Soriano vs NLRC 1986 and the revival or reinstatement of the Decision of Iabor

FELICIANO, J.: Arbiter Sevilla dated 8 July 1985.

Petitioner started working with respondent commodities trading Petitioner claims that respondent Corporation acted in bad faith
Corporation in November 1977 as Investment Counselor and in suspending and terminating her services. Petitioner asserts
eventually became Vice-President, Marketing. On 18 that:
September 1984, petitioner was charged with allowing or
failing to supervise and monitor certain activities of investment 1. respondent Corporation had violated her right to due
counselors in her department, which included the signing of a process by suspending her immediately without the benefit of
contract opening an account for a client by an investment hearing. She argues that the notice of preventive suspension
counselor without authority from the client, transfers of funds served her on 18 September 1986 was "living proof" that the
from one account to another without the knowledge and corporation had already concluded she was guilty of the charges
authority of the clients involved, unauthorized transactions in levelled against her even before she could submit her written
foreign currency with clients of the respondent Corporation, explanation.
unauthorized approval of leave for members of her department,
and resulting in loss of confidence in petitioner. Petitioner was 2. the "true reason" for her "illegal dismissal" was the
preventively suspended and required to explain her acts or "personal grudge which Rivera harbored against her.
failure to act. Two (2) days later, petitioner submitted her
detailed answer or explanation. On 27 September, 1984, the 3. respondent Corporation's bad faith was also
Executive Vice-President and General Manager of respondent demonstrated in discrimination against her in relation to other
Corporation found petitioner's written explanation employees of the Corporation who had been in the past
unsatisfactory and notified petitioner that the Corporation had similarly charged with alleged infractions of the corporation's
lost confidence on her ability to discharge the functions of her rules. More specifically, petitioner asserts discrimination
office and accordingly terminated her services. against herself consisting of the failure of the respondent
Corporation to dismiss the two (2) immediate supervisors of the
Petitioner filed a complaint for illegal suspension and dismissal investment counselor who had carried out the unauthorized
against respondent Corporation and Mr. Guil Rivera, Senior manipulations of clients' accounts in petitioner's department.
Vice-President, and Mr. Richard Tan, Executive Vice-President
and General Manager. She asked for reinstatement with 4. petitioner also charges respondent Corporation with
backwages, as well as moral and exemplary damages, medical having misrepresented the extent of her participation in or the
expenses, attorney's fees and other litigation expenses. scope of her duties in respect of unauthorized acts and
transactions of her subordinates in the marketing department of
On 8 July 1985, Labor Arbiter A.L Sevilla rendered a Decision respondent company.
requiring the respondent Corporation to pay petitioner: (1)
separation pay in the amount of P10,500.00; (2) six (6) months The Court considers that petitioner has failed to show a grave
backwages in the amount of P120,000.00; (3) moral damages abuse of discretion, or an act performed without or in excess of
in the amount of P500,000.00; (4) exemplary damages in the jurisdiction, on the part of the respondent NLRC.
amount of P100,000.00; and (5) attorney's fees equivalent to
10% of the award. In respect of Item 1, preventive suspension does not in itself
prove that the company had prejudged that petitioner was guilty
On appeal by the private respondents, public respondent NLRC, of the charges she was asked to answer and explain. Preventive
in a Decision dated 10 March 1986, modified the Labor suspension may be necessary for the protection of the company,
Arbiter's award by deleting the award of moral and exemplary its operations and assets, pending investigation of the alleged
damages and requiring respondent Corporation to pay: (1) malfeasance or misfeasance on the part of officers or employees
separation pay amounting to P21,000.00; (2) three (3) months of the company and pending a decision on the part of the
backwages without qualification and deduction amounting to company (See Sec. 3 of Rule XIV, Book V, of the Omnibus
P9,000.00; and (3) 10% of the award as attorney's fees. Rules Implementing the Labor Code). Considering the very
senior and sensitive character of petitioner's position as head of
Both the Labor Arbiter and respondent NLRC found that a Department, a fine position as distinguished from a staff or
because of the strained relations between petitioner and planning position, and considering the unauthorized
respondent Corporation, reinstatement of petitioner was not transactions then just discovered by the respondent
feasible. Respondent Corporation had alleged that petitioner Corporation, we do not believe that the preventive suspension
had immediately found employment with Onapal Philippines was an arbitrary and capricious act amounting to bad faith on
Commodities, which had not been denied or refuted by the part of the respondent Corporation.
petitioner. Because respondent Corporation had failed to
specify the definite date of her employment, respondent NLRC In respect of Item 2, the alleged personal motive behind
granted petitioner three (3) months backwages without petitioner's dismissal-personal envy or feelings of personal
qualification and deduction. insecurity on the part of Guil Rivera, Senior Vice-President,
respondent NLRC found that petitioner had not sufficiently
In the present Petition for Certiorari, petitioner seeks the established her assertion. Petitioner's assertion on this point
annulment of the Decision of respondent NLRC dated 10 March appears no more than a conjecture or supposition and does not
afford an adequate basis for overturning respondent NLRC's
finding on this point. Further, if petitioner had clearly proven approval of the complainant. On September 3, 1984,
such personal ill-will on the part of Mr. Rivera, a serious Panemanglor demanded the payment of the balance of
question would arise as to whether the respondent Corporation P25,000.00 from the respondent company to close his account
(as distinguished from Mr. Rivera) could be held liable at all for and the letter of Panemanglor was referred to complainant by
Mr. Rivera's acts in the absence of clear authorization for, or respondent Guil Rivera for necessary action. In her
approval or adoption of, such act by the respondent Corporation memorandum to senior vice president Guil Rivera complainant
with knowledge of the personal malice on the part of Mr. confirmed the irregularity in the handling of the account of
Rivera. Panemanglor, but she failed to take appropriate action against
the erring employee which was within her power to discipline
In respect of Item 3, respondent NLRC's decision was silent. employees under her supervision ater on February 4, 1985, a
The Court believes, however, that respondent Corporation must complaint was filed before the Securities and Exchange
be accorded reasonable latitude in determining who among Commission by Panemanglor for the recovery of the
erring officers or employees should be punished by the P25,000.00 plus damages against the respondent corporation,
company and to what extent. In the instant case, respondent contrary to her claim that the client will not file a recovery suit
Corporation presumably found it was not necessary to terminate against the corporation since the obligation was purely personal
the services also of the two (2) section heads in petitioner's to Nazareno.
department, who clearly are much lower in the corporate
hierarchy than petitioner. Respondents contend that complainant could have immediately
discovered the unauthorized signature of Sofia Nazareno that
With respect to the last and most important of the above listed led to the illegal transfers of fund, had she followed the
items, the scope of petitioner's responsibility for the operations company procedure and practice for her to be personally
of her department and the extent of her supervisory authority acquainted with new clients and her admission that she was not
over her subordinates in the marketing department, respondent aware of the complained acts has brought to light that she was
NLRC set forth the following discussion and evaluation: remiss in her supervisory and monitoring function. On top of
this, she failed to institute disciplinary action
Appellants stressed the point that complainant, as vice
president, marketing, is actually a department head of one of the xxx xxx xxx
company's sales department (sic). As such, her basic function is
the supervision and monitoring the daily activities of her As head of one of the company's sales department (sic) and a
department and the employees she supervises (sic). By the managerial employee at that, complainant is expected to
nature of the company's business, complainant as a department monitor the daily activities of the investment counselors and the
head should see to it that the clients' trust and confidence in the transactions of clients in her department. As a matter of practice
company is upheld through above-board transactions, untainted and procedure, complainant, as vice-president marketing, is
relations, satisfactory servicing and unquestioned integrity of always informed of new clients for her to be personally
its officers and staff, aside from the promotion of cordial acquainted with the client. We agree with the appellants that
employee relations among her personnel through unbiased and had the complainant adhered to this procedure, she could have
uniform implementation of company policies affecting immediately noticed the unauthorized signature by Sofia
employee benefits and welfare. Nazareno that enabled her to transfer funds from one account to
another. Likewise, since the complainant approved the payment
According to the appellants, the finding of the Labor Arbiter instruction for P25,000.00 on July 13, 1984, the transfer of
that 'complainant is not expected to keep an eye or be aware of P4,052.59 on August 6, 1984 from the account of Ramon Lopez
all day-to-day transactions of her workers particularly to Panemanglor's account, and the withdrawal of the transferred
Investment Consultants in her department' does not conform to amount on August 7, 1984, she could have easily suspected that
the facts prevailing in this case. something was irregular with the transaction Yet, it took several
months before she knew of the anomaly and it took her superior,
In the Panemanglor case, which is the crucial point at issue, respondent Guil Rivera, to bring the matter to her attention.
Panemanglor opened an account with the respondent Under the circumstances, it cannot be truthfully said that
corporation on June 28, 1984 by depositing the amount of complainant has not been without any fault whatsoever. For this
P50,000.00 through Sofia Nazareno, investment counselor. reason, the basis for the award of the moral and exemplary
Instead of the client signing the Customers Agreement, it was damages has not been suffiiciently or satisfactorily against the
Nazareno who signed the agreement and the signature card in erring employee. gently or satisfactorily established by the
the name of the client, which is highly irregular. Had she complainant. And besides the dismissal of the complainant by
exercised prudence in the supervision of her investment the respondent was done in good faith. ... (Emphasis supplied)
consultants, the irregularity could hate been earlier detected. As
a result, the sum of P25,000.00 from Panemanglor's account Petitioner's argument that, because she was head of the entire
was transferred by Nazareno to the account of Ramon Lopez, marketing (sales) department, she could not be expected to
without the knowledge of Panemanglor on July 9, 1984. On monitor the detailed or day-to-day acts and behaviour of the
July 13, 1984 the said client withdrew the sum of P25,000.00 staff members of her department, does not address what appears
through a Payment Instruction Form that was approved by the to be the thrust of the respondent NLRC's decision, And that is,
complainant. On August 6, 1964, the amount of P4,052.59 was that as head of the department, it was her responsibility to adopt
transferred by Nazareno to the account of Panemanglor from ways and means of keeping herself sufficiently informed of the
the account of Ramon Lopez. This transaction was with the activities of her staff members so as to prevent or at least
discover at an early stage, e.g., unauthorized or illegal Songco vs NLRC
transactions and manipulation of clients' accounts. On the one MEDIALDEA, J.:
hand, the above position taken by the respondent NLRC cannot
be regarded as so obviously unreasonable and despotic as to This is a petition for certiorari seeking to modify the decision
constitute a grave abuse of discretion, given the character of the of the National Labor Relations Commission in NLRC Case
business of a commodities trading company and the fact that No. RB-IV-20840-78-T entitled, "Jose Songco and Romeo
very substantial sums of money are handled daily by petitioner's Cipres, Complainants-Appellants, v. F.E. Zuellig (M), Inc.,
department. Upon the other hand, petitioner's logic would lead Respondent-Appellee" and NLRC Case No. RN- IV-20855-78-
to the conclusion that the more senior the management position, T entitled, "Amancio Manuel, Complainant-Appellant, v. F.E.
the slighter the responsibility for malfeasance or nonfeasance Zuellig (M), Inc., Respondent-Appellee," which dismissed the
that can be laid upon the position holder; the chief executive appeal of petitioners herein and in effect affirmed the decision
officer of a corporation would effectively have, under this logic, of the Labor Arbiter ordering private respondent to pay
little or no responsibility at all. petitioners separation pay equivalent to their one month salary
(exclusive of commissions, allowances, etc.) for every year of
Turning to the specific award made by respondent NLRC, the service.
salary base properly used in computing the separation pay and
the backwages due to petitioner should include not just the basic The antecedent facts are as follows:
salary but also the regular allowances that petitioner had been
receiving (See Santos v. National Labor Relations Commission Private respondent F.E. Zuellig (M), Inc., (hereinafter referred
G.R. No. 76721, 21 September 1987). In petitioner's case, the to as Zuellig) filed with the Department of Labor (Regional
base figure properly includes her: (a) basic salary of P3,000.00 Office No. 4) an application seeking clearance to terminate the
a month; and (b) living allowance of P2,400 a month services of petitioners Jose Songco, Romeo Cipres, and
(petitioner's Affidavit, dated 12 April 1985, Exhibit "G", Rollo, Amancio Manuel (hereinafter referred to as petitioners)
p. 105). The commissions also claimed by petitioner ("override allegedly on the ground of retrenchment due to financial losses.
commission" plus "net deposit incentive") are not properly This application was seasonably opposed by petitioners
includible in such base figure since such commissions must be alleging that the company is not suffering from any losses. They
earned by actual market transactions attributable to petitioner. alleged further that they are being dismissed because of their
Neither should "travels equivalent" [an unusual and membership in the union. At the last hearing of the case,
unexplained term; P10,000.00 a month] and "commission in however, petitioners manifested that they are no longer
trading personal clients" P3,000.00 a month] be included in contesting their dismissal. The parties then agreed that the sole
such base figure. Considering that the charge of bad faith on the issue to be resolved is the basis of the separation pay due to
part of private respondents was not proven, the respondent petitioners. Petitioners, who were in the sales force of Zuellig
NLRC having, on the contrary, made a finding that petitioner's received monthly salaries of at least P40,000. In addition, they
dismissal was made in good faith there appears no real basis for received commissions for every sale they made.
the award of attorney's fees (Art. 2208 5 Civil Code). This
award should not exceed a nominal amount which we set at The collective Bargaining Agreement entered into between
P1,500.00. Zuellig and F.E. Zuellig Employees Association, of which
petitioners are members, contains the following provision (p.
Thus, the appropriate computation would be: 71, Rollo):

A. Separationpay-P5,400.00/month 7 = P37,800.00 ARTICLE XIV Retirement Gratuity

(in view of petitioner's seven (7) years of service)
Section l(a)-Any employee, who is separated from employment
B. Backwages-P5,400.00/month x 3 mos. = P16,200.00 due to old age, sickness, death or permanent lay-off not due to
the fault of said employee shall receive from the company a
Sub-Total P54,000.00 retirement gratuity in an amount equivalent to one (1) month's
salary per year of service. One month of salary as used in this
plus nominal attorney's fees 1,500.00 paragraph shall be deemed equivalent to the salary at date of
retirement; years of service shall be deemed equivalent to total
TOTAL P55,500.00 service credits, a fraction of at least six months being
considered one year, including probationary employment.
ACCORDINGLY, the Court Resolved to DISMISS the Petition (Emphasis supplied)
for certiorari for lack of merit. The Decision of the respondent
NLRC dated 10 March 1986 is modified so as to award On the other hand, Article 284 of the Labor Code then
petitioner the following items: a) separation pay in the amount prevailing provides:
of P37,800.00; b) backwages for three (3) months in the amount
of P16,200.00; and c) attorney's fees of P1,500.00, making a Art. 284. Reduction of personnel. The termination of
total of P55,500.00. employment of any employee due to the installation of labor
saving-devices, redundancy, retrenchment to prevent losses,
SO ORDERED. and other similar causes, shall entitle the employee affected
thereby to separation pay. In case of termination due to the
installation of labor-saving devices or redundancy, the
separation pay shall be equivalent to one (1) month pay or to at
least one (1) month pay for every year of service, whichever is Petitioners' position was that in arriving at the correct and legal
higher. In case of retrenchment to prevent losses and other amount of separation pay due them, whether under the Labor
similar causes, the separation pay shall be equivalent to one (1) Code or the CBA, their basic salary, earned sales commissions
month pay or at least one-half (1/2) month pay for every year and allowances should be added together. They cited Article
of service, whichever is higher. A fraction of at least six (6) 97(f) of the Labor Code which includes commission as part on
months shall be considered one (1) whole year. (Emphasis one's salary, to wit;
supplied)
(f) 'Wage' paid to any employee shall mean the remuneration or
In addition, Sections 9(b) and 10, Rule 1, Book VI of the Rules earnings, however designated, capable of being expressed in
Implementing the Labor Code provide: terms of money, whether fixed or ascertained on a time, task,
piece, or commission basis, or other method of calculating the
xxx same, which is payable by an employer to an employee under a
written or unwritten contract of employment for work done or
Sec. 9(b). Where the termination of employment is due to to be done, or for services rendered or to be rendered, and
retrechment initiated by the employer to prevent losses or other includes the fair and reasonable value, as determined by the
similar causes, or where the employee suffers from a disease Secretary of Labor, of board, lodging, or other facilities
and his continued employment is prohibited by law or is customarily furnished by the employer to the employee. 'Fair
prejudicial to his health or to the health of his co-employees, the reasonable value' shall not include any profit to the employer or
employee shall be entitled to termination pay equivalent at least to any person affiliated with the employer.
to his one month salary, or to one-half month pay for every year
of service, whichever is higher, a fraction of at least six (6) Zuellig argues that if it were really the intention of the Labor
months being considered as one whole year. Code as well as its implementing rules to include commission
in the computation of separation pay, it could have explicitly
xxx said so in clear and unequivocal terms. Furthermore, in the
definition of the term "wage", "commission" is used only as one
Sec. 10. Basis of termination pay. The computation of the of the features or designations attached to the word
termination pay of an employee as provided herein shall be remuneration or earnings.
based on his latest salary rate, unless the same was reduced by
the employer to defeat the intention of the Code, in which case Insofar as the issue of whether or not allowances should be
the basis of computation shall be the rate before its deduction. included in the monthly salary of petitioners for the purpose of
(Emphasis supplied) computation of their separation pay is concerned, this has been
settled in the case of Santos v. NLRC, et al., G.R. No. 76721,
On June 26,1978, the Labor Arbiter rendered a decision, the September 21, 1987, 154 SCRA 166, where We ruled that "in
dispositive portion of which reads (p. 78, Rollo): the computation of backwages and separation pay, account
must be taken not only of the basic salary of petitioner but also
RESPONSIVE TO THE FOREGOING, respondent should be of her transportation and emergency living allowances." This
as it is hereby, ordered to pay the complainants separation pay ruling was reiterated in Soriano v. NLRC, et al., G.R. No.
equivalent to their one month salary (exclusive of commissions, 75510, October 27, 1987, 155 SCRA 124 and recently, in
allowances, etc.) for every year of service that they have worked Planters Products, Inc. v. NLRC, et al., G.R. No. 78524,
with the company. January 20, 1989.

SO ORDERED. We shall concern ourselves now with the issue of whether or

not earned sales commission should be included in the monthly
The appeal by petitioners to the National Labor Relations salary of petitioner for the purpose of computation of their
Commission was dismissed for lack of merit. separation pay.

Hence, the present petition. Article 97(f) by itself is explicit that commission is included in
the definition of the term "wage". It has been repeatedly
On June 2, 1980, the Court, acting on the verified "Notice of declared by the courts that where the law speaks in clear and
Voluntary Abandonment and Withdrawal of Petition dated categorical language, there is no room for interpretation or
April 7, 1980 filed by petitioner Romeo Cipres, based on the construction; there is only room for application (Cebu Portland
ground that he wants "to abide by the decision appealed from" Cement Co. v. Municipality of Naga, G.R. Nos. 24116-17,
since he had "received, to his full and complete satisfaction, his August 22, 1968, 24 SCRA 708; Gonzaga v. Court of Appeals,
separation pay," resolved to dismiss the petition as to him. G.R.No. L-2 7455, June 28,1973, 51 SCRA 381). A plain and
unambiguous statute speaks for itself, and any attempt to make
The issue is whether or not earned sales commissions and it clearer is vain labor and tends only to obscurity. How ever, it
allowances should be included in the monthly salary of may be argued that if We correlate Article 97(f) with Article
petitioners for the purpose of computation of their separation XIV of the Collective Bargaining Agreement, Article 284 of the
pay. Labor Code and Sections 9(b) and 10 of the Implementing
Rules, there appears to be an ambiguity. In this regard, the
The petition is impressed with merit.
Labor Arbiter rationalized his decision in this manner (pp. 74- Broadly, the word "salary" means a recompense or
76, Rollo): consideration made to a person for his pains or industry in
another man's business. Whether it be derived from "salarium,"
The definition of 'wage' provided in Article 96 (sic) of the Code or more fancifully from "sal," the pay of the Roman soldier, it
can be correctly be (sic) stated as a general definition. It is 'wage carries with it the fundamental idea of compensation for
' in its generic sense. A careful perusal of the same does not services rendered. Indeed, there is eminent authority for holding
show any indication that commission is part of salary. We can that the words "wages" and "salary" are in essence synonymous
say that commission by itself may be considered a wage. This (Words and Phrases, Vol. 38 Permanent Edition, p. 44 citing
is not something novel for it cannot be gainsaid that certain Hopkins vs. Cromwell, 85 N.Y.S. 839,841,89 App. Div. 481;
types of employees like agents, field personnel and salesmen do 38 Am. Jur. 496). "Salary," the etymology of which is the Latin
not earn any regular daily, weekly or monthly salaries, but rely word "salarium," is often used interchangeably with "wage", the
mainly on commission earned. etymology of which is the Middle English word "wagen". Both
words generally refer to one and the same meaning, that is, a
Upon the other hand, the provisions of Section 10, Rule 1, Book reward or recompense for services performed. Likewise, "pay"
VI of the implementing rules in conjunction with Articles 273 is the synonym of "wages" and "salary" (Black's Law
and 274 (sic) of the Code specifically states that the basis of the Dictionary, 5th Ed.). Inasmuch as the words "wages", "pay" and
termination pay due to one who is sought to be legally separated "salary" have the same meaning, and commission is included in
from the service is 'his latest salary rates. the definition of "wage", the logical conclusion, therefore, is, in
the computation of the separation pay of petitioners, their salary
x x x. base should include also their earned sales commissions.

Even Articles 273 and 274 (sic) invariably use 'monthly pay or The aforequoted provisions are not the only consideration for
monthly salary'. deciding the petition in favor of the petitioners.

The above terms found in those Articles and the particular We agree with the Solicitor General that granting, in gratia
Rules were intentionally used to express the intent of the argumenti, that the commissions were in the form of incentives
framers of the law that for purposes of separation pay they mean or encouragement, so that the petitioners would be inspired to
to be specifically referring to salary only. put a little more industry on the jobs particularly assigned to
them, still these commissions are direct remuneration services
.... Each particular benefit provided in the Code and other rendered which contributed to the increase of income of Zuellig
Decrees on Labor has its own pecularities and nuances and . Commission is the recompense, compensation or reward of an
should be interpreted in that light. Thus, for a specific provision, agent, salesman, executor, trustees, receiver, factor, broker or
a specific meaning is attached to simplify matters that may arise bailee, when the same is calculated as a percentage on the
there from. The general guidelines in (sic) the formation of amount of his transactions or on the profit to the principal
specific rules for particular purpose. Thus, that what should be (Black's Law Dictionary, 5th Ed., citing Weiner v. Swales, 217
controlling in matters concerning termination pay should be the Md. 123, 141 A.2d 749, 750). The nature of the work of a
specific provisions of both Book VI of the Code and the Rules. salesman and the reason for such type of remuneration for
At any rate, settled is the rule that in matters of conflict between services rendered demonstrate clearly that commission are part
the general provision of law and that of a particular- or specific of petitioners' wage or salary. We take judicial notice of the fact
provision, the latter should prevail. that some salesmen do not receive any basic salary but depend
on commissions and allowances or commissions alone, are part
On its part, the NLRC ruled (p. 110, Rollo): of petitioners' wage or salary. We take judicial notice of the fact
that some salesman do not received any basic salary but depend
From the aforequoted provisions of the law and the on commissions and allowances or commissions alone,
implementing rules, it could be deduced that wage is used in its although an employer-employee relationship exists. Bearing in
generic sense and obviously refers to the basic wage rate to be mind the preceeding dicussions, if we adopt the opposite view
ascertained on a time, task, piece or commission basis or other that commissions, do not form part of wage or salary, then, in
method of calculating the same. It does not, however, mean that effect, We will be saying that this kind of salesmen do not
commission, allowances or analogous income necessarily receive any salary and therefore, not entitled to separation pay
forms part of the employee's salary because to do so would lead in the event of discharge from employment. Will this not be
to anomalies (sic), if not absurd, construction of the word absurd? This narrow interpretation is not in accord with the
"salary." For what will prevent the employee from insisting that liberal spirit of our labor laws and considering the purpose of
emergency living allowance, 13th month pay, overtime, and separation pay which is, to alleviate the difficulties which
premium pay, and other fringe benefits should be added to the confront a dismissed employee thrown the the streets to face the
computation of their separation pay. This situation, to our mind, harsh necessities of life.
is not the real intent of the Code and its rules.
Additionally, in Soriano v. NLRC, et al., supra, in resolving the
We rule otherwise. The ambiguity between Article 97(f), which issue of the salary base that should be used in computing the
defines the term 'wage' and Article XIV of the Collective separation pay, We held that:
Bargaining Agreement, Article 284 of the Labor Code and
Sections 9(b) and 10 of the Implementing Rules, which mention The commissions also claimed by petitioner ('override
the terms "pay" and "salary", is more apparent than real. commission' plus 'net deposit incentive') are not properly
includible in such base figure since such commissions must be delivery to certain locations, except in instances when he would
earned by actual market transactions attributable to petitioner. be ordered to accompany the companys delivery vehicles, as
pahinante; that he reported for work from Monday to Saturday
Applying this by analogy, since the commissions in the present from 7:00 oclock in the morning to 5:00 oclock in the afternoon;
case were earned by actual market transactions attributable to that during his employment, he was not issued an identification
petitioners, these should be included in their separation pay. In card and payslips by the company; that on May 6, 2008, he
the computation thereof, what should be taken into account is reported for work but he was no longer allowed to enter the
the average commissions earned during their last year of company premises by the security guard upon the instruction of
employment. Ruben Ong (Mr. Ong), his superior;[5] that after several
minutes of begging to the guard to allow him to enter, he saw
The final consideration is, in carrying out and interpreting the Ong whom he approached and asked why he was being barred
Labor Code's provisions and its implementing regulations, the from entering the premises; that Ong replied by saying,
workingman's welfare should be the primordial and paramount Tanungin mo anak mo; [6] that he then went home and
consideration. This kind of interpretation gives meaning and discussed the matter with his family; that he discovered that
substance to the liberal and compassionate spirit of the law as Ong had been courting his daughter Annalyn after the two met
provided for in Article 4 of the Labor Code which states that at a fiesta celebration in Malabon City; that Annalyn tried to
"all doubts in the implementation and interpretation of the talk to Ong and convince him to spare her father from trouble
provisions of the Labor Code including its implementing rules but he refused to accede; that thereafter, Javier was terminated
and regulations shall be resolved in favor of labor" (Abella v. from his employment without notice; and that he was neither
NLRC, G.R. No. 71812, July 30,1987,152 SCRA 140; Manila given the opportunity to refute the cause/s of his dismissal from
Electric Company v. NLRC, et al., G.R. No. 78763, July work.
12,1989), and Article 1702 of the Civil Code which provides
that "in case of doubt, all labor legislation and all labor contracts
shall be construed in favor of the safety and decent living for To support his allegations, Javier presented an affidavit of one
the laborer. Bengie Valenzuela who alleged that Javier was a stevedore or
pahinante of Fly Ace from September 2007 to January 2008.
ACCORDINGLY, the petition is hereby GRANTED. The The said affidavit was subscribed before the Labor Arbiter
decision of the respondent National Labor Relations (LA).[7]
Commission is MODIFIED by including allowances and
commissions in the separation pay of petitioners Jose Songco
and Amancio Manuel. The case is remanded to the Labor For its part, Fly Ace averred that it was engaged in the business
Arbiter for the proper computation of said separation pay. of importation and sales of groceries. Sometime in December
2007, Javier was contracted by its employee, Mr. Ong, as extra
SO ORDERED. helper on a pakyaw basis at an agreed rate of 300.00 per trip,
which was later increased to 325.00 in January 2008. Mr. Ong
Javier vs Fly ace contracted Javier roughly 5 to 6 times only in a month whenever
MENDOZA, J.: the vehicle of its contracted hauler, Milmar Hauling Services,
was not available. On April 30, 2008, Fly Ace no longer needed
the services of Javier. Denying that he was their employee, Fly
Ace insisted that there was no illegal dismissal.[8] Fly Ace
submitted a copy of its agreement with Milmar Hauling
Services and copies of acknowledgment receipts evidencing
This is a petition under Rule 45 of the Rules of Civil Procedure payment to Javier for his contracted services bearing the words,
assailing the March 18, 2010 Decision[1] of the Court of daily manpower (pakyaw/piece rate pay) and the latters
Appeals (CA) and its June 7, 2010 Resolution,[2] in CA-G.R. signatures/initials.
SP No. 109975, which reversed the May 28, 2009 Decision[3]
of the National Labor Relations Commission (NLRC) in the
case entitled Bitoy Javier v. Fly Ace/Flordelyn Castillo,[4] Ruling of the Labor Arbiter
holding that petitioner Bitoy Javier (Javier) was illegally
dismissed from employment and ordering Fly Ace Corporation
(Fly Ace) to pay backwages and separation pay in lieu of On November 28, 2008, the LA dismissed the complaint for
reinstatement. lack of merit on the ground that Javier failed to present proof
that he was a regular employee of Fly Ace. He wrote:

Antecedent Facts

On May 23, 2008, Javier filed a complaint before the NLRC for
underpayment of salaries and other labor standard benefits. He Complainant has no employee ID showing his employment
alleged that he was an employee of Fly Ace since September with the Respondent nor any document showing that he
2007, performing various tasks at the respondents warehouse received the benefits accorded to regular employees of the
such as cleaning and arranging the canned items before their Respondents. His contention that Respondent failed to give him
said ID and payslips implies that indeed he was not a regular WHEREFORE, premises considered, complainants appeal is
employee of Fly Ace considering that complainant was a helper partially GRANTED. The assailed Decision of the labor arbiter
and that Respondent company has contracted a regular trucking is VACATED and a new one is hereby entered holding
for the delivery of its products. respondent FLY ACE CORPORATION guilty of illegal
dismissal and non-payment of 13th month pay. Consequently,
Respondent Fly Ace is not engaged in trucking business but in it is hereby ordered to pay complainant DANILO Bitoy
the importation and sales of groceries. Since there is a regular JAVIER the following:
hauler to deliver its products, we give credence to Respondents
claim that complainant was contracted on pakiao basis.

As to the claim for underpayment of salaries, the payroll 1. Backwages -45,770.83

presented by the Respondents showing salaries of workers on
pakiao basis has evidentiary weight because although the 2. Separation pay, in lieu of reinstatement - 8,450.00
signature of the complainant appearing thereon are not uniform,
they appeared to be his true signature. 3. Unpaid 13th month pay (proportionate) - 5,633.33

xxxx
TOTAL -59,854.16
Hence, as complainant received the rightful salary as shown by
the above described payrolls, Respondents are not liable for
salary differentials. [9]
All other claims are dismissed for lack of merit.

Ruling of the NLRC

SO ORDERED.[11]

On appeal with the NLRC, Javier was favored. It ruled that the
LA skirted the argument of Javier and immediately concluded
that he was not a regular employee simply because he failed to Ruling of the Court of Appeals
present proof. It was of the view that a pakyaw-basis
arrangement did not preclude the existence of employer- On March 18, 2010, the CA annulled the NLRC findings that
employee relationship. Payment by result x x x is a method of Javier was indeed a former employee of Fly Ace and reinstated
compensation and does not define the essence of the relation. It the dismissal of Javiers complaint as ordered by the LA. The
is a mere method of computing compensation, not a basis for CA exercised its authority to make its own factual
determining the existence or absence of an employer-employee determination anent the issue of the existence of an employer-
relationship.[10] The NLRC further averred that it did not employee relationship between the parties. According to the
follow that a worker was a job contractor and not an employee, CA:
just because the work he was doing was not directly related to
the employers trade or business or the work may be considered xxx
as extra helper as in this case; and that the relationship of an
employer and an employee was determined by law and the same
would prevail whatever the parties may call it. In this case, the In an illegal dismissal case the onus probandi rests on the
NLRC held that substantial evidence was sufficient basis for employer to prove that its dismissal was for a valid cause.
judgment on the existence of the employer-employee However, before a case for illegal dismissal can prosper, an
relationship. Javier was a regular employee of Fly Ace because employer-employee relationship must first be established. x x x
there was reasonable connection between the particular activity it is incumbent upon private respondent to prove the employee-
performed by the employee (as a pahinante) in relation to the employer relationship by substantial evidence.
usual business or trade of the employer (importation, sales and
delivery of groceries). He may not be considered as an
independent contractor because he could not exercise any xxx
judgment in the delivery of company products. He was only
engaged as a helper.
It is incumbent upon private respondent to prove, by substantial
evidence, that he is an employee of petitioners, but he failed to
Finding Javier to be a regular employee, the NLRC ruled that discharge his burden. The non-issuance of a company-issued
he was entitled to a security of tenure. For failing to present identification card to private respondent supports petitioners
proof of a valid cause for his termination, Fly Ace was found to contention that private respondent was not its employee.[12]
be liable for illegal dismissal of Javier who was likewise
entitled to backwages and separation pay in lieu of
reinstatement. The NLRC thus ordered:
The CA likewise added that Javiers failure to present salary The petitioner chiefly relied on Chavez v. NLRC,[17] where the
vouchers, payslips, or other pieces of evidence to bolster his Court ruled that payment to a worker on a per trip basis is not
contention, pointed to the inescapable conclusion that he was significant because this is merely a method of computing
not an employee of Fly Ace. Further, it found that Javiers work compensation and not a basis for determining the existence of
was not necessary and desirable to the business or trade of the employer-employee relationship. Javier likewise invokes the
company, as it was only when there were scheduled deliveries, rule that, in controversies between a laborer and his master, x x
which a regular hauling service could not deliver, that Fly Ace x doubts reasonably arising from the evidence should be
would contract the services of Javier as an extra helper. Lastly, resolved in the formers favour. The policy is reflected is no less
the CA declared that the facts alleged by Javier did not pass the than the Constitution, Labor Code and Civil Code.[18]
control test.
Claiming to be an employee of Fly Ace, petitioner asserts that
he was illegally dismissed by the latters failure to observe
substantive and procedural due process. Since his dismissal was
He contracted work outside the company premises; he was not not based on any of the causes recognized by law, and was
required to observe definite hours of work; he was not required implemented without notice, Javier is entitled to separation pay
to report daily; and he was free to accept other work elsewhere and backwages.
as there was no exclusivity of his contracted service to the
company, the same being co-terminous with the trip only.[13] In its Comment,[19] Fly Ace insists that there was no
Since no substantial evidence was presented to establish an substantial evidence to prove employer-employee relationship.
employer-employee relationship, the case for illegal dismissal Having a service contract with Milmar Hauling Services for the
could not prosper. purpose of transporting and delivering company products to
customers, Fly Ace contracted Javier as an extra helper or
pahinante on a mere per trip basis. Javier, who was actually a
The petitioners moved for reconsideration, but to no avail. loiterer in the area, only accompanied and assisted the company
driver when Milmar could not deliver or when the exigency of
Hence, this appeal anchored on the following grounds: extra deliveries arises for roughly five to six times a month.
Before making a delivery, Fly Ace would turn over to the driver
I. and Javier the delivery vehicle with its loaded company
WHETHER THE HONORABLE COURT OF APPEALS products. With the vehicle and products in their custody, the
ERRED IN HOLDING THAT THE PETITIONER WAS NOT driver and Javier would leave the company premises using their
A REGULAR EMPLOYEE OF FLY ACE. own means, method, best judgment and discretion on how to
II. deliver, time to deliver, where and [when] to start, and manner
WHETHER THE HONORABLE COURT OF APPEALS of delivering the products.[20]
ERRED IN HOLDING THAT THE PETITIONER IS NOT
ENTITLED TO HIS MONETARY CLAIMS.[14] Fly Ace dismisses Javiers claims of employment as baseless
assertions. Aside from his bare allegations, he presented
nothing to substantiate his status as an employee. It is a basic
The petitioner contends that other than its bare allegations and rule of evidence that each party must prove his affirmative
self-serving affidavits of the other employees, Fly Ace has allegation. If he claims a right granted by law, he must prove
nothing to substantiate its claim that Javier was engaged on a his claim by competent evidence, relying on the strength of his
pakyaw basis. Assuming that Javier was indeed hired on a own evidence and not upon the weakness of his opponent.[21]
pakyaw basis, it does not preclude his regular employment with Invoking the case of Lopez v. Bodega City,[22] Fly Ace insists
the company. Even the acknowledgment receipts bearing his that in an illegal dismissal case, the burden of proof is upon the
signature and the confirming receipt of his salaries will not complainant who claims to be an employee. It is essential that
show the true nature of his employment as they do not reflect an employer-employee relationship be proved by substantial
the necessary details of the commissioned task. Besides, Javiers evidence. Thus, it cites:
tasks as pahinante are related, necessary and desirable to the
line of business by Fly Ace which is engaged in the importation
and sale of grocery items. On days when there were no
scheduled deliveries, he worked in petitioners warehouse, In an illegal dismissal case, the onus probandi rests on the
arranging and cleaning the stored cans for delivery to employer to prove that its dismissal of an employee was for a
clients.[15] More importantly, Javier was subject to the control valid cause. However, before a case for illegal dismissal can
and supervision of the company, as he was made to report to the prosper, an employer-employee relationship must first be
office from Monday to Saturday, from 7:00 oclock in the established.
morning until 5:00 oclock in the afternoon. The list of Fly Ace points out that Javier merely offers factual assertions
deliverable goods, together with the corresponding clients and that he was an employee of Fly Ace, which are unfortunately
their respective purchases and addresses, would necessarily not supported by proof, documentary or otherwise.[23] Javier
have been prepared by Fly Ace. Clearly, he was subjected to simply assumed that he was an employee of Fly Ace, absent any
compliance with company rules and regulations as regards competent or relevant evidence to support it. He performed his
working hours, delivery schedule and output, and his other contracted work outside the premises of the respondent; he was
duties in the warehouse.[16] not even required to report to work at regular hours; he was not
made to register his time in and time out every time he was
contracted to work; he was not subjected to any disciplinary decision must be supported by substantial evidence.[29]
sanction imposed to other employees for company violations; Accordingly, the petitioner needs to show by substantial
he was not issued a company I.D.; he was not accorded the same evidence that he was indeed an employee of the company
benefits given to other employees; he was not registered with against which he claims illegal dismissal.
the Social Security System (SSS) as petitioners employee; and,
he was free to leave, accept and engage in other means of Expectedly, opposing parties would stand poles apart and
livelihood as there is no exclusivity of his contracted services proffer allegations as different as chalk and cheese. It is,
with the petitioner, his services being co-terminus with the trip therefore, incumbent upon the Court to determine whether the
only. All these lead to the conclusion that petitioner is not an party on whom the burden to prove lies was able to hurdle the
employee of the respondents.[24] same. No particular form of evidence is required to prove the
Moreover, Fly Ace claims that it had no right to control the existence of such employer-employee relationship. Any
result, means, manner and methods by which Javier would competent and relevant evidence to prove the relationship may
perform his work or by which the same is to be be admitted. Hence, while no particular form of evidence is
accomplished.[25] In other words, Javier and the company required, a finding that such relationship exists must still rest on
driver were given a free hand as to how they would perform some substantial evidence. Moreover, the substantiality of the
their contracted services and neither were they subjected to evidence depends on its quantitative as well as its qualitative
definite hours or condition of work. aspects.[30] Although substantial evidence is not a function of
quantity but rather of quality, the x x x circumstances of the
instant case demand that something more should have been
proffered. Had there been other proofs of employment, such as
Fly Ace likewise claims that Javiers function as a pahinante was x x x inclusion in petitioners payroll, or a clear exercise of
not directly related or necessary to its principal business of control, the Court would have affirmed the finding of employer-
importation and sales of groceries. Even without Javier, the employee relationship.[31]
business could operate its usual course as it did not involve the
business of inland transportation. Lastly, the acknowledgment
receipts bearing Javiers signature and words pakiao rate, In sum, the rule of thumb remains: the onus probandi falls on
referring to his earned salaries on a per trip basis, have petitioner to establish or substantiate such claim by the requisite
evidentiary weight that the LA correctly considered in arriving quantum of evidence.[32] Whoever claims entitlement to the
at the conclusion that Javier was not an employee of the benefits provided by law should establish his or her right thereto
company. x x x.[33] Sadly, Javier failed to adduce substantial evidence as
basis for the grant of relief.
The Court affirms the assailed CA decision.
In this case, the LA and the CA both concluded that Javier failed
It must be noted that the issue of Javiers alleged illegal to establish his employment with Fly Ace. By way of evidence
dismissal is anchored on the existence of an employer- on this point, all that Javier presented were his self-serving
employee relationship between him and Fly Ace. This is statements purportedly showing his activities as an employee of
essentially a question of fact. Generally, the Court does not Fly Ace. Clearly, Javier failed to pass the substantiality
review errors that raise factual questions. However, when there requirement to support his claim. Hence, the Court sees no
is conflict among the factual findings of the antecedent deciding reason to depart from the findings of the CA.
bodies like the LA, the NLRC and the CA, it is proper, in the
exercise of Our equity jurisdiction, to review and re-evaluate While Javier remains firm in his position that as an employed
the factual issues and to look into the records of the case and re- stevedore of Fly Ace, he was made to work in the company
examine the questioned findings.[26] In dealing with factual premises during weekdays arranging and cleaning grocery
issues in labor cases, substantial evidence that amount of items for delivery to clients, no other proof was submitted to
relevant evidence which a reasonable mind might accept as fortify his claim. The lone affidavit executed by one Bengie
adequate to justify a conclusion is sufficient.[27] Valenzuela was unsuccessful in strengthening Javiers cause. In
said document, all Valenzuela attested to was that he would
As the records bear out, the LA and the CA found Javiers claim frequently see Javier at the workplace where the latter was also
of employment with Fly Ace as wanting and deficient. The hired as stevedore.[34] Certainly, in gauging the evidence
Court is constrained to agree. Although Section 10, Rule VII of presented by Javier, the Court cannot ignore the inescapable
the New Rules of Procedure of the NLRC[28] allows a conclusion that his mere presence at the workplace falls short
relaxation of the rules of procedure and evidence in labor cases, in proving employment therein. The supporting affidavit could
this rule of liberality does not mean a complete dispensation of have, to an extent, bolstered Javiers claim of being tasked to
proof. Labor officials are enjoined to use reasonable means to clean grocery items when there were no scheduled delivery
ascertain the facts speedily and objectively with little regard to trips, but no information was offered in this subject simply
technicalities or formalities but nowhere in the rules are they because the witness had no personal knowledge of Javiers
provided a license to completely discount evidence, or the lack employment status in the company. Verily, the Court cannot
of it. The quantum of proof required, however, must still be accept Javiers statements, hook, line and sinker.
satisfied. Hence, when confronted with conflicting versions on
factual matters, it is for them in the exercise of discretion to The Court is of the considerable view that on Javier lies the
determine which party deserves credence on the basis of burden to pass the well-settled tests to determine the existence
evidence received, subject only to the requirement that their of an employer-employee relationship, viz: (1) the selection and
engagement of the employee; (2) the payment of wages; (3) the entitled to respect and enforcement in the interest of simple fair
power of dismissal; and (4) the power to control the employees play. Out of its concern for the less privileged in life, the Court
conduct. Of these elements, the most important criterion is has inclined, more often than not, toward the worker and upheld
whether the employer controls or has reserved the right to his cause in his conflicts with the employer. Such favoritism,
control the employee not only as to the result of the work but however, has not blinded the Court to the rule that justice is in
also as to the means and methods by which the result is to be every case for the deserving, to be dispensed in the light of the
accomplished.[35] established facts and the applicable law and doctrine.[39]

In this case, Javier was not able to persuade the Court that the WHEREFORE, the petition is DENIED. The March 18, 2010
above elements exist in his case. He could not submit competent Decision of the Court of Appeals and its June 7, 2010
proof that Fly Ace engaged his services as a regular employee; Resolution, in CA-G.R. SP No. 109975, are hereby
that Fly Ace paid his wages as an employee, or that Fly Ace AFFIRMED.
could dictate what his conduct should be while at work. In other
words, Javiers allegations did not establish that his relationship SO ORDERED.
with Fly Ace had the attributes of an employer-employee
relationship on the basis of the above-mentioned four-fold test. SLL International vs NLRC
Worse, Javier was not able to refute Fly Aces assertion that it MENDOZA, J.:
had an agreement with a hauling company to undertake the
delivery of its goods. It was also baffling to realize that Javier Assailed in this petition for review on certiorari are the January
did not dispute Fly Aces denial of his services exclusivity to the 11, 2006 Decision1 and the March 31, 2006 Resolution2 of the
company. In short, all that Javier laid down were bare Court of Appeals (CA), in CA-G.R. SP No. 00598 which
allegations without corroborative proof. affirmed with modification the March 31, 2004 Decision3 and
December 15, 2004 Resolution4 of the National Labor
Relations Commission (NLRC). The NLRC Decision found the
Fly Ace does not dispute having contracted Javier and paid him petitioners, SLL International Cables Specialist (SLL) and its
on a per trip rate as a stevedore, albeit on a pakyaw basis. The manager, Sonny L. Lagon (petitioners), not liable for the illegal
Court cannot fail to note that Fly Ace presented documentary dismissal of Roldan Lopez, Danilo Caete and Edgardo Zuiga
proof that Javier was indeed paid on a pakyaw basis per the (private respondents) but held them jointly and severally liable
acknowledgment receipts admitted as competent evidence by for payment of certain monetary claims to said respondents.
the LA. Unfortunately for Javier, his mere denial of the
signatures affixed therein cannot automatically sway us to A chronicle of the factual antecedents has been succinctly
ignore the documents because forgery cannot be presumed and summarized by the CA as follows:
must be proved by clear, positive and convincing evidence and
the burden of proof lies on the party alleging forgery.[36] Sometime in 1996, and January 1997, private respondents
Roldan Lopez (Lopez for brevity) and Danilo Caete (Caete
Considering the above findings, the Court does not see the for brevity), and Edgardo Zuiga (Zuiga for brevity)
necessity to resolve the second issue presented. respectively, were hired by petitioner Lagon as apprentice or
trainee cable/lineman. The three were paid the full minimum
One final note. The Courts decision does not contradict the wage and other benefits but since they were only trainees, they
settled rule that payment by the piece is just a method of did not report for work regularly but came in as substitutes to
compensation and does not define the essence of the the regular workers or in undertakings that needed extra
relation.[37] Payment on a piece-rate basis does not negate workers to expedite completion of work. After their training,
regular employment. The term wage is broadly defined in Zuiga, Caete and Lopez were engaged as project employees
Article 97 of the Labor Code as remuneration or earnings, by the petitioners in their Islacom project in Bohol. Private
capable of being expressed in terms of money whether fixed or respondents started on March 15, 1997 until December 1997.
ascertained on a time, task, piece or commission basis. Payment Upon the completion of their project, their employment was
by the piece is just a method of compensation and does not also terminated. Private respondents received the amount of
define the essence of the relations. Nor does the fact that the P145.00, the minimum prescribed daily wage for Region VII.
petitioner is not covered by the SSS affect the employer- In July 1997, the amount of P145 was increased to P150.00 by
employee relationship. However, in determining whether the the Regional Wage Board (RWB) and in October of the same
relationship is that of employer and employee or one of an year, the latter was increased to P155.00. Sometime in March
independent contractor, each case must be determined on its 1998, Zuiga and Caete were engaged again by Lagon as
own facts and all the features of the relationship are to be project employees for its PLDT Antipolo, Rizal project, which
considered.[38] Unfortunately for Javier, the attendant facts and ended sometime in (sic) the late September 1998. As a
circumstances of the instant case do not provide the Court with consequence, Zuiga and Caetes employment was
sufficient reason to uphold his claimed status as employee of terminated. For this project, Zuiga and Caete received only
Fly Ace. the wage of P145.00 daily. The minimum prescribed wage for
Rizal at that time was P160.00.
While the Constitution is committed to the policy of social
justice and the protection of the working class, it should not be Sometime in late November 1998, private respondents re-
supposed that every labor dispute will be automatically decided applied in the Racitelcom project of Lagon in Bulacan. Zuiga
in favor of labor. Management also has its rights which are and Caete were re-employed. Lopez was also hired for the said
specific project. For this, private respondents received the wage which were usual, necessary and desirable in the business or
of P145.00. Again, after the completion of their project in trade of the employer.
March 1999, private respondents went home to Cebu City.
With regard to the underpayment of wages, the LA found that
On May 21, 1999, private respondents for the 4th time worked private respondents were underpaid. It ruled that the free board
with Lagons project in Camarin, Caloocan City with Furukawa and lodging, electricity, water, and food enjoyed by them could
Corporation as the general contractor. Their contract would not be included in the computation of their wages because these
expire on February 28, 2000, the period of completion of the were given without their written consent.
project. From May 21, 1997-December 1999, private
respondents received the wage of P145.00. At this time, the The LA, however, found that petitioners were not liable for
minimum prescribed rate for Manila was P198.00. In January illegal dismissal. The LA viewed private respondents act of
to February 28, the three received the wage of P165.00. The going home as an act of indifference when petitioners decided
existing rate at that time was P213.00. to prohibit overtime work.7

For reasons of delay on the delivery of imported materials from In its March 31, 2004 Decision, the NLRC affirmed the findings
Furukawa Corporation, the Camarin project was not completed of the LA. In addition, the NLRC noted that not a single report
on the scheduled date of completion. Face[d] with economic of project completion was filed with the nearest Public
problem[s], Lagon was constrained to cut down the overtime Employment Office as required
work of its worker[s][,] including private respondents. Thus, by the Department of Labor and Employment (DOLE)
when requested by private respondents on February 28, 2000 to Department Order No. 19, Series of 1993.8 The NLRC later
work overtime, Lagon refused and told private respondents that denied9 the motion for reconsideration10 subsequently filed by
if they insist, they would have to go home at their own expense petitioners.
and that they would not be given anymore time nor allowed to
stay in the quarters. This prompted private respondents to leave When the matter was elevated to the CA on a petition for
their work and went home to Cebu. On March 3, 2000, private certiorari, it affirmed the findings that the private respondents
respondents filed a complaint for illegal dismissal, non- were regular employees. It considered the fact that they
payment of wages, holiday pay, 13th month pay for 1997 and performed functions which were the regular and usual business
1998 and service incentive leave pay as well as damages and of petitioners. According to the CA, they were clearly members
attorneys fees. of a work pool from which petitioners drew their project
employees.
In their answers, petitioners admit employment of private
respondents but claimed that the latter were only project The CA also stated that the failure of petitioners to comply with
employees[,] for their services were merely engaged for a the simple but compulsory requirement to submit a report of
specific project or undertaking and the same were covered by termination to the nearest Public Employment Office every
contracts duly signed by private respondents. Petitioners further time private respondents employment was terminated was
alleged that the food allowance of P63.00 per day as well as proof that the latter were not project employees but regular
private respondents allowance for lodging house, employees.
transportation, electricity, water and snacks allowance should
be added to their basic pay. With these, petitioners claimed that The CA likewise found that the private respondents were
private respondents received higher wage rate than that underpaid. It ruled that the board and lodging, electricity, water,
prescribed in Rizal and Manila. and food enjoyed by the private respondents could not be
included in the computation of their wages because these were
Lastly, petitioners alleged that since the workplaces of private given without their written consent. The CA added that the
respondents were all in Manila, the complaint should be filed private respondents were entitled to 13th month pay.
there. Thus, petitioners prayed for the dismissal of the
complaint for lack of jurisdiction and utter lack of merit. The CA also agreed with the NLRC that there was no illegal
(Citations omitted.) dismissal. The CA opined that it was the petitioners
prerogative to grant or deny any request for overtime work and
On January 18, 2001, Labor Arbiter Reynoso Belarmino (LA) that the private respondents act of leaving the workplace after
rendered his decision5 declaring that his office had jurisdiction their request was denied was an act of abandonment.
to hear and decide the complaint filed by private respondents.
Referring to Rule IV, Sec. 1 (a) of the NLRC Rules of In modifying the decision of the labor tribunal, however, the
Procedure prevailing at that time,6 the LA ruled that it had CA noted that respondent Roldan Lopez did not work in the
jurisdiction because the "workplace," as defined in the said rule, Antipolo project and, thus, was not entitled to wage
included the place where the employee was supposed to report differentials. Also, in computing the differentials for the period
back after a temporary detail, assignment or travel, which in this January and February 2000, the CA disagreed in the award of
case was Cebu. differentials based on the minimum daily wage of P223.00, as
the prevailing minimum daily wage then was only P213.00.
As to the status of their employment, the LA opined that private Petitioners sought reconsideration but the CA denied it in its
respondents were regular employees because they were March 31, 2006 Resolution.11
repeatedly hired by petitioners and they performed activities
In this petition for review on certiorari,12 petitioners seek the being that the pertinent personnel files, payrolls, records,
reversal and setting aside of the CA decision anchored on this remittances and other similar documents which will show
lone: that overtime, differentials, service incentive leave and other
claims of workers have been paid are not in the possession
GROUND/ASSIGNMENT OF ERROR of the worker but in the custody and absolute control of the
employer.18
THE PUBLIC RESPONDENT NLRC COMMITTED A
SERIOUS ERROR IN LAW IN AWARDING WAGE In this case, petitioners, aside from bare allegations that private
DIFFERENTIALS TO THE PRIVATE COMPLAINANTS respondents received wages higher than the prescribed
ON THE BASES OF MERE TECHNICALITIES, THAT IS, minimum, failed to present any evidence, such as payroll or
FOR LACK OF WRITTEN CONFORMITY x x x AND LACK payslips, to support their defense of payment. Thus, petitioners
OF NOTICE TO THE DEPARTMENT OF LABOR AND utterly failed to discharge the onus probandi.
EMPLOYMENT (DOLE)[,] AND THUS, THE COURT OF
APPEALS GRAVELY ERRED IN AFFIRMING WITH Private respondents, on the other hand, are entitled to be paid
MODIFICATION THE NLRC DECISION IN THE LIGHT OF the minimum wage, whether they are regular or non-regular
THE RULING IN THE CASE OF JENNY M. AGABON and employees.
VIRGILIO AGABON vs, NLRC, ET AL., GR NO. 158963,
NOVEMBER 17, 2004, 442 SCRA 573, [AND Section 3, Rule VII of the Rules to Implement the Labor
SUBSEQUENTLY IN THE CASE OF GLAXO WELLCOME Code19 specifically enumerates those who are not covered by
PHILIPPINES, INC. VS. NAGAKAKAISANG the payment of minimum wage. Project employees are not
EMPLEYADO NG WELLCOME-DFA (NEW DFA), ET among them.
AL., GR NO. 149349, 11 MARCH 2005], WHICH FINDS
APPLICATION IN THE INSTANT CASE BY ANALOGY.13 On whether the value of the facilities should be included in the
computation of the "wages" received by private respondents,
Petitioners reiterated their position that the value of the facilities Section 1 of DOLE Memorandum Circular No. 2 provides that
that the private respondents enjoyed should be included in the an employer may provide subsidized meals and snacks to his
computation of the "wages" received by them. They argued that employees provided that the subsidy shall not be less that 30%
the rulings in Agabon v. NLRC14and Glaxo Wellcome of the fair and reasonable value of such facilities. In such cases,
Philippines, Inc. v. Nagkakaisang Empleyado Ng Wellcome- the employer may deduct from the wages of the employees not
DFA15 should be applied by analogy, in the sense that the lack more than 70% of the value of the meals and snacks enjoyed by
of written acceptance of the employees of the facilities enjoyed the latter, provided that such deduction is with the written
by them should not mean that the value of the facilities could authorization of the employees concerned.
not be included in the computation of the private respondents
"wages." Moreover, before the value of facilities can be deducted from
the employees wages, the following requisites must all be
On November 29, 2006, the Court resolved to issue a attendant: first, proof must be shown that such facilities are
Temporary Restraining Order (TRO) enjoining the public customarily furnished by the trade; second, the provision of
respondent from enforcing the NLRC and CA decisions until deductible facilities must be voluntarily accepted in writing by
further orders from the Court. the employee; and finally, facilities must be charged at
reasonable value.20 Mere availment is not sufficient to allow
After a thorough review of the records, however, the Court deductions from employees wages.21
finds no merit in the petition.
These requirements, however, have not been met in this case.
This petition generally involves factual issues, such as, whether SLL failed to present any company policy or guideline showing
or not there is evidence on record to support the findings of the that provisions for meals and lodging were part of the
LA, the NLRC and the CA that private respondents were project employees salaries. It also failed to provide proof of the
or regular employees and that their salary differentials had been employees written authorization, much less show how they
paid. This calls for a re-examination of the evidence, which the arrived at their valuations. At any rate, it is not even clear
Court cannot entertain. Settled is the rule that factual findings whether private respondents actually enjoyed said facilities.
of labor officials, who are deemed to have acquired expertise in
matters within their respective jurisdiction, are generally The Court, at this point, makes a distinction between "facilities"
accorded not only respect but even finality, and bind the Court and "supplements." It is of the view that the food and lodging,
when supported by substantial evidence. It is not the Courts or the electricity and water allegedly consumed by private
function to assess and evaluate the evidence respondents in this case were not facilities but supplements. In
the case of Atok-Big Wedge Assn. v. Atok-Big Wedge Co.,22
all over again, particularly where the findings of both the Labor the two terms were distinguished from one another in this wise:
tribunals and the CA concur. 16
"Supplements," therefore, constitute extra remuneration or
As a general rule, on payment of wages, a party who alleges special privileges or benefits given to or received by the
payment as a defense has the burden of proving it.17 laborers over and above their ordinary earnings or wages.
Specifically with respect to labor cases, the burden of proving "Facilities," on the other hand, are items of expense necessary
payment of monetary claims rests on the employer, the rationale for the laborer's and his family's existence and subsistence so
that by express provision of law (Sec. 2[g]), they form part of 2. Paterno Llarena
the wage and when furnished by the employer are deductible
therefrom, since if they are not so furnished, the laborer would Front Desk Clerk
spend and pay for them just the same.
3. Gregorio Nicerio
In short, the benefit or privilege given to the employee which
constitutes an extra remuneration above and over his basic or Supervisory Waiter
ordinary earning or wage is supplement; and when said benefit
or privilege is part of the laborers' basic wages, it is a facility. 4. Amado Macandog
The distinction lies not so much in the kind of benefit or item
(food, lodging, bonus or sick leave) given, but in the purpose Roomboy
for which it is given.23 In the case at bench, the items provided
were given freely by SLL for the purpose of maintaining the 5. Luis Guades
efficiency and health of its workers while they were working at
their respective projects.1avvphi1 Utility/Maintenance Worker

For said reason, the cases of Agabon and Glaxo are inapplicable 6. Santos Broola
in this case. At any rate, these were cases of dismissal with just
and authorized causes. The present case involves the matter of Roomboy
the failure of the petitioners to comply with the payment of the
prescribed minimum wage. 7. Teodoro Laurenaria

The Court sustains the deletion of the award of differentials Waiter

with respect to respondent Roldan Lopez. As correctly pointed
out by the CA, he did not work for the project in Antipolo. 8. Eduardo Alamares

WHEREFORE, the petition is DENIED. The temporary Roomboy/Waiter

restraining order issued by the Court on November 29, 2006 is
deemed, as it is hereby ordered, DISSOLVED. 9. Lourdes Camigla

SO ORDERED. Cashier

Mayon Hotel vs Adana 10. Chona Bumalay

PUNO, J.:
Cashier
This is a petition for certiorari to reverse and set aside the
Decision issued by the Court of Appeals (CA)1 in CA-G.R. SP 11. Jose Atractivo
No. 68642, entitled "Rolando Adana, Wenefredo Loveres, et.
al. vs. National Labor Relations Commission (NLRC), Mayon Technician
Hotel & Restaurant/Pacita O. Po, et al.," and the Resolution2
denying petitioners' motion for reconsideration. The assailed 12. Amado Alamares
CA decision reversed the NLRC Decision which had dismissed
all of respondents' complaints,3 and reinstated the Joint Dishwasher and Kitchen Helper
Decision of the Labor Arbiter4 which ruled that respondents
were illegally dismissed and entitled to their money claims. 13. Roger Burce

The facts, culled from the records, are as follows:5 Cook

Petitioner Mayon Hotel & Restaurant is a single proprietor 14. Rolando Adana
business registered in the name of petitioner Pacita O. Po,6
whose mother, petitioner Josefa Po Lam, manages the Waiter
establishment.7 The hotel and restaurant employed about
sixteen (16) employees. 15. Miguel Torrefranca

Records show that on various dates starting in 1981, petitioner Cook

hotel and restaurant hired the following people, all respondents
in this case, with the following jobs:8 16. Edgardo Torrefranca

1. Wenefredo Loveres Cook

Accountant and Officer-in-charge Due to the expiration and non-renewal of the lease contract for
the rented space occupied by the said hotel and restaurant at
Rizal Street, the hotel operations of the business were
suspended on March 31, 1997.9 The operation of the restaurant I. The Honorable Court of Appeals erred in reversing the
was continued in its new location at Elizondo Street, Legazpi decision of the National Labor Relations Commission (Second
City, while waiting for the construction of a new Mayon Hotel Division) by holding that the findings of fact of the NLRC were
& Restaurant at Pearanda Street, Legazpi City.10 Only nine not supported by substantial evidence despite ample and
(9) of the sixteen (16) employees continued working in the sufficient evidence showing that the NLRC decision is indeed
Mayon Restaurant at its new site.11 supported by substantial evidence;

On various dates of April and May 1997, the 16 employees filed II. The Honorable Court of Appeals erred in upholding the joint
complaints for underpayment of wages and other money claims decision of the labor arbiter which ruled that private
against petitioners, as follows:12 respondents were illegally dismissed from their employment,
despite the fact that the reason why private respondents were
Wenefredo Loveres, Luis Guades, Amado Macandog and Jose out of work was not due to the fault of petitioners but to causes
Atractivo for illegal dismissal, underpayment of wages, beyond the control of petitioners.
nonpayment of holiday and rest day pay; service incentive leave
pay (SILP) and claims for separation pay plus damages; III. The Honorable Court of Appeals erred in upholding the
award of monetary benefits by the labor arbiter in his joint
Paterno Llarena and Gregorio Nicerio for illegal dismissal with decision in favor of the private respondentS, including the
claims for underpayment of wages; nonpayment of cost of award of damages to six (6) of the private respondents, despite
living allowance (COLA) and overtime pay; premium pay for the fact that the private respondents have not proven by
holiday and rest day; SILP; nightshift differential pay and substantial evidence their entitlement thereto and especially the
separation pay plus damages; fact that they were not illegally dismissed by the petitioners.

Miguel Torrefranca, Chona Bumalay and Lourdes Camigla for IV. The Honorable Court of Appeals erred in holding that Pacita
underpayment of wages; nonpayment of holiday and rest day Ong Po is the owner of the business establishment, petitioner
pay and SILP; Mayon Hotel and Restaurant, thus disregarding the certificate
of registration of the business establishment ISSUED by the
Rolando Adana, Roger Burce and Amado Alamares for local government, which is a public document, and the
underpayment of wages; nonpayment of COLA, overtime, unqualified admissions of complainants-private respondents.14
holiday, rest day, SILP and nightshift differential pay;
In essence, the petition calls for a review of the following
Eduardo Alamares for underpayment of wages, nonpayment of issues:
holiday, rest day and SILP and night shift differential pay;
1. Was it correct for petitioner Josefa Po Lam to be held liable
Santos Broola for illegal dismissal, underpayment of wages, as the owner of petitioner Mayon Hotel & Restaurant, and the
overtime pay, rest day pay, holiday pay, SILP, and damages;13 proper respondent in this case?
and
2. Were respondents Loveres, Guades, Macandog, Atractivo,
Teodoro Laurenaria for underpayment of wages; nonpayment Llarena and Nicerio illegally dismissed?
of COLA and overtime pay; premium pay for holiday and rest
day, and SILP. 3. Are respondents entitled to their money claims due to
underpayment of wages, and nonpayment of holiday pay, rest
On July 14, 2000, Executive Labor Arbiter Gelacio L. Rivera, day premium, SILP, COLA, overtime pay, and night shift
Jr. rendered a Joint Decision in favor of the employees. The differential pay?
Labor Arbiter awarded substantially all of respondents' money
claims, and held that respondents Loveres, Macandog and It is petitioners' contention that the above issues have already
Llarena were entitled to separation pay, while respondents been threshed out sufficiently and definitively by the NLRC.
Guades, Nicerio and Alamares were entitled to their retirement They therefore assail the CA's reversal of the NLRC decision,
pay. The Labor Arbiter also held that based on the evidence claiming that based on the ruling in Castillo v. NLRC,15 it is
presented, Josefa Po Lam is the owner/proprietor of Mayon non sequitur that the CA should re-examine the factual findings
Hotel & Restaurant and the proper respondent in these cases. of both the NLRC and the Labor Arbiter, especially as in this
case the NLRC's findings are allegedly supported by substantial
On appeal to the NLRC, the decision of the Labor Arbiter was evidence.
reversed, and all the complaints were dismissed.
We do not agree.
Respondents filed a motion for reconsideration with the NLRC
and when this was denied, they filed a petition for certiorari There is no denying that it is within the NLRC's competence, as
with the CA which rendered the now assailed decision. an appellate agency reviewing decisions of Labor Arbiters, to
disagree with and set aside the latter's findings.16 But it stands
After their motion for reconsideration was denied, petitioners to reason that the NLRC should state an acceptable cause
now come to this Court, seeking the reversal of the CA decision therefore, otherwise it would be a whimsical, capricious,
on the following grounds: oppressive, illogical, unreasonable exercise of quasi-judicial
prerogative, subject to invalidation by the extraordinary writ of that Josefa Po Lam is the owner of the subject hotel and
certiorari.17 And when the factual findings of the Labor Arbiter restaurant. There were conflicting documents submitted by
and the NLRC are diametrically opposed and this disparity of Josefa herself. She was ordered to submit additional documents
findings is called into question, there is, necessarily, a re- to clearly establish ownership of the hotel and restaurant,
examination of the factual findings to ascertain which opinion considering the testimonies given by the [respondents] and the
should be sustained.18 As ruled in Asuncion v. NLRC,19 non-appearance and failure to submit her own position paper by
Pacita Po. But Josefa did not comply with the directive of the
Although, it is a legal tenet that factual findings of Labor Arbiter. The ruling of the Supreme Court in Metropolitan
administrative bodies are entitled to great weight and respect, Bank and Trust Company v. Court of Appeals applies to Josefa
we are constrained to take a second look at the facts before us Po Lam which is stated in this wise:
because of the diversity in the opinions of the Labor Arbiter and
the NLRC. A disharmony between the factual findings of the When the evidence tends to prove a material fact which imposes
Labor Arbiter and those of the NLRC opens the door to a review a liability on a party, and he has it in his power to produce
thereof by this Court.20 evidence which from its very nature must overthrow the case
made against him if it is not founded on fact, and he refuses to
The CA, therefore, did not err in reviewing the records to produce such evidence, the presumption arises that the
determine which opinion was supported by substantial evidence[,] if produced, would operate to his prejudice, and
evidence. support the case of his adversary.

Moreover, it is explicit in Castillo v. NLRC21 that factual Furthermore, in ruling that Josefa Po Lam is the real owner of
findings of administrative bodies like the NLRC are affirmed the hotel and restaurant, the labor arbiter relied also on the
only if they are supported by substantial evidence that is testimonies of the witnesses, during the hearing of the instant
manifest in the decision and on the records. As stated in case. When the conclusions of the labor arbiter are sufficiently
Castillo: corroborated by evidence on record, the same should be
respected by appellate tribunals, since he is in a better position
[A]buse of discretion does not necessarily follow from a to assess and evaluate the credibility of the contending
reversal by the NLRC of a decision of a Labor Arbiter. Mere parties.23 (citations omitted)
variance in evidentiary assessment between the NLRC and the
Labor Arbiter does not automatically call for a full review of Petitioners insist that it was error for the Labor Arbiter and the
the facts by this Court. The NLRC's decision, so long as it is not CA to have ruled that petitioner Josefa Po Lam is the owner of
bereft of substantial support from the records, deserves respect Mayon Hotel & Restaurant. They allege that the documents
from this Court. As a rule, the original and exclusive they submitted to the Labor Arbiter sufficiently and clearly
jurisdiction to review a decision or resolution of respondent establish the fact of ownership by petitioner Pacita Po, and not
NLRC in a petition for certiorari under Rule 65 of the Rules of her mother, petitioner Josefa Po Lam. They contend that
Court does not include a correction of its evaluation of the petitioner Josefa Po Lam's participation was limited to merely
evidence but is confined to issues of jurisdiction or grave abuse (a) being the overseer; (b) receiving the month-to-month and/or
of discretion. Thus, the NLRC's factual findings, if supported year-to-year financial reports prepared and submitted by
by substantial evidence, are entitled to great respect and even respondent Loveres; and (c) visitation of the premises.24 They
finality, unless petitioner is able to show that it simply and also put emphasis on the admission of the respondents in their
arbitrarily disregarded the evidence before it or had position paper submitted to the Labor Arbiter, identifying
misappreciated the evidence to such an extent as to compel a petitioner Josefa Po Lam as the manager, and Pacita Po as the
contrary conclusion if such evidence had been properly owner.25 This, they claim, is a judicial admission and is binding
appreciated. (citations omitted)22 on respondents. They protest the reliance the Labor Arbiter and
the CA placed on their failure to submit additional documents
After careful review, we find that the reversal of the NLRC's to clearly establish ownership of the hotel and restaurant,
decision was in order precisely because it was not supported by claiming that there was no need for petitioner Josefa Po Lam to
substantial evidence. submit additional documents considering that the Certificate of
Registration is the best and primary evidence of ownership.
1. Ownership by Josefa Po Lam
We disagree with petitioners. We have scrutinized the records
The Labor Arbiter ruled that as regards the claims of the and find the claim that petitioner Josefa Po Lam is merely the
employees, petitioner Josefa Po Lam is, in fact, the owner of overseer is not borne out by the evidence.
Mayon Hotel & Restaurant. Although the NLRC reversed this
decision, the CA, on review, agreed with the Labor Arbiter that First. It is significant that only Josefa Po Lam appeared in the
notwithstanding the certificate of registration in the name of proceedings with the Labor Arbiter. Despite receipt of the
Pacita Po, it is Josefa Po Lam who is the owner/proprietor of Labor Arbiter's notice and summons, other notices and Orders,
Mayon Hotel & Restaurant, and the proper respondent in the petitioner Pacita Po failed to appear in any of the proceedings
complaints filed by the employees. The CA decision states in with the Labor Arbiter in these cases, nor file her position
part: paper.26 It was only on appeal with the NLRC that Pacita Po
signed the pleadings.27 The apathy shown by petitioner Pacita
[Despite] the existence of the Certificate of Registration in the Po is contrary to human experience as one would think that the
name of Pacita Po, we cannot fault the labor arbiter in ruling
owner of an establishment would naturally be concerned when
all her employees file complaints against her. Article 221 of the Labor Code is clear: technical rules are not
binding, and the application of technical rules of procedure may
Second. The records of the case belie petitioner Josefa Po Lam's be relaxed in labor cases to serve the demand of substantial
claim that she is merely an overseer. The findings of the Labor justice.29 The rule of evidence prevailing in court of law or
Arbiter on this question were based on credible, competent and equity shall not be controlling in labor cases and it is the spirit
substantial evidence. We again quote the Joint Decision on this and intention of the Labor Code that the Labor Arbiter shall use
matter: every and all reasonable means to ascertain the facts in each
case speedily and objectively and without regard to
Mayon Hotel and Restaurant is a [business name] of an technicalities of law or procedure, all in the interest of due
enterprise. While [petitioner] Josefa Po Lam claims that it is her process.30 Labor laws mandate the speedy administration of
daughter, Pacita Po, who owns the hotel and restaurant when justice, with least attention to technicalities but without
the latter purchased the same from one Palanos in 1981, Josefa sacrificing the fundamental requisites of due process.31
failed to submit the document of sale from said Palanos to
Pacita as allegedly the sale was only verbal although the license Similarly, the fact that the respondents' complaints contained no
to operate said hotel and restaurant is in the name of Pacita allegation that petitioner Josefa Po Lam is the owner is of no
which, despite our Order to Josefa to present the same, she moment. To apply the concept of judicial admissions to
failed to comply (p. 38, tsn. August 13, 1998). While several respondents who are but lowly employees - would be to
documentary evidences were submitted by Josefa wherein exact compliance with technicalities of law that is contrary to
Pacita was named therein as owner of the hotel and restaurant the demands of substantial justice. Moreover, the issue of
(pp. 64, 65, 67 to 69; vol. I, rollo)[,] there were documentary ownership was an issue that arose only during the course of the
evidences also that were submitted by Josefa showing her proceedings with the Labor Arbiter, as an incident of
ownership of said enterprise (pp. 468 to 469; vol. II, rollo). determining respondents' claims, and was well within his
While Josefa explained her participation and interest in the jurisdiction.32
business as merely to help and assist her daughter as the hotel
and restaurant was near the former's store, the testimonies of Petitioners were also not denied due process, as they were given
[respondents] and Josefa as well as her demeanor during the sufficient opportunity to be heard on the issue of ownership.33
trial in these cases proves (sic) that Josefa Po Lam owns Mayon The essence of due process in administrative proceedings is
Hotel and Restaurant. [Respondents] testified that it was Josefa simply an opportunity to explain one's side or an opportunity to
who exercises all the acts and manifestation of ownership of the seek reconsideration of the action or ruling complained of.34
hotel and restaurant like transferring employees from the And there is nothing in the records which would suggest that
Greatwall Palace Restaurant which she and her husband Roy Po petitioners had absolute lack of opportunity to be heard.35
Lam previously owned; it is Josefa to whom the employees Obviously, the choice not to present evidence was made by
submits (sic) reports, draws money for payment of payables and petitioners themselves.36
for marketing, attending (sic) to Labor Inspectors during ocular
inspections. Except for documents whereby Pacita Po appears But more significantly, we sustain the Labor Arbiter and the CA
as the owner of Mayon Hotel and Restaurant, nothing in the because even when the case was on appeal with the NLRC,
record shows any circumstance or manifestation that Pacita Po nothing was submitted to negate the Labor Arbiter's finding that
is the owner of Mayon Hotel and Restaurant. The least that can Pacita Po is not the real owner of the subject hotel and
be said is that it is absurd for a person to purchase a hotel and restaurant. Indeed, no such evidence was submitted in the
restaurant in the very heart of the City of Legazpi verbally. proceedings with the CA nor with this Court. Considering that
Assuming this to be true, when [petitioners], particularly Josefa, petitioners vehemently deny ownership by petitioner Josefa Po
was directed to submit evidence as to the ownership of Pacita Lam, it is most telling that they continue to withhold evidence
of the hotel and restaurant, considering the testimonies of which would shed more light on this issue. We therefore agree
[respondents], the former should [have] submitted the lease with the CA that the failure to submit could only mean that if
contract between the owner of the building where Mayon Hotel produced, it would have been adverse to petitioners' case.37
and Restaurant was located at Rizal St., Legazpi City and Pacita
Po to clearly establish ownership by the latter of said enterprise. Thus, we find that there is substantial evidence to rule that
Josefa failed. We are not surprised why some employers petitioner Josefa Po Lam is the owner of petitioner Mayon
employ schemes to mislead Us in order to evade liabilities. We Hotel & Restaurant.
therefore consider and hold Josefa Po Lam as the
owner/proprietor of Mayon Hotel and Restaurant and the proper 2. Illegal Dismissal: claim for separation pay
respondent in these cases.28
Of the sixteen employees, only the following filed a case for
Petitioners' reliance on the rules of evidence, i.e., the certificate illegal dismissal: respondents Loveres, Llarena, Nicerio,
of registration being the best proof of ownership, is misplaced. Macandog, Guades, Atractivo and Broola.38
Notwithstanding the certificate of registration, doubts were cast
as to the true nature of petitioner Josefa Po Lam's involvement The Labor Arbiter found that there was illegal dismissal, and
in the enterprise, and the Labor Arbiter had the authority to granted separation pay to respondents Loveres, Macandog and
resolve this issue. It was therefore within his jurisdiction to Llarena. As respondents Guades, Nicerio and Alamares were
require the additional documents to ascertain who was the real already 79, 66 and 65 years old respectively at the time of the
owner of petitioner Mayon Hotel & Restaurant. dismissal, the Labor Arbiter granted retirement benefits
pursuant to Article 287 of the Labor Code as amended.39 The confounds us, therefore, how the NLRC could have so
Labor Arbiter ruled that respondent Atractivo was not entitled cavalierly treated this uncontroverted factual finding by ruling
to separation pay because he had been transferred to work in the that respondents have not introduced any evidence to show that
restaurant operations in Elizondo Street, but awarded him they were illegally dismissed, and that the Labor Arbiter's
damages. Respondents Loveres, Llarena, Nicerio, Macandog finding was based on conjecture.46 It was a serious error that
and Guades were also awarded damages.40 the NLRC did not inquire as to the legality of the cessation of
employment. Article 286 of the Labor Code is clear there is
The NLRC reversed the Labor Arbiter, finding that "no clear termination of employment when an otherwise bona fide
act of termination is attendant in the case at bar" and that suspension of work exceeds six (6) months.47 The cessation of
respondents "did not submit any evidence to that effect, but the employment for more than six months was patent and the
finding and conclusion of the Labor Arbiter [are] merely based employer has the burden of proving that the termination was for
on his own surmises and conjectures."41 In turn, the NLRC was a just or authorized cause.48
reversed by the CA.
Moreover, we are not impressed by any of petitioners' attempts
It is petitioners contention that the CA should have sustained to exculpate themselves from the charges. First, in the
the NLRC finding that none of the above-named respondents proceedings with the Labor Arbiter, they claimed that it could
were illegally dismissed, or entitled to separation or retirement not be illegal dismissal because the lay-off was merely
pay. According to petitioners, even the Labor Arbiter and the temporary (and due to the expiration of the lease contract over
CA admit that when the illegal dismissal case was filed by the old premises of the hotel). They specifically invoked Article
respondents on April 1997, they had as yet no cause of action. 286 of the Labor Code to argue that the claim for separation pay
Petitioners therefore conclude that the filing by respondents of was premature and without legal and factual basis.49 Then,
the illegal dismissal case was premature and should have been because the Labor Arbiter had ruled that there was already
dismissed outright by the Labor Arbiter.42 Petitioners also illegal dismissal when the lay-off had exceeded the six-month
claim that since the validity of respondents' dismissal is a period provided for in Article 286, petitioners raise this novel
factual question, it is not for the reviewing court to weigh the argument, to wit:
conflicting evidence.43
It is the firm but respectful submission of petitioners that
We do not agree. Whether respondents are still working for reliance on Article 286 of the Labor Code is misplaced,
petitioners is a factual question. And the records are considering that the reason why private respondents were out of
unequivocal that since April 1997, when petitioner Mayon work was not due to the fault of petitioners. The failure of
Hotel & Restaurant suspended its hotel operations and petitioners to reinstate the private respondents to their former
transferred its restaurant operations in Elizondo Street, positions should not likewise be attributable to said petitioners
respondents Loveres, Macandog, Llarena, Guades and Nicerio as the private respondents did not submit any evidence to prove
have not been permitted to work for petitioners. Respondent their alleged illegal dismissal. The petitioners cannot discern
Alamares, on the other hand, was also laid-off when the why they should be made liable to the private respondents for
Elizondo Street operations closed, as were all the other their failure to be reinstated considering that the fact that they
respondents. Since then, respondents have not been permitted were out of work was not due to the fault of petitioners but due
to work nor recalled, even after the construction of the new to circumstances beyond the control of petitioners, which are
premises at Pearanda Street and the reopening of the hotel the termination and non-renewal of the lease contract over the
operations with the restaurant in this new site. As stated by the subject premises. Private respondents, however, argue in their
Joint Decision of the Labor Arbiter on July 2000, or more than Comment that petitioners themselves sought the application of
three (3) years after the complaint was filed:44 Article 286 of the Labor Code in their case in their Position
Paper filed before the Labor Arbiter. In refutation, petitioners
[F]rom the records, more than six months had lapsed without humbly submit that even if they invoke Article 286 of the Labor
[petitioner] having resumed operation of the hotel. After more Code, still the fact remains, and this bears stress and emphasis,
than one year from the temporary closure of Mayon Hotel and that the temporary suspension of the operations of the
the temporary transfer to another site of Mayon Restaurant, the establishment arising from the non-renewal of the lease contract
building which [petitioner] Josefa allege[d] w[h]ere the hotel did not result in the termination of employment of private
and restaurant will be transferred has been finally constructed respondents and, therefore, the petitioners cannot be faulted if
and the same is operated as a hotel with bar and restaurant said private respondents were out of work, and consequently,
nevertheless, none of [respondents] herein who were employed they are not entitled to their money claims against the
at Mayon Hotel and Restaurant which was also closed on April petitioners.50
30, 1998 was/were recalled by [petitioner] to continue their
services... It is confounding how petitioners have fashioned their
arguments. After having admitted, in effect, that respondents
Parenthetically, the Labor Arbiter did not grant separation pay have been laid-off since April 1997, they would have this Court
to the other respondents as they had not filed an amended excuse their refusal to reinstate respondents or grant them
complaint to question the cessation of their employment after separation pay because these same respondents purportedly
the closure of Mayon Hotel & Restaurant on March 31, 1997.45 have not proven the illegality of their dismissal.

The above factual finding of the Labor Arbiter was never Petitioners' arguments reflect their lack of candor and the
refuted by petitioners in their appeal with the NLRC. It blatant attempt to use technicalities to muddle the issues and
defeat the lawful claims of their employees. First, petitioners mismanagement.56 The vehemence of petitioners' accusation
admit that since April 1997, when hotel operations were of mismanagement against respondents, especially against
suspended due to the termination of the lease of the old Loveres, is inconsistent with the desire to recall them to work.
premises, respondents Loveres, Macandog, Llarena, Nicerio Fourth, petitioners' memorandum on appeal also averred that
and Guades have not been permitted to work. Second, even after the case was filed "not because of the business being operated
six months of what should have been just a temporary lay-off, by them or that they were supposedly not receiving benefits
the same respondents were still not recalled to work. As a matter from the Labor Code which is true, but because of the fact that
of fact, the Labor Arbiter even found that as of the time when the source of their livelihood, whether legal or immoral, was
he rendered his Joint Decision on July 2000 or more than stopped on March 31, 1997, when the owner of the building
three (3) years after the supposed "temporary lay-off," the terminated the Lease Contract."57 Fifth, petitioners had
employment of all of the respondents with petitioners had inconsistencies in their pleadings (with the NLRC, CA and with
ceased, notwithstanding that the new premises had been this Court) in referring to the closure,58 i.e., in the petition filed
completed and the same operated as a hotel with bar and with this court, they assert that there is no illegal dismissal
restaurant. This is clearly dismissal or the permanent because there was "only a temporary cessation or suspension of
severance or complete separation of the worker from the service operations of the hotel and restaurant due to circumstances
on the initiative of the employer regardless of the reasons beyond the control of petitioners, and that is, the non-renewal
therefor.51 of the lease contract..."59 And yet, in the same petition, they
also assert that: (a) the separation of respondents was due to
On this point, we note that the Labor Arbiter and the CA are in severe financial losses and reverses leading to the closure of the
accord that at the time of the filing of the complaint, business; and (b) petitioner Pacita Po had to close shop and was
respondents had no cause of action to file the case for illegal bankrupt and has no liquidity to put up her own building to
dismissal. According to the CA and the Labor Arbiter, the lay- house Mayon Hotel & Restaurant.60 Sixth, and finally, the
off of the respondents was merely temporary, pending uncontroverted finding of the Labor Arbiter that petitioners
construction of the new building at Pearanda Street.52 terminated all the other respondents, by not employing them
when the Hotel and Restaurant transferred to its new site on
While the closure of the hotel operations in April of 1997 may Pearanda Street.61 Indeed, in this same memorandum,
have been temporary, we hold that the evidence on record belie petitioners referred to all respondents as "former employees of
any claim of petitioners that the lay-off of respondents on that Mayon Hotel & Restaurant."62
same date was merely temporary. On the contrary, we find
substantial evidence that petitioners intended the termination to These factors may be inconclusive individually, but when taken
be permanent. First, respondents Loveres, Macandog, Llarena, together, they lead us to conclude that petitioners really
Guades, Nicerio and Alamares filed the complaint for illegal intended to dismiss all respondents and merely used the
dismissal immediately after the closure of the hotel operations termination of the lease (on Rizal Street premises) as a means
in Rizal Street, notwithstanding the alleged temporary nature of by which they could terminate their employees.
the closure of the hotel operations, and petitioners' allegations
that the employees assigned to the hotel operations knew about Moreover, even assuming arguendo that the cessation of
this beforehand. Second, in their position paper submitted to the employment on April 1997 was merely temporary, it became
Labor Arbiter, petitioners invoked Article 286 of the Labor dismissal by operation of law when petitioners failed to
Code to assert that the employer-employee relationship was reinstate respondents after the lapse of six (6) months, pursuant
merely suspended, and therefore the claim for separation pay to Article 286 of the Labor Code.
was premature and without legal or factual basis.53 But they
made no mention of any intent to recall these respondents to We are not impressed by petitioners' claim that severe business
work upon completion of the new premises. Third, the various losses justified their failure to reinstate respondents. The
pleadings on record show that petitioners held respondents, evidence to prove this fact is inconclusive. But more important,
particularly Loveres, as responsible for mismanagement of the serious business losses do not excuse the employer from
establishment and for abuse of trust and confidence. Petitioner complying with the clearance or report required under Article
Josefa Po Lam's affidavit on July 21, 1998, for example, 283 of the Labor Code and its implementing rules before
squarely blamed respondents, specifically Loveres, Bumalay terminating the employment of its workers.63 In the absence of
and Camigla, for abusing her leniency and causing petitioner justifying circumstances, the failure of petitioners to observe
Mayon Hotel & Restaurant to sustain "continuous losses until it the procedural requirements set out under Article 284, taints
is closed." She then asserts that respondents "are not entitled to their actuations with bad faith, especially since they claimed
separation pay for they were not terminated and if ever the that they have been experiencing losses in the three years before
business ceased to operate it was because of losses."54 Again, 1997. To say the least, if it were true that the lay-off was
petitioners make the same allegation in their memorandum on temporary but then serious business losses prevented the
appeal with the NLRC, where they alleged that three (3) years reinstatement of respondents, then petitioners should have
prior to the expiration of the lease in 1997, the operation of the complied with the requirements of written notice. The
Hotel had been sustaining consistent losses, and these were requirement of law mandating the giving of notices was
solely attributed to respondents, but most especially due to intended not only to enable the employees to look for another
Loveres's mismanagement and abuse of petitioners' trust and employment and therefore ease the impact of the loss of their
confidence.55 Even the petition filed in this court made jobs and the corresponding income, but more importantly, to
reference to the separation of the respondents due to "severe give the Department of Labor and Employment (DOLE) the
financial losses and reverses," again imputing it to respondents'
opportunity to ascertain the verity of the alleged authorized of the respondents have been paid.74 The CA thus reinstated
cause of termination.64 the Labor Arbiter's grant of respondents' monetary claims,
including damages.
And even assuming that the closure was due to a reason beyond
the control of the employer, it still has to accord its employees Petitioners assail this ruling by repeating their long and
some relief in the form of severance pay.65 convoluted argument that as there was no illegal dismissal, then
respondents are not entitled to their monetary claims or
While we recognize the right of the employer to terminate the separation pay and damages. Petitioners' arguments are not only
services of an employee for a just or authorized cause, the tiring, repetitive and unconvincing, but confusing and confused
dismissal of employees must be made within the parameters of entitlement to labor standard benefits is a separate and
law and pursuant to the tenets of fair play.66 And in termination distinct concept from payment of separation pay arising from
disputes, the burden of proof is always on the employer to prove illegal dismissal, and are governed by different provisions of
that the dismissal was for a just or authorized cause.67 Where the Labor Code.
there is no showing of a clear, valid and legal cause for
termination of employment, the law considers the case a matter We agree with the CA and the Labor Arbiter. Respondents have
of illegal dismissal.68 set out with particularity in their complaint, position paper,
affidavits and other documents the labor standard benefits they
Under these circumstances, the award of damages was proper. are entitled to, and which they alleged that petitioners have
As a rule, moral damages are recoverable where the dismissal failed to pay them. It was therefore petitioners' burden to prove
of the employee was attended by bad faith or fraud or that they have paid these money claims. One who pleads
constituted an act oppressive to labor, or was done in a manner payment has the burden of proving it, and even where the
contrary to morals, good customs or public policy.69 We employees must allege nonpayment, the general rule is that the
believe that the dismissal of the respondents was attended with burden rests on the defendant to prove nonpayment, rather than
bad faith and meant to evade the lawful obligations imposed on the plaintiff to prove non payment.75 This petitioners failed
upon an employer. to do.

To rule otherwise would lead to the anomaly of respondents We also agree with the Labor Arbiter and the CA that the
being terminated from employment in 1997 as a matter of fact, documents petitioners submitted, i.e., affidavits executed by
but without legal redress. This runs counter to notions of fair some of respondents during an ocular inspection conducted by
play, substantial justice and the constitutional mandate that an inspector of the DOLE; notices of inspection result and
labor rights should be respected. If doubts exist between the Facility Evaluation Orders issued by DOLE, are not sufficient
evidence presented by the employer and the employee, the to prove payment.76 Despite repeated orders from the Labor
scales of justice must be tilted in favor of the latter the Arbiter,77 petitioners failed to submit the pertinent employee
employer must affirmatively show rationally adequate evidence files, payrolls, records, remittances and other similar documents
that the dismissal was for a justifiable cause.70 It is a time- which would show that respondents rendered work entitling
honored rule that in controversies between a laborer and his them to payment for overtime work, night shift differential,
master, doubts reasonably arising from the evidence, or in the premium pay for work on holidays and rest day, and payment
interpretation of agreements and writing should be resolved in of these as well as the COLA and the SILP documents which
the former's favor.71 The policy is to extend the doctrine to a are not in respondents' possession but in the custody and
greater number of employees who can avail of the benefits absolute control of petitioners.78 By choosing not to fully and
under the law, which is in consonance with the avowed policy completely disclose information and present the necessary
of the State to give maximum aid and protection of labor.72 documents to prove payment of labor standard benefits due to
respondents, petitioners failed to discharge the burden of
We therefore reinstate the Labor Arbiter's decision with the proof.79 Indeed, petitioners' failure to submit the necessary
following modifications: documents which as employers are in their possession, inspite
of orders to do so, gives rise to the presumption that their
(a) Separation pay for the illegal dismissal of respondents presentation is prejudicial to its cause.80 As aptly quoted by the
Loveres, Macandog and Llarena; (Santos Broola cannot be CA:
granted separation pay as he made no such claim);
[W]hen the evidence tends to prove a material fact which
(b) Retirement pay for respondents Guades, Nicerio, and imposes a liability on a party, and he has it in his power to
Alamares, who at the time of dismissal were entitled to their produce evidence which from its very nature must overthrow
retirement benefits pursuant to Article 287 of the Labor Code the case made against him if it is not founded on fact, and he
as amended;73 and refuses to produce such evidence, the presumption arises that
the evidence, if produced, would operate to his prejudice, and
(c) Damages for respondents Loveres, Macandog, Llarena, support the case of his adversary.81
Guades, Nicerio, Atractivo, and Broola.
Petitioners next claim that the cost of the food and snacks
3. Money claims provided to respondents as facilities should have been included
in reckoning the payment of respondents' wages. They state that
The CA held that contrary to the NLRC's ruling, petitioners had although on the surface respondents appeared to receive
not discharged the burden of proving that the monetary claims minimal wages, petitioners had granted respondents other
benefits which are considered part and parcel of their wages and ruled that the cost of the meals actually provided to respondents
are allowed under existing laws.82 They claim that these should be deducted as part of their salaries, on the ground that
benefits make up for whatever inadequacies there may be in respondents have availed themselves of the food given by
compensation.83 Specifically, they invoked Sections 5 and 6, petitioners.90 The law is clear that mere availment is not
Rule VII-A, which allow the deduction of facilities provided by sufficient to allow deductions from employees' wages.
the employer through an appropriate Facility Evaluation Order
issued by the Regional Director of the DOLE.84 Petitioners More important, we note the uncontroverted testimony of
also aver that they give five (5) percent of the gross income each respondents on record that they were required to eat in the hotel
month as incentives. As proof of compliance of payment of and restaurant so that they will not go home and there is no
minimum wages, petitioners submitted the Notice of Inspection interruption in the services of Mayon Hotel & Restaurant. As
Results issued in 1995 and 1997 by the DOLE Regional ruled in Mabeza, food or snacks or other convenience provided
Office.85 by the employers are deemed as supplements if they are granted
for the convenience of the employer. The criterion in making a
The cost of meals and snacks purportedly provided to distinction between a supplement and a facility does not so
respondents cannot be deducted as part of respondents' much lie in the kind (food, lodging) but the purpose.91
minimum wage. As stated in the Labor Arbiter's decision:86 Considering, therefore, that hotel workers are required to work
different shifts and are expected to be available at various odd
While [petitioners] submitted Facility Evaluation Orders (pp. hours, their ready availability is a necessary matter in the
468, 469; vol. II, rollo) issued by the DOLE Regional Office operations of a small hotel, such as petitioners' business.92 The
whereby the cost of meals given by [petitioners] to deduction of the cost of meals from respondents' wages,
[respondents] were specified for purposes of considering the therefore, should be removed.
same as part of their wages, We cannot consider the cost of
meals in the Orders as applicable to [respondents]. We also do not agree with petitioners that the five (5) percent
[Respondents] were not interviewed by the DOLE as to the of the gross income of the establishment can be considered as
quality and quantity of food appearing in the applications of part of the respondents' wages. We quote with approval the
[petitioners] for facility evaluation prior to its approval to Labor Arbiter on this matter, to wit:
determine whether or not [respondents] were indeed given such
kind and quantity of food. Also, there was no evidence that the While complainants, who were employed in the hotel,
quality and quantity of food in the Orders were voluntarily receive[d] various amounts as profit share, the same cannot be
accepted by [respondents]. On the contrary; while some [of the considered as part of their wages in determining their claims for
respondents] admitted that they were given meals and violation of labor standard benefits. Although called profit
merienda, the quality of food serve[d] to them were not what share[,] such is in the nature of share from service charges
were provided for in the Orders and that it was only when they charged by the hotel. This is more explained by [respondents]
filed these cases that they came to know about said Facility when they testified that what they received are not fixed
Evaluation Orders (pp. 100; 379[,] vol. II, rollo; p. 40, tsn[,] amounts and the same are paid not on a monthly basis (pp. 55,
June 19, 1998). [Petitioner] Josefa herself, who applied for 93, 94, 103, 104; vol. II, rollo). Also, [petitioners] failed to
evaluation of the facility (food) given to [respondents], testified submit evidence that the amounts received by [respondents] as
that she did not inform [respondents] concerning said Facility profit share are to be considered part of their wages and had
Evaluation Orders (p. 34, tsn[,] August 13, 1998). been agreed by them prior to their employment. Further, how
can the amounts receive[d] by [respondents] be considered as
Even granting that meals and snacks were provided and indeed profit share when the same [are] based on the gross receipt of
constituted facilities, such facilities could not be deducted the hotel[?] No profit can as yet be determined out of the gross
without compliance with certain legal requirements. As stated receipt of an enterprise. Profits are realized after expenses are
in Mabeza v. NLRC,87 the employer simply cannot deduct the deducted from the gross income.
value from the employee's wages without satisfying the
following: (a) proof that such facilities are customarily On the issue of the proper minimum wage applicable to
furnished by the trade; (b) the provision of deductible facilities respondents, we sustain the Labor Arbiter. We note that
is voluntarily accepted in writing by the employee; and (c) the petitioners themselves have admitted that the establishment
facilities are charged at fair and reasonable value. The records employs "more or less sixteen (16) employees,"93 therefore
are clear that petitioners failed to comply with these they are estopped from claiming that the applicable minimum
requirements. There was no proof of respondents' written wage should be for service establishments employing 15
authorization. Indeed, the Labor Arbiter found that while the employees or less.
respondents admitted that they were given meals and merienda,
the quality of food served to them was not what was provided As for petitioners repeated invocation of serious business
for in the Facility Evaluation Orders and it was only when they losses, suffice to say that this is not a defense to payment of
filed the cases that they came to know of this supposed Facility labor standard benefits. The employer cannot exempt himself
Evaluation Orders.88 Petitioner Josefa Po Lam herself admitted from liability to pay minimum wages because of poor financial
that she did not inform the respondents of the facilities she had condition of the company. The payment of minimum wages is
applied for.89 not dependent on the employer's ability to pay.94

Considering the failure to comply with the above-mentioned Thus, we reinstate the award of monetary claims granted by the
legal requirements, the Labor Arbiter therefore erred when he Labor Arbiter.
4. Conclusion (6) Granting attorney's fees of P10,000.00 each to all
respondents.
There is no denying that the actuations of petitioners in this case
have been reprehensible. They have terminated the respondents' The case is REMANDED to the Labor Arbiter for the
employment in an underhanded manner, and have used and RECOMPUTATION of the total monetary benefits awarded
abused the quasi-judicial and judicial processes to resist and due to the employees concerned in accordance with the
payment of their employees' rightful claims, thereby protracting decision. The Labor Arbiter is ORDERED to submit his
this case and causing the unnecessary clogging of dockets of the compliance thereon within thirty (30) days from notice of this
Court. They have also forced respondents to unnecessary decision, with copies furnished to the parties.
hardship and financial expense. Indeed, the circumstances of
this case would have called for exemplary damages, as the SO ORDERED.
dismissal was effected in a wanton, oppressive or malevolent
manner,95 and public policy requires that these acts must be Mabeza vs NLRC
suppressed and discouraged.96 KAPUNAN, J.:

Nevertheless, we cannot agree with the Labor Arbiter in This petition seeking the nullification of a resolution of public
granting exemplary damages of P10,000.00 each to all respondent National Labor Relations Commission dated April
respondents. While it is true that other forms of damages under 28, 1994 vividly illustrates why courts should be ever vigilant
the Civil Code may be awarded to illegally dismissed in the preservation of the constitutionally enshrined rights of the
employees,97 any award of moral damages by the Labor working class. Without the protection accorded by our laws and
Arbiter cannot be based on the Labor Code but should be the tempering of courts, the natural and historical inclination of
grounded on the Civil Code.98 And the law is clear that capital to ride roughshod over the rights of labor would run
exemplary damages can only be awarded if plaintiff shows unabated.
proof that he is entitled to moral, temperate or compensatory
damages.99 The facts of the case at bar, culled from the conflicting versions
of petitioner and private respondent, are illustrative.
As only respondents Loveres, Guades, Macandog, Llarena,
Nicerio, Atractivo and Broola specifically claimed damages Petitioner Norma Mabeza contends that around the first week
from petitioners, then only they are entitled to exemplary of May, 1991, she and her co-employees at the Hotel Supreme
damages.sjgs1 in Baguio City were asked by the hotel's management to sign
an instrument attesting to the latter's compliance with minimum
Finally, we rule that attorney's fees in the amount to P10,000.00 wage and other labor standard provisions of law. 1 The
should be granted to each respondent. It is settled that in actions instrument provides: 2
for recovery of wages or where an employee was forced to
litigate and incur expenses to protect his rights and interest, he JOINT AFFIDAVIT
is entitled to an award of attorney's fees.100 This case
undoubtedly falls within this rule. We, SYLVIA IGANA, HERMINIGILDO AQUINO,
EVELYN OGOY, MACARIA JUGUETA, ADELAIDA
IN VIEW WHEREOF, the petition is hereby DENIED. The NONOG, NORMA MABEZA, JONATHAN PICART and
Decision of January 17, 2003 of the Court of Appeals in CA- JOSE DIZON, all of legal ages (sic), Filipinos and residents of
G.R. SP No. 68642 upholding the Joint Decision of July 14, Baguio City, under oath, depose and say:
2000 of the Labor Arbiter in RAB V Case Nos. 04-00079-97
and 04-00080-97 is AFFIRMED, with the following 1. That we are employees of Mr. Peter L. Ng of his Hotel
MODIFICATIONS: Supreme situated at No. 416 Magsaysay Ave., Baguio City.

(1) Granting separation pay of one-half (1/2) month for every 2. That the said Hotel is separately operated from the
year of service to respondents Loveres, Macandog and Llarena; Ivy's Grill and Restaurant;

(2) Granting retirement pay for respondents Guades, Nicerio, 3. That we are all (8) employees in the hotel and assigned
and Alamares; in each respective shifts;

(3) Removing the deductions for food facility from the amounts 4. That we have no complaints against the management
due to all respondents; of the Hotel Supreme as we are paid accordingly and that we
are treated well.
(4) Awarding moral damages of P20,000.00 each for
respondents Loveres, Macandog, Llarena, Guades, Nicerio, 5. That we are executing this affidavit voluntarily
Atractivo, and Broola; without any force or intimidation and for the purpose of
informing the authorities concerned and to dispute the alleged
(5) Deleting the award of exemplary damages of P10,000.00 report of the Labor Inspector of the Department of Labor and
from all respondents except Loveres, Macandog, Llarena, Employment conducted on the said establishment on February
Guades, Nicerio, Atractivo, and Broola; and 2, 1991.
 1991, the private respondent asserted that his employees
IN WITNESS WHEREOF, we have hereunto set our hands this actually have no problems with management. In a supplemental
7th day of May, 1991 at Baguio City, Philippines. answer submitted eleven (11) months after the original
complaint for illegal dismissal was filed, private respondent
(Sgd.) (Sgd.) (Sgd.) raised a new ground, loss of confidence, which was supported
SYLVIA IGAMA HERMINIGILDO AQUINO by a criminal complaint for Qualified Theft he filed before the
EVELYN OGOY prosecutor's office of the City of Baguio against petitioner on
July 4, 1991. 8
(Sgd.) (Sgd.) (Sgd.)
MACARIA JUGUETA ADELAIDA NONOG On May 14, 1993, Labor Arbiter Pati rendered a decision
NORMA MABEZA. dismissing petitioner's complaint on the ground of loss of
confidence. His disquisitions in support of his conclusion read
(Sgd.) (Sgd.) as follows:
JONATHAN PICART JOSE DIZON
It appears from the evidence of respondent that complainant
SUBSCRIBED AND SWORN to before me this 7th day of carted away or stole one (1) blanket, 1 piece bedsheet, 1 piece
May, 1991, at Baguio City, Philippines. thermos, 2 pieces towel (Exhibits "9", "9-A," "9-B," "9-C" and
"10" pages 12-14 TSN, December 1, 1992).
Asst. City Prosecutor
In fact, this was the reason why respondent Peter Ng lodged a
Petitioner signed the affidavit but refused to go to the City criminal complaint against complainant for qualified theft and
Prosecutor's Office to swear to the veracity and contents of the perjury. The fiscal's office finding a prima facie evidence that
affidavit as instructed by management. The affidavit was complainant committed the crime of qualified theft issued a
nevertheless submitted on the same day to the Regional Office resolution for its filing in court but dismissing the charge of
of the Department of Labor and Employment in Baguio City. perjury (Exhibit "4" for respondent and Exhibit "B-7" for
complainant). As a consequence, complainant was charged in
As gleaned from the affidavit, the same was drawn by court for the said crime (Exhibit "5" for respondent and Exhibit
management for the sole purpose of refuting findings of the "B-6" for the complainant).
Labor Inspector of DOLE (in an inspection of respondent's
establishment on February 2, 1991) apparently adverse to the With these pieces of evidence, complainant committed serious
private respondent. 3 misconduct against her employer which is one of the just and
valid grounds for an employer to terminate an employee
After she refused to proceed to the City Prosecutor's Office (Article 282 of the Labor Code as amended). 9
on the same day the affidavit was submitted to the Cordillera
Regional Office of DOLE petitioner avers that she was On April 28, 1994, respondent NLRC promulgated its assailed
ordered by the hotel management to turn over the keys to her Resolution 10 affirming the Labor Arbiter's decision. The
living quarters and to remove her belongings from the hotel resolution substantially incorporated the findings of the Labor
premises. 4 According to her, respondent strongly chided her Arbiter. 11 Unsatisfied, petitioner instituted the instant special
for refusing to proceed to the City Prosecutor's Office to attest civil action for certiorari under Rule 65 of the Rules of Court
to the affidavit. 5 She thereafter reluctantly filed a leave of on the following grounds: 12
absence from her job which was denied by management. When
she attempted to return to work on May 10, 1991, the hotel's 1. WITH ALL DUE RESPECT, THE HONORABLE
cashier, Margarita Choy, informed her that she should not NATIONAL LABOR RELATIONS COMMISSION
report to work and, instead, continue with her unofficial leave COMMITTED A PATENT AND PALPABLE ERROR
of absence. Consequently, on May 13, 1991, three days after AMOUNTING TO GRAVE ABUSE OF DISCRETION IN
her attempt to return to work, petitioner filed a complaint for ITS FAILURE TO CONSIDER THAT THE ALLEGED LOSS
illegal dismissal before the Arbitration Branch of the National OF CONFIDENCE IS A FALSE CAUSE AND AN
Labor Relations Commission CAR Baguio City. In addition AFTERTHOUGHT ON THE PART OF THE RESPONDENT-
to her complaint for illegal dismissal, she alleged underpayment EMPLOYER TO JUSTIFY, ALBEIT ILLEGALLY, THE
of wages, non-payment of holiday pay, service incentive leave DISMISSAL OF THE COMPLAINANT FROM HER
pay, 13th month pay, night differential and other benefits. The EMPLOYMENT;
complaint was docketed as NLRC Case No. RAB-CAR-05-
0198-91 and assigned to Labor Arbiter Felipe P. Pati. 2. WITH ALL DUE RESPECT, THE HONORABLE
NATIONAL LABOR RELATIONS COMMISSION
Responding to the allegations made in support of petitioner's COMMITTED A PATENT AND PALPABLE ERROR
complaint for illegal dismissal, private respondent Peter Ng AMOUNTING TO GRAVE ABUSE OF DISCRETION IN
alleged before Labor Arbiter Pati that petitioner "surreptitiously ADOPTING THE RULING OF THE LABOR ARBITER
left (her job) without notice to the management" 6 and that she THAT THERE WAS NO UNDERPAYMENT OF WAGES
actually abandoned her work. He maintained that there was no AND BENEFITS ON THE BASIS OF EXHIBIT "8" (AN
basis for the money claims for underpayment and other benefits UNDATED SUMMARY OF COMPUTATION PREPARED
as these were paid in the form of facilities to petitioner and the BY ALLEGEDLY BY RESPONDENT'S EXTERNAL
hotel's other employee. 7 Pointing to the Affidavit of May 7, ACCOUNTANT) WHICH IS TOTALLY INADMISSIBLE
AS AN EVIDENCE TO PROVE PAYMENT OF WAGES the private respondent's claim that petitioner abandoned her job.
AND BENEFITS; As the Solicitor General in his manifestation observed:

3. WITH ALL DUE RESPECT, THE HONORABLE Petitioner's absence on that day should not be construed as
NATIONAL LABOR RELATIONS COMMISSION abandonment of her job. She did not report because the cashier
COMMITTED A PATENT AND PALPABLE ERROR told her not to report anymore, and that private respondent Ng
AMOUNTING TO GRAVE ABUSE OF DISCRETION IN did not want to see her in the hotel premises. But two days later
FAILING TO CONSIDER THE EVIDENCE ADDUCED or on the 10th of May, after realizing that she had to clarify her
BEFORE THE LABOR ARBITER AS CONSTITUTING employment status, she again reported for work. However, she
UNFAIR LABOR PRACTICE COMMITTED BY THE was prevented from working by private respondents. 19
RESPONDENT.
We now come to the second cause raised by private respondent
The Solicitor General, in a Manifestation in lieu of Comment to support his contention that petitioner was validly dismissed
dated August 8, 1995 rejects private respondent's principal from her job.
claims and defenses and urges this Court to set aside the public
respondent's assailed resolution. 13 Loss of confidence as a just cause for dismissal was never
intended to provide employers with a blank check for
We agree. terminating their employees. Such a vague, all-encompassing
pretext as loss of confidence, if unqualifiedly given the seal of
It is settled that in termination cases the employer bears the approval by this Court, could readily reduce to barren form the
burden of proof to show that the dismissal is for just cause, the words of the constitutional guarantee of security of tenure.
failure of which would mean that the dismissal is not justified Having this in mind, loss of confidence should ideally apply
and the employee is entitled to reinstatement. 14 only to cases involving employees occupying positions of trust
and confidence or to those situations where the employee is
In the case at bar, the private respondent initially claimed that routinely charged with the care and custody of the employer's
petitioner abandoned her job when she failed to return to work money or property. To the first class belong managerial
on May 8, 1991. Additionally, in order to strengthen his employees, i.e., those vested with the powers or prerogatives to
contention that there existed sufficient cause for the termination lay down management policies and/or to hire, transfer, suspend,
of petitioner, he belatedly included a complaint for loss of lay-off, recall, discharge, assign or discipline employees or
confidence, supporting this with charges that petitioner had effectively recommend such managerial actions; and to the
stolen a blanket, a bedsheet and two towels from the hotel. 15 second class belong cashiers, auditors, property custodians,
Appended to his last complaint was a suit for qualified theft etc., or those who, in the normal and routine exercise of their
filed with the Baguio City prosecutor's office. functions, regularly handle significant amounts of money or
property. Evidently, an ordinary chambermaid who has to sign
From the evidence on record, it is crystal clear that the out for linen and other hotel property from the property
circumstances upon which private respondent anchored his custodian each day and who has to account for each and every
claim that petitioner "abandoned" her job were not enough to towel or bedsheet utilized by the hotel's guests at the end of her
constitute just cause to sanction the termination of her services shift would not fall under any of these two classes of employees
under Article 283 of the Labor Code. For abandonment to arise, for which loss of confidence, if ably supported by evidence,
there must be concurrence of two things: 1) lack of intention to would normally apply. Illustrating this distinction, this Court in
work; 16 and 2) the presence of overt acts signifying the Marina Port Services, Inc. vs. NLRC, 20 has stated that:
employee's intention not to work. 17
To be sure, every employee must enjoy some degree of trust
In the instant case, respondent does not dispute the fact that and confidence from the employer as that is one reason why he
petitioner tried to file a leave of absence when she learned that was employed in the first place. One certainly does not employ
the hotel management was displeased with her refusal to attest a person he distrusts. Indeed, even the lowly janitor must enjoy
to the affidavit. The fact that she made this attempt clearly that trust and confidence in some measure if only because he is
indicates not an intention to abandon but an intention to return the one who opens the office in the morning and closes it at
to work after the period of her leave of absence, had it been night and in this sense is entrusted with the care or protection
granted, shall have expired. of the employer's property. The keys he holds are the symbol of
that trust and confidence.
Furthermore, while absence from work for a prolonged period
may suggest abandonment in certain instances, mere absence of By the same token, the security guard must also be considered
one or two days would not be enough to sustain such a claim. as enjoying the trust and confidence of his employer, whose
The overt act (absence) ought property he is safeguarding. Like the janitor, he has access to
to unerringly point to the fact that the employee has no intention this property. He too, is charged with its care and protection.
to return to work, 18 which is patently not the case here. In fact,
several days after she had been advised to take an informal Notably, however, and like the janitor again, he is entrusted
leave, petitioner tried to resume working with the hotel, to no only with the physical task of protecting that property. The
avail. It was only after she had been repeatedly rebuffed that employer's trust and confidence in him is limited to that
she filed a case for illegal dismissal. These acts militate against ministerial function. He is not entrusted, in the Labor Arbiter's
words, with the duties of safekeeping and safeguarding
company policies, management instructions, and company practice. The first act clearly preempts the right of the hotel's
secrets such as operation devices. He is not privy to these workers to seek better terms and conditions of employment
confidential matters, which are shared only in the higher through concerted action.
echelons of management. It is the persons on such levels who,
because they discharge these sensitive duties, may be We agree with the Solicitor General's observation in his
considered holding positions of trust and confidence. The manifestation that "[t]his actuation . . . is analogous to the
security guard does not belong in such category. 21 situation envisaged in paragraph (f) of Article 248 of the Labor
Code" 24 which distinctly makes it an unfair labor practice "to
More importantly, we have repeatedly held that loss of dismiss, discharge or otherwise prejudice or discriminate
confidence should not be simulated in order to justify what against an employee for having given or being about to give
would otherwise be, under the provisions of law, an illegal testimony" 25 under the Labor Code. For in not giving positive
dismissal. "It should not be used as a subterfuge for causes testimony in favor of her employer, petitioner had reserved not
which are illegal, improper and unjustified. It must be genuine, only her right to dispute the claim and proffer evidence in
not a mere afterthought to justify an earlier action taken in bad support thereof but also to work for better terms and conditions
faith." 22 of employment.

In the case at bar, the suspicious delay in private respondent's For refusing to cooperate with the private respondent's scheme,
filing of qualified theft charges against petitioner long after the petitioner was obviously held up as an example to all of the
latter exposed the hotel's scheme (to avoid its obligations as hotel's employees, that they could only cause trouble to
employer under the Labor Code) by her act of filing illegal management at great personal inconvenience. Implicit in the act
dismissal charges against the private respondent would hardly of petitioner's termination and the subsequent filing of charges
warrant serious consideration of loss of confidence as a valid against her was the warning that they would not only be
ground for dismissal. Notably, the Solicitor General has himself deprived of their means of livelihood, but also possibly, their
taken a position opposite the public respondent and has personal liberty.
observed that:
This Court does not normally overturn findings and conclusions
If petitioner had really committed the acts charged against her of quasi-judicial agencies when the same are ably supported by
by private respondents (stealing supplies of respondent hotel), the evidence on record. However, where such conclusions are
private respondents should have confronted her before based on a misperception of facts or where they patently fly in
dismissing her on that ground. Private respondents did not do the face of reason and logic, we will not hesitate to set aside
so. In fact, private respondent Ng did not raise the matter when those conclusions. Going into the issue of petitioner's money
petitioner went to see him on May 9, 1991, and handed him her claims, we find one more salient reason in this case to set things
application for leave. It took private respondents 52 days or up right: the labor arbiter's evaluation of the money claims in this
to July 4, 1991 before finally deciding to file a criminal case incredibly ignores existing law and jurisprudence on the
complaint against petitioner, in an obvious attempt to build a matter. Its blatant one-sidedness simply raises the suspicion that
case against her. something more than the facts, the law and jurisprudence may
have influenced the decision at the level of the Arbiter.
The manipulations of private respondents should not be
countenanced. 23 Labor Arbiter Pati accepted hook, line and sinker the private
respondent's bare claim that the reason the monetary benefits
Clearly, the efforts to justify petitioner's dismissal on top of received by petitioner between 1981 to 1987 were less than
the private respondent's scheme of inducing his employees to minimum wage was because petitioner did not factor in the
sign an affidavit absolving him from possible violations of the meals, lodging, electric consumption and water she received
Labor Code taints with evident bad faith and deliberate during the period in her computations. 26 Granting that meals
malice petitioner's summary termination from employment. and lodging were provided and indeed constituted facilities,
such facilities could not be deducted without the employer
Having said this, we turn to the important question of whether complying first with certain legal requirements. Without
or not the dismissal by the private respondent of petitioner satisfying these requirements, the employer simply cannot
constitutes an unfair labor practice. deduct the value from the employee's ages. First, proof must be
shown that such facilities are customarily furnished by the
The answer in this case must inevitably be in the affirmative. trade. Second, the provision of deductible facilities must be
voluntarily accepted in writing by the employee. Finally,
The pivotal question in any case where unfair labor practice on facilities must be charged at fair and reasonable value. 27
the part of the employer is alleged is whether or not the
employer has exerted pressure, in the form of restraint, These requirements were not met in the instant case. Private
interference or coercion, against his employee's right to institute respondent "failed to present any company policy or guideline
concerted action for better terms and conditions of employment. to show that the meal and lodging . . . (are) part of the salary;"
Without doubt, the act of compelling employees to sign an 28 he failed to provide proof of the employee's written
instrument indicating that the employer observed labor authorization; and, he failed to show how he arrived at the
standards provisions of law when he might have not, together valuations. 29
with the act of terminating or coercing those who refuse to
cooperate with the employer's scheme constitutes unfair labor
Curiously, in the case at bench, the only valuations relied upon informing the employee of the employer's decision to terminate
by the labor arbiter in his decision were figures furnished by the him stating the basis of the dismissal. During the process
private respondent's own accountant, without corroborative leading to the second notice, the employer must give the
evidence. On the pretext that records prior to the July 16, 1990 employee ample opportunity to be heard and defend himself,
earthquake were lost or destroyed, respondent failed to produce with the assistance of counsel if he so desires.
payroll records, receipts and other relevant documents, where
he could have, as has been pointed out in the Solicitor General's Given the seriousness of the second cause (qualified theft) of
manifestation, "secured certified copies thereof from the nearest the petitioner's dismissal, it is noteworthy that the private
regional office of the Department of Labor, the SSS or the BIR." respondent never even bothered to inform petitioner of the
30 charges against her. Neither was petitioner given the
opportunity to explain the loss of the articles. It was only almost
More significantly, the food and lodging, or the electricity and two months after petitioner had filed a complaint for illegal
water consumed by the petitioner were not facilities but dismissal, as an afterthought, that the loss was reported to the
supplements. A benefit or privilege granted to an employee for police and added as a supplemental answer to petitioner's
the convenience of the employer is not a facility. The criterion complaint. Clearly, the dismissal of petitioner without the
in making a distinction between the two not so much lies in the benefit of notice and hearing prior to her termination violated
kind (food, lodging) but the purpose. 31 Considering, therefore, her constitutional right to due process. Under the circumstance
that hotel workers are required to work different shifts and are an award of One Thousand Pesos (P1,000.00) on top of
expected to be available at various odd hours, their ready payment of the deficiency in wages and benefits for the period
availability is a necessary matter in the operations of a small aforestated would be proper.
hotel, such as the private respondent's hotel.
WHEREFORE, premises considered, the RESOLUTION of the
It is therefore evident that petitioner is entitled to the payment National Labor Relations Commission dated April 24, 1994 is
of the deficiency in her wages equivalent to the full wage REVERSED and SET ASIDE, with costs. For clarity, the
applicable from May 13, 1988 up to the date of her illegal economic benefits due the petitioner are hereby summarized as
dismissal. follows:

Additionally, petitioner is entitled to payment of service 1) Deficiency wages and the applicable ECOLA from
incentive leave pay, emergency cost of living allowance, night May 13, 1988 up to the date of petitioner's illegal dismissal;
differential pay, and 13th month pay for the periods alleged by
the petitioner as the private respondent has never been able to 2) Service incentive leave pay; night differential pay and
adduce proof that petitioner was paid the aforestated benefits. 13th month pay for the same period;

However, the claims covering the period of October 1987 up to 3) Separation pay equal to one month's salary for every
the time of filing the case on May 13, 1988 are barred by year of petitioner's continuous service with the private
prescription as P.D. 442 (as amended) and its implementing respondent starting with her job at the Belfront Hotel;
rules limit all money claims arising out of employer-employee
relationship to three (3) years from the time the cause of action 4) Full backwages, without qualification or deduction,
accrues. 32 from the date of petitioner's illegal dismissal up to the date of
promulgation of this decision pursuant to our ruling in
We depart from the settled rule that an employee who is Bustamante vs. NLRC. 34
unjustly dismissed from work normally should be reinstated
without loss of seniority rights and other privileges. Owing to 5) P1,000.00.
the strained relations between petitioner and private respondent,
allowing the former to return to her job would only subject her SO ORDERED.
to possible harassment and future embarrassment. In the instant
case, separation pay equivalent to one month's salary for every Our Haus Realty vs Parian
year of continuous service with the private respondent would BRION, J.:
be proper, starting with her job at the Belfront Hotel.
We resolve in this petition for review on certiorari1 the
In addition to separation pay, backwages are in order. Pursuant challenge to the May 7, 2012 decision2 and the November 27,
to R.A. 6715 and our decision in Osmalik Bustamante, et al. vs. 2012 resolution3 (assailed CA rulings) of the Court of Appeals
National Labor Relations Commission, 33 petitioner is entitled (CA) in CA-G.R. SP No. 123273. These assailed CA rulings
to full backwages from the time of her illegal dismissal up to affirmed the July 20, 2011 decision4 and the December 2, 2011
the date of promulgation of this decision without qualification resolution5 (NLRC rulings) of the National Labor Relations
or deduction. Commission (NLRC) in NLRC LAC No. 02-000489-11
(NLRC NCR Case No. 06-08544-10). The NLRC rulings in
Finally, in dismissal cases, the law requires that the employer turn reversed and set aside the December 10, 2010 decision6 of
must furnish the employee sought to be terminated from the labor arbiter (LA).
employment with two written notices before the same may be
legally effected. The first is a written notice containing a Factual Antecedents
statement of the cause(s) for dismissal; the second is a notice
Respondents Alexander Parian, Jay Erinco, Alexander Canlas,
Jerry Sabulao and Bernardo Tenederowere all laborers working The respondents pointed out that Our Haus never presented any
for petitioner Our Haus Realty Development Corporation (Our proof that they agreed in writing to the inclusion of their meals
Haus), a company engaged in the construction business.The value in their wages.16 Also, Our Haus failed to prove that the
respondents respective employment records and daily wage value of the facilities it furnished was fair and reasonable.17
rates from 2007 to 2010 are summarized in the table7 below: Finally, instead of deducting the maximum amount of 70% of
the value of the meals, Our Haus actually withheld its full value
Name Date Hired Years of Service Year and Place of (which was Php290.00 per week for each employee).18
Assignment Daily Rate
Alexander M. Parian October 1999 10 years 2007- The LA ruled in favor of Our Haus. He held that if the
2010- Quezon City P353.50 reasonable values of the board and lodging would be taken into
Jay C. Erinco January 2000 10 years 2008- Quezon account, the respondents daily wages would meet the
City 2009- Antipolo 2010- Quezon City P342.00 minimum wage rate.19 As to the other benefits, the LA found
Alexander R. Canlas 2005 5 years 2007-2010- that the respondents were not able to substantiate their claims
Quezon City P312.00 for it.20
Jerry Q. Sabulao August 1999 10 years 2008- Quezon
City 2009- Antipolo 2010- Quezon City P342.00 The respondents appealed the LAs decision to the NLRC,
Bernardo N. Tenedero 1994 16 years 2007-2010- which in turn, reversed it. Citing the case of Mayon Hotel &
Quezon City P383.50 Restaurant v. Adana,21 the NLRC noted that the respondents
Sometime in May 2010, Our Haus experienced financial did not authorize Our Haus in writing to charge the values of
distress. To alleviate its condition, Our Haus suspended some their board and lodging to their wages. Thus, the samecannot be
of its construction projects and asked the affected workers, credited.
including the respondents, to take vacation leaves.8
The NLRC also ruled that the respondents are entitled to their
Eventually, the respondents were asked to report back to work respective proportionate 13th month payments for the year
but instead of doing so, they filed with the LA a complaint for 2010 and SIL payments for at least three years,immediately
underpayment of their daily wages. They claimed that except preceding May 31, 2010, the date when the respondents leftOur
for respondent Bernardo N. Tenedero, their wages were below Haus. However, the NLRC sustained the LAs ruling that the
the minimum rates prescribed in the following wage orders respondents were not entitled to overtime pay since the exact
from 2007 to 2010: dates and times when they rendered overtime work had not been
proven.22
1. Wage Order No. NCR-13, which provides for a daily
minimum wage rate of P362.00for the non-agriculture sector Our Haus moved for the reconsideration23 of the NLRCs
(effective from August 28, 2007 until June 13, 2008); and decision and submitted new evidence (the five kasunduans) to
show that the respondents authorized Our Haus in writing to
2. Wage Order No. NCR-14, which provides for a daily charge the values of their meals and lodging to their wages.
minimum wage rate of P382.00for the non-agriculture sector
(effective from June 14, 2008 until June 30, 2010). The NLRC denied Our Haus motion, thus it filed a Rule 65
petition24 with the CA. In its petition, Our Haus propounded a
The respondents also alleged thatOur Haus failed to pay them new theory. It made a distinction between deduction and
their holiday, service incentive leave (SIL), 13th month and charging. A written authorization is only necessary if the
overtime pays.9 facilitys value will be deducted and will not be needed if it will
merely be charged or included in the computation of wages.25
The Labor Arbitration Rulings Our Haus claimed that it did not actually deduct the values of
the meals and housing benefits. It only considered these in
Before the LA, Our Haus primarily argued that the respondents computing the total amount of wages paid to the respondents
wages complied with the laws minimum requirement. Aside for purposes of compliance with the minimum wage law.
from paying the monetary amount of the respondents wages, Hence, the written authorization requirement should not apply.
Our Haus also subsidized their meals (3 times a day), and gave
them free lodging near the construction project they were Our Haus also asserted that the respondents claim for SIL pay
assigned to.10 In determining the total amount of the should be denied as this was not included in their pro
respondents daily wages, the value of these benefits should be formacomplaint. Lastly, it questioned the
considered, in line with Article 97(f)11 of the Labor Code. respondentsentitlement to attorneys fees because they were
not represented by a private lawyer but by the Public Attorneys
Our Haus also rejected the respondents other monetary claims Office (PAO).
for lack of proof that they were entitled to it.12
The CAs Ruling
On the other hand, the respondents argued that the value of their
meals should not be considered in determining their wages The CA dismissed Our Haus certiorari petition and affirmed
total amount since the requirements set under Section 413 of the NLRC rulings in toto. It found no real distinction between
DOLE14 Memorandum Circular No. 215 were not complied deduction and charging,26 and ruled that the legal requirements
with. before any deduction or charging can be made, apply to both.
Our Haus, however, failed to prove that it complied with any of Strictly, factual issues cannot be considered under Rule 45
the requirements laid down in Mabeza v. National Labor except in the course of resolving if the CA correctly determined
Relations Commission.27 Accordingly, it cannot consider the whether or not the NLRC committed grave abuse of discretion
values of its meal and housing facilities in the computation of in considering and appreciating the factual issues before it.37
the respondents total wages.
In ruling for legal correctness, we have to view the CA decision
Also, the CA ruled that since the respondents were able to allege in the same context that the petition for certiorariit ruled upon
non-payment of SIL in their position paper, and Our Haus, in was presented to it; we have to examine the CA decision from
fact, opposed it in its various pleadings,28 then the NLRC the prism of whether it correctly determined the presence or
properly considered it as part of the respondents causes of absence of grave abuse of discretion in the NLRC decision
action. Lastly, the CA affirmed the respondents entitlement to before it, not on the basis of whether the NLRC decision, on the
attorneys fees.29 merits of the case, was correct. In other words, we have to be
keenly aware that the CA undertook a Rule 65 review, not a
Our Haus filed a motion for reconsideration but the CA denied review on appeal, of the NLRC decision challenged before it.
its motion, prompting it to file the present petition for review This is the approach that should bebasic in a Rule 45 review of
on certiorari under Rule 45. a CA ruling in a labor case. In question form, the question to
ask in the present case is: did the CA correctly determine that
The Petition the NLRC did not commit grave abuse of discretion in ruling
on the case?38 We rule that the CA correctly did.
Our Haus submits that the CA erred in ruling that the legal
requirements apply without distinction whether the facilitys No substantial distinction between deducting and charging a
value will be deducted or merely included in the computation facilitys value from the employees wage; the legal
of the wages. At any rate, it complied with the requirements for requirements for creditability apply to both
deductibility of the value of the facilities. First, the five
kasunduans executed by the respondents constitute the written To justify its non-compliance with the requirements for the
authorization for the inclusion of the board and lodgings values deductibility of a facility, Our Haus asks us to believe that there
to their wages. Second, Our Haus only withheld the amount of is a substantial distinction between the deduction and the
P290.00 which represents the foods raw value; the weekly charging of a facilitys value to the wages. Our Haus explains
cooking cost (cooks wage, LPG, water) at P239.40 per person that in deduction, the amount of the wage (which may already
is a separate expense that Our Haus did not withhold from the be below the minimum) would still be lessened by the facilitys
respondents wages.30 This disproves the respondentsclaim value, thus needing the employees consent. On the other hand,
that it deducted the full amount of the meals value. in charging, there is no reduction of the employees wage since
the facilitys value will just be theoretically added to the wage
Lastly, the CA erred in ruling that the claim for SIL pay may for purposes of complying with the minimum wage
still be granted though not raised in the complaint; and that the requirement.39
respondents are entitled to an award of attorneys fees.31
Our Haus argument is a vain attempt to circumvent the
The Case for the Respondents minimum wage law by trying to create a distinction where none
exists.
The respondents prayed for the denial of the petition.32 They
maintained that the CA did not err inruling that the values of the In reality, deduction and charging both operate to lessen the
board and lodging cannot be deducted from their wages for actual take-home pay of an employee; they are two sides of the
failure to comply with the requirements set by law.33 And same coin. In both, the employee receives a lessened amount
though the claim for SIL pay was not included in their pro forma because supposedly, the facilitys value, which is part of his
complaint, they raised their claims in their position paper and wage, had already been paid to him in kind. As there is no
Our Haus had the opportunity to contradict it in its pleadings.34 substantial distinction between the two, the requirements set by
law must apply to both.
Finally, under the PAO law, the availment of the PAOs legal
services does not exempt its clients from an award of attorneys As the CA correctly ruled, these requirements, as summarized
fees.35 in Mabeza, are the following:

The Courts Ruling a. proof must be shown thatsuch facilities are customarily
furnished by the trade;
We resolve to DENYthe petition.
b. the provision of deductiblefacilities must be voluntarily
The nature of a Rule 45 petition only questions of law accepted in writingby the employee; and

Basic is the rule that only questions of lawmay be raised in a c. The facilities must be charged at fair and reasonable value.40
Rule 45 petition.36 However, in this case, weare confronted
with mixed questions of fact and law that are subsumed under We examine Our Haus compliance with each of these
the issue of whether Our Haus complied with the legal requirements in seriatim.
requirements on the deductibility of the value of facilities.
a. The facility must be customarily furnished by the trade 16.4 Separate sanitary, washing and sleeping facilitiesfor men
and women workers. [emphasis ours]
In a string of cases, we have concluded that one of the badges
to show that a facility is customarily furnished by the trade is Moreover, DOLE DO No. 56, series of 2005, which sets out the
the existence of a company policy or guideline showing that guidelines for the implementation ofDOLE DO No. 13,
provisions for a facility were designated as part of the mandates that the cost of the implementation of the
employees salaries.41 To comply with this, Our Haus requirements for the construction safety and health of workers,
presented in its motion for reconsideration with the NLRC the shall be integrated to the overall project cost.44 The rationale
joint sinumpaang salaysayof four of its alleged employees. behind this isto ensure that the living accommodation of the
These employees averred that they were recipients of free workers is not substandard and is strictly compliant with the
lodging, electricity and water, as well as subsidized meals from DOLEs OSH criteria.
Our Haus.42
As part of the project cost that construction companies already
We agree with the NLRCs finding that the sinumpaang charge to their clients, the value of the housing of their workers
salaysay statements submitted by Our Haus are self- cannot be charged again to their employees salaries. Our Haus
serving.1wphi1 For one, Our Haus only produced the cannot pass the burden of the OSH costs of its construction
documents when the NLRC had already earlier determined that projects to its employees by deducting it as facilities. This is
Our Haus failed to prove that it was traditionally giving the Our Haus obligation under the law.
respondents their board and lodging. This document did not
state whether these benefits had been consistently enjoyed by Lastly, even if a benefit is customarily provided by the trade, it
the rest of Our Haus employees. Moreover, the records reveal must still pass the purpose testset by jurisprudence. Under this
that the board and lodging were given on a per project basis. test, if a benefit or privilege granted to the employee is clearly
Our Haus did not show if these benefits were also provided inits for the employers convenience, it will not be considered as a
other construction projects, thus negating its claimed customary facility but a supplement.45 Here, careful consideration is given
nature. Even assuming the sinumpaang salaysay to be true, this to the nature of the employers business in relation to the work
document would still work against Our Haus case. If Our Haus performed by the employee. This test is used to address
really had the practice of freely giving lodging, electricity and inequitable situations wherein employers consider a benefit
water provisions to its employees, then Our Haus should not deductible from the wages even if the factual circumstances
deduct its values from the respondents wages. Otherwise, this show that it clearly redounds to the employers greater
will run contrary to the affiants claim that these benefits were advantage.
traditionally given free of charge.
While the rules serve as the initial test in characterizing a
Apart from company policy, the employer may also prove benefit as a facility, the purpose test additionally recognizes that
compliance with the first requirement by showing the existence the employer and the employee do not stand at the same
of an industry-wide practice of furnishingthe benefits in bargaining positions on benefits that must or must not formpart
question among enterprises engaged in the same line of of an employees wage. In the ultimate analysis, the purpose
business. If it were customary among construction companies test seeks to prevent a circumvention of the minimum wage law.
to provide board and lodging to their workers and treat their
values as part of their wages, we would have more reason to a1. The purpose test in jurisprudence
conclude that these benefits were really facilities.
Under the law,46 only the value of the facilities may be
However, Our Haus could not really be expected to prove deducted from the employees wages but not the value of
compliance with the first requirement since the living supplements. Facilities include articles or services for the
accommodation of workers in the construction industry is not benefit of the employee or his family but exclude tools of the
simply a matter of business practice. Peculiar to the trade or articles or services primarily for the benefit of the
construction business are the occupational safety and health employer or necessary to the conduct of the employers
(OSH) services which the law itself mandates employers to business.47
provide to their workers. This isto ensure the humane working
conditions of construction employees despite their constant The law also prescribes that the computation of wages shall
exposure to hazardous working environments. Under Section exclude whatever benefits, supplementsor allowances given to
16 of DOLE Department Order (DO) No. 13, series of 1998,43 employees. Supplements are paid to employees on top of their
employers engaged in the construction business are required to basic pay and are free of charge.48 Since it does not form part
providethe following welfare amenities: of the wage, a supplements value may not be includedin the
determination of whether an employer complied with the
16.1 Adequate supply of safe drinking water prescribed minimum wage rates.

16.2 Adequate sanitaryand washing facilities In the present case, the board and lodging provided by Our Haus
cannot be categorized asfacilities but as supplements. In SLL
16.3 Suitable living accommodation for workers, and as may be International Cables Specialist v. National Labor Relations
applicable, for their families Commission,49 this Court was confronted with the issue on the
proper characterization of the free board and lodging provided
by the employer. We explained:
 order to finish the project on the designated turn-over date.
The Court, at this point, makes a distinction between "facilities" Thus, it will be more convenient to the employer if itsworkers
and "supplements". It is of the view that the food and lodging, are housed near the construction site to ensure their ready
or the electricity and water allegedly consumed by private availability during urgent or emergency circumstances. Also,
respondents in this case were not facilities but supplements. In productivity issues like tardiness and unexpected absences
the case of Atok-Big Wedge Assn. v. Atok-Big Wedge Co., the would be minimized. This observation strongly bears in the
two terms were distinguished from one another in this wise: present case since three of the respondents are not residents of
the National Capital Region. The board and lodging provision
"Supplements", therefore, constitute extra remuneration or might have been a substantial consideration in their acceptance
special privileges or benefits given to or received by the of employment in a place distant from their provincial
laborers overand above their ordinary earnings or wages. residences.
"Facilities", on the other hand, are items of expense necessary
for the laborer's and his family's existence and subsistence so Based on these considerations, we conclude that even under the
thatby express provision of law (Sec. 2[g]), they form part of purpose test, the subsidized meals and free lodging provided by
the wage and when furnished by the employer are deductible Our Haus are actually supplements. Although they also work to
therefrom, since if they are not so furnished, the laborer would benefit the respondents, an analysis of the nature of these
spend and pay for them just the same. benefits in relation to Our Haus business shows that they were
given primarily for Our Haus greater convenience and
In short, the benefit or privilege given to the employee which advantage. If weighed on a scale, the balance tilts more towards
constitutes an extra remuneration above and over his basic or Our Haus side. Accordingly, their values cannot be considered
ordinary earning or wage is supplement; and when said benefit in computing the total amount of the respondents wages. Under
or privilege is part of the laborers' basic wages, it is a facility. the circumstances, the dailywages paid to the respondents are
The distinction lies not so much in the kind of benefit or item clearly below the prescribed minimum wage rates in the years
(food, lodging, bonus or sick leave) given, but in the purpose 2007-2010.
for which it is given.In the case at bench, the items provided
were given freely by SLLfor the purpose of maintaining the b. The provision of deductible facilities must be voluntarily
efficiency and health of its workers while they were working accepted in writing by the employee
attheir respective projects.50
In Mayon Hotel, we reiterated that a facility may only be
Ultimately, the real difference lies not on the kind of the benefit deducted from the wage if the employer was authorized in
but on the purpose why it was given by the employer. If it is writingby the concerned employee.51 As it diminishes the take-
primarily for the employees gain, then the benefit is a facility; home pay of an employee, the deduction must be with his
if its provision is mainly for the employers advantage, then it express consent.
is a supplement. Again, this is to ensure that employees are
protected in circumstances where the employer designates a Again, in the motion for reconsideration with the NLRC, Our
benefit as deductible from the wages even though it clearly Haus belatedly submitted five kasunduans, supposedly
works to the employers greater convenience or advantage. executed by the respondents, containing their conformity to the
inclusion of the values of the meals and housing to their total
Under the purpose test, substantial consideration must be given wages. Oddly, Our Haus only offered these documents when
to the nature of the employers business inrelation to the the NLRC had already ruled that respondents did not
character or type of work performed by the employees accomplish any written authorization, to allow deduction from
involved. their wages. These five kasunduans were also undated, making
us wonder if they had reallybeen executed when respondents
Our Haus is engaged in the construction business, a first assumed their jobs.
laborintensive enterprise. The success of its projects is largely
a function of the physical strength, vitality and efficiency of its Moreover, in the earlier sinumpaang salaysay by Our Haus
laborers. Its business will be jeopardized if its workers are four employees, it was not mentioned that they also executed a
weak, sickly, and lack the required energy to perform strenuous kasunduanfor their board and lodging benefits. Because of these
physical activities. Thus, by ensuring that the workers are surrounding circumstances and the suspicious timing when the
adequately and well fed, the employer is actually investing on five kasunduanswere submitted as evidence, we agree withthe
its business. CA that the NLRC committed no grave abuse of discretion in
disregarding these documents for being self serving.
Unlike in office enterprises where the work is focused on desk
jobs, the construction industry relies heavily and directly on the c. The facility must be charged at a fair and reasonable value
physical capacity and endurance of its workers. This is not to
say that desk jobs do not require muscle strength; wesimply Our Haus admitted that it deducted the amount of P290.00 per
emphasize that in the construction business, bulk of the work week from each of the respondents for their meals. But it now
performed are strenuous physical activities. submits that it did not actually withhold the entire amount as it
did not figure in the computation the money it expended for the
Moreover, in the construction business, contractors are usually salary of the cook, the water, and the LPG used for cooking,
faced with the problem ofmeeting target deadlines. More often which amounts to P249.40 per week per person. From these, it
than not, work is performed continuously, day and night, in appears that the total meal expense per week for each person is
P529.40,making Our Haus P290.00 deduction within the 70% complaint alone but also from a consideration and evaluation of
ceiling prescribed by the rules. both his complaint and position paper.54

However, Our Haus valuation cannotbe plucked out of thin air. The respondents entitlement to the other monetary benefits
The valuation of a facility must besupported by relevant
documents such as receipts and company records for it to be Generally a party who alleges payment as a defense has the
considered as fair and reasonable. In Mabeza, we noted: burden of proving it.Particularly in labor cases, the burden of
proving payment of monetary claims rests on the employeron
Curiously, in the case at bench, the only valuations relied upon the reasoning that the pertinent personnel files, payrolls,
by the labor arbiter in his decision were figures furnished by the records, remittances and other similar documents which will
private respondent's own accountant, without corroborative show that overtime, differentials, service incentive leave and
evidence.On the pretext that records prior to the July 16, 1990 other claims of workers have been paid are not in the
earthquake were lost or destroyed, respondent failed to produce possession of the worker but in the custody and absolute control
payroll records, receipts and other relevant documents, where of the employer.55
he could have, as has been pointedout in the Solicitor General's
manifestation, "secured certified copies thereof from the nearest Unfortunately, records will disclose the absence of any credible
regional office of the Department of Labor, the SSS or the document which will show that respondents had been paid their
BIR".52 [emphasis ours] 13th month pay, holiday and SIL pays. Our Haus merely
presented a handwritten certification from its administrative
In the present case, Our Haus never explained how it came up officer that its employees automatically become entitled to five
with the valuesit assigned for the benefits it provided; it merely days of service incentive leave as soon as they pass probation.
listed its supposed expenses without any supporting document. This certification was not even subscribed under oath. Our Haus
Since Our Haus is using these additional expenses (cooks could have at least submitted its payroll or copies of the pay
salary, water and LPG) to support its claim that it did not slips of respondents to show payment of these benefits.
withhold the full amount of the meals value, Our Haus is However, it failed to do so.
burdened to present evidence to corroborate its claim. The
records however, are bereft of any evidence to support Our Respondents are entitled to attorneys fees.
Haus meal expense computation. Eventhe value it assigned for
the respondents living accommodations was not supported by Finally, we affirm that respondents are entitled to attorneys
any documentary evidence. Without any corroborative fees. Our Haus asserts that respondents availment of free legal
evidence, it cannot be said that Our Haus complied withthis services from the PAO disqualifies them from such award. We
third requisite. find this untenable.

A claim not raised in the pro forma complaint may still beraised It is settled that in actions for recovery of wages or where an
in the position paper. employee was forced to litigate and, thus, incur expenses to
protect his rights and interest, the award of attorney's fees is
Our Haus questions the respondents entitlement to SIL pay by legally and morally justifiable.56 Moreover, under the PAO
pointing out that this claim was not included in the pro forma Law or Republic Act No. 9406, the costs of the suit, attorney's
complaint filed with the NLRC. However, we agree with the fees and contingent fees imposed upon the adversary of the
CA that such omission does not bar the labor tribunals from PAO clients after a successful litigation shall be deposited in
touching upon this cause of action since this was raised and the National Treasury as trust fund and shall be disbursed for
discussed inthe respondents position paper. In Samar-Med special allowances of authorized officials and lawyers of the
Distribution v. National Labor Relations Commission,53 we PAO.57
held:
Thus, the respondents are still entitled to attorney's fees. The
Firstly, petitioners contention that the validity of Gutangs attorney's fees awarded to them shall be paid to the PAO. It
dismissal should not be determined because it had not been serves as a token recompense to the PAO for its provision of
included in his complaint before the NLRC is bereft of merit. free legal services to litigants who have no means of hiring a
The complaint of Gutang was a mere checklist of possible private lawyer.
causes of action that he might have against Roleda. Such
manner of preparing the complaint was obviously designed to WHEREFORE, in light of these considerations, we conclude
facilitate the filing of complaints by employees and laborers that the Court of Appeals correctly found that the National
who are thereby enabled to expediently set forth their Labor Relations Commission did not abuse its discretion in its
grievances in a general manner. But the non-inclusion in the decision of July 20, 2011 and Resolution of December 2,
complaint of the issue on the dismissal did not necessarily mean 2011.1wphi1 Consequently we DENY the petition and
that the validity of the dismissal could not be an issue.The rules AFFIRM the Court of Appeals' decision dated May 7, 2012 and
of the NLRC require the submission of verified position papers resolution dated November 27, 2012 in CA-G.R. SP No.
by the parties should they fail to agree upon an amicable 123273. No costs.
settlement, and bar the inclusion of any cause of action not
mentioned in the complaint or position paper from the time of SO ORDERED.
their submission by the parties. In view of this, Gutangs cause
of action should be ascertained not from a reading of his Manila Mandarin vs NLRC
NARVASA, C.J.: f. Wage Order No. 2 issued on July 6, 1983 increasing the
mandatory basic minimum wage and living allowance for non-
The petitioner in this special civil action of certiorari seeks agricultural and agricultural workers in the following manner:
nullification of the September 11, 1992 Decision of the Second
Division of the National Labor Relations Commission reversing 1) For non-agricultural employees, receiving not more than
the judgment of the Labor Arbiter in NLRC NCR Case No. 10- P1,800.00 monthly, P1.00 a day as minimum wage and P1.50 a
4336-86 and dismissing the case for lack of merit, as well as of day as cost of living allowance;
the Commissions November 24, 1992 Resolution denying
reconsideration of said decision. 2) For plantation agricultural employees, P1.00 a day as
minimum wage and P0.50 a day as cost of living allowance
On October 30, 1986, the Manila Mandarin Employees Union subject to the same salary ceiling provided in the immediately
(hereafter UNION), as exclusive bargaining agent of the rank- preceding section; and
and-file employees of the Manila Mandarin Hotel, Inc.
(hereafter MANDARIN), filed with the NLRC Arbitration 3) For non-plantation agricultural employees, P1.00 a day as
Branch a complaint in its members behalf to compel minimum wage; and
MANDARIN to pay the salary differentials of the individual
employees concerned because of wage distortions in their also, providing that effective October 1, 1983, the living
salary structure allegedly created by the upward revisions of the allowances rates as adjusted in the preceding section shall be
minimum wage pursuant to various Presidential Decrees and further increased subject to the same salary ceiling, for non-
Wage Orders, and the failure of MANDARIN to implement the agricultural employees, by P1.00.
corresponding increases in the basic salary rate of newly-hired
employees. g. Wage Order No. 3 issued November 7, 1983 increasing the
statutory minimum wage rates for workers in the private sector
The relevant Presidential Decrees and Wage Orders were by P1.00 per day effective November 1, 1983, and also
specified by the UNION as follows: increasing the statutory wage rates by P1.00 per day, effective
December 1, 1983;
a. PD 1389, amending PD 928, mandating an increase in the
statutory minimum wage by P3.00 spread out over a period of h. Wage Order No. 4 issued on May 1, 1984 increasing the
three years, as follows: P1.00 starting July 1, 1978; P1.00 statutory daily minimum wages, after integrating the mandatory
starting May 1, 1979; and P1.00 starting May 1, 1980. living allowance under PDs 1614, 1634, 1678 and 1713 into the
basic pay of all covered employees, effective May 1, 1984; --
b. PD 1614, providing that workers covered by PD 1389, after the integration, the minimum daily wage rate was
whether agricultural or non-agricultural, should receive an increased by P11.00 for non-agricultural workers.
increase of P2.00 in their statutory minimum wage effective
April 1, 1979, the same representing an acceleration of the i. Wage Order No. 5 issued on June 11, 1984 increasing the
remaining increases under PD 1389; and that all non- statutory daily minimum wage rates and living allowances of
agricultural workers in Metro Manila shall receive a minimum workers in the private sector by P3.00 effective June 16, 1984 -
wage of P12.00; - the minimum daily wage rates became P35.00 for Metro
Manila and P34.00 for outside Metro Manila; and
c. PD 1713, issued on august 18, 1980 providing an increase in
the minimum daily wage rates and for additional allowance; j. Wage Order No. 6, effective November 1, 1984, increasing
increasing the minimum daily wage rates by P1.00 and the statutory minimum wage rate by P2.00 per day.
providing that all private employers shall pay their employees
with wages or salaries not exceeding P1,500.00 a month, an On January 15, 1987, the UNION filed its Position Paper
additional mandatory living allowance of P60.00 a month for amplifying the allegations of its complaint and setting forth the
non-agricultural workers, P45.00 for plantation workers and legal bases of its demands against MANDARIN; and on March
P30.00 a month for agricultural non-plantation workers; 25, 1987, it filed an Amended Complaint presenting an
additional claim for payment of salary differentials to the union
d. PD 1751, issued on December 14, 1980, increasing the members affected, allegedly resulting from underpayment of
statutory daily minimum wages by integrating the P4.00 wages.
mandatory allowance under PD 525 and PD 1123 into the basic
pay of all covered workers; The Labor Arbiter eventually ruled in favor of the UNION,
holding that there were in fact wage distortions entitling its
e. Wage Order No. 1, issued on March 26, 1981, increasing the members to salary adjustments totalling P26,173,601.25 -- for
mandatory emergency living allowance of all workers with 541 employees -- as well as underpayments amounting to
salaries or wages of P1,500.00 a month by P2.00 a day for non- P1,978,296.18 -- 182 employees. The dispositive portion of his
agricultural workers, P1.50 a day for agricultural plantation decision reads:[1]
workers, P1.00 a day for agricultural non-plantation workers,
effective March 22, 1981; WHEREFORE, judgment is hereby rendered ordering the
respondent Hotel to pay the individual complainants who are
members of the respondent Union whose names appear on the
respective computations embodied in this Decision, the
aggregate amount of P26,173,601.25 representing their salary - subsequently filed by order of the NLRC -- was just as
adjustments by way of correcting the wage distortions in their defective because the latter company had an authorized
respective salary structure, for the period from October 30, maximum net retention level in the amount of only
1983 up to October 31, 1990, and continuously thereafter to pay P686,582.80, way below the monetary award subject of
the corresponding amounts due them as such salary adjustments MANDARINS appeal to the Commission.
until the same are properly and finally restored in their basic
monthly rates; to pay the aggregate amount of P1,978,296.18 The Court rules that respondent Commission acted correctly in
representing their salary differentials resulting from accepting and acting on MANDARINs appeal. The
underpayment of wages in violation of the minimum wage circumstances attendant upon the filing of the appeal and
laws, Presidential Decrees and Wage Orders for the period from supersedeas bond are clearly set forth in the Certification of
March 25, 1984 up to October 31, 1990, and continuously Deputy Executive Clerk Demaisip, Jr.[5] above mentioned,
thereafter to pay the corresponding amounts due them as such viz.:
salary differentials until the same are properly and finally
restored into their basic monthly rates. This is to certify that when Atty. Godofredo Labay filed the
appeal in NLRC NCR Case No. 10-4335-86 entitled Manila
Likewise, the respondent Hotel is ordered to pay an amount Mandarin Employees Union vs. Manila Mandarin on Friday,
equivalent to ten percent (10%) of the total awards granted to February 1, 1991, the Cashier and the Docket Section, NCR,
individual complainants, by way of and as attorneys fees. were not around, that no one would receive the pleadings and
the appeal fee. He therefore approached Commissioner
On appeal, the Second Division of respondent Commission Domingo H. Zapanta for assistance and to have the appeal
(composed of Commissioner Domingo H. Zapanta, ponente, including the appeal bond in said case duly received on
and Presiding Commissioner Edna Bonto-Perez) rendered the February 1, 1991 at 4:50 p.m.
dispositions already referred to and now assailed -- setting aside
the Labor Arbiters judgment and dismissing the UNIONs with respect to the appeal fee, since no one was authorized to
complainant, and later denying the UNIONs motion for act as substitute for the Cashier of the NCR for purposes of
reconsideration.[2] receiving the appeal fee and issuing a temporary receipt and/or
official receipt therefor, Commissioner Zapanta requested Atty.
The principal issues raised in this Court are: (1) Whether or not Gaudencio P. Demaisip, Jr. to receive said pleadings and
the NLRC had jurisdiction to take cognizance of allowed Atty. Labay to pay the appeal fee on Monday, February
MANDARINS appeal from the Labor Arbiters decision; and 4, 1991.
(2) if so, whether or not it gravely abused its discretion in setting
aside the Labor Arbiters judgment and dismissing the UNIONS This certification is issued upon request of Atty. Labay for
complaint. whatever purpose it may serve him.

The issue of jurisdiction is grounded on the posited tardiness of (SGD.) GAUDENCIO P. DEMAISIP, JR.
private respondents appeal from the Labor Arbiters judgment to Deputy Executive Clerk
the NLRC, and fatal defect in their supersedeas bond. Second Division

The UNION contends[3] that the records indubitably show that MANDARIN cannot be faulted for paying the appeal fee only
MANDARIN received on January 22, 1991 its copy of the on February 4, 1991. The fact is that on February 1, 1991, its
Labor Arbiters Decision (of January 15, 1991), but filed its lawyer was in the NLRC premises, ready to pay said fee, but
appeal and paid the appeal fee only on February 4, 1991, three was unable to do so because the NLRC Cashier or any other
(3) days beyond the reglementary ten-day period for doing so. employee authorized to receive payment in his stead, was no
It also condemns as anomalous the certification of Deputy longer around. This is why Commissioner Zapanta allowed
Executive Clerk Gaudencio P. Demaisip, Jr., NLRC, to the payment of the appeal fee to be made on the next business day,
effect that MANDARINs lawyer had approached Hon. as in fact the appeal fee was paid on, February 4, 1991. This
Domingo H. Zapanta, a member of the Second Division, Court has ruled that the failure to pay the appeal docketing fee
NLRC, for assistance to have the appeal including the appeal within the reglementary period confers a directory, not
fee in said case duly received and acknowledged on February mandatory, power to dismiss an appeal, to be exercised with
1, 1991, at 4:40 P.M; and claims that the anomally was circumspection in light of all the relevant facts.[6] In view of
aggravated when it was Commissioner Zapanta who wrote the these considerations, and the meritoriousness of MANDARINs
Decision for the Second Division[4]-- reversing the Labor appeal -- as later pronounced by respondent NLRC -- the
Arbiters judgment, as aforesaid -- despite the UNIONS motion interest of justice was quite evidently served when
for his disqualification and/or inhibition. The UNION finally MANDARINs appeal was given due course despite delayed
argues that MANDARINS appeal was not only tardy but also payment of the docketing fee.
fatally flawed in that its supersedeas bond had been issued by a
surety company -- Plaridel Surety & Insurance Company -- The contention concerning MANDARINs ostensibly defective
which had pending obligations and liabilities at the time, the appeal bond, issued by Plaridel Surety and Insurance Company,
Insurance Commissioner having in fact issued a Cease-and- deserves short shrift, too. The issuance of the bond antedated
Desist Order against said company for issuing bonds of no little this Courts resolution of January 15, 1992 -- to which the
magnitude without authority; and that moreover, the attention of respondent NLRC had been invited by the UNION
replacement bond of the Commonwealth Insurance Company - -- declaring said surety company to be of doubtful solvency.
More important, the issue was mooted when MANDARIN under their collective bargaining agreement of through
posted a new surety bond, through Commonwealth Insurance conciliation.
Company, in compliance with the Order of the respondent
Commission dated December 10, 1991. The UNIONs In case where there is no collective bargaining agreement or
contention that this new bond was equally defective because the recognized labor organization, the employer shall endeavor to
bonding company had an authorized maximum net retention correct such distortions in consultation with their workers. Any
level lower than the sum of P30,967,087.17 involved in this dispute arising from wage distortions shall be resolved through
dispute, is inconsequential, the new bonding company being conciliation by the appropriate Regional Office of the Ministry
duly accredited by this Court and licensed by the Insurance of Labor and Employment or through arbitration by the NLRC
Commission. Arbitration Branch having jurisdiction over the work-place.
(Underscoring supplied)
At any rate, this Court has invariably ruled that Article 223 of
the Labor Code, requiring a bond in appeals involving monetary It is therefore opportune to re-state the general principles
awards, must be liberally construed, in line with the desired enunciated in that case, summarized in Metro Transit
objective of resolving controversies on their merits.[7] The Organization, Inc. vs. NLRC, et al.[10] as follows:
circumstance under which the bond was filed in this case
adequately justify such liberal application of the provision. (a) The concept of wage distortion assumes an existing
grouping or classification of employees which establishes
As to the alleged partiality of Commissioner Domingo Zapanta, distinctions among such employees on some relevant or
the Court finds that his intervention on February 1, 1991 in the legitimate basis. This classification is reflected in a differing
matter of payment of the appeal docketing fee did not, in the wage rate for each of the existing classes of employees.
circumstances already related, constitute impropriety or pre-
judgment of the case and a ground for his disqualification as a (b) Wage distortions have often been the result of government-
member of the Second Division to which the case was thereafter decreed increases in minimum wages. There are, however,
raffled. Significantly, in its motion to inhibit, the UNION other causes of wage distortions, like the merger of two (2)
mentioned that the case was assigned particularly to the late companies (with differing classification of employees and
Commissioner Rustico Diokno ** (but) that upon the latters different wage rates) where the surviving company absorbs all
demise, the case was reassigned to Commissioner Domingo the employees of the dissolved corporation. (In the present
Zapanta as the new ponente.[8] As Commissioner Zapanta had Metro case, as already noted, the wage distortion arose because
always been a member of the Second Division, the UNIONs the effectivity dates of wage increases given to each of the two
motion for his inhibition, filed more than a year after the (2) classes of employees (rank-in-file and supervisory) had not
occurrence of the incident on which it was based, becomes been synchronized in their respective CBAs.)
suspect as a mere afterthought. In any case, Commissioner
Zapanta did inhibit himself from taking part in the resolution of (c) Should a wage distortion exist, there is no legal requirement
the UNIONS motion for reconsideration of the assailed that, in the rectification of that distortion by re-adjustment of
decision of September 11, 1992, thus dispelling what doubts the wage rates of the differing classes of employees, the gap
might linger about his impartiality. which had previously or historically existed be restored in
precisely the same amount. In other words, correction of a wage
Coming now to the issue of wage distortion, prior to the distortion may be done by re-establishing a substantial or
effectivity on June 9, 1989 of Republic Act No. 6727 which, significant gap (as distinguished from the historical gap)
among others, amended Article 124 (Standards/Criteria for between the wage rates of the differing classes of employees.
Minimum Wage Fixing) of the Labor Code, the concept to wage
distortion was relatively obscure. So it was observed by this (d) The re-establishment of a significant difference in wage
Court in National Federation of Labor vs. NLRC,[9] a case rates may be the result of resort to grievance procedures or
involving the same subject Wage Orders: collective bargaining negotiations.

We note that neither the Wage Orders noted above, nor the It was only on June 9, 1989, upon the enactment of R.A. No.
Implementing Rules promulgated by the Department of Labor 6727 (Wage Rationalization Act, amending, among others,
and Employment, set forth a clear and specific notion of wage Article 124 of the Labor Code),[11] that the term wage
distortion. What the Wage Orders and the Implementing Rules distortion came to be explicitly defined as:
did was simply to recognize that implementation of the Wage
Orders could result in a distortion of the wage structure of an ** a situation where an increase in prescribed wage rates results
employer, and to direct the employer and the union to negotiate in the elimination or severe contraction of intentional
with each other to correct the distortion. Thus, Section 6 of quantitative differences in wage or salary rates between and
Wage Order No. 3, dated 7 November 1983, provided as among employee groups in an establishment as to effectively
follows: obliterate the distinctions embodied in such wage structure
based on skills, length of service, or other logical bases of
Section 6. Where the application of the minimum wage rate differentiation.
prescribed herein results in distortions of the wage structure of
an establishment, the employer and the union shall negotiate to The same provision lays down the procedure to be followed
correct the distortions. Any dispute arising from wage where wage distortion arises from the implementation of a wage
distortions shall be resolved through the grievance procedure
increase prescribed by law or ordered by a Regional Wage receiving lower than the minimum daily wage set therein. For
Board, viz.: example, Section 1 of Wage Order No. 6 provides that effective
November 1, 1984, the statutory minimum daily wage rates
Where the application of any prescribed wage increase by virtue workers in the private sector shall be increased by P2.00. Also,
of a law or Wage order issued by any Regional Board results in Section 1 of Presidential Decree 1389 provides that Presidential
distortions of the wage structure within an establishment, the Decree 928 is hereby amended by increasing all existing
employer and the union shall negotiate to correct the statutory minimum wages in the country by Three Pesos
distortions. Any dispute arising from the wage distortions shall (P3.00) spread equally over a period of three years, as follows:
be resolved through the grievance procedure under their 1)One Peso (P1.00) starting July 1, 1978; 2)One Peso(P1.00)
collective bargaining agreement and, if it remains unresolved, starting May 1, 1979; and One Peso (P1.00) starting May 1,
through voluntary arbitration. Unless otherwise agreed by the 1980. Thus, it is clear that the presidential decrees and wage
parties in writing, such dispute shall be decided by the voluntary orders merely provide for a floor wage to be observed by the
arbitrator or panel of voluntary arbitrators within ten (10) employers in the private sector.
calendar days from the time said dispute was referred to
voluntary arbitration. It indeed appears that the clear mandate of those issuances was
merely to increase the prevailing minimum wages of particular
In cases where there are no collective agreements or recognized employee groups. There were no across-the-board increases to
labor unions, the employers and workers shall endeavor to all employees; increases were required only as regards those
correct such distortions. Any dispute arising therefrom shall be specified therein.[17] It was therefore incorrect for the UNION
settled through the National Conciliation and Mediation Board to claim that all its members became automatically entitled to
and, if it remains unresolved after ten (10) calendar days of across-the-board increases upon the effectivity of the Decrees
conciliation, shall be referred to the appropriate branch of the and Wage Orders in question. And even if there were wage
National Labor Relations Commission (NLRC). It shall be distortions, which is not the case here, the appropriate remedy
mandatory for the NLRC to conduct continuous hearings and thereunder prescribed is for the employer and the union to
decide the dispute within twenty (20) calendar days from the negotiate to correct them; or, if the dispute be not thereby
time said dispute is submitted for compulsory arbitration. resolved, to thresh out the controversy through the grievance
procedure in the collective bargaining agreement, or through
The pendency of a dispute arising from a wage distortion shall conciliation or arbitration.
not in any way delay the applicability of any increase in
prescribed wage rates pusurant to the provisions of law or Wage A review of the records convinces this Court that respondent
Order. NLRC committed no grave abuse of discretion in holding that
no wage distortion was demonstrated by the UNION. It was, to
The issue of whether or not a wage distortion exists as a be sure, incumbent on the UNION to prove by substantial
consequence of the grant of a wage increase to certain evidence its assertion of the existence of a wage distortion. This
employees, is a question of fact;[12] and as a rule, factual it failed to do. It presented no such evidence to establish, as
findings in labor cases, where grounded on substantial required by the law, what, if any, were the designed quantitative
evidence, are not reviewed.[13] However, a disharmony such differences in wage or salary rates between employee groups,
as exists here, between the factual findings of the Labor Arbiter and if there were any severe contractions or elimination of these
and those of the NLRC, opens the door to a review thereof by quantitative differences.
this Court.[14]
The UNIONs effort to prove wage distortion consisted only of
The Labor Arbiter ruled that a wage distortion existed, and that the presentation of an unverified list of thirteen (13) employees
the only and logical way to correct ** (it) in the salary structure denominated a Sample Comparison of Salary Rates Affected by
of the employees of respondent Hotel is to apply the Wage Distortion,[18] viz.:
corresponding increase made by way of revising upward the
minimum wage or integration of the ECOLA into the basic SAMPLE COMPARISON OF SALARY RATES OF
wage as embodied in the various Presidential Decrees and COMPLAINANTS
Wage Orders, across-the-board, so that employees whose AFFECTED BY WAGE DISTORTION
salaries are above the minimum set by law who have already
been long in the service will not be discriminated against.[15] F & B DEPT.

On the other hand, respondent Commission declared in its Name Position Date Hired Basic Rate
decision[16] that there was no wage distortion arising from the (12/30/85)
implementation of said Presidential Decrees and Wage Orders
such as warranted across-the-board increases to all employees: 1. Pablo Trinidad -- Waiter -- 9/1/78 P1,300
2. Eduardo Vito -- Waiter -- 10/16/80 P1,375
On the issue of wage distortion, we have examined the various
presidential decrees and wage orders referred to by the 3. Camilo Sanchez -- Busboy -- 8/1/83 P 954
complainant and in the Labor Arbiters decision and we found 4. Renato Solomon -- Busboy -- 7/19/84 P1,096
nothing therein that would justify the award of across-the-board 5. Buenconsejo Monico -- Busboy -- 4/15/85 P 968
increases to all employees. The apparent intention of the law is
only to upgrade the salaries or wages of the employees HOUSEKEEPING DEPT.
1. Ruben A. Rillo -- Linen Uniform Att. -- 6/19/76 P 984 The Court agrees that the claimed wage distortion was actually
2. Hubert Malolot -- Linen Uniform Att. -- 1/16/80 P1,238 a result of the UNIONS failure to appreciate various
3. Aurella Kilat -- Linen Uniform Att. -- 5/2/79 P1,272 circumstances relating to the employment of the thirteen
employees. For instance, while some of these employees
4. Rogelio Molaco -- Cloakroom Attn. -- 9/1/80 P 946 mentioned by UNION Vice-President Arnulfo Castro occupied
5. David Pineda -- Cloakroom Attn. -- 9/14/81 P1,194 the same or similar positions, they were hired by the Hotel on
6. Nemesio Matro -- Houseman Attn. -- 6/10/76 P1,142 different dates and at different salaries. As explained in part by
7. Domgo Sabando -- Houseman Attn. -- 3/8/82 P1,194 MANDARIN:
8. Renato Guina -- Houseman Attn. -- 8/24/81 P1,194
With respect to the case of Pablo Trinidad and Eduardo Vito,
SUBMITTED: while they were both occupying the position of waiter in 1987,
with monthly salaries of P2,044.00 and P2,217.00, respectively,
(SGD.) ATTY. R. E. ESPINOSA a comparative study of the records of these employees shows
9/17/87. one of them was initially hired at a higher position level which
naturally carried a higher hiring rate. Trinidad was originally
The UNIONs Internal Vice-President, Arnulfo Castro, deposed hired in 1978 as a mere Houseman at the Banquet Department
that the employees named in this list were the more or less (13) with a basic starting rate of P301.00 a month. On the other hand,
persons found to have suffered wage distortion,[19] and the Vito was originally hired in 1980 already a Busboy at the Food
UNION pointed out that while these thirteen employees and Beverage Department with a starting salary of P366.00 a
occupied similar positions, they were receiving different rates month. Before he was hired at the Mandarin Hotel, Vito had
of salary. already been working as Waiter at the Metropolitan Club.
Rrecords also show that it was only after some time that
Respondent Commission however found that as explained by Trinidad was promoted to Busboy but still with the smaller
respondents, such disparity was due simply to the fact that the Banquet Department. The headway in rate was carried by Vito
employees mentioned had been hired on different dates and although at some point in their careers, these two employees
were thus receiving different salaries; or that an employee was achieved the same position as Waiter. Not long after, Vito was
hired initially at a position level carrying a hiring rate than the promoted to Captain Waiter while Trinidad remained Waiter.
others; or that an employee failed to meet the cut-off date in the There is therefore no reason to compare the remuneration of
grant of yearly CBA increase; or that the union did not get the these two employees as the circumstances attendant to their
correct data on salaries. The Commission accepted as more employment are different.[21]
accurate the data presented by MANDARIN respecting the
same employees, to wit:[20] Respondent Commission correctly concluded that these did not
represent cases of wage distortion contemplated by the law
ANNEX2 (Article 124, Labor Code, as amended), i.e., a situation where
an increase in prescribed wage rates results in the elimination
F & B Dept. or severe contraction of intentional quantitative differences in
wage or salary rates between and among employees groups in
NAME Position Date Hired Basic Rate an establishment as to effectively obliterate the distinctions
per Hotel Records as of 12/30/85 embodied in such wage structure based on skills, length of
service, or other logical basis of differentation.
1. Pablo Trinidad Waiter 09/01/78 P1,302.00*
2. Eduardo Vito Waiter 10/16/80 1,375.00* Moreover, even assuming arguendo that there was really a wage
3. Camilo Sanchez Busboy 08/01/83 1,194.00 distortion, it was wrong for the Labor Arbiter, after first
4. Renato Solomon Busboy 07/19/84 1,096.00 acknowledging that some of the money claims had prescribed
5. Buenconsejo Monico Busboy 14/15/85 968.00 under Article 291 of the Labor Code,[22] to nevertheless order
the computation of salary differentials retroactive to the
Housekeeping Dept. effective dates of PDs 1389,1614,1713, 1751 and Wage Orders
Nos. 2,3,4,5,and 6: in 1978, 1979, 1980, 1980, July 1983,
1. Ruben A. Rillo Linen Uniform Att. 06/19/76 1,417.00 November 1983, May 1984, June 1981 and November 1984,
2. Hubert Malolot Linen Uniform Att. 01/16/80 1.238.00 respectively. Clearly, five of these Decrees and Wage Orders
3. Aurella Kilat Linen Uniform Att. 05/02/79 1,272.00 took effect after the lapse of the three-year prescriptive period
4. Rogelio Molaco Cloakroom Attn. 09/01/80 1,272.00 for litigating claims for wage distortion differentials, the
5. David Pineda Cloakroom Attn. 09/14/81 1,213.00 original complaint for wage distortion having been filed on
6. Nemesio Matro Houseman Attn. 06/10/77 1,342.00 October 30, 1986 and the amended complaint for underpayment
7. Domingo Sabando Houseman Attn. 03/08/82 1,194.00 of wages, on March 25, 1987. Consequently, the applicable cut-
8. Renato Guina Houseman Attn. 08/24/81 1,194.00 off dates, for purposes of prescription, were October 30, 1983
and March 25, 1984, respectively.
* Vito was hired at a higher position with a higher hiring rate
than that given to Trinidad, i.e. Vito was hired at P366/mo. Finally, the records show that the matter of wage distortion,
While Trinidad at P301/mo. Prior to hiring, Vito already actual or imputed under the various issuances up to Wage Order
worked as a waiter at the Metropolitan Club. No. 6, had been settled by the parties as early as July 30, 1985.
On that day they executed a Compromise Agreement with the
assistance of the then Regional Director of the National Capital
Region, Severo M. Pucan in which they affirmed that with the The UNIONs theory was that since the employees of
implementation by MANDARIN of Wage Order Nos. 4 and 6 MANDARIN are paid on a monthly basis under the Group III
as well as P.D. 1634, the latter was deemed for all legal and category, the applicable increase in daily wage must be
purposes to have fully satisfied all its legal and contractual multiplied by 365 and then divided by 12 to determine the
obligations to its employees under all presidential issuances on equivalent monthly rate. MANDARINs position, on the other
wages,[23] hand, was that it had consistently been using the multiplier 313,
and not 365, for the purpose of deriving salary related benefits
The Compromise Agreement pertinently states: of its employees who are paid by the month, excluding from
365, the 52 unpaid rest days in a year. This appears to have been
1. That the respondent shall implement Wage Order No. 6 the consistent practice of MANDARIN, following the formula
effective July 1, 1985, without prejudice to the outcome of the for daily paid employees under Group II category as prepared
application for exemption as distressed employer filed by said by the Bureau of Labor Standards:[27]
respodent with the National Wage Council as regards benefits
that might be due between November 1, 1985 and June 30, AR x 313 days = EMR
inclusive; ____________
12
2. The the respondent shall also implement effective August 1,
1985 the integration of the P90.00 a month cost of living Where: 313 days = 303 actual working days a year
allowance under P.D. 1634 into the basic wages of its plus the paid 10 unworked regular
employees as called for under Wage Order No. 4 in accordance holidays.
with the Guidelines contained in the Explanatory Bulletin Actual working days . 303
issued by the Bureau of Working Conditions on August 8, 1985; 10 legal holidays 10
_____
3. That as soon as the respondent shall have complied with the
above terms of this Compromise Agreement, said respondent Total No. of Days 313.
shall be deemed for all legal intents and puposes to have fully
satisfied all the legal and contractual obligations to its MANDARIN presented evidence of its practice regarding the
employees under all presidential issuances on wages, including use of the factor 313 in computing the monthly equivalent of
Wage Orders No. 4 and 6, and Article XI of the collective the minimum daily wages and other related benefits of its
bargaining agreement, employees; i.e., Annexes 3 and 4 of its Supplemental Appeal
dated November 12, 1991. This was corroborated by the
The Labor Code recognizes the conclusiveness of compromises UNIONs Internal Vice President, Arnulfo Castro, who admitted
as a means to settle and end labor disputes. Article 227 provides during cross-examination that in his research and study, he
that (a)ny compromise settlement, including those involving found that the divisor used in arriving at the daily rate of the
labor standard laws, voluntary agreed upon by the parties with hotel employees was 313 days, which meant that the days-off
the assistance of the Bureau or the regional office of the or rest days are not paid.[28] The admission confirms that the
Department of Labor, shall be final and binding upon the hotel employees pertain to Group II category under the Bureau
parties. The National Labor Relations Commission or any court of Labor Standards Guidelines for computing the equivalent
shall not assume jurisdiction over issues involved therein monthly minimum wage rates.[29] Thus, instead of multiplying
except in case of non-compliance thereof or if there is prima the applicable minimum daily wage by 365 and dividing the
facie evidence that the settlement was obtained through fraud, result by 12 to derive the applicable minimum monthly salary,
misrepresentation or coercion. In Olaybar vs. NLRC,[24] this the factor used is 313, composed of 303 actual working days
Court had occasion, in a labor dispute, to apply the rule that and the 10 unworked but paid regular holidays in a year.
compromises and settlements have the effect and
conclusiveness of res judicata upon the parties. In his explanatory Bulletin on the payment of Holiday Pay --
Ref. No. 85-08 dated 6 November 1985 -- then Secretary
Thus, and again assuming arguendo the existence of a wage Augusto Sanchez of the Department of Labor and Employment,
distortion, this was corrected under the fully implemented expatiating on the implications of the Chartered Bank case,[30]
Compromise Agreement;[25] and such correction having been stated:
explicitly acknowledge by the UNION, it is now estopped from
claiming that a distortion still subsists. In the same manner, 6. Monthly Paid Employees
when the UNION entered into a new collective agreement with
MANDARIN, providing for wage increases in 1987, it is Oftentime confusion arises from the different interpretations as
deemed to have thereby settled any remaining question of wage to who is a monthly-paid employee. A monthly-paid employee
distortion, since the subject of wages and wage distortions were is one whose monthly salary includes payments for everyday of
plainly and unavoidably an economic issue and the proper the month although he does not regularly work on his rest days
subject of collective bargaining.[26] or Sundays and on regular and special holidays. Group III in the
above illustration covers monthly paid employees. Employees
Neither did respondent Commission gravely abuse its discretion falling under Group I, II and IV are in reality daily paid
in ruling against the UNION on the issue of underpayment of employees but whose daily rate is translated into its monthly
wages. equivalent. The fact, therefore, that an employee is regularly
paid a fixed monthly rate does not necessarily mean that he is a Wage Orders increased the statutory minimum wages of
monthly-paid employee as defined above. (Italics supplied) workers with differing increases being specified for agricultural
plantation and non-agricultural workers.
As applied to the UNION, the monthly equivalent of the
minimum wage under the various Presidential Decrees and Before the effectivity of Wage Order No. 3, the wage rates of
Wage Orders based on the above formula should be as follows: regular employees and of casual (or non-regular) employees of
private respondent Franklin Baker Company of the Philippines
PD/WO NO. Effectivity Minimum Daily Equivalent (Davao Plant) ("Company") were such that there was a positive
Wage Rate Monthly Rate differential between the two (2) in the amount of P4.56. The
effect of the implementation of the successive Wage Orders
PD 1389 01 July 1978 P 11.00 P 286.96 upon the daily wage rates of these two (2) groups of employees
PD 1614 1 March 1979 13.00 339.00 was summarized by petitioner in the following table:
PD 1813 18 Aug. 1980 14.00 365.17
WO # 2 06 July 1983 19.00 495.58 Effectivity Wage of Wage of Gap
WO # 3 01 Nov. 1983 20.00 521.67
WO # 4 01 May 1984 32.00 834.67 Date Regulars Casuals
WO # 5 01 Nov. 1984 35.00 912.92
WO # 6 01 Nov. 1984 37.00 965.08 Before W.O. No. 3 P22.56 P18.00 P4.56
After W.O. No. 3 1 Nov. 1983 22.56 20.00
On the other hand, the monthly pay of the Hotel employees and 2.56
their hiring rate may be illustrated as follows: After W.O. No. 4 1 May 1984 32.64 31.00
1.64
PD/WO NO. Effectivity Equivalent Lowest Salary After W.O. No. 5 16 June 1984 34.00 34.00
Monthly Rate in the Hotel 0.00 1

PD 1389 01 July 1978 P 286.92 P 350.00 Upon the effectivity of Wage Order No. 5, grievance meetings
PD 1614 01 March 1979 339.08 411.00 were held by petitioner National Federation of Labor ("NFL")
PD 1813 18 Aug. 1980 365.17 562.00 and private respondent Company sometime in June 1984,
WO # 2 06 July 1983 495.58 960.00 addressing the impact which implementation of the various
WO # 3 01 Nov. 1983 521.67 960.00 Wage Orders had on the wage structure of the Company.
WO # 4 01 May 1984 834.67 960.00
WO # 5 16 May 1984 912.92 960.00 On 21 June 1984, all the casual or non-regular employees of
WO # 6 01 Nov. 1984 965.08 1,015.00. private respondent Company (at least in its Davao Plant) were
"regularized," or converted into regular employees, pursuant to
A comparative analysis of the wages of the Hotels employees the request of petitioner NFL.
from 1978 to 1984 vis a vis the minimum wages fixed by law
for the same period reveals that at no time during the said period On 1 July 1984, the effectivity date of the 1984 Collective
was there any underpayment of wages by the respondent Hotel. Bargaining Agreement between NFL and the Company, all
On the contrary, the prevailing monthly salaries of the subject regular employees of the Company received an increase of
hotel employees appear to be and above the minimum amounts P1.84 in their daily wage; the regular daily wage of the regular
required under the applicable Presidential Decrees and Wage employees thus became P35.84 as against P34.00 per day for
Orders. non-regular employees.

WHEREFORE, the assailed Decision of respondent As a result of the implementation of Wage Order No. 6, casual
Commission promulgated on September 11, 1992 -- reversing employees received an increase of their daily wage from P34.00
the judgment of the Labor Arbiter and dismissing the UNIONS to P36.00. At the same time, the Company unilaterally granted
complaint - - being based on substantial evidence and in accord an across-the-board increase of P2.00 in the daily rate of all
with applicable laws and jurisprudence, as well as said regular employees, thus increasing their daily wage from
Commissions Resolution dated November 24, 1992 -- denying P35.84 to P37.84. Further, on 1 July 1985, the anniversary date
reconsideration -- are hereby AFFIRMED in toto. of the increases under the CBA, all regular employees who were
members of the collective bargaining unit got a raise of P1.76
SO ORDERED. in their basic daily wage, which pushed that daily wage from
P37.84 to P39.60, as against the non-regular's basic wage of
National Federation of Labor vs NLRC P36.00 per day. Finally, by November 1987, the lowest paid
FELICIANO, J.: regular employee had a basic daily rate of P64.64, or P10.64
more than the statutory minimum wage paid to a non-regular
Between 1 November 1983 and 1 November 1984, Wage employee.
Orders Nos. 3, 4, 5 and 6 were promulgated by the then
President Ferdinand E. Marcos. Wage Order No. 3 became The development of the wage scales of the Company's
effective as of 1 November 1983; Wage Order No. 4, as of 1 employees after the effectivity date of Wage Order No. 5 is
May 1984; Wage Order No. 5, as of 16 June 1984; and Wage presented in the following table:
Order No. 6 went into effect on 1 November 1984. All these
Effectivity Wage of Wage of Gap On motion for partial reconsideration filed by the Company, the
above quoted portion of the NLRC En Banc's decision was
Date Regulars Casuals reconsidered and set aside by the NLRC Fifth Division. 3 The
Fifth Division of the NLRC in effect found that while a wage
After W.O. No. 5 16 June 1984 34.00 34.00 distortion did exist commencing 16 June 1984, the distortion
0.00 persisted only for a total of fifteen (15) days and accordingly
CBA Increase 1 July 1984 35.84 34.00 1.84 required private respondent company to pay "a wage increase
After W.O. No. 6 1 Nov. 1984 37.84 36.00 of P2.00 per day to all regular workers effective June 16, 1984
1.84 up to June 30, 1984 or a total of fifteen (15) days." 4 The rest
CBA Anniversary 1 July 1985 39.60 36.00 of the decision of 11 November 1987 was left untouched.
3.60
In its decision dated 16 December 1991, the NLRC (Fifth
Increase Division) said:

Meantime, while the above wage developments were unfolding, . . . At the time Wage Order No. 4 was implemented on May 1,
the Company experienced a work output slow down. The 1984, casual employees were increased to P34.00 per day,
Company directed some 205 workers to explain the reduction placing them on equal salary footing with the regular employees
in their work output. The workers failed to comply and they who were likewise receiving P34.00 per day. But effective July
were accordingly issued notices of dismissal by the Company. 1, 1984 when the 1984 CBA took effect, the regular employees
As a response to its decreasing productivity levels, the of the company admittedly received the basic wage of P35.84
Company suspended operations on 16 August 1984. Operations or an increase of P1.84 as against the daily wage of P34.00 of
were resumed on 14 September 1984; the Company, however, the casual employees.
refused to take back the 205 dismissed employees. Petitioner
Union then went on strike alleging a lock-out on the part of the Thus, the apparent wage distortion did not last long but only for
Company and demanding rectification of the wage distortion. 15 days, that is from June 16, 1984 when Wage Order No. 5
The case was certified by the Secretary of Labor to the National took effect and lasted only up to June 30, 1984. From July 1,
Labor Relations Commission ("NLRC") for compulsory 1984, the regular employees received an increase of P1.84
conciliation. making their daily wage P35.84 as against the wage of casual
employees of P34.00 per day. And as rightly pointed out
On 19 June 1985, the Union and the Company reached an respondent-movant, the difference in the wage scale between
agreement with respect to the lock-out issue. The agreement, the two (2) groups of employees was maintained even after the
which was approved by the NLRC En Banc, granted the 205 implementation of Wage Order No. 6 which took effect on
employees "financial assistance" equivalent to thirty (30) days' November 1, 1984. 5 (Emphasis supplied)
separation pay. This left unresolved only the wage distortion
issue. The bottom line issue presented to the Court is thus whether or
not, under the facts as summarized above, the NLRC (Fifth
On 11 November 1987, the NLRC En Banc rendered a decision Division) committed a grave abuse of discretion amounting to
which in effect found the existence of wage distortion and lack or excess of jurisdiction, when it concluded that the wage
required the Company to pay a P1.00 wage increase effective 1 distortion had ceased to exist, after 1 July 1984.
May 1984:
The principal contention of petitioner NFL is that a wage
In the computation submitted by the Union, there is a need to distortion in the wage structure of private respondent Company
restore the P2.56 gap between non-regulars or "casuals" and continued to exist although a gap of P1.84 between the daily
"regular workers." This difference in the basic wage of these wage rate of regular employees and that of casual employees
workers was existing at the time of the conclusion of the had been re-established upon the effectivity of the CBA
collective bargaining agreement and before the implementation increase on 1 July 1984. The original claim of NFL was that the
of Wage Orders No. 4 & 5. The imprecise claim of respondent initial prior to effectivity of Wage Order No. 3 differential
that there is P3.60 gap between non-regular and regulars may of P4.56 in the wage rate of regular employees and that of
not be sustained because as aforestated, this amount represents casual employees, should be re-created this time between the
negotiated wage increase which should not be considered wage rates of the newly "regularized" employees (i.e., the
covered and in compliance with the wage orders. Considering, casual employees regularized by the Company on 21 June
however, the present economic conditions and the outlay 1984) and the "old" regular employees (employees who,
involved in correcting the distortion in the wages of allegedly, had been regular employees for at least three [3]
respondent's workers, this Commission, in the exercise of its years before the "regularization" of the casuals). 6 NFL stresses
arbitral powers, feels that an increase of P1.00 on the present that seniority is a valid basis of distinction between differing
basic wage of regular workers would significantly rectify or groups of employees, under the Labor Code.
minimize the distortion in the wage structure of respondent
company caused by the implementation of the various wage We note that neither the Wage Orders noted above, nor the
orders. Respondent is, therefore, required to implement the Implementing Rules promulgated by the Department of Labor
P1.00 wage increase effective May 1, 1984 when Wage Order and Employment, set forth a clear and specific notion of "wage
4 took effect. 2 (Emphasis supplied) distortion." What the Wage Orders and the Implementing Rules
did was simply to recognize that implementation of the Wage
Orders could result in a "distortion of the wage structure" of an From the above quoted material, it will be seen that the concept
employer, and to direct the employer and the union to negotiate of wage distortion assumes an existing grouping or
with each other to correct the distortion. Thus, Section 6 of classification of employees which establishes distinctions
Wage Order No. 3, dated 7 November 1983, provided as among such employees on some relevant or legitimate basis.
follows: This classification is reflected in a differing wage rate for each
of the existing classes of employees. The wage distortion
Sec. 6. Where the application of the minimum wage rate anticipated in Wage Orders Nos. 3, 4, 5 and 6 was a "distortion"
prescribed herein results in distortions of the wage structure of (or "compression") which ensued from the impact of those
an establishment, the employer and the union shall negotiate to Wage Orders upon the different wage rates of the several
correct the distortions. Any dispute arising from wage classes of employees. Thus distortion ensued where the result
distortions shall be resolved through the grievance procedure of implementation of one or another of the several Wage Orders
under their collective bargaining agreement or through was the total elimination or the severe reduction of the
conciliation. differential or gap existing between the wage rates of the
differing classes of employees. 10
In case where there is no collective bargaining agreement or
recognized labor organization, the employer shall endeavor to It is important to note that the remedy contemplated in the Wage
correct such distortions in consultation with their workers. Any Orders, and now in Article 124 of the Labor Code, for a wage
dispute shall be resolved through conciliation by the distortion consisted of negotiations between employer and
appropriate Regional Office of the Ministry of Labor and employees for the rectification of the distortion by re-adjusting
Employment or through arbitration by the NLRC Arbitration the wage rates of the differing classes of employees. As a
Branch having jurisdiction over the work-place. 7 (Emphasis practical matter, this ordinarily meant a wage increase for one
supplied) or more of the affected classes of employees so that some gap
or differential would be
In its Resolution dated 11 November 1987, the NLRC En Banc re-established. There was no legal requirement that the
provided some elaboration of the notion of wage distortion, in historical gap which existed before the implementation of the
the following terms: Wage Orders be restored in precisely the same form or amount.

Wage distortion presupposes a classification of positions and Applying the above concept to the case at bar, we note that there
ranking of these positions at various levels. One visualizes a did exist a two-fold classification of employees within the
hierarchy of positions with corresponding ranks basically in private respondent Company: regular employees on the one
terms of wages and other emoluments. Where a significant hand and casual (or non-regular) employees on the other. As
change occurs at the lowest level of positions in terms of basic can be seen from the figures referred to earlier, the differential
wage without a corresponding change in the other level in the between these two (2) classes of employees existing before
hierarchy of positions, negating as a result thereof the Wage Order No. 3 was reduced to zero upon the effectivity of
distinction between one level of position from the next higher Wage Order No. 5 on 16 June 1984. Obviously, distortion
level, and resulting in a disparity [should be "parity"] between consisting of complete elimination of the wage rate differential
the lowest level [and] the next higher level or rank, between had occurred. It is equally clear, however, that fifteen (15)
new entrants and old hires, there exists a wage distortion. days later, on 1 July 1984, upon effectivity of the wage increase
stipulated in the collective bargaining agreement between the
The various issuances on wages anticipated this occurrence so parties, a gap or differential of P1.84 was re-created. This
that it had been commonly provided for in these issuances that restored differential persisted after the effectivity of Wage
negotiations may be initiated for the purposes of correcting the Order No. 6 on 1 November 1984. By operation of the same
resulting distortion. 8 (Emphases and brackets supplied) CBA, by 1 July 1985, the wage differential had grown to P3.60.

A statutory definition of "wage distortion" is now found in We believe and so hold that the re-establishment of a significant
Article 124 of the Labor Code as amended by Republic Act. No. gap or differential between regular employees and casual
6727 (dated 9 June 1989) which reads as follows: employees by operation of the CBA was more than substantial
compliance with the requirements of the several Wage Orders
Article 124. Standards/Criteria for Minimum Wage (and of Article 124 of the Labor Code). That this re-
Fixing . . . establishment of a significant differential was the result of
collective bargaining negotiations, rather than of a special
xxx xxx xxx grievance procedure, is not a legal basis for ignoring it. The
NLRC En Banc was in serious error when it disregarded the
As used herein, a wage distortion shall mean a situation where differential of P3.60 which had been restored by 1 July 1985
an increase in prescribed wage rates results in the elimination upon the ground that such differential "represent[ed] negotiated
or severe contraction of intentional quantitative differences in wage increase[s] which should not be considered covered and
wage or salary rates between and among employee groups in an in compliance with the Wage Orders." 11 The Wage Orders
establishment as to effectively obliterate the distinctions referred to above had provided for the crediting of increases in
embodied in such wage structure based on skills, length of wages or allowances granted or paid by employers within a
service, or other logical bases of differentiation. 9 (Emphasis specified time against the statutorily prescribed increases in
supplied) minimum wages. 12 A similar provision recognizing crediting
of increases in daily basic wage rates granted by employers
pursuant to collective bargaining agreements, is set out in
Section 4(d) of R.A. No. 6727, a statute which sought to The basic point which needs to be stressed is that whether or
"rationalize wage policy determination by establishing the not a new or additional scheme of classification of employees
mechanism and proper standards therefor ." In Apex Mining for compensation purposes should be established by the
Company, Inc. v. National Labor Relations Commission, 13 the Company (and the legitimacy or viability of the bases of
Supreme Court said: distinction there embodied) is properly a matter for
management judgment and discretion, and ultimately, perhaps,
It is important to note that the creditability provisions in Wage a subject matter for bargaining negotiations between employer
Orders Nos. 5 and 6 (as well as the parallel provisions in Wage and employees. It is assuredly something that falls outside the
Orders Nos. 2, 3 and 4) are grounded in an important public concept of "wage distortion." The Wage Orders and Article 124
policy. That public policy may be seen to be the encouragement as amended do not require the establishment of new
of employers to grant wage and allowance increases to their classifications or sub-classifications by the employer. The
employees higher than the minimum rates of increases NLRC is not authorized unilaterally to impose, directly or
prescribed by statute or administrative regulation. indirectly, under the guise of rectifying a "wage distortion,"
To obliterate the creditability provisions in the Wage Orders upon an employer a new scheme of classification of employees
through interpretation or otherwise, and to compel employers where none has been established either by management
simply to add legislated increases in salaries or allowances decision or by collective bargaining.
without regard to what is already being paid, would be to
penalize employers who grant their workers more than the We conclude that petitioner NFL has not shown any grave
statutorily prescribed minimum rates of increases. Clearly, this abuse of discretion amounting to lack of excess of jurisdiction
would be counter-productive so far as securing the interests of on the part of the NLRC in rendering its decision (through its
labor is concerned. The creditability provisions in the Wage Fifth Division) dated 16 December 1991.
Orders prevent the penalizing of employers who are industry
leaders and who do not wait for statutorily prescribed increases WHEREFORE, the Petition for Certiorari is hereby
in salary or allowances and pay their workers more than what DISMISSED for lack of merit. No pronouncement as to costs.
the law or regulations require. 14 (Emphases in the original)
SO ORDERED.
We believe that the same public policy requires recognition and
validation, as it were, of wage increases given by employers Bankard EEs Union vs NLRC
either unilaterally or as a result of collective bargaining CARPIO MORALES, J.:
negotiations, in the effort to correct wage distortions.
The present Petition for Review on Certiorari under Rule 45 of
We consider, still further, that the "regularization" of the casual the Rules of Court raises the issue of whether the unilateral
or non-regular employees on 21 June 1984 which was adoption by an employer of an upgraded salary scale that
unilaterally effected by the Company (albeit upon the request increased the hiring rates of new employees without increasing
of petitioner NFL), in conjunction with the coming into effect the salary rates of old employees resulted in wage distortion
of the increases in daily wage stipulated in the CBA, had the within the contemplation of Article 124 of the Labor Code.
effect of rendering the whole problem of wage distortion
academic. The act of "regularization" eliminated the Bankard, Inc. (Bankard) classifies its employees by levels, to
classification scheme in respect of which the wage distortion wit: Level I, Level II, Level III, Level IV, and Level V. On May
had existed. 28, 1993, its Board of Directors approved a "New Salary Scale",
made retroactive to April 1, 1993, for the purpose of making its
Petitioner NFL's principal contention that the wage distortion hiring rate competitive in the industrys labor market. The
persisted with respect to the "old" regular employees and the "New Salary Scale" increased the hiring rates of new
"newly regularized" employees, is realistically a claim or employees, to wit: Levels I and V by one thousand pesos
demand that the classification of "regular" employees be broken (P1,000.00), and Levels II, III and IV by nine hundred pesos
down into a sub-classification of "new regulars" and "old (P900.00). Accordingly, the salaries of employees who fell
regulars." A basic problem with this contention is that, per the below the new minimum rates were also adjusted to reach such
record of this case and during the period of time here relevant, rates under their levels.
there was in fact no pre-existing sub-classification of regular
employees into "new regulars" and "old regulars" (i.e., on the Bankards move drew the Bankard Employees Union-WATU
basis of seniority or longevity) in the Company. It follows that, (petitioner), the duly certified exclusive bargaining agent of the
as pointed out by the Solicitor-General, 15 no wage distortion regular rank and file employees of Bankard, to press for the
within the meaning of Wage Orders Nos. 3 through 6 (and of increase in the salary of its old, regular employees.
Article 124 of the Labor Code) continued beyond the
"regularization" of the casual employees on Bankard took the position, however, that there was no
21 June 1984. It may be though here again the record is silent obligation on the part of the management to grant to all its
that the Company had some other sub-grouping of regular employees the same increase in an across-the-board manner.
employees on the basis, for instance, of the kind of functions
discharged by employees (e.g., rank and file; supervisory; As the continued request of petitioner for increase in the wages
middle management; senior management; highly technical, and salaries of Bankards regular employees remained
etc.). unheeded, it filed a Notice of Strike on August 26, 1993 on the
ground of discrimination and other acts of Unfair Labor a grouping or classification of employees that establishes
Practice (ULP). distinctions among them on some relevant or legitimate bases.6

A director of the National Conciliation and Mediation Board Involved in the classification of employees are various factors
treated the Notice of Strike as a "Preventive Mediation Case" such as the degrees of responsibility, the skills and knowledge
based on a finding that the issues therein were "not strikeable". required, the complexity of the job, or other logical basis of
differentiation. The differing wage rate for each of the existing
Petitioner filed another Notice of Strike on October 8, 1993 on classes of employees reflects this classification.
the grounds of refusal to bargain, discrimination, and other acts
of ULP - union busting. The strike was averted, however, when Petitioner maintains that for purposes of wage distortion, the
the dispute was certified by the Secretary of Labor and classification is not one based on "levels" or "ranks" but on two
Employment for compulsory arbitration. groups of employees, the newly hired and the old, in each and
every level, and not between and among the different levels or
The Second Division of the NLRC, by Order of May 31, 1995, ranks in the salary structure.
finding no wage distortion, dismissed the case for lack of merit.
Public respondent National Labor Relations Commission
Petitioners motion for reconsideration of the dismissal of the (NLRC) refutes petitioners position, however. It, through the
case was, by Resolution of July 28, 1995, denied. Office of the Solicitor General, essays in its Comment of April
12, 2000 as follows:
Petitioner thereupon filed a petition for certiorari before this
Court, docketed as G.R. 121970. In accordance with its ruling To determine the existence of wage distortion, the "historical"
in St. Martin Funeral Homes v. NLRC,1 the petition was classification of the employees prior to the wage increase must
referred to the Court of Appeals which, by October 28, 1999, be established. Likewise, it must be shown that as between the
denied the same for lack of merit. different classification of employees, there exists a "historical"
gap or difference.
Hence, the present petition which faults the appellate court as
follows: xxx

(1) It misapprehended the basic issues when it concluded that The classification preferred by petitioner is belied by the wage
under Bankards new wage structure, the old salary gaps structure of private respondent as shown in the new salary scale
between the different classification or level of employees were it adopted on May 28, 1993, retroactive to April 1, 1993, which
"still reflected" by the adjusted salary rates2; and provides, thus:

(2) It erred in concluding that "wage distortion does not appear

to exist", which conclusion is manifestly contrary to law and Hiring Minimum Maximum
jurisprudence.3 Level From To From To From To
I 3,100 4,100 3,200 4,200 7,200 9,250
Upon the enactment of R.A. No. 6727 (WAGE II 3,200 4,100 3,300 4,200 7,500 9,500
RATIONALIZATION ACT, amending, among others, Article III 3,300 4,200 3,400 4,300 8,000 10,000
124 of the Labor Code) on June 9, 1989, the term "wage IV 3,500 4,400 3,600 4,500 8,500 10,500
distortion" was explicitly defined as: V 3,700 4,700 3,800 4,800 9,000 11,000
Thus the employees of private respondent have been
... a situation where an increase in prescribed wage rates results "historically" classified into levels, i.e. I to V, and not on the
in the elimination or severe contraction of intentional basis of their length of service. Put differently, the entry of new
quantitative differences in wage or salary rates between and employees to the company ipso facto place[s] them under any
among employee groups in an establishment as to effectively of the levels mentioned in the new salary scale which private
obliterate the distinctions embodied in such wage structure respondent adopted retroactive [to] April 1, 1993. Petitioner
based on skills, length of service, or other logical bases of cannot make a contrary classification of private respondents
differentiation.4 employees without encroaching upon recognized management
prerogative of formulating a wage structure, in this case, one
Prubankers Association v. Prudential Bank and Trust based on level.7 (Emphasis and underscoring supplied)
Company5 laid down the four elements of wage distortion, to
wit: (1.) An existing hierarchy of positions with corresponding The issue of whether wage distortion exists being a question of
salary rates; (2) A significant change in the salary rate of a lower fact that is within the jurisdiction of quasi-judicial tribunals,8
pay class without a concomitant increase in the salary rate of a and it being a basic rule that findings of facts of quasi-judicial
higher one; (3) The elimination of the distinction between the agencies, like the NLRC, are generally accorded not only
two levels; and (4) The existence of the distortion in the same respect but at times even finality if they are supported by
region of the country. substantial evidence, as are the findings in the case at bar, they
must be respected. For these agencies have acquired expertise,
Normally, a company has a wage structure or method of their jurisdiction being confined to specific matters.9
determining the wages of its employees. In a problem dealing
with "wage distortion," the basic assumption is that there exists
It is thus clear that there is no hierarchy of positions between Our mind said gap is not significant as to obliterate or result in
the newly hired and regular employees of Bankard, hence, the severe contraction of the intentional quantitative differences in
first element of wage distortion provided in Prubankers is the salary rates between the employee group. As already stated,
wanting.lawphi1.nt the classification under the wage structure is based on the rank
of an employee, not on seniority. For this reason, ,wage
While seniority may be a factor in determining the wages of distortion does not appear to exist.12 (Emphasis and
employees, it cannot be made the sole basis in cases where the underscoring supplied)
nature of their work differs.
Apart from the findings of fact of the NLRC and the Court of
Moreover, for purposes of determining the existence of wage Appeals that some of the elements of wage distortion are absent,
distortion, employees cannot create their own independent petitioner cannot legally obligate Bankard to correct the alleged
classification and use it as a basis to demand an across-the- "wage distortion" as the increase in the wages and salaries of
board increase in salary. the newly-hired was not due to a prescribed law or wage order.

As National Federation of Labor v. NLRC, et al.10 teaches, the The wordings of Article 124 are clear. If it was the intention of
formulation of a wage structure through the classification of the legislators to cover all kinds of wage adjustments, then the
employees is a matter of management judgment and discretion. language of the law should have been broad, not restrictive as
it is currently phrased:
[W]hether or not a new additional scheme of classification of
employees for compensation purposes should be established by Article 124. Standards/Criteria for Minimum Wage Fixing.
the Company (and the legitimacy or viability of the bases of
distinction there embodied) is properly a matter of management xxx
judgment and discretion, and ultimately, perhaps, a subject
matter for bargaining negotiations between employer and Where the application of any prescribed wage increase by virtue
employees. It is assuredly something that falls outside the of a law or Wage Order issued by any Regional Board results
concept of "wage distortion."11 (Emphasis and underscoring in distortions of the wage structure within an establishment, the
supplied) employer and the union shall negotiate to correct the
distortions. Any dispute arising from the wage distortions shall
As did the Court of Appeals, this Court finds that the third be resolved through the grievance procedure under their
element provided in Prubankers is also wanting. For, as the collective bargaining agreement and, if it remains unresolved,
appellate court explained: through voluntary arbitration.

In trying to prove wage distortion, petitioner union presented a x x x (Italics and emphasis supplied)
list of five (5) employees allegedly affected by the said increase:
Article 124 is entitled "Standards/Criteria for Minimum Wage
Fixing." It is found in CHAPTER V on "WAGE STUDIES,
Pay of Old/ Pay of Newly Difference WAGE AGREEMENTS AND WAGE DETERMINATION"
Regular Employees Hired Employees which principally deals with the fixing of minimum wage.
A. Prior to April 1, 1993 Article 124 should thus be construed and correlated in relation
Level I P4,518.75 to minimum wage fixing, the intention of the law being that in
(Sammy Guce) P3,100 P1,418.75 the event of an increase in minimum wage, the distinctions
Level II P6,242.00 embodied in the wage structure based on skills, length of
(Nazario Abello) P3,200 P3,042.00 service, or other logical bases of differentiation will be
Level III P4,850.00 preserved.
(Arthur Chavez) P3,300 P1,550.00
Level IV P5,339.00 If the compulsory mandate under Article 124 to correct "wage
Melissa Cordero) P3,500 P1,839.00 distortion" is applied to voluntary and unilateral increases by
Level V P7,090.69 the employer in fixing hiring rates which is inherently a
(Ma. Lourdes Dee) P3,700 P3,390.69 business judgment prerogative, then the hands of the employer
B. Effective April 1, 1993 would be completely tied even in cases where an increase in
Level I P4,518.75 wages of a particular group is justified due to a re-evaluation of
Sammy Guce) P4,100 P418.75 the high productivity of a particular group, or as in the present
Level II P6,242.00 case, the need to increase the competitiveness of Bankards
(Nazario Abello) P4,100 P2,142.00 hiring rate. An employer would be discouraged from adjusting
Level III P4,850.00 the salary rates of a particular group of employees for fear that
(Arthur Chavez) P4,200 P650.00 it would result to a demand by all employees for a similar
Level IV P5,330.00 increase, especially if the financial conditions of the business
(Melissa Cordero) P4,400 P939.00 cannot address an across-the-board increase.
Level V P7,090.69
(Ma. Lourdes Dee) P4,700 P2,390.69 Petitioner cites Metro Transit Organization, Inc. v. NLRC13 to
Even assuming that there is a decrease in the wage gap between support its claim that the obligation to rectify wage distortion is
the pay of the old employees and the newly hired employees, to
not confined to wage distortion resulting from government wage increases through appropriate channels, such as through a
decreed law or wage order. CBA.

Reliance on Metro Transit is however misplaced, as the This Court, time and again, has shown concern and compassion
obligation therein to rectify the wage distortion was not by to the plight of workers in adherence to the Constitutional
virtue of Article 124 of the Labor Code, but on account of a then provisions on social justice and has always upheld the right of
existing "company practice" that whenever rank-and-file workers to press for better terms and conditions of employment.
employees were paid a statutorily mandated salary increase, It does not mean, however, that every dispute should be decided
supervisory employees were, as a matter of practice, also paid in favor of labor, for employers correspondingly have rights
the same amount plus an added premium. Thus this Court held under the law which need to be respected.
in said case:
WHEREFORE, the present petition is hereby DENIED.
We conclude that the supervisory employees, who then (i.e., on
April 17, 1989) had, unlike the rank-and-file employees, no SO ORDERED.
CBA governing the terms and conditions of their employment,
had the right to rely on the company practice of unilaterally Prubankers vs Prudential
correcting the wage distortion effects of a salary increase given PANGANIBAN, J.:
to the rank-and-file employees, by giving the supervisory
employees a corresponding salary increase plus a premium. . . Wage distortion presupposes an increase in the compensation
.14 (Emphasis supplied) of the lower ranks in an office hierarchy wirhout a
corresponding raise for higher-tiered employees in the same
Wage distortion is a factual and economic condition that may region of the country, resulting in the elimination or the severe
be brought about by different causes. In Metro Transit, the diminution of the distinction between the two groups. Such
reduction or elimination of the normal differential between the distortion does not arise when a wage order gives employees in
wage rates of rank-and-file and those of supervisory employees one branch of a bank higher compensation than that given to
was due to the granting to the former of wage increase which their counterparts in other regions occupying the same pay
was, however, denied to the latter group of employees. scale, who are not covered by said wage order. In short, the
implementation of wage orders in one region but not in others
The mere factual existence of wage distortion does not, does not in itself necessarily result in wage distortion.
however, ipso facto result to an obligation to rectify it, absent a
law or other source of obligation which requires its The Case
rectification.
Before us is a Petition for Review on Certiorari, challenging the
Unlike in Metro Transit then where there existed a "company November 6, 1997 Decision 1 of the Court of Appeals in CA-
practice," no such management practice is herein alleged to GR SP No. 42525. The dispositive portion of the challenged
obligate Bankard to provide an across-the-board increase to all Decision reads:
its regular employees.
WHEREFORE, the petition is GRANTED. The assailed
Bankards right to increase its hiring rate, to establish minimum decision of the Voluntary Arbitration Committee dated June 18,
salaries for specific jobs, and to adjust the rates of employees 1996 is hereby REVERSED and SET ASIDE for having been
affected thereby is embodied under Section 2, Article V (Salary issued with grave abuse of discretion tantamount to lack of or
and Cost of Living Allowance) of the parties Collective excess of jurisdiction, and a new judgment is rendered finding
Bargaining Agreement (CBA), to wit: that no wage distortion resulted from the petitioner's separate
and regional implementation of Wage Order No. VII-03 at its
Section 2. Any salary increase granted under this Article shall Cebu, Mabolo and P. del Rosario.
be without prejudice to the right of the Company to establish
such minimum salaries as it may hereafter find appropriate for The June 18, 1996 Decision of the Voluntary Arbitration
specific jobs, and to adjust the rates of the employees thereby Commitee, 2 which the Court of Appeals reversed and set aside,
affected to such minimum salaries thus established.15 (Italics disposed as follows:
and underscoring supplied)
WHEREFORE, it is hereby ruled that the Bank's separate and
This CBA provision, which is based on legitimate business- regional implementation of Wage Order No. VII-03 at its Cebu,
judgment prerogatives of the employer, is a valid and legally Mabolo and P. del Rosario branches created a wage distortion
enforceable source of rights between the parties. in the Bank nationwide which should be resolved in accordance
with Art. 124 of the Labor Code. 3
In fine, absent any indication that the voluntary increase of
salary rates by an employer was done arbitrarily and illegally The Facts
for the purpose of circumventing the laws or was devoid of any
legitimate purpose other than to discriminate against the regular The facts of the case are summarized by the Court of Appeals
employees, this Court will not step in to interfere with this thus:
management prerogative. Employees are of course not
precluded from negotiating with its employer and lobby for
On November 18, 1993, the Regional Tripartite Wages and orders are diverse, based on the distinctive situations and needs
Productivity Board of Region V issued Wage Order No. RB 05- existing in each region. Hence, there is no basis to apply the
03 which provided for a Cost of Living Allowance (COLA) to salary increases imposed by Wage Order No. VII-03 to
workers in the private sector who ha[d] rendered service for at employees outside of Region VII." Furthermore, the Court of
least three (3) months before its effectivity, and for the same Appeals ruled that "the distinctions between each employee
period [t]hereafter, in the following categories: SEVENTEEN group in the region are maintained, as all employees were
PESOS AND FIFTY CENTAVOS (P17.50) in the cities of granted an increase in minimum wage rate. 5
Naga and Legaspi; FIFTEEN PESOS AND FIFTY
CENTAVOS (P15.50) in the municipalities of Tabaco, Daraga, The Issues
Pili and the city of Iriga; and TEN PESOS (P10.00) for all other
areas in the Bicol Region. In its Memorandum, petitioner raises the following issues: 6

Subsequently on November 23, 1993, the Regional Tripartite I

Wages and Productivity Board of Region VII issued Wage
Order No. RB VII-03, which directed the integration of the Whether or not the Court of Appeals departed from the usual
COLA mandated pursuant to Wage Order No. RO VII-02-A course of judicial procedure when it disregarded the factual
into the basic pay of all workers. It also established an increase findings of the Voluntary Arbitration Committee as to the
in the minimum wage rates for all workers and and employees existence of wage distortion.
in the private sector as follows: by Ten Pesos (P10.00) in the
cities of Cebu, Mandaue and Lapulapu; Five Pesos (P5.00) in II
the municipalities of Compostela, Liloan, Consolacion,
Cordova, Talisay, Minglanilla, Naga and the cities of Davao, Whether or not the Court of Appeals committed grave error in
Toledo, Dumaguete, Bais, Canlaon and Tagbilaran. law when it ruled that wage distortion exists only within a
region and not nationwide.
The petitioner then granted a COLA of P17.50 to its employees
at its Naga Branch, the only branch covered by Wage Order No. III
RB 5-03, and integrated the P150.00 per month COLA into the
basic pay of its rank-and-file employees at its Cebu, Mabolo Whether or not the Court of Appeals erred in implying that the
and P. del Rosario branches, the branches covered by Wage term "establishment" as used in Article 125 of the Labor Code
Order No. RB VII-03. refers to the regional branches of the bank and not to the bank
as a whole.
On June 7, 1994, respondent Prubankers Association wrote the
petitioner requesting that the Labor Management Committee be The main issue is whether or not a wage distortion resulted from
immediately convened to discuss and resolve the alleged wage respondent's implementation of the aforecited Wage Orders. As
distortion created in the salary structure upon the a preliminary matter, we shall also take up the question of
implementation of the said wage orders. Respondent forum-shopping.
Association then demanded in the Labor Management
Committee meetings that the petitioner extend the application The Court's Ruling
of the wage orders to its employees outside Regions V and VII,
claiming that the regional implementation of the said orders The petition is devoid of merit. 7
created a wage distortion in the wage rates of petitioner's
employees nationwide. As the grievance could not be settled in Preliminary Issue: Forum-Shopping
the said meetings, the parties agreed to submit the matter to
voluntary arbitration. The Arbitration Committee formed for Respondent asks for the dismissal of the petition because
that purpose was composed of the following: public respondent petitioner allegedly engaged in forum-shopping. It maintains
Froilan M. Bacungan as Chairman, with Attys. Domingo T. that petitioner failed to comply with Section 2 of Rule 42 of the
Anonuevo and Emerico O. de Guzman as members. The issue Rules of Court, which requires that parties must certify under
presented before the Committee was whether or not the bank's oath that they have not commenced any other action involving
separate and regional implementation of Wage Order No. 5-03 the same issues in the Supreme Court, the Court of Appeals, or
at its Naga Branch and Wage Order No. VII-03 at its Cebu, different divisions thereof, or any other tribunal or agency; if
Mabolo and P. del Rosario branches, created a wage distortion there is such other action or proceeding, they must state the
in the bank nationwide. status of the same; and if they should thereafter learn that a
similar action or proceeding has been filed or is pending before
The Arbitration Committee on June 18, 1996 rendered the said courts, they should promptly inform the aforesaid
questioned decision. 4 courts or any other tribunal or agency within five days
therefrom. Specifically, petitioner accuses respondent of failing
Ruling of the Court of Appeals to inform this Court of the pendency of NCMB-NCR-RVA-O4-
012-97 entitled "In Re: Voluntary Arbitration between
In ruling that there was no wage distortion, the Court of Appeals Prudential Bank and Prubankers Association" (hereafter
held that the variance in the salary rates of employees in referred to as "voluntary arbitration case"), an action involving
different regions of the country was justified by RA 6727. It issues allegedly similar to those raised in the present
noted that "the underlying considerations in issuing the wage controversy.
 shopping is deemed to exist and, on this basis, the summary
In its Reply, petitioner effectively admits that the voluntary dismissal of both actions is indeed warranted.
arbitration case was already pending when it filed the present
petition. However, it claims no violation of the rule against Nonetheless, we deem it appropriate to pass upon the main issue
forum-shopping, because there is no identity of causes of action on its merit in view of its importance.
and issues between the two cases.
Main Issue: Wage Distortion
We sustain the respondent. The rule on forum-shopping was
first included in Section 17 of the Interim Rules and Guidelines The statutory definition of wage distortion is found in Article
issued by this Court on January 11, 1983, which imposed a 124 of the Labor Code, as amended by Republic Act No. 6727,
sanction in this wise: "A violation of the rule shall constitute which reads:
contempt of court and shall be a cause for the summary
dismissal of both petitions, without prejudice to the taking of Art. 124.Standards/Criteria for Minimum Wage Fixing . . .
appropriate action against the counsel or party concerned."
Thereafter, the Court restated the rule in Revised Circular No. As used herein, a wage distortion shall mean a situation where
28-91 and Administrative Circular No. 04-94. Ultimately, the an increase in prescribed wage results in the elimination of
rule was embodied in the 1997 amendments to the Rules of severe contraction of intentional quantitative differences in
Court. wage or salary rates between and among employee groups in an
establishment as to effectively obliterate the distinctions
As explained by this Court in First Philippine International embodied in such wage structure based on skills, length of
Bank v. Court of Appeals, 8 forum-shopping exists where the service, or other logical bases of differentiation.
elements of litis pendentia are present, and where a final
judgment in one case will amount to res judicata in the other. Elaborating on this statutory definition, this Court ruled: "Wage
Thus, there is forum-shopping when, between an action distortion presupposes a classification of positions and ranking
pending before this Court and another one, there exist: "a) of these positions at various levels. One visualizes a hierarchy
identity of parties, or at least such parties as represent the same of positions with corresponding ranks basically in terms of
interests in both actions, b) identity of rights asserted and relief wages and other emoluments. Where a significant change
prayed for, the relief being founded on the same facts, and c) occurs at the lowest level of positions in terms of basic wage
the identity of the two preceding particulars is such that any without a corresponding change in the other level in the
judgement rendered in the other action, will, regardless of hierarchy of positions, negating as a result thereof the
which party is successful amount to res judicata in the action distinction between one level of position from the next higher
under consideration; said requisites also constitutive of the level, and resulting in a parity between the lowest level and the
requisites for auter action pendant or lis pendens." 9 Another next higher level or rank, between new entrants and old hires,
case elucidates the consequence of forum-shopping: "[W]here there exists a wage distortion. . . . . The concept of a wage
a litigant sues the same party against whom another action or distortion assumes an existing grouping or classification of
actions for the alleged violation of the same right and the employees which establishes distinctions among such
enforcement of the same relief is/are still pending, the defense employees on some relevant or legitimate basis. This
of litis pendentia in one case is a bar to the others; and, a final classification is reflected in a differing wage rate for each of the
judgment in one would constitute res judicata and thus would existing classes of employees" 11
cause the dismissal of the rest." 10
Wage distortion involves four elements:
The voluntary arbitration case involved the issue of whether the
adoption by the Bank of regionalized hiring rates was valid and 1. An existing hierarchy of positions with corresponding
binding. On the other hand, the issue now on hand revolves salary rates
around the existence of a wage distortion arising from the
Bank's separate and regional implementation of the two Wage 2. A significant change in the salary rate of a lower pay
Orders in the affected branches. A closer look would show that, class without a concomitant increase in the salary rate of a
indeed, the requisites of forum-shopping are present. higher one

First, there is identity of parties. Both cases are between the 3. The elimination of the distinction between the two
Bank and the Association acting on behalf of all its members. levels
Second, although the respective issues and reliefs prayed for in
the two cases are stated differently, both actions boil down to 4. The existence of the distortion in the same region of
one single issue: the validity of the Bank's regionalization of its the country
wage structure based on RA 6727. Even if the voluntary
arbitration case calls for striking, down the Bank's regionalized In the present case, it is clear that no wage distortion resulted
hiring scheme while the instant petition calls for the correction when respondent implemented the subject Wage Orders in the
of the alleged wage distortion caused by the regional covered branches. In the said branches, there was an increase in
implementation of Wage Order No. VII-03, the ultimate relief the salary rates of all pay classes. Furthermore, the hierarchy of
prayed for in both cases is the maintenance of the Bank's positions based on skills, lengh of service and other logical
national wage structure. Hence, the final disposition of one bases of differentiation was preserved. In other words, the
would constitute res judicata in the other. Thus, forum- quantitative difference in compensation between different pay
classes remained the same in all branches in the affected region. economic factors and the national economic and social
Put differently, the distinction between Pay Class 1 and Pay development plans.
Class 2, for example, was not eliminated as a result of the
implementation of the two Wage Orders in the said region. RA 6727 also amended Article 124 of the Labor Code, thus:
Hence, it cannot be said that there was a wage distortion.
Art. 124.Standards/Criteria for Minimum Wage Fixing. The
Petitioner argues that a wage distortion exists, because the regional minimum wages to be established by the Regional
implementation of the two Wage Orders has resulted in the Board shall be as nearly adequate as is economically feasible to
discrepancy in the compensation of employees of similar pay maintain the minimum standards of living necessary for the
classification in different regions. Hence, petitioner maintains health, efficiency and general well-being of the employees
that, as a result of the two Wage Orders, the employees in the within the frame work of the national economic and social
affected regions have higher compensation than their development program. In the determination of such regional
counterparts of the same level in other regions. Several tables minimum wages, the Regional Board shall, among other
are presented by petitioner to illustrate that the employees in the relevant factors, consider the following:
regions covered by the Wage Orders are receiving more than
their counterparts in the same pay scale in other regions. The demand for living wages;
Wage adjustment vis-a-vis the consumer price index;
The Court is not persuaded. A wage parity between employees The cost of living and changes or increases therein;
in different rungs, is not at issue here, but a wage disparity The needs of workers and their families;
between employees in the same rung but located in different The need to induce industries to invest in the countryside;
regions of the country. Improvements in standards of living;
The prevailing wage levels;
Contrary to petitioner's postulation, a disparity in wages Fair return of the capital invested and capacity to pay of
between employees holding similar positions but in different employers;
regions does not constitute wage distortion as contemplated by Effects on employment generation and family income; and
law. As previously enunciated, it is the hierarchy of positions The equitable distribution of income and wealth along the
and the disparity of their corresponding wages and other imperatives of social and economic development.
emoluments that are sought to be preserved by the concept of From the above-quoted rationale of the law, as well as the
wage distortion. Put differently, a wage distortion arises when criteria enumerated, a disparity in wages between employees
a wage order engenders wage parity between employees in with similar positions in different regions is necessarily
different rungs of the organizational ladder of the same expected. In insisting that the employees of the same pay class
establishment. It bears emphasis that wage distortion involves in different regions should receive the same compensation,
a parity in the salary rates of different pay classes which, as a petitioner has apparently misunderstood both the meaning of
result, eliminates the distinction between the different ranks in wage distortion and the intent of the law to regionalize wage
the same region. rates.

Different Regional Wages It must be understood that varying in each region of the country
are controlling factors such as the cost of living; supply and
Mandated by RA 6727 demand of basic goods, services and necessities; and the
purchasing power of the peso. Other considerations underscore
Petitioner's claim of wage distortion must also be denied for one the necessity of the law. Wages in some areas may be increased
other reason. The difference in wages between employees in the in order to prevent migration to the National Capital Region
same pay scale in different regions is not the mischief sought to and, hence, to decongest the metropolis. Therefore, what the
be banished by the law. In fact, Republic Act No. 6727 (the petitioner herein bewails is precisely what the law provides in
Wage Rationalization Act), recognizes "existing regional order to achieve its purpose.
disparities in the cost of living." Section 2 of said law provides:
Petitioner claims that it "does not insist that the Regional Wage
Sec 2. It is hereby declared the policy of the State to Boards created pursuant to RA 6727 do not have the authority
rationalize the fixing of minimum wages and to promote to issue wage orders based on the distinctive situations and
productivity-improvement and gain-sharing measures to ensure needs existing in each region. So also, . . . it does not insist that
a decent standard of living for the workers and their families; to the [B]ank should not implement regional wage orders. Neither
guarantee the rights of labor to its just share in the fruits of does it seek to penalize the Bank for following Wage Order VII-
production; to enhance employment generation in the 03. . . . What it simply argues is that it is wrong for the Bank to
countryside through industry dispersal; and to allow business peremptorily abandon a national wage structure and replace the
and industry reasonable returns on investment, expansion and same with a regionalized structure in violation of the principle
growth. of equal pay for equal work. And, it is wrong to say that its act
of abandoning its national wage structure is mandated by law."
The State shall promote collective bargaining as the primary
mode of settling wages and other terms and conditions of As already discussed above, we cannot sustain this argument.
employment; and whenever necessary, the minimum wage rates Petitioner contradicts itself in not objecting, on the one hand, to
shall be adjusted in a fair and equitable manner, considering the right of the regional wage boards to impose a regionalized
existing regional disparities in the cost of living and other socio- wage scheme; while insisting, on the other hand, on a national
wage structure for the whole Bank. To reiterate, a uniform
national wage structure is antithetical to the purpose of RA Management Practice
6727.
Petitioner also insists that the Bank has adopted a uniform wage
The objective of the law also explains the wage disparity in the policy, which has attained the status of an established
example cited by petitioner: Armae Librero, though only in Pay management practice; thus, it is estopped from implementing a
Class 4 in Mabolo, was, as a result of the Wage Order, receiving wage order for a specific region only. We are not persuaded.
more than Bella Cristobal, who was already in Pay Class 5 in Said nationwide uniform wage policy of the Bank had been
Subic. 12 RA 6727 recognizes that there are different needs for adopted prior to the enactment of RA 6727. After the passage
the different situations in different regions of the country. The of said law, the Bank was mandated to regionalize its wage
fact that a person is receiving more in one region does not structure. Although the Bank implemented Wage Order Nos.
necessarily mean that he or she is better off than a person NCR-01 and NCR-02 nationwide instead of regionally even
receiving less in another region. We must consider, among after the effectivity of RA 6727, the Bank at the time was still
others, such factors as cost of living, fulfillment of national uncertain about how to follow the new law. In any event, that
economic goals, and standard of living. In any event, this Court, single instance cannot be constitutive of "management
in its decisions, merely enforces the law. It has no power to pass practice."
upon its wisdom or propriety.
WHEREFORE, the petition is DENIED and the assailed
Equal Pay for Equal Work Decision is AFFIRMED. Costs against petitioner.1wphi1.nt

Petitioner also avers that the implementation of the Wage Order SO ORDERED.
in only one region violates the equal-pay-for-equal-work
principle. This is not correct. At the risk of being repetitive, we
stress that RA 6727 mandates that wages in every region must
be set by the particular wage board of that region, based on the
prevailing situation therein. Necessarily, the wages in different
regions will not be uniform. Thus, under RA 6727, the
minimum wage in Region 1 may be different from that in
Region 13, because the socioeconomic conditions in the two
regions are different.

Meaning of "Establishment"

Petitioner further contends that the Court of Appeals erred in

interpreting the meaning of "establishment" in relation to wage
distortion. It quotes the RA 6727 Implementing Rules,
specifically Section 13 thereof which speaks of "workers
working in branches or agencies of establishments in or outside
the National Capital Region." Petitioner infers from this that the
regional offices of the Bank do not themselves constitute, but
are simply branches of, the establishment which is the whole
bank. In effect, petitioner argues that wage distortion covers the
pay scales even of employees in different regions, and not only
those of employees in the same region or branch. We disagree.

Sec. 13 provides that the "minimum wage rates of workers

working in branches or agencies of establishments in or outside
the National Capital Region shall be those applicable in the
place where they are sanctioned" The last part of the sentence
was omitted by petitioner in its argument. Given the entire
phrase, it is clear that the statutory provision does not support
petitioner's view that "establishment" includes all branches and
offices in different regions.

Further negating petitioner's theory is NWPC Guideline No. 1

(S. 1992) entitled "Revised Guidelines on Exemption From
Compliance With the Prescribed Wage/Cost of Living
Allowance Increases Granted by the Regional Tripartite Wages
and Productivity Board," which states that "establishment"
"refers to an economic unit which engages in one or
predominantly one kind of economic activity with a single fixed
location."