Subject: Statutory Construction

Doctrine: -
Topic: Aids in Statutory Construction
Subtopic: Extrinsic Aids, Contemporary Construction, Erroneous Construction; does not bind the Courts; does
not preclude judicial correction nor create rights; exception
Digester: Peace Panangin

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

THE CHARTERED BANK EMPLOYEES ASSOCIATION vs. HON. BLAS F. OPLE

Facts:
 On May 20, 1975, the Chartered Bank Employees Association, in representation of its monthly paid
employees/members, instituted a complaint with the Regional Office No. IV, Department of Labor,
now Ministry of Labor and Employment (MOLE) against private respondent Chartered Bank, for the
payment of ten (10) unworked legal holidays, as well as for premium and overtime differentials for
worked legal holidays from November 1, 1974.
 On the bases of the foregoing facts of the case, both the arbitrator and the National Labor Relations
Commission (NLRC) ruled in favor of the petitioners ordering the respondent bank to pay its monthly
paid employees, holiday pay for the ten (10) legal holidays effective November 1, 1974 and to pay premium
or overtime pay differentials to all employees who rendered work during said legal holidays.
 On appeal, the Minister of Labor set aside the decision of the NLRC and dismissed the petitioner's claim
for lack of merit basing its decision on Section 2, Rule IV, Book Ill of the Integrated Rules and Policy
Instruction No. 9, which respectively provide:

Sec. 2. Status of employees paid by the month. Employees who are uniformly paid by the month,
irrespective of the number of working days therein, with a salary of not less than the statutory or established
minimum wage shall be presumed to be paid for all days in the month whether worked or not.

Issue:
Whether or not the decision of the Minister of Labor was correct as it used Section 2, Rule IV, Book Ill of the
Integrated Rules and Policy Instruction No. 9 as its basis.

Ruling:
No. The Minister of Labor erred in its decision.

It is elementary in the rules of statutory construction that when the language of the law is clear and unequivocal
the law must be taken to mean exactly what it says. Moreover, while it is true that the contemporaneous
construction placed upon a statute by executive officers whose duty is to enforce it should be given great
weight by the courts, if such construction is so erroneous, the same must be declared as null and void. It is
the role of the Judiciary to refine and, when necessary correct constitutional (and/or statutory)
interpretation, in the context of the interactions of the three branches of the government, almost always in situations
where some agency of the State has engaged in action that stems ultimately from some legitimate area of governmental
power

In the case at bar, the provisions of the Labor Code on the entitlement to the benefits of holiday pay are clear and
explicit it provides for both the coverage of and exclusion from the benefit. In Policy Instruction No. 9, the then
Secretary of Labor went as far as to categorically state that the benefit is principally intended for daily paid
employees, when the law clearly states that every worker shall be paid their regular holiday pay. Moreover,
Section 2, Rule IV, Book III of the Rules to implement the Labor Code and Policy Instruction No. 9 issued by
the then Secretary of Labor must be declared null and void. Accordingly, public respondent Deputy Minister of Labor
Amado G. Inciong had no basis at all to deny the members of petitioner union their regular holiday pay as directed by the
Labor Code.

Therefore, the Minister of Labor erred in its decision.

FULL TEXT AHEAD 

 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

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

THE CHARTERED BANK EMPLOYEES ASSOCIATION, petitioner,

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

GUTIERREZ, JR., J.:

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

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

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

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

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

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

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

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

xxx xxx xxx

xxx xxx xxx

Section 5. The provisions of Section I above notwithstanding the BANK may revert to the six
(6) days work week, to include Saturday for a four (4) hour day, in the event the Central Bank
should require commercial banks to open for business on Saturday.
 3. In computing overtime pay and premium pay for work done during regular holidays, the
divisor used in arriving at the daily rate of pay is 251 days although formerly the divisor used
was 303 days and this was when the respondent bank was still operating on a 6-day work
week basis. However, for purposes of computing deductions corresponding to absences
without pay the divisor used is 365 days.

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

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

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

Sec. 2. Status of employees paid by the month. Employees who are uniformly paid by the
month, irrespective of the number of working days therein, with a salary of not less than the
statutory or established minimum wage shall be presumed to be paid for all days in the
month whether worked or not.

POLICY INSTRUCTION NO. 9

TO: All Regional Directors

SUBJECT: PAID LEGAL HOLIDAYS

The rules implementing PD 850 have clarified the policy in the implementation of the ten (10)
paid legal holidays. Before PD 850, the number of working days a year in a firm was
considered important in determining entitlement to the benefit. Thus, where an employee
was working for at least 313 days, he was considered definitely already paid. If he was
working for less than 313, there was no certainty whether the ten (10) paid legal holidays
were already paid to him or not.

The ten (10) paid legal holidays law, to start with, is intended to benefit principally daily
employees. In the case of monthly, only those whose monthly salary did not yet include
payment for the ten (10) paid legal holidays are entitled to the benefit.

Under the rules implementing PD 850, this policy has been fully clarified to eliminate
controversies on the entitlement of monthly paid employees. The new determining rule is
this: 'If the monthly paid employee is receiving not less than P240, the maximum monthly
minimum wage, and his monthly pay is uniform from January to December, he is presumed
to be already paid the ten (10) paid legal holidays. However, if deductions are made from his
monthly salary on account of holidays in months where they occur, then he is still entitled to
the ten (10) paid legal holidays.

These new interpretations must be uniformly and consistently upheld.

This issuance shall take effect immediately.

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

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

Second Error

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

Third Error

Whether or not the respondent Secretary of Labor, in not giving due

credence to the respondent bank's practice of paying its employees base pay
of 100% and premium pay of 50% for work done during legal holidays, acted
contrary to law and abused his discretion in denying the claim of petitioners
for unworked holidays and premium and overtime pay differentials for worked
holidays.

The petitioner contends that the respondent Minister of Labor gravely abused his discretion in promulgating Section
2, Rule IV, Book III of the Integrated Rules and Policy Instruction No. 9 as guidelines for the implementation of
Articles 82 and 94 of the Labor Code and in applying said guidelines to this case. It maintains that while it is true that
the respondent Minister has the authority in the performance of his duty to promulgate rules and regulations to
implement, construe and clarify the Labor Code, such power is limited by provisions of the statute sought to be
implemented, construed or clarified. According to the petitioner, the so-called "guidelines" promulgated by the
respondent Minister totally contravened and violated the Code by excluding the employees/members of the
petitioner from the benefits of the holiday pay, when the Code itself did not provide for their expanding the Code's
clear and concise conclusion and notwithstanding the Code's clear and concise phraseology defining those
employees who are covered and those who are excluded from the benefits of holiday pay.

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

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

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

Obviously, the Secretary (Minister) of Labor had exceeded his statutory authority granted by
Article 5 of the Labor Code authorizing him to promulgate the necessary implementing rules
and regulations.

We further ruled:

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

xxx xxx xxx

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

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

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

ART. 82. Coverage. The provision of this Title shall apply to employees in all establishments
and undertakings, whether for profit or not, but not to government employees, managerial
employees, field personnel members of the family of the employer who are dependent on
him for support, domestic helpers, persons in the personal service of another, and workers
who are paid by results as determined by the Secretary of Labor in appropriate regulations.
(Emphasis supplied).

The questioned Section 2, Rule IV, Book III of the Integrated Rules and the Secretary's Policy Instruction No. 9 add
another excluded group, namely, "employees who are uniformly paid by the month." While the additional exclusion
is only in the form of a presumption that all monthly paid employees have already been paid holiday pay, it
constitutes a taking away or a deprivation which must be in the law if it is to be valid. An administrative interpretation
which diminishes the benefits of labor more than what the statute delimits or withholds is obviously ultra vires.

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

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

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

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

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

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

We are not unmindful of the fact that the respondent's employees are among the highest paid in the industry. It is
not the intent of this Court to impose any undue burdens on an employer which is already doing its best for its
personnel. we have to resolve the labor dispute in the light of the parties' own collective bargaining agreement and
the benefits given by law to all workers. When the law provides benefits for "employees in all establishments and
undertakings, whether for profit or not" and lists specifically the employees not entitled to those benefits, the
administrative agency implementing that law cannot exclude certain employees from its coverage simply because
they are paid by the month or because they are already highly paid. The remedy lies in a clear redrafting of the
collective bargaining agreement with a statement that monthly pay already includes holiday pay or an amendment of
the law to that effect but not an administrative rule or a policy instruction.

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

SO ORDERED.

Makasiar, C.J., Concepcion, Jr., Melencio-Herrera, Plana, Escolin, Relova, De la Fuente, Cuevas, Alampay and
Patajo, JJ., concur.

Teehankee, J., in the result.

Aquino, J., took no part.