Separation Pay and Backwages

 

CONSEQUENCES OF TERMINATION

 

SEPARATION PAY – FOUR CONTEXT

SEPARATION PAY FOR AUTHORIZED CAUSES UNDER ARTS. 283-284.

Separation Pay. An employee lawfully dismissed for a just cause is not entitled to any separation pay; while an employee separated for an authorized cause is entitled to separation pay in accordance with the rates prescribed by law. (Chan. The Labor Code of the Philippines Annotated – Volume II).

Art. 298. [283] Closure of Establishment and Reduction of Personnel. – The employer may also terminate the employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof. In case of termination due to the installation of labor-saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered as one (1) whole year.

In case the CBA or company policy provides for a higher separation pay, the same must be followed instead of the one provided in Article 283. (Chan. The Labor Code of the Philippines Annotated – Volume II).

Art. 299. [284] Disease as a Ground of Termination – An employer may terminate the services of an employee who has been found to be suffering from any disease and whose continued employment is prohibited by law or is prejudicial to his health as well as to the health of his co-employees: Provided, That he is paid separation pay equivalent to at least one (1) month salary or to one-half (1/2) month salary for every year of service, whichever is greater, a fraction of at least six (6) months being considered as one (1) whole year.

 

 

SEPARATION PAY AS FINANCIAL ASSISTANCE IN LEGAL DISMISSAL UNDER ART. 282

The basis of the grant of financial assistance is equity. (Chan. The Labor Code of the Philippines Annotated – Volume II).

An employee who is dismissed for just cause is generally not entitled to separation pay. A reading of Art. 279 in relation to Art. 282 of the Labor Code, reveals that an employee who is dismissed for cause after appropriate proceedings in compliance with due process requirements is not entitled to an award of separation pay. In some cases however, the SC awarded separation pay to a legally dismissed employee on the grounds of equity and social justice. This is not allowed though when the employee has been dismissed for serious misconduct or some other causes reflecting on his moral character or personal integrity. (Etcuban, Jr. v. Sulpicio Lines, Inc. G.R. No. 148410, Jan. 17, 2005, among others).

 

SEPARATION PAY IN LIEU OF REINSTATEMENT

If reinstatement is no longer possible, the employer has the alternative of paying the employee his separation pay in lieu of reinstatement. (Manila Water Co, Inc. v. Pena, G.R. No. 158255, Jul. 8, 2004).

Reinstatement cannot be awarded when what is prayed for is separation pay. As pronounced in Dela Cruz v. NLRC, [G.R. No. 121288, November 20, 1998], the petitioner therein would have been entitled to reinstatement as a consequence of his illegal dismissal from employment. However, by expressly asking for separation pay, he is deemed to have opted for separation pay in lieu of reinstatement.

In Deguzman v. NLRC, [G.R. No. 167701, Dec. 12, 2007], and in several other earlier cases, where the employee explicitly prayed for an award of separation pay in lieu of reinstatement, it was held that by so praying, he forecloses reinstatement as a relief by implication. Consequently, he is entitled to separation pay equivalent to one month pay for every year of services, computed from the time of his illegal dismissal up to the finality of the judgement, as an alternative to reinstatement.

The amount of separation pay that should be paid in lieu of reinstatement is not provided in the Labor Code or its implementing rules. Jurisprudence, however, dictates that the following should be included in its computation:

  1. The amount equivalent to at least one (1) month salary or to one (1) month salary for every year of services, whichever is higher, a fraction of at least six (6) months being considered as one (1) whole year. (Sec. 4[b], Rule I, Book VI, Rules to Implement the Labor Code).
  2. Allowances that the employee has been receiving on a regular basis. (Planters Products, Inc. v. NLRC, G.R. No. 78524, Jan. 20, 1989).

 

SEPARATION PAY AS AN EMPLOYEE BENEFIT

Employers may lawfully and effectively reduce their personnel by offering resignation benefits through a Voluntary Resignation Program where employees are afforded the right to voluntarily terminate the employment relationship. If made in good faith, such as scheme should be considered a valid form of terminating employment. Consequently, the employer need not comply with the requirement under Article 283 of the Labor Code that notice be sent to the Department of Labor and Employment at least a month prior to the effectivity of the termination of employment. The reason is that by applying to voluntarily resign, the employee thereby acknowledges the existence of a valid cause for terminating his employment. (Dole Philippines Inc. v. NLRC, G.R. No. 120009, Sept. 13, 2001; International Hardware, Inc. v. NLRC, G.R. No. 80770, Aug. 10, 1989).

 

BACKWAGES

DISTINGUISH FROM SEPARATION PAY

Separation pay in lieu of reinstatement and backwages are two different things. Payment of separation pay is not inconsistent with payment of backwages. (Cabatulan v. Buat, G.R. No. 147142, Feb. 14, 2005).

Separation pay is paid when reinstatement is not possible; while backwages are paid for the compensation which otherwise the employee should have earned had he not been illegally dismissed. (Equitable Banking Corp. v. Sadac, G.R. No. 164772, June 8, 2006).

Separation pay is computed on the basis of employee’s length of service; while backwages are based on the actual period when he was unlawfully prevented from working. (Lim v. NLRC, G.R. Nos. 79907 and 79975, Mar. 16, 1989).

Separation pay is paid where a wherewithal during the period that an employee is looking for another employment; while backwages are paid for the loss of earnings during the period between illegal dismissal and reinstatement. (Quebec, Sr. v. NLRC, G.R. No. 123184, Jan. 22, 1999).

Separation pay is oriented towards the immediate future; while backwages involve the restoration of the past income lost. (Lopez, Jr. v. NLRC, G.R. No. 109166, Jul. 6, 1995).

Separation pay cannot be paid in lieu of backwages. (Torillo v. Leogardo, G.R. No. 77205, May 27, 1991).

 

FULL BACKWAGES

MERCURY DRUG RULE (PRIOR TO R.A. 6715)

MERCURY DRUG VS. CIR 56 SCRA 694

MAKASIAR, J.:p

Procedural History:

Petitioner Mercury Drug Co., Inc. seeked the reversal of the decision of respondent Court of Industrial Relations dated January 17, 1964 and its order dated February 25, 1964 denying petitioners’ motion for reconsideration of the said decision.

Statement of Facts:

Private respondent Dayao was employed on February 13, 1956 by the petitioners originally as driver, later assigned as delivery man, then as checker and was last promoted to the position of assistant chief checker in the checking department until his separation on April 10, 1961.

Days before April 10, 1961, Dayao urged petitioners to pay them overtime pay, criticized their employees’ association for failing to protect the welfare of the employees by not securing such additional compensation for overtime, and campaigned among his co-employees to organize another labor union. Hearing of Dayao’s union activities, petitioner called for Dayao on April 10, 1961, told him to resign and persuaded him to accept the amount of P562.50 as termination pay and to sign a clearance stating to the effect that he has no claims whatsoever of any kind and nature against herein petitioners.

On April 25, 1963, exactly two years and fifteen days from his separation on April 10, 1961, Dayao filed a complaint for unfair labor practice against petitioners for dismissing him because of his having campaigned among his co-employees to become members of a new labor union that he was then organizing.

In their answer to the ULP complaint, petitioners interposed as their only defense that Dayao “was separated from the service … for cause because of creating trouble with another employee who was also dismissed and that even if the said complainant was separated for cause, he received compensation pay and hereby relieved respondent from whatever claim or claims that he had against respondents.” They also relied on laches, aside from estoppel, to defeat Dayao’s ULP charge.

SC held that the petitioners were guilty of unfair labor practices. There was no sufficient basis for discharging Dayao from employment. Acceptance of termination pay does not divest a laborer the right to prosecute his employer for unfair labor practice acts, much less for signing the clearance paper. Acceptance of those benefits would not amount to estoppel. SC stated that there was clear interference with the union activity and that his dismissal from employment was discriminatory. And since there was illegal dismissal, Dayao was entitled to backwages.

Issue:

How much backwages shall be allowed private respondent Dayao.

Answer:

Dayao should be paid backwages equivalent to one year, eleven months, and fifteen days without further disqualifications, which is computed from 4 years prescriptive period less the period of delay in instituting the ULP charge (2 years and 15 days).

Reasoning:

While this case was submitted for decision on March 29, 1965, the delay in its resolution is not due to the parties. However, it should be noted that private respondent Dayao filed his ULP charge with reinstatement and back wages about two years and fifteen days after his separation on April 10, 1961. As aforestated, the shortest prescriptive period for the filing of all other actions for which the statute of limitations does not fix a period, is four years. The period of delay in instituting this ULP charge with claim for reinstatement and back wages, although within the prescriptive period, should be deducted from the liability of the employer to him for back wages. In order that the employee however should be relieved from proving his income during the period he was out of the service and the employer from submitting counter-proofs, which may delay the execution of the decision, the employer in the case at bar should be directed to pay private respondent Dayao backwages equivalent to one year, eleven months, and fifteen days without further disqualifications.

Holding:

WHEREFORE, THE PETITION IS HEREBY DISMISSED AND PETITIONERS ARE HEREBY DIRECTED: (1) TO PAY PRIVATE RESPONDENT NARDO DAYAO BACK WAGES EQUIVALENT TO ONE YEAR, ELEVEN MONTHS, AND FIFTEEN DAYS; (2) TO REINSTATE HIM AFTER CERTIFICATION OF HIS PHYSICAL FITNESS BY A GOVERNMENT PHYSICIAN; AND (3) TO PAY THE COSTS.

Justice Teehankee’s Dissent:

Justice Teehankee dissented from the specific result in the judgement, awarding respondent backwages only in an amount equivalent to 1 year, 11 months and 15 days. Such delay in filing the complaint should in no manner prejudice the amount of the back wages award justly due respondent — particularly, when it is considered that he pursued with vigor his complaint after its filing on April 25, 1963 and obtained favorable judgment in the industrial court within a year as per said court’s decision of January 17, 1964 and its en banc resolution of February 25, 1964 denying petitioner’s motion for reconsideration.

Hence, an award of back wages equivalent to three years (where the case is not terminated sooner) should serve as the base figure for such awards without deduction, subject to deduction where there are mitigating circumstances in favor of the employer but subject to increase by way of exemplary damages where there are aggravating circumstances (e.g. oppression or dilatory appeals) on the employer’s part. He submitted that the minimum award to which respondent is entitled should be at the very least the equivalent of the proposed base figure of three years pay. Employers should be put on notice as a deterrent that if they pursue manifestly dilatory and unmeritorious appeals and thus delay satisfaction of the judgment justly due their employee(s), they run the risk of exemplary and punitive damages being assessed against them by way of an increased award of back wages to the wrongfully discharged employee(s) commensurate to the delay caused by the appeal process.

 

RULE AFTER R.A. 6715 (DATE TO RECKON – MARCH 21, 1989)

ALEX FERRER VS. NLRC

JULY 5, 1993

MELO, J.:

Procedural History:

The petition for certiorari seeks to annul and set aside: (a) the decision dated June 20, 1991 of the Second Division of the National Labor Relations Commission (NLRC) which affirmed in toto the decision of April 5, 1990 of Labor Arbiter dismissing the complaint for illegal dismissal and unfair labor practice on the ground that both the company and the union merely complied with the collective bargaining agreement provision sanctioning the termination of any employee who fails to retain membership in good standing with the union; and (b) the NLRC resolution denying the motion for the reconsideration of said decision.

Statement of Facts:

Petitioners were regular and permanent employees of the Occidental Foundry Corporation (OFC) which was under the management of Hui Kam Chang. As piece workers, petitioners’ earnings ranged from P110 to P140 a day. They had been in the employ of OFC for about ten years at the time of their dismissal in 1989.

On January 5, 1989, the Samahang Manggagawa ng Occidental Foundry Corporation-FFW (SAMAHAN) and the OFC entered into a collective bargaining agreement (CBA) which would be effective for the three-year period between October 1, 1988 and September 30, 1991. It included a union security clause saying that failure to retain membership in good standing with the UNION shall be ground for the operation of paragraph 1 hereof and the dismissal by the company of the aforesaid employee upon written request by the union.

Several intraunion squabbles took place as to the election of the officers due to their alleged inattentiveness to the economic demands of the members. This prompted the union to send a letter to Hui Kam Chang, requesting for the dismissal of several people, including petitioners Ferrer et. al. The petitioners professed their innocence to the chages levelled against them by SAMAHAN and FFW, but received no reply. As such, they filed a complained for illegal dismissal and unfair labor practice before the NLRC against Hui Kam Chang, OFC, SAMAHAN, and FFW.

Labor Arbiter dismissed the complaint, saying that OFC was merely complying with the mandatory provisions of the CBA, and that SAMAHAN and FFW cannot be charged with illegal dismissal as there was no employer-employee relationship between them and the petitioners. NLRC affirmed the decision of Labor Arbiter. Hence the appeal.

SC held that the petitioners were illegally dismissed because while the CBA’s union security clause was valid, both parties thereto should see to it that no right is violated or impaired during its implementation. There was an absence of notice and hearing when the petitioners were illegally dismissed. Due process was inexistent.

Issue:

Whether or not the petitioners, who were illegally dismissed, were entitled to backwages.

Answer:

Yes. The petitioners can receive their full back wages computed from the moment their compensation was withheld after their dismissal in 1989 up to the date of actual reinstatement.

Reasoning:

With the passage of Republic Act No. 6715 which took effect on March 21, 1989, Article 279 of the Labor Code was amended to read as follows:

Security of Tenure. — In cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or when authorized by this Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement.

and as implemented by Section 3, Rule 8 of the 1990 New Rules of Procedure of the National Labor Relations Commission, it would seem that the Mercury Drug Rule (Mercury Drug Co., Inc. vs. Court of Industrial Relations, 56 SCRA 694 [1974]) which limited the award of back wages of illegally dismissed workers to three (3) years “without deduction or qualification” to obviate the need for further proceedings in the course of execution, is no longer applicable.

A legally dismissed employee may now be paid his back wages, allowances, and other benefits for the entire period he was out of work subject to the rule enunciated before the Mercury Drug Rule, which is that the employer may, however, deduct any amount which the employee may have earned during the period of his illegal termination. Computation of full back wages and presentation of proof as to income earned elsewhere by the illegally dismissed employee after his termination and before actual reinstatement should be ventilated in the execution proceedings before the Labor Arbiter concordant with Section 3, Rule 8 of the 1990 new Rules of Procedure of the National Labor Relations Commission.

The petitioners can receive their back wages computed from the moment their compensation was withheld after their dismissal in 1989 up to the date of actual reinstatement. In such a scenario, the award of back wages can extend beyond the 3-year period fixed by the Mercury Drug Rule depending, of course, on when the employer will reinstate the employees.

Holding:

WHEREFORE, the decision appealed from is hereby SET ASIDE and private respondents are hereby ordered to reinstate petitioners to their former or equivalent positions without loss of seniority rights and with full back wages, inclusive of allowances and other benefits or their monetary equivalent, pursuant to Article 279 of the Labor Code, as amended by Republic Act No. 6715.

 

PINES CITY VS. NLRC

NOV. 10, 1993

NOCON, J.:

Procedural History:

This a petition for certiorari seeking the reversal of the resolution of public respondent National Labor Relations Commission dated November 29, 1990, in NLRC Case No. 01-04-0056-89, which affirmed in toto the decision of the Labor Arbiter dated February 28,1990.

Statement of Facts:

Private respondents Bentrez et. al., were all employed as teachers on probationary basis by petitioner Pines City Educational Center. All the private respondents, except Roland Picart and Lucia Chan, signed contracts of employment with petitioner for a fixed duration. On March 31, 1989, due to the expiration of private respondents’ contracts and their poor performance as teachers, they were notified of petitioners’ decision not to renew their contracts anymore.

On April 10, 1989, private respondents filed a complaint for illegal dismissal before the Labor Arbiter, alleging that their dismissals were without cause and in violation of due process. Except for private respondent Leila Dominguez who worked with petitioners for one semester, all other private respondents were employed for one to two years. They were never informed in writing by petitioners regarding the standards or criteria of evaluation so as to enable them to meet the requirements for appointment as regular employees.

For their part, petitioners contended that private respondents’ separation from employment, apart from their poor performance, was due to the expiration of the periods stipulated in their respective contracts. In the case of private respondent Dangwa Bentrez, the duration of his employment contract was for one year, or beginning June, 1988 to March 1989 whereas in the case of the other private respondents, the duration of their employment contracts was for one semester, or beginning November, 1988 to March 1989.

On February 28, 1990, the Labor Arbiter rendered judgment in favor of private respondents, ordering their reinstatement and the payment of their full backwages and other benefits and privileges without qualification and deduction from the time they were dismissed up to their actual reinstatement. The computation of backwages covered only the period private respondents were terminated up to January 31, 1990 or 10 months and does not include backwages from January 31, 1990 up to their actual reinstatement. In support of this decision, the Labor Arbiter rationalized that the teacher’s contracts were vague and did not include the specific description of duties and assignments of private respondents.

NLRC affirmed the decision of Labor Arbiter. Hence, the appeal.

SC held that insofar as the private respondents who knowingly and voluntarily agreed upon fixed periods of employment are concerned, their services were lawfully terminated by reason of the expiration of the periods of their respective contracts. With respect to the remaining private respondents Roland Picart and Lucia Chan, both of whom did not sign any contract fixing the periods of their employment nor to have knowingly and voluntarily agreed upon fixed periods of employment, petitioners had the burden of proving that the termination of their services was legal. As probationary employees, they are likewise protected by the security of tenure provision of the Constitution. Consequently, they cannot be removed from their positions unless for cause.

Issue:

Whether or not private respondents Picart and Chan, who were illegally dismissed, were entitled to payment of backwages.

Answer:

Yes. Private respondents Picart and Chan were entitled to payment of backwages. However, in the computation of the backwages, the total amount derived from employment elsewhere by the employee from the date of dismissal up to the date of reinstatement, if any, should be deducted therefrom.

Reasoning:

The order for their reinstatement and payment of full backwages and other benefits and privileges from the time they were dismissed up to their actual reinstatement was proper, conformably with Article 279 of the Labor Code, as amended by Section 34 of Republic Act No. 6715, 14 which took effect on March 21, 1989. It should be noted that private respondents Roland Picart and Lucia Chan were dismissed illegally on March 31, 1989, or after the effectivity of said amendatory law.

However, in ascertaining the total amount of backwages payable to them, SC went back to the rule prior to the Mercury Drug Rule that the total amount derived from employment elsewhere by the employee from the date of dismissal up to the date of reinstatement, if any, should be deducted therefrom. SC restated the underlying reason that employees should not be permitted to enrich themselves at the expense of their employer. In addition, the law abhors double compensation. To this extent, SC’s ruling in Alex Ferrer, et al., v. NLRC, et al., G.R. No. 100898, promulgated on July 5, 1993, was hereby modified.

Holding:

WHEREFORE, the resolution of public respondent National Labor Relations Commission dated November 29, 1990 is hereby MODIFIED. Private respondents Roland Picart and Lucia Chan are ordered reinstated without loss of seniority rights and other privileges and their backwages paid in full inclusive of allowances, and to their other benefits or their monetary equivalent pursuant to Article 279 of the Labor Code, as amended by Section 34 of Republic Act No. 6715, subject to deduction of income earned elsewhere during the period of dismissal, if any, to be computed from the time they were dismissed up to the time of their actual reinstatement. The rest of the Labor Arbiter’s decision dated February 28, 1990, as affirmed by the NLRC is set aside.

 

PINES CITY RULING ABANDONED

BUSTAMANTE VS. NLRC

Nov. 28, 1996

PADILLA, J.

Procedural History:

This is a Motion for Reconsideration filed for a previous decision issued by SC.

Statement of Facts:

On 15 March 1996, SC First Division promulgated a decision, stating that backwages shall be paid to petitioners from the time of their illegal dismissal on 25 June 1990 up to the date of their reinstatement. If reinstatement is no longer feasible, a one-month salary shall be paid the petitioners as ordered in the Labor Arbiter’s decision, in addition to the adjudged backwages.

Private respondent moved to reconsider the decision on grounds that assuming that petitioners were entitled to backwages, computation thereof should not start from cessation of work up to actual reinstatement, and that salary earned elsewhere (during the period of illegal dismissal) should be deducted from the award of such backwages.

From here, SC stated that over the years, it applied different methods in the computation of backwages:

  1. The first labor relations law governing the award of backwages was Republic Act No. 875, the Industrial Peace Act, approved on 17 June 1953. Sections 5 and 15 thereof provided that backpay (the same as backwages) could be awarded where, in the opinion of the Court of Industrial Relations (CIR) such was necessary to effectuate the policies of the Industrial Peace Act. As the CIR was given wide discretion to grant or disallow payment of backpay (backwages) to an employee, it also had the implied power of mitigating (reducing) the backpay where backpay was allowed. Thus, in the exercise of its jurisdiction, the CIR increased or diminished the award of backpay, depending on several circumstances, among them, the employee’s employment in other establishments during the period of illegal dismissal. The same was enunciated in the case of Itogon-Suyoc Mines, Inc. v. Sagilo-Itogon Workers’ Union.
  2. SC found occasion in the case of Mercury Drug Co., Inc., et al. v. CIR, et al. to rule that a fixed amount of backwages without further qualifications should be awarded to an illegally dismissed employee (hereinafter the Mercury Drug rule). However, Justice Teehankee dissented from the majority and opined that an award of back wages equivalent to three years (where the case is not terminated sooner) should serve as the base figure for such awards without deduction, subject to deduction where there are mitigating circumstances in favor of the employer but subject to increase by way of exemplary damages where there are aggravating circumstances (e.g. oppression or dilatory appeals) on the employer’s part.”
  3. The proposal on the three-year backwages was subsequently adopted in later cases.
  4. Then came Presidential Decree No. 442 (the Labor Code of the Philippines) which was signed into law on 1 May 1974 and which took effect on 1 November 1974. The law specifically declared that the award of backwages was to be computed from the time compensation was withheld from the employee up to the time of his reinstatement. This nothwithstanding, the rule generally applied by the Court after the promulgation of the Mercury Drug case, and during the effectivity of P.D. No. 442 was still the Mercury Drug rule. A survey of cases from 1974 until 1989, when the amendatory law to P.D. No. 442, namely, R.A. No. 6715 took effect, supports this conclusion.
  5. In the case of New Manila Candy Workers Union (Naconwa-Paflu) v. CIR (1978), or after the Labor Code (P.D. No. 442) had taken effect, the Court still followed the Mercury Drug rule to avoid the necessity of a hearing on earnings obtained elsewhere by the employee during the period of illegal dismissal. In an even later case (1987) the Court declared that the general principle is that an employee is entitled to receive as backwages all the amounts he may have received from the date of his dismissal up to the time of his reinstatement. However, in compliance with the jurisprudential policy of fixing the amount of backwages to a just and reasonable level, the award of backwages equivalent to three (3) years, without qualification or deduction, was nonetheless followed.
  6. In a more direct approach to the rule on the award of backwages, this Court declared in the 1990 case of Medado v. Court of Appeals that “any decision or order granting backwages in excess of three (3) years is null and void as to the excess”. In sum, during the effectivity of P.D. 442, the Court enforced the Mercury Drug rule and, in effect, qualified the provision under P.D. No. 442 by limiting the award of backwages to three (3) years.
  7. On 21 march 1989, Republic Act No. 6715 took effect, amending the Labor Code. In here, an illegally dismissed employee is entitled to his full backwages from the time his compensation was withheld from him (which, as a rule, is from the time of his illegal dismissal) up to the time of his actual reinstatement. It was true that SC had ruled in the case of Pines City Educational Center vs. NLRC (G.R. No. 96779, 10 November 1993, 227 SCRA 655) that “in ascertaining the total amount of backwages payable to them (employees), SC went back to the rule prior to the Mercury Drug rule that the total amount derived from employment elsewhere by the employee from the date of dismissal up to the date of reinstatement, if any, should be deducted therefrom.” The rationale for such ruling was that, the earning derived elsewhere by the dismissed employee while litigating the legality of his dismissal, should be deducted from the full amount of backwages which the law grants him upon reinstatement, so as not to unduly or unjustly enrich the employee at the expense of the employer.

Issue:

Whether or not the ruling in Pines City v NLRC must still be observed.

Answer:

No. SC categorically concluded the final computation of the backwages after reconsidering the ruling mentioned in Pines City v. NLRC case. Those who were illegally dismissed are entitled to the payment of full backwages.

Reasoning:

With the evident legislative intent as expressed in Rep. Act No. 6715, above-quoted, backwages to be awarded to an illegally dismissed employee, should not, as a general rule, be diminished or reduced by the earnings derived by him elsewhere during the period of his illegal dismissal. The underlying reason for this ruling is that the employee, while litigating the legality (illegality) of his dismissal, must still earn a living to support himself and family, while full backwages have to be paid by the employer as part of the price or penalty he has to pay for illegally dismissing his employee.

The clear legislative intent of the amendment in Rep. Act No. 6715 is to give more benefits to workers than was previously given them under the Mercury Drug rule or the “deduction of earnings elsewhere” rule. Thus, a closer adherence to the legislative policy behind Rep. Act No. 6715 points to “full backwages” as meaning exactly that, i.e., without deducting from backwages the earnings derived elsewhere by the concerned employee during the period of his illegal dismissal.

Therefore, in accordance with R.A No. 6715, petitioners were entitled to their full backwages, inclusive of allowances and other benefits or their monetary equivalent, from the time their actual compensation was withheld from them up to the time of their actual reinstatement. As to reinstatement of petitioners, SC has already ruled that since reinstatement is no longer feasible, because the company would be unjustly prejudiced by the continued employment of petitioners who at present are overage, a separation pay equal to one-month salary granted to them in the Labor Arbiter’s decision was in order and, therefore, affirmed in the Court’s decision of 15 March 1996. Furthermore, since reinstatement in this case is no longer feasible, the amount of backwages shall be computed from the time of their illegal termination on 25 June 1990 up to the time of finality of this decision.

Holding:

ACCORDINGLY, private respondent’s Motion for Reconsideration, dated 10 April 1996, is DENIED.

 

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Case Brief: Baez v Valdevilla & Oro Marketing

Q: Whether or not the Labor Arbiter can award damages arising from tortious acts.

A: I qualify.  Generally, the Labor Arbiter cannot award damages arising from tortious acts. It is the RTC which has jurisdiction thereto. This is also true when the employer-employee relationship is merely incidental, and the cause of action comes from a different source of obligation.
However, if the damages arise directly from employer-employee relationship, Labor Arbiter can award damages arising therefrom.

GR No. 128024  May 9, 2000

Baez

v.

Valdevilla and Oro Marketing, Inc

Facts:
Baez was the sales operations manager of Oro Marketing Inc. In 1993, Oro Marketing indefinitely suspended Baez, prompting Baez to file for illegal dismissal. Labor Arbiter ruled in favor of Baez. Since Oro Marketing failed to timely file the appeal, both NLRC and SC dismissed the same.

Oro Marketing filed a complaint for damages before the RTC for loss of profit, cost of supplies, litigation expenses, and attorney’s fees. It alleged that due to Baez’ modus operandi, its sales decreased and reduced its profits.

Baez filed a motion to dismiss, interposing that the action for damages, having arisen from employer-employee relationship, was squarely under the exclusive original jurisdiction of NLRC under Art. 217(a) par. 4 of Labor Code, and is barred by reason of the final judgment in labor case. As such, he accused Oro Marketing of splitting causes of action, and that the latter should have included the claim in its counterclaim before the Labor Arbiter.

The respondent RTC Judge Valdevilla ruled that it had jurisdiction over the subject matter, since the complaint did not ask for any relief under the Labor Code, but rather to recover damages as redress for Baez’s nefarious activities, causing damage and prejudice to Oro Marketing. Since this there was a breach of contractual obligation, which is within the realm of civil law, the jurisdiction belongs to the regular courts.

Issue:
Whether or not RTC has jurisdiction over the claim for damages filed by Oro Marketing against Baez.
Held:
No. RTC had no jurisdiction over Oro Marketing’s complaint for damages.

RTC was incorrect in saying that the resolution of the issues presented by the complaint did not entail application of the Labor Code or other labor laws; the dispute was intrinsically civil. Article 217(a) of the Labor Code, as amended, clearly bestows upon the Labor Arbiter original and exclusive jurisdiction over claims for damages arising from employer-employee relations —in other words, the Labor Arbiter has jurisdiction to award not only the reliefs provided by labor laws, but also damages governed by the Civil Code.

It is clear that under Art. 217(a) par. 4 of Labor Code, the Labor Arbiter and NLRC have original and exclusive jurisdiction claims for actual, moral, exemplary and other forms of damages arising from the employer-employee relations. This provision is the result of the amendment by Section 9 of Republic Act (“R.A.”) No. 6715, which took effect on March 21, 1989, and which put to rest the earlier confusion as to who between Labor Arbiters and regular courts had jurisdiction over claims for damages as between employers and employees.

It will be recalled that years prior to R.A. 6715, jurisdiction over all money claims of workers, including claims for damages, was originally lodged with the Labor Arbiters and the NLRC by Article 217 of the Labor Code. On May 1, 1979, however, Presidential Decree (“P.D.”) No. 1367 amended said Article 217 to the effect that “Regional Directors shall not indorse and Labor Arbiters shall not entertain claims for moral or other forms of damages.” This limitation in jurisdiction, however, lasted only briefly since on May 1, 1980, P.D. No. 1691 nullified P.D. No. 1367 and restored Article 217 of the Labor Code almost to its original form. Presently, and as amended by R.A. 6715, the jurisdiction of Labor Arbiters and the NLRC in Article 217 is comprehensive enough to include claims for all forms of damages “arising from the employer-employee relations”.

By the designating clause “arising from the employer-employee relations”, Art. 217 should also apply with equal force to the claim of an employer for actual damages against its dismissed employee, where the basis for the claim arises from or is necessarily connected with the fact of termination, and should be entered as a counterclaim in the illegal dismissal case.

In this case, Oro Marketing’s claim against Baez for actual damages arose from a prior employer-employee relationship. In the first place, Oro Marketing’s would not have taken issue with Baez’s “doing business of his own” had the latter not been concurrently its employee. Thus, the damages alleged in the complaint were: first, those amounting to lost profits and earnings due to Baez’s abandonment or neglect of his duties as sales manager, having been otherwise preoccupied by his unauthorized installment sale scheme; and second, those equivalent to the value of Oro Marketing’s property and supplies which Baez used in conducting his “business”.

Second, contrary to Oro Marketing’s allegations, no business losses may be attributed to Baez as in fact, it was by reason of Baez’s sales operations that the sales reached its highest record level, and that the installment scheme was in fact with the knowledge of the management of Oro Marketing. In other words, the issue of actual damages has been settled in the labor case, which is now final and executory.

This is, of course, to distinguish from cases of actions for damages where the employer-employee relationship is merely incidental and the cause of action proceeds from a different source of obligation. Thus, the jurisdiction of regular courts was upheld where the damages, claimed for were based on tort, malicious prosecution, or breach of contract, as when the claimant seeks to recover a debt from a former employee or seeks liquidated damages in enforcement of a prior employment contract.

Case Brief: St. Luke’s Medical Center Employee’s Foundation AFW v NLRC

G.R. No. 162053 March 7, 2007

ST. LUKE’S MEDICAL CENTER EMPLOYEE’S FOUNDATION AFW

v.

NLRC

Facts:

Congress passed and enacted Republic Act No. 7431 known as the “Radiologic Technology Act of 1992.” Said law requires that no person shall practice or offer to practice as a radiology and/or x-ray technologist in the Philippines without having obtained the proper certificate of registration from the Board of Radiologic Technology. Petitioner Maribel Santos was hired as X-Ray Technician in the Radiology department of private respondent St. Luke’s Medical Center, Inc. (SLMC).

Pursuant to RA 7431 the assistant Executive Director-Ancillary Services and HR Director of private respondent SLMC issued a final notice to all practitioners of Radiologic Technology to comply with the requirement otherwise, the unlicensed employee will be transferred to an area which does not require a license to practice if a slot is available.

The Director of the Institute of Radiology issued another memorandum to petitioner Maribel S. Santos advising her that only a license can assure her of her continued employment at the Institute of Radiology of the private respondent SLMC and that the latter is giving her the last chance to take and pass the forthcoming board examination scheduled in June 1998; otherwise, private respondent SLMC shall be constrained to take action which may include her separation from employment.  On November 23, 1998, the Director of the Institute of Radiology issued a notice to petitioner Maribel S. Santos informing the latter that the management of private respondent SLMC has approved her retirement in lieu of separation pay. SLMC issued a “Notice of Separation from the Company” to petitioner Maribel S. Santos effective December 30, 1998 in view of the latter’s refusal to accept private respondent SLMC’s offer for early retirement.

Petitioner Maribel Santos files a complaint against private respondent illegal dismissal and non-payment of salaries, allowances and other monetary benefits. She
further contends that her failure to pass the board licensure exam for exam for X-ray
technicians did not constitute just cause for termination as it violated her
constitutional right to security of tenure. The appellate court finds this contention
untenable, hence this petition for certiorari.

Issue:

Whether or not the petitioner is legally dismissed pursuant to R.A. 7431
exercising police power of the State?

Held:

Yes, the petitioner dismissal is valid due to her inability to secure a certificate
of registration from Board of Radiologic Technology.

While the right of workers to security of tenure is guaranteed by the Constitution, its exercise may be reasonably regulated pursuant to the police power of the State to safeguard health, morals, peace, education, order, safety, and the general welfare of the people. Consequently, persons who desire to engage in the learned professions requiring scientific or technical knowledge may be required to take an examination as a prerequisite to engaging in their chosen careers. The state is justified in prescribing the specific requirements for x-ray technicians and/or any other professions connected with the health and safety of its citizens. Respondent being engaged in the hospital and health care business, is a proper subject of the cited law; thus, having in mind the legal requirements of these laws, the latter cannot close its eyes and complainant private interest override public interest. The law is clear that the Certificate of Registration cannot be substituted by any other requirement to allow a person to practice as a Radiologic Technologist and/or X-ray Technologist (Technician

Case Brief: Abad v NLRC

G.R. No. 108996 February 20, 1998

Domingo Abad, et. al., petitioners
vs.
Hon. National Labor Relations Commission, Third Division, and Atlantic Gulf and Pacific Co., respondents.

Facts:

Private respondent Atlantic Gulf and Pacific Co. is a construction company engaged, among other things, in building offshore marine structures for third parties. Petitioners were hired by private respondent. Private respondent treated petitioners as project workers, claiming that the hiring of workers was based on the availability of project contracts and was thus done on and off. Workers were hired for definite periods of time, with tenure depending on the need for each worker’s particular skills.
Petitioners had been in the service of private respondent for a period of three to ten years until their termination on different dates during the period 1973-1976. They instituted two separate complaints before the NLRC praying for reinstatement. They alleged that they were non-project employees who should have become regular employees after completing one year of service and that, as regular employees, they would have been entitled to benefits extended to regular employees under the company’s CBA as well as to other benefits enjoyed by regular employees.

In 1977, both complaints were archived upon motion of petitioners to hold hearings on the cases in abeyance. They filed the motion because at that time an “identical and analogous” case (Jose Abuan, et al. v. AG&P, docketed as NLRC Case No. RBIV-1746-75) was pending appeal in the Office of the Secretary of Labor. The Abuan case was elevated to the Supreme Court and was finally decided on July 11, 1980 when this Court denied for lack of merit the motion filed by petitioners in that case for reconsideration of the Court’s earlier resolution denying their petition for certiorari.

Petitioners moved for the revival of the cases, and the Labor Arbiter ruled in favor of the petitioners. He held that petitioners were non-project employees. In addition, the Labor Arbiter found that petitioners continued working for private respondent even when there were no major projects to work on. Accordingly, the Labor Arbiter ordered private respondent to reinstate petitioners.

Private respondent appealed to the NLRC which reversed the decision of the Labor Arbiter in a ruling dated November 17, 1992. The NLRC cited the case of Abuan, et al. v. AG&P which it said presented substantially the same facts as these cases. It pointed out that petitioners, like the complainants in the Abuan case, also worked in private respondent’s Poro Point Project with contracts of employment with durations ranging from 15 to 30 days. The contracts specified the projects to which the complainants were assigned. The complainants in Abuan were separated from employment due to the expiration of their employment contracts. The workers in that case were held to be project employees, and so should it be for the workers in these cases.

Petitioners assert that the NLRC should have ruled on the issue of whether or not the workers were regular employees based on the available evidence instead of merely invoking stare decisis.

Issue:

Whether NLRC is correct in invoking stare decisis and reversing the decision of the Labor Arbiter.

Held:

Yes.

Stare decisis declares that, for the sake of certainty, a conclusion reached in one case should be applied to those which follow, if the facts are substantially the same, even though the parties may be different.

Indeed, the facts and the questions involved in Abuan and the present case are the same. Petitioners themselves did admit as much when they filed their motion to hold hearings in abeyance pending the final determination of the issues in Abuan, to avoid any conflict in the decisions in the two cases.

The workers in Abuan and the petitioners were all hired to work in private respondent’s Poro Point Project, and were attached to private respondent’s Offshore and Marine Services Division. Therein, ¾ the workers in the Abuan case had essentially the same nature of employment as petitioners.

Like the workers in Abuan, petitioners in this case also had contracts with periods ranging from 15 days to 30 days. The contracts of both sets of workers were renewed several times such that the workers spent more than a year working for private respondent. The workers in Abuan as well as the petitioners were separated from the service upon the completion of the projects to which they were assigned. After such separation, they filed separate complaints seeking the same relief: recognition of their regular status, their reinstatement and payment of salaries and benefits due regular workers. Thus the workers in Abuan and petitioners in the present case were similarly situated.

Petitioners herein, like the workers in Abuan, are project employees, assigned to work in a particular construction project. They are workers whose employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of their engagement.

WHEREFORE, the petition is DENIED and the decision of the NLRC is AFFIRMED.

Case Brief: Plastic Town Center Corporation v NLRC, et al.

G.R. No. 81176  April 19, 1989

PLASTIC TOWN CENTER CORPORATION, petitioner,

vs.

NATIONAL LABOR RELATIONS COMMISSION AND NAGKAKAISANG LAKAS NG MANGGAGAWA (NLM)-KATIPUNAN, respondents.

Facts:

On September 1984, respondent Nagkakaisang Lakas ng Manggagawa (NLM)-Katipunan filed a complaint against petitioner Plastic Town Center Corporation with:

– violation of CBA by crediting the P1 per day increase in gratuity pay to resigning employees instead of 30 days equivalent to one month
– unfair labor practice by giving only 26 days pay instead of 30 days equivalent to one month as gratuity pay to resigning employees.

In the CBA, it was provided that:

Company agreed to grant regular workers who rendered at least one year of continuous service of P1 per worked day.
Company to grant gratuity pay to a resigning employee or laborer amounting to, among others, one month salary for those who rendered two to five years of service.

Plastic Town Center Corporation maintained that under the principle of “fair day’s wage for fair day’s labor”, gratuity pay should be computed on the basis of 26 days for one month salary considering that the employees are daily paid.

Labor Arbiter:  Ruled in favor of NLM Union. As daily wage earner, there would be no instance that the worker would work for 30 days a month since work does not include Sunday or rest days.

NLRC:  Reversed the decision of Labor Arbiter and held that PTC should grant gratuity pay equivalent of thirty days salary.

Issue:

Whether the PTC’s contention that the gratuity pay should be computed on the basis of 26 days for one month salary instead of 30 days is valid.

Held:

No, PTC’s contention does not hold merit in this case.

Gratuity pay is not intended to pay a worker for actual services rendered. It is a money benefit given to the workers whose purpose is “to reward employees or laborers who have rendered satisfactory and efficient service to the company.”

While it may be enforced once it forms part of a contractual undertaking, the grant of such benefit is not mandatory so as to be considered a part of labor standard law unlike salary, which are covered in Labor Code. Nowhere has it ever been stated that gratuity pay should be based on actual number of days worked over the period of years forming its basis. Court saw no point in counting the number of days worked over a ten-year period to determine the meaning of “two and one- half months’ gratuity.”

Moreover any doubts or ambiguity in the contract between management and the union members should be resolved in favor of the laborer. When months are not designated by name, a month is understood to be 30 days.

As such, NLRC did not act with grave abuse of discretion when it decided that the gratuity pay should be equivalent to 30 days.

WHEREFORE, the petition is hereby DISMISSED for lack of merit.

Case Brief: Trans-Asia Phils. Employees Association (TAPEA) v. NLRC, et al.

G.R. No. 118289 December 13, 1999

TRANS-ASIA PHILS. EMPLOYEES ASSOCIATION (TAPEA) and ARNEL GALVEZ, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, TRANS-ASIA (PHILS.) and ERNESTO S. DE CASTRO, respondents.

Facts:

On 7 July 1988, Trans-Asia Philippines Employees Association (TAPEA) entered into a Collective Bargaining Agreement (“CBA”) with their employer. The CBA provided for, among others, the payment of holiday pay with a stipulation that if an employee is permitted to work on a legal holiday, the said employee will receive a salary equivalent to 200% of the regular daily wage plus a 60% premium pay.

Despite the conclusion of the CBA, however, an issue was still left unresolved with regard to the claim of TAPEA for payment of holiday pay. Since the parties were not able to arrive at an amicable settlement despite the conciliation meetings, TAPEA, led by its President, petitioner Arnie Galvez, filed a complaint for the payment of their holiday pay in arrears. On 18 September 1988, petitioners amended their complaint to include the payment of holiday pay for the duration of the recently concluded CBA (from 1988 to 1991), unfair labor practice, damages and attorney’s fees.

In their Position Paper, TAPEA contended that their claim for holiday pay in arrears is based on the non-inclusion of the same in their monthly pay.

In response, Trans-Asia contended that it has always honored the labor law provisions on holiday pay by incorporating the same in the payment of the monthly salaries of its employees. In support of this claim, Trans-Asia pointed out that it has long been the standing practice of the company to use the divisor of “286” days in computing for its employees’ overtime pay and daily rate deductions for absences.

52 x 44 / 8 = 286 days

Where: 52 = number of weeks in a year

44 = number of work hours per week

8 = number of work hours per day

Trans-Asia further clarified that the “286” days divisor already takes into account the ten (10) regular holidays in a year since it only subtracts from the 365 calendar days the unworked and unpaid 52 Sundays and 26 Saturdays (employees are required to work half-day during Saturdays). Trans-Asia claimed that if the ten (10) regular holidays were not included in the computation of their employees’ monthly salary, the divisor which they would have used would only be 277 days which is arrived at by subtracting 52 Sundays, 26 Saturdays and the 10 legal holidays from 365 calendar days.

Labor Arbiter and NLRC: Dismissed the complaint for lack of merit.

Issue: Whether the Trans-Asia’s use of 286 days as divisor is invalid.

Held:

No, it is not in such a way that the Supreme Court adjusted the divisor.

Trans-Asia’s inclusion of holiday pay in petitioners’ monthly salary is clearly established by its consistent use of the divisor of “286” days in the computation of its employees’ benefits and deductions. The use by Trans-Asia of the “286” days divisor was never disputed by petitioners. A simple application of mathematics would reveal that the ten (10) legal holidays in a year are already accounted for with the use of the said divisor. As explained by Trans-Asia, if one is to deduct the unworked 52 Sundays and 26 Saturdays (derived by dividing 52 Saturdays in half since petitioners are required to work half-day on Saturdays) from the 365 calendar days in a year, the resulting divisor would be 286 days (should actually be 287 days). Since the ten (10) legal holidays were never included in subtracting the unworked and unpaid days in a calendar year, the only logical conclusion would be that the payment for holiday pay is already incorporated into the said divisor.

However, SC held that that there is a need to adjust the divisor used by Trans-Asia to 287 days, instead of only 286 days, in order to properly account for the entirety of regular holidays and special days in a year as prescribed by Executive Order No. 203 in relation to Section 6 of the Rules Implementing Republic Act 6727.

Sec. 1 of Executive Order No. 203 provides:

Sec. 1. Unless otherwise modified by law, order or proclamation, the following regular holidays and special days shall be observed in the country:

A. Regular Holidays

New Year’s Day — January 1

Maundy Thursday — Movable Date

Good Friday — Movable Date

Araw ng Kagitingan — April 9

(Bataan and Corregidor Day)

Labor Day — May 1

Independence Day — June 12

National Heroes Day — Last Sunday of August

Bonifacio Day — November 30

Christmas Day — December 25

Rizal Day — December 30

B. Nationwide Special Days

All Saints Day — November 1

Last Day of the Year — December 31

On the other hand, Section 6 of the Implementing Rules and Regulations of Republic Act No. 6727 provides:

Sec. 6. Suggested Formula in Determining the Equivalent Monthly Statutory Minimum Wage Rates. — Without prejudice from existing company practices, agreements or policies, the following formulas may be used as guides in determining the equivalent monthly statutory minimum wage rates:

xxx xxx xxx

d) For those who do not work and are not considered paid on Saturdays and Sundays or rest days:

Equivalent Monthly = Average Daily Wage Rate x 262 days / 12 months

Where 262 days =

250 days — Ordinary working days

10 days — Regular holidays

2 days — Special days (If considered paid; if actually worked, this is equivalent to 2.6

Based on the above, the proper divisor that should be used for a situation wherein the employees do not work and are not considered paid on Saturdays and Sundays or rest days is 262 days. In the present case, since the employees of Trans-Asia are required to work half-day on Saturdays, 26 days should be added to the divisor of 262 days, thus, resulting to 288 days. However, due to the fact that the rest days of petitioners fall on a Sunday, the number of unworked but paid legal holidays should be reduced to nine (9), instead of ten (10), since one legal holiday under E.O. No. 203 always falls on the last Sunday of August, National Heroes Day. Thus, the divisor that should be used in the present case should be 287 days.

However, the Court notes that if the divisor is increased to 287 days, the resulting daily rate for purposes of overtime pay, holiday pay and conversions of accumulated leaves would be diminished. To illustrate, if an employee receives P8,000.00 as his monthly salary, his daily rate would be P334.49, computed as follows:

P8,000.00 x 12 months / 287 days = P334.49/day

Whereas if the divisor used is only 286 days, the employee’s daily rate would be P335.66, computed as follows:

P8,000.00 x 12 months / 286 days = P335.66/day

Clearly, this muddled situation would be violative of the proscription on the non-diminution of benefits under Section 100 of the Labor Code. On the other hand, the use of the divisor of 287 days would be to the advantage of petitioners if it is used for purposes of computing for deductions due to the employee’s absences. In view of this situation, the Court rules that the adjusted divisor of 287 days should only be used by Trans-Asia for computations which would be advantageous to petitioners (i.e., deductions for absences), and not for computations which would diminish the existing benefits of the employees (i.e., overtime pay, holiday pay and leave conversions.)

SC Decision:

WHEREFORE, the Resolutions of the NLRC, dated 23 November 1993 and 13 September 1994, are hereby AFFIRMED with the MODIFICATION that Trans-Asia is hereby ordered to adjust its divisor to 287 days and pay the resulting holiday pay in arrears brought about by this adjustment starting from 30 June 1987, the date of effectivity of E.O. No. 203.

Case Brief: Union of Filipro Employees v. Benigno Vivar, Jr, et al.

G.R. No. 79255 January 20, 1992

UNION OF FILIPRO EMPLOYEES (UFE), petitioner,
vs.
BENIGNO VIVAR, JR., NATIONAL LABOR RELATIONS COMMISSION and NESTLÉ PHILIPPINES, INC. (formerly FILIPRO, INC.), respondents.

We used to have ten (10) regular holidays. This is the reason for the 251 divisor, used by some companies in computing the daily wage, which represents the 365 days of the year, less 52 Saturdays, 52 Sundays and the 10 legal holidays. The new law added one more regular holiday – the Eid’l Fitr. We thus have eleven (11) regular holidays under R.A. 9492:

  • New Year’s Day (January 1)
  • Maundy Thursday (Movable date)
  • Good Friday (Movable date)
  • Eid’l Fitr (Movable date)
  • Araw ng Kagitingan – Bataaan and Corregidor Day (Monday nearest April 9)
  • Labor Day (Monday nearest May 1)
  • Independence Day (Monday nearest June 12)
  • National Heroes Day (Last Monday of August)
  • Bonifacio Day (Monday nearest November 30)
  • Christmas Day (December 25)
  • Rizal Day (Monday nearest December 30)

The Labor Code provides that every worker shall be paid his daily wage during regular holidays. Employers are now required to pay for an extra regular holiday.

Facts:

On November 8, 1985, respondent Filipro, Inc. (now Nestle Philippines, Inc.) filed with the National Labor Relations Commission (NLRC) a petition for claims of its monthly paid employees for holiday pay.

Abitrator Vivar: Filipro to pay its monthly paid employees holiday pay pursuant to Art 94 of Labor Code, subject to exclusions and limitations in Art 82.

Filipro filed a motion for clarification seeking (1) the limitation of the award to three years, (2) the exclusion of salesmen, sales representatives, truck drivers, merchandisers and medical representatives (hereinafter referred to as sales personnel) from the award of the holiday pay, and (3) deduction from the holiday pay award of overpayment for overtime, night differential, vacation and sick leave benefits due to the use of 251 divisor.

Petitioner UFE answered that the award should be made effective from the date of effectivity of the Labor Code, that their sales personnel are not field personnel and are therefore entitled to holiday pay, and that the use of 251 as divisor is an established employee benefit which cannot be diminished.

Arbitrator Vivar: On January 14, 1986, the respondent arbitrator issued an order declaring that the effectivity of the holiday pay award shall retroact to November 1, 1974, the date of effectivity of the Labor Code. He adjudged, however, that the company’s sales personnel are field personnel and, as such, are not entitled to holiday pay. He likewise ruled that with the grant of 10 days’ holiday pay, the divisor should be changed from 251 to 261 and ordered the reimbursement of overpayment for overtime, night differential, vacation and sick leave pay due to the use of 251 days as divisor.

Issues:

1) Whether or not Nestle’s sales personnel are entitled to holiday pay; and

2) Whether or not, concomitant with the award of holiday pay, the divisor should be changed from 251 to 261 days and whether or not the previous use of 251 as divisor resulted in overpayment for overtime, night differential, vacation and sick leave pay.

Held:

1.  Sales personnel are not entitled to holiday pay.

Under Article 82, field personnel are not entitled to holiday pay. Said article defines field personnel as “non-agritultural 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.”

The law requires that the actual hours of work in the field be reasonably ascertained. The company has no way of determining whether or not these sales personnel, even if they report to the office before 8:00 a.m. prior to field work and come back at 4:30 p.m, really spend the hours in between in actual field work.

Moreover, the requirement that “actual hours of work in the field cannot be determined with reasonable certainty” must be read in conjunction with Rule IV, Book III of the Implementing Rules which provides:

Rule IV Holidays with Pay

Sec. 1. Coverage — This rule shall apply to all employees except:

xxx xxx xxx

(e) Field personnel and other employees whose time and performance is unsupervised by the employer . . . (Emphasis supplied)

Hence, in deciding whether or not an employee’s actual working hours in the field can be determined with reasonable certainty, query must be made as to whether or not such employee’s time and performance is constantly supervised by the employer.

2. The divisor in computing the award of holiday pay should still be 251 days.

While in that case the issue was whether or not salesmen were entitled to overtime pay, the same rationale for their exclusion as field personnel from holiday pay benefits also applies.

The petitioner union also assails the respondent arbitrator’s ruling that, concomitant with the award of holiday pay, the divisor should be changed from 251 to 261 days to include the additional 10 holidays and the employees should reimburse the amounts overpaid by Filipro due to the use of 251 days’ divisor.

The 251 working days divisor is the result of subtracting all Saturdays, Sundays and the ten (10) legal holidays from the total number of calendar days in a year. If the employees are already paid for all non-working days, the divisor should be 365 and not 251.

In the petitioner’s case, its computation of daily ratio since September 1, 1980, is as follows:

monthly rate x 12 months / 251 days

The use of 251 days’ divisor by respondent Filipro indicates that holiday pay is not yet included in the employee’s salary, otherwise the divisor should have been 261.

It must be stressed that the daily rate, assuming there are no intervening salary increases, is a constant figure for the purpose of computing overtime and night differential pay and commutation of sick and vacation leave credits. Necessarily, the daily rate should also be the same basis for computing the 10 unpaid holidays.

The respondent arbitrator’s order to change the divisor from 251 to 261 days would result in a lower daily rate which is violative of the prohibition on non-diminution of benefits found in Article 100 of the Labor Code. To maintain the same daily rate if the divisor is adjusted to 261 days, then the dividend, which represents the employee’s annual salary, should correspondingly be increased to incorporate the holiday pay.

To illustrate, if prior to the grant of holiday pay, the employee’s annual salary is P25,100, then dividing such figure by 251 days, his daily rate is P100.00 After the payment of 10 days’ holiday pay, his annual salary already includes holiday pay and totals P26,100 (P25,100 + 1,000). Dividing this by 261 days, the daily rate is still P100.00. There is thus no merit in respondent Nestle’s claim of overpayment of overtime and night differential pay and sick and vacation leave benefits, the computation of which are all based on the daily rate, since the daily rate is still the same before and after the grant of holiday pay.

SC Decision:

The Court thereby resolves that the grant of holiday pay be effective, not from the date of promulgation of the Chartered Bank case nor from the date of effectivity of the Labor Code, but from October 23, 1984, the date of promulgation of the IBAA case (Insular Bank of Asia and America Employees’ Union (IBAAEU) v. Inciong, where the court declared that Sec 2, Rule IV, Book III of IRR which excluded monthly paid employees from holiday pay benefits, are null and void).

WHEREFORE, the order of the voluntary arbitrator in hereby MODIFIED. The divisor to be used in computing holiday pay shall be 251 days. The holiday pay as above directed shall be computed from October 23, 1984. In all other respects, the order of the respondent arbitrator is hereby AFFIRMED.