1 of 25 MGVD - Wages Case Digest Compilation - Labor Law B - Atty. Chan-Gonzaga

A. Concept and Definition and does not define the essence of the relation. 2.
Tat Lagrama was not

reported as an employee to the SSS is not conclusive, on the question
1. Tan v. Lagrama whether he was an employee, otherwise Tan would be rewarded for his
failure or even neglect to perform his obligation.
Facts: Lagrama works for Tan as painter of billboards and murals for the C. Power of Dismissal – by Tan stating that he had the right to fire
motion pictures shown at the theaters managed by Tan for more than Lagrama, Tan in effect acknowledged Lagrama to be his employee
10years. Lagrama was dismissed for having urinated in his working area. D. Power of Selection and Engagement of Employees – Tan engaged
Lagrama filed a complaint for illegal dismissal and non payment of benefits. the services of Lagrama without the intervention of third party Compared to
Tan asserted that Lagrama was an independent contractor as he was paid in an employee, an independent contractor is one who carries on a distinct and
piece-work basis independent business and undertakes to perform the job, work, or service on
its own account and under its own responsibility according to its own manner
Issue: W/N Lagrama is an independent contractor or an employee of Tan. and method, free from the control and direction of the principal in all matters
connected with the performance of the work except as to the results thereof.
Held: Lagrama is an employee, not an independent contractor. [8] Hence, while an independent contractor enjoys independence and
Applying Four Fold Test freedom from the control and supervision of his principal, an employee is
A. Power of Control - Evidence shows that the Lagrama performed his subject to the employer’s power to control the means and methods by which
work as painter and under the supervision and control of Tan. 1. Lagrama the employee’s work is to be performed and accomplished.
worked in a designated work area inside the theater of Tan for the use of
which petitioner prescribed rules, which rules included the observance of 2. Philippine Spring Water Resources v. Mahilum
cleanliness and hygeine and prohibition against urinating in the work area
and any other place other than rest rooms and 2. Tan's control over Facts:
Lagrama's work extended not only the use of work area but also the result of
Lagrama;s work and the manner and means by which the work was to be Issue:
accomplished 3. Lagrama is not an independent contractor because he did
not enjoy independence and freedom from the control and supervision of Tan Held:
and he was subjected to Tan's control over the means and methods by which
his work is to be performed and accomplished
B. Payment of Wages - 1. Lagrama worked for Tan on a fixed piece
work basis is of no moment. Payment by result is a method of compensation
1 of 25 mgvd – wages case digest compilation – labor law B – atty. chan-gonzaga

3. Mabeza v. NLRC Responding to the allegations for illegal dismissal, private respondent
Peter Ng alleged before Labor Arbiter that petitioner surreptitiously left her
Facts: Petitioner Norma Mabeza contends that on the first week of May 1991, job without notice to the management and that she actually abandoned her
she and her co-employees at the Hotel Supreme in Baguio City were asked by work. He maintained that there was no basis for the money claims for
the hotel's management to sign an instrument attesting to the latter's underpayment and other benefits as these were paid in the form of facilities
compliance with minimum wage and other labor standard provisions of law. to petitioner and the hotel's other employees.
Petitioner signed the affidavit but refused to go to the City Prosecutor's Office Labor Arbiter dismissed the complaint. On April 1994, respondent
to swear to the veracity and contents of the affidavit as instructed by NLRC promulgated its assailed Resolution affirming the Labor Arbiter's
management. The affidavit was nevertheless submitted on the same day to decision.
the Regional Office of the Department of Labor and Employment in Baguio
City. Issue: Whether or not the employer has exerted pressure, in the form of
The affidavit was drawn by management for the sole purpose of restraint, interference or coercion, against his employee's right to institute
refuting findings of the Labor Inspector of DOLE apparently adverse to the concerted action for better terms and conditions of employment constitutes
private respondent. After she refused to proceed to the City Prosecutor's unfair labor practice.
Office, petitioner states that she was ordered by the hotel management to
turn over the keys to her living quarters and to remove her belongings from Held: The Court ruled that there was unfair labor practice. Without doubt,
the hotel premises. According to her, respondent strongly chided her for the act of compelling employees to sign an instrument indicating that the
refusing to proceed to the City Prosecutor's Office to attest to the affidavit. employer observed labor standards provisions of law when he might have
She thereafter reluctantly filed a leave of absence from her job which was not, together with the act of terminating or coercing those who refuse to
denied by management. When she attempted to return to work on May cooperate with the employer's scheme constitutes unfair labor practice. The
1991, the hotel's cashier informed her that she should not report to work first act clearly preempts the right of the hotel's workers to seek better terms
and, instead, continue with her unofficial leave of absence. and conditions of employment through concerted action. For refusing to
Consequently, three days after her attempt to return to work, cooperate with the private respondent's scheme, petitioner was obviously
petitioner filed a complaint for illegal dismissal before the Arbitration Branch held up as an example to all of the hotel's employees, that they could only
of the National Labor Relations Commission — CAR Baguio City. In addition to cause trouble to management at great personal inconvenience. Implicit in the
her complaint for illegal dismissal, she alleged underpayment of wages, non- act of petitioner's termination and the subsequent filing of charges against
payment of holiday pay, service incentive leave pay, 13th month pay, night her was the warning that they would not only be deprived of their means of
differential and other benefits. livelihood, but also possibly, their personal liberty.

Granting that meals and lodging were provided and indeed effective control and supervision over his work, pointing out that David: (1)
constituted facilities, such facilities could not be deducted without the set the work day, reporting time and hogs to be chopped, as well as the
employer complying first with certain legal requirements. Without satisfying manner by which he was to perform his work; (2) daily paid his salary of
these requirements, the employer simply cannot deduct the value from the P700.00, which was increased from P600.00 in 2007, P500.00 in 2006 and
employee's wages. First, proof must be shown that such facilities are P400.00 in 2005; and (3) approved and disapproved his leaves.
customarily furnished by the trade. Second, the provision of deductible Macasio added that David owned the hogs delivered for chopping, as well
facilities must be voluntarily accepted in writing by the employee. Finally, as the work tools and implements; David also rented the workplace. He
facilities must be charged at fair and reasonable value. These requirements further claimed that David employs about twenty-five (25) butchers and
were not met in the instant case. delivery drivers.
More significantly, the food and lodging, or the electricity and water David claimed that he started his hog dealer business in 2005, and that
consumed by the petitioner were not facilities but supplements. A benefit or he only has ten employees. He alleged that he hired Macasio as a butcher or
privilege granted to an employee for the convenience of the employer is not a chopper on “pakyaw” or task basis who is, therefore, not entitled to overtime
facility. The criterion in making a distinction between the two not so much pay, holiday pay and 13th month pay.
lies in the kind (food, lodging) but the purpose. Considering that hotel David pointed out that Macasio: (1) usually starts his work at 10:00
workers are required to work different shifts and are expected to be available p.m. and ends at 2:00 a.m. of the following day or earlier, depending on the
at various odd hours, their ready availability is a necessary matter in the volume of the delivered hogs; (2) received the fixed amount of P700.00 per
operations of a small hotel, such as the private respondent's hotel. engagement, regardless of the actual number of hours that he spent
chopping the delivered hogs; and (3) was not engaged to report for work and,
B. Wage-Fixing accordingly, did not receive any fee when no hogs were delivered.
Macasio disputed David’s allegations. He argued that, first, David did
1. David v. Macasio not start his business only in 2005. He pointed to the Certificate of
Employment that David issued in his favor which placed the date of his
Facts: Macasio filed before the Labor Arbiter a complaint against employment, albeit erroneously, in January 2000. Second, he reported for
petitioner Ariel L. David, doing business under the name and style “Yiels Hog work every day which the payroll or time record could have easily proved had
Dealer,” for nonpayment of overtime pay, holiday pay, and 13th month pay. David submitted them in evidence.
He also claimed payment for moral and exemplary damages and attorney’s David claimed that he issued the Certificate of Employment, upon
fees; and for payment of service incentive leave (SIL). Macasio’s request, only for overseas employment purposes.
Macasio alleged before the Labor Arbiter that he had been working as a The Labor Arbiter dismissed Macasio’s complaint for lack of merit. The
butcher for David since January 6, 1995. He claimed that David exercised Labor Arbiter gave credence to David’s claim that he engaged Macasio on

“pakyaw” or task basis. The LA concluded that since Macasio was engaged on The Supreme Court reject this assertion of the petitioner.
“pakyaw” or task basis, he is not entitled to overtime, holiday, SIL and 13th Engagement on “pakyaw” or task basis does not characterize the relationship
month pay. that may exist between the parties, i.e., whether one of employment or
The NLRC affirmed the Labor arbiter’s ruling. independent contractorship.
The CA partly granted Macasio’s certiorari petition and reversed the To determine the existence of an employer-employee relationship,
NLRC’s ruling for having been rendered with grave abuse of discretion. While four elements generally need to be considered, namely: (1) the selection and
the CA agreed with the LA and the NLRC that Macasio was a task basis engagement of the employee; (2) the payment of wages; (3) the power of
employee, it nevertheless found Macasio entitled to his monetary claims. The dismissal; and (4) the power to control the employee’s conduct. These
CA explained that as a task basis employee, Macasio is excluded from the elements or indicators comprise the so-called “four-fold” test of employment
coverage of holiday, SIL and 13th month pay only if he is likewise a “field relationship.
personnel.” Macasio’s relationship with David satisfies this test. A distinguishing
As defined by the Labor Code, a “field personnel” is one who performs characteristic of “pakyaw” or task basis engagement, as opposed to straight-
the work away from the office or place of work, and whose regular work hour wage payment, is the non-consideration of the time spent in working.
hours cannot be determined with reasonable certainty. The payment of an employee on task or pakyaw basis alone is insufficient to
In Macasio’s case, the elements that characterize a “field personnel” exclude one from the coverage of Service Incentive Leave (SIL) and holiday
are evidently lacking as he had been working as a butcher at David’s “Yiels pay.
Hog Dealer” business in Sta. Mesa, Manila under David’s supervision and In determining whether workers engaged on “pakyaw” or task basis is
control, and for a fixed working schedule that starts at 10:00 p.m. entitled to holiday and Service Incentive Leave (SIL) pay, the presence (or
Accordingly, the CA awarded Macasio’s claim for holiday, SIL and 13th absence) of employer supervision as regards the worker’s time and
month pay for three years, with 10% attorney’s fees on the total monetary performance is the key.
award. Hence, David filed the present petition. The Supreme Court agree with the CA that Macasio does not fall
under the definition of “field personnel.” The CA’s finding in this regard is
Issue: The issue revolves around the proper application and interpretation of supported by the established facts of this case: first, Macasio regularly
the labor law provisions on holiday, SIL and 13th month pay to a worker performed his duties at David’s principal place of business; second, his actual
engaged on “pakyaw” or task basis. hours of work could be determined with reasonable certainty; and third,
David supervised his time and performance of duties.
Held: David confuses engagement on “pakyaw” or task basis with the lack of Since Macasio cannot be considered a “field personnel,” then he is not
employment relationship. Impliedly, David asserts that their “pakyawan” or exempted from the grant of holiday, SIL pay even as he was engaged on
task basis arrangement negates the existence of employment relationship. “pakyaw” or task basis.

With respect to the payment of 13th month pay however, the Nasipit Lumber Company (NALCO), Philippine Wallboard Corporation
Supreme Court find that the CA legally erred in finding that the NLRC gravely (PWC), and Anakan Lumber Company (ALCO) applied for an exemption from
abused its discretion in denying this benefit to Macasio. the Wage Orders as distressed establishments under Guidelines No. 3, issued
The governing law on 13th month pay is PD 8 5 1. As with holiday and by RTWPB.
SIL pay, 13th month pay benefits generally cover all employees; an employee They are engaged in the logging and integrated wood processing
must be one of those expressly enumerated to be exempted. Section 3 of the mindustry but are distressed due to conditions beyond their control (1.
Rules and Regulations Implementing P.D. 851 enumerates the exemptions Worldwide recession, 2. Peace and order problems, 3. Environmental fees on
from the coverage of 13th month pay benefits. Under said law, “employers of top of regular forest charges, 4. Logging moratorium, 5. Deduction in annual
those who are paid on task basis, and those who are paid a fixed amount for allowable volume of cut logs, 6. Highly insufficient raw material supply, 7.
performing a specific work, irrespective of the time consumed in the Extraordinary increases in costs of fuel, oil, spare parts, and maintenance, 8.
performance thereof” are exempted. Excessive labor cost, and 9. Lumber export ban).
Note that unlike the IRR of the Labor Code on holiday and SIL pay, Unions opposed the application for exemption on the ground that said
Section 3(e) of the Rules and Regulations Implementing PD 851 exempts companies are not distressed establishments since their capitalization has not
employees “paid on task basis” without any reference to “field personnel.” been impaired by 25%.
This could only mean that insofar as payment of the 13th month pay is RTWPB approved the applications for exemption because (1) they are
concerned, the law did not intend to qualify the exemption from its coverage claiming exemption not on the basis of capital impairment but on belonging
with the requirement that the task worker be a “field personnel” at the same to a distressed industry, (2) they are experiencing liquidity problems and
time. extreme difficulty servicing their loan obligations, (3) there is a slump in the
wood-processing industry, and (4) most of the circumstances responsible for
2. Nasipit Lumber Co. v. NWPC the financial straits of petitioners are largely external. In fact, they should be
extended assistance and encouragement to continue operating so that jobs
Facts: The Region X Tripartite Wages and Productivity Board (RTWPB) issued therein may be preserved.
Wage Order No. RX-01 which provides an increase in minimum wage rates Unions filed an appeal with the National Wages and Productivity
applicable to workers and employees in the private sector in Northern Commission (NWPC), which affirmed ALCO’s application but reversed
Mindanao. A supplementary Wage Order No. RX-01-A was also issued, which NALCO’s and PWC’s because Guideline No. 3 cannot be a valid basis for
provides that all workers in Region X already receiving wages above the granting exemption since it did not pass the approval of the commission.
statutory minimum wage (P120) shall also receive an increase as provided in Sec 1, Rule VIII, of the Rules of Procedure on Minimum Wage Fixing
RX-01. provides that it NWPC is empowered to set the criteria on exemptions while

the Boards may issue guidelines but should first pass NWPC for the purpose NWPC authorized the RTWPB to issue exemptions from wage orders,
of determining its conformity to the latter’s general policies and guidelines.
but subject to its review and approval. Since NWPC never assented to
After NWPC’s Secretariat made some comments on Guidelines No. 3 Guideline No. 3, it is inoperative and cannot be used in deciding or acting on
by RTWPB, it was never submitted again for approval. Until and unless it is applications for exemption.
approved by NWPC, it has no operative force and effect. To allow RTWPB Guideline No. 3 to take effect without the approval of
The applicable guidelines on exemption are the one issued by NWPC NWPC is to arrogate unto RTWPB a power vested in the NWPC by Art 121, LC,
which requires a 25% impairment on the paid-up capital or total invested as amended by RA 6727.
capital. A statutory grant of “powers should not be extended by implication
NALCO, ALCO, and PWC incurred a capital impairment of 1.89%, beyond what may be necessary for their just and reasonable execution.
28.72%, and 5.03%, respectively therefore only ALCO’s application should be There is no basis for petitioner’s claim that their vested rights were
approved. prejudiced by the alleged retroactive application of NWPC’s rules because
(As response to the MR) Guidelines No. 3 cannot also be given effect
Guideline No. 3, not being valid, cannot be a source a right, much less a
because it grants exemption by industry when the Wage Order mentioned vested one.
only distressed establishments. The implementing guidelines cannot expand Guideline No. 3 is also void because it is inconsistent with the avowed
nor limit the provision of the law it seeks to implement. State policies protective of labor. By exempting all establishments belonging
to a distressed industry, it surreptitiously and irregularly takes away the
Issue: Is a guideline issued by an RTWPB without the approval of or, worse, mandated increase in the minimum wage awarded to the affected workers It
contrary to the guidelines promulgated by the NWPC valid? proceeded against the declared policy enshrined in RA 6727.
Held: No, the petition is dismissed. The three branches and the various 3. ECOP v. NWCP, RTWPB-NCR and TUCP
administrative agencies of the government can exercise only those powers
conferred upon them by the Constitution and the law. Facts:
RA 6727, amending the Labor Code, created both the NWPC and the
RTWPB and defined their respective powers. It clearly grants the NWPC, not Issue:
the RTWPB, the power to “prescribe the rules and guidelines” for the
determination of minimum wage and productivity measures. Held:
RTWPB has the power to issue wage orders under Art 122(b), LC but
such orders are subject to the guidelines prescribed by NWPC. NWPC lays
down the guidelines which the RTWPB implements.

4. Metropolitan Bank and Trust Company v. NWPC Held: The Court finds that Section 1, Wage Order No. R02-03 is void insofar as
it grants a wage increase to employees earning more than the minimum wage
Facts: On October 17, 1995, the Regional Tripartite Wages and Productivity rate; and pursuant to the separability clause of the Wage Order, Section 1 is
Board, Region II, Tuguegarao, Cagayan (RTWPB), by virtue of Republic Act No. declared valid with respect to employees earning the prevailing minimum
6727 (R.A. No. 6727), otherwise known as the Wage Rationalization Act, wage rate.
issued Wage Order No. R02-03 (Wage Order), as follows: Section 1. Upon The powers of NWPC are enumerated in ART. 121. Powers and
effectivity of this Wage Order, all employees/workers in the private sector Functions of the Commission. - The Commission shall have the following
throughout Region II, regardless of the status of employment are granted an powers and functions: (d) To review regional wage levels set by the Regional
across-the-board increase of P15.00 daily. Tripartite Wages and Productivity Boards to determine if these are in
The Wage Order was published in a newspaper of general circulation accordance with prescribed guidelines and national development plans; (f) To
on December 2, 1995 and took effect on January 1, 1996. Its Implementing review plans and programs of the Regional Tripartite Wages and Productivity
Rules were approved on February 14, 1996. Per Section 13 of the Wage Boards to determine whether these are consistent with national
Order, any party aggrieved by the Wage Order may file an appeal with the development plans; (g) To exercise technical and administrative supervision
National Wages and Productivity Commission (NWPC) through the RTWPB over the Regional Tripartite Wages and Productivity Boards.
within 10 calendar days from the publication of the Wage Order. R.A. No. 6727 declared it a policy of the State to rationalize the fixing
Banker’s Council in a letter inquiry to NWPC requested for ruling to of minimum wages and to promote productivity-improvement and gain-
seek exemption from coverage of the wage order since the members bank sharing measures to ensure a decent standard of living for the workers and
are paying more than the regular wage. NWPC replied that the member their families; to guarantee the rights of labor to its just share in the fruits of
banks are covered by the wage order and does not fall with the exemptible production; to enhance employment generation in the countryside through
categories. industrial dispersal; and to allow business and industry reasonable returns on
In another letter inquiry, Metrobank asked for the interpretation of investment, expansion and growth.
the applicability of the wage order. NWPC referred it to RTWPB. RTWPB in In line with its declared policy, R.A. No. 6727 created the NWPC,
return clarified that establishments in Region 2 are covered by the wage vested with the power to prescribe rules and guidelines for the determination
order. Petitioner filed a petition with the CA and denied the petition. of appropriate minimum wage and productivity measures at the regional,
provincial or industry levels; and authorized the RTWPB to determine and fix
Issue: Whether or not the wage order is void thus it has no legal effect and the minimum wage rates applicable in their respective regions, provinces, or
the RTWPB acted in excess of its jurisdiction. industries therein and issue the corresponding wage orders, subject to the
guidelines issued by the NWPC. Pursuant to its wage fixing authority, the

RTWPB may issue wage orders which set the daily minimum wage rates,
based on the standards or criteria set by Article 124 of the Labor Code. Wage Distortion
The Court declared that there are two ways of fixing the minimum
wage: the "floor-wage" method and the "salary-ceiling" method. The "floor- 1. Metropolitan Bank & Trust Company Employees Union-ALU-TUCP v. NLRC
wage" method involves the fixing of a determinate amount to be added to
the prevailing statutory minimum wage rates. On the other hand, in the Facts:
"salary-ceiling" method, the wage adjustment was to be applied to
employees receiving a certain denominated salary ceiling. In other words, Issue:
workers already being paid more than the existing minimum wage (up to a
certain amount stated in the Wage Order) are also to be given a wage Held:
increase.
In the present case, the RTWPB did not determine or fix the minimum 2. Prubankers Association v. Prudential Bank
wage rate by the "floor-wage method" or the "salary-ceiling method" in
issuing the Wage Order. The RTWPB did not set a wage level nor a range to Synopsis: Regional Tripartite Wages and Productivity Board of Region V and
which a wage adjustment or increase shall be added. Instead, it granted an VII imposed increase in the wage/s in the form of COLA and also adjusted the
across-the-board wage increase of P15.00 to all employees and workers of minimum wage rate. Prudential Bank complied with the wage orders but only
Region 2. In doing so, the RTWPB exceeded its authority by extending the in its branches covered by the wage orders. Petitioner, Prubankers
coverage of the Wage Order to wage earners receiving more than the Association, contended that there is wage distortion and that Prudential Bank
prevailing minimum wage rate, without a denominated salary ceiling. As should have adjusted the wages in all of its branches nationwide (it argued
correctly pointed out by the OSG, the Wage Order granted additional benefits that increasing wages only in Region V created wage distortion). Court held
not contemplated by R.A. No. 6727. that there is no wage distortion. Wage distortion involves a parity in the
salary rates of different pay classes which, as a result, eliminates the
5. NWPC and RTWP v. APL distinction between the different ranks in the same region.
Facts: Facts: On November 18, 1993, the Regional Tripartite Wages and Productivity
Board (The Board) of Region V issued Wage Order No. RB 05-03 which
Issue: provided for a Cost of Living Allowance (COLA) to workers in the private
sector who had rendered service for at least three (3) months before its
Held: effectivity, and for the same period thereafter. (17.50 in the cities of Naga and

Legaspi; (P15.50) in the municipalities of Tabaco, Daraga, Pili and the city of 2. WoN wage distortion is confined only in one region and not
Iriga; and (P10.00) for all other areas in the Bicol Region. nationwide-Yes
The Board then issued another wage order mandating the integration 3. WoN the Wage Orders violate the “equal pay for equal work”
of the COLA into the basic pay of all workers. It also established an increase in principle-No
the minimum wage rates for all workers in the private sector (in Cebu, 4. WoN “establishment” as used in Art. 125 of LC refers to the regional
Mandaue and Lapulapu, municipalities of Compostela, Liloan, Consolacion, Branches of the Bank and not the bank as a wholeyes
Cordova, Talisay, Minglanilla, Naga and the cities of Davao, Toledo, 5. WoN the bank is stopped from implementing the wage order
Dumaguete, Bais, Canlaon and Tagbilaran)  Prudential Bank complied with for a specific region only-No
the wage orders only in branches covered by said orders.
On June 7, 1994, respondent Prubankers Association wrote the Held: CA decision affirmed. There is no wage distortion.
petitioner requesting that the Labor Management Committee be immediately 1.) Petitioner argues: Wage distortion exists, because the
convened to discuss and resolve the alleged wage distortion created in the implementation of the two Wage Orders has resulted in the discrepancy in
salary structure upon the implementation of the said wage orders. The the compensation of employees of similar pay classification in different
dispute was not resolved. They agreed to submit to voluntary arbitration. regions. (the employees in the affected regions have higher compensation
Ruling of Voluntary Arbiter: There is wage distortion. “the Bank's than their counterparts of the same level in other regions)
separate and regional implementation of Wage Order No. VII-03 at its Cebu, SC held: Contrary to petitioner's postulation, a disparity in wages
Mabolo and P. del Rosario branches created a wage distortion in the Bank between employees holding similar positions but in different regions does
nationwide which should be resolved in accordance with Art. 124 of the not constitute wage distortion as contemplated by law. It is the hierarchy of
Labor Code” positions and the disparity of their corresponding wages and other
Court of Appeals: No wage distortion. The variance in the salary rates emoluments that are sought to be preserved by the concept of wage
of employees in different regions of the country was justified by RA 6727. The distortion. A wage distortion arises when a wage order engenders wage
underlying considerations in issuing the wage orders are diverse, based on parity between employees in different rungs of the organizational ladder of
the distinctive situations and needs existing in each region. Hence, there is no the same establishment.
basis to apply the salary increases imposed by Wage Order No. VII-03 to The statutory definition of Wage Distortion is found in Art. 124 of the
employees outside of Region VII.; The distinctions between each employee Labor Code, as amended by RA 6727. “As used herein, a wage distortion shall
group in the region are maintained, as all employees were granted an mean a situation where an increase in prescribed wage results in the
increase in minimum wage rate.” elimination of severe contraction of intentional quantitative differences in
wage or salary rates between and among employee groups in an
Issue: 1. WoN there was wage distortion-No establishment as to effectively obliterate the distinctions embodied in such

wage structure based on skills, length of service, or other logical bases of employees of the same pay class in different regions should receive the same
differentiation.” (Art. 124 as amended) compensation, petitioner has apparently misunderstood both the meaning of
The Court previously held that where a significant change occurs at wage distortion and the intent of the law to regionalize wage rates. The
the lowest level of positions in terms of basic wage without a corresponding reasons behind the necessity of such disparity/ regionalization of wages are:
change in the other level in the hierarchy of positions, negating as a result Controlling factors such as the cost of living; supply and demand of basic
thereof the distinction between one level of position from the next higher goods, services and necessities; and the purchasing power of the peso vary in
level, and resulting in a parity between the lowest level and the next higher each region of the country.
level or rank, between new entrants and old hires, there exists a wage Wages in some areas may be increased in order to prevent migration
distortion. to the National Capital Region and, hence, to decongest the metropolis. RA
Wage distortion involves four elements: 1. An existing hierarchy of 6727 recognizes that there are different needs for the different situations in
positions with corresponding salary rates; 2. A significant change in the salary different regions of the country. The fact that a person is receiving more in
rate of a lower pay class without a concomitant increase in the salary rate of a one region does not necessarily mean that he or she is better off than a
higher one; 3. The elimination of the distinction between the two levels; and person receiving less in another region. We must consider, among others,
4. The existence of the distortion in the same region of the country such factors as cost of living, fulfillment of national economic goals, and
In the case at bar, there is no wage distortion because: In the said standard of living.
branches, there was an increase in the salary rates of all pay classes. In any event, the Court is only concerned with the enforcement of the
Furthermore, the hierarchy of positions based on skills, length of service and law. It does not have the power to pass upon the wisdom of the law (political
other logical bases of differentiation was preserved. The distinction between question).
Pay Class 1 and Pay Class 2, for example, was not eliminated as a result of the 3.) Petitioner argues: the implementation of the Wage Order in only
implementation of the two Wage Orders in the said region. one region violates the equal-pay-for-equal-work principle
2.) Petitioner argues: The wage orders must be applied nationwide. SC held: No. Socioeconomic factors vary per region. RA 6727
“Wage distortion” should not only be confined in a certain region. mandates that wages in every region must be set by the particular wage
SC held: The difference in wages between employees in the same pay board of that region, based on the prevailing situation therein. Necessarily,
scale in different regions is not the mischief sought to be banished by the law. the wages in different regions will not be uniform.
Republic Act No. 6727 (the Wage Rationalization Act), recognized "existing 4. Petitioner argues: Regional offices of the Bank do not themselves
regional disparities in the cost of living”. It also established several factors to constitute, but are simply branches of, the establishment which is the whole
be taken into consideration in the determination of regional minimum wages. bank. Thus, wage distortion covers all employees even those of different
It is clear therefore that a disparity in wages between employees with similar regions.
positions in different regions is necessarily expected. In insisting that the

SC held: RA 6727, Sec. 13 provides that the "minimum wage rates of increased by P900.00 (see Note # 1). The salaries of employees who fell
workers working in branches or agencies of establishments in or outside the below the new minimum rates were also adjusted accordingly to reach such
National Capital Region shall be those applicable in the place where they are rates under their levels. As a result, Bankard Employees Union-Workers
sanctioned". The statutory provision does not support petitioner's view that Alliance Trade Unions (Bankard Union) demanded for salary increase of its
"establishment" includes all branches and offices in different regions. Also, old, regular employees. Bankard refused on the ground that it had no
NWPC Guideline No. 1 (S. 1992) entitled "Revised Guidelines on Exemption obligation to grant all its employees the same increase. Bankard Union filed a
From Compliance With the Prescribed Wage/Cost of Living Allowance Notice of Strike on the ground of discrimination and other acts of Unfair
Increases Granted by the Regional Tripartite Wages and Productivity Board," Labor Practice. This was initially treated as a preventive mediation case on
states that "establishment" "refers to an economic unit which engages in one the ground that the issues raised were not strikable. Upon the second notice
or predominantly one kind of economic activity with a single fixed location." of strike, the dispute was certified for compulsory arbitration. The NLRC
5. Petitioner argues: Bank has adopted a uniform wage policy, which dismissed the case for lack of merit, finding no wage distortion. The CA
has attained the status of an established management practice; thus, it is denied the same for lack of merit. Hence, this petition.
estopped from implementing a wage order for a specific region only.
SC held: No. Said nationwide uniform wage policy of the Bank had Issue: Whether the unilateral adoption by an employer of an upgraded salary
been adopted prior to the enactment of RA 6727. After the passage of said scale that increased the hiring rates of new employees without increasing the
law, the Bank was mandated to regionalize its wage structure. Even if the salary rates of old employees resulted in wage distortion within the
Bank implemented some wage orders nationwide after effectivity of RA 6727, contemplation of Article 124 of the Labor Code.
the Bank was, at the time, still uncertain on how to follow the new law. Court
held that said single instance cannot be constitutive of "management Held: No. The Court held that wage distortion does not exist in this case as all
practice." the elements were not met. There are four elements of wage distortion (See
note #2), namely: (1) An existing hierarchy of positions with corresponding
3. Bankard Employees Union-Workers Alliance Trade Unions v. NLRC salary rates, (2) a significant change in the salary rate of a lower pay class
without a concomitant increase in the salary rate of a higher one, (3) the
Facts: Bankard, Inc. classifies its employees according to level: Level I, Level II, elimination of the distinction between the two levels and (4) the existence of
Level III, Level IV and Level V (See Note #1 for corresponding salary rates). On the distortion in the same region of the country. In a problem dealing with
May 28, 1993, the directors of respondent Bankard, Inc. approved a new "wage distortion," the basic assumption is that there exists a grouping or
salary scale for the purpose of making its hiring rate competitive in the labor classification of employees that establishes distinctions among them on some
market. The new salary scale increased the hiring rates of new employees, to relevant or legitimate bases. Various factors such as the degrees of
wit: Levels I and V were increased by P1,000.00 while Levels II, III and IV were

responsibility, the skills and knowledge required, the complexity of the job, or not due to a prescribed law or wage order. (See Note #3) The fixing of hiring
other logical basis of differentiation are involved in such classifications. rates which resulted to wage increases was a voluntary and unilateral
According to the NLRC, to determine the existence of wage distortion, increase made by Bankard. The Court held that Article 124 is to be construed
the "historical" classification of the employees prior to the wage increase in relation to minimum wage fixing, the intention of the law being that in case
must be established. In this case, the employees of Bankard have been of an increase in minimum wage, the distinctions in the wage structure will
“historically” classified into levels (I-V), and not on the basis of their length of be preserved. The case of Metro Transit Organization Inc. v. NLRC (See Note
service. New employees are automatically placed under any of these levels #4) is not applicable in this case as in the former, there was no CBA but
upon their entry. This is the wage structure formulated by Bankard, a instead, an existing company practice "that whenever rank-and-file
recognized management prerogative which Bankard Union may not encroach employees were paid a statutorily mandated salary increase, supervisory
upon by creating their own independent classification (ie, based on newly employees were, as a matter of practice, also paid the same amount plus an
hired and old employees) to use as a basis for demanding an across-the- added premium.” The mere existence of a wage distortion does not ipso facto
board salary increase. According to established jurisprudence, the result to an obligation to rectify it, absent a law or other source of obligation
formulation of a wage structure through the classification of employees is a which requires its rectification. Furthermore, Bankard’s right to increase its
matter of management judgment and discretion. hiring rate, to establish minimum salaries for specific jobs, and to adjust the
Based on the wage structure, there is no hierarchy of positions rates of employees affected thereby is embodied under the parties’ CBA (See
between the newly hired and regular employees of Bankard since it is a Note #5). The CBA is a valid and legally enforceable source of rights between
structure which is based on level, not seniority. The first element of wage the parties and as such, will not be interfered with by the Courts absent any
distortion is therefore lacking. bad faith on the part of the employer. WHEREFORE, the present petition is
Second, the third element of wage distortion ie the elimination of the hereby DENIED.
distinction between the two levels, is also missing. Even if there was indeed a
resulting decrease in the wage gap between the salary of the old and new C. Payment of Wages
employees, the gap was held to be insignificant as to result in severe
contraction of the intentional quantitave differences in the salary rates 1. SHS Perforated Materials v. Diaz (compare with Milan v. NLRC)
between the employee group as the classification under the wage structure is
based on rank, and not seniority. Facts:
Third, pursuant to Article 124 of the Labor Code, Bankard cannot be
legally obligated to correct the alleged “wage distortion”, should it have Issue:
existed in this case, because the increase in the wages and salaries of the
newly-hired was Held:

Facts:
2. Commando Security v. NLRC
Issue:
Facts:
Held:
Issue:
3. Universal Corn Products v. NLRC
Held:
Facts:
3. Mabeza v. NLRC
Issue:
Facts:
Held:
Issue:
4. San Miguel Corporation v. Inciong
Held:
Facts:
D. Thirteenth-Month Pay
Issue:
1. National Federation of Sugar Workers v. Ovejera
Held:
Facts:
5. Philippine Duplicators v. NLRC
Issue:
Facts:
Held:
Issue:
2. Dole Philippines v. Leogardo
Held:

For two to three years prior to 1999, petitioner Sevilla Trading
6. Boie-Takeda Chemicals v. Dela Serna Company (Petitioner), a domestic corporation engaged in trading business,
organized and existing under Philippine laws, added to the base figure, in its
Facts: computation of the 13th-month pay of its employees, the amount of other
benefits received by the employees which are beyond the basic pay.
Issue: Petitioner claimed that it entrusted the preparation of the payroll to
its office staff, including the computation and payment of the 13th-month pay
Held: and other benefits.When it changed its person in charge of the payroll in the
process of computerizing its payroll, and after audit was conducted, it
7. Philippine Agricultural Commercial and Industrial Workers Union v. NLRC allegedly discovered the error of including non-basic pay or other benefits in
the base figure used in the computation of the 13th-month pay of its
Facts: employees.It cited the Rules and Regulations Implementing P.D. No. 851
which stated: “Basic salary shall include all remunerations or earnings paid by
Issue: an employer to an employee for services rendered but may not include cost
of-living allowances granted pursuant to P.D. No. 525 or Letter of Instruction
Held: No. 174, profit-sharing payments, and all allowances and monetary benefits
which are not considered or integrated as part of the regular or basic salary
E. Service Charge of the employee at the time of the promulgation of the Decree on December
16, 1975.”
1. N/A Petitioner then effected a change in the computation of the thirteenth
month pay, as follows: 13th-month pay = net basic pay. Hence, the new
F. Non-Diminution computation reduced the employees thirteenth month pay.The daily piece
rate workers represented by private respondent Sevilla Trading Workers
1. Sevilla Trading Co. v. Semana Union SUPER (Union, for short), a duly organized and registered union,
through the Grievance Machinery in their Collective Bargaining Agreement,
Facts: On appeal is the Decision of the Court of Appeals (CA) sustaining the contested the new computation and reduction of their thirteenth month
sustaining the Decision of Accredited Voluntary Arbitrator Tomas E. pay .The parties failed to resolve the issue.
Semana. The Union alleged that petitioner violated the rule prohibiting the
elimination or diminution of employees benefits as provided for in Art. 100

of the Labor Code, as amended.They claimed that paid leaves, like sick leave, In the case at bar, petitioner Sevilla Trading kept the practice of
vacation leave, paternity leave, union leave, bereavement leave, holiday pay including non-basic benefits such as paid leaves for unused sick leave and
and other leaves with pay in the CBA should be included in the base figure in vacation leave in the computation of their 13th-month pay for at least two (2)
the computation of their 13th-month pay. years. This, we rule likewise constitutes voluntary employer practice which
cannot be unilaterally withdrawn by the employer without violating Art. 100
Issue: WON a voluntary act of the employerwhich was favorable to the of the Labor Code.
employees though not conforming to law, has ripened into a practice and
therefore can be withdrawn, reduced, diminished, discontinued or 2. Arco Metal Products v. Samahan ng mga Manggagawa sa Arco-Metal-
eliminated? NAFLU
Held: NO. As such the SC affirms the decision of the Accredited Voluntary Facts: Petitioner (ARCO) is a company engaged in the manufacture of metal
Arbitrator Tomas E. Semana granting to pay corresponding back wages to all products, whereas respondent (NAFLU) is the labor union of petitioner’s rank
covered and entitled employees arising from the exclusion of said benefits in and file employees.
the computation of 13th-month pay. Sometime in December 2003, petitioner paid the 13th month pay,
With regard to the length of time the company practice should have bonus, and leave encashment of three union members in amounts
been exercised to constitute voluntary employer practice which cannot be proportional to the service they actually rendered in a year, which is less than
unilaterally withdrawn by the employer, we hold that jurisprudence has not a full twelve (12) months.
laid down any rule requiring a specific minimum number of years. In the Respondent protested the prorated scheme, claiming that on several
above quoted case of Davao Fruits Corporation vs. Associated Labor Unions, occasions petitioner did not prorate the payment of the same benefits to
the company practice lasted for six (6) years. In another case, Davao seven (7) employees who had not served for the full 12 months. According to
Integrated Port Stevedoring Services vs. Abarquez, the employer, for three (3) respondent, the prorated payment violates the rule against diminution of
years and nine (9) months, approved the commutation to cash of the benefits under Article 100 of the Labor Code. Thus, they filed a complaint
unenjoyed portion of the sick leave with pay benefits of its intermittent before the National Conciliation and Mediation Board (NCMB). The parties
workers. While in Tiangco vs. Leogardo, Jr. the employer carried on the submitted the case for voluntary arbitration.
practice of giving a fixed monthly emergency allowance from November 1976 The voluntary arbitrator, ruled in favor of petitioner. The giving of the
to February 1980, or three (3) years and four (4) months . In all these cases, contested benefits in full, irrespective of the actual service rendered within
this Court held that the grant of these benefits has ripened into company one year has not ripened into a practice.
practice or policy which cannot be peremptorily withdrawn. CA ruled in favor of the respondents. The Court of Appeals ruled that
the CBA did not intend to foreclose the application of prorated payments of

leave benefits to covered employees. The appellate court found that discontinued or eliminated. In Sevilla Trading Company v. Semana, we ruled
petitioner, however, had an existing voluntary practice of paying the aforesaid that the employer’s act of including non-basic benefits in the computation of
benefits in full to its employees, thereby rejecting the claim that petitioner the 13th month pay was a voluntary act and had ripened into a company
erred in paying full benefits to its seven employees. practice which cannot be peremptorily withdrawn.
Petitioner moved for the reconsideration of the decision but its In the years 1992, 1993, 1994, 1999, 2002 and 2003, petitioner had
motion was denied, hence this petition. adopted a policy of freely, voluntarily and consistently granting full benefits to
its employees regardless of the length of service rendered. True, there were
Issue: Whether or not the grant of 13th month pay, bonus, and leave only a total of seven employees who benefited from such a practice, but it
encashment in full regardless of actual service rendered constitutes voluntary was an established practice nonetheless.
employer practice and, consequently, whether or not the prorated payment Jurisprudence has not laid down any rule specifying a minimum
of the said benefits constitute diminution of benefits under Article 100 of the number of years within which a company practice must be exercised in order
Labor Code. to constitute voluntary company practice. Thus, it can be six (6) years, three
(3) years, or even as short as two (2) years. Petitioner cannot shirk away from
Held: Any benefit and supplement being enjoyed by employees cannot be its responsibility by merely claiming that it was a mistake or an error
reduced, diminished, discontinued or eliminated by the employer. (According to petitioner, it was only in 2003 that the accounting department
The principle of non-diminution of benefits is founded on the discovered the error "when there were already three (3) employees involved
Constitutional mandate to "protect the rights of workers and promote their with prolonged absences and the error was corrected by implementing the
welfare and to afford labor full protection. Said mandate in turn is the basis of pro-rata payment of benefits pursuant to law and their existing CBA),
Article 4 of the Labor Code which states that all doubts in the implementation supported only by an affidavit of its manufacturing group head. Hence,
and interpretation of this Code, including its implementing rules and petition was denied.
regulations shall be rendered in favor of labor.
Jurisprudence is replete with cases which recognize the right of 3. Globe Mackay Cable v. NLRC
employees to benefits which were voluntarily given by the employer and
which ripened into company practice. Thus in Davao Fruits Corporation v. Facts: It is alleged that Salazar and Saldivar are very close. It is also
Associated Labor Unions, et al. where an employer had freely and mentioned that they share an apartment.
continuously included in the computation of the 13th month pay those items In 1984, reports shows that the company equipment and spare parts
that were expressly excluded by the law, we held that the act which was worth thousands of dollars under the custody of Saldivar were missing. A
favorable to the employees though not conforming to law had thus ripened report prepared by Maramara indicated that: Saldivar entered into a
into a practice and could not be withdrawn, reduced, diminished, partnership with Yambao; That Saldivar recommended Elecon; That the

missing aircon was used by Saldivar for personal use (recovered by replevin); on Article 2 which enshrines “full protection” to labor. In the 1986 ConCom,
That Salazar (respondent) got involved because she is a signed witness of the they have designed Social Justice an Human rights to reduce social, economic
Articles of Partnership of the two; That she knows where the missing aircon and political inequalities.
is, failed to report it. Court held that the Labor Code is clear and unambiguous. Under
Because of those, Salazar was suspended and was given time to statcon, if the law is clear, plain and free from ambiguity, it must be applied
explain herself (for 30 days/one month). After 3 days she already filed a literally [Verba Legis] (Additional, away from statcon, she is not in a fiduciary
complaint against GMCR for illegal dismissal (illegal suspension at first then it position so she can be reinstated because “strained relations” aren’t relevant
escalated to that). in her position)
In 1985, Heared by Labor Arbiter – in favor of Imelda Salazar, awarded
her reinstatement, backwages and other benefits plus moral damages. 4. Insular Hotel Employees Union v. Waterfront Insular Hotel Davao
In 1987 NLRC – affirmed Labor Arbiter decision but backwages of 2
years only; no moral damages. Thus this petition by GMCR before SC Facts: Respondent Waterfront Insular Hotel Davao suspend its operations for
a period of six months due to severe and serious business losses sending a
Issue: Is she illegally dismissed based on the Labor Code and Constitutional notice to Dole assuring that if the company could not resume its operations
guarantee? within the six-month period, the company would pay the affected employees
all the benefits legally due to them. After series of negotiations, respondent
Held: She was illegally dismissed. The Court pointed out Art 279 of the Labor and DIHFEU-NFL, signed a Memorandum of Agreement (MOA) wherein
Code, which talks about the Security of tenure for regular employees which respondent agreed to re-open the hotel subject to certain concessions
states that: xxx An employee who is unjustly dismissed from work shall be offered by DIHFEU-NFL in its Manifesto (downsizing its manpower structure
entitled to reinstatement without loss of seniority rights and other privileges to 100 rank-and-file employees and adopting a new pay scale). After the
and to his full backwages, inclusive of allowances, and to his other benefits or respondent resumed business operations, local officers of the National
their monetary equivalent xxx Federation of Labor (NFL), filed a Notice of Mediation before the National
Corollary to it is the Implementing Rules and Regulations of the Labor Conciliation and Mediation Board (NCMB) raising the issue “Diminution of
Code (IRR) stating that employer cannot terminate regular employees wages and other benefits through unlawful Memorandum of Agreement.”
without just cause or authorized by laws 1 and if such employeed get illegally The NCMB called NFL and respondent to a conference to explore the
dismissed, he or she will be entitled to be back in his/her position or be possibility of settling the conflict. In the said conference, respondent and
reinstated without loss of seniority rights plus backwages petitioner Insular Hotel Employees Union-NFL (IHEU-NFL) signed a
The priority is clearly leaned towards the employee or to labor. The Submission Agreement.
Court pointed out the opening paragraph on Labor and the 1973 Constitution

Issue: Whether or not the individual members of the local union (IHEU-NFL), 5. Asis v. Minister of Labor
being an affiliate of DIHFEU-NFL, have the requisite standing to question the
MOA before the NCMB? DOCTRINE: The Deputy Minister found that the evidence satisfactorily
established that the Central's suspension of the petitioner's and others'
Held: A local union does not owe its existence to the federation with which it monthly ration of gasoline and LPG, had been caused by unavoidable financial
is affiliated. It is a separate and distinct voluntary association owing its constraints; that such a suspension, in line with its conservation and cost-
creation to the will of its members. Mere affiliation does not divest the local saving policy, did not in truth effect any significant diminution of said
union of its own personality, neither does it give the mother federation the benefits, since the petitioner was nevertheless entitled to reimbursement of
license to act independently of the local union. It only gives rise to a contract the actual amount of gas consumed; that petitioner had encouraged his co-
of agency, where the former acts in representation of the latter. Hence, local employees to file complaints against the Central over the rations issue, and
unions are considered principals while the federation is deemed to be merely this, as well as his institution of his own actions, had created an atmosphere
their agent. of enmity in the Central, and caused the loss by the Central of that trust and
Even granting that petitioner Union was affiliated with NFL, still the confidence in him so essential in a lawyer-client relationship as that
relationship between that of the local union and the labor federation or theretofore existing between them; and that under the circumstances,
national union with which the former was affiliated is generally understood to petitioner's discharge as the Central's Legal Counsel and Head of the
be that of agency, where the local is the principal and the federation the Manpower & Services Department was justified.
agency. Being merely an agent of the local union, NFL should have presented As regards the temporary revocation of the petitioner's monthly
its authority to file the Notice of Mediation. ration of fuel, suffice it to point out that, as the Solicitor General stresses, this
`As provided under the NCMB Manual of Procedures, only a certified bad been occasioned by force of circumstances affecting the Central's
or duly recognized bargaining representative and an employer may file a business. The monthly ration was not a part of his basic salary, and is not
notice of mediation, declare a strike or lockout or request preventive indeed found in any of the management payroll vouchers pertinent to the
mediation. The Collective Bargaining Agreement (CBA), on the other, petitioner. 11 Moreover, the adverse consequences of the suspension of the
recognizes that DIHFEU-NFL is the exclusive bargaining representative of all monthly rations had been largely if not entirely negated by the Central's
permanent employees. The inclusion of the word “NFL” after the name of the undertaking to reimburse the petitioner for his actual consumption of fuel
local union merely stresses that the local union is NFL's affiliate. It does not, during the period of suspension. These facts are entirely distinct from those
however, mean that the local union cannot stand on its own. The local union obtaining in the case of States Marine Corporation and Royal Line, Inc. v.
owes its creation and continued existence to the will of its members and not Cebu Seamen's Association, Inc., 12 invoked by petitioner and thus preclude
to the federation to which it belongs. application of the ruling therein laid down to the case at bar.

Facts: Petioner was appointed as LEGAL COUNSEL of the Central Azucera de Held: As regards the temporary revocation of the petitioner's monthly ration
Pilar, and later was also appointed as Manpower and Services Dept. of fuel, suffice it to point out that, as the Solicitor General stresses, this bad
He was given basic salaries PLUS 200L gas allowance and a small LPG been occasioned by force of circumstances affecting the Central's business.
tank every month -> but later, such was revoked for 5 years already as a cost The monthly ration was not a part of his basic salary, and is not indeed found
reduction measure. in any of the management payroll vouchers pertinent to the petitioner. 11
This was raised by them, but was denied. This lead Asis to commence Moreover, the adverse consequences of the suspension of the monthly
an action with the Regional Office of the Ministry of Labor and Employment rations had been largely if not entirely negated by the Central's undertaking
to restore the benefit. Later, also filed complaint for he said that he was to reimburse the petitioner for his actual consumption of fuel during the
“relieved” through a “temporary leave absence” by the company. He averred period of suspension. These facts are entirely distinct from those obtaining in
that this was tantamount to ILLEGAL DISMISSAL. the case of States Marine Corporation and Royal Line, Inc. v. Cebu Seamen's
The two cases were jointly heard and decided by the Regional Association, Inc., 12 invoked by petitioner and thus preclude application of
Director. The latter's judgments was for the petitioner's reinstatement to his the ruling therein laid down to the case at bar.
former positions without loss of seniority, benefits and other privileges, the A review of the record demonstrates that there is substantial evidence
payment to him of back wages from date of his relief up to time of supporting the factual findings of the respondent Deputy Minister. Said
reinstatement, and the delivery to him of the monthly benefits from the time findings, as well as the legal conclusions derived therefrom, cannot be said to
of their temporary revocation up to actual restoration or, at his option, the have been rendered with grave abuse of discretion, and will thus be affirmed.
money equivalent thereof. In fine, and as petitioner could not but have realized from the outset, neither
But this decision was REVERSED by the Deputy Minister of Labor. The he nor any other employee similarly situated had any legitimate grievance
suspension of the benefit was because of an unavoidable financial constraint. against the Central. WHEREFORE, the petition is DISMISSED for lack of merit,
Further, the institution of actions created “an atmosphere of enmity between with costs against petitioner.
them”, hence his discharge was said to be justifiable. The Deputy Minister's
order of dismissal was however subsequently modified, at the petitioner's 6. American Wire and Cable Daily Rated Employees Union v. American Wire
instance, by decreeing the payment to the latter of separation pay equivalent and Cable
to one month's salary for every year of service rendered.
Facts: American Wire and Cable Co., Inc., is a corporation engaged in the
Issue: WON the removal of monthly ration of fuel benefit was okay? (YES) manufacture of wires and cables. There are two unions in this company, the
WON there was ILLEGAL DISMISSAL? (NO, there was no need to alter deputy American Wire and Cable Monthly-Rated Employees Union (Monthly-Rated
minister’s findings) Union) and the American Wire and Cable Daily-Rated Employees Union
(Daily-Rated Union).

On 16 February 2001, an original action was filed before the NCMB of was granted to the affected employees which was denied for lack of merit. An
the Department of Labor and Employment (DOLE) by the two unions for appeal was made by the Daily-Rated Union before the Court of Appeals was
voluntary arbitration. They alleged that the private respondent, without valid also DISMISSED, for lack of merit and upheld the Decision of Voluntary
cause, suddenly and unilaterally withdrew and denied certain benefits and Arbitrator Angel A. Ancheta .
entitlements which they have long enjoyed. These are the following: a.
Service Award; c. Christmas Party; and d. Promotional Increase. Issue: whether or not private respondent is guilty of violating Article 100 of
A promotional increase was asked by the petitioner for fifteen (15) of the Labor Code, as amended, when the benefits/entitlements given to the
its members who were given or assigned new job classifications. According to members of petitioner union were withdrawn.
petitioner, the new job classifications were in the nature of a promotion,
necessitating the grant of an increase in the salaries of the said 15 members. Held: The Court ruled that respondent is not guilty of violating Art. 100 of the
On 21 June 2001, a Submission Agreement was filed by the parties before the Labor Code.
Office for Voluntary Arbitration. Assigned as Voluntary Arbitrator was Angel A. ART. 100. PROHIBITION AGAINST ELIMINATION OR DIMINUTION OF BENEFITS.
Ancheta. –Nothing in this Book shall be construed to eliminate or in any way diminish
On 25 September 2001, a Decision was rendered by Voluntary supplements, or other employee benefits being enjoyed at the time of
Arbitrator Angel A. Ancheta in favor of the private respondent. The promulgation of this Code.
dispositive portion of the said Decision is quoted hereunder: “WHEREFORE, The benefits and entitlements mentioned in the instant case are all
with all the foregoing considerations, it is hereby declared that the Company considered bonuses which were given by the private respondent out of its
is not guilty of violating Article 100 of the Labor Code, as amended, or generosity and munificence. A bonus is an amount granted and paid to an
specifically for withdrawing the service award, Christmas party and 35% employee for his industry and loyalty which contributed to the success of the
premium for work rendered during Holy Week and Christmas season and for employer’s business and made possible the realization of profits. The granting
not granting any promotional increase to the alleged fifteen (15) Daily-Rated of a bonus is a management prerogative, something given in addition to what
Union Members in the absence of a promotion. The Company however, is is ordinarily received by or strictly due the recipient. Thus, a bonus is not a
directed to grant the service award to deserving employees in amounts and demandable and enforceable obligation, except when it is made part of the
extent at its discretion, in consultation with the Unions on grounds of equity wage, salary or compensation of the employee.
and fairness” For a bonus to be enforceable, it must have been promised by the
A motion for reconsideration was filed by both unions where they employer and expressly agreed upon by the parties or it must have had a
alleged that the Voluntary Arbitrator manifestly erred in finding that the fixed amount and had been a long and regular practice on the part of the
company did not violate Article 100 of the Labor Code, as amended, when it employer. The assailed benefits were never subjects of any agreement
unilaterally withdrew the subject benefits, and when no promotional increase between the union and the company. It was never incorporated in the CBA.

To b e considered a “regular practice,” the giving of the bonus should have The bottling operators work in two shifts. The first is from 8-5 while
been done over a long period of time, and must be shown to have been the second is from 5 PM until the production operations is finished. Hence,
consistent and deliberate. The downtrend in the grant of these two bonuses the second shift varies and may end beyond eight hours. However, if the
over the years demonstrates that there is nothing consistent about it. To hold operators work beyond eight hours, he is compensated with overtime pay.
that an employer should be forced to distribute bonuses which it granted out In Bottling Line 1, 10 operators for each shift while in Bottline Line 2,
of kindness is to penalize him for his past generosity. 6-7 operators per shift.
Each shift has rotations of work and break time. Before September
7. Royal Plant Workers Union v. Coca Cola Bottlers 2008, the rotation is: after 2 ½ hours of work, operators are given a 30-
minute break and this goes on until the shift ends. In Sept. 2008 up to the
CASE LAW/ DOCTRINE: Labor Law; Management Prerogatives;.—The Court present, the rotation has changed and operators are now given a 30 minute
has held that management is free to regulate, according to its own discretion break after 1 ½ hours of work.
and judgment, all aspects of employment, including hiring, work assignments, In 1974, the operators of Bottling Line 2 were provided chairs upon
working methods, time, place, and manner of work, processes to be followed, request. In 1988, the operators of Bottling Line 1 followed suit. In Sept 2008,
supervision of workers, working regulations, transfer of employees, work the chairs were removed pursuant to a national directive of CCBPI. The
supervision, lay-off of workers, and discipline, dismissal and recall of workers. directive was in line to the “I Operate, I Maintain, I Clean” program of CCBPI
The exercise of management prerogative, however, is not absolute as it must wherein the operators are given the responsibility to keep the machinery and
be exercised in good faith and with due regard to the rights of labor. equipment assigned to him clean and safe. The program focuses the duty of
Labor Standards; There is no law that requires employers to provide operators to constantly move in the exercise of their duties.
chairs for bottling operators. The Labor Code, specifically Article 132 thereof, Since they are expected to constantly move, the operators no longer
only requires employers to provide seats for women. No similar requirement need a chair. CCBPI explained that the removal of the chairs is implemented
is mandated for men or male workers. so that operators would avoid sleeping in order to prevent personal injuries,
since if they fall asleep and the machines are moving, it might result to injury.
Facts: Coca-Cola Bottlers Philippines, Inc. (CCBPI) is a domestic corporation The operators, however, took issue with the removal of the chairs.
engaged in the manufacture, sale and distribution of softdrink products. It Through the ROPWU, they initiated a grievance machinery of the CBA in
has several bottling plants in the Philippines, one of which is in Cebu City. In November 2008. Sadly, they only reached a deadlock with CCBPI, insisting on
each bottling plant, there are bottling operators. For example, in Cebu City, the removal of the chairs. Thus, ROPWU initiated arbitration proceedings.
there are 20 bottling operators who work for its Bottling Line 1 while there Arbitration Committee Decision: In favor of ROPWU stating that the
are 12-14 bottling operators who work for Bottle Line 2. All of them are male use of chairs by the operators had been a company practice for 34 years in
and they are members of the Royal Plant Workers Union (ROPWU). Bottling Line 2 and 20 years in Bottling Line 1 and that it ripened into a

benefit enjoyed by the employees, thus, it cannot be reduced by the removal of the chairs was compensated by: a) reduction of the operating
employer under Article 100 of the Labor Code. hours, and b) an increase of the break period.
CA Decision: Reversed the Arbitration Decision. CA held that the The decision to remove the chairs was done with good intentions as
removal of the chairs by the CCBPI is within the province of management CCBPI wanted to avoid instances of operators sleeping on the job while in the
prerogatives and that it was part of his inherent right to control and manage performance of their duties and responsibilities. In short, the removal of the
its enterprise effectively; and that since it was the employer’s discretion to chairs was design to increase work efficiency.
constantly develop measures or means to optimize the efficiency of its The fact that there is no proof of any operator sleeping on the job
employees, it was appropriate that it should be given wide latitude in holds no water. There is no guarantee that such incident would never happen
exercising it. as sitting on a chair is relaxing. Ultimate purpose is to promote work
CA further added that the CCBPI complied with the conditions of a efficiency. Further, no labor law requires employers to provide chairs for
valid exercise of a management prerogative when it decided to remove the bottling operators. The CA was correct in saying that Article 132 of the Labor
chairs. The removal of the chairs was motivated by the best intentions for Code only requires employers to provide seats for women.
both the Union and CCBPI. Without the chairs, the operators could efficiently No violation of the Health, Safety and Social Welfare Benefit
supervise these machineries’ operations. Hence, this appeal. Provisions of the Labor Code because the removal of the chairs resulted in
the increase in the rest period. The chairs cannot be considered to form part
Issue: W/N the CCBPI’s decision to remove the chairs was within its of the benefits under Article 100 of the Labor Code. The term benefits refers
management prerogative. to monetary benefits or privileges given to the employee with monetary
equivalents such as employee’s wage, salary or compensation.
Held: Yes. Petition is denied. It is a valid exercise of management prerogative. Jurisprudence recognizes the exercise of management prerogatives.
The Court has held that management is free to regulate, according to Labor laws also discourage interference with an employer’s judgment in the
its own discretion and judgment, all aspects of employment, including hiring, conduct of its business. Thus, the Court often declines to interfere in
work assignments, working methods, time, place and manner of work, legitimate business decisions of employers. The law must protected not only
processes to be followed, supervision of workers, working regulations, the welfare of the employees, but also the right of the employers.
transfer of employees, work supervision, lay-off workers, and discipline,
dismissal and recall of workers. G. Worker Preference
The exercise of management prerogative, however, is not absolute as
it must be exercised in good faith and with due regard to the rights of labor. It 1. Development Bank of the Philippines v. Labor Arbiter
cannot be denied that CCBPI removed the chairs in line with its national
directive and that the chairs were not removed indiscriminately. In fact, the Facts:

Labor Arbiter favored private respondents and held RHI and DBP
Issue: jointly and severally liable to private respondents. DBP appealed to the NLRC.
NLRC affirmed LA’s judgment. DBP filed M.R. but it was dismissed. Thus, this
Held: petition for certiorari.
Issue: (1) Whether the private respondents are entitled to separation pay.
(2) Whether the private respondents’ separation pay should be preferred
2. Development Bank of the Philippines v. Secretary than the DBP’s lien over the RHI’s mortgaged assets.
Facts: Held: Yes. Despite the enormous losses incurred by RHI due to the fire that
gutted the sawmill in 1981 and despite the logging ban in 1953, the
Issue: uncontroverted claims for separation pay show that most of the private
respondents still worked up to the end of 1985. RHI would still have
Held: continued its business had not the petitioner foreclosed all of its assets and
properties on September 24, 1985. Thus, the closure of RHI’s business was
3. Development Bank of the Philippines v. NLRC not primarily brought about by serious business losses. Such closure was a
consequence of DBP’s foreclosure of RHI’s assets. The Supreme Court applied
Facts: November 14, 1986, private respondents filed with DOLE- Daet, Article 283 which provides: “. . . in cases of closures or cessation of operations
Camarines Norte, 17 individual complaints against Republic Hardwood Inc. of establishment or undertaking not due to serious business losses or
(RHI) for unpaid wages and separation pay. These complaints were thereafter financial reverses, the separation pay shall be equivalent to 1 month pay or at
endorsed to Regional Arbitration Branch of the NLRC since the petitioners least 1/2 month pay for every year of service, whichever is higher. . . .”
had already been terminated from employment. (2) No. Because of the petitioner’s assertion that LA and NLRC
RHI alleged that it had ceased to operate in 1983 due to the incorrectly applied the provisions of Article 110 of the Labor Code, the
government ban against tree-cutting and that in May 24, 1981, its sawmill Supreme Court was constrained to grant the petition for certiorari.
was totally burned resulting in enormous losses and that due to its financial Article 110 must be read in relation to the Civil Code concerning the
setbacks, RHI failed to pay its loan with the DBP. RHI contended that since classification, concurrence and preference of credits, which is application in
DBP foreclosed its mortgaged assets on September 24,1985, then any insolvency proceedings where the claims of all creditors, preferred or non-
adjudication of monetary claims in favor of its former employees must be preferred, may be adjudicated in a binding manner. Before the workers’
satisfied against DBP. Private respondent impleaded DBP.

preference provided by Article 110 may be invoked, there must first be a (Note: SC favored DBP because their mortgage against RHI was
declaration of bankruptcy or a judicial liquidation of the employer’s business. executed prior to the amendment of Article 110. The amendment can’t be
NLRC committed grave abuse of discretion when it affirmed the LA’s ruling. given retroactive effect daw. But in the present, laborer’s unpaid wages are
DBP’s lien on RHI’s mortgaged assets, being a mortgage credit, is a special first priority regardless of whether or not the other creditors of the employer
preferred credit under Article 2242 of the Civil Code while the workers’ have mortgage)
preference is an ordinary preferred credit under Article 2244. Article 110 of the Labor Code has been amended by R.A. No. 6715 and
A distinction should be made between a preference of credit and a now reads: “Article 110. Worker preference in case of bankruptcy. – In the
lien. A preference applies only to claims which do not attach to specific event of bankruptcy or liquidation of an employers business, his workers shall
properties. A lien creates a charge on a particular property. The right of first enjoy first preference as regards their unpaid wages and other monetary
preference as regards unpaid wages recognized by Article 110 does not claims, any provision of law to the contrary notwithstanding. Such unpaid
constitute a lien on the property of the insolvent debtor in favor of workers. It wages, and monetary claims shall be paid in full before the claims of the
is but a preference of credit in their favor, a preference in application. It is a Government and other creditors may be paid.”
method adopted to determine and specify the order in which credits should The amendment “expands worker preference to cover not only unpaid
be paid in the final distribution of the proceeds of the insolvent’s assets. It is wages but also other monetary claims to which even claims of the
a right to a first preference in the discharge of the funds of the judgment Government must be deemed subordinate.” Hence, under the new law, even
debtor. mortgage credits are subordinate to workers’ claims.
Article 110 of the Labor Code does not create a lien in favor of R.A. No. 6715, however, took effect only on March 21, 1989. The
workers or employees for unpaid wages either upon all of the properties or amendment cannot therefore be retroactively applied to, nor can it affect,
upon any particular property owned by their employer. Claims for unpaid the mortgage credit which was secured by the petitioner several years prior
wages do not therefore fall at all within the category of specially preferred to its effectivity.
claims established under Articles 2241 and 2242 of the Civil Code, except to Even if Article 110 and its Implementing Rule, as amended, should be
the extent that such claims for unpaid wages are already covered by Article interpreted to mean `absolute preference,’ the same should be given only
2241, (6)- (claims for laborers’ wages, on the goods manufactured or the prospective effect in line with the cardinal rule that laws shall have no
work done); or by Article 2242,(3)- (claims of laborers and other workers retroactive effect, unless the contrary is provided. To give Article 110
engaged in the construction, reconstruction or repair of buildings, canals and retroactive effect would be to wipe out the mortgage in DBP’s favor and
other works, upon said buildings, canals and other works. expose it to a risk which it sought to protect itself against by requiring a
Since claims for unpaid wages fall outside the scope of Article 2241 (6) collateral in the form of real property.
and 2242 (3), and not attached to any specific property, they would come
within the category of ordinary preferred credits under Article 2244.

The public respondent, therefore, committed grave abuse of
discretion when it retroactively applied the amendment introduced by R.A.
No. 6715 to the case at bar. Petition GRANTED. Decision of NLRC SET ASIDE.
Dissenting Opinion:
H. Attorney’s Fees
1. N/A

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A. Concept and Definition and does not define the essence of the relation. 2.

Tat Lagrama was not

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