APL-IUF), Philippine Plaza Chapter
(Union).
The Factual Antecedents
The Union is the collective bargaining agent of the rank-and-file employees of respondent Philippine
Plaza Holdings, Inc. (PPHI).
On November 24, 1998, the PPHI and the Union executed the "Third Rank-and-File Collective
Bargaining Agreement as Amended"6 (CBA). The CBA provided, among others, for the collection, by
the PPHI, of a ten percent (10%) service charge on the saleof food, beverage, transportation,
laundry and rooms. The pertinent CBA provisions read:
SECTION 68. COLLECTION. The HOTEL shall continue to collect ten percent (10%) service charge on
the sale of food, beverage, transportation, laundry and rooms except on negotiated contracts and
special rates. [Emphasis supplied]
SECTION 69. DISTRIBUTION. The service charge to be distributed shall consist of the following:
Effective Food & Beverage Room, Transportation & valet
1998
95%
100%
1997
95%
100%
The distributable amount will beshared equally by all HOTEL employees, including managerial
employees but excluding expatriates, with three shares to be given to PPHI Staff and three shares to
the UNION (one for the national and two for the local funds) that may be utilized by them for
purposes for which the UNION may decide.
These provisions merely reiterated similar provisions found in the PPHIUnion’s earlier collective
bargaining agreement executed on August 29, 1995.7
On February 25, 1999, the Union’s Service Charge Committee informed the Union President, through
an audit report (1st audit report),8 of uncollected service charges for the last quarter of 1998
amounting to ₱2,952,467.61. Specifically, the audit report referred to the service charges from the
following items: (1) "Journal Vouchers;" (2) "Banquet Other Revenue;" and (3) "Staff and Promo."
The Union presented this audit report to the PPHI’s management during the February 26, 1999 Labor
Management Cooperation Meeting (LMCM).9 The PPHI’s management responded that the Hotel
Financial Controller would need to verify the audit report.
Through a letter dated June 9, 1999,10 the PPHI admitted liability for ₱80,063.88 out of the
₱2,952,467.61 thatthe Union claimed as uncollected service charges. The PPHI denied the rest of the
Union’s claims because: (1) they were exempted from the service charge being revenues from
"special promotions" (revenue from the Westin Gold Card sales) or "negotiated contracts" (alleged
revenue from the Maxi-Media contract); (2) the revenues did not belong to the PPHI but to thirdparty suppliers; and (3) no revenue was realized from these transactions as they were actually
expenses incurred for the benefit of executives or by way of good-will to clients and government
officials.
During the July 12, 1999 LMCM,11 the Union maintained its position on uncollected service charges so
that a deadlock on the issue ensued. The parties agreed to refer the matter to a third party for the
solution. They considered two options – voluntary arbitration or court action – and promised to get
back to each other on their chosen option.
In its formal reply (to the PPHI’sJune 9, 1999 letter) dated July 21, 1999 (2nd audit report),12 the
Union modified its claims. It claimed uncollected service charges from: (1) "Journal Vouchers Westin Gold Revenue and Maxi-Media" (F&B and Rooms Barter); (2) "Banquet and Other Revenue;"
and (3) "Staff and Promo."
On August 10, 2000, the Union’s Service Charge Committee made another service charge audit
report for the years 1997, 1998 and 1999 (3rd audit report).13 This 3rd audit report reflected total
uncollected service charges of ₱5,566,007.62 from the following entries: (1) "Journal Vouchers;" (2)
"Guaranteed No Show;" (3) "Promotions;" and (4) "F & B Revenue." The Union President presented
the 3rd audit report to the PPHI on August 29, 2000.
When the parties failed to reachan agreement, the Union, on May 3, 2001, filed before the LA
(Regional Arbitration Branch of the NLRC) a complaint14 for non-payment of specified service
charges. The Union additionally charged the PPHI with unfair labor practice (ULP) under Article 248 of
the Labor Code, i.e., for violation of their collective bargaining agreement.
In its decision15 dated April 30, 2002, the LA dismissed the Union’s complaint for lack of merit. The
LA declared that the Union failed to show, by law, contract and practice, its entitlement to the
payment of service charges from the entries specified in its audit reports (specified
entries/transactions).
The LA pointed out that Section 68 of the CBA explicitly requires, as a precondition for the
distribution of service charges in favor of the covered employees, the collection of the 10% service
charge on the "sale of food, beverage, transportation, laundry and rooms;" at the same time, the
provision exempts from its coverage "negotiated contracts" and "special rates" that the LA deemed
as non-revenue generating transactions involving "food, beverage, transportation, laundry and
rooms." The Union failed to prove that the PPHI collected 10% service charges on the specified
entries/transactions that could have triggered the PPHI’s obligation under this provision.
Particularly, the LA pointed out that, first, the only evidence on record that could have formed the
basis of the Union’s claim for service charges was the PPHI’s admission that, as a matter of policy, it
has been charging, collecting and distributing to the covered employees 10% service charge on the
fifty percent (50%) of the total selling price of the "Maxi-Media F & B" and on the "Average House"
rate of the "Maxi-Media Rooms." And it did so, notwithstanding the fact that the "Maxi-Media F & B
and Rooms Barter" is a "negotiated contract" and/or "special rate" that Section 68 explicitly excludes
from the service charge coverage.
Second,while the PPHI derived revenues from the sale of the Westin Gold Cards (Westin Gold
Revenue), the PPHI did not and could not have collected a 10% service charge as these transactions
could not be considered as sale of food, beverage, transportation, laundry and rooms that Section 68
contemplates.
Third, the "Staff and Business Promotion and Banquet" entry refers to the expenses incurred by the
PPHI’s Marketing Department and Department Heads and Hotel executives either as part of their
perks or the PPHI’s marketing tool/public relations. These are special rates that are essentially nonrevenue generating items.
Fourth, the "Backdrop" entry refers to services undertaken by third parties payment for which were
made of course to them; hence, this entry/transaction could not likewise be considered as sale of
services by PPHI for which collection of the 10% service charge was warranted.
Lastly, the LA equally brushed aside the Union’s claim of ULP declaring that the PPHI was well within
its legal and contractual right to refuse payment of service charges for entries from which it did not
collect any service charge pursuant tothe provision of their CBA.
The NLRC’s ruling
In its decision16 of July 4, 2005, the NLRC reversed the LA’s decision and considered the specified
entries/transactions as "service chargeable." As the PPHI failed to prove that it paid or remitted the
required service charges, the NLRC held the PPHI liable to pay the Union ₱5,566,007.62 representing
the claimed uncollected service charges for the years 1997, 1998 and 1999 per the 3rd audit report.
The PHHI went to the CA on a petition for certiorari17 after the NLRC denied its motion for
reconsideration.18
The CA’s ruling
The CA granted the PPHI’s petition in its January 31, 2007 decision.19 It affirmed the LA’s decision
but ordered the PPHI to pay the Union the amount of ₱80,063.88 as service charges that it found
was due under the circumstances. The CA declared that no service charges were due from the
specified entries/transactions; either these constituted "negotiated contracts" and "special rates" that
Section 68 of the CBA explicitly excludes from the coverage of service charges, or they were cited
bases that the Union failed to sufficiently prove.
The CA pointed out that: one, the "Westin Gold Card Revenues" entry involved the sale, not of food,
beverage, transportation, laundry and rooms, but of a "contractual right" to be charged a lesser rate
for the products and services that the Hotel and the stores within it provide. At any rate, the PPHI
charges, collects and distributes to the covered employees the CBAagreed service charges whenever
any Westin Gold Card member purchases food, beverage, etc. Two, the "Maxi-Media F & B and
Rooms and Barter" entry did not involve any sale transaction that Section 68 contemplates. The CA
pointed out that the arrangement20 between the PPHI and Maxi-Media International, Inc. was not one
of sale but an innominate contract of facio ut des, i.e., in exchange for the professional
entertainment services provided by Maxi-Media, the Hotel agreed to give the former ₱2,800,000.00
worth of products and services.The CA added that this agreement falls under "negotiated contracts"
that Section 68 explicitly exempts. Three, the sale of "Gift Certificates" does not involve the CBAcontemplated "sale of food, beverage, etc." Four, the Union failed to show the source of its
computations for its "Guaranteed No Show" and "F & B Revenue" claims. Five, the "Business
Promotions" entry likewise did not involve any sale; these were part of the PPHI’s business expenses
in the form of either signing benefits for the PPHI’s executives or asmarketing tool used by the PPHI’s
marketing personnel to generate goodwill. And six, the Union’s claims for service charges that the
PPHI allegedly collected prior to May 3, 1998 or three years before the Union filed itscomplaint on
May 3, 2001 had already prescribed per Article 291 of the Labor Code.
The Union filed the present petition after the CA denied its motion for Reconsideration 21
in the CA’s April 20, 2007 resolution.22
The Petition
The Union argues that the CA clearly misapprehended and misappreciated, with grave abuse of
discretion, the facts and evidence on record. It maintains that the specified entries/transactions are
revenue based transactions which, per Section 68 and 69 of the CBA, clearly called for the collection
and distribution of a 10% service charge in favor of the covered employees. Particularly, the Union
argues that: (1) the "Westin Gold Cards" serve not only as a discount card but also as a "pre-paid"
card that provide its purchasing members complimentary amenities for which the Hotel employees
rendered services and should, therefore, had been subjected to the 10% service charge; (2) the PPHI
failed to prove that it had paid and distributed to the covered employees the service charge due on
the actual discounted sales of food, beverage, etc., generated by the "Westin Gold Cards;" (3) the
Hotel employees likewise rendered services whenever the Maxi-Media International, Inc. consumed
or availed part of the 2,800,000.00 worth of goods and services pursuant to its agreement with the
PPHI; (4) the "Maxi-Media" discounts should be charged to the PPHI as part of its expenses and not
the Union’s share in the service charges; (5) the PPHI has a separate budget for promotions, hence
the "Business Promotions" entry should likewise had been subjected to the 10% service charge; (6)
the sale of "Gift Certificates," recorded in the PPHI’s "Journal Vouchers" as "other revenue/income,"
constituted a revenue transaction for which service charges were due; (7) the PPHI admitted that
service charges from "Guaranteed No Show" were due; and (8) it properly identified through
reference numbers the uncollected service charges from "Food and Beverage Revenue."
The Union contends that inrefusing to collect and remit the CBA-mandated service charges that the
PPHI insists were non-revenue transactions falling under "Negotiated Contracts" and/or "Special
Rates," the PPHI, in effect, contravened the employees’ rights to service charges under the law and
the CBA. The Union also contends that the term "Negotiated Contracts" should be applied to "airline
contracts" only that they (the Union and the PPHI) intended when they executed the CBA. It points
out that at the time the CBA was executed, the PPHI had an existing agreement with Northwest
Airlines to which the term "Negotiated Contracts" clearly referred to. Further, the Union argues that
its claim for unpaid services charges for the year 1997 and part of 1998 had not yet prescribed.
Applying Article 1155 of the Civil Code in relation toArticle 291 of the Labor Code, the Union points
out that the running of the prescriptive period for the filing of its claim was interrupted when it
presented to the PPHI its 1st audit report during the February 26, 1999 LMCMand when the PPHI
admitted the service charges due to the Union inthe PPHI’s June 9, 1999 letter.
The Union additionally argues that the PPHI failed to conform to the generally accepted accounting
standards when it reclassified the revenue items as expense items.
Finally, the Union contends that the PPHI’s refusal, despite repeated demands, to distribute the
unremitted service charges and recognize its right to service charges on the specified entries; the
PPHI’s deliberate failure to disclose its financial transactions and audit reports; and the PPHI’s
reclassification of the revenues into expense items constitute gross violation of the CBA that amounts
to whatthe law considers as ULP.
The Case for the Respondent
The PPHI primarily counters, in its comment,23 that the Union’s call for the Court to thoroughly reexaminethe records violates the Rule 45 proscription against questions of facts.The PPHI points out
that Rule 45 of the Rules of Court under which the petition is filed requires that only questions of law
be raised. In addition, the factual findings of the LA that had been affirmed by the CA deserve not
only respect but even finality.
On the petition’s merits, the PPHI argues that the specified entries/transactions for which the Union
claims service charges: (1) were not revenue generating transactions; (2) that did not involve a sale
of food, beverage, rooms, transportation or laundry; and/or (3) were in the nature of negotiated
contracts and special rates that Section 68 of the CBA specifically excepts from the collection of
service charges. Correlatively, Article 96 of the Labor Code requires the collection of service charges
as a condition precedent to its distribution or payment. Thus, as no service charges were collected on
the specified entries/transactions that the CBA expressly excepts, the Union’s claim for unpaid
service charges clearly had no basis.
To be precise, the PPHI points out that, first, the sale per se of the "Westin Gold Cards" did not
involve a sale of food, beverage, etc. that Section 68 of the CBA contemplates. The discounted sales
of food, beverage, etc. to Westin Gold Card holders, on the other hand, had already been subjected
to service charges inclusive of the discount, i.e., computed on the gross sales of food, beverage, etc.
to the card holders, and which service charges it had already distributed to the covered employees.
Second, its agreement with Maxi-Media involved an exchange or barter transaction, i.e., its food and
Hotel services in exchange for Maxi-Media’s entertainment services that did not generate income.
This agreement likewise falls under "Negotiated Contracts" that Section 68 clearly excepts. And, in
any case, it had already collected, and distributed to the covered employees, the service charges on
the food, beverage, etc. that Maxi-Media consumed based on the monthly average rate of the rooms
and on the 50% rate of the price of the consumed food and beverage. Third, the Union failed to
prove its claims for uncollected service charges from "Guaranteed No Show" and "Business
Promotions." Fourth, the "Food and Beverage other Revenue" entry refers to the PPHI’s transactions
with external service providers the payment for whose services could not be considered as the PPHI’s
revenue. Fifth, the sale per se of the "Gift Certificates" also did not involve the Section 68contemplated sale of food, beverage, etc. and the Union failed to prove that the presented Gift
Certificateshad actually been consumed, i.e., used within the Hotel premises for food, beverage, etc.
And sixth, it had never been its practice to collect service charges on the specified
entries/transactions that could have otherwise resulted in what the Union considers as "partial
abolition of service charges" when it refused to collect service charges from them.
The PPHI also disputes what it considers as the Union’s strained interpretation of the CBA exception
of "Negotiated Contracts" as applicable to airline contracts only. It points out that the clear wordings
of Section 68 of the CBA plainly show the intent to except, in a general and broad sense, "Negotiated
Contracts" and "Special Rates" as to include the "Westin Gold Cards" and "Maxi-Media" barter
agreement. The PPHI additionally argues that the CBA’s exception of "Negotiated Contracts" and
"Special Rates" from the collection of service charges does not violate Article 96 of the Labor Code. It
points out that Article 96 merely provides for the minimum percentage distribution, between it (the
PPHI) as the employer and the Hotel’s covered employees, of the collected service charges which
their CBA more than satisfied. It also points out that Article 96 does not prohibit the exception of
certain transactions from the coverage and/or collection of service charges that it (as the employer)
and the Union (in behalf of the covered Hotel employees) had voluntarily and mutually agreed on in
their CBA.1âwphi1 And in fact, the Union’s refusal to recognize these clear and express exceptions
constituted a violation of their agreement.
Further, the PPHI maintains that the Union’s claim for the alleged uncollected service charges for the
year 1997 and the early months of 1998 had already prescribed per Article 291 of the Labor Code.
Finally, the PPHI points out that the issue in this case is not whether service charges had been paid.
Rather, the clear issue is whether or not service charges should have been collected (and distributed
to the covered employees) for the specified entries/transactions that the LA and the CA correctly
addressed and which the NLRC clearly missed as it rendered a decision without any factual or legal
basis.
The Court's Ruling
We find the petition unmeritorious.
Preliminary considerations: jurisdictional limitations of the Court’s Rule 45 review of the CA’s Rule 65
decision in labor cases; the Montoya ruling and factual-issue-bar-rule
In a petition for review on certiorari under Rule 45 of the Rules of Court, we review the legal errors
that the CA may have committed in the assailed decision, in contrastwith the review for jurisdictional
errors that we undertake in an original certiorari action. In reviewing the legal correctness of the CA
decision in a labor case taken under Rule 65 of the Rules of Court, we examine the CA decision in the
context that it determined the presence or the absence of grave abuse of discretion in the NLRC
decision before it and not on the basis of whether the NLRC decision, on the merits of the case, was
correct. In other words, we proceed from the premise that the CA undertook a Rule 65 review, not a
review on appeal, of the NLRC decision challenged before it. Within this limited scope of our Rule 45
review, the question that we ask is: Did the CA correctly determine whether the NLRC committed
grave abuse of discretion in ruling on the case?24
In addition, the Court’s jurisdiction in a Rule 45 petition for review on certiorari is limited to resolving
only questions of law. A question of law arises when the doubt or controversy exists as to what law
pertains to a particular set of facts; and a question of fact arises when the doubt or controversy
pertains to the truth or falsity of the alleged facts.25
The present petition essentially raises the question – whether the Union may collect from the PPHI,
under the terms of the CBA, its share of the service charges. This is a clear question of law that falls
well within the Court’s power in a Rule 45 petition.
Resolution of this question of law, however, is inextricably linked with the largely factual issue of
whether the specified entries/transactions fall within the generally covered sale of food, beverage,
transportation, etc. from which service charges are due or within the CBA excepted "Negotiated
Contracts" and "Special Rates." It also unavoidably requires resolution of another factual issue, i.e.,
whether the Union’s claim for service charges collected for the year 1997 and the early months of
1998 had already prescribed. As questions of fact, they are proscribed by our Rule 45 jurisdiction; we
generally cannot address these factual issues except to the extent necessary to determine whether
the CA correctly found the NLRC in grave abuse of discretion in granting the Union’s claim for service
charges from the specified entries/transactions.
The jurisdictional limitations of our Rule 45 review of the CA’s Rule 65 decision in labor cases
constrain us to deny the present petition for clear lack of legal error in the CA’s decision.Our
consideration of the facts taken within this limited scope of our factual review power, convinces us
that grave abuse of discretion attended the NLRC’s decision. At what point and to what extent the
NLRC gravely abusedits discretion is the matter we shall discuss below.
The NLRC’s patently erroneous appreciation of the real issue in the present controversy, along with
the facts and the evidence, amounted to grave abuse of discretion
In granting the Union’s claim, the NLRC simply declared that the PPHI "has not shown any proof that
it paid or remitted what is due to the Union and its members" and concluded that the specified
entries/transactions were "service chargeable." This NLRC conclusion plainly failed to appreciate that
it involved only the alleged uncollected service charges from the specified entries/transactions. The
NLRC likewise, in the course of its ruling, did not point to any evidence supporting its conclusion.
In deciding as it did, the NLRC patently proceeded from the wrong premise, i.e., that the PPHI did
not at all distribute to the Hotel’s covered employees their share in the collected service charges. It
likewise erroneously assumed that all the specified entries/transactions were subject to service
charges and that the PPHI collected service charges from them as its ruling was patently silent on
this point. The NLRC also erroneously assumed that each and every transaction that the PPHI
entered into was subject to a service charge.
What the NLRC clearly and conveniently overlooked was the underlying issue of whether service
charges are due from the specified entries/transactions, i.e., whether the specified
entries/transactions are covered by the CBA’s general-rule provisions on the collection of service
charges or whether they are excepted because they fall within the excepted "Negotiated Contracts"
and "Special Rates" or simply did not involve a "sale of food, beverage, etc." from which service
charges are due. This understanding of this case’s real issue is an indispensable requisite in the
proper resolution of the controversy and a task that the NLRC, as a tribunal exercising quasi-judicial
power, mustperform with circumspection and utmost diligence. The patent failure led to its
manifestly flawed conclusions that were belied by the underlying facts. By so doing, the NLRC acted
outside the clear contemplation of the law.26
Accordingly, we affirm the CA’s decision to be legally correct as it correctly reversed the NLRC
decision for grave abuse of discretion.
Nature of a CBA; rules inthe interpretation of CBA provisions
A collective bargaining agreement, as used in Article 252 (now Article 262)27 of the Labor Code, is a
contract executed at the request of either the employer or the employees’ exclusive bargaining
representative with respect to wages, hours of work and all other terms and conditions of
employment, including proposals for adjusting any grievances or questions under such
agreement.28 Jurisprudence settles that a CBA is the law between the contracting parties who are
obliged under the law to comply with its provisions.29
As a contract and the governing law between the parties, the general rules of statutory construction
apply in the interpretation of its provisions. Thus, if the terms of the CBA are plain, clear and leave
no doubt on the intention of the contracting parties, the literal meaning of its stipulations, as they
appear on the face of the contract, shall prevail.30 Only when the words used are ambiguous and
doubtful or leading to several interpretations of the parties’ agreement that a resort to interpretation
and construction is called for.31
No service charges were due from the specified entries/transactions; they either fall within the CBAexcepted "Negotiated Contracts" and "Special Rates" or did not involve "a sale of food, beverage,
etc."
The Union anchors its claim for services charges on Sections 68 and 69 of the CBA, in relation with
Article96 of the Labor Code. Section 68 states that the sale of food, beverage, transportation,
laundry and rooms are subject to service charge at the rate often percent (10%). Excepted from the
coverage of the 10% service charge are the so-called "negotiated contracts" and "special rates."
Following the wordings of Section 68 of the CBA, three requisites must be present for the provisions
on service charges to operate: (1) the transaction from which service charge is sought to be collected
is a sale; (2) the sale transaction covers food, beverage, transportation, laundry and rooms; and (3)
the sale does not result from negotiated contracts and/or at special rates.
In plain terms, all transactions involving a "sale of food, beverage, transportation, laundry and
rooms" are generally covered. Excepted from the coverage are, first, non-sale transactions or
transactions that do not involve any sale even though they involve "food, beverage, etc." Second,
transactions that involve a sale but do not involve "food, beverage, etc." And third, transactions
involving "negotiated contracts" and "special rates" i.e., a "sale of food, beverage, etc." resulting
from "negotiated contracts" or at "special rates;" non-sale transactions involving "food, beverage,
etc." resulting from "negotiated contracts" and/or "special rates;" and sale transactions, but not
involving "food, beverage, etc.," resulting from "negotiated contracts" and "special rates." Notably,
the CBA does not specifically define the terms "negotiated contracts" and "special rates."
Nonetheless, the CBA likewise does not explicitly limit the use of these terms to specified
transactions. With particular reference to "negotiated contracts," the CBA does not confine its
application to "airline contracts" as argued by the Union. Thus, as correctly declared by the CA, the
term "negotiated contracts" should be read as applying to all types of negotiated contracts and not to
"airlines contracts" only. This is in line with the basic rule of construction that when the terms are
clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its
stipulations shall prevail. A constricted interpretation of this term, i.e., as applicable to "airlines
contracts" only, must be positively shown either by the wordings of the CBA or by sufficient evidence
of the parties’ intention to limit its application. The Union completely failed to provide support for its
constricted reading of the term "negotiated contracts," either from the wordings of the CBA or from
the evidence.
In reversing the NLRC’s ruling and denying the Union’s claim, the CA found the specified
entries/transactions as either falling under the excepted negotiated contracts and/or special rates or
not involving a sale of food, beverage, etc. Specifically, it considered the entries "Westin Gold
Cards Revenue" and "Maxi Media Barter" to be negotiated contracts or contracts under special rates,
and the entries "Business Promotions" and "Gift Certificates" as contracts that did not involve a sale
of food, beverage, etc. The CA also found no factual and evidentiary basis to support the Union’s
claim for service charges on the entries "Guaranteed No show" and "F & B Revenue."
Our consideration of the records taken under our limited factual review power convinces us that
these specified entries/transactions are indeed not subject to a 10% service charge. We thus see no
reason to disturb the CA’s findings on these points.
The PPHI did not violate Article 96 of the Labor Code when they refused the Union’s claim for service
charges on the specified entries/transactions
Article 96 of the Labor Code provides for the minimum percentage distribution between the employer
and the employees of the collected service charges, and its integration inthe covered employees’
wages in the event the employer terminates its policy of providing for its collection. It pertinently
reads:
Art. 96. Service Charges.
x x x In case the service charge is abolished, the share of the covered employees shall be considered
integrated in their wages.
This last paragraph of Article 96 of the Labor Code presumes the practice of collecting service
charges and the employer’s termination of this practice. When this happens, Article 96 requires the
employer to incorporate the amount that the employees had been receiving as share of the collected
service charges into their wages. Incases where no service charges had previously been collected (as
where the employer never had any policy providing for collection of service charges or had never
imposed the collection of service charges on certain specified transactions), Article 96 will not
operate.
In this case, the CA found that the PPHI had not in fact been collecting services charges on the
specified entries/transactions that we pointed out as either falling under "negotiated contracts"
and/or "special rates" or did not involve a "sale of food, beverage, etc." Accordingly, Article 96 of the
Labor Code finds no application in this case; the PPHI did not abolish or terminate the
implementation of any company policy providing for the collection of service charges on specified
entries/transactions that could have otherwise rendered it liable to pay an amount representing the
covered employees’ share in the alleged abolished service charges.
The Union’s claim for service charges for the year 1997 and the early months of 1998 could not have
yet prescribed at the time it filed its complaint on May 3, 2001; Article 1155 of the Civil Code applies
suppletorily to Article 291 of the Labor Code
Article 291 (now Article 305)32 of the Labor Code states that "all money claims arising from
employer-employee relations x x x shall be filed within three (3) years from the time the cause of
action accrued; otherwise, they shall forever be barred." [Emphasis supplied]
Like other causes of action, the prescriptive period for money claims under Article 291 of the Labor
Code is subject to interruption. And, in the absence of an equivalent Labor Codeprovision for
determining whether Article 291’s three-year prescriptive period may be interrupted, Article 1155 of
the Civil Code33 may be applied. Thus, the period of prescription of money claims under Article 291 is
interrupted by: (1) the filing of an action; (2) a written extrajudicial demand by the creditor; and (3)
a written acknowledgment of the debt by the debtor.
In the present petition, the facts indisputably showed that as early as 1998, the Union demanded, via
the 1st audit report, from the PPHI the payment and/or distribution of the alleged uncollected service
charges for the year 1997. From thereon, the parties went through negotiations (LCMC) to settle and
reconcile on their respective positions and claims.
Under these facts – the Union’s written extrajudicial demand through its 1st audit report and the
successive negotiation meetings between the Union and the PPHI – the running of the three-year
prescriptive period under Article 291 of the Labor Code could have effectively been interrupted.
Consequently, the Union’s claims for the alleged uncollected service charges for the year 1997 could
not have yet prescribed at the time it filed its complaint on May 3, 2001.
This non-barring effect of prescription, notwithstanding (i.e., that the running of the three-year
prescriptive period had effectively been interrupted – by the Union's written extrajudicial demand on
the PPHI), the CA, as it affirmed the LA, still correctly denied the Union's claims for the alleged
uncollected and/or undistributed service charges on the specified entries/transactions for the year
1997 and the early part of 1998. As the CA found and discussed in its decision, and with which we
agree as amply supported by factual and legal bases, the nature of these specified
entries/transactions as either excepted from the collection of service charges or not constituting a
"sale of food, beverage, etc.," and the Union's failure to support its claims by sufficient evidence
warranted, without doubt, the denial of the Union's action.
In sum, we find the CA's denial of the Union's claim for service charges from the specified
entries/transactions legally correct and to be well supported by the facts and the law. The CA
correctly reversed for grave abuse of discretion the NLRC's decision.
WHEREFORE, in light of these considerations, we hereby DENY the petition. We AFFIRM the decision
dated January 31, 2007 and resolution dated April 20, 2007 of the Court of Appeals in CA-G.R. Sp
No. 93698.
SO ORDERED.
[G.R. No. 123880. February 23, 1999]
MARANAW HOTELS AND RESORT CORPORATION, (Owner of Century Park Sheraton
Manila), petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and EDDIE
DAMALERIO, respondents.
DECISION
PURISIMA, J.:
This special civil action for certiorari under Rule 65 of the Revised Rules of Court seeks to annul
and set aside the Decision, dated September 18, 1995, of the National Labor Relations Commission
(NLRC)[1], and the Order[2], dated January 30, 1996, denying petitioner's motion for reconsideration in
NLRC-NCR-CA No. 005642-93, on the ground of lack or excess of jurisdiction or grave abuse of
discretion.
On April 2, 1992, Eddie Damalerio (Damalerio), a room attendant of the Century Park Sheraton
Hotel, operated by Maranaw Hotel and Resort Corporation, was seen by hotel guest Jamie Glaser
(Glaser) with left hand inside the latter's suitcase. Confronted with what he was doing, Damalerio
explained that he was trying to tidy up the room. Not satisfied with the explanation of Damalerio,
Glaser lodged a written complaint before William D. Despuig, shift-in-charge of security of the
hotel. Glaser also reported that Damalerio had previously asked from him souvenirs, cassettes, and
other giveaways. The complaint was later brought by Despuig to the attention of Major Eddie Buluran,
chief of Security of the hotel.
On April 3, 1992, Damalerio was given a Disciplinary Action Notice (DAN). The next day, an
administrative hearing was conducted on the matter. Among those present at the hearing were: 1)
Lourdes Ricardo (room attendant), 2) Angelito Torres (floor supervisor), 3) Major Eddie
Buluran (chief of security), 4) Susan Dino (Personnel representative), 5) Alfredo San Gabriel (senior
floor supervisor) and 6) Ben Hur Amador (union representative).
Taking the witness stand on his own behalf, Damalerio denied the accusation against him,
theorizing that when he found the room of Glaser in disarray, and was about to make the bed, he
noticed some belongings, such as socks and T-shirts of the said hotel guest scattered around, so much
so that he thought of placing the same in his luggage. While doing so, Glaser arrived. When asked by
the latter if something was wrong, he (Damalerio) said "I'm just cleaning your room," and Glaser
remarked, "Good work," and then, the two of them chatted about Glaser's concert at the Araneta
Coliseum.
On April 13, 1992, Damalerio received a memorandum[3] issued by Alfredo San Gabriel, Sr., Floor
Supervisor, bearing the approval of Nicolas R. Kirit, Executive Housekeeper, stating that he (Damalerio)
was found to have committed qualified theft in violation of House Rule No. 1, Section 3 of Hotel Rules
and Regulations. The same memorandum served as a notice of termination of his employment.
On May 19,1992, Damalerio filed with the Labor Arbiter a Complaint for illegal dismissal against
the petitioner.
On August 20, 1993, after the parties had sent in their position papers, Labor Arbiter Ceferina J.
Diosana decided the case; disposing, thus:
"WHEREFORE, judgment is hereby rendered finding the dismissal of complainant to be illegal
and ordering the respondents to reinstate him to his former or equivalent position without loss of
seniority rights and with backwages from April 15, 1992 when he was preventively suspended up to
actual reinstatement and other benefits, including but not limited to his share in the charges
and/or tips which he failed to receive, and all other CBA benefits that have accrued since his
dismissal.
SO ORDERED.
From the aforesaid Labor Arbiter's disposition, the petitioner appealed to the NLRC, which modified
the appealed decision by giving petitioner the option of paying Damalerio a separation pay equivalent
to one (1) month pay for every year of service, instead of reinstating him.
On November 22, 1995, petitioner interposed a motion for reconsideration but to no avail. NLRC
denied the same on January 30, 1996.
Undaunted, petitioner has come to this Court via the present petition; posing the questions:
1. WHETHER OR NOT RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OF JURISDICTION IN HOLDING THAT PETITIONER FAILED TO
ADDUCE CONCLUSIVE EVIDENCE IN SUPPORT OF ITS VERSION OF THE INCIDENT,
CONSIDERING THE FACT THAT THE EVIDENCE ON RECORD INELUCTABLY SHOWS THAT
PRIVATE RESPONDENT WAS CAUGHT IN FLAGRANTE DELICTO; and
2. WHETHER OR NOT RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OF JURISDICTION IN NOT REVERSING THAT PORTION OF THE
DECISION OF THE LABOR ARBITER ORDERING HEREIN PETITIONER TO PAY PRIVATE
RESPONDENT HIS SHARE IN THE SERVICE CHARGE WHICH WAS COLLECTED DURING THE
TIME HE WAS NOT WORKING IN THE HOTEL.
The petition is barren of merit.
Petitioner's theory that Damalerio was caught committing qualified theft in flagrante delicto is
anemic of evidentiary support. Records disclose petitioner's failure to substantiate such imputation
against him. During the investigation presided over by the Labor Arbiter, Damalerio narrated a
plausible and satisfactory explanation for his behavior complained of. According to him, he was then
cleaning the hotel room of Glaser, and while in the process of placing inside the luggage the personal
belongings of Glaser scattered near the bed, the latter entered the room. Glaser did not bother to
testify as all his things were intact.
Although it was not completely proper for Damalerio to be touching the things of a hotel guest
while cleaning the hotel rooms, personal belongings of hotel guests being off-limits to roomboys, under
the attendant facts and circumstances, we believe that the dismissal of Damalerio was unwarranted. To
be sure, the investigation held by the hotel security people did not unearth enough evidence of
culpability. It bears repeating that subject hotel guest lost nothing. Albeit petitioner may have reasons
to doubt the honesty and trustworthiness of Damalerio, as a result of what happened, absent sufficient
proof of guilt, he (Damalerio), who is a rank-and-file employee, cannot be legally
dismissed.[4] Unsubstantiated suspicions and baseless conclusions by employers are not legal
justification for dismissing employees. The burden of proving the existence of a valid and authorized
cause of termination is on the employer.[5] Any doubt should be resolved in favor of the employee, in
keeping with the principle of social justice enshrined in the Constitution.[6]
All things studiedly considered and viewed in proper perspective, the dismissal of Damalerio, under
the premises, cannot be countenanced.
As regards the share of Damalerio in the service charges collected during the period of his
preventive suspension, the same form part of his earnings, and his dismissal having been adjudged to
be illegal, he is entitled not only to full backwages but also to other benefits, including a just share in
the service charges, to be computed from the start of his preventive suspension until his reinstatement.
However, mindful of the animosity and strained relations between the parties, emanating from this
litigation, we uphold the ruling a quo that in lieu of reinstatement, separation pay may be given to the
private respondent, at the rate of one (1) month pay for every year of service. Should petitioner opt
in favor of separation pay, the private respondent shall no longer be entitled to share in the service
charges collected during his preventive suspension.
WHEREFORE, the petition is hereby DISMISSED and the Court affirms the questioned Decision of
the National Labor Relations Commission, to be implemented according to law and this disposition. No
pronouncement as to costs.
SO ORDERED.
G.R. No. L-60337 August 21, 1987
UNIVERSAL CORN PRODUCTS (A DIVISION OF UNIVERSAL ROBINA
CORPORATION), petitioner,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION and JOSE ARMAS, ENGRACIO ASIS,
AUSTERINAO ELEUTERIO, FAUSTINO ATIENZA, MARIO ALTARES, JAIME ALTARES, ISIDRO
ARANO, LEONILO ARANO, ALFREDO ANCHETA, DOMINGO ANCHETA, RIZALITO, ABANTO,
RIZALITO, CRESENCIO ASCUTIA, JESUS ASCUTIA, FELICIANO ABORQUE, WILFREDO
ARMENIO, ALEJANDRO ABAGAT, PABLO ADLAWAN, FILEMON ABADINES, ROMEO AREVALO,
PABLO BUTIAL, BANAAG REMIGIO, LUCIO BERDIJO, ANTONIO BIONSON, ABELARDO
BRACAMONTE, SAMSON BORDEOS, TEODORO, BARBIANA, FRANCISCO BABOR, HERCULANO
BARRAMEDA, RODRIGO BONGAIS, JAIME BERANA, EDUARDO, BUENAVENTURA, RODRIGO
BAUTISTA, FELEMON BAUTISTA, DIONISIO BERNALES, MARIANO BALAGTAS, ALFREDO
BERNADAS, EPIGENIO BORDEOS, BRIGIDO BAER, OSCAR BONDOC, JOSE BONDOC, ROMEO
BUCAYAN, VITALIANO BATOBATO, DOMINGO BALLON, JOSE BORLEO, JOSE BORJA,
RUFINO CLEMENTE, JUAN CABALLERO, TRANQUILINA CAUSON, AUGORIO CALNEA,
LEOPOLDO CUARTERO, ALBERTO CATBAGAN, ROMEO CALIVO, ANDRES CUNTAPAY,
ALBERTO CASTRO, CASTOR RODRIGO, SIMPLICIO CACATIAN, NILO DALANON,
BIENVENIDO DUMAGAT, SR., BIENVENIDO DUMAGAT, JR., DOMINADOR DUMANTAY,
TEODORO DULOMBAL, RODOLFO DANDAN, SALVADOR DASIGO, ELIAS DASIGO,
FRANCISCO ESTOLANO, LEOPOLDO ESTIOCO, ROGELIO ESTANISLAO, MONTANO
ESTANISLAO, ELIAS ESTRADA, ERNESTO ESTABALLIO, FERNANDO FERNANDEZ, PEDRO
GETEZO, ALFONSO DE GUZMAN, LORENZO DE GUZMAN, MODESTO DE GUZMAN, ARELLANO
GARCIA, ALFREDO GARCIA, MANUEL GOROSPE, RAYMUNDO GELLIDO, RODOLFO GALEON,
ROMEO GONZALES, GERARDO GERMEDIA, BENITO GALE, ROBERTO HASAL, EDILBERTO
HERNANDEZ, RAFAEL IGUIZ, MARGARITO JAVIER, PABLO JOSE, PEDRO JOVE, CELEDONIO
JACA, REYNALDO JALLA, EDUARDO JUMAQUIO, DOMINGO JUANO, AGUSTIN KHO,
ANTONIO LAMERA, RODOLFO LINEZO, MANUEL LAMBATIN, MANUEL LOPEZ, BENEDICTO
LOPEZ, MARIANO LARA, ELINO MISA, FRANCISCO MINA, RODOLFO MIRABEL, ROGER
MIRABEL, ROLANDO MIRABEL, OSCAR MARTINEZ, MIGUEL MANACIO, PEDRO MANALO,
LEOPOLDO MARQUEZ, ANTONIO, MEDINA, SALVADOR MARAINAN, NAPOLEON MAGAYA,
ALFREDO MAQUI, EDUARDO MILLET, PABLO MENDEZ, DULCISIMO NATIVIDAD, ROMEO
NAGTALON, ALFONSO NOQUEZ, ALEJANDRO NOQUEZ, ANASTACIO NIVAL, EMILIO ORTIZ,
PONCIANO ORLANDA, GERARDO POSADAS, ATICO PEDRIGOZA, ALFREDO PASCUA,
LEONARDO PATRON, MIGUEL PACHECO, DOMINGO PACHECO, FELIMON POLICARPIO,
ERNESTO QUIJANO, EFREN QUIBOTE, SIMEON RESCO, FERNANDO REYNOSO, EMILIO
RIVERA, GRACIANO RAMOS, REYNALDO RAMIREZ, PAQUITO RAMIREZ, THOMAS ROSARIO,
JR., ROMULO REYES, REYNALDO RAPSING, ALFREDO DEL ROSARIO, FLORENCIO SASAN,
ALFONSO SAMSON, LUIS SUAREZ, GREGORIO SOMODO, FRANCISCO SAPLAN, LUCIANO
SARNO, RICARDO SOREL, CRESENCIO SANTOS, ARSENIO SERGA JR., BALTAZAR TALATO,
DIOSDADO TULANG, EUGENIO TOLENTINO, AMADOR TABULOG, LAZARO TORRES, JAIME
TRAJANO, GENEROSO TANTE, SERGIO TABUAC, ANASTACIO TIMOG, DANIEL UDAN,
HERMENIGILDO VITO, VICENTE VITO, BENJAMIN VILLAMOR, ARTURO VALIENTE, ERNESTO
VALIENTE, FELICISIMO VERA, respondents.
SARMIENTO, J.:
The petitioner invokes National Federation of Sugar Workers (NFSW) v. Ovejera, 1 in which we held
that Presidential Decree No. 851, 2 the 13th-month pay law, does not cover employers already
paying their employees an "equivalent" to the 13th month pay.
There is no dispute as to the facts.
Sometime in May, 1972, the petitioner and the Universal Corn Products Workers Union entered into a
collective bargaining agreement in which it was provided, among other things, that:
xxx xxx xxx
The COMPANY agrees to grant all regular workers within the bargaining unit with at
least one (1) year of continuous service, a Christmas bonus equivalent to the regular
wages for seven (7) working days, effective December, 1972. The bonus shall be given
to the workers on the second week of December.
In the event that the service of a worker is not continuous due to factory shutdown,
machine breakdown or prolonged absences or leaves, the Christmas bonus shall be
prorated in accordance with the length of services that worker concerned has served
during the year . 3
xxx xxx xxx
The agreement had a duration of three years, effective June 1, 1971, or until June 1, 1974.
On account however of differences between the parties with respect to certain economic issues, the
collective bargaining agreement in question expired without being renewed. On June 1, 1979, the
parties entered into an "addendum" stipulating certain wage increases covering the years from 1974
to 1977. Simultaneously, they entered into a collective bargaining agreement for the years from
1979 to 1981. Like the "addendum," the new collective bargaining agreement did not refer to the
"Christmas bonus" theretofore paid but dealt only with salary adjustments. According to the
petitioner, the new agreements deliberately excluded the grant of Christmas bonus with the
enactment of Presidential Decree No. 851 4 on December 16, 1975. It further claims that since 1975,
it had been paying its employees 13th-month pay pursuant to the Decree. 5
For failure of the petitioner to pay the seven-day Christmas bonus for 1975 to 1978 inclusive, in
accordance with the 1972 CBA, the union went to the labor arbiter for relief. In his decision, 6 the
labor arbiter ruled that the payment of the 13th month pay precluded the payment of further
Christmas bonus. The union appealed to the National Labor Relations Commission (NLRC). The NLRC
set aside the decision of the labor arbiter appealed from and entered another one, "directing
respondent company [now the petitioner] to pay the members concerned of complainants [sic] union
their 7-day wage bonus in accordance with the 1972 CBA from 1975 to 1978." Justifying its reversal
of the arbiter's decision, the NLRC held:
xxx xxx xxx
It is clear that the company implemented the aforequoted provision of the CBA in 1972,
1973 and 1974. In view thereof it is our considered opinion that the crediting of said
benefit to the 13th month pay cannot be sanctioned on the ground that it is contrary to
Section 10 of the Rules and Regulations Implementing Presidential Decree No. 85 1,
which provides, to wit;
Section 10. Prohibition against reduction or elimination of benefits. —
Nothing herein shall be construed to authorize any employer to eliminate,
or diminish in any way, supplements, or other employee benefits or
favorable practice being enjoyed by the employee at the time of
promulgation of this issuance.
More so because the benefit involved was not magnanimously extended by the
company to its employees but was obtained by the latter thru bargaining negotiations.
The aforementioned CBA was the law between the parties and the provisions thereof
must be faithfully observed by them during its effectivity. In this connection, it should
be noted that the same parties entered into another 3-year CBA on June 11, 1979,
which no longer provides for a 7-day wage Christmas bonus. In effect, therefore, the
parties agreed to discontinue the privilege, which agreement should also be
respected. 7
xxx xxx xxx
We hold that in the case at bar, Ovejera (La Carlota) case does not apply.
We apply instead, United CMC Textile Workers Union v. Valenzuela
this Court, speaking through Mr. Justice Edgardo Paras, held:
8
a recent decision. In that case
xxx xxx xxx
... If the Christmas bonus was included in the 13th month pay, then there would be no
need for having a specific provision on Christmas bonus in the CBA. But it did not
provide for a bonus in graduated amounts depending on the length of service of the
employee. The intention is clear therefore that the bonus provided in the CBA was
meant to be in addition to the legal requirement. Moreover, why exclude the payment
of the 1978 Christmas bonus and pay only the 1979-1980 bonus. The classification of
the company's workers in the CBA according to their years of service supports the
allegation that the reason for the payment of bonus was to give bigger award to the
senior employees-a purpose which is not found by P.D. 851. A bonus under the CBA is
an obligation created by the contract between the management and workers while the
13th month pay is mandated by the law (P. D. 851). 9
xxx xxx xxx
In the same vein, we consider the seven-day bonus here demanded "to be in addition to the legal
requirement." Although unlike the Valenzuela CBA, which took effect after the promulgation of
Presidential Decree No. 851 in 1975, the subject agreement was entered into as early as 1972, that
is no bar to our application of Valenzuela. What is significant for us is the fact that, like
the Valenzuela, agreement, the Christmas bonus provided in the collective bargaining agreement
accords a reward, in this case, for loyalty, to certain employees. This is evident from the stipulation
granting the bonus in question to workers "with at least one (1) year of continuous service." As we
said in Valenzuela" this is "a purpose not found in P.D. 851." 10
It is claimed, however, that as a consequence of the impasse between the parties beginning 1974
through 1979, no collective bargaining agreement was in force during those intervening years.
Hence, there is allegedly no basis for the money award granted by the respondent labor body. But it
is not disputed that under the 1972 collective bargaining agreement, [i]f no agreement and
negotiations are continued, all the provisions of this Agreement shall remain in full force up to the
time a new agreement is executed." 11 The fact, therefore, that the new agreements are silent on
the seven-day bonus demanded should not preclude the private respondents' claims thereon. The
1972 agreement is basis enough for such claims for the whole writing is " "instinct with an
obligation," imperfectly express." 12
WHEREFORE, premises considered, the petition is hereby DISMISSED. The Decision of the public
respondent NLRC promulgated on February 11, 1982, and its Resolution dated March 23, 1982, are
hereby AFFIRMED. The temporary restraining order issued on May 19, 1982 is LIFTED.
This Decision is IMMEDIATELY EXECUTORY.
No pronouncement as to costs.
SO ORDERED.
.R. No. 114280. July 26, 1996]
PHILIPPINE AIRLINES, INC. (PAL), petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION and AIRLINE PILOTS ASSOCIATION OF THE PHILIPPINES
(ALPAP), respondents.
[G.R. No. 115224. July 26, 1996]
AIRLINE PILOTS ASSOCIATION OF THE PHILIPPINES (ALPAP), petitioner, vs. NATIONAL
LABOR
RELATIONS
COMMISSION
and
PHILIPPINE
AIRLINES,
INC.
(PAL), respondents.
DECISION
FRANCISCO, J.:
For refusing to pay its pilots their thirteenth (13th)month pay, a complaint [docketed as NLRC Case
No. 00-09-005598-91] for unfair labor practice was filed against Philippine Airlines, Inc. (PAL) by the
Airline Pilots Association of the Philippines (ALPAP). The Labor Arbiter ruled in favor of ALPAP and
ordered PAL to pay its pilots belonging to ALPAP their thirteenth month pay from 1988 to 1990. Both
parties appealed to the National Labor Relations Commission which in turn affirmed with modifications
the decision of the Labor Arbiter. Their motions for reconsideration having been denied, PAL and ALPAP
proceeded to this Court with their respective petitions for certiorari assailing the Resolutions
promulgated by the NLRC on November 23, 1993 and February 28, 1994 in NLRC Case No. 00348092.
In G.R. No. 114280, petitioner PAL takes exception to the findings of the NLRC holding it liable to
the members of ALPAP for non-payment of their thirteenth month pay from 1988 to 1990. On the other
hand, in G. R. No. 115224, petitioner ALPAP disputes the deletion of the award of moral and exemplary
damages in its favor, as well as the non-imposition of legal interest in the payment of the amounts due
them from PAL. Upon motion of ALPAP's counsel, the court ordered the consolidation of both
petitions.[1]
ALPAP filed its complaint[2] on September, 1991, charging PAL of violating Presidential Decree No.
851, its Implementing Rules and Regulations and Memorandum Order No. 28 issued by then President
Corazon C. Aquino, for unlawfully refusing and failing to pay the pilots their thirteenth month pay from
1988 to 1990. Aside from their accumulated thirteenth month pay, ALPAP prayed for an award of
P500,000.00 as moral damages and P100,000.00 as exemplary damages to each of their pilots, plus
attorney's fees equivalent to ten percent (10%) of the total awards adjudged. Subsequently however,
ALPAP expanded the coverage of its claim from 1986 to 1990 upon filing its position paper.[3]
In answer to the complaint, PAL denied any liability to ALPAP and maintained that it was not obliged
to give its pilots a thirteenth month pay under P.D. 851 as it was already paying said employees the
equivalent of a thirteenth month pay in the form of a year-end bonus. PAL invokes that under Section
2 of P.D. 851 and its Implementing Rules and Regulations, "employers already paying their employees
a 13th month pay or more in a calendar year or its equivalent at the time of this issuance," are not
covered by P.D. 851.[4] Additionally, PAL contends that there is no demandable obligation in the
absence of any contractual stipulation or a legal provision requiring it to give its pilots a thirteenth
month pay aside from the year-end bonus that the latter are already receiving.[5]
Disputing PAL's contention, ALPAP argued that the payment of the year-end bonus cannot be
equated with the thirteenth month pay since the payment of the former is conditional in character and
not fixed in its amount, while that of the thirteenth month pay is mandatory in character and definite
in its amount.[6]
On May 29, 1992, judgment was rendered by the Labor Arbiter in ALPAP's favor and ordered PAL
to pay the following amounts:
"WHEREFORE, judgment is hereby rendered in this case, declaring respondent Philippine Airlines
(PAL) guilty of non-payment of the 13th month pay. Respondent is therefore ordered to pay
members of complainant Airlines Pilots Association of the Philippines (ALPAP) the following sums of
money:
13th month payP69,167,244.00
Moral and Exemplary
Damages............ 6,948,000.00
Attorney's fees .. 7,611,524.00
Grand Total..P83,726,768.00
All other claims are denied for lack of legal or factual basis.[7]
In the aforecited decision, the Labor Arbiter discarded PAL's contentions and took note of the fact
that the payment of the year-end bonus is conditional and uncertain. PAL's argument that it is
exempted from the coverage of P.D. 851 was ruled out because it was shown that except for the pilots,
all other employees of PAL were receiving both the thirteenth month pay and the year-end
bonus. However, the coverage of the award for thirteenth month pay was confined to 1988 until 1990,
excluding those from 1986 and 1987, due to ALPAP's failure to amend its complaint.
Not satisfied, both parties appealed to the NLRC which in turn promulgated the assailed resolution
on November 23, 1993[8] and ruled in this wise:
WHEREFORE, premises considered, the decision of (sic) dated 29 May 1992 is hereby AFFIRMED with
the modification that respondent PAL also pay the 13th month pay to the ALPAP pilots for the years
1986 and 1987; the dismissal of the claim for moral and exemplary damages; the payment of PAL of
legal interest from the dates the 13th-month pay of the ALPAP pilots accrued up to the time of actual
payment; and the payment of attorney's fees of 10% of the total award.
SO ORDERED.[9]
Still dissatisfied, the parties sought reconsideration which, however, were both denied by the NLRC
in its resolution dated February 28, 1994.[10] The NLRC also reduced the award of attorney's fees to
five percent (5%) and deleted the payment of legal interest for lack of basis.[11]
Hence, these petitions.
The pivotal issue in this petition is whether or not the NLRC committed grave abuse of discretion
in holding PAL liable to the members of ALPAP for non-payment of their thirteenth month pay from
1988 to 1990, notwithstanding that, as claimed by PAL, there is no legal basis for the said finding.
PAL's contention is premised on the following arguments:
1) Payment of the thirteenth month pay under P.D. 851 and Memorandum Order No. 28 covers only
rank and file employees. Pilots are excluded from the coverage because they are not rank and file
employees but rather supervisory employees. Hence, they are not entitled to any thirteenth month
pay.
2) There is no contractual obligation to pay the pilots any thirteenth month pay in the absence of any
provision in their CBA. And even assuming that they are entitled to a thirteenth month pay, the
payment of a year-end bonus is already equivalent to a thirteenth month pay.
Anent the first argument, PAL cites Memorandum Order No. 28 which provides as follows:
"Section 1 of Presidential Decree No. 851 is hereby modified to the extent that all employers are
hereby required to pay all their rank and file employees a 13th month pay not later than December
24 of every year.
PAL maintains that pilots cannot be classified as rank and file employees since the nature of their
job includes the exercise of supervision over the cabin crew and the power to recommend disciplinary
actions over the latter.[12]
Interestingly, however, the contention was raised by PAL rather belatedly and invoked for the first
time on appeal. Worse, this issue was not even discussed in PAL's original Memorandum and was raised
only much later when PAL filed a Supplemental Memorandum on Appeal through a new counsel. In
fact, in denying PAL's appeal, the NLRC did not even bother to consider the new issue raised by
PAL. This precludes us from taking cognizance of and resolving the aforementioned issue with respect
to the employment status of the pilots as it would be violative of the proscription against the
presentation of new issues on appeal. The rule is well-settled that points of law, theories, issues and
arguments not adequately brought to the attention of the trial court need not be, and ordinarily will
not be considered by a reviewing court as they cannot be raised for the first time on appeal[13] because
this would be offensive to the basic rules of fair play, justice and due process. [14] By invoking the
alleged supervisory status of the pilots only during the pendency of its appeal and raising the issue
only later in their Supplemental Memorandum, it was evident that this was a last ditch effort to shift
to a new theory and raise a new matter inthe hope of a favorable result. This, however, is the pernicious
practice that has consistently been rejected. Thus, PAL is now barred from claiming that their pilots
are not rank and file employees.
The other argument of PAL is that there is no provision in the CBA of ALPAP which obligates the
former to pay the members of the latter any thirteenth month pay. PAL contends that it is of no moment
that its other employees, namely, the flight attendants belonging to the Flight Attendants and Stewards
Association of the Philippines (FASAP) and the other rank and file employees belonging to Philippine
Airlines Employees Association (PALEA), are being granted both the thirteenth month pay and the yearend bonus because the payment of the said benefits were the result of contractual negotiations in their
respective CBAs. The absence of such contractual grant to the members of ALPAP only shows that
there was no intention to give the pilots the same benefits. Furthermore, PAL argues that even
assuming that the pilots are legally entitled to a thirteenth month pay, the law exempts them from
compliance with the same because the payment of a year-end/Christmas bonus is already equivalent
to the thirteenth month pay. To bolster this claim, PAL relies on the doctrine laid down by this Court in
the cases of National Federation of Sugar Workers (NFSW) vs. Ovejera, [114 SCRA 354 (1982)], Dole
Philippines, Inc. vs. Leogardo, Jr., [117 SCRA 938 (1982)] and Brokenshire Memorial Hospital vs. NLRC
[143 SCRA 564 (1986)], which was crystallized as follows:
"Clearly, from the discussions in National Federation of Sugar Workers (NFSW), Dole and
Brokenshire, what the law wants to prevent is the imposition of a 'double burden' upon the employer
who is already paying the equivalent of a 13th month pay. The law exempts from the payment of the
13th month pay employers who are already giving its equivalent. Otherwise the goal of uniformly
providing employees with additional income will not be met.Another inequity will result; while most
employees will be paid thirteen (13) months salary, some by virtue of P.D. No. 851, will be receiving
salary for fourteen (14) months.[15]
ALPAP however disputes the abovementioned contentions of PAL and maintains that the grant of
a thirteenth month pay being statutory, the same is mandatory in character and need not be embodied
in any written agreement because it is deemed incorporated therein. It is therefore inconsequential if
the payment of the thirteenth month pay is not expressly provided in the CBA. ALPAP also doubts the
applicability of the cases invoked by PAL considering the difference in the factual background of this
case. According to ALPAP what is squarely applicable herein are the pronouncements in the cases of
United CMC Textile Workers Union vs. Labor Arbiter, 149 SCRA 424 (1987), Universal Corn
Products v. NLRC, 153 SCRA 191 (1987) and UST Faculty Union vs. NLRC, 190 SCRA 215 (1990), which
uniformly ruled that where the purpose for the giving of a Christmas bonus is not the same as the
reasons for the granting of a thirteenth month pay under P.D. 851, which is to uniformly provide
employees with additional income, then the employer is still obligated to give the thirteenth month pay
in addition to the bonus. ALPAP also decries the fact that it is only their pilots who are deprived of both
the thirteenth month pay and the year-end bonus, as opposed to the rest of PAL's employees belonging
to FASAP and PALEA who are enjoying both benefits.
The absence of an express provision in the CBA between PAL and ALPAP obligating the former to
pay the members of the latter a thirteenth month pay is immaterial. It cannot be disputed that the
tenor of P.D. 851 as amended by Memorandum Order No. 28 is mandatory in so providing that "all
employers are hereby required to pay all their rank and file employees a thirteenth month pay not later
than December 24 of every year. Non-compliance with this mandate cannot be excused by the simple
expedient of pointing to the absence of a similar provision in the CBA for this would contravene the
basic rule that an existing law enters into and forms part of a valid contract without the need for the
parties to expressly make reference to it.[16] Notwithstanding therefore the absence of any contractual
agreement, the payment of a thirteenth month pay being a statutory grant, compliance with the same
is mandatory and is deemed incorporated in the CBA.
But whether or not PAL can claim the exemption provided under the law by equating the year-end
bonus with the payment of the thirteenth month pay deserves a very close scrutiny in this case.
Although P.D. 851 as amended by Memorandum Order No. 28 requires all employers to pay all
their rank and file employees a thirteenth month pay, the rule is subject to certain exceptions. Excluded
from the coverage are employers already paying their employees a thirteenth month pay or more in a
calendar year or its equivalent at the time of the issuance of the law. [17] Construing the term "Its
equivalent", the same was defined as inclusive of Christmas bonus, mid-year bonus, profit-sharing
payments and other cash bonuses amounting to not less than 1/12th of the basic salary but shall not
include cash and stock dividend, cost of living allowances and all other allowances regularly enjoyed
by the employee, as well as non-monetary benefits. When an employer pays less than 1/12th of the
employee's basic salary, the employer shall pay the difference.[18]
The term "bonus" was in turn interpreted to mean:
[A] bonus is an amount granted and paid to an employee for his industry and loyalty which
contributed to the success of the employer's business and made possible the realization of profits. It
is an act of generosity of the employer . . . It is also granted by an enlightened employer to spur the
employee to greater efforts for the success of the business and realization of bigger profits.[19]
Applying the aforecited definitions, it would seem that the year-end bonus being granted by PAL
to the employees may be considered as an equivalent of the thirteenth month pay considering the
similarity in the purpose for granting the same. As advanced by ALPAP, the rationale for PAL's grant of
a year-end bonus was to give regard for the loyalty, dedication and hardwork of the
employee.[20] Confirming this purpose is the declaration made by then PAL President, Feliciano
Belmonte, Jr. in his letter addressed to the employees of the PAL dated October 30, 1991, announcing
the granting of a Christmas bonus equivalent to 125% of the employee's monthly pay for a "job well
done" to wit:
xxx xxx xxx
In simple terms, we made a profit from our efforts to increase revenues and cut costs. I believe it is
only proper that appreciation for a job well done should be expressed in a tangible manner.
I am therefore pleased to announce that for this year, management has decided to award a
Christmas bonus equivalent to 125% of your monthly basic pay. x x x x x x.[21]
From the foregoing, it appears that the rationale for the grant of the year-end bonus by PAL
coincides with the nature of the bonus which can be equated with the payment of a thirteenth month
pay.
However, notwithstanding the above disquisitions, the peculiar circumstances in this case wavers
against the outright application of the rule preventing the imposition of a double burden upon the
employer who is already paying the equivalent of the thirteenth month pay, and thereby exempt PAL
from granting both benefits of a year-end bonus and a thirteenth month pay to its pilots.
It bears to stress that this Court is not precluded from going into a meticulous scrutiny of the
attendant facts and circumstances from which we could extract the real intention and purpose behind
the grant by PAL of the year-end bonus to its employees. In previous cases, we denied the claim for
an exemption under the guise of paying the equivalent of a thirteenth month pay under P.D. 851,
where it has been shown that the true purpose for the grant of the bonus to the employees is different
from the avowed intention of P.D. 851, that is to uniformly provide the low paid employee with
additional income.[22]
In the instant case, it is beyond dispute that except for the pilots belonging to ALPAP, all other
employees of PAL who are either members of FASAP or PALEA are enjoying both benefits of a thirteenth
month pay and a year-end bonus.
Explaining this discrepancy, PAL argues that whatever benefits are being enjoyed by the members
of the FASAP and PALEA resulted from negotiations in their respective CBA's. The absence of a provision
granting both benefits to the members of ALPAP confirms that there was no intention on the part of
the PAL to extend additional benefits to the former over and above that required by law.
We find no merit in PAL's assertion. The inclusion of a provision for the continued payment of the
year-end bonus in the 1988-1991 CBA of ALPAP and PAL belies the latter's contention that the grant
of the year-end bonus was intended to be credited as compliance with the mandate to pay the pilots a
thirteenth month pay. Memorandum Order No. 28 which amended P.D. 851, requiring all employers to
pay all rank and file employees, regardless of the amount of their salaries, a thirteenth month pay,
was issued on August 13, 1986. As early as said date, PAL was therefore fully aware that it was legally
obliged to grant all its rank and file employees a thirteenth month pay. Thus, if PAL really intended to
equate the year-end bonus with the thirteenth month pay, then the same should have been expressly
declared in their 1988-1991 CBA, or the provision on the year-end bonus should have been deleted
because it would only be a mere superfluity. But as it is, the provision for the continued payment of a
year-end bonus was incorporated in the CBA without any qualification, from which the only logical
conclusion that could be derived is that PAL intended to give the members of ALPAP a year-end bonus
in addition to its obligation to grant a thirteenth month pay.
Moreover, there is no rational basis for withholding from the members of ALPAP the benefit of a
year-end bonus in addition to the thirteenth month pay, while the same is being granted to the other
rank and file employees of PAL. PAL's failure to extend the same benefits to its pilots is a blatant act
of discrimination and is grossly unfair to the latter considering the heavy and delicate responsibilities
that they bear in the airline business, particularly in ensuring the safety and comfort of thousands of
passengers. In fact, it cannot be discounted that pilots are the lifeblood of every airline company. This
makes it imperative that due regard must be exercised in safeguarding their rights and welfare as
employees. Finally, it is worth mentioning that herein pilots of ALPAP are not even seeking more
benefits than what the other employees of PAL are already enjoying, rather, they simply seek to be
accorded the same benefits and treatment already being extended by PAL's management to the other
employees. In this regard, we must therefore uphold their claims.
With respect however to the deletion of the award of moral and exemplary damages, the nonimposition of legal interest on the awards, and the award of attorney's fees, we find no cogent reason
to reverse the conclusion reached by respondent NLRC, bearing in mind that the award of these items
are subject to the sound discretion of the court, which if properly exercised will not be disturbed on
appeal.[23] The claim for moral and exemplary damages was properly dismissed in this case due to the
absence of clear and convincing evidence to merit the same. For moral damages to be awarded, it is
essential that the claimant must have satisfactorily proved during the trial the existence of the factual
basis of the damages and its causal connection with the adverse party's acts. [24] If the court has no
proof or evidence upon which the claim for moral damages could be based, such indemnity could not
be outrightly awarded.[25] The same holds true with respect to the award of exemplary damages where
it must be shown that the party acted in a wanton, oppressive or malevolent manner.[26]
The award of attorney's fees on the basis of quantum meruit at the rate of five percent (5%) of
the total monetary award is reasonable in this case considering the explicit provisions laid out in Article
III of the Labor Code and in Rule VIII, Sec. II, Book III of the Omnibus Rules Implementing the Labor
Code,[27] to wit:
Art. III. Attorney's fees. - (a) In cases of unlawful withholding of wages the culpable party may be
assessed attomey's fees equivalent to ten percent of the amount of wages recovered.
xxx xxx xxx
Sec. 11, Attorney's fees. - Attorney's fees in any judicial or administrative proceedings for the
recovery of wages shall not exceed 10% of the amount awarded. The fees may be deducted from the
total amount due the winning party.
WHEREFORE, finding no merit in the petitions, the same are hereby DENIED and the Resolutions
of public respondent NLRC promulgated on November 23, 1993 and February 28, 1994 are hereby
AFFIRMED.
SO ORDERED.
G.R. No. 110068 February 15, 1995
PHILIPPINE DUPLICATORS, INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and PHILIPPINE DUPLICATORS EMPLOYEES
UNION-TUPAS, respondents.
RESOLUTION
FELICIANO, J.:
On 11 November 1993, this Court, through its Third Division, rendered a decision dismissing the
Petition for Certiorari filed by petitioner Philippine Duplicators, Inc. (Duplicators) in G.R. No. 110068.
The Court upheld the decision of public respondent National Labor Relations Commission (NLRC),
which affirmed the order of Labor Arbiter Felipe T. Garduque II directing petitioner to pay 13th month
pay to private respondent employees computed on the basis of their fixed wages plus sales
commissions. The Third Division also denied with finality on 15 December 1993 the Motion for
Reconsideration filed (on 12 December 1993) by petitioner.
On 17 January 1994, petitioner Duplicators filed (a) a Motion for Leave to Admit Second Motion for
Reconsideration and (b) a Second Motion for Reconsideration. This time, petitioner invoked the
decision handed down by this Court, through its Second Division, on 10 December 1993 in the two
(2) consolidated cases of Boie-Takeda Chemicals, Inc. vs. Hon. Dionisio de la Serna and Philippine
Fuji Xerox Corp. vs. Hon. Cresenciano B. Trajano, in G.R. Nos. 92174 and 102552, respectively. In its
decision, the Second Division inter alia declared null and void the second paragraph of Section 5
(a)1 of the Revised Guidelines issued by then Secretary of Labor Drilon. Petitioner submits that the
decision in the Duplicators case should now be considered as having been abandoned or reversed by
the Boie-Takeda decision, considering that the latter went "directly opposite and contrary to" the
conclusion reached in the former. Petitioner prays that the decision rendered in Duplicators be set
aside and another be entered directing the dismissal of the money claims of private respondent
Philippine Duplicators' Employees' Union.
In view of the nature of the issues raised, the Third Division of this Court referred the petitioner's
Second Motion for Reconsideration, and its Motion for Leave to Admit the Second Motion for
Reconsideration, to the Court en banc en consulta. The Court en banc, after preliminary deliberation,
and inorder to settle the condition of the relevant case law, accepted G.R. No. 110068 as
a banc case.
Deliberating upon the arguments contained in petitioner's Second Motion for Reconsideration, as well
as its Motion for Leave to Admit the Second Motion for Reconsideration, and after review of the
doctrines embodied, respectively, in Duplicators and Boie-Takeda, we consider that these Motions
must fail.
The decision rendered in Boie-Takeda cannot serve as a precedent under the doctrine of stare
decisis. The Boie-Takeda decision was promulgated a month after this Court, (through its Third
Division), had rendered the decision in the instant case. Also, the petitioner's (first) Motion for
Reconsideration of the decision dated 10 November 1993 had already been denied, with finality, on
15 December 1993, i.e.; before the Boie-Takeda decision became final on 5 January 1994.
Preliminarily, we note that petitioner Duplicators did not put in issue the validity of the Revised
Guidelines on the Implementary on of the 13th Month Pay Law, issued on November 16, 1987, by
then Labor Secretary Franklin M. Drilon, either in its Petition for Certiorari or in its (First) Motion for
Reconsideration. In fact, petitioner's counsel relied upon these Guidelines and asserted their validity
in opposing the decision rendered by public respondent NLRC. Any attempted change in petitioner's
theory, at this late stage of the proceedings, cannot be allowed.
More importantly, we do not agree with petitioner that the decision in Boie-Takeda is "directly
opposite or contrary to" the decision in the present (Philippine Duplicators). To the contrary, the
doctrines enunciated in these two (2) cases in fact co-exist one with the other. The two (2) cases
present quite different factual situations (although the same word "commissions" was used or
invoked) the legal characterizations of which must accordingly differ.
The Third Division in Durplicators found that:
In the instant case, there is no question that the sales commission earned by the
salesmen who make or close a sale of duplicating machines distributed by petitioner
corporation, constitute part of the compensation or remuneration paid to salesmen for
serving as salesmen, and hence as part of the "wage" or salary of petitioner's
salesmen. Indeed, it appears that petitioner pays its salesmen a small fixed or
guaranteed wage; the greater part of the salesmen's wages or salaries being composed
of the sales or incentive commissions earned on actual sales closed by them. No doubt
this particular galary structure was intended for the benefit of the petitioner
corporation, on the apparent assumption that thereby its salesmen would be moved to
greater enterprise and diligence and close more sales in the expectation of increasing
their sales commissions. This, however, does not detract from the character of such
commissions as part of the salary or wage paid to each of its salesmen for rendering
services to petitioner corporation.
In other words, the sales commissions received for every duplicating machine sold constituted part of
the basic compensation or remuneration of the salesmen of Philippine Duplicators for doing their job.
The portion of the salary structure representing commissions simply comprised an automatic
increment to the monetary value initially assigned to each unit of work rendered by a salesman.
Especially significant here also is the fact that the fixed or guaranteed portion of the wages paid to
the Philippine Duplicators' salesmen represented only 15%-30% of an employee's total earnings in a
year. We note the following facts on record:
Salesmen's Total Earnings and 13th Month Pay
For the Year 19862
Name of Total Amount Paid Montly Fixed
Salesman Earnings as 13th Month Pay Wages x 123
Baylon, P76,610.30 P1,350.00 P16,200.00
Benedicto
Bautista 90,780.85 1,182.00 14,184.00
Salvador
Brito, 64,382.75 1,238.00 14,856.00
Tomas
Bunagan, 89,287.75 1,266.00 15,192.00
Jorge
Canilan, 74,678.17 1,350.00 16,200.00
Rogelio
Dasig, 54,625.16 1,378,00 16,536.00
Jeordan
Centeno, 51,854.15 1,266.04 15,192.00
Melecio, Jr.
De los Santos 73,551.39 1,322.00 15,864.00
Ricardo
del Mundo, 108,230.35 1,406.00 16,872.00
Wilfredo
Garcia, 93,753.75 1,294.00 15,528.00
Delfin
Navarro, 98,618.71 1,266.00 15,192.00
Ma. Teresa
Ochosa, 66,275.65 1,406.00 16,872.00
Rolano
Quisumbing, 101,065.75 1,406.00 16,872.00
Teofilo
Rubina, 42,209.73 1,266.00 15,192.00
Emma
Salazar, 64,643.65 1,238.00 14,856.00
Celso
Sopelario, 52,622.27 1,350.00 16,200.00
Ludivico
Tan, 30,127.50 1,238.00 14,856.00
Leynard
Talampas, 146,510.25 1,434.00 17,208.00
Pedro
Villarin, 41,888.10 1,434.00 17,208.00
Constancio
Carrasco, 50,201.20 403.75*
Cicero
Punzalan, 24,351.89 1,266.00 15,192.00
Reynaldo
Poblador, 25,516.75 323.00*
Alberto
Cruz, 32,950.45 323.00*
Danilo
Baltazar, 15,681.35 323.00*
Carlito
Considering the above circumstances, the Third Division held, correctly, that the sales commissions
were an integral part of the basic salary structure of Philippine Duplicators' employees salesmen.
These commissions are not overtime payments, nor profit-sharing payments nor any other fringe
benefit. Thus, the salesmen's commissions, comprising a pre-determined percent of the selling price
of the goods sold by each salesman, were properly included in the term "basic salary" for purposes of
computing their 13th month pay.
In Boie-Takeda the so-called commissions "paid to or received by medical representatives of BoieTakeda Chemicals or by the rank and file employees of Philippine Fuji Xerox Co.," were excluded
from the term "basic salary" because these were paid to the medical representatives and rank-andfile employees as "productivity bonuses."4 The Second Division characterized these payments as
additional monetary benefits not properly included in the term "basic salary" in computing their 13th
month pay. We note that productivity bonuses are generally tied to the productivity, or capacity for
revenue production, of a corporation; such bonuses closely resemble profit-sharing payments and
have no clear director necessary relation to the amount of work actually done by each individual
employee. More generally, a bonus is an amount granted and paid ex gratia to the employee; its
payment constitutes an act of enlightened generosity and self-interest on the part of the employer,
rather than as a demandable or enforceable obligation. In Philippine Education Co. Inc. (PECO)
v. Court of Industrial Relations,5 the Court explained the nature of a bonus in the following general
terms:
As a rule a bonus is an amount granted and paid to an employee for his industry loyalty
which contributed to the success of the employer's business and made possible the
realization of profits. It is an act of generosity of the employer for which the employee
ought to be thankful and grateful. It is also granted by an enlightened employer to spur
the employee to greater efforts for the success of the business and realization of bigger
profits. . . . . From the legal point of view a bonus is not and mandable and enforceable
obligation. It is so when It is made part of the wage or salary or compensation. In such
a case the latter would be a fixed amount and the former would be a contingent one
dependent upon the realization of profits. . . .6 (Emphasis supplied)
In Atok-Big Wedge Mining Co., Inc. v. Atok-Big Wedge Mutual Benefit Association,7 the Court
amplified:
. . . . Whether or not [a] bonus forms part of waqes depends upon the circumstances or
conditions for its payment. If it is an additional compensation which the employer
promised and agreed to give without any conditions imposed for its payment, such as
success of business or greater production or output, then it is part of the wage. But if it
is paid only if profits are realized or a certain amount of productivity achieved, it cannot
be considered part of wages. . . . It is also paid on the basis of actual or actual work
accomplished. If the desired goal of production is not obtained, or the amount of actual
work accomplished, the bonus does not accrue. . . . 8 (Emphasis supplied)
More recently, the non-demandable character of a bonus was stressed by the Court in Traders Royal
Bank v.National Labor Relations Commission:9
A bonus is a "gratuity or act of liberality of the giver which the recipient has no right to
demand as a matter of right." (Aragon v. Cebu Portland Cement Co., 61 O.G. 4567). "It
is something given in addition to what is ordinarily received by or strictly due the
recipient." The granting of a bonus is basically a management prerogative which cannot
be forced upon the employer "who may not be obliged to assume the onerous burden of
granting bonuses or other benefits aside from the employee's basic salaries or wages . .
." (Kamaya Point Hotel v. NLRC, 177 SCRA 160 [1989]). 10 (Emphasis supplied)
If an employer cannot be compelled to pay a productivity bonus to his employees, it should follow
that such productivity bonus, when given, should not be deemed to fall within the "basic salary" of
employees when the time comes to compute their 13th month pay.
It is also important to note that the purported "commissions" paid by the Boie-Takeda Company to
its medical representatives could not have been "sales commissions" in the same sense that
Philippine Duplicators paid its salesmen Sales commissions. Medical representatives
are not salesmen; they do not effect any sale of any article at all. In common commercial practice, in
the Philippines and elsewhere, of which we take judicial notice, medical representatives are
employees engaged in the promotion of pharmaceutical products or medical devices manufactured by
their employer. They promote such products by visiting identified physicians and inform much
physicians, orally and with the aid of printed brochures, of the existence and chemical composition
and virtues of particular products of their company. They commonly leave medical samples with each
physician visited; but those samples are not "sold" to the physician and the physician is, as a matter
of professional ethics, prohibited from selling such samples to their patients. Thus, the additional
payments made to Boie-Takeda's medical representatives were not in fact sales commissions but
rather partook of the nature of profit-sharing bonuses.
The doctrine set out in the decision of the Second Division is, accordingly, that additional payments
made to employees, to the extent they partake of the nature of profit-sharing payments, are properly
excluded from the ambit of the term "basic salary" for purposes of computing the 13th month pay
due to employees. Such additional payments are not "commissions" within the meaning of the
second paragraph of Section 5 (a) of the Revised Guidelines Implementing 13th Month Pay.
The Supplementary Rules and Regulations Implementing P.D. No. 851 subsequently issued by former
Labor Minister Ople sought to clarify the scope of items excluded in the computation of the 13th
month pay; viz.:
Sec. 4. Overtime pay, earnings and other remunerations which are not part of the basic
salary shall not be included in the computation of the 13th month pay.
We observe that the third item excluded from the term "basic salary" is cast in open ended and
apparently circular terms: "other remunerations which are not part of the basic salary." However,
what particular types of earnings and remuneration are or are not properly included or integrated in
the basic salary are questions to be resolved on a case to case basis, in the light of the specific and
detailed facts of each case. In principle, where these earnings and remuneration are closely akin to
fringe benefits, overtime pay or profit-sharing payments, they are properly excludedin computing the
13th month pay. However, sales commissions which are effectively an integral portion of the basic
salary structure of an employee, shall be included in determining his 13th month pay.
We recognize that both productivity bonuses and sales commissions may have an incentive effect.
But there is reason to distinguish one from the other here. Productivity bonuses are generally tied to
the productivity or profit generation of the employer corporation. Productivity bonuses are not
directly dependent on the extent an individual employee exerts himself. A productivity bonus is
something extra for which no specific additional services are rendered by any particular employee
and hence not legally demandable, absent a contractual undertaking to pay it. Sales commissions, on
the other hand, such as those paid in Duplicators, are intimately related to or directly proportional to
the extent or energy of an employee's endeavors. Commissions are paid upon the specific results
achieved by a salesman-employee. It is a percentage of the sales closed by a salesman and operates
as an integral part of such salesman's basic pay.
Finally, the statement of the Second Division in Boie-Takeda declaring null and void the second
paragraph of Section 5(a) of the Revised Guidelines Implementing the 13th Month Pay issued by
former Labor Secretary Drilon, is properly understood as holding that that second paragraph provides
no legal basis for including within the term "commission" there used additional payments to
employees which are, as a matter of fact, in the nature of profit-sharing payments or bonuses. If and
to the extent that such second paragraph is so interpreted and applied, it must be regarded as
invalid as having been issued in excess of the statutory authority of the Secretary of Labor. That
same second paragraph however, correctly recognizes that commissions, like those paid
in Duplicators, may constitute part of the basic salary structure of salesmen and hence should be
included in determining the 13th month pay; to this extent, the second paragraph is and remains
valid.
ACCORDINGLY, the Motions for (a) Leave to File a Second Motion for Reconsideration and the (b)
aforesaid Second Reconsideration are DENIED for lack of merit. No further pleadings will be
entertained.
Narvasa, C.J., Padilla, Bidin, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Quiason, Puno, Vitug,
Kapunan, Mendoza and Francisco, JJ., concur.
JPL MARKETING G.R. No. 151966
PROMOTIONS,
Petitioner, Present:
PUNO, J.,
Chairman,
- versus - AUSTRIA-MARTINEZ,
CALLEJO, SR.,
TINGA, and
COURT OF APPEALS, NATIONAL CHICO-NAZARIO, JJ.
LABOR RELATIONS COMMISSION,
NOEL GONZALES, RAMON ABESA
III and FAUSTINO ANINIPOT,
Respondents. Promulgated:
July 8, 2005
x-------------------------------------------------------------------x
DECISION
TINGA, J.:
This is a petition for review of the Decision[1] of the Court of Appeals in CA-G.R. SP No. 62631 dated
03 October 2001 and its Resolution[2] dated 25 January 2002 denying petitioners Motion for
Reconsideration, affirming the Resolution of the National Labor Relations Commission (NLRC), Second
Division, dated 27 July 2000, awarding separation pay, service incentive leave pay, and 13th month
pay to private respondents.
JPL Marketing and Promotions (hereinafter referred to as JPL) is a domestic corporation engaged in the
business of recruitment and placement of workers. On the other hand, private respondents Noel
Gonzales, Ramon Abesa III and Faustino Aninipot were employed by JPL as merchandisers on separate
dates and assigned at different establishments in Naga City and Daet, Camarines Norte as attendants
to the display of California Marketing Corporation (CMC), one of petitioners clients.
On 13 August 1996, JPL notified private respondents that CMC would stop its direct merchandising
activity in the Bicol Region, Isabela, and Cagayan Valley effective 15 August 1996.[3] They were advised
to wait for further notice as they would be transferred to other clients. However, on 17 October
1996,[4] private respondents Abesa and Gonzales filed before the National Labor Relations Commission
Regional Arbitration Branch (NLRC) Sub V complaints for illegal dismissal, praying for separation pay,
13th month pay, service incentive leave pay and payment for moral damages.[5] Aninipot filed a similar
case thereafter.
After the submission of pertinent pleadings by all of the parties and after some clarificatory hearings,
the complaints were consolidated and submitted for resolution. Executive Labor Arbiter Gelacio L.
Rivera, Jr. dismissed the complaints for lack of merit.[6] The Labor Arbiter found that Gonzales and
Abesa applied with and were employed by the store where they were originally assigned by JPL even
before the lapse of the six (6)-month period given by law to JPL to provide private respondents a new
assignment. Thus, they may be considered to have unilaterally severed their relation with JPL, and
cannot charge JPL with illegal dismissal.[7] The Labor Arbiter held that it was incumbent upon private
respondents to wait until they were reassigned by JPL, and if after six months they were not reassigned,
they can file an action for separation pay but not for illegal dismissal.[8] The claims for 13th month pay
and service incentive leave pay was also denied since private respondents were paid way above the
applicable minimum wage during their employment.[9]
Private respondents appealed to the NLRC. In its Resolution,[10] the Second Division of the NLRC agreed
with the Labor Arbiters finding that when private respondents filed their complaints, the six-month
period had not yet expired, and that CMCs decision to stop its operations in the areas was beyond the
control of JPL, thus, they were not illegally dismissed. However, it found that despite JPLs effort to look
for clients to which private respondents may be reassigned it was unable to do so, and hence they are
entitled to separation pay.[11] Setting aside the Labor Arbiters decision, the NLRC ordered the payment
of:
1. Separation pay, based on their last salary rate and counted from the first day
of their employment with the respondent JPL up to the finality of this judgment;
2. Service Incentive Leave pay, and 13th month pay, computed as in No.1 hereof.[12]
Aggrieved, JPL filed a petition for certiorari under Rule 65 of the Rules of Court with the Court of
Appeals, imputing grave abuse of discretion on the part of the NLRC. It claimed that private
respondents are not by law entitled to separation pay, service incentive leave pay and 13th month pay.
The Court of Appeals dismissed the petition and affirmed in toto the NLRC resolution. While conceding
that there was no illegal dismissal, it justified the award of separation pay on the grounds of equity
and social justice.[13] The Court of Appeals rejected JPLs argument that the difference in the amounts
of private respondents salaries and the minimum wage in the region should be considered as payment
for their service incentive leave and 13th month pay.[14]Notwithstanding the absence of a contractual
agreement on the grant of 13th month pay, compliance with the same is mandatory under the law.
Moreover, JPL failed to show that it was exempt from paying service incentive leave pay. JPL filed a
motion for reconsideration of the said resolution, but the same was denied on 25 January 2002.[15]
In the instant petition for review, JPL claims that the Court of Appeals committed reversible error in
rendering the assailed Decision and Resolution.[16] The instant case does not fall under any of the
instances where separation pay is due, to wit: installation of labor-saving devices, redundancy,
retrenchment or closing or cessation of business operation,[17] or disease of an employee whose
continued employment is prejudicial to him or co-employees,[18] or illegal dismissal of an employee but
reinstatement is no longer feasible.[19] Meanwhile, an employee who voluntarily resigns is not entitled
to separation unless stipulated in the employment contract, or the collective bargaining agreement, or
is sanctioned by established practice or policy of the employer.[20] It argues that private respondents
good record and length of service, as well as the social justice precept, are not enough to warrant the
award of separation pay. Gonzales and Aninipot were employed by JPL for more than four (4) years,
while Abesa rendered his services for more than two (2) years, hence, JPL claims that such short period
could not have shown their worth to JPL so as to reward them with payment of separation pay.[21]
In addition, even assuming arguendo that private respondents are entitled to the benefits awarded,
the computation thereof should only be from their first day of employment with JPL up to 15 August
1996, the date of termination of CMCs contract, and not up to the finality of the 27 July 2000 resolution
of the NLRC.[22]To compute separation pay, 13th month pay, and service incentive leave pay up to 27
July 2000 would negate the findings of both the Court of Appeals and the NLRC that private respondents
were not unlawfully terminated.[23] Additionally, it would be erroneous to compute service incentive
leave pay from the first day of their employment up to the finality of the NLRC resolution since an
employee has to render at least one (1) year of service before he is entitled to the same. Thus, service
incentive leave pay should be counted from the second year of service.[24]
On the other hand, private respondents maintain that they are entitled to the benefits being claimed
as per the ruling of this Court in Serrano v. NLRC, et al.[25]They claim that their dismissal, while not
illegal, was tainted with bad faith.[26] They allege that they were deprived of due process because the
notice of termination was sent to them only two (2) days before the actual termination. [27] Likewise,
the most that JPL offered to them by way of settlement was the payment of separation pay of seven
(7) days for every year of service.[28]
Replying to private respondents allegations, JPL disagrees that the notice it sent to them was a notice
of actual termination. The said memo merely notified them of the end of merchandising for CMC, and
that they will be transferred to other clients.[29] Moreover, JPL is not bound to observe the thirty (30)day notice rule as there was no dismissal to speak of. JPL counters that it was private respondents who
acted in bad faith when they sought employment with another establishment, without even the
courtesy of informing JPL that they were leaving for good, much less tender their resignation. [30] In
addition, the offer of seven (7) days per year of service as separation pay was merely an act of
magnanimity on its part, even if private respondents are not entitled to a single centavo of separation
pay.[31]
The case thus presents two major issues, to wit: whether or not private respondents are entitled to
separation pay, 13th month pay and service incentive leave pay, and granting that they are so entitled,
what should be the reckoning point for computing said awards.
Under Arts. 283 and 284 of the Labor Code, separation pay is authorized only in cases of
dismissals due to any of these reasons: (a) installation of labor saving devices; (b) redundancy; (c)
retrenchment; (d) cessation of the employer's business; and (e) when the employee is suffering from
a disease and his continued employment is prohibited by law or is prejudicial to his health and to the
health of his co-employees. However, separation pay shall be allowed as a measure of social justice in
those cases where the employee is validly dismissed for causes other than serious misconduct or those
reflecting on his moral character, but only when he was illegally dismissed.[32] In addition, Sec. 4(b),
Rule I, Book VI of the Implementing Rules to Implement the Labor Code provides for the payment of
separation pay to an employee entitled to reinstatement but the establishment where he is to be
reinstated has closed or has ceased operations or his present position no longer exists at the time of
reinstatement for reasons not attributable to the employer.
The common denominator of the instances where payment of separation pay is warranted is that the
employee was dismissed by the employer.[33] In the instant case, there was no dismissal to speak of.
Private respondents were simply not dismissed at all, whether legally or illegally. What they received
from JPL was not a notice of termination of employment, but a memo informing them of the termination
of CMCs contract with JPL. More importantly, they were advised that they were to be reassigned. At
that time, there was no severance of employment to speak of.
Furthermore, Art. 286 of the Labor Code allows the bona fide suspension of the operation of a business
or undertaking for a period not exceeding six (6) months, wherein an employee/employees are placed
on the so-called floating status. When that floating status of an employee lasts for more than six
months, he may be considered to have been illegally dismissed from the service. Thus, he is entitled
to the corresponding benefits for his separation, and this would apply to suspension either of the entire
business or of a specific component thereof.[34]
As clearly borne out by the records of this case, private respondents sought employment from other
establishments even before the expiration of the six (6)-month period provided by law. As they
admitted in their comment, all three of them applied for and were employed by another establishment
after they received the notice from JPL.[35] JPL did not terminate their employment; they themselves
severed their relations with JPL. Thus, they are not entitled to separation pay.
The Court is not inclined in this case to award separation pay even on the ground of compassionate
justice. The Court of Appeals relied on the cases[36] wherein the Court awarded separation pay to legally
dismissed employees on the grounds of equity and social consideration. Said cases involved employees
who were actually dismissed by their employers, whether for cause or not. Clearly, the principle applies
only when the employee is dismissed by the employer, which is not the case in this instance. In seeking
and obtaining employment elsewhere, private respondents effectively terminated their employment
with JPL.
In addition, the doctrine enunciated in the case of Serrano[37] cited by private respondents has already
been abandoned by our ruling in Agabon v. National Labor Relations Commission.[38] There we ruled
that an employer is liable to pay indemnity in the form of nominal damages to a dismissed employee
if, in effecting such dismissal, the employer failed to comply with the requirements of due process.
However, private respondents are not entitled to the payment of damages considering that there was
no violation of due process in this case. JPLs memo dated 13 August 1996 to private respondents is
not a notice of termination, but a mere note informing private respondents of the termination of CMCs
contract and their re-assignment to other clients. The thirty (30)-day notice rule does not apply.
Nonetheless, JPL cannot escape the payment of 13th month pay and service incentive leave pay to
private respondents. Said benefits are mandated by law and should be given to employees as a matter
of right.
Presidential Decree No. 851, as amended, requires an employer to pay its rank and file employees a
13th month pay not later than 24 December of every year. However, employers not paying their
employees a 13th month pay or its equivalent are not covered by said law.[39] The term its equivalent
was defined by the laws implementing guidelines as including Christmas bonus, mid-year bonus, cash
bonuses and other payment amounting to not less than 1/12 of the basic salary but shall not include
cash and stock dividends, cost-of-living-allowances and all other allowances regularly enjoyed by the
employee, as well as non-monetary benefits.[40]
On the other hand, service incentive leave, as provided in Art. 95 of the Labor Code, is a yearly leave
benefit of five (5) days with pay, enjoyed by an employee who has rendered at least one year of
service. Unless specifically excepted, all establishments are required to grant service incentive leave
to their employees. The term at least one year of service shall mean service within twelve (12) months,
whether continuous or broken reckoned from the date the employee started working.[41]The Court has
held in several instances that service incentive leave is clearly demandable after one year of service. [42]
Admittedly, private respondents were not given their 13th month pay and service incentive leave pay
while they were under the employ of JPL. Instead, JPL provided salaries which were over and above
the minimum wage. The Court rules that the difference between the minimum wage and the actual
salary received by private respondents cannot be deemed as their 13th month pay and service incentive
leave pay as such difference is not equivalent to or of the same import as the said benefits
contemplated by law. Thus, as properly held by the Court of Appeals and by the NLRC, private
respondents are entitled to the 13th month pay and service incentive leave pay.
However, the Court disagrees with the Court of Appeals ruling that the 13 th month pay and service
incentive leave pay should be computed from the start of employment up to the finality of the NLRC
resolution. While computation for the 13th month pay should properly begin from the first day of
employment, the service incentive leave pay should start a year after commencement of service, for it
is only then that the employee is entitled to said benefit. On the other hand, the computation for both
benefits should only be up to 15 August 1996, or the last day that private respondents worked for JPL.
To extend the period to the date of finality of the NLRC resolution would negate the absence of illegal
dismissal, or to be more precise, the want of dismissal in this case. Besides, it would be unfair to
require JPL to pay private respondents the said benefits beyond 15 August 1996 when they did not
render any service to JPL beyond that date. These benefits are given by law on the basis of the service
actually rendered by the employee, and in the particular case of the service incentive leave, is granted
as a motivation for the employee to stay longer with the employer. There is no cause for granting said
incentive to one who has already terminated his relationship with the employer.
The law in protecting the rights of the employees authorizes neither oppression nor selfdestruction of the employer. It should be made clear that when the law tilts the scale of justice in favor
of labor, it is but recognition of the inherent economic inequality between labor and management. The
intent is to balance the scale of justice; to put the two parties on relatively equal positions. There may
be cases where the circumstances warrant favoring labor over the interests of management but never
should the scale be so tilted if the result is an injustice to the employer. Justitia nemini neganda
est (Justice is to be denied to none).[43]
WHEREFORE, the petition is GRANTED IN PART. The Decision and Resolution of the Court of
Appeals in CA-G.R. SP No. 62631 are hereby MODIFIED. The award of separation pay is deleted.
Petitioner is ordered to pay private respondents their 13 th month pay commencing from the date of
employment up to 15 August 1996, as well as service incentive leave pay from the second year of
employment up to 15 August 1996. No pronouncement as to costs.
SO ORDERED.
ZAYBER JOHN B. PROTACIO, G.R. No. 168654
Petitioner,
Present:
MARTINEZ,*
- versus - CORONA,**
TINGA,
Acting Chairperson,
LAYA MANANGHAYA & CO. BRION, JJ.
and/or MARIO T. MANANGHAYA,
Respondents.
Promulgated:
March 25, 2009
VELASCO, JR., and
x----------------------------------------------------------------------------x
DECISION
TINGA, J.:
Before the Court is a petition for review on certiorari[1] under Rule 45 of the 1997 Rules of Civil
Procedure, assailing the decision[2] and resolution[3] of the Court of Appeals in CA-G.R. SP No. 85038.
The Court of Appeals decision reduced the monetary award granted to petitioner by the National Labor
Relations Commission (NLRC) while the resolution denied petitioners motion for reconsideration for
lack of merit.
The following factual antecedents are matters of record.
Respondent KPMG Laya Mananghaya & Co. (respondent firm) is a general professional
partnership duly organized under the laws of the Philippines. Respondent firm hired petitioner Zayber
John B. Protacio as Tax Manager on 01 April 1996. He was subsequently promoted to the position of
Senior Tax Manager. On 01 October 1997, petitioner was again promoted to the position of Tax
Principal.[4]
However, on 30 August 1999, petitioner tendered his resignation effective 30 September 1999.
Then, on 01 December 1999, petitioner sent a letter to respondent firm demanding the immediate
payment of his 13th month pay, the cash commutation of his leave credits and the issuance of his 1999
Certificate of Income Tax Withheld on Compensation. Petitioner sent to respondent firm two more
demand letters for the payment of his reimbursement claims under pain of the legal action.[5]
Respondent firm failed to act upon the demand letters. Thus, on 15 December 1999, petitioner
filed before the NLRC a complaint for the non-issuance of petitioners W-2 tax form for 1999 and the
non-payment of the following benefits: (1) cash equivalent of petitioners leave credits in the amount
of P55,467.60; (2) proportionate 13th month pay for the year 1999; (3) reimbursement claims in the
amount of P19,012.00; and (4) lump sum pay for the fiscal year 1999 in the amount of P674,756.70.
Petitioner also sought moral and exemplary damages and attorneys fees. Respondent Mario T.
Managhaya was also impleaded in his official capacity as respondent firms managing partner.[6]
In his complaint,[7] petitioner averred, inter alia, that when he was promoted to the position of
Tax Principal in October 1997, his compensation package had consisted of a monthly gross
compensation of P60,000.00, a 13th month pay and a lump sum payment for the year 1997 in the
amount of P240,000.00 that was paid to him on 08 February 1998.
According to petitioner, beginning 01 October 1998, his compensation package was revised as
follows: (a) monthly gross compensation of P95,000.00, inclusive of nontaxable allowance; (b)
13th month pay; and (c) a lump sum amount in addition to the aggregate monthly gross compensation.
On 12 April 1999, petitioner received the lump sum amount of P573,000.00 for the fiscal year ending
1998.[8]
Respondent firm denied it had intentionally delayed the processing of petitioners claims but
alleged that the abrupt departure of petitioner and three other members of the firms Tax Division had
created problems in the determination of petitioners various accountabilities, which could be finished
only by going over voluminous documents. Respondents further averred that they had been taken
aback upon learning about the labor case filed by petitioner when all along they had done their best to
facilitate the processing of his claims.[9]
During the pendency of the case before the Labor Arbiter, respondent firm on three occasions
sent check payments to petitioner in the following amounts: (1) P71,250.00, representing petitioners
13th month pay; (2) P54,824.18, as payments for the cash equivalent of petitioners leave credits and
reimbursement claims; and (3) P10,762.57, for the refund of petitioners taxes withheld on his vacation
leave credits. Petitioners copies of his withholding tax certificates were sent to him along with the check
payments.[10] Petitioner acknowledged the receipt of the 13th month pay but disputed the computation
of the cash value of his vacation leave credits and reimbursement claims.[11]
On 07 June 2002, Labor Arbiter Eduardo J. Carpio rendered a decision,[12] the dispositive portion
of which reads:
WHEREFORE, judgment is hereby rendered ordering respondents to jointly and
solidarily pay complainant the following:
P12,681.00 - representing the reimbursement claims of complainant;
P28,407.08 - representing the underpayment of the cash equivalent of the unused
leave credits of complainant;
P573,000.00 - representing complainants 1999 year-end lump sum payment; and
10% of the total judgment awards way of attorneys fees.
SO ORDERED.[13]
The Labor Arbiter awarded petitioners reimbursement claims on the ground that respondent
firms refusal to grant the same was not so much because the claim was baseless but because petitioner
had failed to file the requisite reimbursement forms. He held that the formal defect was cured when
petitioner filed several demand letters as well as the case before him.[14]
The Labor Arbiter held that petitioner was not fully paid of the cash equivalent of the leave
credits due him because respondent firm had erroneously based the computation on a basic pay
of P61,000.00. He held that the evidence showed that petitioners monthly basic salary was P95,000.00
inclusive of the other benefits that were deemed included and integrated in the basic salary and that
respondent firm had computed petitioners 13th month pay based on a monthly basic pay
of P95,000.00; thus, the cash commutation of the leave credits should also be based on this figure.[15]
The Labor Arbiter also ruled that petitioner was entitled to a year-end payment of P573,000.00
on the basis of the company policy of granting yearly lump sum payments to petitioner during all the
years of service and that respondent firm had failed to give petitioner the same benefit for the year
1999 without any explanation.[16]
Aggrieved, respondent firm appealed to the NLRC. On 21 August 2003, the NLRC rendered a
modified judgment,[17] the dispositive portion of which states:
WHEREFORE, the Decision dated June 7, 2002 is hereby Affirmed with the
modification that the complainant is only entitled to receive P2,301.00 as reimbursement
claims. The award of P12,681.00 representing the reimbursement claims of complainant
is set aside for lack of basis.
SO ORDERED.[18]
From the amount of P12,681.00 awarded by the Labor Arbiter as payment for the
reimbursement claims, the NLRC lowered the same to P2,301.00 representing the amount which
remained unpaid.[19] As regards the issues on the lump sum payments and cash equivalent of the leave
credits, the NLRC affirmed the findings of the Labor Arbiter.
Respondents filed a motion for reconsideration[20] but the NLRC denied the motion for lack of
merit.[21] Hence, respondents elevated the matter to the Court of Appeals via a petition for
certiorari.[22]
In the assailed Decision dated 19 April 2005, the Court of Appeals further reduced the total
money award to petitioner, to wit:
WHEREFORE, in the light of the foregoing, the assailed resolution of public
respondent NLRC dated August 21, 2003 in NLRC NCR Case No. 30-12-00927-99 (CA No.
032304-02) is hereby MODIFIED, ordering petitioner firm to pay private respondent the
following:
(1)
(2)
P2,301.00 representing private respondents reimbursement claims;
P9,802.83 representing the underpayment of the cash equivalent of private
respondents unused leave credits;
(3) P10,000.00 attorneys fees.
SO ORDERED.[23]
Petitioner sought reconsideration. In the assailed Resolution dated 27 June 2005, the Court of Appeals
denied petitioners motion for reconsideration for lack of merit.
Hence, the instant petition, raising the following issues:
I.
WHETHER PUBLIC RESPONDENT COURT OF APPEALS SUMMARY DENIAL OF PETITIONERS
MOTION FOR RECONSIDERATION VIOLATES THE CONSTITUTIONAL REQUIREMENT
THAT COURT DECISIONS MUST STATE THE LEGAL AND FACTUAL BASIS [THEREOF].
II
WHETHER PUBLIC RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF
DISCRETION AND ACTED IN WANTON EXCESS OF JURISDICTION IN TAKING
COGNIZANCE OF [RESPONDENTS] PETITION FOR CERTIORARI WHEN THE RESOLUTION
THEREOF HINGES ON MERE EVALUATION OF EVIDENCE.
III.
WHETHER PUBLIC RESPONDENT COURT OF APPEALS WANTONLY ABUSED ITS
DISCRETION IN EMPLOYING A LARGER DIVISOR TO COMPUTE PETITIONERS DAILY
SALARY RATE THEREBY DIMINISHING HIS BENEFITS, IN [VIOLATION] OF THE LABOR
CODE.
IV.
WHETHER PUBLIC RESPONDENT COURT OF APPEALS CAPRICIOUSLY ABUSED ITS
DISCRETION IN REVERSING THE [CONCURRING] FINDINGS OF BOTH LABOR ARBITER
AND NLRC ON THE COMPENSABLE NATURE OF PETITIONERS YEAR END [LUMP] SUM
PLAY [sic] CLAIM.[24]
Before delving into the merits of the petition, the issues raised by petitioner adverting to the
Constitution must be addressed. Petitioner contends that the Court of Appeals resolution which denied
his motion for reconsideration violated Article VIII, Section 14 of the Constitution, which states:
Section 14. No decision shall be rendered by any court without expressing therein
clearly and distinctly the facts and the law on which it is based.
No petition for review or motion for reconsideration of a decision of the court shall
be refused due course or denied without stating the legal basis therefor.
Obviously, the assailed resolution is not a decision within the meaning of the Constitutional
requirement. This mandate is applicable only in cases submitted for decision, i.e., given due course
and after filing of briefs or memoranda and/or other pleadings, as the case may be.[25] The requirement
is not applicable to a resolution denying a motion for reconsideration of the decision. What is applicable
is the second paragraph of the above-quoted Constitutional provision referring to motion for
reconsideration of a decision of the court. The assailed resolution complied with the requirement therein
that a resolution denying a motion for reconsideration should state the legal basis of the denial. It
sufficiently explained that after reading the pleadings filed by the parties, the appellate court did not
find any cogent reason to reverse itself.
Next, petitioner argues that the Court of Appeals erred in giving due course to the petition for
certiorari when the resolution thereof hinged on mere evaluation of evidence. Petitioner opines that
respondents failed to make its case in showing that the Labor Arbiter and the NLRC had exercised their
discretion in an arbitrary and despotic manner.
As a general rule, in certiorari proceedings under Rule 65 of the Rules of Court, the appellate
court does not assess and weigh the sufficiency of evidence upon which the Labor Arbiter and the NLRC
based their conclusion. The query in this proceeding is limited to the determination of whether or not
the NLRC acted without or in excess of its jurisdiction or with grave abuse of discretion in rendering its
decision. However, as an exception, the appellate court may examine and measure the factual findings
of the NLRC if the same are not supported by substantial evidence.[26] The Court has not hesitated to
affirm the appellate courts reversals of the decisions of labor tribunals if they are not supported by
substantial evidence.[27]
The Court is not unaware that the appellate court had reexamined and weighed the evidence on
record in modifying the monetary award of the NLRC. The Court of Appeals held that the amount of
the year-end lump sum compensation was not fully justified and supported by the evidence on record.
The Court fully agrees that the lump sum award of P573,000.00 to petitioner seemed to have been
plucked out of thin air. Noteworthy is the fact that in his position paper, petitioner claimed that he was
entitled to the amount of P674,756.70.[28] The variance between the claim and the amount awarded,
with the record bereft of any proof to support either amount only shows that the appellate court was
correct in holding that the award was a mere speculation devoid of any factual basis. In the exceptional
circumstance as in the instant case, the Court finds no error in the appellate courts review of the
evidence on record.
After an assessment of the evidence on record, the Court of Appeals reversed the findings of
the NLRC and the Labor Arbiter with respect to the award of the year-end lump sum pay and the cash
value of petitioners leave credits. The appellate court held that while the lump sum payment was in
the nature of a proportionate share in the firms annual income to which petitioner was entitled, the
payment thereof was contingent upon the financial position of the firm. According to the Court of
Appeals, since no evidence was adduced showing the net income of the firm for fiscal year ending 1999
as well as petitioners corresponding share therein, the amount awarded by the labor tribunals was a
baseless speculation and as such must be deleted.[29]
On the other hand, the NLRC affirmed the Labor Arbiters award of the lump sum payment in the
amount of P573,000.00 on the basis that the payment thereof had become a company policy which
could not be withdrawn arbitrarily. Furthermore, the NLRC held that respondent firm had failed to
controvert petitioners claim that he was responsible for generating some P7,365,044.47 in cash
revenue during the fiscal year ending 1999.
The
evidence
on
record
establishes
that
aside
from
the
basic
monthly
compensation,[30] petitioner received a yearly lump sum amount during the first two years [31] of his
employment, with the payments made to him after the annual net incomes of the firm had been
determined. Thus, the amounts thereof varied and were dependent on the firms cash position and
financial performance.[32] In one of the letters of respondent Mananghaya to petitioner, the amount
was referred to as petitioners share in the incentive compensation program.[33]
While the amount was drawn from the annual net income of the firm, the distribution thereof to
non-partners or employees of the firm was not, strictly speaking, a profit-sharing arrangement between
petitioner and respondent firm contrary to the Court of Appeals finding. The payment thereof to nonpartners of the firm like herein petitioner was discretionary on the part of the chairman and managing
partner coming from their authority to fix the compensation of any employee based on a share in the
partnerships net income.[34] The distribution being merely discretionary, the year-end lump sum
payment may properly be considered as a year-end bonus or incentive. Contrary to petitioners claim,
the granting of the year-end lump sum amount was precisely dependent on the firms net income;
hence, the same was payable only after the firms annual net income and cash position were
determined.
By definition, a bonus is a gratuity or act of liberality of the giver. It is something given in
addition to what is ordinarily received by or strictly due the recipient.[35] A bonus is granted and paid
to an employee for his industry and loyalty which contributed to the success of the employers business
and made possible the realization of profits.[36] Generally, a bonus is not a demandable and enforceable
obligation. It is so only when it is made part of the wage or salary or compensation. When considered
as part of the compensation and therefore demandable and enforceable, the amount is usually fixed.
If the amount would be a contingent one dependent upon the realization of the profits, the bonus is
also not demandable and enforceable.[37]
In the instant case, petitioners claim that the year-end lump sum represented the balance of
his total compensation package is incorrect. The fact remains that the amounts paid to petitioner on
the two occasions varied and were always dependent upon the firms financial position.
Moreover, in Philippine Duplicators, Inc. v. NLRC,[38] the Court held that if the bonus is paid only
if profits are realized or a certain amount of productivity achieved, it cannot be considered part of
wages. If the desired goal of production is not obtained, of the amount of actual work accomplished,
the bonus does not accrue.[39] Only when the employer promises and agrees to give without any
conditions imposed for its payment, such as success of business or greater production or output, does
the bonus become part of the wage.[40]
Petitioners assertion that he was responsible for generating revenues amounting to more
than P7 million remains a mere allegation in his pleadings. The records are absolutely bereft of any
supporting evidence to substantiate the allegation.
The granting of a bonus is basically a management prerogative which cannot be forced upon the
employer who may not be obliged to assume the onerous burden of granting bonuses or other benefits
aside from the employees basic salaries or wages.[41] Respondents had consistently maintained from
the start that petitioner was not entitled to the bonus as a matter of right. The payment of the yearend lump sum bonus based upon the firms productivity or the individual performance of its employees
was well within respondent firms prerogative. Thus, respondent firm was also justified in declining to
give the bonus to petitioner on account of the latters unsatisfactory performance.
Petitioner failed to present evidence refuting respondents allegation and proof that they received
a number of complaints from clients about petitioners poor services. For purposes of determining
whether or not petitioner was entitled to the year-end lump sum bonus, respondents were not legally
obliged to raise the issue of substandard performance with petitioner, unlike what the Labor Arbiter
had suggested. Of course, if what was in question was petitioners continued employment vis--vis the
allegations of unsatisfactory performance, then respondent firm was required under the law to give
petitioner due process to explain his side before instituting any disciplinary measure. However, in the
instant case, the granting of the year-end lump sum bonus was discretionary and conditional, thus,
petitioner may not question the basis for the granting of a mere privilege.
With regard to the computation of the cash equivalent of petitioners leave credits, the Court of
Appeals used a base figure of P71,250.00 representing petitioners monthly salary as opposed
to P95,000.00 used by the Labor Arbiter and NLRC. Meanwhile, respondents insist on a base figure of
only P61,000.00, which excludes the advance incentive pay of P15,000.00, transportationallowance
of P15,000.00 and representation allowance of P4,000.00, which petitioner regularly received every
month. Because of a lower base figure (representing the monthly salary) used by the appellate court,
the cash equivalent of petitioners leave credits was lowered from P28,407.08 to P9,802.83.
The monthly compensation of P71,250.00 used as base figure by the Court of Appeals is totally
without basis. As correctly held by the Labor Arbiter and the NLRC, the evidence on record reveals that
petitioner was receiving a monthly compensation of P95,000.00 consisting of a basic salary
of P61,000.00, advance incentive pay of P15,000.00, transportation allowance of P15,000.00 and
representation allowance of P4,000.00. These amounts totaling P95,000.00 are all deemed part of
petitioners monthly compensation package and, therefore, should be the basis in the cash commutation
of the petitioners leave credits. These allowances were customarily furnished by respondent firm and
regularly received by petitioner on top of the basic monthly pay of P61,000.00. Moreover, the Labor
Arbiter noted that respondent firms act of paying petitioner a 13th month-pay at the rate of P95,000.00
was an admission on its part that petitioners basic monthly salary was P95,000.00
The Court of Appeals, Labor Arbiter and NLRC used a 30-working day divisor instead of 26 days
which petitioner insists. The Court of Appeals relied on Section 2, Rule IV, Book III [42] of the
implementing rules of the Labor Code in using the 30-working day divisor. The provision essentially
states that monthly-paid employees are presumed to be paid for all days in the month whether worked
or not.
The provision has long been nullified in Insular Bank of Asia and American Employees Union
(IBAAEU) v. Hon. Inciong, etc., et al.,[43] where the Court ruled that the provision amended the Labor
Codes provisions on holiday pay by enlarging the scope of their exclusion.[44] In any case, the provision
is inapplicable to the instant case because it referred to the computation of holiday pay for monthlypaid employees.
Petitioners claim that respondent firm used a 26-working day divisor is supported by the
evidence on record. In a letter addressed to
petitioner,[45] respondents counsel expressly admitted that respondent used a 26-working day divisor.
The Court is perplexed why the tribunals below used a 30-day divisor when there was an express
admission on respondents part that they used a 26-day divisor in the cash commutation of leave
credits.
Thus,
with
a
monthly
compensation
of P95,000.00
and
using
a
26-working
day
divisor, petitioners daily rate is P3,653.85.[46] Based on this rate, petitioners cash equivalent of his
leave credits of 23.5 is P85,865.48.[47] Since petitioner has already received the amount P46,009.67,
a balance of P39,855.80 remains payable to petitioner.
WHEREFORE, the instant petition for review on certiorari is PARTLY GRANTED. The Decision
of the Court of Appeals in CA-G.R. SP No. 85038 is AFFIRMED with the MODIFICATION that
respondents are liable for the underpayment of the cash equivalent of petitioners leave credits in the
amount of P39,855.80.
SO ORDERED.
PRODUCERS BANK OF THE PHILIPPINES, petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION and PRODUCERS BANK EMPLOYEES ASSOCIATION,[1]respondents.
DECISION
GONZAGA-REYES, J.:
Before us is a special civil action for certiorari with prayer for preliminary injunction and/or
restraining order seeking the nullification of (1) the decision of public respondent in NLRC-NCR Case
No. 02-00753-88, entitled Producers Bank Employees Association v. Producers Bank of the Philippines,
promulgated on 30 April 1991, reversing the Labor Arbiters dismissal of private respondents complaint
and (2) public respondents resolution dated 18 June 1991 denying petitioners motion for partial
reconsideration.
The present petition originated from a complaint filed by private respondent on 11 February 1988
with the Arbitration Branch, National Capital Region, National Labor Relations Commission (NLRC),
charging petitioner with diminution of benefits, non-compliance with Wage Order No. 6 and nonpayment of holiday pay. In addition, private respondent prayed for damages.[2]
On 31 March 1989, Labor Arbiter Nieves V. de Castro found private respondents claims to be
unmeritorious and dismissed its complaint.[3] In a complete reversal, however, the NLRC[4] granted all
of private respondents claims, except for damages.[5] The dispositive portion of the NLRCs decision
provides
WHEREFORE, premises considered, the appealed Decision is, as it is hereby, SET ASIDE and another
one issued ordering respondent-appellee to pay complainant-appellant:
1. The unpaid bonus (mid-year and Christmas bonus) and 13th month pay;
2. Wage differentials under Wage Order No. 6 for November 1, 1984 and the corresponding
adjustment thereof; and
3. Holiday pay under Article 94 of the Labor Code, but not to exceed three (3) years.
The rest of the claims are dismissed for lack of merit.
SO ORDERED.
Petition filed a Motion for Partial Reconsideration, which was denied by the NLRC in a Resolution
issued on 18 June 1991. Hence, recourse to this Court.
Petitioner contends that the NLRC gravely abused its discretion in ruling as it did for the succeeding
reasons stated in its Petition
1. On the alleged diminution of benefits, the NLRC gravely abused its discretion when (1) it
contravened the Supreme Court decision in Traders Royal Bank v. NLRC, et al., G.R. No. 88168,
promulgated on August 30, 1990, (2) its ruling is not justified by law and Art. 100 of the Labor Code,
(3) its ruling is contrary to the CBA, and (4) the so-called company practice invoked by it has no
legal and moral bases (p. 2, Motion for Partial Reconsideration, Annex H);
2. On the alleged non-compliance with Wage Order No. 6, the NLRC again gravely abused its
discretion when it patently and palpably erred in holding that it is more inclined to adopt the stance
of appellant (private respondent UNION) in this issue since it is more in keeping with the law and its
implementing provisions and the intendment of the parties as revealed in their CBA without giving
any reason or justification for such conclusions as the stance of appellant (private respondent
UNION) does not traverse the clear and correct finding and conclusion of the Labor Arbiter.
Furthermore, the petitioner, under conservatorship and distressed, is exempted under Wage Order
No. 6.
Finally, the wage differentials under Wage Order No. 6 for November 1, 1984 and the corresponding
adjustment thereof (par. 2, dispositive portion, NLRC Decision), has prescribed (p. 12, Motion for
Partial Reconsideration, Annex H).
3. On the alleged non-payment of legal holiday pay, the NLRC again gravely abused its discretion
when it patently and palpably erred in approving and adopting the position of appellant (private
respondent UNION) without giving any reason or justification therefor which position does not
squarely traverse or refute the Labor Arbiters correct finding and ruling (p. 18, Motion for Partial
Reconsideration, Annex H).[6]
On 29 July 1991, the Court granted petitioners prayer for a temporary restraining order enjoining
respondents from executing the 30 April 1991 Decision and 18 June 1991 Resolution of the NLRC. [7]
Coming now to the merits of the petition, the Court shall discuss the issues ad seriatim.
Bonuses
As to the bonuses, private respondent declared in its position paper[8] filed with the NLRC that
1. Producers Bank of the Philippines, a banking institution, has been providing several benefits to its
employees since 1971 when it started its operation. Among the benefits it had been regularly giving
is a mid-year bonus equivalent to an employees one-month basic pay and a Christmas bonus
equivalent to an employees one whole month salary (basic pay plus allowance);
2. When P.D. 851, the law granting a 13th month pay, took effect, the basic pay previously being
given as part of the Christmas bonus was applied as compliance to it (P.D. 851), the allowances
remained as Christmas bonus;
3. From 1981 up to 1983, the bank continued giving one month basic pay as mid-year bonus, one
month basic pay as 13th month pay but the Christmas bonus was no longer based on the allowance
but on the basic pay of the employees which is higher;
4. In the early part of 1984, the bank was placed under conservatorship but it still provided the
traditional mid-year bonus;
5. By virtue of an alleged Monetary Board Resolution No. 1566, the bank only gave a one-half (1/2)
month basic pay as compliance of the 13th month pay and none for the Christmas bonus. In a tabular
form, here are the banks violations:
YEAR
previous
years
1984
MID-YEAR BONUS CHRISTMAS BONUS 13TH MO. PAY
one mo. basic
one mo. basic
one mo. basic
[one mo. basic]
- none -
1985
one-half mo. basic
- none -
1986
1987
one-half mo. basic one-half mo. basic
one-half mo. basic one-half mo. basic
one-half mo.
basic
one-half mo.
basic
one mo. basic
one mo. basic
Private respondent argues that the mid-year and Christmas bonuses, by reason of their having
been given for thirteen consecutive years, have ripened into a vested right and, as such, can no longer
be unilaterally withdrawn by petitioner without violating Article 100 of Presidential Decree No.
442[9] which prohibits the diminution or elimination of benefits already being enjoyed by the
employees. Although private respondent concedes that the grant of a bonus is discretionary on the
part of the employer, it argues that, by reason of its long and regular concession, it may become part
of the employees regular compensation.[10]
On the other hand, petitioner asserts that it cannot be compelled to pay the alleged bonus
differentials due to its depressed financial condition, as evidenced by the fact that in 1984 it was placed
under conservatorship by the Monetary Board. According to petitioner, it sustained losses in the
millions of pesos from 1984 to 1988, an assertion which was affirmed by the labor arbiter. Moreover,
petitioner points out that the collective bargaining agreement of the parties does not provide for the
payment of any mid-year or Christmas bonus. On the contrary, section 4 of the collective bargaining
agreement states that
Acts of Grace. Any other benefits or privileges which are not expressly provided in this Agreement,
even if now accorded or hereafter accorded to the employees, shall be deemed purely acts of grace
dependent upon the sole judgment and discretion of the BANK to grant, modify or withdraw.[11]
A bonus is an amount granted and paid to an employee for his industry and loyalty which
contributed to the success of the employers business and made possible the realization of profits. It is
an act of generosity granted by an enlightened employer to spur the employee to greater efforts for
the success of the business and realization of bigger profits. [12] The granting of a bonus is a
management prerogative, something given in addition to what is ordinarily received by or strictly due
the recipient.[13] Thus, a bonus is not a demandable and enforceable obligation,[14] except when it is
made part of the wage, salary or compensation of the employee.[15]
However, an employer cannot be forced to distribute bonuses which it can no longer afford to
pay. To hold otherwise would be to penalize the employer for his past generosity. Thus, in Traders
Royal Bank v. NLRC,[16] we held that
It is clear x x x that the petitioner may not be obliged to pay bonuses to its employees. The matter of
giving them bonuses over and above their lawful salaries and allowances is entirely dependent on the
profits, if any, realized by the Bank from its operations during the past year.
From 1979-1985, the bonuses were less because the income of the Bank had decreased. In 1986,
the income of the Bank was only 20.2 million pesos, but the Bank still gave out the usual two (2)
months basic mid-year and two months gross year-end bonuses. The petitioner pointed out,
however, that the Bank weakened considerably after 1986 on account of political developments in
the country. Suspected to be a Marcos-owned or controlled bank, it was placed under sequestration
by the present administration and is now managed by the Presidential Commission on Good
Government (PCGG).
In light of these submissions of the petitioner, the contention of the Union that the granting of
bonuses to the employees had ripened into a company practice that may not be adjusted to the
prevailing financial condition of the Bank has no legal and moral bases. Its fiscal condition having
declined, the Bank may not be forced to distribute bonuses which it can no longer afford to pay and,
in effect, be penalized for its past generosity to its employees.
Private respondents contention, that the decrease in the mid-year and year-end bonuses constituted
a diminution of the employees salaries, is not correct, for bonuses are not part of labor standards in
the same class as salaries, cost of living allowances, holiday pay, and leave benefits, which are
provided by the Labor Code.
This doctrine was reiterated in the more recent case of Manila Banking Corporation v.
NLRC[17] wherein the Court made the following pronouncements
By definition, a bonus is a gratuity or act of liberality of the giver which the recipient has no right to
demand as a matter of right. It is something given in addition to what is ordinarily received by or
strictly due the recipient. The granting of a bonus is basically a management prerogative which
cannot be forced upon the employer who may not be obliged to assume the onerous burden of
granting bonuses or other benefits aside from the employees basic salaries or wages, especially so if
it is incapable of doing so.
xxx xxx xxx
Clearly then, a bonus is an amount given ex gratia to an employee by an employer on account of
success in business or realization of profits. How then can an employer be made liable to pay
additional benefits in the nature of bonuses to its employees when it has been operating on
considerable net losses for a given period of time?
Records bear out that petitioner Manilabank was already in dire financial straits in the mid-80s. As
early as 1984, the Central Bank found that Manilabank had been suffering financial
losses. Presumably, the problems commenced even before their discovery in 1984. As earlier
chronicled, the Central Bank placed petitioner bank under comptrollership in 1984 because of
liquidity problems and excessive interbank borrowings. In 1987, it was placed under receivership and
ordered to close operation. In 1988, it was ordered liquidated.
It is evident, therefore, that petitioner bank was operating on net losses from the years 1984, 1985
and 1986, thus, resulting to its eventual closure in 1987 and liquidation in 1988. Clearly, there was
no success in business or realization of profits to speak of that would warrant the conferment of
additional benefits sought by private respondents. No company should be compelled to act liberally
and confer upon its employees additional benefits over and above those mandated by law when it is
plagued by economic difficulties and financial losses. No act of enlightened generosity and selfinterest can be exacted from near empty, if not empty coffers.
It was established by the labor arbiter[18] and the NLRC[19] and admitted by both parties[20] that
petitioner was placed under conservatorship by the Monetary Board, pursuant to its authority under
Section 28-A of Republic Act No. 265,[21] as amended by Presidential Decree No. 72,[22] which provides
Sec. 28-A. Appointment of conservator. - Whenever, on the basis of a report submitted by the
appropriate supervising and examining department, the Monetary Board finds that a bank is in a
state of continuing inability or unwillingness to maintain a condition of solvency and liquidity deemed
adequate to protect the interest of depositors and creditors, the Monetary Board may appoint a
conservator to take charge of the assets, liabilities, and the management of that banking institution,
collect all monies and debts due said bank and exercise all powers necessary to preserve the assets
of the bank, reorganize the management thereof and restore its viability. He shall have the power to
overrule or revoke the actions of the previous management and board of directors of the bank, any
provision of law to the contrary notwithstanding, and such other powers as the Monetary Board shall
deem necessary.
xxx xxx xxx
Under Section 28-A, the Monetary Board may place a bank under the control of a conservator when
it finds that the bank is continuously unable or unwilling to maintain a condition of solvency or
liquidity. In Central Bank of the Philippines v. Court of Appeals,[23] the Court declared that the order
placing petitioner herein under conservatorship had long become final and its validity could no longer
be litigated upon. Also, in the same case, the Court found that sometime in August, 1983, some news
items triggered a bank-run in petitioner which resulted in continuous over-drawings on petitioners
demand deposit account with the Central Bank; the over-drawings reached P143.955 million by 17
January 1984; and as of 13 February 1990, petitioner had over-drawings of up to P1.233 billion, which
evidences petitioners continuing inability to maintain a condition of solvency and liquidity, thus
justifying the conservatorship. Our findings in the Central Bank case coincide with petitioners claims
that it continuously suffered losses from 1984 to 1988 as follows -
YEAR NET LOSSES IN MILLIONS OF PESOS
1984 P 144.418
1985 P 144.940
1986 P 132.940
1987 P 84.182
January-February 1988 P 9.271
These losses do not include the interest expenses on the overdraft loan of the petitioner to the
Central Bank, which interest as of July 31, 1987, amounted to P610.065 Million, and penalties on
reserve deficiencies which amounted to P89.029 Million. The principal balance of the overdraft
amounted to P971.632 Million as of March 16, 1988.[24]
Petitioner was not only experiencing a decline in its profits, but was reeling from tremendous losses
triggered by a bank-run which began in 1983. In such a depressed financial condition, petitioner cannot
be legally compelled to continue paying the same amount of bonuses to its employees. Thus, the
conservator was justified in reducing the mid-year and Christmas bonuses of petitioners employees. To
hold otherwise would be to defeat the reason for the conservatorship which is to preserve the assets
and restore the viability of the financially precarious bank. Ultimately, it is to the employees advantage
that the conservatorship achieve its purposes for the alternative would be petitioners closure whereby
employees would lose not only their benefits, but their jobs as well.
13th Month Pay
With regard to the 13th month pay, the NLRC adopted the position taken by private respondent
and held that the conservator was not justified in diminishing or not paying the 13 th month pay and
that petitioner should have instead applied for an exemption, in accordance with section 7 of
Presidential Decree No. 851 (PD 851), as amended by Presidential Decree No. 1364, but that it did not
do so.[25] The NLRC held that the actions of the conservator ran counter to the provisions of PD 851.
In its position paper,[26] private respondent claimed that petitioner made the following payments
to its members
YEAR MID-YEAR BONUS 13th MONTH PAY CHRISTMAS BONUS
1984 1 month basic
month basic
None
1985 month basic
month basic
None
1986 month basic
1 month basic
month basic
1987 month basic
1 month basic
month basic
[27]
However, in its Memorandum
filed before this Court, private respondent revised its claims as
follows
YEARMID-YEAR
13th MONTH PAY CHRISTMAS BONUS
BONUS
1984 1 month
None
month basic
basic
1985 month basic None
month basic
1986 month basic month basic
1 month basic
1987 month basic month basic
1 month basic
1988 month basic month basic
1 month basic
Petitioner argues that it is not covered by PD 851 since the mid-year and Christmas bonuses it has
been giving its employees from 1984 to 1988 exceeds the basic salary for one month (except for
1985 where a total of one month basic salary was given). Hence, this amount should be applied
towards the satisfaction of the 13th month pay, pursuant to Section 2 of PD 851.[28]
PD 851, which was issued by President Marcos on 16 December 1975, requires all employers to
pay their employees receiving a basic salary of not more than P1,000 a month, [29] regardless of the
nature of the employment, a 13th month pay, not later than December 24 of every year.[30] However,
employers already paying their employees a 13th month pay or its equivalent are not covered by the
law. Under the Revised Guidelines on the Implementation of the 13 th-Month Pay Law,[31] the term
equivalent shall be construed to include Christmas bonus, mid-year bonus, cash bonuses and other
payments amounting to not less than 1/12 of the basic salary. The intention of the law was to grant
some relief not to all workers but only to those not actually paid a 13th month salary or what amounts
to it, by whatever name called. It was not envisioned that a double burden would be imposed on the
employer already paying his employees a 13th month pay or its equivalent whether out of pure
generosity or on the basis of a binding agreement. To impose upon an employer already giving his
employees the equivalent of a 13th month pay would be to penalize him for his liberality and in all
probability, the employer would react by withdrawing the bonuses or resist further voluntary grants
for fear that if and when a law is passed giving the same benefits, his prior concessions might not be
given due credit.[32]
In the case at bar, even assuming the truth of private respondents claims as contained in its
position paper or Memorandum regarding the payments received by its members in the form of
13th month pay, mid-year bonus and Christmas bonus, it is noted that, for each and every year
involved, the total amount given by petitioner would still exceed, or at least be equal to, one month
basic salary and thus, may be considered as an equivalent of the 13thmonth pay mandated by PD
851. Thus, petitioner is justified in crediting the mid-year bonus and Christmas bonus as part of the
13th month pay.
Wage Order No. 6
Wage Order No. 6, which came into effect on 1 November 1984, increased the statutory minimum
wage of workers, with different increases being specified for agricultural plantation and non-agricultural
workers. The bone of contention, however, involves Section 4 thereof which reads All wage increase in wage and/or allowance granted by employers between June 17, 1984 and the
effectivity of this Order shall be credited as compliance with the minimum wage and allowance
adjustments prescribed herein provided that where the increases are less than the applicable amount
provided in this Order, the employer shall pay the difference. Such increases shall not include
anniversary wage increases provided in collective bargaining agreements unless the agreement
expressly provide otherwise.
On 16 November 1984, the parties entered into a collective bargaining agreement providing for
the following salary adjustments
Article VIII. Section 1. Salary Adjustments. Cognizant of the effects of, among others, price increases
of oil and other commodities on the employees wages and earnings, and the certainty of continued
governmental or statutory actions adjusting employees minimum wages, earnings, allowances,
bonuses and other fringe benefits, the parties have formulated and agreed on the following highly
substantial packaged increases in salary and allowance which take into account and cover (a) any
deflation in income of employees because of such price increases and inflation and (b) the expected
governmental response thereto in the form of statutory adjustments in wages, allowances and
benefits, during the next three (3) years of this Agreement:
(i) Effective March 1, 1984 P225.00 per month as salary increase plus P100.00 per month as increase
in allowance to employees within the bargaining unit on March 1, 1984.
(ii) Effective March 1, 1985 P125.00 per month as salary increase plus P100.00 per month as
increase in allowance to employees within the bargaining unit on March 1, 1985.
(iii) Effective March 1, 1986 P125.00 per month as salary increase plus P100.00 per month as
increase in allowance to employees within the bargaining unit on March 1, 1986.
In addition, the collective bargaining agreement of the parties also included a provision on the
chargeability of such salary or allowance increases against government-ordered or legislated income
adjustments
Section 2. Pursuant to the MOLE Decision dated October 2, 1984 and Order dated October 24, 1984,
the first-year salary and allowance increases shall be chargeable against adjustments under Wage
Order No. 5, which took effect on June 16, 1984. The chargeability of the foregoing salary increases
against government-ordered or legislated income adjustments subsequent to Wage Order No. 5 shall
be determined on the basis of the provisions of such government orders or legislation.
Petitioner argues that it complied with Wage Order No. 6 because the first year salary and
allowance increase provided for under the collective bargaining agreement can be credited against the
wage and allowance increase mandated by such wage order. Under Wage Order No. 6, all increases in
wages or allowances granted by the employer between 17 June 1984 and 1 November 1984 shall be
credited as compliance with the wage and allowance adjustments prescribed therein. Petitioner asserts
that although the collective bargaining agreement was signed by the parties on 16 November 1984,
the first year salary and allowance increase was made to take effect retroactively, beginning from 1
March 1984 until 28 February 1985. Petitioner maintains that this period encompasses the period of
creditability provided for under Wage Order No. 6 and that, therefore, the balance remaining after
applying the first year salary and allowance increase in the collective bargaining agreement to the
increase mandated by Wage Order No. 5, in the amount of P125.00, should be made chargeable against
the increase prescribed by Wage Order No. 6, and if not sufficient, petitioner is willing to pay the
difference.[33]
On the other hand, private respondent contends that the first year salary and allowance increases
under the collective bargaining agreement cannot be applied towards the satisfaction of the increases
prescribed by Wage Order No. 6 because the former were not granted within the period of creditability
provided for in such wage order. According to private respondent, the significant dates with regard to
the granting of the first year increases are 9 November 1984 the date of issuance of the MOLE
Resolution, 16 November 1984 the date when the collective bargaining agreement was signed by the
parties and 1 March 1984 the retroactive date of effectivity of the first year increases. Private
respondent points out that none of these dates fall within the period of creditability under Wage Order
No. 6 which is from 17 June 1984 to 1 November 1984. Thus, petitioner has not complied with Wage
Order No. 6.[34]
The creditability provision in Wage Order No. 6 is based on important public policy, that is, the
encouragement of employers to grant wage and allowance increases to their employees higher than
the minimum rates of increases prescribed by statute or administrative regulation. Thus, we held
in Apex Mining Company, Inc. v. NLRC[35] that
[t]o obliterate the creditability provisions in the Wage Orders through interpretation or otherwise,
and to compel employers simply to add on legislated increases in salaries or allowances without
regard to what is already being paid, would be to penalize employers who grant their workers
more than the statutorily prescribed minimum rates of increases. Clearly, this would be counterproductive so far as securing the interest of labor is concerned. The creditability provisions in the
Wage Orders prevent the penalizing of employers who are industry leaders and who do not wait
for statutorily prescribed increases in salary or allowances and pay their workers more than what
the law or regulations require.
Section 1 of Article VIII of the collective bargaining agreement of the parties states that the parties
have formulated and agreed on the following highly substantial packaged increases in salary and
allowance which take into account and cover (a) any deflation in income of employees because of such
price increases and inflation and (b) the expected governmental response thereto in the form of
statutory adjustments in wages, allowances and benefits, during the next three (3) years of this
Agreement The unequivocal wording of this provision manifests the clear intent of the parties to apply
the wage and allowance increases stipulated in the collective bargaining agreement to any statutory
wage and allowance adjustments issued during the effectivity of such agreement - from 1 March 1984
to 28 February 1987. Furthermore, contrary to private respondents contentions, there is nothing in the
wording of Section 2 of Article VIII of the collective bargaining agreement that would prevent petitioner
from crediting the first year salary and allowance increases against the increases prescribed by Wage
Order No. 6.
It would be inconsistent with the abovestated rationale underlying the creditability provision of
Wage Order No. 6 if, after applying the first year increase to Wage Order No. 5, the balance was not
made chargeable to the increases under Wage Order No. 6 for the fact remains that petitioner actually
granted wage and allowance increases sufficient to cover the increases mandated by Wage Order No.
5 and part of the increases mandated by Wage Order No. 6.
Holiday Pay
Article 94 of the Labor Code provides that every worker shall be paid his regular daily wage during
regular holidays[36] and that 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. In this case, the Labor
Arbiter found that the divisor used by petitioner in arriving at the employees daily rate for the purpose
of computing salary-related benefits is 314.[37] This finding was not disputed by the NLRC.[38] However,
the divisor was reduced to 303 by virtue of an inter-office memorandum issued on 13 August 1986, to
wit To increase the rate of overtime pay for rank and filers, we are pleased to inform that effective
August 18, 1986, the acting Conservator approved the use of 303 days as divisor in the computation
of Overtime pay. The present Policy of 314 days as divisor used in the computation for cash
conversion and determination of daily rate, among others, still remain, Saturdays, therefore, are still
considered paid rest days.
Corollarily, the Acting Convservator also approved the increase of meal allowance from P25.00 to
P30.00 for a minimum of four (4) hours of work for Saturdays.
Proceeding from the unambiguous terms of the above quoted memorandum, the Labor Arbiter
observed that the reduction of the divisor to 303 was for the sole purpose of increasing the employees
overtime pay and was not meant to replace the use of 314 as the divisor in the computation of the
daily rate for salary-related benefits.[39]
Private respondent admits that, prior to 18 August 1986, petitioner used a divisor of 314 in arriving
at the daily wage rate of monthly-salaried employees. Private respondent also concedes that the divisor
was changed to 303 for purposes of computing overtime pay only. In its Memorandum, private
respondent states that
49. The facts germane to this issue are not debatable. The Memorandum Circular issued by the
Acting Conservator is clear. Prior to August 18, 1986, the petitioner bank used a divisor of 314 days
in arriving at the daily wage rate of the monthly-salaried employees. Effective August 18, 1986, this
was changed. It adopted the following formula:
Basic salary x 12 months = Daily Wage Rate
303 days
50. By utilizing this formula even up to the present, the conclusion is inescapable that the petitioner
bank is not actually paying its employees the regular holiday pay mandated by law. Consequently, it
is bound to pay the salary differential of its employees effective November 1, 1974 up to the present.
xxx xxx xxx
54. Since it is a question of fact, the Inter-office Memorandum dated August 13, 1986 (Annex E)
provides for a divisor of 303 days in computing overtime pay. The clear import of this document is
that from the 365 days in a year, we deduct 52 rest days which gives a total of 313 days. Now, if 313
days is the number of working days of the employees then, there is a disputable presumption that
the employees are paid their holiday pay. However, this is not so in the case at bar. The bank uses
303 days as its divisor. Hence, it is not paying its employees their corresponding holiday pay.[40]
In Union of Filipro Employees v. Vivar, Jr.[41] the Court held that [t]he divisor assumes an important
role in determining whether or not holiday pay is already included in the monthly paid employees salary
and in the computation of his daily rate. This was also our ruling in Chartered Bank Employees
Association v. Ople,[42] as follows
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 petitioners 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 form
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.
Apparently, the divisor of 314 is arrived at by subtracting all Sundays from the total number of
calendar days in a year, since Saturdays are considered paid rest days, as stated in the inter-office
memorandum. Thus, the use of 314 as a divisor leads to the inevitable conclusion that the ten legal
holidays are already included therein.
We agree with the labor arbiter that the reduction of the divisor to 303 was done for the sole
purpose of increasing the employees overtime pay, and was not meant to exclude holiday pay from
the monthly salary of petitioners employees. In fact, it was expressly stated in the inter-office
memorandum - also referred to by private respondent in its pleadings - that the divisor of 314 will still
be used in the computation for cash conversion and in the determination of the daily rate. Thus, based
on the records of this case and the parties own admissions, the Court holds that petitioner has complied
with the requirements of Article 94 of the Labor Code.
Damages
As to private respondents claim for damages, the NLRC was correct in ruling that there is no basis
to support the same.
WHEREFORE, for the reasons above stated, the 30 April 1991 Decision of public respondent in
NLRC-NCR Case No. 02-00753-88, entitled Producers Bank Employees Association v. Producers Bank
of the Philippines, and its 18 June 1991 Resolution issued in the same case are hereby SET ASIDE,
with the exception of public respondents ruling on damages.
SO ORDERED.
Melo, (Chairman), Vitug, Panganiban, and Sandoval-Gutierrez, JJ., concur.
KAMAYA POINT HOTEL, Petitioner, v. NATIONAL LABOR RELATIONS COMMISSION,
FEDERATION OF FREE WORKERS and MEMIA QUIAMBAO, Respondents.
SYLLABUS
1. LABOR LAW; LABOR CODE; PROVISION REGARDING DIMINUTION OF BENEFITS NOT APPLICABLE.
— It is patently obvious that Article 100 is clearly without applicability. The date of effectivity of the
Labor Code is May 1, 1974. In the case at bar, petitioner extended its 14th month pay beginning
1979 until 1981. What is demanded is payment of the 14th month pay for 1982. Indubitably from
these facts alone, Article 100 of the Labor Code cannot apply.
2. ID.; PAYMENT OF THE 14TH MONTH PAY NOT MANDATED BY LAW. — There is no law that
mandates the payment of the 14th month pay. This is emphasized in the grant of exemption under
Presidential Decree 851 (13th Month Pay Law) which states: "Employers already paying their
employees a 13th month pay or its equivalent are not covered by this Decree." Necessarily then, only
the 13th month pay is mandated. Having enjoyed the additional income in the form of the 13th
month pay, private respondents’ insistence on the 14th month pay for 1982 is already an
unwarranted expansion of the liberality of the law.
3. ID.; 14TH MONTH PAY; CONCEPT. — A 14th month pay is a misnomer because it is basically a
bonus and, therefore, gratuitous in nature. The granting of the 14th month pay is a management
prerogative which cannot be forced upon the employer. It is something given in addition to what is
ordinarily received by or strictly due the recipient. It is a gratuity to which the recipient has no right
to make a demand.
4. ID.; EMPLOYER-EMPLOYEE RELATIONSHIP; EMPLOYER NOT OBLIGED TO ASSUME BURDEN OF
PAYING BOTH THE 13TH AND 14TH MONTH PAY. — An employer may not be obliged to assume a
"double burden" of paying the 13th month pay in addition to bonuses or other benefits aside from the
employee’s basic salaries or wages.
DECISION
FERNAN, C.J.:
This petition for review on certiorari filed by herein petitioner Kamaya Point Hotel seeks to set aside
the decision 1 of the National Labor Relations Commission dated June 25, 1986 in NLRC Case No.
RAB III-4-1191-83 which affirmed with modification the decision of the Labor Arbiter dated May 31,
1984.
Respondent Memia Quiambao with thirty others who are members of private respondent Federation
of Free Workers (FFW) were employed by petitioner as hotel crew. On the basis of the profitability of
the company’s business operations, management granted a 14th month pay to its employees starting
in 1979. In January 1982, operations ceased to give way to the hotel’s conversion into a training
center for Libyan scholars. However, due to technical and financing problems, the Libyans preterminated the program on July 7, 1982, leaving petitioner without any business, aside from the fact
that it was not paid for the use of the hotel premises and in addition had to undertake repairs of the
premises damaged by the Libyan students. All in all petitioner allegedly suffered losses amounting to
P2-million.
Although petitioner reopened the hotel premises to the public, it was not able to pick-up its lost
patronage. In a couple of months it effected a retrenchment program until finally on January 7, 1984,
it totally closed its business. 2
On April 18, 1983, private respondent Federation of Free Workers (FFW); a legitimate labor
organization, filed with the Ministry of Labor and Employment, Bataan Provincial Office, Bataan
Export Processing Zone, Mariveles, Bataan, a complaint against petitioner for illegal suspension,
violation of the CBA and non-payment of the 14th month pay. 3 Records however show that the case
was submitted for decision on the sole issue of alleged non-payment of the 14th month pay for the
year 1982. 4
After the hearing, Executive Labor Arbiter Francisco M. Jose, Jr. rendered a decision dated May 31,
1984, the dispositive portion of which reads:chanrobles law library
"WHEREFORE, IN VIEW OF ALL THE FOREGOING, judgment is hereby
rendered:jgc:chanrobles.com.ph
"1. Ordering the respondent Kamaya Point Hotel to pay the 14th month pay for 1982 of all its rank
and file employees;
"2. Ordering the same respondent to pay the monetary equivalent of the benefits mentioned in
Section 6 of Article XII and Sections 1 and 2 of Article XII of the then existing Collective Bargaining
Agreement which will expire on 1 July 1984." 5
On appeal, the National Labor Relations Commission (NLRC) in its decision dated June 25, 1986 set
aside the award of monetary benefits under the CBA but affirmed the grant of the 14th month pay
adopting the Labor Arbiter’s reasoning, thus:chanrob1es virtual 1aw library
x
x
x
We agree with respondent that there is no law granting a 14th month pay. We likewise agree with
respondent that there is no provision in the Collective Bargaining Agreement granting a 14th month
pay. Despite all these, however, we believe that individual complainants herein are still entitled to
the 14th month pay for 1982 because to our mind, the granting of this 14th month pay has already
ripened into a company practice which respondent company cannot withdraw unilaterally. This 14th
month pay is now an existing benefit which cannot be withdrawn without violating Article 100 of the
Labor Code. To allow its withdrawal now would certainly amount to a diminution of existing benefits
which complainants are presently enjoying. Premised on the above, the individual complainants are
entitled to the 14th month pay for 1982 and respondent should pay the same." (Emphasis supplied)
6
Before this Court, petitioner now seeks to reverse the decision of the NLRC arguing that the latter
tribunal committed grave abuse of discretion when it adopted the Labor Arbiter’s decision saying that
the 14th month pay cannot be withdrawn without violating Article 100 of the Labor Code which
states:jgc:chanrobles.com.ph
"Prohibition against elimination or diminution of benefits. — Nothing in this Book shall be construed
to eliminate or in any way diminish supplements, or other employee benefits being enjoyed at the
time of promulgation of this Code."cralaw virtua1aw library
We find it difficult to comprehend why the NLRC and the Labor Arbiter, despite their admission that
the 14th month pay has no contractual or legal basis, still chose to rule in favor of private
respondents. It is patently obvious that Article 100 is clearly without applicability. The date of
effectivity of the Labor Code is May 1, 1974. In the case at bar, petitioner extended its 14th month
pay beginning 1979 until 1981. What is demanded is payment of the 14th month pay for 1982.
Indubitably from these facts alone, Article 100 of the Labor Code cannot apply.chanrobles law library
Moreover, there is no law that mandates the payment of the 14th month pay. This is emphasized in
the grant of exemption under Presidential Decree 851 (13th Month Pay Law) which states:
"Employers already paying their employees a 13th month pay or its equivalent are not covered by
this Decree." Necessarily then, only the 13th month pay is mandated. Having enjoyed the additional
income in the form of the 13th month pay, private respondents’ insistence on the 14th month pay for
1982 is already an unwarranted expansion of the liberality of the law.
Also contractually, as gleaned from the collective bargaining agreement between management and
the union, there is no stipulation as to such extra remuneration. Evidently, this omission is an
acknowledgment that such benefit is entirely contingent or dependent on the profitability of the
company’s operations.
Verily, a 14th month pay is a misnomer because it is basically a bonus and, therefore, gratuitous in
nature. The granting of the 14th month pay is a management prerogative which cannot be forced
upon the employer. It is something given in addition to what is ordinarily received by or strictly due
the recipient. It is a gratuity to which the recipient has no right to make a demand. 7
This Court is not prepared to compel petitioner to grant the 14th month pay solely because it has
allegedly ripened into a "company practice" as the labor arbiter has put it. Having lost its catering
business derived from Libyan students, Kamaya Hotel should not be penalized for its previous
liberality.
An employer may not be obliged to assume a "double burden" of paying the 13th month pay in
addition to bonuses or other benefits aside from the employee’s basic salaries or wages. 8 Restated
differently, we rule that an employer may not be obliged to assume the onerous burden of granting
bonuses or other benefits aside from the employee’s basic salaries or wages in addition to the
required 13th month pay.cralawnad
WHEREFORE, the petition is hereby GRANTED. The portion of the decision of the National Labor
Relations Commission dated June 25, 1986 ordering the payment of 14th month pay to private
respondents is set aside.
SO ORDERED.
Gutierrez, Jr., Feliciano, Bidin and Cortes, JJ., concur.
LEPANTO CERAMICS, INC.,
Petitioner,
G.R. No. 180866
Present:
CARPIO, J.,
Chairperson,
BRION,
DEL CASTILLO,
ABAD, and
PEREZ, JJ.
- versus -
LEPANTO CERAMICS EMPLOYEES
ASSOCIATION,
Respondent.
Promulgated:
March 2, 2010
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
PEREZ, J.:
Before this Court is a Petition for Review on Certiorari under Rule 45[1] of the 1997 Rules of Civil
Procedure filed by petitioner Lepanto Ceramics, Inc. (petitioner), assailing the: (1) Decision [2] of the
Court of Appeals, dated 5 April 2006, in CA-G.R. SP No. 78334 which affirmed in toto the decision of
the Voluntary Arbitrator[3] granting the members of the respondent association a Christmas Bonus in
the amount of Three Thousand Pesos (P3,000.00), or the balance of Two Thousand Four Hundred Pesos
(P2,400.00) for the year 2002, and the (2) Resolution[4] of the same court dated 13 December 2007
denying Petitioners Motion for Reconsideration.
The facts are:
Petitioner Lepanto Ceramics, Incorporated is a duly organized corporation existing and operating
by virtue of Philippine Laws. Its business is primarily to manufacture, make, buy and sell, on wholesale
basis, among others, tiles, marbles, mosaics and other similar products.[5]
Respondent Lepanto Ceramics Employees Association (respondent Association) is a legitimate
labor organization duly registered with the Department of Labor and Employment. It is the sole and
exclusive bargaining agent in the establishment of petitioner.[6]
In December 1998, petitioner gave a P3,000.00 bonus to its employees, members of the
respondent Association.[7]
Subsequently, in September 1999, petitioner and respondent Association entered into a
Collective Bargaining Agreement (CBA) which provides for, among others, the grant of a Christmas gift
package/bonus to the members of the respondent Association.[8] The Christmas bonus was one of the
enumerated existing benefit, practice of traditional rights which shall remain in full force and effect.
The text reads:
Section 8. All other existing benefits, practice of traditional rights
consisting of Christmas Gift package/bonus, reimbursement of transportation
expenses in case of breakdown of service vehicle and medical services and
safety devices by virtue of company policies by the UNION and employees shall
remain in full force and effect.
Section 1. EFFECTIVITY
This agreement shall become effective on September 1, 1999 and shall
remain in full force and effect without change for a period of four (4) years or
up to August 31, 2004 except as to the representation aspect which shall be
effective for a period of five (5) years. It shall bind each and every employee in
the bargaining unit including the present and future officers of the Union.
In the succeeding years, 1999, 2000 and 2001, the bonus was not in cash. Instead, petitioner
gave each of the members of respondent Association Tile Redemption Certificates equivalent
to P3,000.00.[9] The bonus for the year 2002 is the root of the present dispute. Petitioner gave a yearend cash benefit of Six Hundred Pesos (P600.00) and offered a cash advance to interested employees
equivalent to one (1) month salary payable in one year.[10] The respondent Association objected to
the P600.00 cash benefit and argued that this was in violation of the CBA it executed with the
petitioner.
The parties failed to amicably settle the dispute. The respondent Association filed a Notice of
Strike with the National Conciliation Mediation Board, Regional Branch No. IV, alleging the violation of
the CBA. The case was placed under preventive mediation. The efforts to conciliate failed. The case
was then referred to the Voluntary Arbitrator for resolution where the Complaint was docketed as Case
No. LAG-PM-12-095-02.
In support of its claim, respondent Association insisted that it has been the traditional practice of the
company to grant its members Christmas bonuses during the end of the calendar year, each in the
amount of P3,000.00 as an expression of gratitude to the employees for their participation in the
companys continued existence in the market. The bonus was either in cash or in the form of company
tiles. In 2002, in a speech during the Christmas celebration, one of the companys top executives
assured the employees of said bonus. However, the Human Resources Development Manager informed
them that the traditional bonus would not be given as the companys earnings were intended for the
payment of its bank loans. Respondent Association argued that this was in violation of their CBA.
The petitioner averred that the complaint for nonpayment of the 2002 Christmas bonus had no
basis as the same was not a demandable and enforceable obligation. It argued that the giving of extra
compensation was based on the companys available resources for a given year and the workers are
not entitled to a bonus if the company does not make profits. Petitioner adverted to the fact that it was
debt-ridden having incurred net losses for the years 2001 and 2002 totaling to P1.5 billion; and since
1999, when the CBA was signed, the companys accumulated losses amounted to over P2.7
billion. Petitioner further argued that the grant of a one (1) month salary cash advance was not meant
to take the place of a bonus but was meant to show the companys sincere desire to help its employees
despite its precarious financial condition. Petitioner also averred that the CBA provision on a Christmas
gift/bonus refers to alternative benefits. Finally, petitioner emphasized that even if the CBA contained
an unconditional obligation to grant the bonus to the respondent Association, the present difficult
economic times had already legally released it therefrom pursuant to Article 1267 of the Civil Code.[11]
The Voluntary Arbitrator rendered a Decision dated 2 June 2003, declaring that petitioner is
bound to grant each of its workers a Christmas bonus of P3,000.00 for the reason that the bonus was
given prior to the effectivity of the CBA between the parties and that the financial losses of the company
is not a sufficient reason to exempt it from granting the same. It stressed that the CBA is a binding
contract and constitutes the law between the parties. The Voluntary Arbitrator further expounded that
since the employees had already been given P600.00 cash bonus, the same should be deducted from
the claimed amount of P3,000.00, thus leaving a balance of P2,400.00. The dispositive portion of the
decision states, viz:
Wherefore, in view of the foregoing respondent LCI is hereby ordered to pay the
members of the complainant union LCEA their respective Christmas bonus in the amount
of three thousand (P3,000.00) pesos for the year 2002 less the P600.00 already given or
a balance of P2,400.00.[12]
Petitioner sought reconsideration but the same was denied by the Voluntary Arbitrator in an
Order dated 27 June 2003, in this wise:
The Motion for Reconsideration filed by the respondent in the above-entitled case
which was received by the Undersigned on June 26, 2003 is hereby denied pursuant to
Section 7 Rule XIX on Grievance Machinery and Voluntary Arbitration; Amending The
Implementing Rules of Book V of the Labor Code of the Philippines; to wit:
Section 7. Finality of Award/Decision − The decision, order,
resolution or award of the voluntary arbitrator or panel of voluntary
arbitrators shall be final and executory after ten (10) calendar days from
receipt of the copy of the award or decision by the parties and it shall not
be subject of a motion for reconsideration.[13]
Petitioner elevated the case to the Court of Appeals via a Petition for Certiorari under Rule 65 of
the Rules of Court docketed as CA-G.R. SP No. 78334.[14] As adverted to earlier, the Court of Appeals
affirmed in toto the decision of the Voluntary Arbitrator. The appellate court also denied petitioners
motion for reconsideration.
In affirming respondent Associations right to the Christmas bonus, the Court of Appeals held:
In the case at bar, it is indubitable that petitioner offered private respondent a
Christmas bonus/gift in 1998 or before the execution of the 1999 CBA which incorporated
the said benefit as a traditional right of the employees. Hence, the grant of said bonus to
private respondent can be deemed a practice as the same has not been given only in the
1999 CBA. Apparently, this is the reason why petitioner specifically recognized the grant
of a Christmas bonus/gift as a practice or tradition as stated in the CBA. x x x.
xxxx
Evidently, the argument of petitioner that the giving of a Christmas bonus is a
management prerogative holds no water. There were no conditions specified in the CBA
for the grant of said benefit contrary to the claim of petitioner that the same is justified
only when there are profits earned by the company. As can be gleaned from the CBA, the
payment of Christmas bonus was not contingent upon the realization of profits. It does
not state that if the company derives no profits, there are no bonuses to be given to the
employees. In fine, the payment thereof was not related to the profitability of business
operations.
Moreover, it is undisputed that petitioner, aside from giving the mandated
13th month pay, has further been giving its employees an additional Christmas bonus at
the end of the year since 1998 or before the effectivity of the CBA in September
1999. Clearly, the grant of Christmas bonus from 1998 up to 2001, which brought about
the filing of the complaint for alleged non-payment of the 2002 Christmas bonus does
not involve the exercise of management prerogative as the same was given continuously
on or about Christmas time pursuant to the CBA. Consequently, the giving of said bonus
can no longer be withdrawn by the petitioner as this would amount to a diminution of the
employees existing benefits.[15]
Not to be dissuaded, petitioner is now before this Court. The only issue before us is whether or
not the Court of Appeals erred in affirming the ruling of the voluntary arbitrator that the petitioner is
obliged to give the members of the respondent Association a Christmas bonus in the amount
of P3,000.00 in 2002.[16]
We uphold the rulings of the voluntary arbitrator and of the Court of Appeals. Findings of labor
officials, who are deemed to have acquired expertise in matters within their respective jurisdictions,
are generally accorded not only respect but even finality, and bind us when supported by substantial
evidence. This is the rule particularly where the findings of both the arbitrator and the Court of Appeals
coincide.[17]
As a general proposition, an arbitrator is confined to the interpretation and application of the
CBA. He does not sit to dispense his own brand of industrial justice: his award is legitimate only in so
far as it draws its essence from the CBA.[18] That was done in this case.
By definition, a bonus is a gratuity or act of liberality of the giver. It is something given in
addition to what is ordinarily received by or strictly due the recipient. A bonus is granted and paid to
an employee for his industry and loyalty which contributed to the success of the employers business
and made possible the realization of profits.[19]
A bonus is also granted by an enlightened employer to spur the employee to greater efforts for
the success of the business and realization of bigger profits.[20]
Generally, a bonus is not a demandable and enforceable obligation. For a bonus to be
enforceable, it must have been promised by the employer and expressly agreed upon by the
parties.[21]Given that the bonus in this case is integrated in the CBA, the same partakes the nature of
a demandable obligation. Verily, by virtue of its incorporation in the CBA, the Christmas bonus due to
respondent Association has become more than just an act of generosity on the part of the petitioner
but a contractual obligation it has undertaken.[22]
A CBA refers to a 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. As in all other contracts, the parties to 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.[23]
It is a familiar and fundamental doctrine in labor law that the CBA is the law between the parties
and they are obliged to comply with its provisions.[24] This principle stands strong and true in the case
at bar.
A reading of the provision of the CBA reveals that the same provides for the giving of a Christmas
gift package/bonus without qualification. Terse and clear, the said provision did not state that the
Christmas package shall be made to depend on the petitioners financial standing. The records are also
bereft of any showing that the petitioner made it clear during CBA negotiations that the bonus was
dependent on any condition. Indeed, if the petitioner and respondent Association intended that
the P3,000.00 bonus would be dependent on the company earnings, such intention should have been
expressed in the CBA.
It is noteworthy that in petitioners 1998 and 1999 Financial Statements, it took note that the
1997 financial crisis in the Asian region adversely affected the Philippine economy.[25]
From the foregoing, petitioner cannot insist on business losses as a basis for disregarding its
undertaking. It is manifestly clear that petitioner was very much aware of the imminence and possibility
of business losses owing to the 1997 financial crisis. In 1998, petitioner suffered a net loss
of P14,347,548.00.[26] Yet it gave a P3,000.00 bonus to the members of the respondent Association.
In 1999, when petitioners very own financial statement reflected that the positive developments in the
economy have yet to favorably affect the operations of the company,[27] and reported a loss
of P346,025,733.00,[28] it entered into the CBA with the respondent Association whereby it contracted
to grant a Christmas gift package/bonus to the latter. Petitioner supposedly continued to incur losses
in the years 2000[29] and 2001. Still and all, this did not deter it from honoring the CBA provision on
Christmas bonus as it continued to give P3,000.00 each to the members of the respondent Association
in the years 1999, 2000 and 2001.
All given, business losses are a feeble ground for petitioner to repudiate its obligation under the
CBA. The rule is settled that any benefit and supplement being enjoyed by the employees cannot be
reduced, diminished, discontinued or eliminated by the employer. The principle of non-diminution of
benefits is founded on the constitutional mandate to protect the rights of workers and to promote their
welfare and to afford labor full protection.[30]
Hence, absent any proof that petitioners consent was vitiated by fraud, mistake or duress, it is
presumed that it entered into the CBA voluntarily and had full knowledge of the contents thereof and
was aware of its commitments under the contract.
The Court is fully aware that implementation to the letter of the subject CBA provision may
further deplete petitioners resources. Petitioners remedy though lies not in the Courts invalidation of
the provision but in the parties clarification of the same in subsequent CBA negotiations. Article 253 of
the Labor Code is relevant:
Art. 253. Duty to bargain collectively when there exists a collective
bargaining agreement. - When there is a collective bargaining agreement, the
duty to bargain collectively shall also mean that neither party shall terminate
nor modify such agreement during its lifetime. However, either party can serve
a written notice to terminate or modify the agreement at least sixty (60) days
prior to its expiration date. It shall be the duty of both parties to keep the status
quo and to continue in full force and effect the terms and conditions of the
existing agreement during the sixty (60)-day period and/or until a new
agreement is reached by the parties.
WHEREFORE, Premises considered, the petition is DENIED for lack of merit. The Decision of
the Court of Appeals dated 5 April 2006 and the Resolution of the same court dated 13 December
2007 in CA-G.R. SP No. 78334 are AFFIRMED.
SO ORDERED.
EASTERN
TELECOMMUNICATIONS
PHILIPPINES, INC.,
Petitioner,
- versus -
G.R. No. 185665
Present:
VELASCO, JR., J., Chairperson,
BERSAMIN,*
EASTERN TELECOMS
EMPLOYEES UNION,
Respondent.
ABAD,
MENDOZA, and
PERLAS-BERNABE, JJ.
Promulgated:
February 8, 2012
x ----------------------------------------------------------------------------------------x
DECISION
MENDOZA, J.:
Before the Court is a petition for review on certiorari seeking modification of the June 25, 2008
Decision[1] of the Court of Appeals (CA) and its December 12, 2008 Resolution,[2] in CA-G.R. SP No.
91974, annulling the April 28, 2005 Resolution[3] of the National Labor Relations Commission (NLRC) in
NLRC-NCR-CC-000273-04 entitled In the Matter of the Labor Dispute in Eastern Telecommunications,
Philippines, Inc.
The Facts
As synthesized by the NLRC, the facts of the case are as follows, viz:
Eastern Telecommunications Phils., Inc. (ETPI) is a corporation engaged in the
business of providing telecommunications facilities, particularly leasing international date
lines or circuits, regular landlines, internet and data services, employing approximately
400 employees.
Eastern Telecoms Employees Union (ETEU) is the certified exclusive bargaining
agent of the companys rank and file employees with a strong following of 147 regular
members. It has an existing collecti[ve] bargaining agreement with the company to
expire in the year 2004 with a Side Agreement signed on September 3, 2001.
In essence, the labor dispute was a spin-off of the companys plan to defer payment
of the 2003 14th, 15th and 16th month bonuses sometime in April 2004. The companys
main ground in postponing the payment of bonuses is due to allege continuing
deterioration of companys financial position which started in the year 2000. However,
ETPI while postponing payment of bonuses sometime in April 2004, such payment would
also be subject to availability of funds.
Invoking the Side Agreement of the existing Collective Bargaining Agreement for
the period 2001-2004 between ETPI and ETEU which stated as follows:
4. Employment Related Bonuses. The Company confirms that the
14th, 15th and 16th month bonuses (other than 13th month pay) are granted.
The union strongly opposed the deferment in payment of the bonuses by filing a
preventive mediation complaint with the NCMB on July 3, 2003, the purpose of which
complaint is to determine the date when the bonus should be paid.
In the conference held at the NCMB, ETPI reiterated its stand that payment of the
bonuses would only be made in April 2004 to which date of payment, the union agreed.
Thus, considering the agreement forged between the parties, the said agreement was
reduced to a Memorandum of Agreement. The union requested that the President of the
company should be made a signatory to the agreement, however, the latter refused to
sign. In addition to such a refusal, the company made a sudden turnaround in its position
by declaring that they will no longer pay the bonuses until the issue is resolved through
compulsory arbitration.
The companys change in position was contained in a letter dated April 14,
2004 written to the union by Mr. Sonny Javier, Vice-President for Human Resources and
Administration, stating that the deferred release of bonuses had been superseded and
voided due to the unions filing of the issue to the NCMB on July 18, 2003. He declared
that until the matter is resolved in a compulsory arbitration, the company cannot and will
not pay any bonuses to any and all union members.
Thus, on April 26, 2004, ETEU filed a Notice of Strike on the ground of unfair labor
practice for failure of ETPI to pay the bonuses in gross violation of the economic provision
of the existing CBA.
On May 19, 2004, the Secretary of Labor and Employment, finding that the
company is engaged in an industry considered vital to the economy and any work
disruption thereat will adversely affect not only its operation but also that of the other
business relying on its services, certified the labor dispute for compulsory arbitration
pursuant to Article 263 (q) of the Labor Code as amended.
Acting on the certified labor dispute, a hearing was called on July 16, 2004 wherein
the parties have submitted that the issues for resolution are (1) unfair labor practice and
(2) the grant of 14th, 15th and 16th month bonuses for 2003, and 14th month bonus for
2004. Thereafter, they were directed to submit their respective position papers and
evidence in support thereof after which submission, they agreed to have the case
considered submitted for decision.[4]
In its position paper,[5] the Eastern Telecoms Employees Union (ETEU) claimed that Eastern
Telecommunications Philippines, Inc. (ETPI) had consistently and voluntarily been giving out
14th month bonus during the month of April, and 15th and 16th month bonuses every December of each
year (subject bonuses) to its employees from 1975 to 2002, even when it did not realize any net
profits. ETEU posited that by reason of its long and regular concession, the payment of these monetary
benefits had ripened into a company practice which could no longer be unilaterally withdrawn by ETPI.
ETEU added that this long-standing company practice had been expressly confirmed in the Side
Agreements of the 1998-2001 and 2001-2004 Collective Bargaining Agreements(CBA) which provided
for the continuous grant of these bonuses in no uncertain terms. ETEU theorized that the grant of the
subject bonuses is not only a company practice but also a contractual obligation of ETPI to the union
members.
ETEU contended that the unjustified and malicious refusal of the company to pay the subject
bonuses was a clear violation of the economic provision of the CBA and constitutes unfair labor
practice (ULP). According to ETEU, such refusal was nothing but a ploy to spite the union for bringing
the matter of delay in the payment of the subject bonuses to the National Conciliation and Mediation
Board (NCMB). It prayed for the award of moral and exemplary damages as well as attorneys fees for
the unfair labor practice allegedly committed by the company.
On the other hand, ETPI in its position paper,[6] questioned the authority of the NLRC to take
cognizance of the case contending that it had no jurisdiction over the issue which merely involved the
interpretation of the economic provision of the 2001-2004 CBA Side Agreement. Nonetheless, it
maintained that the complaint for nonpayment of 14th, 15th and 16th month bonuses for 2003 and
14th month bonus for 2004 was bereft of any legal and factual basis. It averred that the subject bonuses
were not part of the legally demandable wage and the grant thereof to its employees was an act of
pure gratuity and generosity on its part, involving the exercise of management prerogative and always
dependent on the financial performance and realization of profits. It posited that it resorted to the
discontinuance of payment of the bonuses due to the unabated huge losses that the company had
continuously experienced. It claimed that it had been suffering serious business losses since 2000 and
to require the company to pay the subject bonuses during its dire financial straits would in effect
penalize it for its past generosity. It alleged that the non-payment of the subject bonuses was neither
flagrant nor malicious and, hence, would not amount to unfair labor practice.
Further, ETPI argued that the bonus provision in the 2001-2004 CBA Side Agreement was a
mere affirmation that the distribution of bonuses was discretionary to the company, premised and
conditioned on the success of the business and availability of cash. It submitted that said bonus
provision partook of the nature of a one-time grant which the employees may demand only during the
year when the Side Agreement was executed and was never intended to cover the entire term of the
CBA. Finally, ETPI emphasized that even if it had an unconditional obligation to grant bonuses to its
employees, the drastic decline in its financial condition had already legally released it therefrom
pursuant to Article 1267 of the Civil Code.
On April 28, 2005, the NLRC issued its Resolution dismissing ETEUs complaint and held that
ETPI could not be forced to pay the union members the 14th, 15th and 16th month bonuses for the year
2003 and the 14th month bonus for the year 2004 inasmuch as the payment of these additional benefits
was basically a management prerogative, being an act of generosity and munificence on the part of
the company and contingent upon the realization of profits. The NLRC pronounced that ETPI may not
be obliged to pay these extra compensations in view of the substantial decline in its financial condition.
Likewise, the NLRC found that ETPI was not guilty of the ULP charge elaborating that no sufficient and
substantial evidence was adduced to attribute malice to the company for its refusal to pay the subject
bonuses. The dispositive portion of the resolution reads:
WHEREFORE, premises considered, the instant complaint is hereby DISMISSED for
lack of merit.
SO ORDERED.[7]
Respondent ETEU moved for reconsideration but the motion was denied by the NLRC in its
Resolution dated August 31, 2005.
Aggrieved, ETEU filed a petition for certiorari[8] before the CA ascribing grave abuse of discretion
on the NLRC for disregarding its evidence which allegedly would prove that the subject bonuses were
part of the union members wages, salaries or compensations. In addition, ETEU asserted that the NLRC
committed grave abuse of discretion when it ruled that ETPI is not contractually bound to give said
bonuses to the union members.
In its assailed June 25, 2008 Decision, the CA declared that the Side Agreements of the 1998
and 2001 CBA created a contractual obligation on ETPI to confer the subject bonuses to its employees
without qualification or condition. It also found that the grant of said bonuses has already ripened into
a company practice and their denial would amount to diminution of the employees benefits. It held
that ETPI could not seek refuge under Article 1267 of the Civil Code because this provision would apply
only when the difficulty in fulfilling the contractual obligation was manifestly beyond the contemplation
of the parties, which was not the case therein. The CA, however, sustained the NLRC finding that the
allegation of ULP was devoid of merit. The dispositive portion of the questioned decision reads:
WHEREFORE, premises considered, the instant petition is GRANTED and the
resolution of the National Labor Relations Commission dated April 28, 2005 is hereby
ANNULLED and SET ASIDE. Respondent Eastern Telecommunications Philippines, Inc. is
ordered to pay the members of petitioner their 14th, 15th and 16th month bonuses for the
year 2003 and 14th month for the year 2004. The complaint for unfair labor practice
against said respondent is DISMISSED.
SO ORDERED.[9]
ISSUES
Dissatisfied, ETPI now comes to this Court via Rule 45, raising the following errors allegedly
committed by the CA, to wit:
I.
THE COURT OF APPEALS COMMITTED GRAVE ERROR OF LAW WHEN IT
ANNULLED AND SET ASIDE THE RESOLUTIONS OF THE NLRC DISREGARDING
THE WELL SETTLED RULE THAT A WRIT OF CERTIORARI (UNDER RULE 65)
ISSUES ONLY FOR CORRECTION OF ERRORS OF JURISDICTION OR GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION.
II.
THE COURT OF APPEALS COMMITTED GRAVE ERROR OF LAW WHEN IT
DISREGARDED THE RULE THAT FINDINGS OF FACTS OF QUASI-JUDICIAL
BODIES ARE ACCORDED FINALITY IF THEY ARE SUPPORTED BY SUBSTANTIAL
EVIDENCE CONSIDERING THAT THE CONCLUSIONS OF THE NLRC WERE BASED
ON SUBSTANTIAL AND OVERWHELMING EVIDENCE AND UNDISPUTED FACTS.
III.
IT WAS A GRAVE ERROR OF LAW FOR THE COURT OF APPEALS TO CONSIDER
THAT THE BONUS GIVEN BY EASTERN COMMUNICATIONS TO ITS EMPLOYEES IS
NOT DEPENDENT ON THE REALIZATION OF PROFITS.
IV.
THE COURT OF APPEALS COMMITTED A GRAVE ERROR OF LAW WHEN IT
DISREGARDED THE UNDISPUTED FACT THAT EASTERN COMMUNICATIONS IS
SUFFERING FROM TREMENDOUS FINANCIAL LOSSES, AND ORDERED EASTERN
COMMUNICATIONS TO GRANT THE BONUSES REGARDLESS OF THE FINANCIAL
DISTRESS OF EASTERN COMMUNICATIONS.
V.
THE COURT OF APPEALS COMMITTED A GRAVE ERROR OF LAW WHEN IT
ARRIVED AT THE CONCLUSION THAT THE GRANT OF BONUS GIVEN BY EASTERN
COMMUNICATIONS TO ITS EMPLOYEES HAS RIPENED INTO A COMPANY
PRACTICE.[10]
A careful perusal of the voluminous pleadings filed by the parties leads the Court to conclude
that this case revolves around the following core issues:
1. Whether or not petitioner ETPI is liable to pay 14th, 15th and 16th month bonuses for
the year 2003 and 14th month bonus for the year 2004 to the members of respondent
union; and
2. Whether or not the CA erred in not dismissing outright ETEUs petition for certiorari.
ETPI insists that it is under no legal compulsion to pay 14th, 15th and 16th month bonuses for
the year 2003 and 14th month bonus for the year 2004 contending that they are not part of the
demandable wage or salary and that their grant is conditional based on successful business
performance and the availability of company profits from which to source the same. To thwart ETEUs
monetary claims, it insists that the distribution of the subject bonuses falls well within the companys
prerogative, being an act of pure gratuity and generosity on its part. Thus, it can withhold the grant
thereof especially since it is currently plagued with economic difficulties and financial losses. It alleges
that the companys fiscal situation greatly declined due to tremendous and extraordinary losses it
sustained beginning the year 2000. It claims that it cannot be compelled to act liberally and confer
upon its employees additional benefits over and above those mandated by law when it cannot afford
to do so. It posits that so long as the giving of bonuses will result in the financial ruin of an already
distressed company, the employer cannot be forced to grant the same.
ETPI further avers that the act of giving the subject bonuses did not ripen into a company
practice arguing that it has always been a contingent one dependent on the realization of profits and,
hence, the workers are not entitled to bonuses if the company does not make profits for a given year.
It asseverates that the 1998 and 2001 CBA Side Agreements did not contractually afford ETEU a vested
property right to a perennial payment of the bonuses. It opines that the bonus provision in the Side
Agreement allows the giving of benefits only at the time of its execution. For this reason, it cannot be
said that the grant has ripened into a company practice. In addition, it argues that even if such
traditional company practice exists, the CA should have applied Article 1267 of the Civil Code which
releases the obligor from the performance of an obligation when it has become so difficult to fulfill the
same.
It is the petitioners stance that the CA should have dismissed outright the respondent unions
petition for certiorari alleging that no question of jurisdiction whatsoever was raised therein but,
instead, what was being sought was a judicial re-evaluation of the adequacy or inadequacy of the
evidence on record. It claims that the CA erred in disregarding the findings of the NLRC which were
based on substantial and overwhelming evidence as well as on undisputed facts. ETPI added that the
CA court should have refrained from tackling issues of fact and, instead, limited itself on issues of
jurisdiction and grave abuse of jurisdiction amounting to lack or excess of it.
The Courts Ruling
As a general rule, in petitions for review under Rule 45, the Court, not being a trier of facts,
does not normally embark on a re-examination of the evidence presented by the contending parties
during the trial of the case considering that the findings of facts of the CA are conclusive and binding
on the Court. The rule, however, admits of several exceptions, one of which is when the findings of the
appellate court are contrary to those of the trial court or the lower administrative body, as the case
may be.[11] Considering the incongruent factual conclusions of the CA and the NLRC, this Court finds
Itself obliged to resolve it.
The pivotal question determinative of this controversy is whether the members of ETEU are
entitled to the payment of 14th, 15th and 16th month bonuses for the year 2003 and 14th month bonus
for year 2004.
After an assiduous assessment of the record, the Court finds no merit in the petition.
From a legal point of view, a bonus is a gratuity or act of liberality of the giver which the recipient
has no right to demand as a matter of right.[12] The grant of a bonus is basically a management
prerogative which cannot be forced upon the employer who may not be obliged to assume the onerous
burden of granting bonuses or other benefits aside from the employees basic salaries or wages. [13]
A bonus, however, becomes a demandable or enforceable obligation when it is made part of the
wage or salary or compensation of the employee.[14] Particularly instructive is the ruling of the Court
in Metro Transit Organization, Inc. v. National Labor Relations Commission,[15] where it was written:
Whether or not a bonus forms part of wages depends upon the circumstances and
conditions for its payment. If it is additional compensation which the employer promised
and agreed to give without any conditions imposed for its payment, such as success of
business or greater production or output, then it is part of the wage. But if it is paid only
if profits are realized or if a certain level of productivity is achieved, it cannot be
considered part of the wage. Where it is not payable to all but only to some employees
and only when their labor becomes more efficient or more productive, it is only an
inducement for efficiency, a prize therefore, not a part of the wage.
The consequential question that needs to be settled, therefore, is whether the subject bonuses
are demandable or not. Stated differently, can these bonuses be considered part of the wage, salary
or compensation making them enforceable obligations?
The Court believes so.
In the case at bench, it is indubitable that ETPI and ETEU agreed on the inclusion of a provision
for the grant of 14th, 15th and 16th month bonuses in the 1998-2001 CBA Side Agreement,[16]as well as
in the 2001-2004 CBA Side Agreement,[17] which was signed on September 3, 2001. The provision,
which was similarly worded, states:
Employment-Related Bonuses
The Company confirms that the 14th, 15th and 16th month bonuses (other than the
13th month pay) are granted.
A reading of the above provision reveals that the same provides for the giving of 14th, 15th and
16th month bonuses without qualification. The wording of the provision does not allow any other
interpretation. There were no conditions specified in the CBA Side Agreements for the grant of the
benefits contrary to the claim of ETPI that the same is justified only when there are profits earned by
the company. Terse and clear, the said provision does not state that the subject bonuses shall be made
to depend on the ETPIs financial standing or that their payment was contingent upon the realization of
profits. Neither does it state that if the company derives no profits, no bonuses are to be given to the
employees. In fine, the payment of these bonuses was not related to the profitability of business
operations.
The records are also bereft of any showing that the ETPI made it clear before or during the
execution of the Side Agreements that the bonuses shall be subject to any condition. Indeed, if ETPI
and ETEU intended that the subject bonuses would be dependent on the company earnings, such
intention should have been expressly declared in the Side Agreements or the bonus provision should
have been deleted altogether. In the absence of any proof that ETPIs consent was vitiated by fraud,
mistake or duress, it is presumed that it entered into the Side Agreements voluntarily, that it had full
knowledge of the contents thereof and that it was aware of its commitment under the contract. Verily,
by virtue of its incorporation in the CBA Side Agreements, the grant of 14th, 15th and 16thmonth
bonuses has become more than just an act of generosity on the part of ETPI but a contractual obligation
it has undertaken. Moreover, the continuous conferment of bonuses by ETPI to the union members
from 1998 to 2002 by virtue of the Side Agreements evidently negates its argument that the giving of
the subject bonuses is a management prerogative.
From the foregoing, ETPI cannot insist on business losses as a basis for disregarding its
undertaking. It is manifestly clear that although it incurred business losses of ₱149,068,063.00 in the
year 2000, it continued to distribute 14th, 15th and 16th month bonuses for said year. Notwithstanding
such huge losses, ETPI entered into the 2001-2004 CBA Side Agreement on September 3,
2001whereby it contracted to grant the subject bonuses to ETEU in no uncertain terms. ETPI continued
to sustain losses for the succeeding years of 2001 and 2002 in the amounts of ₱348,783,013.00 and
₱315,474,444.00, respectively. Still and all, this did not deter it from honoring the bonus provision in
the Side Agreement as it continued to give the subject bonuses to each of the union members in 2001
and 2002 despite its alleged precarious financial condition. Parenthetically, it must be emphasized that
ETPI even agreed to the payment of the 14th, 15th and 16th month bonuses for 2003 although it opted
to defer the actual grant in April 2004. All given, business losses could not be cited as grounds for ETPI
to repudiate its obligation under the 2001-2004 CBA Side Agreement.
The Court finds no merit in ETPIs contention that the bonus provision confirms the grant of the
subject bonuses only on a single instance because if this is so, the parties should have included such
limitation in the agreement. Nowhere in the Side Agreement does it say that the subject bonuses shall
be conferred once during the year the Side Agreement was signed. The Court quotes with approval the
observation of the CA in this regard:
ETPI argues that assuming the bonus provision in the Side Agreement of the 20012004 CBA entitles the union members to the subject bonuses, it is merely in the nature
of a one-time grant and not intended to cover the entire term of the CBA. The contention
is untenable. The bonus provision in question is exactly the same as that contained in the
Side Agreement of the 1998-2001 CBA and there is no denying that from 1998 to 2001,
ETPI granted the subject bonuses for each of those years. Thus, ETPI may not now claim
that the bonus provision in the Side Agreement of the 2001-2004 CBA is only a one-time
grant.[18]
ETPI then argues that even if it is contractually bound to distribute the subject bonuses to ETEU
members under the Side Agreements, its current financial difficulties should have released it from the
obligatory force of said contract invoking Article 1267 of the Civil Code. Said provision declares:
Article 1267. When the service has become so difficult as to be manifestly beyond
the contemplation of the parties, the obligor may also be released therefrom, in whole or
in part.
The Court is not persuaded.
The parties to the contract must be presumed to have assumed the risks of unfavorable
developments. It is, therefore, only in absolutely exceptional changes of circumstances that equity
demands assistance for the debtor.[19] In the case at bench, the Court determines that ETPIs claimed
depressed financial state will not release it from the binding effect of the 2001-2004 CBA Side
Agreement.
ETPI appears to be well aware of its deteriorating financial condition when it entered into the
2001-2004 CBA Side Agreement with ETEU and obliged itself to pay bonuses to the members of ETEU.
Considering that ETPI had been continuously suffering huge losses from 2000 to 2002, its business
losses in the year 2003 were not exactly unforeseen or unexpected. Consequently, it cannot be said
that the difficulty in complying with its obligation under the Side Agreement was manifestly beyond
the contemplation of the parties. Besides, as held in Central Bank of the Philippines v. Court of
Appeals,[20] mere pecuniary inability to fulfill an engagement does not discharge a contractual
obligation. Contracts, once perfected, are binding between the contracting parties. Obligations arising
therefrom have the force of law and should be complied with in good faith. ETPI cannot renege from
the obligation it has freely assumed when it signed the 2001-2004 CBA Side Agreement.
Granting arguendo that the CBA Side Agreement does not contractually bind petitioner ETPI to
give the subject bonuses, nevertheless, the Court finds that its act of granting the same has become
an established company practice such that it has virtually become part of the employees salary or
wage. A bonus may be granted on equitable consideration when the giving of such bonus has been the
companys long and regular practice. In Philippine Appliance Corporation v. Court of Appeals,[21] it was
pronounced:
To be considered a regular practice, however, the giving of the bonus should have
been done over a long period of time, and must be shown to have been consistent and
deliberate. The test or rationale of this rule on long practice requires an indubitable
showing that the employer agreed to continue giving the benefits knowing fully well that
said employees are not covered by the law requiring payment thereof.
The records show that ETPI, aside from complying with the regular 13th month bonus, has been
further giving its employees 14th month bonus every April as well as 15th and 16th month bonuses every
December of the year, without fail, from 1975 to 2002 or for 27 years whether it earned profits or
not. The considerable length of time ETPI has been giving the special grants to its employees indicates
a unilateral and voluntary act on its part to continue giving said benefits knowing that such act was
not required by law. Accordingly, a company practice in favor of the employees has been established
and the payments made by ETPI pursuant thereto ripened into benefits enjoyed by the employees.
The giving of the subject bonuses cannot be peremptorily withdrawn by ETPI without violating
Article 100 of the Labor Code:
Art. 100. Prohibition against elimination or diminution of benefits. Nothing in this
Book shall be construed to eliminate or in any way diminish supplements, or other
employee benefits being enjoyed at the time of promulgation of this Code.
The rule is settled that any benefit and supplement being enjoyed by the employees cannot be
reduced, diminished, discontinued or eliminated by the employer. The principle of non-diminution of
benefits is founded on the constitutional mandate to protect the rights of workers and to promote their
welfare and to afford labor full protection.[22]
Interestingly, ETPI never presented countervailing evidence to refute ETEUs claim that the
company has been continuously paying bonuses since 1975 up to 2002 regardless of its financial state.
Its failure to controvert the allegation, when it had the opportunity and resources to do so, works in
favor of ETEU. Time and again, it has been held that should doubts exist between the evidence
presented by the employer and the employee, the scales of justice must be tilted in favor of the
latter.[23]
WHEREFORE, the petition is DENIED. The June 25, 2008 Decision of the Court of Appeals and
its December 12, 2008 Resolution are AFFIRMED.
SO ORDERED.