Case no 1. Autobus Transport System vs Bautista May 16, 2005

FACTS: Since 24 May 1995, respondent Antonio Bautista has been employed by petitioner Auto Bus Transport Systems, Inc. (Autobus), as driver-conductor with travel routes Manila-Tuguegarao via Baguio, Baguio- Tuguegarao via Manila and Manila-Tabuk via Baguio. Respondent was paid on commission basis, seven percent (7%) of the total gross income per travel, on a twice a month basis. On 03 January 2000, while respondent was driving Autobus No. 114 along Sta. Fe, Nueva Vizcaya, the bus hewas driving accidentally bumped the rear portion of Autobus No. 124. Respondent alleged that he was not allowed to work until he fully paid the amount of P75,551.50, representing thirty percent (30%) of the cost of repair of the damaged buses and that despite respondent’s pleas for reconsideration, the same was ignored by management. After a month, management sent him a letter of termination. Thus, on 02 February 2000, respondent instituted a Complaint for Illegal Dismissal with Money Claims for nonpayment of 13th month pay and service incentive leave pay against Autobus. ISSUE: Whether or not respondent is entitled to service incentive leave; Whether or not the three (3)-year prescriptive period provided under Article 291 of the Labor Code, as amended, is applicable to respondentʼs claim of service incentive leave pay. HELD: First Issue: Yes, respondent is entitled to his SIL Art. 95. RIGHT TO SERVICE INCENTIVE LEAVE

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

Book III, Rule V: SERVICE INCENTIVE LEAVE SECTION 1. Coverage. – This rule shall apply to all employees except: …

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

The phrase “other employees whose performance is unsupervised by the employer” must not be understood as a separate classification of employees to which service incentive leave shall not be granted. Rather, it

serves as an amplification of the interpretation of the definition of field personnel under the Labor Code as those “whose actual hours of work in the field cannot be determined with reasonable certainty. Petitionerʼs contention that respondent is not entitled to the grant of service incentive leave just because he was paid on purely commission basis is misplaced. What must be ascertained in order to resolve the issue of propriety of the grant of service incentive leave to respondent is whether or not he is a field personnel. According to Article 82 of the Labor Code, “field personnel” shall refer to non-agricultural employees who regularly perform their duties away from the principal place of business or branch office of the employer and whose actual hours of work in the field cannot be determined with reasonable certainty. It is of judicial notice that along the routes that are plied by these bus companies, there are its inspectors assigned at strategic places who board the bus and inspect the passengers, the punched tickets, and the conductor’s reports. There is also the mandatory once-a-week car barn or shop day, where the bus is regularly checked as to its mechanical, electrical, and hydraulic aspects, whether or not there are problems thereon as reported by the driver and/or conductor. They too, must be at specific place as [sic] specified time, as they generally observe prompt departure and arrival from their point of origin to their point of destination. In each and every depot, there is always the Dispatcher whose function is precisely to see to it that the bus and its crew leave the premises at specific times and arrive at the estimated proper time. The driver, the complainant herein, was therefore under constant supervision while in the performance of this work. He cannot be considered a field personnel. Second Issue: No, action for the claim of the SIL has NOT prescribed. Accordingly, if the employee wishes to accumulate his leave credits and opts for its commutation upon his resignation or separation from employment, his cause of action to claim the whole amount of his accumulated service incentive leave shall arise when the employer fails to pay such amount at the time of his resignation or separation from employment. We can conclude that the three (3)-year prescriptive period commences, not at the end of the year when the employee becomes entitled to the commutation of his service incentive leave, but from the time when the employer refuses to pay its monetary equivalent after demand of commutation or upon termination of the employee’s services, as the case may be.

Case no. 2 Millares et al. vs NLRC March 29, 1999

FACTS: Petitioners numbering one hundred sixteen (116) occupied the positions of Technical Staff, Unit Manager, Section Manager, Department Manager, Division Manager and Vice President in the mill site of respondent Paper Industries Corporation of the Philippines (PICOP) in Bislig, Surigao del Sur. In 1992 PICOP suffered a major financial setback allegedly brought about by the joint impact of restrictive government regulations on logging and the economic crisis. To avert further losses, it undertook a retrenchment program and terminated the services of petitioners. Accordingly, petitioners received separation pay computed at the rate of one (1) month basic pay for every year of service. Believing however that the allowances they allegedly regularly received on a monthly basis during their employment should have been included in the computation thereof they lodged a complaint for separation pay differentials. The allowances in question pertained to the following: 1. Staff/Manager's Allowance 2. Transportation Allowance 3. Bislig Allowance ISSUE: Whether or not the separation pay of said employees must include their allowances received HELD: No, in this case, said allowances cannot be included in the workers separation pay We correlate Art. 283 with Art. 97 of the same Code on definition of terms. "Pay" is not defined therein but "wage." In Songco the Court explained that both words (as well as salary) generally refer to one and the same meaning, i.e., a reward or recompense for services performed. Specifically, "wage" is defined in letter (f) as the remuneration or earnings, however designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis, or other method of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of employment for work done or to be done, or for services rendered or to be rendered and includes the fair and reasonable value, as determined by the Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer to the employee. We invite attention to the above-underlined clause. Stated differently, when an employer customarily furnishes his employee board, lodging or other facilities, the fair and reasonable value thereof, as determined by the Secretary of Labor and Employment, is included in "wage." In order to ascertain whether the subject allowances form part of petitioner's "wages," we divide the discussion on the following - "customarily furnished;" "board, lodging or other facilities;" and, "fair and reasonable value as determined by the Secretary of Labor." "Customary" is founded on long-established and constant practice connoting regularity. The receipt of an allowance on a monthly basis does not ipso facto characterize it as regular and forming part of salary because the nature of the grant is a factor worth considering. We agree with the observation of the Office of the Solicitor General that the subject allowances were temporarily, not regularly, received by petitioners because—In the case of the housing allowance, once a vacancy occurs in the company-provided housing accommodations, the employee concerned transfers to the company premises and his housing allowance is

discontinued. On the other hand, the transportation allowance is in the form of advances for actual transportation expenses subject to liquidation x x x given only to employees who have personal cars. The Bislig allowance is given to Division Managers and corporate officers assigned in Bislig, Surigao del Norte. Once the officer is transferred outside Bislig, the allowance stops. Although it is quite easy to comprehend "board" and "lodging," it is not so with "facilities." Thus Sec. 5, Rule VII, Book III, of the Rules Implementing the Labor Code gives meaning to the term as including articles or services for the benefit of the employee or his family but excluding tools of the trade or articles or service primarily for the benefit of the employer or necessary to the conduct of the employer's business. The Staff / Manager's allowance may fall under "lodging" but the transportation and Bislig allowances are not embraced in "facilities" on the main consideration that they are granted as well as the Staff/Manager's allowance for respondent PICOP's benefit and convenience, i.e., to insure that petitioners render quality performance. In determining whether a privilege is a facility, the criterion is not so much its kind but its purpose. In Santos the Court decreed that in the computation of separation pay awarded in lieu of reinstatement, account must be taken not only of the basic salary but also of transportation and emergency living allowances. Later, the Court in Soriano, citing Santos, was general in its holding that the salary base properly used in computing separation pay where reinstatement was no longer feasible should include not just the basic salary but also the regular allowances that the employee had been receiving. Insular merely reiterated the aforementioned rulings. The rationale is not difficult to discern. It is the obligation of the employer to pay an illegally dismissed employee the whole amount of his salaries plus all other benefits, bonuses and general increases to which he would have been normally entitled had he not been dismissed and had not stopped working. The same holds true in case of retrenched employees. And thus we applied Insular and Soriano in Planters in the computation of separation pay of retrenched employees. Songco likewise involved retrenchment and was relied upon in Planters, Soriano and Santos in determining the proper amount of separation pay. As culled from the foregoing jurisprudence, separation pay when awarded to an illegally dismissed employee in lieu of reinstatement or to a retrenched employee should be computed based not only on the basic salary but also on the regular allowances that the employee had been receiving. But in view of the previous discussion that the disputed allowances were not regularly received by petitioners herein, there was no reason at all for petitioners to resort to the above cases.

Case #3 SLL INTERNATIONAL CABLE SPECIALIST vs. NLRC Petitioners: SLL Int'l Cable Specialist Sonny L. Lagon (SLL Manager) Respondents: NLRC Roldan Lopez Edgardo Zuñiga Danilo Cañete FACTS: Sometime in 1996 and January 1997, Roldan Lopez and Danilo Cañete, and Edgardo Zuñiga respectively, were hired by petitioner Lagon as apprentice or trainee cable/lineman. They were paid the full minimum wage and other benefits. As trainees, they did not report for work regularly but came in as substitutes to the regular workers or in undertakings that needed extra workers. After their training, Zuñiga, Cañete and Lopez were engaged as project employees by the petitioners in their Islacom project in Bohol. They started on March 15, 1997 until December 1997. Upon the completion of their project, their employment was also terminated. They received the amount of P145.00, the minimum daily wage in Region VII. In July 1997, it was increased to P150 by the Regional Wage Board and in October 1997, the latter was increased to P155. In March 1998, Zuñiga and Cañete were engaged again by Lagon as project employees for its PLDT Antipolo, Rizal project which ended late September 1998. As a consequence, their employment was terminated. For this project, Zuñiga and Cañete received only the wage of P145 daily. The prescribed minimum wage at that time for Rizal was P160. Sometime in late November 1998, respondents re-applied in the Recitelcom project of Lagon in Bulacan. The three were hired for the specific project. For this, the respondents received the wage of P145. Again after the completion of their project in March 1999, they went home to Cebu City. On May 21, 1999, the three, for the 4th time worked with Lagon's project in Camarin, Caloocan City with Furukawa Corporation as the general contractor. Their contract would expire on February 28, 2000, the period of completion of the said project. From May 21, 1997-December 1999, they received the wage of P145. However, the prescribed rate at this time for Manila was P198. In January-February 28, they received the wage of P165. The existing rate at that time was P213. For reasons of delay on the delivery of imported materials from Furukawa Corporation, the Camarin project was not completed on the scheduled date of completion. Faced with economic problems, Lagon was constrained to cut down the overtime work of its workers including the respondents. Thus, when requested by the respondents on February 28, 2000 to work overtime, Lagon refused and told them that if they insist, they would have to go home at their own expense and that they would not be given anymore time nor allowed to stay in the quarters. This prompted the respondents to leave their work and go home to Cebu. On March 3, 2000, the private respondents filed a complaint for illegal dismissal, non-payment of wages, holiday pay, 13th month pay for 1997 and 1998 and service incentive pay as well as damages and attorney's fees. PETITIONERS' CONTENTIONS:

- The three were only project employees for theire services were merely engaged for a specific undertaking which were covered by a contract duly signed by the respondents.

- Food allowance of P63.00 per day, allowance for lodging house, transportation, electricity, water and snacks allowance should be added to their basic pay. With these, petitioners claimed that respondents received higher rate than that prescribed in Rizal and Manila.

- Since the workplaces of the respondents were all in Manila, the complaint should be filed there. Thus, petitioners prayed for the dismissal of the complaint for lack of jurisdiction and utter lack of merit.

LABOR ARBITER:

- LA Reynoso Belarmino had jurisdiction to hear and decide the complaint filed by the respondents. - Respondents were regular employees because they were repeatedly hired by the petitioners and they

performed activities which were usual, necessary and desirable in the business or trade of the employer. - Respondents were underpaid. Free board and lodging, electricity, water, and food allowance could not be

included in the computation of their wages because these were given without the respondents' written consent. - Petitioners, however, are not liable for illegal dismissal. The LA viewed respondents' act of going home as an act

of indifference when petitioners decided to prohibit overtime work. NLRC:

- Affirmed the decision of the LA - NLRC noted that not a single report of project completion was filed with the nearest Public Employment Office

as required by DOLE Dept. Order 19, Series of 1993. - Denied motion for reconsideration filed by the petitioners.

CA:

- Affirmed that respondents were regular employees of petitioner. - Failure of petitioners to submit a report of termination to a Public Employment Office every time respondents'

employment was terminated was proof that they were not project employees. - Affirmed that respondents were underpaid. The CA added that they were entitled to 13th month pay. - Affirmed that there was no illegal dismissal on the part of the petitioners because of the act of abandonment of

the respondents. Petitioners filed a petition for review on certiorari before the SC. ISSUE: Whether or not the value of the facilities that the private respondents enjoyed should be included in the computation of the wages received by them. HELD: No, said facilities enjoyed by the workers were only supplements. Private respondents, on the other hand, are entitled to be paid the minimum wage, whether they are regular or non-regular employees. Section 3, Rule VII of the Rules to Implement the Labor Code specifically enumerates those who are not covered by the payment of minimum wage. Project employees are not among them. On whether the value of the facilities should be included in the computation of the "wages" received by private respondents, Section 1 of DOLE Memorandum Circular No. 2 provides that an employer may provide subsidized meals and snacks to his employees provided that the subsidy shall not be less that 30% of the fair and reasonable value of such facilities. In such cases, the employer may deduct from the wages of the employees not more than 70% of the value of the meals and snacks enjoyed by the latter, provided that such deduction is with the written authorization of the employees concerned. Moreover, before the value of facilities can be deducted from the employeesʼ wages, the following requisites must all be attendant: first, proof must be shown that such facilities are customarily furnished by the trade; second, the provision of deductible facilities must be voluntarily accepted in writing by the employee; and finally, facilities must be charged at reasonable value. Mere availment is not sufficient to allow deductions from employeesʼ wages. These requirements, however, have not been met in this case. SLL failed to present any company policy or guideline showing that provisions for meals and lodging were part of the employeeʼs salaries. It also failed to provide proof of the employeesʼ written authorization, much less show how they arrived at their valuations. At any rate, it is not even clear whether privaterespondents actually enjoyed said facilities.

The Court, at this point, makes a distinction between "facilities" and "supplements." It is of the view that the food and lodging, or the electricity and water allegedly consumed by private respondents in this case were not facilities but supplements. In the case of Atok-Big Wedge Assn. v. Atok-Big Wedge Co., the two terms were distinguished from one another in this wise: "Supplements," therefore, constitute extra remuneration or special privileges or benefits given to or received by the laborers over and above their ordinary earnings or wages. "Facilities," on the other hand, are items of expense necessary 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 the wage and when furnished by the employer are deductible therefrom, since if they are not so furnished, the laborer would spend and pay for them just the same. PETITION DENIED.

Case no. 4 Songco et al. vs NLRC March 23, 1990

FACTS: Private respondent F.E. Zuellig (M), Inc., (hereinafter referred to as Zuellig) filed with the Department of Labor (Regional Office No. 4) an application seeking clearance to terminate the services of petitioners Jose Songco, Romeo Cipres, and Amancio Manuel (hereinafter referred to as petitioners) allegedly on the ground of retrenchment due to financial losses. This application was seasonably opposed by petitioners alleging that the company is not suffering from any losses. They alleged further that they are being dismissed because of their membership in the union. At the last hearing of the case, however, petitioners manifested that they are no longer contesting their dismissal. The parties then agreed that the sole issue to be resolved is the basis of the separation pay due to petitioners. Petitioners, who were in the sales force of Zuellig received monthly salaries of at least P40,000. In addition, they received commissions for every sale they made. ISSUE: Whether or not earned sales commissions and allowances should be included in the monthly salary of petitioners for the purpose of computation of their separation pay. HELD: Yes, sales commissions are included in the monthly salary of said petitioners and must be included in their separation pay. Petitioners' position was that in arriving at the correct and legal amount of separation pay due them, whether under the Labor Code or the CBA, their basic salary, earned sales commissions and allowances should be added together. They cited Article 97(f) of the Labor Code which includes commission as part on one's salary, to wit;

(f) 'Wage' paid to any employee shall mean the remuneration or earnings, however designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis, or other method of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of employment for work done or to be done, or for services rendered or to be rendered, and includes the fair and reasonable value, as determined by the Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer to the employee. 'Fair reasonable value' shall not include any profit to the employer or to any person affiliated with the employer.

Broadly, the word "salary" means a recompense or consideration made to a person for his pains or industry in another man's business. Whether it be derived from "salarium," or more fancifully from "sal," the pay of the Roman soldier, it carries with it the fundamental idea of compensation for services rendered. Indeed, there is eminent authority for holding that the words "wages" and "salary" are in essence synonymous. "Salary," the etymology of which is the Latin word "salarium," is often used interchangeably with "wage", the etymology of which is the Middle English word "wagen". Both words generally refer to one and the same meaning, that is, a reward or recompense for services performed. Likewise, "pay" is the synonym of "wages" and "salary". Inasmuch as the words "wages", "pay" and "salary" have the same meaning, and commission is included in the definition of "wage", the logical conclusion, therefore, is, in the computation of the separation pay of petitioners, their salary base should include also their earned sales commissions. Commission is the recompense, compensation or reward of an agent, salesman, executor, trustees, receiver, factor, broker or bailee, when the same is calculated as a percentage on the amount of his transactions or on the profit to the principal. The nature of the work of a salesman and the reason for such type of remuneration for

services rendered demonstrate clearly that commission is part of petitioners' wage or salary. We take judicial notice of the fact that some salesmen do not receive any basic salary but depend on commissions and allowances or commissions alone, are part of petitioners' wage or salary. We take judicial notice of the fact that some salesman do not received any basic salary but depend on commissions and allowances or commissions alone, although an employer-employee relationship exists. Bearing in mind the preceding discussions, if we adopt the opposite view that commissions, do not form part of wage or salary, then, in effect, We will be saying that this kind of salesmen do not receive any salary and therefore, not entitled to separation pay in the event of discharge from employment. Will this not be absurd? *Take note - another issue was whether there was a difference between salary and wage since the CBA and Art 284 and its IRR use the word salary instead of wage. The employer’s contention was that Art 97 could not be applied since said article used the word wage instead of salary

Case no 5. AMERICAN WIRE AND CABLE DAILY RATED EMPLOYEES UNION vs. AMERICAN WIRE AND CABLE CO., INC.

and THE COURT OF APPEALS

ART. 100. PROHIBITION AGAINST ELIMINATION OR DIMINUTION OF BENEFITS. — Nothing in this Book shall be construed to eliminate or in any way diminish supplements, or other employee benefits being enjoyed at the time of promulgation of this Code.

American Wire and Cable Co., Inc., is a corporation engaged in the manufacture of wires and cables. There are two unions in this company, the AmericanWire and Cable Monthly-Rated Employees Union (Monthly-Rated Union) and the American Wire and Cable Daily-Rated Employees Union (Daily-Rated Union) An original action was filed before the NCMB of the Department of Labor and Employment (DOLE) by the two unions for voluntary arbitration. They alleged that the private respondent, without valid cause, suddenly and unilaterally withdrew and denied certain benefits and entitlements which they have long enjoyed, including Service Award; 35% premium pay of an employee's basic pay for the work rendered during Holy Monday, Holy Tuesday, Holy Wednesday, December 23, 26, 27, 28 and 29; Christmas Party; and Promotional Increase. A promotional increase was asked by the petitioner for fifteen (15) of its members who were given or assigned new job classifications. According to petitioner, the new job classifications were in the nature of a promotion, necessitating the grantof an increase in the salaries of the said 15 members. Unions : Company violated Art 100 of LC Voluntary Arbiter: No. (Appeal was made but Voluntary Arbiter dismissed it again) Daily-Rated Union Appealed to CA; CA: Dismissed Motion for Recon : Again denied by CA Issue:Whether or not private respondent is guilty of violating Article 100 of the Labor Code, as amended, when the benefits/entitlements given to the members of petitioner union were withdrawn Union: Withdrawal of the private respondent of the 35% premium pay for selected days during the Holy Week and Christmas season, theholding of the Christmas Party and its incidental benefits, and the giving of service awards violated Article 100 of the Labor Code. The grant of these benefits was a customary practice that can no longer be unilaterally withdrawn by private respondent without the tacit consent of the petitioner. The benefits in question were given by the respondent to the petitioner consistently, deliberately, and unconditionally since time immemorial. The benefits/entitlements were not given to petitioner due to an error in interpretation, or a construction of a difficult question of law, but simply, the grant has been a practice over a long period of time. As such, it cannot be withdrawn from the

petitioner at private respondent's whim and caprice, and without the consent of the former. The benefits given by the private respondent cannot be considered as a "bonus" as they are not founded on profit. Even assuming that it can be treated as a "bonus," the grant of the same, by reason of its long and regular concession, may beregarded as part of regular compensation. With respect to the fifteen (15) employees who are members of petitioner union that were given new job classifications, it asserts that a promotional increase in their salaries was in order. Salary adjustment is a must due to their promotion. Company: The grant of all subject benefits has not ripened into practice that the employees concerned can claima demandable right over them. The grant of these benefits was conditional based upon the financial performance of the company and that conditions/circumstances that existed before have indeed substantially changed thereby justifying the discontinuance of said grants. The company's financial performance was affected by the recent political turmoil and instability that led the entire nation to a bleeding economy.

SC: Benefits/entitlements subjects of the instant case are all bonuses which were given bythe private respondent out of its generosity and munificence. The additional 35% premium pay for work done during selected days of the Holy Week and Christmas season, the holding of Christmas parties with raffle, and the cash incentives given together with the

service awards are all in excess of what the law requires each employer to give its employees. Since they are above what is strictly due to the members of petitioner-union, the granting of the same was a management prerogative, which, whenever management sees necessary, may be withdrawn, unless they have been made a part of the wage or salary or compensation of the employees

For a bonus to be enforceable, it must have been promised by the employer and expressly agreed upon by the parties, or it must have had a fixed amount and had been a long and regular practice on the part of the employer. The benefits/entitlements in question were never subjects of any express agreement between the parties. They were never incorporated in the Collective Bargaining Agreement (CBA). As observed by the Voluntary Arbitrator, the records reveal that these benefits/entitlements have not been subjects of any express agreement between the union and the company, and have not yet been incorporated in the CBA. In fact, the petitioner has not denied having made proposals with the private respondent for the service award and the additional 35% premium pay to be made part of the CBA Considering that the Union was unable to adduce proof that a promotion indeed occur[ed] with respect to the 15 employees, the Daily Rated Union's claim for promotional increase likewise fall[s] there being no promotion established under the records at hand.

Case no. 6. TSPIC CORPORATION vs TSPIC EMPLOYEES UNION (FFW), G.R. No. 163419 VELASCO, JR., J.: FACTS: Background: TSPIC is engaged in the business of designing, manufacturing, and marketing integrated circuits to serve the communication, automotive, data processing, and aerospace industries. Respondent TSPIC Employees Union (FFW) (Union), on the other hand, is the registered bargaining agent of the rank-and-file employees of TSPIC. The respondents are all members of the Union. In 1999, TSPIC and the Union entered into a Collective Bargaining Agreement (CBA) for the years 2000 to 2004. The CBA included a provision on yearly salary increases starting January 2000 until January 2002. Consequently, on January 1, 2000, all the regular rank-and-file employees of TSPIC received a 10% increase in their salary(FIRST GROUP). The CBA also provided that employees who acquire regular employment status within the year but after the effectivity of a particular salary increase shall receive a proportionate part of the increase upon attainment of their regular status. Sometime in 2000, the Regional Tripartite Wage and Productivity Board, National Capital Region, issued Wage Order No. NCR-081 (WO No. 8) which raised the daily minimum wage from PhP 223.50 to PhP 250 effective November 1, 2000. Conformably, the wages of 17 probationary employees(2nd Group) were increased to PhP 250.00 effective November 1, 2000. On various dates during the last quarter of 2000, the 17 employees attained regular employment and received 25% of 10% of their salaries as granted under the provision on regularization increase under the CBA. In January 2001, TSPIC implemented the new wage rates as mandated by the CBA. As a result, the nine employees (first group), who were senior to the above-listed recently regularized employees, received less wages. On January 19, 2001, a few weeks after the salary increase for the year 2001 became effective, TSPIC’s Human Resources Department notified 24 employees that due to an error in the automated payroll system, they were overpaid and the overpayment would be deducted from their salaries in a staggered basis, starting February 2001. TSPIC explained that the correction of the erroneous computation was based on the crediting provision of Sec. 1, Art. X of the CBA. The Union, on the other hand, asserted that there was no error and the deduction of the alleged overpayment from employees constituted diminution of pay. The issue was brought to the grievance machinery, but TSPIC and the Union failed to reach an agreement. Petitioner Contention: TSPIC maintains that the formula proposed by the Union, was flawed, inasmuch as it completely disregarded the “crediting provision” of the CBA. TSPIC also maintains that charging the overpayments made to the 16 respondents through staggered deductions from their salaries does not constitute diminution of benefits. Consequently, TSPIC and the Union agreed to undergo voluntary arbitration on the solitary issue of whether or not the acts of the management in making deductions from the salaries of the affected employees constituted diminution of pay. Decision of Voluntary Arbitrator Jimenez: Rendered a Decision, holding that the unilateral deduction made by TSPIC violated the provision of Labor Code. TSPIC filed a Motion for Reconsideration which was denied in a Resolution dated November 21, 2001. Aggrieved, TSPIC filed before the CA a petition for review under Rule 43. Decision of Court of Appeals: Dismissed the petition and affirmed in toto the decision of the voluntary arbitrator. The CA declared TSPIC’s computation allowing PhP 287 as daily wages to the newly regularized employees to be correct,

noting that the computation conformed to WO No. 8 and the provisions of the CBA. According to the CA, TSPIC failed to convince the appellate court that the deduction was a result of a system error in the automated payroll system. The CA explained that when WO No. 8 took effect on November 1, 2000, the concerned employees were still probationary employees who were receiving the minimum wage of PhP 223.50. The CA said that effective November 1, 2000, said employees should have received the minimum wage of PhP 250. The CA held that when respondents became regular employees on November 29, 2000, they should be allowed the salary increase granted them under the CBA at the rate of 25% of 10% of their basic salary for the year 2000; thereafter, the 12% increase for the year 2001 and the 10% increase for the year 2002 should also be made applicable to them. ISSUE: Does the TSPIC’s decision to deduct the alleged overpayment from the salaries of the affected members of the Union constitute diminution of benefits in violation of the Labor Code? SUPREME COURT DECISION: Meritorious A Collective Bargaining Agreement is the law between the parties It is familiar and fundamental doctrine in labor law that the CBA is the law between the parties and they are obliged to comply with its provisions. We said so in Honda Phils., Inc. v. Samahan ng Malayang Manggagawa sa Honda: A collective bargaining agreement or CBA refers to the negotiated contract between a legitimate labor organization and the employer concerning wages, hours of work and all other terms and conditions of employment in a bargaining unit. As in all contracts, the parties in a CBA may establish such stipulations, clauses, terms and conditions as they may deem convenient provided these are not contrary to law, morals, good customs, public order or public policy. Thus, where the CBA is clear and unambiguous, it becomes the law between the parties and compliance therewith is mandated by the express policy of the law. Moreover, if the terms of a contract, as in a CBA, are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of their stipulations shall control. However, sometimes, as in this case, though the provisions of the CBA seem clear and unambiguous, the parties sometimes arrive at conflicting interpretations. Here, TSPIC wants to credit the increase granted by WO No. 8 to the increase granted under the CBA. According to TSPIC, it is specifically provided in the CBA that “the salary/wage increase for the year 2001 shall be deemed inclusive of the mandated minimum wage increases under future wage orders that may be issued after Wage Order No. 7.” The Union, on the other hand, insists that the “crediting” provision of the CBA finds no application in the present case, since at the time WO No. 8 was issued, the probationary employees (second group) were not yet covered by the CBA, particularly by its crediting provision. As a general rule, in the interpretation of a contract, the intention of the parties is to be pursued.Littera necat spiritus vivificat. An instrument must be interpreted according to the intention of the parties. It is the duty of the courts to place a practical and realistic construction upon it, giving due consideration to the context in which it is negotiated and the purpose which it is intended to serve. Absurd and illogical interpretations should also be avoided. Considering that the parties have unequivocally agreed to substitute the benefits granted under the CBA with those granted under wage orders, the agreement must prevail and be given full effect. Diminution of benefits Diminution of benefits is the unilateral withdrawal by the employer of benefits already enjoyed by the employees. There is diminution of benefits when it is shown that: (1) the grant or benefit is founded on a policy or has ripened into a practice over a long period; (2) the practice is consistent and deliberate; (3) the practice is not due to error in the construction or application of a doubtful or difficult question of law; and (4) the diminution or discontinuance is done unilaterally by the employer. As correctly pointed out by TSPIC, the overpayment of its employees was a result of an error. This error was immediately rectified by TSPIC upon its discovery. We have ruled before that an erroneously granted benefit may be withdrawn without violating the prohibition against non-diminution of benefits. We ruled in Globe-Mackay Cable and

Radio Corp. v. NLRC: Absent clear administrative guidelines, Petitioner Corporation cannot be faulted for erroneous application of the law. Payment may be said to have been made by reason of a mistake in the construction or application of a “doubtful or difficult question of law”. (Article 2155, in relation to Article 2154 of the Civil Code). Since it is a past error that is being corrected, no vested right may be said to have arisen nor any diminution of benefit under Article 100 of the Labor Code may be said to have resulted by virtue of the correction. Here, no vested right accrued to individual respondents when TSPIC corrected its error by crediting the salary increase for the year 2001 against the salary increase granted under WO No. 8, all in accordance with the CBA. Hence, any amount given to the employees in excess of what they were entitled to, as computed above, may be legally deducted by TSPIC from the employees’ salaries. It was also compassionate and fair that TSPIC deducted the overpayment in installments over a period of 12 months starting from the date of the initial deduction to lessen the burden on the overpaid employees. TSPIC, in turn, must refund to individual respondents any amount deducted from their salaries which was in excess of what TSPIC is legally allowed to deduct from the salaries based on the computations discussed in this Decision. As a last word, it should be reiterated that though it is the state’s responsibility to afford protection to labor, this policy should not be used as an instrument to oppress management and capital. In resolving disputes between labor and capital, fairness and justice should always prevail. We ruled in Norkis Union v. Norkis Trading that in the resolution of labor cases, we have always been guided by the State policy enshrined in the Constitution: social justice and protection of the working class. Social justice does not, however, mandate that every dispute should be automatically decided in favor of labor. In any case, justice is to be granted to the deserving and dispensed in the light of the established facts and the applicable law and doctrine.2[30] WHEREFORE, premises considered, the September 13, 2001 Decision of the Labor Arbitrator in National Conciliation and Mediation Board Case No. JBJ-AVA-2001-07-57 and the October 22, 2003 CA Decision in CA-G.R. SP No. 68616 are hereby AFFIRMED with MODIFICATION. TSPIC is hereby ORDERED to pay respondents their salary increases in accordance with this Decision, as follows:

Case NO. 7 LEPANTO CERAMICS, INC. vs. LEPANTO CERAMICS EMPLOYEES ASSOCIATION

FACTS: Lepanto Ceramics, Inc (LCI), in December 1998, gave to its employees, members of Lepanto Ceramics Employees Association (LCEA), a P3,000 Christmas bonus. In 1999, LCI and LCEA entered into a Collective Bargaining Agreement (CBA) which provides for, among others, the grant of a Christmas gift package/bonus to the members of LCEA. The Christmas bonus was one of the enumerated "existing benefit, practice of traditional rights" which "shall remain in full force and effect" for a period of 4 years.

In 1999, 2000 and 2001, instead of cash, LCI gave each members of LCEA Redemption Certificates equivalent to P3,000 as bonus. In 2002, LCI gave year-end cash benefit of P600.00 and offered a cash advance to interested employees equivalent to 1 month salary payable in one year. LCEA objected to the P600.00 cash benefit and argued that this was in violation of the CBA.

They failed to settle amicably and LCEA filed a Notice of Strike with the National Conciliation Mediation Board. Efforts to conciliate failed thus the case was referred to the Voluntary Arbitrator.

LCI argued that the giving of extra compensation was based on the company's available resources for a given year and the workers are not entitled to a bonus if the company does not make profits. LCI adverted that it was debt-ridden having incurred net losses.

VOLUNTARY ARBITRATOR (VA): Declared LCI is bound to grant each worker a Christmas bonus of P3,000 (less P600 cash benefit) for the reason that the bonus was given prior to the effectivity of the CBA and that the financial losses of the company is not a sufficient reason to exempt it from granting the same. It stressed that the CBA is a binding contract and constitutes the law between the parties

COURT OF APPEALS: In a petition for certiorari, the CA affirmed in toto the decision of the VA holding that the benefit is a traditional right of the employees since it was granted in 1998.

ISSUE: W/N LCI is obliged to give the members of the LCEA a Christmas bonus amounting to P3,000.

HELD: YES

Generally, a bonus is not a demandable and enforceable obligation. For a bonus to be enforceable, it must have been promised by the employer and expressly agreed upon by the parties. Given that the bonus in this case is integrated in the CBA, the same partakes the nature of a demandable obligation. Verily, by virtue of its incorporation in the CBA, the Christmas bonus due to LCEA has become more than just an act of generosity on the part of the LCI but a contractual obligation it has undertaken.

A reading of the provision of the CBA reveals that the same provides for the giving of a "Christmas gift package/bonus" without qualification. Terse and clear, the said provision did not state that the Christmas package shall be made to depend on LCI's financial standing. Indeed, if LCI and LCEA intended that the P3,000.00 bonus would be dependent on the company earnings, such intention should have been expressed in the CBA.

Business losses are a feeble ground for LCI to repudiate its obligation under the CBA because in 1998, LCI suffered a net loss of P14,347,548.00. Yet it gave a P3,000.00 bonus to the members of LCEA. In 1999, when LCI's very own financial statement reflected that "the positive developments in the economy have yet to favorably affect the operations of the company," and reported a loss of P346,025,733.00, it entered into the CBA with LCEA whereby it contracted to grant a Christmas gift package/bonus to the latter. LCI supposedly continued to incur losses in the years 2000 and 2001. Still and all, this did not deter it from honoring the CBA provision on Christmas bonus as it continued to give P3,000.00 each to the members of LCEA in the years 1999, 2000 and 2001.

DEFINITION:

"bonus" is a gratuity or act of liberality of the giver. It is something given in addition to what is ordinarily received by or strictly due the recipient. A bonus is granted and paid to an employee for his industry and loyalty which contributed to the success of the employer's business and made possible the realization of profits.

A CBA refers to a negotiated contract between a legitimate labor organization and the employer, concerning wages, hours of work and all other terms and conditions of employment in a bargaining unit. As in all other contracts, the parties to a CBA may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided these are not contrary to law, morals, good customs, public order or public policy.

Case no 8. EASTERN TELECOMMUNICATIONS PHILIPPINES, INC. vs. EASTERN TELECOMS EMPLOYEES UNION Eastern Telecommunications Phils., Inc. (ETPI) is a corporation engaged in the business of providing telecommunications facilities, particularly leasing international date lines or circuits, regular landlines, internet and data services, employing approximately 400 employees. Eastern Telecoms Employees Union (ETEU) is the certified exclusive bargaining agent of the company's rank and file employees with a strong following of 147 regular members. It has an existing collecti[ve] bargaining agreement with the company to expire in the year 2004 with a Side Agreement signed on September 3, 2001. The company planned to defer payment of the 2003 14th, 15th and 16th month bonuses sometime in April 2004. The company's main ground in postponing the payment of bonuses is due to allege continuing deterioration of company's financial position which started in the year 2000. However, ETPI while postponing payment of bonuses sometime in April 2004, such payment would also be subject to availability of funds. Invoking the Side Agreement of the existing Collective Bargaining Agreement for the period 2001-2004 between ETPI and ETEU which stated as follows: "4. Employment Related Bonuses. The Company confirms that the 14th, 15th and 16th month bonuses (other than 13th month pay) are granted." the union strongly opposed the deferment in payment of the bonuses by filing a preventive mediation complaint with the NCMB on July 3, 2003, the purpose of which complaint is to determine the date when the bonus should be paid.

Company argues: It is under no legal compulsion to pay 14th, 15th and 16th month bonuses for the year 2003 and 14th month bonus for the year 2004 contending that they are not part of the demandable wage or salary and that their grant is conditional based on successful business performance and the availability of company profits from which to source the same. To thwart ETEU's monetary claims, it insists that the distribution of the subject bonuses falls well within the company's prerogative, being an act of pure gratuity and generosity on its part. Thus, it can withhold the grant thereof especially since it is currently plagued with economic difficulties and financial losses.

ETPI further avers that the act of giving the subject bonuses did not ripen into a company practice arguing that it has always been a contingent one dependent on the realization of profits and, hence, the workers are not entitled to bonuses if the company does not make profits for a given year.

Issues: Whether the company is obliged to pay the 14th, 15th and 16th month bonuses based on the CBA

Whether the payment of such bonuses has become a “regular practice”

SC: Yes to both. From a legal point of view, a bonus is a gratuity or act of liberality of the giver which the recipient has no right to demand as a matter of right.

The grant of a bonus is basically a management prerogative which cannot be forced upon the employer who may not be obliged to assume the onerous burden of granting bonuses or other benefits aside from the employee's basic salaries or wages. A bonus, however, becomes a demandable or enforceable obligation when it is made part of the wage or salary or compensation of the employee. Parties agreed on the inclusion of a provision for the grant of 14th, 15th an d 16th month bonuses in the 1998-2001 CBA Side Agreement, as well as in the 2001-2004 CBA Side

Agreement, which was signed on September 3, 2001. The provision, which was similarly worded, states: Employment-Related Bonuses. The Company confirms that the 14th, 15th and 16th month bonuses (other than the 13th month pay) are granted. A reading of the above provision reveals that the same provides for the giving of 14th, 15th and 16th month bonuses without qualification. The wording of the provision does not allow any other interpretation. There were no conditions specifiedin the CBA Side Agreements for the grant of the benefits contrary to the claim of ETPI that the same is justified only when there are profits earned by the company. Terse and clear, the said provision does not state that the subject bonuses shall be made to depend on the ETPI's financial standing or that their payment was contingent upon the realization of profits. Neither does it state that if the company derives no profits, no bonuses are to be given to the employees. In fine, the payment of these bonuses was not related to the profitability of business operations. Granting arguendo that the CBA Side Agreement does not contractually bind petitioner ETPI to give the subject bonuses, nevertheless, the Court finds that its act of granting the same has become an established company practice such that it has virtually become part of the employees' salary or wage. A bonus may be granted on equitable consideration when the giving of such bonus has been the company's long and regular practice. In Philippine Appliance Corporation v. Court of Appeals,it was pronounced: To be considered a "regular practice," however, the giving of the bonus should have been done over a long period of time, and must be shown to havebeen consistent and deliberate. The test or rationale of this rule on long practice requires an indubitable showing that the employer agreed to continue giving thebenefits knowing fully well that said employees are not covered by the law requiring payment thereof. The records show that ETPI, aside from complying with the regular 13th month bonus, has been further giving its employees 14th month bonus every April as well as 15th and 16th month bonuses every December of the year, without fail, from 1975 to 2002 or for 27 years whether it earned profits or not. The considerable length of time. ETPI has been giving the special grants to its employees indicates a unilateral and voluntary act on its part to continue giving said benefits knowing that such act was not required by law. Accordingly, a company practice in favor of the employees has been established and the payments made by ETPI pursuant thereto ripened into benefits enjoyed by the employees. The giving of the subject bonuses cannot be peremptorily withdrawn by ETPI without violating Article 100 of the Labor Code

Case no. 9 GSIS vs. NATIONAL LABOR RELATIONS COMMISSION

FACTS: Respondents Dionisio Banlasan, Alfredo T. Tafalla, Telesforo D. Rubia, Rogelio A. Alvarez, Dominador A. Escobal, and Rosauro Panis were employed as security guards by DNL Security Agency (DNL Security). In 1978, DNL Security and GSIS entered into a service contact and respondents were assigned to GSIS’s Tacloban City office with monthly income of P1,400. In 1989, GSIS voluntarily increased respondents’ monthly salary to P3,000.

In Februrary 1993, DNL Security informed respondents that its service contract with GSIS was terminated but they were instructed to continue reporting for work to GSIS. Respondents worked as instructed until April 20, 1993, but without receiving their wages; after which, they were terminated from employment.

On June 15, 1995, respondents filed with NLRC a complaint against DNL Security and GSIS for illegal dismissal, separation pay, salary differential, 13th month pay, and payment of unpaid salary.

LABOR ARBITER: Ordering DNL Security to give separation pay and wages representing February to April 1993. Ordering as joint and solidary liability by DNL Security and GSIS for salary differential and 13th month pay. Found no illegal dismissal because the employment of security guards is dependent on the service contract between the security agency and its client.

NLRC: dismissed appeal of GSIS because it was filed beyond the reglementary period.

COURT OF APPEALS: Affirmed decision of NLRC.

In present petition, GSIS insists that its appeal before the NLRC was filed on time through registered mail; and that GSIS is not solidarily liable with DNL Security, GSIS questions the award of monetary benefit for lack of evidence, and GSIS’s charter unequivocally exempts it from execution.

ISSUE: W/N GSIS is liable as indirect employer.

HELD: YES. Solidarily liable with DNL Security for wage differential, 13th month pay, and unpaid wages from February to April 1993, but exonerated from paying separation pay.

When GSIS contracted DNL Security's services, GSIS became an indirect employer of respondents, pursuant to Article 107 of the Labor Code. After DNL Security failed to pay respondents the correct wages and other monetary benefits, GSIS, as principal, became jointly and severally liable, as provided in Articles 106 and 109 of the Labor Code. This statutory scheme is designed to give the workers ample protection, consonant with labor and social justice provisions of the 1987 Constitution.

GSIS's liability covers the payment of respondents' salary differential and 13th month pay during the time they worked for GSIS. In addition, GSIS is solidarily liable with DNL Security for respondents' unpaid wages from February 1993 until April 20, 1993. While it is true that respondents continued working for GSIS after the expiration of their contract, based on the instruction of DNL Security, GSIS did not object to such assignment and allowed respondents to render service. Thus, GSIS impliedly approved the extension of respondents' services. Accordingly, GSIS is bound by the provisions of the Labor Code on indirect employment. GSIS cannot be allowed to deny its obligation to respondents after it had benefited from their services. So long as the work, task, job, or project has been performed for GSIS's benefit or on its behalf, the liability accrues for such services.

GSIS's liability, however, cannot extend to the payment of separation pay. An order to pay separation pay is invested with a punitive character, such that an indirect employer should not be made liable without a finding that it had conspired in the illegal dismissal of the employees.

IN CASE TATANUNGIN NI MA’AM:

Appeal filed on time. The date of filing is determinable from two sources: from the post office stamp on the envelope or from the registry receipt, either of which may suffice to prove the timeliness of the filing of the pleadings.

GSIS’s charter should not be used to evade its liabilities to its employees, even to its indirect employees, as mandated by the Labor Code.

In Rubia vs. GSIS:

“The processual exemption of the GSIS funds and properties under Section 39 of the GSIS Charter, in our view, should be read consistently with its avowed principal purpose: to maintain actuarial solvency of the GSIS in the protection of assets which are to be used to finance the retirement, disability and life insurance benefits of its members. Clearly, the exemption should be limited to the purposes and objects covered. Any interpretation that would give it an expansive construction to exempt all GSIS assets from legal processes absolutely would be unwarranted.”

Case no 10. ALIVIADO vs PROCTER & GAMBLE PHILS., INC., and PROMM-GEM INC., G.R. No. 160506 June 6, 2011 DEL CASTILLO, J.: FACTS: Petitioners worked as merchandisers of P&G from various dates, allegedly starting as early as 1982 or as late as June 1991, to either May 5, 1992 or March 11, 1993. They all individually signed employment contracts with either Promm-Gem or SAPS for periods of more or less five months at a time. They were assigned at different outlets, supermarkets and stores where they handled all the products of P&G. They received their wages from Promm-Gem or SAPS. SAPS and Promm-Gem imposed disciplinary measures on erring merchandisers for reasons such as habitual absenteeism, dishonesty or changing day-off without prior notice. P&G is principally engaged in the manufacture and production of different consumer and health products, which it sells on a wholesale basis to various supermarkets and distributors. To enhance consumer awareness and acceptance of the products, P&G entered into contracts with Promm-Gem and SAPS for the promotion and merchandising of its products.In December 1991, petitioners filed a complaint

against P&G for regularization, service incentive leave pay and other benefits with damages. The complaint was later amended to include the matter of their subsequent dismissal. Petitioners’ Arguments Petitioners insist that they are employees of P&G. They claim that they were recruited by the salesmen of P&G and were engaged to undertake merchandising chores for P&G long before the existence of Promm-Gem and/or SAPS. They further claim that when the latter had its so-called re-alignment program, petitioners were instructed to fill up application forms and report to the agencies which P&G created. Petitioners further claim that P&G instigated their dismissal from work as can be gleaned from its letter to SAPS dated February 24, 1993, informing the latter that their Merchandising Services Contract will no longer be renewed. Petitioners further assert that Promm-Gem and SAPS are labor-only contractors providing services of manpower to their client. They claim that the contractors have neither substantial capital nor tools and equipment to undertake independent labor contracting. Petitioners insist that since they had been engaged to perform activities which are necessary or desirable in the usual business or trade of P&G, then they are its regular employees. Respondents’ Arguments On the other hand, P&G points out that the instant petition raises only questions of fact and should thus be thrown out as the Court is not a trier of facts. It argues that findings of facts of the NLRC, particularly where the NLRC and the Labor Arbiter are in agreement, are deemed binding and conclusive on the Supreme Court. P&G further argues that there is no employment relationship between it and petitioners. It was Promm-Gem or SAPS that (1) selected petitioners and engaged their services; (2) paid their salaries; (3) wielded the power of dismissal; and (4) had the power of control over their conduct of work. P&G also contends that the Labor Code neither defines nor limits which services or activities may be validly outsourced. Thus, an employer can farm out any of its activities to an independent contractor, regardless of whether such activity is peripheral or core in nature. It insists that the determination of whether to engage the services of a job contractor or to engage in direct hiring is within the ambit of management prerogative. Ruling of the Labor Arbiter: dismissed the complaint for lack of merit and ruled that there was no employer-employee relationship between petitioners and P&G. He found that the selection and engagement of the petitioners, the payment of their wages, the power of dismissal and control with respect to the means and methods by which their work was accomplished, were all done and exercised by Promm-Gem/SAPS. He further found that Promm-Gem and SAPS were legitimate independent job contractors. Ruling of the NLRC: rendered a Decision affirming the Decision of the Labor Arbiter. Ruling of the Court of Appeals: the decision of the National Labor Relations Commission is AFFIRMED with the MODIFICATION that respondent Procter & Gamble Phils., Inc. is ordered to pay service incentive leave pay to petitioners. ISSUES: whether P&G is the employer of petitioners. SUPREME COURT DECISION: The petition has merit. In order to resolve the issue of whether P&G is the employer of petitioners, it is necessary to first determine whether Promm-Gem and SAPS are labor-only contractors or legitimate job contractors. The pertinent Labor Code provision on the matter states: ART. 106. Contractor or subcontractor. – Whenever an employer enters into a contract with another person for the performance of the former’s work, the employees of the contractor and of the latter’s subcontractor, if any, shall be paid in accordance with the provisions of this Code.In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work performed under the contract, in the same manner and extent that he is liable to employees directly employed by him.The Secretary of Labor may, by appropriate

regulations, restrict or prohibit the contracting out of labor to protect the rights of workers established under this Code. In so prohibiting or restricting, he may make appropriate distinctions between labor-only contracting and job contracting as well as differentiations within these types of contracting and determine who among the parties involved shall be considered the employer for purposes of this Code, to prevent any violation or circumvention of any provision of this Code. There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such person are performing activities which are directly related to the principal business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him. Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor Code, as amended by Department Order No. 18-02,24 distinguishes between legitimate and labor-only contracting: x x x x Section 3. Trilateral Relationship in Contracting Arrangements. In legitimate contracting, there exists a trilateral relationship under which there is a contract for a specific job, work or service between the principal and the contractor or subcontractor, and a contract of employment between the contractor or subcontractor and its workers. Hence, there are three parties involved in these arrangements, the principal which decides to farm out a job or service to a contractor or subcontractor, the contractor or subcontractor which has the capacity to independently undertake the performance of the job, work or service, and the contractual workers engaged by the contractor or subcontractor to accomplish the job[,] work or service.x x x xSection 5. Prohibition against labor-only contracting. Labor-only contracting is hereby declared prohibited. For this purpose, labor-only contracting shall refer to an arrangement where the contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal, and any of the following elements are present: i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or service to be performed and the employees recruited, supplied or placed by such contractor or subcontractor are performing activities which are directly related to the main business of the principal; orii) [T]he contractor does not exercise the right to control over the performance of the work of the contractual employee.The foregoing provisions shall be without prejudice to the application of Article 248 (c) of the Labor Code, as amended. "Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of corporations, tools, equipment, implements, machineries and work premises, actually and directly used by the contractor or subcontractor in the performance or completion of the job, work or service contracted out.The "right to control" shall refer to the right reserved to the person for whom the services of the contractual workers are performed, to determine not only the end to be achieved, but also the manner and means to be used in reaching that end. x x x x Clearly, the law and its implementing rules allow contracting arrangements for the performance of specific jobs, works or services. Indeed, it is management prerogative to farm out any of its activities, regardless of whether such activity is peripheral or core in nature. However, in order for such outsourcing to be valid, it must be made to an independent contractor because the current labor rules expressly prohibit labor-only contracting. To emphasize, there is labor-only contracting when the contractor or sub-contractor merely recruits, supplies or places workers to perform a job, work or service for a principal25 and any of the following elements are present: i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or service to be performed and the employees recruited, supplied or placed by such contractor or subcontractor are performing activities which are directly related to the main business of the principal; or ii) The contractor does not exercise the right to control over the performance of the work of the contractual employee. In the instant case, the financial statements26 of Promm-Gem show that ithas authorized capital stock of P1 million and a paid-in capital, or capital available for operations, of P500,000.00 as of 1990.27 It also has long term assets worth P432,895.28 and current assets of P719,042.32. Promm-Gem has also proven that it maintained its own warehouse and office space with a floor area of 870 square meters.28 It also had under its name three registered vehicles which were used for its promotional/merchandising business.29 Promm-Gem also has other clients30 aside from P&G.31 Under the circumstances, we find that Promm-Gem has substantial investment which relates to the work to be performed. These factors negate the existence of the element specified in Section 5(i) of DOLE Department Order No. 18-02. The records also show that Promm-Gem supplied its complainant-workers with the relevant materials, such as markers, tapes, liners and cutters, necessary for them to perform their work. Promm-Gem also issued uniforms to them. It is also relevant to mention that Promm-Gem already considered the complainants working under it as its regular, not merely contractual or project, employees.32 This circumstance negates the existence of element (ii) as stated in Section 5 of DOLE Department Order No. 18-02, which speaks of contractual employees. This, furthermore, negates – on the part of Promm-Gem – bad faith and intent to circumvent labor laws which factors have often been tipping points that lead the Court to strike down the employment practice or agreement concerned as contrary to public policy, morals, good customs or public order.33

Under the circumstances, Promm-Gem cannot be considered as a labor-only contractor. We find that it is a legitimate independent contractor. As to SAPS On the other hand, the Articles of Incorporation of SAPS shows that it has a paid-in capital of only P31,250.00. There is no other evidence presented to show how much its working capital and assets are. Furthermore, there is no showing of substantial investment in tools, equipment or other assets. In Vinoya v. National Labor Relations Commission,34 the Court held that "[w]ith the current economic atmosphere in the country, the paid-in capitalization of PMCI amounting to P75,000.00 cannot be considered as substantial capital and, as such, PMCI cannot qualify as an independent contractor."35 Applying the same rationale to the present case, it is clear that SAPS – having a paid-in capital of only P31,250 - has no substantial capital. SAPS’ lack of substantial capital is underlined by the records36 which show that its payroll for its merchandisers alone for one month would already total P44,561.00. It had 6-month contracts with P&G.37 Yet SAPS failed to show that it could complete the 6-month contracts using its own capital and investment. Its capital is not even sufficient for one month’s payroll. SAPS failed to show that its paid-in capital of P31,250.00 is sufficient for the period required for it to generate its needed revenue to sustain its operations independently. Substantial capital refers to capitalization used in the performance or completion of the job, work or service contracted out. In the present case, SAPS has failed to show substantial capital. Furthermore, the petitioners have been charged with the merchandising and promotion of the products of P&G, an activity that has already been considered by the Court as doubtlessly directly related to the manufacturing business,38 which is the principal business of P&G. Considering that SAPS has no substantial capital or investment and the workers it recruited are performing activities which are directly related to the principal business of P&G, we find that the former is engaged in "labor-only contracting". "Where ‘labor-only’ contracting exists, the Labor Code itself establishes an employer-employee relationship between the employer and the employees of the ‘labor-only’ contractor."39 The statute establishes this relationship for a comprehensive purpose: to prevent a circumvention of labor laws. The contractor is considered merely an agent of the principal employer and the latter is responsible to the employees of the labor-only contractor as if such employees had been directly employed by the principal employer.40

Case no 11. Mandaue Galleon vs Andales, et. al G.R. No. 159668, March 7, 2008

Justice Austria-Martinez Facts: Petitioner Mandaue Galleon Trace INC (MGTI), and Gamallosons Traders INC (GTI), are business entities engaged in rattan furniture manufacturing for export. Respondents are were hired as weavers, granders, sanders and finishers by petitioner. Respondent Andales filed a complaint with the LA against both the petitioners for illegal dismissal and non-payment of 13th month pay and SIL pay. His coworkers also filed similar complaints. They allege that MGTI hired them, and that sometime in August 1998 some were given visitor IDs while some were told to look for work elsewhere as the company had no work for them. Eventually they were all dismissed without notice or just cause. They allege that they were in fact regular employees because they performed the work inside the premises, were issued uniforms; were under supervision of the MGTI's foremen, quality control personnel and checkers; MGTI supplied the materials, designs, tools etc; MGTI conducts orientations on how the work was to be done and the safe and efficient use of tools; MGTI issued memos regarding absences and waste of resources; and MGTI exercised power to discipline them. MGTI denied the existence of an employer-employee relationship, claiming that they were workers of independent contractor whose services they temporarily engaged in when the demands for its products were high. LA ruled that 183 of the 260 complainants were indeed regular employees and ordered petitioner to pay. Both parties appealed. CA ruled in favor of NLRC's decision. ISSUE: WON respondents are labor-only contractors or independent contractors. HELD: The court held that they are LABOR-ONLY CONTRACTORS. Based on Art. 106 of the LC and Sec. 5 and 7 of the IRR, “labor-only contracting” exists when : (1) where the contractor or subcontractor supplying workers to an employer DOES NOT have substantial capital or investment in the form of tools, equipment, machineries, work premises, among other things; and the workers recruited and placed by the contractor or subcontractor are performing activities which are directly related to the principal business of such employer (2) where the contractor does NOT exercise the right to control the performance of the work of the employee.

Under the law, the principal employer is solidarily liable with the labor-only contractors for the rightful claim of the employees. The latter are deemed AGENTS of the former, and the law makes the employer responsible to the employees of the labor only contractors as if the principal itself directly hired or employed the employees. Thus, an employer-employee relationship is created between the employer and the employee of the labor-only contractor. The purpose of the law is to prevent the circumvention by the employers, of the labor laws that are intended to protect employees.

MGTI cannot say that respondents are independent contractors because of the following criteria laid down in law. First, respondents workers were directly related to MGTI's principal business of rattan furniture. Second, MGTI was unable to present any proof that its contractors had substantial capital. Thus, the contractors are labor-only contractors because of the absence of any substantial capital which relates to the service performed. The work of respondents were directly related to MGTI's main business.

Case no. 12. spic n span services corp vs paje et al

FACTS: Swift Foods, Inc. (Swift) is a subsidiary of RFM Corporation that manufactures and processes meat products and other food products. SNS’s business is to supply manpower services to its clients for a fee. Swift and SNS have a contract to promote Swift products. complainants worked as Deli/Promo Girls of Swift products in various supermarkets in Tarlac and Pampanga. They were all dismissed from their employment. the complainants alleged that they were employees of Swift and SNS, and their services were terminated without cause and without due process. The termination came on the day they received their notices; thus, they were denied the procedural due process requirements of notice and hearing prior to their termination of employment.5 Swift, in its position paper, moved to dismiss the complaints on the ground that it entered into an independent labor contract with SNS for the promotion of its products; it alleged that the complainants were the employees of SNS, not of Swift.

ISSUE: Whether or not SNS is Swift’s agent

RULING: Yes. In order that a labor relationship can be categorized as legitimate/permissible job contracting or as prohibited labor-only contracting, the totality of the facts and the surrounding circumstances of the relationship ought to be considered.

To be legitimate, contracting or subcontracting must satisfy the following requirements: 1) The contractor or subcontractor carries on a distinct and independent business and undertakes to perform the job, work or service on its own account and under its own responsibility, according to its own manners and methods, and free from the control and direction of the principal in all matters connected with the performance of the work except as to the results thereof; 2) the contractor or subcontractor has substantial capital or investment; and 3) the agreement between the principal and contractor or subcontractor assures the contractual employees’ entitlement to all labor and occupational safety and health standards, free exercise of right to self-organization, security of tenure, and social and welfare benefit

The Labor Arbiter, in finding that SNS was merely a labor-only contractor, cited the following reasons: First, the agreement between SNS and Swift shows that the latter exercised control over the promo girls and/or merchandisers through the services of coordinators. Second, it cannot be said that SNS has substantial capital. Third, the duties of the petitioners were directly related, necessary and vital to the day-to-day operations of Swift. Lastly, the uniform and identification cards used by the petitioners were subject to the approval of Swift.

Hence, SNS is considered merely an agent of Swift which does not exempt the latter from liability. therefore, is a case of illegal dismissal perpetrated by a principal and its illegal contractor-agent.

Case No 13 - DBP vs. NLRC

FACTS: On 21 March 1977 private respondent Leonor A. Ang started employment as Executive Secretary with Tropical Philippines Wood Industries, Inc. (TPWII), a corporation engaged in the manufacture and sale of veneer, plywood and sawdust panel boards. In September 1983 petitioner Development Bank of the Philippines, as mortgagee of TPWII, foreclosed its plant facilities and equipment. In January 1986 petitioner took possession of the foreclosed properties. From then on the company ceased its operations. As a consequence, private respondent was on 15 April 1986 verbally terminated from the service. Aggrieved by the termination of her employment, private respondent filed with the Labor Arbiter a complaint for separation pay, 13th month pay, vacation and sick leave pay, salaries and allowances against TPWII, its General Manager, and petitioner. Labor Arbiter: TPWII primarily liable; General Manager subsidiarily liable NLRC: affirmed NLRC's decision

ISSUE: Did the NLRC commit grave a buse of discretion in holding that Art. 110 is applicable in the case at bar notwithstanding the absence of formal declaration of bankruptcy or judicial liquidation of TPWII? / Is declaration of bankruptcy or judicial liquidation required before the worker's preference may be invoked under Art. 110 of the Labor Code? RULING: YES. The decision of NLRC runs counter to the consistent rulings of this Court emphasizing that Art. 110 of the Labor Code is contingent upon the institution of bankruptcy or judicial liquidation proceedings against the employer.

1. Art. 110 should not be treated apart from other laws but applied in conjunction with the pertinent provisions of the Civil Code and the Insolvency Law to the extent that piece-meal distribution of the assets of the debtor is avoided. The Court had interpreted this provision in the case of Development Bank of the Philippines v . Santos in this manner, " . . . a declaration of bankruptcy or a judicial liquidation must be present before the worker's preference may be enforced. Thus, Article 110 of the Labor Code and its implementing rule cannot be invoked by the respondents in this case absent a formal decl aration of bankruptcy or a liquidation order..." Rationale: To hold Art. 110 applicable also to extrajudicial proceedings would be putting the worker in a better position than the State which could only assert its own prior preference in case of a judicial proceeding.

2. What is the effect of the amendment by RA 6715 of Art. 110? ARTICLE 110. Worker preference in case of bankruptcy . — In the event of bankruptcy or liquidation of an employer's business, his workers shall enjoy first preference as regards their unpaid wages and other monetary claims, any provision of law to the contrary notwithstanding. Such unpaid wages and monetary claims shall be paid in full before the claims of the Government and other creditors may be paid. (as amended) *It expanded the concept of worker preference not only in unpaid wages but also to other monetary claims *The words "declaration" (of bankruptcy) or "judicial" (liquidation) have been notably eliminated EFFECT? Wala. Hahaha. Ganun pa rin. In the case of DBP vs. NLRC (ibang kaso to ha), Court did not alter its original position that the right to preference given to workers under Art. 110 cannot exist in any effective way prior to the time of its presentation in distribution proceedings. Why oh why? Here. In the event of insolvency, a principal objective should be to effect an equitable distribution of the insolvent's property among his creditors. To accomplish this there must first be some proceeding where notice to all of the insolvent's creditors may be given and where the claims of preferred creditors may be bindingly adjudicated. (This next one makes a very good point.) "A preference of credit bestows upon the preferred creditor an advantage of having his credit satisfied first ahead of other claims which may be established against the debtor. Logically, it becomes material only when the properties and assets of the debtor s are insufficient to pay his debts in full; for if the debtor is amply able to pay his various creditors in full, how can the necessity exist to determine which of his creditors shall be paid first or whether they shall be paid out of the proceeds of the sale (of) the debtor's specific property. Indubitably, the preferential right of credit attains significance only after the properties of the debtor have been inventoried and liquidated, and the claims held by his various creditors have been established." In the case at bar, since there is still no declaration of insolvency nor a judicial liquidation of TPWII, it would be PREMATURE to enforce the workers preference. 3. The NLRC also held that the complainant enjoys a preference of credit over the properties of TPWII being held in possession by DBP. Wrong.

The right of first preference as regards unpaid wages recognized by Article 110 does not constitute a lien on the proper ty of the insolvent debtor in favor of workers. It is but a preference of credit in their favor, a preference in application.Article 110 of the Labor Code does not purport to create a lien in favor of workers or employees for unpaid wages either upon all of the properties or upon any particular property owned by their employer. Claims for unpaid wages do not therefore fall at all within the category of specially preferred claims established under Articles 2241 and 2242 of the Civil Code (claims for laborers' wage on goods manufactured or the work done; claims of other workers engaged in the construction, reconstruction or repair of buildings, canals and other works, upon said buildings, canals and other works). The DBP anchors its claims on a mortgage credit. It creates a real right which is enforceable against the whole world. It is a lien on an identified immovable property, which a preference is not. A recorded mortgage credit is a special preferred credit under Article 2242 (5) of the Civil Code on classification of credits.

Case No. 14- SHS perforated materials vs Diaz

Facts: Petitioner SHS Perforated Materials Ins (SHS ) is a start up corporation organized under the republic of the Philippines and registered under the PEZA, Petitioner Winfried Hartmannshen and Hinrich Johann Schumacher is its president and treasurer respectively. Respondent Manuel Diaz was hired as manager for business development on probationary status from july 18, 2005 to January 18, 2006 with a monthly salary of P100,000.00 who is to directly report to Mr. Hartmannshen. his duties includes representing the company in PEZA’s events and performing sales and marketing function also The latter required him to report to the SHS plant at least 2 days every work week and to observe technical process involved in the manufacturing of perforated material.

During his employment Hartmannshen is always abroad and because of business exigencies, his instructions to respondent were either sent by electronic mail or through telephone or mobile phone. As to respondents work there is no close supervision by him. During meetings with the respondent Hartmannshen expressed his dissatisfaction over respondent’s poor performance. In numerous e-mails respondent acknowledges his poor performance and offered to resign for the company.

On nov 16, 2005 in preparation for his trip to the Philippines, Hartmannshen tried to call respondent on his mobile phone, but the latter failed to answer. On November 18, 2005 Hartmannshen arrived in the Philippines form Germany and on November 22 and 24, 2005 notified the respondent of his arrival through e-mail and advised him to get in touch with him. Respondent claimed that he nev3r received the messages.

On November 29, Hartmannshen instructed not to release respondent’s salary. He was informed that it was being withheld and to contact Hartmannshen immediately. The next day respondent served on SHS a demand letter and resignation letter. Demanding his salary for the period of November 16-30 and the basis for his resignation is “illegal an unfair labor practices”

In the evening of the same day, respondent met with Hartmannshen, the latter told him that he was extremely disappointed and that he accepted respondents resignation and informed him that his salary would be released upon explanation of his failure to report to work and proof that he did, in fact work for the period in question. He demanded that respondent surrender all company property and information in his possession. Respondent agreed to these exit conditions through email. But instead of complying respondent sent another letter appealing for the released of his salary. To settle the issue amicably petitioner’s counsel advised respondents counsel that a check had been prepared in the amount of 50,000.00 but responded never picked up the check on December 9, respondent filed a complaint for illegal dismissal, non-payment of salaries and wages and 13th month pay, with the prayer for reinstatement and full backwages, exemplary damages and attorney’s fees and legal interest

LA: there was illegal dismissal, the respondent was constructively dismissed because the withholding of his salary was contrary to art 116 or LC as it was not one of the exceptions for allowable wage deduction by the employer under art 113 of LC. That he had no alternative but to resign because he could not be expected to continue working for an employer who withheld wages without valid cause

NLRC: reversed the ruling of LA, on the ground that withholding of respondents salary was a valid exercise of management prerogative. The act was justified as it was reasonable to demand an explanation for failure to report to work and to account for this work accomplishment.

CA: reversed NLRC, it held that withholding of respondents salary was not a valid exercise of management prerogative as there is no such thing as management prerogative to withhold wages temporarily. Petitioners averments of respondents failure to report to work were found to be unsubstantiated allegations not corroborated by any other evidence, insufficient to justify the withholding and lacking in probative value

ISSUE: 1. WON the temporary withholding of respondents salary was a valid exercise of management prerogative

2. WON respondent voluntary resigned

Held: 1. NO, Management Prerogative refers “ to the right of an employer to regulate all aspects of employment, such as freedom to prescribe work assignments, working methods, processes to be followed, regulation regarding transfer of employees, supervision of their work, lay off and discipline and dismissal and recall of work.” It cannot be understood to include the right to temporary withhold salary/wages without consent of the employee. To sanction such interpretation would be contrary to art 116 of LC

ART. 116. Withholding of wages and kickbacks prohibited. — It shall be unlawful for any person, directly or indirectly, to withhold any amount from the wages of a worker or induce him to give up any part of his wages by force, stealth, intimidation, threat or by any other means whatsoever without the worker's consent. Any withholding of an employee's wages by an employer may only be allowed in the form of wage deductions under the circumstances provided in Article 113 of the Labor Code, as set forth below: ART. 113. Wage Deduction. — No employer, in his own behalf or in behalf of any person, shall make any deduction from the wages of his employees, except: DEaHT (a) In cases where the worker is insured with his consent by the employer, and the deduction is to recompense the employer for the amount paid by him as premium on the insurance; (b) For union dues, in cases where the right of the worker or his union to check-off has been recognized by the employer or authorized in writing by the individual worker concerned; and (c) In cases where the employer is authorized by law or regulations issued by the Secretary of Labor. Absent a showing that the withholding of complainant’s wages falls under the exception provided in article 113, the withholding thereof is unlawful 2. NO, the court agrees that respondent was forced to resign and was thus constructively dismissed. In the case of Duldulao vs CA:

“There is constructive dismissal if an act of clear discrimination, insensibility, or disdain by an employer becomes so unbearable on the part of the employee that it would foreclose any choice by him except to forego his continued employment. It exists where there is cessation of work because continued employment is rendered impossible, unreasonable or unlikely, as an offer involving a demotion in rank and a diminution in pay.” What made it impossible, unreasonable or unlikely for respondent to continue working for SHS was the unlawful withholding of his salary. For said reason, he was forced to resign. It is of no moment that he served his resignation letter on November 30, 2005, the last day of payroll period and a non-working holiday sinc4e his salary was already due him on Nov 29, 2005, being the last working day of the said period. In fact, he was then informed that the wages of all other SHS employees were already released, and only his was withheld. What is significant is that respondent prepared and served his resignation letter right after he was informed that his salary was being withheld? The petitioner’s claim that they prepared the check ready for pick-up cannot undo the unlawful withholding.

Case o 15. P.I. Manufacturing Inc. v P.I. Manufacturing Supervisors and Foremen Association

Facts:

• Petitioner is a domestic corporation engaged in the manufacture and sale of household appliances • Respondent is an organization of petitioner’s supervisors and foremen • On December 10, 1987 RA 6640 was passed providing for an increase in the minimum wage and salary rates of

employees Among others, it provides:

1. A P10.00 increase per day for employees in the private sector 2. An P11.00 increase per day for workers outside metro manila 3. A P10.00 increase per day for those already receiving above the minimum wage up to P100.00

(Note: At that time minimum wage was P54.00, number 3 means that for those receiving more than P54 up to P100 they shall also be entitled to receive an increase of P10.00; hence, if receiving >P100 not entitled)

• Meanwhile, a Collective Bargaining Agreement was agreed upon between petitioner and respondent providing an increase of:

1. P625/mo. for Supervisors 2. P475/mo. for Foremen and; 3. That they “absolve…release the COMPANY for any

monetary claim they have, if any there might be or there might have been previous to the signing of this agreement."

• Respondent filed a complaint with NLRC for violation of RA 6640 claiming wage distortion due to implementation of the law Wage distortion, a situation where an increase in prescribed wage rates results in the elimination or severe contraction of intentional quantitative difference between lower and higher positions because of compliance with wage order. (Translation: it eliminates the gap or difference of wage rates based on skills, length of service, or other logical bases between employers, so that all employees would virtually receive the same wage, regardless of their skills, length of service, position etc. )

• Labor Arbiter – favored respondent; granted 13.5% increase; because according to this math genius the increase of P10 from the P54 minimum (making the minimum now at P64) is 13.5% increase.

• CA - affirmed LA but with modification, the court showing off its math prowess, modified the computation saying that the increase of P10 from the minimum of P54 is 18.5% not 13.5%

• So company appealed to SC Issue: WON there is wage distortion WON the Collective Bargaining Agreement violates RA 6640 Held: There was wage distortion.

Out of all of the members of respondent, only 3 were receiving wage rate of P100 and below, so only those 3 were entitled to the P10 increase pursuant to RA 6640. The rest are not entitled to the increase. The effect is 2 foremen exceeded the wage rate of a supervisor, another supervisor who used to have a P9 gap or difference with another supervisor, now receives less than that supervisor. Thus, gaps or differences between and among the wage rates of the employees have been substantially altered and reduced. However, the CBA re-established this gap. The agreement provided rate increases, as follows: Supervisors – P625/mo or P24.03 increase per day Foremen- P475/mo or P18.26 increase per day The above increase was much more than P10, so, much more than substantial compliance with RA6640. CA requiring an increase of 18.5% over and above the negotiated wage increase is highly unfair and oppressive. Another, CBA is the law between the parties when freely and voluntarily entered into. Respondents cannot disregard the concessions it voluntarily extended to petitioner. (Note: The concession mentioned here is that part of the CBA releasing the Company from any monetary claims; so Court ruled that that part of CBA is valid) CBA not a violation of RA 6640. CA reversed.

Case no 16. BANKARD EMPLOYEES UNION V NLRC (BANKARD INC) 423 SCRA 148 February 17, 2004 Carpio-Morales, J. FACTS:

Bankard, Inc. (Bankard) classifies its employees by levels. On May 28, 1993, its Board of Directors approved a "New Salary Scale" for the purpose of making its hiring rate competitive in the industryʼs labor market. The "New Salary Scale" increased the hiring rates of new employees. Accordingly, the salaries of employees who fell below the new minimum rates were also adjusted to reach such rates under their levels. Bankardʼs move drew the Bankard Employees Union-WATU (petitioner), the duly certified exclusive bargaining agent of the regular rank and file employees of Bankard, to press for the increase in the salary of its old, regular employees. Bankard took the position, however, that there was no obligation on the part of the management to grant to all its employees the same increase in an across-the-board manner.

Petitioners filed Notices of Strike on the ground of discrimination and other acts of Unfair Labor Practice. The strike was averted, however, when the dispute was certified by the Secretary of Labor and Employment for compulsory arbitration. NLRC, finding no wage distortion, dismissed the case for lack of merit. MFR was denied. Hence, this petition for certiorari. ISSUE: WON the unilateral adoption by an employer of an upgraded salary scale that increased the hiring rates of new employees without increasing the salary rates of old employees resulted in wage distortion within the contemplation of Article 124 of the Labor Code HELD: NO. The present petition is hereby DENIED.

Petitioner cannot make a contrary classification of private respondentʼs employees without encroaching upon recognized management prerogative of formulating a wage structure, in this case, one based on level.

While seniority may be a factor in determining the wages of employees, it cannot be made the sole basis in cases where the nature of their work differs. Moreover, for purposes of determining the existence of wage distortion, employees cannot create their own independent classification and use it as a basis to demand an across-the-board increase in salary. Apart from the findings of fact of the NLRC and the Court of Appeals that some of the elements of wage distortion are absent, petitioner cannot legally obligate Bankard to correct the alleged "wage distortion" as the increase in the wages and salaries of the newly-hired was not due to a prescribed law or wage order. The wordings of Article 124 are clear. If it was the intention of the legislators to cover all kinds of wage adjustments, then the language of the law should have been broad, not restrictive as it is currently phrased.

Moreover, Bankardʼs right to increase its hiring rate, to establish minimum salaries for specific jobs, and to adjust the rates of employees affected thereby is embodied under Section 2, Article V (Salary and Cost of Living Allowance) of the partiesʼ Collective Bargaining Agreement (CBA).

Case no. 17. central azucarera de tarlac vs central azucarera de tarlac labor union

FACTS: Petitioner is a domestic corporation engaged in the business of sugar manufacturing, while respondent is a legitimate labor organization which serves as the exclusive bargaining representative of petitioner’s rank-and-file employees.

petitioner granted its employees the mandatory thirteenth (13th) - month pay since 1975. The formula used by petitioner in computing the 13th-month pay was: Total Basic Annual Salary divided by twelve (12). Included in petitioner’s computation of the Total Basic Annual Salary were the following: basic monthly salary; first eight (8) hours overtime pay on Sunday and legal/special holiday; night premium pay; and vacation and sick leaves for each year. Throughout the years, petitioner used this computation until 2006.

On Nov 2004, respondent staged a strike. petitioner declared a temporary cessation of operations. In Dec 2005, all the striking union members were allowed to return to work. Subsequently, petitioner declared another temporary cessation of operations for the months of April and May 2006. The suspension of operation was lifted on June 2006, but the rank-and-file employees were allowed to report for work on a fifteen (15) day-per-month rotation basis that lasted until Sept 2006. In Dec 2006, petitioner gave the employees their 13th-month pay based on the employee’s total earnings during the year divided by 12.

Respondent objected to this computation. It claimed that the divisor should have been eight (8) instead of 12, because the employees worked for only 8 months in 2006. It likewise asserted that petitioner did not observe the company practice of giving its employees the guaranteed amount equivalent to their one month pay, in instances where the computed 13th-month pay was less than their basic monthly pay.[5]

petitioner explained that the change in the computation of the 13th-month pay was intended to rectify an error in the computation, particularly the concept of basic pay which should have included only the basic monthly pay of the employees. ISSUE: The controversy stems from the interpretation of the term “basic pay,” essential in the computation of the 13th-month pay.

RULING:

Revised Guidelines on the Implementation of the 13th-Month Pay Law: the minimum 13th-month pay required by law shall not be less than one-twelfth (1/12) of the total basic salary earned by an employee within a calendar year. The term “basic salary” of an employee for the purpose of computing the 13th-month pay was interpreted to include all remuneration or earnings paid by the employer for services rendered, but does not include allowances and monetary benefits which are not integrated as part of the regular or basic salary, such as the cash equivalent of unused vacation and sick leave credits, overtime, premium, night differential and holiday pay, and cost-of-living allowances. However, these salary-related benefits should be included as part of the basic salary in the computation of the 13th-month pay if, by individual or collective agreement, company practice or policy, the same are treated as part of the basic salary of the employees.

the practice of petitioner in giving 13th-month pay based on the employees’ gross annual earnings which included the basic monthly salary, premium pay for work on rest days and special holidays, night shift differential pay and holiday pay continued for almost thirty (30) years and has ripened into a company policy or practice which cannot be unilaterally withdrawn.

Petitioner only changed the formula in the computation of the 13th-month pay after almost 30 years and only after the dispute between the management and employees erupted. This act of petitioner in changing the formula at this time cannot be sanctioned, as it indicates a badge of bad faith.

Case no 18. PEOPLE’S BROADCASTING SERVICE vs SEC.OF LABOR FACTS: Jendeleon Juezan filed a complaint against People’s Broadcasting Service Inc. For illegal deduction, non-payment of service incentive leave, 13th month pay, premium pay for holiday and rest day and illegal diminution of benefits, delayed payment of wages and non-coverage of SSS, PAG-IBIG and Philhealth before the Department of Labor and Employment (DOLE) Regional Office No. VII, Cebu City. DOLE conducted a plant level inspection on 23 September 2003. In the Inspection Report Form, Petitioner was required to rectify/restitute the violations within five (5) days from receipt. No rectification was effected. Thereafter, DOLE Regional Director, in an ORDER dated Feb 27, 2004, Atty. Rodolfo M. Sabulao (Regional Director) ruled that respondent is an employee of petitioner, and that the former is entitled to his money claim. Petitioner sought reconsideration of the Order, claiming that the Regional Director gave credence to the documents offered by respondent without examining the originals, but at the same time he missed or failed to consider petitioner’s evidence. It was , however, denied. It was appealed to the Secretary of Labor but was also dismissed. Petitioner elevated the case to the Court of Appeals, claiming that it was denied due process when the DOLE Secretary disregarded the evidence it presented and failed to give it the opportunity to refute the claims of respondent. Petitioner maintained that there is no employer-employee relationship had ever existed between it and respondent because it was the drama directors and producers who paid, supervised and disciplined respondent. It also added that the case was beyond the jurisdiction of the DOLE and should have been considered by the labor arbiter because respondent’s claim exceeded P5,000.00. The Court of Appeals held that petitioner was not deprived of due process as the essence thereof is only an opportunity to be heard, which petitioner had when it filed a motion for reconsideration with the DOLE Secretary. It further ruled that the latter had the power to order and enforce compliance with labor standard laws irrespective of the amount of individual claims because the limitation imposed by Article 29 of the Labor Code had been repealed by Republic Act No. 7730. Petitioner sought reconsideration of the decision but its motion was denied. Hence, it was raised before the Supreme Court. Petitioner argues that the

1. National Labor Relations Commission (NLRC), and not the DOLE Secretary, has jurisdiction over respondent’s claim, in view of Articles 217 and 128 of the Labor Code.

2. Court of Appeals committed grave abuse of discretion when it dismissed petitioner’s appeal without delving on the issues raised therein, particularly the claim that no employer-employee relationship had ever existed between petitioner and respondent.

3. Finally, petitioner avers that there is no appeal, or any plain, speedy and adequate remedy in the ordinary course of law available to it.

Respondent claims that petitioner was not denied due process since even when the case was with the Regional Director, a hearing was conducted and pieces of evidence were presented. Respondent stands by the propriety of the Court of Appeals’ ruling that there exists an employer-employee relationship between him and petitioner. ISSUE: does the Secretary of Labor have the power to determine the existence of an employer-employee relationship?

RULING: Under the 2006 Decision:

The Court found that there was no employer-employee relationship between petitioner and private respondent. It was held that while the DOLE may make a determination of the existence of an employer-employee relationship, this function could not be co-extensive with the visitorial and enforcement power provided in Art. 128(b) of the Labor Code, as amended by RA 7730.

The National Labor Relations Commission (NLRC) was held to be the primary agency in determining the existence of an employer-employee relationship, since it is an Administrative Agency whose expertise in the matter must be given accord. This was the interpretation of the Court of the clause “in cases where the relationship of employer-employee still exists” in Art. 128(b)

From this Decision, the Public Attorney’s Office (PAO) filed a Motion for Clarification of Decision. The PAO sought to clarify as to when the visitorial and enforcement power of the DOLE be not considered as co-extensive with the power to determine the existence of an employer-employee relationship. DOLE sought clarification as well. The Court treated the Motion for Clarification as a second motion for reconsideration, granting said motion and reinstating the petition.

Under Art. 129 of the Labor Code, the power of the DOLE and its duly authorized hearing officers to hear and decide any matter involving the recovery of wages and other monetary claims and benefits was qualified by the proviso that the complaint not include a claim for reinstatement, or that the aggregate money claims not exceed PhP 5,000. RA 7730, or an Act Further Strengthening the Visitorial and Enforcement Powers of the Secretary of Labor, did away with the PhP 5,000 limitation, allowing the DOLE Secretary to exercise its visitorial and enforcement power for claims beyond PhP 5,000. The only qualification to this expanded power of the DOLE was only that there still be an existing employer-employee relationship. Hence if no employer employee relationship exists or has already terminated, DOLE has no jurisdiction. It is clear and beyond debate that an employer-employee relationship must exist for the exercise of the visitorial and enforcement power of the DOLE, Uner Article 128(b) of the Labor Code.

The question now arises, may the DOLE make a determination of whether or not an employer-employee relationship exists, and if so, to what extent? The first portion of the question must be answered in the affirmative.

_______________________ The prior decision of this Court in the present case accepts such answer, but places a limitation upon the power of the DOLE, that is, the determination of the existence of an employer-employee relationship cannot be co-extensive with the visitorial and enforcement power of the DOLE. But even in conceding the power of the DOLE to determine the existence of an employer-employee relationship, the Court held that the determination of the existence of an employer-employee relationship is still primarily within the power of the NLRC, that any finding by the DOLE is merely preliminary.

2012, SC: This conclusion must be revisited.

No limitation in the law was placed upon the power of the DOLE to determine the existence of an employer-employee relationship. No procedure was laid down where the DOLE would only make a preliminary finding, that the power was primarily held by the NLRC. The law did not say that the DOLE would first seek the NLRC’s determination of the existence of an employer-employee relationship, or that should the existence of the employer-employee relationship be disputed, the DOLE would refer the matter to the NLRC. The DOLE

must have the power to determine whether or not an employer-employee relationship exists, and from there to decide whether or not to issue compliance orders in accordance with Art. 128(b) of the Labor Code, as amended by RA 7730.

Therefore in order to give full effect to the laws and not render one or the othe nugatory, The Supreme Court Rules that: If a complaint is brought before the DOLE to give effect to the labor standards provisions of the Labor Code or other labor legislation, and there is a finding by the DOLE that there is an existing employer-employee relationship, the DOLE exercises jurisdiction to the exclusion of the NLRC. If the DOLE finds that there is no employer-employee relationship, the jurisdiction is properly with the NLRC. If a complaint is filed with the DOLE, and it is accompanied by a claim for reinstatement, the jurisdiction is properly with the Labor Arbiter, under Art. 217(3) of the Labor Code, which provides that the Labor Arbiter has original and exclusive jurisdiction over those cases involving wages, rates of pay, hours of work, and other terms and conditions of employment, if accompanied by a claim for reinstatement. If a complaint is filed with the NLRC, and there is still an existing employer-employee relationship, the jurisdiction is properly with the DOLE. The findings of the DOLE, however, may still be questioned through a petition for certiorari under Rule 65 of the Rules of Court.

In the present case, the finding of the DOLE Regional Director that there was an employer-employee relationship has been subjected to review by this Court, with the finding being that there was no employer-employee relationship between petitioner and private respondent, based on the evidence presented. Private respondent presented self-serving allegations as well as self-defeating evidence. It was not Based on Substatntial Evidence. Since the Respondent having failed to prove the existence of an employer-employee relationship, The DOLE did not acquire jurisdiction. The dismissal of the complaint was proper.

In conclusion, the decision in the 2006 case was affirmed with the modification that in the exercise of the DOLE’s visitorial and enforcement power, the Labor Secretary or the latter’s authorized representative shall have the power to determine the existence of an employer-employee relationship, to the exclusion of the NLRC.

Case no 19. Yanson vs Sec of Labor *appeal is perfected pursuant to a posting of a monetary bond equivalent to the amount of the monetary claims to be paid. Without the posting of such bond, the appeal is to be dismissed. Facts:

On March 27, 1998, Mardy Cabigo and 40 other workers (private respondents) filed with the Department of Labor and Employment-Bacolod District Office (DOLE Bacolod) a request for payroll inspection of Hacienda Valentin Balabag owned by Alberta Yanson (petitioner). DOLE Bacolod conducted an inspection of petitioner’s establishment. They found petitioner liable for the following: 1. Underpayment of salaries and wages (workers being paid a daily rate of Ninety Pesos [P90.00] since 1997

and Seventy Five Pesos [P75.00] prior to such year); 2. Non-payment of 13th month pay for two (2) years; 3. Non-payment of Social Amelioration Bonus (SAB) for two (2) years; 4. Non-payment of employer’s 1/3 carabao share

In addition, DOLE Bacolod scheduled a summary investigation and issued, by registered mail, notices of hearing as well as a subpoena duces tecum to the parties. Petitioner did not appear in any of the scheduled hearings, or present any pleading or document. In a Compliance Order dated August 12, 1998, DOLE Bacolod directed petitioner to pay, within five (5) days, P9,084.00 to each of the 41 respondents or a total of P372,444.00, and to submit proof of payment thereof. It also required petitioner to correct existing violations of occupational safety and health standards.

Petitioner filed with DOLE Bacolod a Double Verified Special Appearance to Oppose “Writ of Execution” For Being a Blatant and Dangerous Violation of Due Process, claiming that she did not receive any form of communication, or participate in any proceeding relative to the subject matter of the writ of execution. Petitioner also impugned the validity of the August 12, 1998 Compliance Order subject of the writ of execution on the ground of lack of employment relationship between her and private respondents. DOLE Bacolod denied said motion. Petitioner then filed with public respondent a Verified Appeal and Supplement to the Verified Appeal, posting therewith an appeal bond of P1,000.00 in money order and attaching thereto a Motion to be Allowed to Post Minimal Bond with Motion for Reduction of Bond. Public respondent dismissed her appeal in an Order dated September 21, 2001. Issue: WON petitioner was denied free access to the courts because of the dismissal of her appeal; WON she was denied of her right to appeal. RULING:

Petition lacks merit. DOLE Bacolod, in the exercise of its visitorial and enforcement power, awarded private respondents P9,084.00 each in labor standard benefits or the aggregate sum of P377,444.00. For its perfection, the appeal was therefore subject to the requirements prescribed under Article 128 of the Labor Code, as amended by Republic Act No. 7730.

Art 128: "...In case said order involves a monetary award, an appeal by the employer may be perfected only upon the posting of a cash or surety bond issued by a reputable bonding company duly accredited by the Secretary of Labor and Employment in the amount equivalent to the monetary award in the order appealed from." When petitioner filed her Verified Appeal and Supplement to the Verified Appeal, she posted a mere P1,000.00-appeal bond and attached a Motion to be Allowed to Post Minimal Bond with Motion for Reduction of Bond. Public respondent rejected said appeal for insufficiency of the appeal bond. She argues that her appeal bond should instead be based on her capacity to pay; otherwise, her right to free access to the courts as guaranteed under Article III, Section 2 of the Constitution would be set to naught merely because of her diminished financial capacity.

However, in previous jurisprudence, the Court has held that the posting of the proper amount of the appeal bond under Article 128 (b) is mandatory for the perfection of an appeal from a monetary award in labor standard cases.

Moreover, Article 128(b) deliberately employed the word “only” in reference to the requirements for perfection of an appeal in labor standards cases. “Only” commands a restrictive application, giving no room for modification of said requirements.

Case no 20. Balladares vs. Peak Ventures Corporation

Facts:

• Nestor Balladares et al, are employed by Peak Ventures Corp. as security guards • They were assigned at the premises of Yangco Market Owners and Administrators Assoc. ( YMOAA) • They filed complaint against Peak Ventures for underpayment of wages • Acting on the complaint, DOLE conducted an inspection of Peak Ventures and found violations:

1. underpayment of the minimum wage and other auxiliary benefits; 2. Pertinent employment records (payrolls, daily time records, contract of employment) were not available

at the time of inspection. • A Notice of Inspection Result was issued to and received by the Human Resource Department Manager of Peak

Ventures; instructed to either effect restitution or file its objections within five days; Respondent failed to correct violations or contest the findings hence, parties were summoned for hearing

• Respondent ,as a defense, alleged that the cause of the underpayment of wages, if any, arose from the failure of the YMOAA

• Regional Director rendered judgment in favor of petitioners and ruled that the contractor was jointly and severally liable with the principal

• MR denied; appeal to Secretary of Labor also denied; elevated it to CA • The CA granted the petition, ruling that the Regional Director had no jurisdiction to hear and decide the case,

because the claims of each of the petitioners exceeded P5,000.00, and power to adjudicate belonged to Labor Arbiter applying Art. 129 and Art. 217 of Labor Code

• Hence, this petition questioning the CA ruling

Issue: WON the DOLE Regional Director has jurisdiction over the case Held: It should be noted that petitioners' complaint involved underpayment of wages and other benefits. In order to verify the allegations in the complaint, DOLE conducted an inspection, which yielded proof of violations of labor standards. By the nature of the complaint and from the result of the inspection, the authority of the DOLE, under Article 128, came into play regardless of the monetary value of the claims involved. The extent of this authority and the powers flowing therefrom are defined and set forth in Article 128 of the Labor Code. In view of the enactment of R.A. No. 7730, the Secretary of Labor or his duly authorized representatives is now empowered to hear and decide, in a summary proceeding, any matter involving the recovery of any amount of wages and other monetary claims arising out of employer-employee relations at the time of the inspection, even if the amount of the money claim exceeds P5,000.00. However, if the Labor standards case is covered by the exception clause of Art.128(b) then the Regional Director would have to endorse it to the Labor Arbiter. In order to divest the Regional Director of his jurisdiction the ff should be present:

1. Employer contests the findings of labor regulations officer and raises issues thereon; 2. That in order to resolve such issues there is a need to examine evidentiary matters: 3. That such matter are not verifiable by the normal course of inspection

Respondent did not contest the findings of the labor regulations officer during the hearing or after receipt of the result of the inspection. Respondent never denied that the petitions were not paid correct wages. This was in fact admitted by respondent, claiming that YMOAA was the one who failed to pay the correct wages. This petition clearly involves a labor standards case, and it is in keeping with the law that: “ the worker need not litigate what legally belongs to him, for the whole enforcement machinery of DOLE exists to insure its expeditious delivery to him free of charge.” Petition granted.

Case no 21. Allied Investigation Bureau vs Sec of Labor and Employment

Facts: Petitioner Allied investigation Bureau is a security agency, it entered into a security contact with Novelty Philippines (NPI). Melvin Pelayo and Samuel Sucanel, two of the security guards assigned by petitioner to NPI filed a complaint with the office of respondent regional director Romeo A. Young charging the petitioner non compliance3 with Wage order NCR-03 which increased the minimum daily pay of workers from 118 to 135.00 effective December 16, 1993 and further by 10.00 or form 135.00 to 145.00 daily beginning april 1, 1994. Private respondents sought the recovery of wage differentials.

On February 9 and 14, the office of regional director young conducted inspection visits at petitioner establishment and found out: - Non-implementation under W.O. # NCR-03 from Dec. 16, 1993 to Dec. 15. 1994 to security guards assigned at Novelty Phils., Inc. However, their prime client has been granted an exemption by the Wage Board under W.O. # NCR-03 with Case No. NCRO-W.O. # 3-E (9) dated June 7, 1994. Please see attached xerox copy. — Non-remittance of SSS Premiums — Excessive deduction or Bayanihan System (P20.00) every pay day instead of P5.00 only. The regional director required the petitioner to effect restitution and correction of the foregoing at the company or plant level within 5 calendar days thereof. Thereafter, in order to facilitate amicable settlement between the parties, a series of conference and hearings were scheduled by the office of the regional director, however despite due notice, petitioner failed to appear in any of the said hearings. On May 9, 1995 respondent regional director issued an order, ordering allied investigation bureau to pay to 92 employees the total amount of 807,570.36. Otherwise a writ of execution shall be issued to enforce this order. Petitioner appealed the above order to secretary of labor and employment without however posting case or surety bond equivalent to the monetary award in the said order. The latter dismissed the appeal for failure to perfect said appeal . Hence this Petition for certiorari, with a prayer for issuance of TRO, petitioner argues that the power to adjudicate money claims belongs to the LA who has exclusive jurisdiction over employee’s claims where the aggregate amount of the claims of each employee exceeds 5,000.00. petitioner cites Art 129 and 127 respectively, that the power of the Regional Director to adjudicate employees' money claims is subject to the condition that the aggregate money claims of each employee does not exceed P5,000.00; and, that the Labor Arbiter has jurisdiction over all other claims arising from employer-employee relations, including those of persons in domestic or household service, involving an amount exceeding five thousand pesos (P5,000.00), whether or not accompanied with a claim for reinstatement. It further contends that since the order appealed from is void and without legal effect the order never assumed finality and therefore it was improper for the secretary of labor and employment to out rightly dismiss the appeal on the ground that petitioner failed to post cash and surety bond Issue: 1. WON the regional director acted without jurisdiction 2. WON the secretary of labor and employment acted with grave abuse of discretion in dismissing the appeal Held: 1. The contention of the petitioner is untenable. The said provisions of law do not contemplate nor cover the visitorial and enforcement powers of the secretary of labor or his duly authorized representative, said powers are defined and set for in arti 128 of LC: Art. 128. Visitorial and enforcement power. — (a) The Secretary of Labor or his duly authorized representatives, including labor regulation officers, shall have access to employer's records and premises at any time of the day or night whenever work is being undertaken therein, and the right to copy therefrom, to question any employee and investigate any fact, condition or matter which may be necessary to determine violations or which may aid in the enforcement of this Code and of any labor law, wage order or rules and regulations issued pursuant thereto. (b) Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and in cases where the relationship of employer-employee exists, the Secretary of Labor and Employment or his duly authorized Representatives shall have the power to issue compliance orders to give effect to the labor standards provisions of this Code and other labor legislation based on the findings of labor employment and enforcement officers or industrial safety engineers made in the course of inspection. The Secretary or his duly authorized representatives shall issue writs of execution to the appropriate authority for the enforcement of their orders, except in cases where the employer contests the findings of the labor employment and enforcement officer and raises issues supported by documentary proofs which were not considered in the course of inspection.

An order issued by the duly authorized representative of the Secretary of Labor and Employment under this article may be appealed to the latter. In case said order involves a monetary award, an appeal by the employer may be perfected only upon the posting of a cash or surety bond issued by a reputable bonding company duly accredited by the Secretary of Labor and Employment in the amount equivalent to the monetary award in the order appealed from. The aforequoted provision explicitly excludes from its coverage Articles 129 and 217 of the Labor Code by the phrase "notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary . . ." thereby retaining and further strengthening the power of the Secretary of Labor or his duly authorized representative to issue compliance orders to give effect to the labor standards provisions of said Code and other labor legislation based on the findings of labor employment and enforcement officers or industrial safety engineers made in the course of inspection. In the case at bar, the Office of respondent Regional Director conducted inspection visits at petitioner's establishment on February 9 and 14, 1995 in accordance with the above-mentioned provision of law. In the course of said inspection, several violations of the labor standard provisions of the Labor Code were discovered and reported. It was on the bases of the aforesaid findings (which petitioner did not contest), that respondent Regional Director issued the assailed Order for petitioner to pay private respondents the respective wage differentials due them. l Clearly, as the duly authorized representative of respondent Secretary of Labor, and in the lawful exercise of the Secretary's visitorial and enforcement powers under Article 128 of the Labor Code, respondent Regional Director had jurisdiction to issue his impugned Order. 2. no, Article 128 of the Labor Code likewise explicitly provides that in case an order issued by the duly authorized representative of the Secretary of Labor and Employment involves a monetary award, an appeal by the employer may be perfected only upon posting of a cash or surety bond in an amount equivalent to the monetary award in the order appealed from. It is undisputed that petitioner herein did not post a cash or surety bond when it filed its appeal with the Office of respondent Secretary of Labor. Consequently, petitioner failed to perfect its appeal on time and the Order of respondent Regional Director became final and executory.

Case no.22 URBANES, (doing business under the name and style of CATALINA SECURITY AGENCY) vs SEC. OF LABOR

FACTS: Petitioner Placido O. Urbanes, Jr., doing business under the name and style of Catalina Security Agency,

entered into an agreement to provide security services to respondent Social Security System SSS. During its effectivity petitioner requested the SSS for the upward adjustment of their contract rate in view of Wage Order No. NCR-03 which was issued by the Regional Tripartite Wages and Productivity Board-NCR pursuant to Republic Act 6727 otherwise known as the Wage Rationalization Act. It reads:

Section 9. In the case of contracts for construction projects and for security, janitorial and similar services, the prescribed amount set forth herein for covered workers shall be borne by the principals or the clients of the construction/service contractors and the contract shall be deemed amended accordingly. In the event, however, that the principal or client failed to pay the prescribed increase, the construction/service contractors shall be jointly and severally liable with the principal or client.

Since his letter to the SSS remained unheeded, petitioner sent another letter reiterating the same.

Thereafter, petitioner pulled out his agency’s services from the premises of the SSS and another security agency, Jaguar, took over. Thus Petitioner filed a complaint with the DOLE-NCR against the SSS seeking the implementation of Wage Order No. NCR-03. Petitioner however, contends that the security guards assigned to the SSS do not have any legal basis to file a complaint against it for lack of contractual privity. Acting on the complaint, Regional Director of the DOLE-NCR issued an Order, ordering SSS to pay the wages of the 148 security guards of the agency. SSS appealed to the Labor Secretary, but was denied, although in each appeal the computation of payment of wages were modified repeatedly.

Hence this Petition before the Supreme Court. Petitioner asserts that the Secretary of Labor does not have

jurisdiction to review appeals from decisions of the Regional Directors in complaints filed under Article 129 of the Labor Code, under ART. 129 Petitioner thus contends that as the appeal of SSS was filed with the wrong forum, it should have been dismissed. The SSS, on the other hand, contends that Article 128, not Article 129, is applicable to the case. Article 128 provides for Visitorial and Enforcement Powers of the Sec.of Labor.

RULING: Petition was Dismissed. Neither the petitioner’s contention nor the SSS’s is impressed with merit. Citing the a recent case where

the security agency filed a complaint before the Regional Trial Court (RTC) against the principal or client Lapanday for the upward adjustment of the contract rate in accordance with Wage Order Nos. 5 and 6. Lapanday argued that it is the National Labor Relations Commission, not the civil courts, which has jurisdiction to resolve the issue in the case, it involving the enforcement of wage adjustment and other benefits due the agency’s security guards as mandated by several wage orders. Holding that the RTC has jurisdiction over the controversy, this Court ruled:

We agree with the respondent that the RTC has jurisdiction over the subject matter of the present case. It is well settled in law and jurisprudence that where no employer-employee relationship exists between the parties and no issue is involved which may be resolved by reference to the Labor Code, other labor statutes or any collective bargaining agreement, it is the Regional Trial Court that has jurisdiction. In this case, even if petitioner filed the complaint on his and also on behalf of the security guards, the relief sought has to do with the enforcement of the contract between him and the SSS which was deemed amended by virtue of Wage Order No. NCR-03. The controversy subject of the case at bar is thus a civil dispute, the proper forum for the resolution of which is the civil courts. But even assuming arguendo that petitioner’s complaint were filed with the proper forum, for lack of cause of action it must be dismissed. The security guards' immediate recourse for the payment of the increases is with their direct employer. However, in order for the security agency to comply with the new wage and allowance rates it has to pay the security guards, the Wage Orders made specific provision to amend existing contracts for security services by allowing the adjustment of the consideration paid by the principal to the security agency concerned. What the Wage Orders require, therefore, is the amendment of the contract as to the consideration to cover the service contractor's payment of the increases mandated. In the end, therefore, ultimate liability for the payment of the increases rests with the principal.

Case no. 23. zialcita vs PAL

FACTS: Complainant Zialcita, an international flight stewardess of PAL, was discharged from the service on account of her marriage. PAL invoked its policy: “Flight attendants must be single. Flight attendants will be automatically separated from employment in the event they subsequently get married.” PAL contends that Article 136 [134] of the Labor Code applies only to women employed un ordinary occupations, like flight attendants, is fair and reasonable, considering the peculiarities of their chosen profession.

ISSUE: Is the policy of PAL against marriage legal?

RULING: No. PAL even invoked Articles 52 and 216 of the NCC on the preservation of marriage as an inviolable social institution and the family as a basic social institution, respectively, as bases for its policy of non-marriage. PAL predicates absence of a flight attendant from her home for long periods of time as contributory to an unhappy married life. This is not based on actual conditions, considering that, in this modern world, sophisticated technology has narrowed the distance from one place to another. PAL overlooked the fact that married flight attendants can program there lives to adapt to prevailing circumstances and events. Therefore, Article 136 [134] is not intended to apply only to women employed in ordinary occupations, or it should have categorically expressed so.

Case #24 STAR PAPER CORPORATION vs. SIMBOL Petitioners: Star Paper Corporation Josephine Ongsitco (Manager of Personnel and Administration Dept., Star Paper Corp.) Sebastian Chua (Managing Director, Star Paper Corp.) Respondents: Ronaldo Simbol Wilfreda Comia Lorna Estrella FACTS: The three respondents were regular employees of Star Paper Corporation. On October 27, 1993, Ronaldo Simbol was hired by Star Paper Corp. He met Alma Dayrit, also an employee of the company, whom he married on June 27, 1998. Prior to the marriage, Ongsitco advised the couple that should they decide to get married, one of them should resign pursuant to a company policy promulgated in 1995.

1. New applicants will not be allowed to be hired if in case he/she has [a] relative, up to [the] 3rd degree of relationship, already employed by the company.

2. In case of two of our employees (both singles [sic], one male and another female) developed a friendly relationship during the course of their employment and then decided to get married, one of them should resign to preserve the policy stated above.

Simbol resigned on June 20, 1998 pursuant to the company policy. Wilfreda Comia was hired by the company on February 5, 1997. She met Howard Comia, a co-employee, whom she married on June 1, 2000. Ongsitco likewise reminded them that pursuant to the company policy, one must resign should they decide to get married. Wilfreda Comia resigned on June 30, 2000. Lorna Estrella was hired on July 29, 1994. She met Luisito Zuñiga, also a co-worker. Petitioners stated that Zuñiga, a married man, got Estrella pregnant. The company allegedly could have terminated her services due to immorality but she opted to resign on December 21, 1999. The respondents each signed a Release and Confirmation Agreement where they stated that they have no money and property accountabilities in the company and that they release the letter of any claim or demand of whatever nature. Respondents offer a different version of their dismissal. Simbol and Comia allege that they did not resign voluntarily; they were compelled to resign in view of an illegal company policy. Estrella alleges that she had a relationship with co-worker Zuñiga who misrepresented himself as a married but separated man. After he got her pregnant, she discovered that he was not separated. Thus, she severed her relationship with him to avoid dismissal due to the company policy. On Nov. 30, 1999, she met an accident and was advised by the doctor at Orthopedic Hospital to recuperate for 21 days. She returned to work on December 21, 1999 but she found out that her name was on-hold at the gate. She was denied entry. She was directed to proceed to the personnel office where she was handed a memorandum stating that she was dismissed for immoral conduct. She refused to sign the memorandum because she was on leave for 21 days and has not been given the chance to explain. The management asked her to write an explanation but was nonetheless dismissed by the company. Due to her urgent need for money, she later submitted a letter of resignation in exchange for her 13th month pay. Respondents filed a complaint for unfair labor practice, constructive dismissal, separation pay, and attorney's fees. LABOR ARBITER: Dismissed the complaint

- Company policy was decreed pursuant to what the corporation perceived as management prerogative . NLRC: Affirmed decision of LA CA: Reversed and set aside NLRC's decision

- Declared illegal the dismissal of the three from employment, ordering reinstatement to their former positions without loss of seniority rights with full backwages from the time of their dismissal until actual reinstatement

- Company policy is violative of the constitutional right towards marriage and the family of employees and of Art. 136 of the Labor Code.

- Resignations of respondents were far from voluntary. ISSUE: Whether or not the policy of the employer banning spouses from working in the same company violates the rights of the employee under the Constitution and the Labor Code. HELD: Yes. Petitionersʼ sole contention that "the company did not just want to have two (2) or more of its employees related between the third degree by affinity and/or consanguinity" is lame. That the second paragraph was meant to give teeth to the first paragraph of the questioned rule is evidently not the valid reasonable business necessity required by the law.

It is significant to note that in the case at bar, respondents were hired after they were found fit for the job, but were asked to resign when they married a co-employee. Petitioners failed to show how the marriage of Simbol, then a Sheeting Machine Operator, to Alma Dayrit, then an employee of the Repacking Section, could be detrimental to its business operations. Neither did petitioners explain how this detriment will happen in the case of Wilfreda Comia, then a Production Helper in the Selecting Department, who married Howard Comia, then a helper in the cutter-machine. The policy is premised on the mere fear that employees married to each other will be less efficient. If we uphold the questioned rule without valid justification, the employer can create policies based on an unproven presumption of a perceived danger at the expense of an employeeʼs right to security of tenure. DECISION OF CA IS AFFIRMED.

CASE NUMBER 25 DOMINGO vs. RAYALA

FACTS: On November 16, 1998, Ma. Lourdes T. Domingo (Domingo), then Stenographic Reporter III at the NLRC, filed a Complaint for sexual harassment against then National Labor Relations Commission (NLRC) Chairman Rogelio I. Rayala (Rayala) before Secretary Bienvenido Laguesma of the Department of Labor and Employment (DOLE).

In an affidavit executed by Domingo, she alleged that Rayala would whisper to her that she's becoming more beautiful everyday; that he would put her hands on her shoulders while she was typing making her nervous for there were rumors that his previous secretaries had resigned due to Rayala's lascivious gestures and advances; that he inquired of her personal life on whether he has a boyfriend or a live-in partner; that she was given P3,000 by Rayala but she returned the same after immediately consulting with her officemates; that she was told to pursue law and promised that she will be taken cared of as long as Rayala was still Chairman; and the final straw was when she was summoned Rayala's office to get his dictation wherein Rayala allegedly placed his hands on Domingo's shoulders, while the latter was typing, and his hands moved up to her neck and her ear and tickled her there. Domingo removed Rayala's hands and after the last incident, Domingo filed a leave of absence and asked to be immediately transferred.

Thereafter, she filed the Complaint for sexual harassment on the basis of Administrative Order No. 250, the Rules and Regulations Implementing RA 7877 in the Department of Labor and Employment. The case was referred to the Office of the President (OP) because Rayala was a presidential appointee. A Committee on Decorum and Investigation (Committee) in accordance with Republic Act (RA) 7877, the Anti-Sexual Harassment Act of 1995, was constituted. After the Committee heard and received evidence, it found Rayala guilty of the offense and recommended that the penalty should be suspension for six (6) months and one (1) day, in accordance with AO 250. On May 8, 2000, the OP, through Executive Secretary Zamora, issued AO 119 which rejected the imposition of the said penalty of suspension and ordered the dismissal of Rayala in view of his position and the abuse of his authority. Rayala filed a MFR with the CA.

CA: There was sufficient evidence on record to create moral certainty that Rayala committed the acts he was charged; affirmed AO 119 MFR in CA: Modified CA decision by reverting back the penalty to suspension, albeit this time, imposing the maximum penalty in RA 7877 for the first offense, that is 1 year suspension from service *Rayala, Domingo and the Republic filed separate petitions for review on the abovesaid decision which was consolidated by the Supreme Court in this case

ARGUMENTS (you may/may not read this kung nagmamadali na): (Domingo) -President has the prerogative to determine the proper penalty to be imposed on an erring Presidential appointee -AO 250 is not intended to cover cases against presidential appointees hence its inapplicability to Rayala (Rayala) -Posits that for sexual harassment to exist under RA 7877, there must be: (a) demand, request, or requirement of a sexual favor; (b) the same is made a pre-condition to hiring, re-employment, or continued employment; or (c) the denial thereof results in discrimination against the employee -Domingo has failed to allege and establish any sexual favor, demand, or request from petitioner in exchange for her continued employment or for her promotion -CA erred in ruling that sexual harassment is malum prohibitum as it is considered an offense against a particular person -AO 250 expanded the definition of sexual harassment and thus, he may not be convicted under it (Republic) -Power to remove the NLRC Chairman solely rests upon the President, limited only by the requirements under the law and the due process clause -Article 215 of the Labor Code states that the Chairman of the NLRC holds office until he reaches the age of 65 only during good behavior; since Rayala's security of tenure is conditioned upon his good behavior, he may be removed from office if it is proven that he has failed to live up to this standard -Although EO 250 provides the penalty of suspension for 1 year, Rayala is still not exempt under the Civil Service Law which provide for the penalty of dismissal in case of disgraceful and immoral conduct ISSUES: 1. Did Rayala commit sexual harassment? 2. If he did, what is the applicable penalty?

RULING: 1. YES. That Rayala committed the acts complained of — and was guilty of sexual harassment — is, the common factual finding of not just one, but three independent bodies: the Committee, the OP and the CA. It should be remembered that when supported by substantial evidence, factual findings made by quasi-judicial and administrative bodies are accorded great respect and even finality by the courts. The principle, therefore, dictates that such findings are binding to this court. Rayala's insistence that these acts do not constitute sexual harassment, because Domingo did not allege in her complaint that there was a demand, request, or requirement of a sexual favor as a condition for her continued employment or for her promotion to a higher position, was unconvincing.

Basic in the law of public officers is the three-fold liability rule , which states that the wrongful acts or omissions of a public officer may give rise to civil, criminal and administrative liability. An action for each can proceed independently of the ot This rule applies with full force to sexual harassment. The law penalizing sexual harassment in this jurisdiction is RA 7877, which defines work-related sexual harassment as: Sec. 3. Work, Education or Training-related Sexual Harassment Defined. — Work, education or training-related sexual harassment is committed by an employer, manager, supervisor, agent of the employer, teacher, instructor, professor, coach, trainor, or any o ther person who, having authority, influence or moral ascendancy over another in a work or training or education environment, demands, requests or otherwise requires any sexual favor from the other, regardless of whether the demand, request or requirement for submission is accepted by the object of said Act. (a) In a work-related or employment environment, sexual harassment is committed when: (1) The sexual favor is made as a condition in the hiring or in the employment, re-employment or continued employment of said individual, or in granting said individual favorable compensation, terms, conditions, promotions, or privileges; or the refusal to grant the sexual favor results in limiting, segregating or classifying the employee which in a way would discriminate, deprive or diminish employment opportunities or otherwise adversely affect said employee; (2) The above acts would impair the employee's rights or privileges under existing labor laws; or (3) The above acts would result in an intimidating, hostile, or offensive environment for the employee

Sec. 4 governs the procedure in administrative cases and states that it is the duty of the employer or the head of the work-related, educational or training environment or institution, to prevent or deter the commission of acts of sexual harassment and to provide the procedures for the resolution, settlement or prosecution of acts of sexual harassment.

Since Rayala was charged with an administrative offense, the CA correctly ruled that Rayala's culpability is not to be determined solely by Sec. 3 of RA 7877. Yet, even if we were to test Rayala's acts strictly by the standards set in Section 3 of RA 7877, he would still be administratively liable. It is true that this provision calls for a "demand, request or requirement of a sexual favor." But it is not necessary that the demand, request or requirement of a sexual favor be articulated in a categorical oral or written statement. It may be discerned, with equal certitude, from the acts of the offender. All the inappropriate acts of Rayala resound with deafening clarity the unspoken request for a sexual favor.

It is also not essential that the demand, request or requirement be made as a condition for continued employment or for promotion to a higher position. It is enough that the respondent's acts result in creating an intimidating, hostile or offensive environment for the employee. This is clearly shown by the common factual finding of the Investigating Committee, the OP and the CA that Domingo reported the matter to an officemate and, after the last incident, filed for a leave of absence and requested transfer to another unit.

*The question of whether or not AO 250 covers Rayala is of no real consequence. The events of this case unmistakably show that the administrative charges against Rayala were for violation of RA 7877 and that jurisdiction was properly acquired by the OP. *What is before us is an administrative case of sexual harassment. Thus, whether the crime of administrative of sexual harassment is malum in se or malum prohibitum is immaterial. 2. Under the Labor Code, the Chairman of the NLRC shall hold office good behavior until he or she reaches the age of sixty-five, during good behavior unless sooner removed for cause as provided by law or becomes incapacitated to discharge the duties of such office.

In this case, it is the President of the Philippines, as the proper disciplining authority, who would determine whether there is a valid cause for the removal of Rayala as NLRC Chairma. This power, however, is qualified by the phrase "for cause as provided by law". Thus, when the President found that Rayala was indeed guilty of disgraceful and immoral conduct, the Chief Executive did not have unfettered discretion to impose a penalty other than the penalty provided by law for such offense. The imposable penalty for the first offense of either the administrative offense of sexual harassment (AO 250) or for disgraceful and immoral conduct (Civil Service Law) is suspension of six (6) months and one (1) day to one (1) year. Accordingly, it was error for the Office of the President to impose upon Rayala the penalty of dismissal from the service, a penalty which can only be imposed upon commission of a second offense.

Even if the OP properly considered the fact that Rayala took advantage of his high government position, under the Revised Uniform Rules on Administrative Cases in the Civil Service, taking undue advantage of a subordinate may be considered as an aggravating circumstance and where only aggravating and no mitigating circumstance is present, the maximum penalty shall be imposed. Hence, the maximum penalty that can be imposed on Rayala is suspension for one (1) year.

Case no. 26 Philippine Aeolus Automotive United Corp (PAAUC) and/or Francis Chua vs. NLRC, Rosalinda Cortez

April 28, 2000, Justice Bellosillo

Facts: Respondent Rosalinda Cortes, the Company Nurse of petitioner PAAUC, was dismissed on the grounds of gross and habitual neglect of duties, serious misconduct and fraud or willful breach of trust. These grounds are based on the following charges which respondent failed to explain to petitioner:

1. That respondent threw a stapler against her Plant Manager William Chua 2. That respondent lost an amount of P1,488 that was entrusted to her by Chua 3. That respondent asked another employee to punch-in her time card 4. That respondent failed to process the ATM application of 9 of her co-employees.

Respondent filed a complaint before the Labor Arbiter for illegal dismissal and payment of back

wages/damages. On the first charge, she explained that she did so because for the first four years of her employment, she did NOT reciprocate the sexual advances and special favors of William Chua, when suddenly, the latter threatened of her of the termination of her employment if she will not accede to his sexual advances. The stapler was thrown during an argument when Chua caused the transfer of her work table equipped with telecom and intercom units to another to a place without such equipment. On the second charge, she said that the money was properly delivered to the Company. On the third charge, she admitted that she did so since she was doing an errand for another Company Officer and that this was with the consent of Chua. On the fourth charge, she denied any knowledge of the ATM application, since it not among those included in her job as a company nurse. The Labor Arbiter denied the complaint but its decision was reversed by the NLRC. ISSUE: Whether respondent was illegally dismissed and whether she is entitled to damages if she really was illegally dismissed. HELD: Yes, the Court held that there was illegal dismissal. On the ground of serious misconduct, the cause of dismissal must be serious; must relate to the performance of employees duties; and must show that employee is unfit to continue working for the employer. In the instant case, the acts complained of do not pertain to her duties as a nurse. It is not her primary duty as a nurse to open ATM accounts for employees.

The Court also held that for negligence to warrant dismissal, it must not merely be gross, but also habitual.

In the instant case, when she asked another to punch-in her time card, she did so in good faith since he was asked by another officer to perform a task outside of office. She did so for the first time in her five year of service for the company. There was also no finding of willful breach of trust.

The Court also dismissed the view of petitioner that she is not entitled of payment of damages since she

failed to prove the existence of bad faith and for her failure to complain the alleged sexual harassment in her 1st four years of employment. The Court ruled that the gravamen of the offense of sexual harassment is NOT the violation of sexuality but the abuse of power by the employer. Any employee, male or female may rightfully cry “foul” provided the claim is well substantiated. There is no time period within which the employee is to complain through the proper channels. In the instant case, the court explained that respondent’s anxiety was building up over the four years of her employment, which she finally vented up her anger when the petitioner found a way to terminate her. Chua must have thought that since he had no place in private respondent’s heart, then she have no place in his office. The anxiety caused by the sexual harassment and the oppressive manner of her dismissal entitle private respondent to moral and exemplary damages.