labor cases 4(13th month pay)

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Republic of the Philippines

SUPREME COURT

Manila

EN BANC

G.R. No. L-60018 October 23, 1982

DOLE PHILIPPINES, INC., petitioner,vs.

THE HON. VICENTE LEOGARDO, JR. (in his capacity as Deputy Minister of Labor), and ASSOCIATED LABOR UNION

(ALU), respondents.

G.R. No. L-60019 October 23, 1982

DOLE PHILIPPINES, INC., petitioner,

vs.

THE HON. VICENTE LEOGARDO, JR. (in his capacity as Deputy Minister of Labor), OSCAR RABINO, OSCAR SERENUELA,

RAUL MONTEJO, and ALL REGULAR RANK AND FILE WORKERS OF THE STANDARD (PHILIPPINES) FRUIT CORPORATION

(now merged with DOLE PHILIPPINES, INC.), respondents.

Jamario T. Seno & Venerando V. Briones for respondent ALU.

Jose C. Espinas for respondent O. Rabino.

Conrado P. Apuzen for respondent O. Rabino, et al.

ESCOLIN, J.:

Petition for certiorari to annul and set aside the order of respondent Deputy Minister of Labor, dated October 26,

1981, which affirmed the order of the Regional Director of the Ministry of Labor, Davao City, requiring petitioner Dole

Philippines, Inc. to pay its employees the year-end productivity bonus agreed upon in their Collective Bargaining

Agreement in addition to the 13th month pay prescribed under Presidential Decree No. 851.

The salient facts are as follows:

On June 6, 1975, Standard Philippines Fruit Corporation or STANFILCO, a company merged in 1981 with petitioner

Dole Philippines, Inc., entered into a collective bargaining agreement with the Associated Labor Union, ALU for short,

effective for a period of three (3) years, beginning June 1, 1975 to May 31, 1978. The Collective Bargaining Agreement

provided, among others, the grant of a yearend productivity bonus to all workers within the collective bargaining unit

Section 1, Article XVII thereof reads as follows:

ARTICLE XVII

YEAR-END PRODUCTIVITY BONUS

SECTION 1. The COMPANY agrees to grant each worker within the bargaining unit a year-end

productivity bonus equivalent to ten (10) days of his basic daily wage if eighty percent (80%) or more

of the average total banana production for the two (2) preceding calendar years together with the

current year's estimate is attained. This bonus is exclusive of any bonus which the Company may be



presently giving or may give in the future to its workers pursuant to the COMPANY's rights under

Section 4, Article I of this Agreement.

Section 4, Article I of the agreement referred to above provides:

SECTION 4. All terms and conditions of employment of workers not specifically excluded in Section I of

this Article are embodied in this Agreement, and the same shall govern the relationship between the

COMPANY and such workers. On the other hand, all such benefits and/or privileges as are not

expressly provided for in this Agreement but which are now being accorded, may in the future beaccorded, or might have previously been accorded to the workers, no matter how long or how often,

shall be deemed purely acts of grace and dependent upon the sole judgment and discretion of the

COMPANY to grant, modify or withdraw, and shall not be construed as establishing an obligation on

the part of the COMPANY.

The 80% production level stated in Article XVII of said CBA having been attained in 1975, the workers were paid the

stipulated year-end productivity bonus on December 11, 1975.

Shortly thereafter, or on December 16, 1975, Presidential Decree 851 took effect. Section 1 thereof required all

employers to pay their employees receiving a basic salary of not more than P1,000.00 a month, regardless of the

nature of their employment, a 13th month pay not later than December 24 of every year. Section 2 of the law,however, exempted from its coverage those employers already paying their employees a 13th month pay or its

equivalent.

On June 22, 1975, Secretary (now Minister) of Labor, Hon. Blas F. Ople, issued the "Rules and Regulations

Implementing Presidential Decree 851." Section 3(c) thereof provides that the term "its equivalent" ... shall include

Christmas bonus, mid-year bonus, profit-sharing payments and other cash bonuses amounting to not less than 1/12th

of the basic salary but shall not include rash and stock dividends, cost of living allowance and other allowances

regularly enjoyed by the employee as well as non-monetary benefits ...

The rules further added that "where an employer pays less than 1/12th of the employee's basic salary, the employer

shall pay the difference."

To comply with the provision of P.D. 851 on the 13th month pay, STANFILCO paid its workers on December 29, 1975

the difference between 1/12th of their yearly basic salary and their year-end productivity bonus. In doing so,

STANFILCO relied on Section 2 of the decree, as interpreted by the MOLE's implementing rules. The same method of

computation was followed in the payment of the year-end productivity bonus and the 13th month pay for the years

1976, 1977 and 1978.

Questioning this procedure, respondent ALU, joined by STANFILCO technical employees as well as its rank-and-file

workers, filed on February 19, 1979 a complaint with the South Cotabato District Labor Office at General Santos City,

docketed as LR-003-G.S.-79, ALU charging STANFILCO with unfair labor practice and non-implementation of the CBA

provision on the year-end productivity bonus. The following day, February 20, 1979, Oscar Rabino, Oscar Serenuela,

Raul Montejo and all the rank-and-file workers of STANFILCO instituted another complaint before the same districtlabor office, docketed as LR-010-G.S.-79, charging the company with non-payment of the production incentive bonus

for the years 1975, 1976, 1977 and 1978.

The issues having been joined. the two (2) cases were Consolidated and the parties were required to file their position

papers.

On May 25, 1979, the Regional Director of MOLE, Davao City, issued an order sustaining respondents' position that

the year-end productivity bonus, being a contractual commitment, is separate and distinct from the 13th month pay

and must, therefore, be paid separately in full. The decretal portion of the order reads:



WHEREFORE, in view of all the foregoing, judgment is hereby rendered

1) DISMISSING the complaint of the office and technical employees;

2) DISMISSING the claim of ALU for damages and interest including its charges against respondent for

unfair labor practice;

3) ABSOLVING respondent Thomas M. Leahy from any personal liability;

4) GRANTING the complaint of OSCAR RABINO and his group as the complaint of all rank and file

workers covered by the CBA, and which will also include all rank and file workers under the complaint

filed by ALU;

5) ORDERING respondent to pay the bonuses under the CBA for the years 1975, 1976, 1977 and 1978.

On appeal, the respondent Deputy Minister of Labor affirming the order.

In mandating the payment of the 13th month compensation to employees earning less than P1,000.00, PD 851

obviously seeks to remedy the sad plight of labor in a milieu of worldwide inflation vis-a-vis a static wage level.

However, cognizant of the fact that the remedy sought to be enforced had long been granted by some employers outof their own volition and magnanimity, the law has expressly exempted from its coverage those employers "who are

already paying their employees a 13th month pay or its equivalent."1

While the intention to exclude those certain employers from the operation of the law is quite clear, the parties

advance conflicting views as to the meaning of the phrase "or its equivalent."

Section 3(e) of the Rules and Regulations Implementing PD No. 851, issued by the Minister of Labor on December 22,

1975 explicitly states that the term "or its equivalent ... shall include Christmas bonus, mid-year bonus, profit-sharing

payments and other cash bonuses amounting to not less than one-twelfth of the basic salary. Where an employer

pays less than 1/12 of the employee's basic salary, the employer shall pay the difference."

In "National Federation of Sugar Workers versus Ovejera, et al .", 2 the interpretation given by the MOLE received the

imprimatur of this Court, thus:

Having been issued by the agency charged with the implementation of PD No. 851 as its

contemporaneous interpretation of the law, the quoted rule shall be accorded great weight.

Furthermore, to resolve the growing number of controversies stemming from the interpretation of Section 2, PD No.

851, this Court in the above-cited case, speaking thru Justice Plana, established definitely the legal equivalent of the

13th month pay in this wise:

The evident intention of the law, as revealed by the law itself, was to grant an additional income in

the form of a 13th month pay to employees not already receiving the same. Otherwise put, theintention was to grant some relief— not to all workers— but only to the unfortunate ones not

actually paid a 13th month salary or what amounts to it, by whatever name caned; but it was not

envisioned that a double burden would be imposed on the employer already paying his employees a

13th month pay or its equivalent— whether out of pure generosity or on the basis of a binding

agreement, and, in the latter case, regardless of the conditional character of the grant (such as

making the payment dependent on profit), so long as there is actual payment.Otherwise, what was

conceived to be a 13th month salary would in effect become a 14th or possibly 15th month pay.

(Emphasis supplied).<äre||anº•1àw>

Continuing, this Court said:



Pragmatic considerations also weigh heavily in favor of crediting both voluntary andcontractual

bonuses for the purpose of determining liability for the 13th month pay ... (Emphasis supplied).

Tested against this norm, it becomes clear that the year-end productivity bonus granted by petitioner to private

respondents pursuant to their CBA is, in legal contemplation, an integral part of their 13th m onth pay,

notwithstanding its conditional nature. When, therefore, petitioner, in order to comply with the mandate of PD No.

851, credited the year-end productivity bonus as part of the 13th month pay and adopted the procedure of paying

only the difference between said bonus and 1/12th of the worker's yearly basic salary, it acted well within the letter

and spirit of the law and its implementing rules. For in the event that "an employer pays less than one-twelfth of theemployees' basic salary, all that said employer is required to do under the law is to pay the difference."

3

To hold otherwise would be to impose an unreasonable and undue burden upon those employers who had

demonstrated their sensitivity and concern for the welfare of their employees. A contrary stance would indeed create

an absurd situation whereby an employer who started giving his employees the 13th month pay only because of the

unmistakable force of the law would be in a far better position than another who, by his own magnanimity or by

mutual agreement, had long been extending to his employees the benefits contemplated under PD No. 851, by

whatever nomenclature these benefits have come to be known. Indeed, PD No. 851, a legislation benevolent in its

purpose, never intended to bring about such oppressive situation.

WHEREFORE, this petition is hereby granted and, accordingly, the order of respondent Deputy Minister of Labor,

dated October 26, 1981, is set aside. No costs.

SO ORDERED.

Aquino, Concepcion, Jr., Guerrero, De Castro, Melencio-Herrera, Plana, Vasquez, Relova and Gutierrez, JJ., concur.

Separate Opinions

MAKASIAR, J., dissenting:

Dissents and reiterate the decision in Macoffees vs. Ople (105 SCRA 95, June 11, 1981), and the dissent of Chief Justice

Fernando in NFSU vs. OVETERA, et al . (No. 59743, May 31, 1982).

Fernando, C.J., I concur with the dissent of Justice Makasiar.

ABAD SANTOS, J., dissenting:

I dissent for the reasons given in my concurring opinion in the La Carlota case.

Teehankee, J., reserves his vote.

Separate Opinions

MAKASIAR, J., dissenting:



Dissents and reiterate the decision in Macoffees vs. Ople (105 SCRA 95, June 11, 1981), and the dissent of Chief Justice

Fernando in NFSU vs. OVETERA, et al . (No. 59743, May 31, 1982).

Fernando, C.J., I concur with the dissent of Justice Makasiar.

ABAD SANTOS, J., dissenting:

I dissent for the reasons given in my concurring opinion in the La Carlota case.

Teehankee, J., reserves his vote.

Footnotes

1 Section 2, PD 851.

2 G.R. No. 59743, May 31, 1982.

3 Section 3(e) of the Rules


SUPREME COURT

Manila

SECOND DIVISION

G.R. No. 70763 April 30, 1987

UNITED CMC TEXTILE WORKERS UNION, petitioner,

vs.

THE HONORABLE LABOR ARBITER, RAYMUNDO VALENZUELA, ARBITRATION BRANCH, NATIONAL LABOR RELATIONS

COMMISSION, respondents.

Isaias O. Cortes for petitioner.

Cruz, Durian Agabin Atienza, Alday & Tuason Law Offices for respondents.

PARAS, J.:

Petitioner seeks to compel the public respondent Labor Arbiter to issue the necessary writ of execution in Case No.

NCRAB-62563-79 (NCR-LRD-6-740-79) there being a Final Entry of Judgment in G.R. No. 58666.

The antecedent facts of the case read as follows:

Sometime in 1979, petitioner filed a complaint against Central Textile Mills, Inc. (CTMI, for brevity) at the Ministry of

Labor and Employment for non-payment of Christmas bonus of the rank and file employees of said company as provided



in Art. XI of the then existing collective bargaining agreement between petitioner and CTMI. Among the provisions of the

said collective agreement is the payment of Christmas bonus based on the following schedule:

10 years and above....................................................P 70.00

7 years and up but less

than 10 years..................................................60.00

2 years but less than

7 years.............................................................50.00

6 months and up but less

than 2 years.....................................................20.00

To be paid to all employees on or before the beginning of the Christmas vacation.

On October 11, 1979, respondent Labor Arbiter rendered a decision with the following dispositive portion:

Foregoing PREMISES CONSIDERED, we find that Sec. 1, Art XI of the CBA concluded between the parties

dealing on the payment of Christmas Bonus is violated by the refusal of respondent Central Textile Mills,

Inc. to pay the same despite demand by complainant United CMC Textile Workers Union. Consequently,

respondent, Central Textile Mills, Inc. should be as it is hereby ordered to implement the same by paying

the workers covered by said CBA the total amount of ONE HUNDRED TWENTY TWO THOUSAND EIGHT

HUNDRED FORTY PESOS (P122,840.00) corresponding to the 1978 Christmas Bonus, the break down of

which is reflected in the list attached to this decision the accuracy of the termination of which by

complainant union is not, in the least, disputed by the respondent company. (p. 106, Rollo)

Respondent CTMI appealed said decision to the National Labor Relations Conunission (NLRC, for brevity) which affirmed

the Labor Arbiter's decision with the modification that the complainant (petitioner herein) was ordered to furnish a copy

of the computation list in order that respondents may verify the correctness and/or validity of the individual claims and

for the latter to present their objection, if any, to the Labor Arbiter of origin, prior to the execution of the decision. CTM

sought the review of said decision by filing with Us a Petition for certiorari docketed as G.R. No. 58666. On January 20,

1982, We dismissed said petition for lack of merit. A motion for reconsideration was likewise denied as per Our

resolution dated August 18, 1982. Subsequently, Entry of Judgment 1 dated September 22, 1982, rendered Our dismissa

of the petition final and executory.

Petitioner filed with the NLRC a motion for execution of the decision in October, 1984. Pursuant to such motion,

conferences were held by the parties before the respondent Labor Arbiter. However, these were stopped when CTMI

filed an appeal with the NLRC stating that the decision of this Court in G.R. No. 68666 has become moot and academic

by virtue of Our ruling in the case of National Federation of Sugar Workers Page 428 vs. Central Azucarera de la Carlota,et al. 2 to the effect that ,employers already paying the equivalent of the 13th month pay to their employees, such as

Christmas bonus, are under no legal obligation to pay an additional 13th month pay prescribed under P.D. No. 851. Due

to the appeal of CTMI, respondent Labor Arbiter refused to continue with the execution of the final order or decision in

G.R. No. 58666 contending that it has become moot and academic.

Hence this petition by the workers' union praying that a writ of mandamus be issued to compel herein respondent Labo

Arbiter Raymundo Valenzuela to issue a writ of execution in G.R. No. 58666 or NCR-AB-62563-79 (NCR-6-740-79). It is

the position of petitioner that in view of the finality of the aforesaid judgment. It is the bounden duty of the public

respondent, to issue the proper writ of execution prayed for.



Petitioner argues thus:

... From receipt of the Entry of Judgment, in Case No. NCRAB-6-2563-79 (NCR-6-740-79) G.R. No. 58666,

petitioner was vested with a right to satisfaction of the aforecited judgment of -this Honorable Court. A

decision, or resolution of the Court which has become final and executory is enforceable for a period of

five years. Since the decision rendered by this Honorable Court in Case No. NCR-AB-6- 2563-79, G.,R. No

58666 has become final and executory, the writ of execution prayed for by petitioner must be

accordingly issued to satisfy judgment. Without said writ the right of petitioners as affirmed by this

Honorable Tribunal would be rendered nugatory or useless. Justice would be meaningless.

The contention that the final decision of this Honorable Court in Case No. NCR-AB-6-2563-79 (NCR-LRD-

6-740-79), G.R. No. 58666 had become moot and academic due to the new ruling enunciated in the La

Carlota Case has no basis in law With due respect, although the principle of law adopted by this

Honorable in Case No. NCR-AB6-2563-79, G.R. No. 58666 may be different or contrary to that one

adopted in the La Carlota Case, since the decision has become final and executory, the La Carlota Case

ruling cannot render moot and academic the final decision of this Honorable Court in G.R. No. 58666.

After judgment has become final no additions can be made thereto, and nothing can be done therewith

except its execution; otherwise there would be no end to litigation, thus setting naught the main rule of

Court of Justice, which is to assist in the enforcement of the rule of law and the maintenance of peace

and order, by setting justice controversies with finality (Vda. de Emmas vs. Emmas, 95 SCRA 470).

The appeal filed by private respondent, Central Textile Mills, Inc, with the National Labor Relations

Commission is already barred by the prior judgment made in G.R. No. 58666 under the doctrine of Res

Judicata. A prior judgment to constitute a bar to subsequent case, the following requisites must concur:

(1) it must be a final judge judgment; (2) it must have been rendered by a court having jurisdiction over

the subject matter and over the parties; (3) it must be a judgment on the merits; (4) there must be

between the first and the second actions, Identity of parties, Identity of subject matter and Identity of

cause of action (Republic vs. Court of Appeals, 99 SCRA 742). The requisites for a prior judgment are

present in Case No. NCR-AB-62563-79 (NCR-LRD-6-740-79) G.R. No. 58666 thus rendering the

case/appeal filed by respondent Central Textile Mills, Inc. at the National Labor Relations Commission,

moot and academic. (pp. 107-108, Rollo)

Respondent CTMI in its memorandum invites Our attention to the fact that its Petition for Review in G.R. No. 58666 was

denied because of Our ruling in the case of "Marcopper Mining Corporation vs. Honorable Blas Ople, et. al ., G.R. No. L-

51254, 3 that the 13th month pay was required on top of the other bonuses agreed upon by the employer and employee

However, on May 31, 1982, in the aforementioned case of "NFSW vs. Central Azucarera de la Carlota, et al.," We

reversed the Marcopper doctrine and ruled that if an employer is already paying its employees the Christmas bonus

under the Collective Bargaining Agreement (CBA) the same is no longer required to pay the 13th month pay provided,

however, if the said Christmas bonus is less than one-twelfth (1/12) of the employees basic pay within a calendar year,

the employer shall pay the difference. It is this La Carlota doctrine which respondents now invoke in support of their

contentions, alleging that this doctrine speaks of no exception in its application, especially considering that it was

handed down by this Court Page 430 during the pendency of said G.R. No. 58666 and that petitioner had earlier

accepted and recognized the applicability of the La Carlota ruling in Case No. 58666 when the new CBA of 1983 wasnegotiated and signed, herein petitioner voluntarily and readily agreed to the deletion of the provision on Christmas

bonus and tacitly withdrew their claims for Christmas bonus for 1978.

We find the contentions of petitioner more meritorious than the contentions of respondents. When We dismissed the

petition for review of private respondents in G.R. No. 58666 on January 20,1982, for lack of merit, We did so upon the

doctrine laid down in the Marcopper Case which was promulgated on June 11, 1981. Before the dismissal of said case

became final and executory, We decided the La Carlota case on May 31, 1982 wherein We ruled that employees are no

longer entitled to an additional Christmas bonus or other Christmas benefits if they are already entitled to a 13th month

pay. Meanwhile in Case No. 58666 the company filed their motion for reconsideration of the dismissal of their petition

which We denied as per Our resolution on August 18, 1982. Subsequently, said dismissal became final and executory as



per Entry of Judgment dated September 22, 1982. Thus, it can be seen that despite the La Carlota ruling We denied the

company's Motion for reconsideration and We reiterated Our previous dismissal of the petition for review for lack of

merit. This only goes to show that We refused to apply or did not choose to apply the La Carlota doctrine to the case at

bar. And We have consistently held in a number of Our decisions that judgments which had long become final and

executory can no longer be amended or modified by the courts. Such is the doctrine known as "the law of the case."

Furthermore, the findings of the NLRC as stated in its decision 4 show that the claim is for Christmas bonus for the year

1978 only. It appears from the records that the employees of the respondent company had been paid their bonuses in

accordance with the collective bargaining agreement, in addition to the 13th month pay, for the years 1979 and 1980.The Page 431 collective bargaining agreement in question took effect on November 1, 1978, 3 years after the

promulgation of P.D. No. 851. If the Christmas bonus was included in the 13th month pay, then there would be no need

for having a specific provision on Christmas bonus in the CBA. But it did provide for a bonus in graduated amounts

depending on the length of service of the employee. The intention is clear therefore that the bonus provided in the CBA

was meant to be in addition to the legal requirement. Moreover, why exclude the payment of the 1978 Christmas bonus

and pay only the 1979-1980 bonus. The classification of the company's workers in the CBA according to their years of

service supports the allegation that the reason for the payment of bonus was to give bigger reward to the senior

employees— a purpose which is not found in P.D. 851. A bonus under the CBA is an obligation created by the contract

between the management and workers while the 13th month pay is mandated by the law (P.D. 851).

Likewise We find no merit in respondent's allegations that the applicability of the said La Carlota ruling to the case at bar

is explicitly recognized by herein petitioner. A cursory reading of the CBA signed on November 2, 19835shows that

petitioner Union recognizes only the application of the La Carlota doctrine in so far as it had agreed to the deletion of

the provision on payment of Christmas bonus in the new CBA of 1983 without necessarily giving up their claim for their

1978 bonus under their former collective bargaining agreement.

WHEREFORE, finding merit in the instant petition the same is hereby GRANTED. Respondent Labor Arbiter Raymundo

Valenzuela, Arbitration Branch, NLRC, is hereby ordered to issue the writ of execution in Case No. AB-62563-79 (NCR-

LRD-6-740-79), G.R. 58666.

SO ORDERED.

Fernan (Chairman), Gutierrez, Jr., Padilla, Bidin and Cortes, JJ., concur.

Footnotes

1 Annex "D, " P. 18, Rollo.

2 4SCRA354 promulgated May3l,1982.

3 105 SCRA 75 promulgated June 11,1981

4 Annex "C, " pp. 15-17, Rollo.

5 Annex "I,"p, 53 Rollo




SUPREME COURT

Manila

SECOND DIVISION

G.R. No. L-60337 August 21, 1987

UNIVERSAL CORN PRODUCTS (A DIVISION OF UNIVERSAL ROBINA CORPORATION), petitioner,vs.

THE NATIONAL LABOR RELATIONS COMMISSION and JOSE ARMAS, ENGRACIO ASIS, AUSTERINAO ELEUTERIO,

FAUSTINO ATIENZA, MARIO ALTARES, JAIME ALTARES, ISIDRO ARANO, LEONILO ARANO, ALFREDO ANCHETA,

DOMINGO ANCHETA, RIZALITO, ABANTO, RIZALITO, CRESENCIO ASCUTIA, JESUS ASCUTIA, FELICIANO ABORQUE,

WILFREDO ARMENIO, ALEJANDRO ABAGAT, PABLO ADLAWAN, FILEMON ABADINES, ROMEO AREVALO, PABLO

BUTIAL, BANAAG REMIGIO, LUCIO BERDIJO, ANTONIO BIONSON, ABELARDO BRACAMONTE, SAMSON BORDEOS,

TEODORO, BARBIANA, FRANCISCO BABOR, HERCULANO BARRAMEDA, RODRIGO BONGAIS, JAIME BERANA, EDUARDO

BUENAVENTURA, RODRIGO BAUTISTA, FELEMON BAUTISTA, DIONISIO BERNALES, MARIANO BALAGTAS, ALFREDO

BERNADAS, EPIGENIO BORDEOS, BRIGIDO BAER, OSCAR BONDOC, JOSE BONDOC, ROMEO BUCAYAN, VITALIANO

BATOBATO, DOMINGO BALLON, JOSE BORLEO, JOSE BORJA, RUFINO CLEMENTE, JUAN CABALLERO, TRANQUILINA

CAUSON, AUGORIO CALNEA, LEOPOLDO CUARTERO, ALBERTO CATBAGAN, ROMEO CALIVO, ANDRES CUNTAPAY,

ALBERTO CASTRO, CASTOR RODRIGO, SIMPLICIO CACATIAN, NILO DALANON, BIENVENIDO DUMAGAT, SR.,

BIENVENIDO DUMAGAT, JR., DOMINADOR DUMANTAY, TEODORO DULOMBAL, RODOLFO DANDAN, SALVADOR

DASIGO, ELIAS DASIGO, FRANCISCO ESTOLANO, LEOPOLDO ESTIOCO, ROGELIO ESTANISLAO, MONTANO ESTANISLAO,

ELIAS ESTRADA, ERNESTO ESTABALLIO, FERNANDO FERNANDEZ, PEDRO GETEZO, ALFONSO DE GUZMAN, LORENZO DE

GUZMAN, MODESTO DE GUZMAN, ARELLANO GARCIA, ALFREDO GARCIA, MANUEL GOROSPE, RAYMUNDO GELLIDO,

RODOLFO GALEON, ROMEO GONZALES, GERARDO GERMEDIA, BENITO GALE, ROBERTO HASAL, EDILBERTO

HERNANDEZ, RAFAEL IGUIZ, MARGARITO JAVIER, PABLO JOSE, PEDRO JOVE, CELEDONIO JACA, REYNALDO JALLA,

EDUARDO JUMAQUIO, DOMINGO JUANO, AGUSTIN KHO, ANTONIO LAMERA, RODOLFO LINEZO, MANUEL LAMBATIN,

MANUEL LOPEZ, BENEDICTO LOPEZ, MARIANO LARA, ELINO MISA, FRANCISCO MINA, RODOLFO MIRABEL, ROGER

MIRABEL, ROLANDO MIRABEL, OSCAR MARTINEZ, MIGUEL MANACIO, PEDRO MANALO, LEOPOLDO MARQUEZ,

ANTONIO, MEDINA, SALVADOR MARAINAN, NAPOLEON MAGAYA, ALFREDO MAQUI, EDUARDO MILLET, PABLO

MENDEZ, DULCISIMO NATIVIDAD, ROMEO NAGTALON, ALFONSO NOQUEZ, ALEJANDRO NOQUEZ, ANASTACIO NIVAL,EMILIO ORTIZ, PONCIANO ORLANDA, GERARDO POSADAS, ATICO PEDRIGOZA, ALFREDO PASCUA, LEONARDO

PATRON, MIGUEL PACHECO, DOMINGO PACHECO, FELIMON POLICARPIO, ERNESTO QUIJANO, EFREN QUIBOTE,

SIMEON RESCO, FERNANDO REYNOSO, EMILIO RIVERA, GRACIANO RAMOS, REYNALDO RAMIREZ, PAQUITO RAMIREZ,

THOMAS ROSARIO, JR., ROMULO REYES, REYNALDO RAPSING, ALFREDO DEL ROSARIO, FLORENCIO SASAN, ALFONSO

SAMSON, LUIS SUAREZ, GREGORIO SOMODO, FRANCISCO SAPLAN, LUCIANO SARNO, RICARDO SOREL, CRESENCIO

SANTOS, ARSENIO SERGA JR., BALTAZAR TALATO, DIOSDADO TULANG, EUGENIO TOLENTINO, AMADOR TABULOG,

LAZARO TORRES, JAIME TRAJANO, GENEROSO TANTE, SERGIO TABUAC, ANASTACIO TIMOG, DANIEL UDAN,

HERMENIGILDO VITO, VICENTE VITO, BENJAMIN VILLAMOR, ARTURO VALIENTE, ERNESTO VALIENTE, FELICISIMO

VERA,respondents.

SARMIENTO, J.:

The petitioner invokes National Federation of Sugar Workers (NFSW) v. Ovejera, 1 in which we held that Presidential

Decree No. 851, 2 the 13th-month pay law, does not cover employers already paying their employees an "equivalent" to

the 13th month pay.

There is no dispute as to the facts.



Sometime in May, 1972, the petitioner and the Universal Corn Products Workers Union entered into a collective

bargaining agreement in which it was provided, among other things, that:

xxx xxx xxx

The COMPANY agrees to grant all regular workers within the bargaining unit with at least one (1) year of

continuous service, a Christmas bonus equivalent to the regular wages for seven (7) working days,

effective December, 1972. The bonus shall be given to the workers on the second week of December.

In the event that the service of a worker is not continuous due to factory shutdown, machine

breakdown or prolonged absences or leaves, the Christmas bonus shall be prorated in accordance with

the length of services that worker concerned has served during the year .3

xxx xxx xxx

The agreement had a duration of three years, effective June 1, 1971, or until June 1, 1974.

On account however of differences between the parties with respect to certain economic issues, the collective

bargaining agreement in question expired without being renewed. On June 1, 1979, the parties entered into an

"addendum" stipulating certain wage increases covering the years from 1974 to 1977. Simultaneously, they entered intoa collective bargaining agreement for the years from 1979 to 1981. Like the "addendum," the new collective bargaining

agreement did not refer to the "Christmas bonus" theretofore paid but dealt only with salary adjustments. According to

the petitioner, the new agreements deliberately excluded the grant of Christmas bonus with the enactment of

Presidential Decree No. 851 4 on December 16, 1975. It further claims that since 1975, it had been paying its employees

13th-month pay pursuant to the Decree. 5

For failure of the petitioner to pay the seven-day Christmas bonus for 1975 to 1978 inclusive, in accordance with the

1972 CBA, the union went to the labor arbiter for relief. In his decision,6 the labor arbiter ruled that the payment of the

13th month pay precluded the payment of further Christmas bonus. The union appealed to the National Labor Relations

Commission (NLRC). The NLRC set aside the decision of the labor arbiter appealed from and entered another one,

"directing respondent company [now the petitioner] to pay the members concerned of complainants [sic] union their 7-

day wage bonus in accordance with the 1972 CBA from 1975 to 1978." Justifying its reversal of the arbiter's decision, the

NLRC held:

xxx xxx xxx

It is clear that the company implemented the aforequoted provision of the CBA in 1972, 1973 and 1974.

In view thereof it is our considered opinion that the crediting of said benefit to the 13th month pay

cannot be sanctioned on the ground that it is contrary to Section 10 of the Rules and Regulations

Implementing Presidential Decree No. 85 1, which provides, to wit;

Section 10. Prohibition against reduction or elimination of benefits.— Nothing herein

shall be construed to authorize any employer to eliminate, or diminish in any way,supplements, or other employee benefits or favorable practice being enjoyed by the

employee at the time of promulgation of this issuance.

More so because the benefit involved was not magnanimously extended by the company to its

employees but was obtained by the latter thru bargaining negotiations. The aforementioned CBA was

the law between the parties and the provisions thereof must be faithfully observed by them during its

effectivity. In this connection, it should be noted that the same parties entered into another 3-year CBA

on June 11, 1979, which no longer provides for a 7-day wage Christmas bonus. In effect, therefore, the

parties agreed to discontinue the privilege, which agreement should also be respected.7



xxx xxx xxx

We hold that in the case at bar, Ovejera (La Carlota) case does not apply.

We apply instead, United CMC Textile Workers Union v. Valenzuela 8 a recent decision. In that case this Court, speaking

through Mr. Justice Edgardo Paras, held:

xxx xxx xxx

... If the Christmas bonus was included in the 13th month pay, then there would be no need for having a

specific provision on Christmas bonus in the CBA. But it did not provide for a bonus in graduated

amounts depending on the length of service of the employee. The intention is clear therefore that the

bonus provided in the CBA was meant to be in addition to the legal requirement. Moreover, why

exclude the payment of the 1978 Christmas bonus and pay only the 1979-1980 bonus. The classification

of the company's workers in the CBA according to their years of service supports the allegation that the

reason for the payment of bonus was to give bigger award to the senior employees-a purpose which is

not found by P.D. 851. A bonus under the CBA is an obligation created by the contract between the

management and workers while the 13th month pay is mandated by the law (P. D. 851). 9

xxx xxx xxx

In the same vein, we consider the seven-day bonus here demanded "to be in addition to the legal requirement."

Although unlike the Valenzuela CBA, which took effect after the promulgation of Presidential Decree No. 851 in 1975,

the subject agreement was entered into as early as 1972, that is no bar to our application ofValenzuela.What is

significant for us is the fact that, like the Valenzuela, agreement, the Christmas bonus provided in the collective

bargaining agreement accords a reward, in this case, for loyalty, to certain employees. This is evident from the

stipulation granting the bonus in question to workers "with at least one (1) year of continuous service." As we said in

Valenzuela" this is "a purpose not found in P.D. 851." 10

It is claimed, however, that as a consequence of the impasse between the parties beginning 1974 through 1979, no

collective bargaining agreement was in force during those intervening years. Hence, there is allegedly no basis for the

money award granted by the respondent labor body. But it is not disputed that under the 1972 collective bargaining

agreement, [i]f no agreement and negotiations are continued, all the provisions of this Agreement shall remain in full

force up to the time a new agreement is executed." 11 The fact, therefore, that the new agreements are silent on the

seven-day bonus demanded should not preclude the private respondents' claims thereon. The 1972 agreement is basis

enough for such claims for the whole writing is " "instinct with an obligation," imperfectly express." 12

WHEREFORE, premises considered, the petition is hereby DISMISSED. The Decision of the public respondent NLRC

promulgated on February 11, 1982, and its Resolution dated March 23, 1982, are hereby AFFIRMED. The temporary

restraining order issued on May 19, 1982 is LIFTED.

This Decision is IMMEDIATELY EXECUTORY.

No pronouncement as to costs.

SO ORDERED.

Yap (Chairman), Paras and Padilla, JJ., concur.

Melencio-Herrera, J., is on leave.



Footnotes

1 No. L-59743, May 31, 1982, 114 SCRA 354 (1982), per Plana, J.

2 As amended by Memo. Order No. 28 (1986).

3 Rollo, 6, 22.

4 Id., 7.

5 Id., 98, also, 12.

6 Id ., 11-15.

7 Id., 23.

8 G.R. No. 70763, April 30, 1987.

9 At 7.

10 Supra.

11 Rollo, Id., 73, 92.

12 Justice Cardozo, Wood v. Duff-Gordon, 222 Wy 88, 118 NE 214 (1917), citing Scott, J., in McCall v.

Wright, 133 App. Div. 62, 117 N.Y. Supp. 775; Moran v. Standard-Dil Co., 211 N.Y. 187, 198, 105 N.E. 217)

and quoted by Chief Justice Fernando in his opinion concurring with qualifications on the questions of

the legality of the strike and dissenting on the interpretation to be accorded Presidential Decree No. 851

on the thirteenth-month additional pay , in National Federation of Sugar Workers (NFSW) vs.

Ovejera, supra, 372, 378.


SUPREME COURT

Manila

FIRST DIVISION

G.R. No. 107994 August 14, 1995

PHILIPPINE AGRICULTURAL COMMERCIAL AND INDUSTRIAL WORKERS UNION (PACIWU)-TUCP, petitioner,

vs.

NATIONAL LABOR RELATIONS COMMISSION AND VALLACAR TRANSIT, INC., respondents.

KAPUNAN, J.:



This is a petition for certiorari seeking to reverse the decision of the National Labor Relations Commission (NLRC) in

NLRC Case No. V-0159-92 which dismissed the appeal of petitioner union and in effect, affirmed the decision of the

Labor Arbiter ordering the dismissal of the complaint of petitioner for payment of 13th month pay to the drivers and

conductors of respondent company.

Petitioner Philippine Agricultural Commercial and Agricultural Workers Union— TUCP is the exclusive bargaining agent

of the rank and file employees of respondent Vallacar Transit, Inc. Petitioner union instituted a complaint with NLRC

Regional Arbitration Branch No. VI, Bacolod City, for payment of 13th month pay in behalf of the drivers and conductors

of respondent company's Visayan operation on the ground that although said drivers and conductors are compensatedon a "purely commission" basis as described in their Collective Bargaining Agreement (CBA), they are automatically

entitled to the basic minimum pay mandated by law should said commission be less than their basic minimum for eight

(8) hours work. 1

In its position paper, respondent Vallacar Transit, Inc. contended that since said drivers and conductors are

compensated on a purely commission basis, they are not entitled to 13th month pay pursuant to the exempting

provisions enumerated in paragraph 2 of the Revised Guidelines on the Implementation of the Thirteenth Month Pay

Law. 2

It further contended that Section 2 of Article XIV of the Collective Bargaining Agreement (CBA) concluded on

October 17, 1988 expressly provided that "drivers and conductors paid on a purely commission are not legally entitled to

13th month pay." Said CBA, being the law between the parties, must be respected, respondent opined.

On May 22, 1992, Labor Arbiter Reynaldo Gulmatico rendered a decision dismissing the complaint. 3

The appeal of the petitioner to the National Labor Relations Commission was likewise dismissed 4 so was the motion for

reconsideration of the said decision. 5

Hence, the present petition.

The principal issue posed for consideration is whether or not the bus drivers and conductors of respondent Vallacar

Transit, Inc. are entitled to 13th month pay.

We rule in the affirmative.

It may be recalled that on December 16, 1975, P.D. 851, otherwise known as the "13th Month Pay" Law, was

promulgated. The same prescribed payment of 13th month pay in the following terms:

Sec. 1. All employers are hereby required to pay all their employees receiving a basic salary of not more than

P1,000.00 a month, regardless of the nature of the employment, a 13th month pay not later than December 24

of every year.

Sec. 2. Employers already paying their employees a 13th month pay or its equivalent are not covered by this

Decree.

The Rules and Regulations Implementing P.D. No. 851, issued by the then Secretary of Labor and Employment onDecember 22, 1975, defined the following basic terms:

xxx xxx xxx

(a) 13th month pay shall mean one-twelfth (1/12) of the basic salary of an employee within a calendar year;

(b) basic salary shall include all remunerations or earnings paid by an employer to an employer for services

rendered , but may not include cost of living allowances granted pursuant to Presidential Decree No. 525 or

Letter of Instructions No. 174, profitsharing payments, and all allowances and monetary benefits which are not



considered or integrated as part of the regular or basic salary of the employee at the time of the promulgation

of the Decree on December 16, 1975.

xxx xxx xxx

On August 13, 1986, President Corazon C. Aquino, exercising both executive and legislative authority, issued

Memorandum Order No. 28 which provided as follows:

xxx xxx xxx

Sec.1. of Presidential Decree No. 851 is hereby modified to the extent that all employers are hereby required to

pay all their rank-and-file employees a 13th month pay not later than December 24 of every year.

xxx xxx xxx

In connection with and in implementation of Memorandum Order No. 28, the then Minister of Labor and Employment

issued MOLE Explanatory Bulletin No. 86-12 on November 24, 1986. Item No. 5 (a) of the said issuance read:

xxx xxx xxx

Employees who are paid a fixed or guaranteed wage plus commission are also entitled to the mandated 13th

month pay, based on their total earning(s) during the calendar year, i .e., on both their fixed and guaranteed

wage and commission.

xxx xxx xxx

(emphasis ours)

From the foregoing legal milieu, it is clear that every employee receiving a commission in addition to a fixed or

guaranteed wage or salary, is entitled to a 13th month pay. For purposes of entitling rank and file employees a 13th

month pay, it is immaterial whether the employees concerned are paid a guaranteed wage plus commission or a

commission with guaranteed wage inasmuch as the botton line is that they receive a guaranteed wage. This is correctly

construed in the MOLE Explanatory Bulletin No. 86-12.

In the case at bench, while the bus drivers and conductors of respondent company are considered by the latter as being

compensated on a commission basis, they are not paid purely by what they receive as commission. As admitted by

respondent company, the said bus drivers and conductors are automatically entitled to the basic minimum pay

mandated by law in case the commissions they earned be less than their basic minimum for eight (8) hours

work. 6 Evidently therefore, the commissions form part of the wage or salary of the bus drivers and conductors. A

contrary interpretation would allow an employer to skirt the law and would result in an absurd situation where an

employee who receives a guaranteed minimum basic pay cannot be entitled to a 13th month pay simply because he is

technically referred to by his employer per the CBA as an employee compensated on a purely commission basis. Such

would be a narrow interpretation of the law, certainly not in accord with the liberal spirit of our labor laws. Moreover,what is controlling is not the label attached to the remuneration that the employee receives but the nature of the

remuneration 7 and the purpose for which the 13th month pay was given to alleviate the plight of the working masses

who are receiving low wages. This is extant from the "WHEREASES" of PD 851, to wit:

WHEREAS, it is necessary to further protect the level of real wages from the ravage of world-wide inflation.

WHEREAS, there has been no increase in the legal minimum wage since 1970.



WHEREAS, the Christmas season is an opportune time for society to show its concern for the plight of the

working masses so they may properly celebrate Christmas and New Year.

Misplaced legal hermeneutics cannot be countenanced to evade paying the rank and file what is due to them under the

law.

Commission is the recompense, compensation, reward of an employee, agent, salesman, executor, trustee, receiver,

factor, broker or bailee, when the same is calculated as a percentage on the amount of his transactions or on the profit

of the principal. 8

While said commissions may be in the form of incentives or encouragement to inspire said bus driversand conductors to put a little more zeal and industry on their jobs, still, it is safe to say that the same are direct

remunerations for services rendered, given the small remuneration they receive for the services they render, 9 which is

precisely the reason why private respondent allowed the drivers and conductors a guaranteed minimum wage. The

conclusion is ineluctable that said commissions are part of their salary. In Philippine Duplicators, Inc. v . National Labor

Relations Commission, 10 we had the occasion to estate that:

. . . Article 97 (f) of the Labor Code defines the term "wage" (which is equivalent to "salary," as used in P.D. No.

851 and Memorandum Order No. 28) in the following terms:

(f) "Wage" paid to any employee shall mean the remuneration or earnings, however designated

capable of being expressed in term of money, 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 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 and reasonable value" shall not include any

profit to the employer or to any person affiliated with the employer.

In the instant case, there is no question that the sales commissions earned by salesmen who make or close a

sale of duplicating machines distributed by petitioner corporation, constitute part of the compensation or

remuneration paid to salesmen for serving as salesmen, and hence as part of the "wage" or "salary" of

petitioner's salesmen. Indeed, it appears that petitioner pays its salesmen a small fixed or guaranteed wage; the

greater part of the salesmen's wages or salaries being composed of the sales or incentive commissions earned

on actual sales closed by them. No doubt this particular salary structure was intended for the benefit of

petitioner corporation, on the apparent assumption that thereby its salesmen would be moved to greater

enterprise and diligence and close more sales in the expectation of increasing their sales commissions. This,

however, does not detract from the character of such commissions as part of the salary or wage paid to each or

its salesmen for rendering services to petitioner corporation. 11

In sum, the 13th month pay of the bus drivers and conductors who are paid a fixed or guaranteed minimum wage in

case their commissions be less than the statutory minimum, and commissions only in case where the same is over and

above the statutory minimum, must be equivalent to one-twelfth (1/12) of their total earnings during the calendar year.

WHEREFORE, the petition is hereby GRANTED. The decision of respondent National Labor Relations Commission ishereby REVERSED and SET ASIDE. The case is remanded to the labor Arbiter for the proper computation of 13th month

pay.

SO ORDERED.

Padilla, Davide, Jr., Bellosillo and Hermosisima, Jr., JJ., concur.

Footnotes



1 CBA, Article VIII, Section 6.

2 2. Exempted Employers.

The following employers are still not covered by P.D. No. 851:

xxx xxx xxx

d. Employers of those who are paid on purely commission, boundary or task basis, . . .

xxx xxx xxx

3 Rollo, p. 123.

4 Id ., at 32.

5 Id ., at 35.

6 See Note 1, supra.

7 In Government Service Insurance System v. Civil Service Commission and Dr. Manuel Baradero and

Matilde Belo, G.R. No. 98395 and 102449, June 19, 1995 where the issue raised was whether or not

regular service in government on a per diem basis, without any other form of compensation or

emolument, is compensation within the contemplation of the term service with Compensation under

the Government Service Insurance Act of 1987, the Court made the pronouncement that what ought to

controlling should be the nature of the remuneration, not the label attached to it.

8 Black's Law Dictionary, 5th Ed., citing Weiner v. Swales, 217 Md. 123, 141 A. 2d 749, 750; See

alsoSongco v. National Labor Relations Commission, 183 SCRA, 610, 618 [1992].

9 7% and 5% for the driver and conductor respectively, of the net fare collection, sometimes even below

the minimum wage.

10 227 SCRA 747 [1993].

11 Id ., at 752-753.


SUPREME COURT

Manila

FIRST DIVISION

G.R. No. 85073 August 24, 1993



DAVAO FRUITS CORPORATION, petitioner,

vs.

ASSOCIATED LABOR UNIONS (ALU) for in behalf of all the rank-and-file workers/employees of DAVAO FRUITS

CORPORATION and NATIONAL LABOR RELATIONS COMMISSION, respondents.

Dominguez & Paderna Law Offices for petitioners.

The Solicitor General for public respondents.

QUIASON, J.:

This is a petition for certiorari to set aside the resolution of the National Labor Relations Commission (NLRC), dismissing

for lack of merit petitioner's appeal from the decision of the Labor Arbiter in NLRC Case No. 1791-MC-X1-82.

On December 28, 1982 respondent Associated Labor Unions (ALU), for and in behalf of all the rank-and-file workers and

employees of petitioner, filed a complaint (NLRC Case No. 1791-MC-XI-82) before the Ministry of Labor and Employmen

Regional Arbitration Branch XI, Davao City, against petitioner, for "Payment of the Thirteenth-Month Pay Differentials."

Respondent ALU sought to recover from petitioner the thirteenth month pay differential for 1982 of its rank-and-fileemployees, equivalent to their sick, vacation and maternity leaves, premium for work done on rest days and special

holidays, and pay for regular holidays which petitioner, allegedly in disregard of company practice since 1975, excluded

from the computation of the thirteenth month pay for 1982.

In its answer, petitioner claimed that it erroneously included items subject of the complaint in the computation of the

thirteenth month pay for the years prior to 1982, upon a doubtful and difficult question of law. According to petitioner,

this mistake was discovered only in 1981 after the promulgation of the Supreme Court decision in the case of San Migue

Corporation v. Inciong (103 SCRA 139).

A decision was rendered on March 7, 1984 by Labor Arbiter Pedro C. Ramos, in favor of respondent ALU. The dispositive

portion of the decision reads as follows:

WHEREFORE, in view of all the foregoing considerations, judgment is hereby rendered ordering

respondent to pay the 1982— 13th month pay differential to all its rank-and-file workers/employees

herein represented by complainant Union (Rollo, p. 32).

Petitioner appealed the decision of the Labor Arbiter to the NLRC, which affirmed the said decision accordingly

dismissed the appeal for lack of merit.

Petitioner elevated the matter to this Court in a petition for review under Rule 45 of the Revised Rules of Court. This

error notwithstanding and in the interest of justice, this Court resolved to treat the instant petition as a special civil

action for certiorari under Rule 65 of the Revised Rules of Court (P.D. No. 1391, Sec. 5; Rules Implementing P.D. No. 1391

Rule II, Sec. 7; Cando v. National Labor Relations Commission, 189 SCRA 666 [1990]: Pearl S. Buck Foundation, Inc. v.National Labor Relations Commission, 182 SCRA 446 [1990]).

The crux of the present controversy is whether in the computation of the thirteenth month pay given by employers to

their employees under P.D.

No. 851, payments for sick, vacation and maternity leaves, premiums for work done on rest days and special holidays,

and pay for regular holidays may be excluded in the computation and payment thereof, regardless of long-standing

company practice.



Presidential Decree No. 851, promulgated on December 16, 1975, mandates all employers to pay their employees a

thirteenth month pay. How this pay shall be computed is set forth in Section 2 of the "Rules and Regulations

Implementing Presidential Decree No. 851," thus:

SECTION 2. . . .

(a) "Thirteenth month pay" shall mean one twelfth (1/12) of the basic salary of an employee within a

calendar year.

(b) "Basic Salary" shall include all renumerations or earnings paid by an employer to an employee for

services rendered but may not include cost of living allowances granted pursuant to Presidential Decree

No. 525 or Letter of Instructions No. 174, profit-sharing payments, and all allowances and monetary

benefits which are not considered or integrated as part of the regular or basic salary of the employee at

the time of the promulgation of the Decree on December 16, 1975.

The Department of Labor and Employment issued on January 16, 1976 the "Supplementary Rules and Regulations

Implementing P.D. No. 851" which in paragraph 4 thereof further defines the term "basic salary," thus:

4. Overtime pay, earnings and other renumerations which are not part of the basic salary shall not be

included in the computation of the 13th month pay.

Clearly, the term "basic salary" includes renumerations or earnings paid by the employer to employee, but excludes

cost-of-living allowances, profit-sharing payments, and all allowances and monetary benefits which have not been

considered as part of the basic salary of the employee as of December 16, 1975. The exclusion of cost-of-living

allowances and profit sharing payments shows the intention to strip "basic salary" of payments which are otherwise

considered as "fringe" benefits. This intention is emphasized in the catch all phrase "all allowances and monetary

benefits which are not considered or integrated as part of the basic salary." Basic salary, therefore does not merely

exclude the benefits expressly mentioned but all payments which may be in the form of "fringe" benefits or allowances

(San Miguel Corporation v. Inciong, supra, at 143-144). In fact, the Supplementary Rules and Regulations Implementing

P.D. No. 851 are very emphatic in declaring that overtime pay, earnings and other renumerations shall be excluded in

computing the thirteenth month pay.

In other words, whatever compensation an employee receives for an eight-hour work daily or the daily wage rate in the

basic salary. Any compensation or remuneration other than the daily wage rate is excluded. It follows therefore, that

payments for sick, vacation and maternity leaves, premium for work done on rest days special holidays, as well as pay

for regular holidays, are likewise excluded in computing the basic salary for the purpose of determining the thirteen

month pay.

Petitioner claims that the mistake in the interpretation of "basic salary" was caused by the opinions, orders and rulings

rendered by then Acting Labor Secretary Amado C. Inciong, expressly including the subject items in computing the

thirteenth month pay. The inclusion of these items is clearly not sanctioned under P.D. No. 851, the governing law and

its implementing rules, which speak only of "basis salary" as the basis for determining the thirteenth month pay.

Moreover, whatever doubt arose in the interpretation of P.D. No. 851 was erased by the Supplementary Rules and

Regulations which clarified the definition of "basic salary."

As pointed out in San Miguel Corporation v. Inciong, (supra):

While doubt may have been created by the prior Rules and Regulations and Implementing Presidential

Decree 851 which defines basic salary to include all remunerations or earnings paid by an employer to

an employee, this cloud is dissipated in the later and more controlling Supplementary Rules and

Regulations which categorically, exclude from the definition of basic salary earnings and other

remunerations paid by employer to an employee. A cursory perusal of the two sets of Rules indicates



that what has hitherto been the subject of broad inclusion is now a subject of broad exclusion. The

Supplementary Rules and Regulations cure the seeming tendency of the former rules to include all

remunerations and earnings within the definition of basic salary.

The all-embracing phrase "earnings and other remunerations which are deemed not part of the basic

salary includes within its meaning payments for sick, vacation, or maternity leaves, premium for work

performed on rest days and special holidays, pay for regular holidays and night differentials. As such

they are deemed not part of the basic salary and shall not be considered in the computation of the 13th

month pay. If they were not so excluded, it is hard to find any "earnings and other remunerations"expressly excluded in computation of the 13th month-pay. Then the exclusionary provision would prove

to be idle and with purpose.

The "Supplementary Rules and Regulations Implementing P.D. No. 851," which put to rest all doubts in the computation

of the thirteenth month pay, was issued by the Secretary of Labor as early as January 16, 1976, barely one month after

the effectivity of P.D. No. 851 and its Implementing Rules. And yet, petitioner computed and paid the thirteenth month

pay, without excluding the subject items therein until 1981. Petitioner continued its practice in December 1981, after

promulgation of the afore-quoted San Miguel decision on February 24, 1981, when petitioner purportedly "discovered"

its mistake.

From 1975 to 1981, petitioner had freely, voluntarily and continuously included in the computation of its employees'

thirteenth month pay, the payments for sick, vacation and maternity leaves, premiums for work done on rest days and

special holidays, and pay for regular holidays. The considerable length of time the questioned items had been included

by petitioner indicates a unilateral and voluntary act on its part, sufficient in itself to negate any claim of mistake.

A company practice favorable to the employees had indeed been established and the payments made pursuant thereto,

ripened into benefits enjoyed by them. And any benefit and supplement being enjoyed by the employees cannot be

reduced, diminished, discontinued or eliminated by the employer, by virtue of Section 10 of the Rules and Regulations

Implementing P.D. No. 851, and Article 100 of the labor of the Philippines, which prohibit the diminution or elimination

by the employer of the employees' existing benefits (Tiangco v. Leogardo, Jr., 122 SCRA 267, [1983]).

Petitioner cannot invoke the principle of solutio indebiti which as a civil law concept that is not applicable in Labor Law.

Besides, in solutio indebiti , the obligee is required to return to the obligor whatever he received from the latter (Civil

Code of the Philippines, Arts. 2154 and 2155). Petitioner in the instant case, does not demand the return of what it paid

respondent ALU from 1975 until 1981; it merely wants to "rectify" the error it made over these years by excluding

unilaterally from the thirteenth month pay in 1982 the items subject of litigation. Solutio indebiti , therefore, is not

applicable to the instant case.

WHEREFORE, finding no grave abuse of discretion on the part of the NLRC, the petition is hereby DISMISSED, and the

questioned decision of respondent NLRC is AFFIRMED accordingly.

Cruz, Griño-Aquino, Davide, Jr. and Bellosillo, JJ., concur.


SUPREME COURT

Manila

EN BANC



G.R. No. 110068 February 15, 1995

PHILIPPINE DUPLICATORS, INC., petitioner,

vs.

NATIONAL LABOR RELATIONS COMMISSION and PHILIPPINE DUPLICATORS EMPLOYEES UNION-TUPAS,respondents.

R E S O L U T I O N

FELICIANO, J.:

On 11 November 1993, this Court, through its Third Division, rendered a decision dismissing the Petition

forCertiorari filed by petitioner Philippine Duplicators, Inc. (Duplicators) in G.R. No. 110068. The Court upheld the

decision of public respondent National Labor Relations Commission (NLRC), which affirmed the order of Labor Arbiter

Felipe T. Garduque II directing petitioner to pay 13th month pay to private respondent employees computed on the

basis of their fixed wages plus sales commissions. The Third Division also denied with finality on 15 December 1993 the

Motion for Reconsideration filed (on 12 December 1993) by petitioner.

On 17 January 1994, petitioner Duplicators filed (a) a Motion for Leave to Admit Second Motion for Reconsideration and

(b) a Second Motion for Reconsideration. This time, petitioner invoked the decision handed down by this Court, through

its Second Division, on 10 December 1993 in the two (2) consolidated cases of Boie-Takeda Chemicals,Inc. vs. Hon. Dionisio de la Serna and Philippine Fuji Xerox Corp. vs. Hon. Cresenciano B. Trajano, in G.R. Nos. 92174 and

102552, respectively. In its decision, the Second Division inter alia declared null and void the second paragraph of

Section 5 (a) 1 of the Revised Guidelines issued by then Secretary of Labor Drilon. Petitioner submits that the decision in

the Duplicators case should now be considered as having been abandoned or reversed by the Boie-Takedadecision,

considering that the latter went "directly opposite and contrary to" the conclusion reached in the former. Petitioner

prays that the decision rendered in Duplicators be set aside and another be entered directing the dismissal of the money

claims of private respondent Philippine Duplicators' Employees' Union.

In view of the nature of the issues raised, the Third Division of this Court referred the petitioner's Second Motion for

Reconsideration, and its Motion for Leave to Admit the Second Motion for Reconsideration, to the Court en banc en

consulta. The Court en banc, after preliminary deliberation, and inorder to settle the condition of the relevant case law,

accepted G.R. No. 110068 as a banc case.

Deliberating upon the arguments contained in petitioner's Second Motion for Reconsideration, as well as its Motion for

Leave to Admit the Second Motion for Reconsideration, and after review of the doctrines embodied, respectively,

in Duplicators and Boie-Takeda, we consider that these Motions must fail.

The decision rendered in Boie-Takeda cannot serve as a precedent under the doctrine of stare decisis. The Boie-

Takeda decision was promulgated a month after this Court, (through its Third Division), had rendered the decision in the

instant case. Also, the petitioner's (first) Motion for Reconsideration of the decision dated 10 November 1993 had

already been denied, with finality , on 15 December 1993, i .e.; before the Boie-Takeda decision became final on 5

January 1994.

Preliminarily, we note that petitioner Duplicators did not put in issue the validity of the Revised Guidelines on the

Implementary on of the 13th Month Pay Law, issued on November 16, 1987, by then Labor Secretary Franklin M. Drilon,

either in its Petition for Certiorari or in its (First) Motion for Reconsideration. In fact, petitioner's counsel relied upon

these Guidelines and asserted their validity in opposing the decision rendered by public respondent NLRC. Any

attempted change in petitioner's theory, at this late stage of the proceedings, cannot be allowed.

More importantly, we do not agree with petitioner that the decision in Boie-Takeda is "directly opposite or contrary to"

the decision in the present (Philippine Duplicators). To the contrary, the doctrines enunciated in these two (2) cases in

fact co-exist one with the other. The two (2) cases present quite different factual situations (although the same word

"commissions" was used or invoked) the legal characterizations of which must accordingly differ.



The Third Division in Durplicators found that:

In the instant case, there is no question that the sales commission earned by the salesmen who make or

close a sale of duplicating machines distributed by petitioner corporation, constitute part of the

compensation or remuneration paid to salesmen for serving as salesmen, and hence as part of the

"wage" or salary of petitioner's salesmen. Indeed, it appears that petitioner pays its salesmen a small

fixed or guaranteed wage; the greater part of the salesmen's wages or salaries being composed of the

sales or incentive commissions earned on actual sales closed by them. No doubt this particular galary

structure was intended for the benefit of the petitioner corporation, on the apparent assumption thatthereby its salesmen would be moved to greater enterprise and diligence and close more sales in the

expectation of increasing their sales commissions. This, however, does not detract from the character of

such commissions as part of the salary or wage paid to each of its salesmen for rendering services to

petitioner corporation.

In other words, the sales commissions received for every duplicating machine sold constituted part of the basic

compensation or remuneration of the salesmen of Philippine Duplicators for doing their job. The portion of the salary

structure representing commissions simply comprised an automatic increment to the monetary value initially assigned

to each unit of work rendered by a salesman. Especially significant here also is the fact that the fixed or guaranteed

portion of the wages paid to the Philippine Duplicators' salesmen represented only 15%-30% of an employee's total

earnings in a year. We note the following facts on record:

Salesmen's Total Earnings and 13th Month Pay

For the Year 1986 2

Name of Total Amount Paid Montly Fixed

Salesman Earnings as 13th Month Pay Wages x 12 3

Baylon, P76,610.30 P1,350.00 P16,200.00

Benedicto

Bautista 90,780.85 1,182.00 14,184.00

Salvador

Brito, 64,382.75 1,238.00 14,856.00

Tomas

Bunagan, 89,287.75 1,266.00 15,192.00

Jorge

Canilan, 74,678.17 1,350.00 16,200.00

Rogelio

Dasig, 54,625.16 1,378,00 16,536.00Jeordan

Centeno, 51,854.15 1,266.04 15,192.00

Melecio, Jr.

De los Santos 73,551.39 1,322.00 15,864.00

Ricardo

del Mundo, 108,230.35 1,406.00 16,872.00

Wilfredo



Garcia, 93,753.75 1,294.00 15,528.00

Delfin

Navarro, 98,618.71 1,266.00 15,192.00

Ma. Teresa

Ochosa, 66,275.65 1,406.00 16,872.00

Rolano

Quisumbing, 101,065.75 1,406.00 16,872.00

Teofilo

Rubina, 42,209.73 1,266.00 15,192.00

Emma

Salazar, 64,643.65 1,238.00 14,856.00

Celso

Sopelario, 52,622.27 1,350.00 16,200.00

Ludivico

Tan, 30,127.50 1,238.00 14,856.00

Leynard

Talampas, 146,510.25 1,434.00 17,208.00

Pedro

Villarin, 41,888.10 1,434.00 17,208.00

Constancio

Carrasco, 50,201.20 403.75*

Cicero

Punzalan, 24,351.89 1,266.00 15,192.00

Reynaldo

Poblador, 25,516.75 323.00*

Alberto

Cruz, 32,950.45 323.00*

Danilo

Baltazar, 15,681.35 323.00*

Carlito

Considering the above circumstances, the Third Division held, correctly, that the sales commissions were an integral part

of the basic salary structure of Philippine Duplicators' employees salesmen. These commissions are not overtime

payments, nor profit-sharing payments nor any other fringe benefit. Thus, the salesmen's commissions, comprising a

pre-determined percent of the selling price of the goods sold by each salesman, were properly included in the term

"basic salary" for purposes of computing their 13th month pay.



In Boie-Takeda the so-called commissions "paid to or received by medical representatives of Boie-Takeda Chemicals or

by the rank and file employees of Philippine Fuji Xerox Co.," were excluded from the term "basic salary" because these

were paid to the medical representatives and rank-and-file employees as "productivity bonuses." 4 The Second Division

characterized these payments as additional monetary benefits not properly included in the term "basic salary" in

computing their 13th month pay. We note that productivity bonuses are generally tied to the productivity, or capacity

for revenue production, of a corporation; such bonuses closely resemble profit-sharing payments and have no clear

director necessary relation to the amount of work actually done by each individual employee. More generally, a bonus is

an amount granted and paid ex gratia to the employee; its payment constitutes an act of enlightened generosity and

self-interest on the part of the employer, rather than as a demandable or enforceable obligation. InPhilippine EducationCo. Inc. (PECO) v . Court of Industrial Relations, 5 the Court explained the nature of a bonus in the following general terms

As a rule a bonus is an amount granted and paid to an employee for his industry loyalty which

contributed to the success of the employer's business and made possible the realization of profits. It is

an act of generosity of the employer for which the employee ought to be thankful and grateful. It is also

granted by an enlightened employer to spur the employee to greater efforts for the success of the

business and realization of bigger profits. . . . . From the legal point of view a bonus is not and mandable

and enforceable obligation. It is so when It is made part of the wage or salary or compensation. In such a

case the latter would be a fixed amount and the former would be a contingent one dependent upon the

realization of profits. . . . 6

(Emphasis supplied)

In Atok-Big Wedge Mining Co. , Inc. v . Atok-Big Wedge Mutual Benefit Association, 7

the Court amplified:

. . . . Whether or not [a] bonus forms part of waqes depends upon the circumstances or conditions for its

payment . If it is an additional compensation which the employer promised and agreed to give without

any conditions imposed for its payment, such as success of business or greater production or output,

then it is part of the wage. But if it is paid only if profits are realized or a certain amount of productivity

achieved, it cannot be considered part of wages. . . . It is also paid on the basis of actual or actual work

accomplished. If the desired goal of production is not obtained, or the amount of actual work

accomplished, the bonus does not accrue. . . . 8 (Emphasis supplied)

More recently, the non-demandable character of a bonus was stressed by the Court in Traders Royal Bank v .National

Labor Relations Commission: 9

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 ." (Aragon v. Cebu Portland Cement Co., 61 O.G. 4567). "It is something given in addition

to what is ordinarily received by or strictly due the recipient ." The granting 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 . . ." (Kamaya Point Hotel v. NLRC, 177 SCRA 160 [1989]). 10 (Emphasis supplied)

If an employer cannot be compelled to pay a productivity bonus to his employees, it should follow that such productivity

bonus, when given, should not be deemed to fall within the "basic salary" of employees when the time comes to

compute their 13th month pay.

It is also important to note that the purported "commissions" paid by the Boie-Takeda Company to its medical

representatives could not have been "sales commissions" in the same sense that Philippine Duplicators paid its salesmen

Sales commissions. Medical representatives are not salesmen; they do not effect any sale of any article at all. In common

commercial practice, in the Philippines and elsewhere, of which we take judicial notice, medical representatives are

employees engaged in the promotion of pharmaceutical products or medical devices manufactured by their employer.

They promote such products by visiting identified physicians and inform much physicians, orally and with the aid of

printed brochures, of the existence and chemical composition and virtues of particular products of their company. They

commonly leave medical samples with each physician visited; but those samples are not "sold" to the physician and the

physician is, as a matter of professional ethics, prohibited from selling such samples to their patients. Thus, the



additional payments made to Boie-Takeda's medical representatives were not in fact sales commissions but rather

partook of the nature of profit-sharing bonuses.

The doctrine set out in the decision of the Second Division is, accordingly, that additional payments made to

employees, to the extent they partake of the nature of profit-sharing payments, are properly excluded from the ambit of

the term "basic salary" for purposes of computing the 13th month pay due to employees. Such additional payments

are not "commissions" within the meaning of the second paragraph of Section 5 (a) of the Revised Guidelines

Implementing 13th Month Pay.

The Supplementary Rules and Regulations Implementing P.D. No. 851 subsequently issued by former Labor Minister

Ople sought to clarify the scope of items excluded in the computation of the 13th month pay; viz.:

Sec. 4. Overtime pay, earnings and other remunerations which are not part of the basic salary shall not

be included in the computation of the 13th month pay.

We observe that the third item excluded from the term "basic salary" is cast in open ended and apparently circular

terms: "other remunerations which are not part of the basic salary." However, what particular types of earnings and

remuneration are or are not properly included or integrated in the basic salary are questions to be resolved on a case to

case basis, in the light of the specific and detailed facts of each case. In principle, where these earnings and

remuneration are closely akin to fringe benefits, overtime pay or profit-sharing payments, they are properlyexcluded incomputing the 13th month pay. However, sales commissions which are effectively an integral portion of the basic salary

structure of an employee, shall be included in determining his 13th month pay.

We recognize that both productivity bonuses and sales commissions may have an incentive effect. But there is reason to

distinguish one from the other here. Productivity bonuses are generally tied to the productivity or profit generation of

the employer corporation. Productivity bonuses are not directly dependent on the extent an individual employee exerts

himself. A productivity bonus is something extra for which no specific additional services are rendered by any particular

employee and hence not legally demandable, absent a contractual undertaking to pay it. Sales commissions, on the

other hand, such as those paid in Duplicators, are intimately related to or directly proportional to the extent or energy o

an employee's endeavors. Commissions are paid upon the specific results achieved by a salesman-employee. It is a

percentage of the sales closed by a salesman and operates as an integral part of such salesman's basic pay.

Finally, the statement of the Second Division in Boie-Takeda declaring null and void the second paragraph of Section 5(a)

of the Revised Guidelines Implementing the 13th Month Pay issued by former Labor Se cretary Drilon, is properly

understood as holding that that second paragraph provides no legal basis for including within the term "commission"

there used additional payments to employees which are, as a matter of fact, in the nature of profit -sharing payments or

bonuses. If and to the extent that such second paragraph is so interpreted and applied, it must be regarded as invalid as

having been issued in excess of the statutory authority of the Secretary of Labor. That same second paragraph however,

correctly recognizes that commissions, like those paid in Duplicators, may constitute part of the basic salary structure of

salesmen and hence should be included in determining the 13th month pay; to this extent, the second paragraph is and

remains valid.

ACCORDINGLY, the Motions for (a) Leave to File a Second Motion for Reconsideration and the (b) aforesaid SecondReconsideration are DENIED for lack of merit. No further pleadings will be entertained.

Narvasa, C.J., Padilla, Bidin, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Quiason, Puno, Vitug, Kapunan, Mendoza

and Francisco, JJ., concur.

Footnotes



1 The second paragraph of Section 5 (a) of the Revised Guidelines Implementing the 13th Month Pay

reads as follows:

Employees who are paid a fixed or guaranteed wage plus commission are also entitled to the mandated

13th month pay, based on their total earnings during the calendar year, i .e., on both their fixed or

guaranteed wage and commission.

2 See Annex "A", Records of G.R. No. 110068, Philippine Duplicators, Inc. v. National Labor Relations

Commission.

3 This column is added by the Court. We have assumed that the amount paid as 13th month pay, as

shown in the preceding column, represented a full month's fixed wage, without any deductions for, e.g.,

absences, undertime, etc. In the items below marked with an asterisk, the amount of the 13th month

pay is so tiny as to give rise to the impression that some deduction therefrom was probably made; the

nature of such deduction is not here pertinent.

The 15%-30% range in the proportion of fixed wages to total earnings is obtained by the following

fraction:

Monthly Fixed Wage x 12

——————————

Total Earnings

4 See Rollo of Boie-Takeda v. Trajano, p. 126; Rollo of Fuji Xerox v. Trajano,

p. 27.

5 92 Phil. 381 (1952).

6 92 Phil. at 385; see also Luzon Stevedoring Corporation v. Court of Industrial Relations, 15 SCRA 660

(1965).

7 92 Phil. 754 (1953).

8 92 Phil, at 757; see also Claparols v. Court of Industrial Relations, 65 SCRA 613 (1975).

9 189 SCRA 274 (1990).

10 189 SCRA at 277.

labor cases 4(13th month pay)

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