THIRD DIVISION

[G.R. No. 116593. September 24, 1997]

PULP AND PAPER, INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION AND EPIFANIA ANTONIO, respondents. DECISION
PANGANIBAN, J.:

In the absence of wage rates specially prescribed for piece-rate workers, how should the separation pay and salary differential of such workers be computed?

Statement of the Case This is the main question raised in the instant petition for certiorari, filed under Rule 65 of the Rules of Court, to set aside and annul National Labor Relations Commissions[1]Decision[2] promulgated on September 24, 1993 and Resolution[3] dated December 16, 1993 in NLRC NCR CA No. 004041-92.[4] Public respondents assailed Decision affirmed in toto Labor Arbiter Eduardo J. Carpios decision[5] dated October 6, 1992, which disposed thus:[6]

IN VIEW OF ALL THE FOREGOING, judgement [sic] is hereby rendered:

1. dismissing the complaint for illegal dismissal for lack of merit; 2. ordering respondent Pulp and Papers Distributors Inc. to pay complainant Efipania (sic) Antonio the sum of P49.088.00 representing her separation pay; and 3. ordering respondent to pay the complainant the sum of P31,149.56 representing the underpayment of wages. 4. dismissing all other issues for lack of merit.

The assailed Resolution denied petitioners motion for reconsideration for lack of merit.

The Facts

The facts as found by the labor arbiter are as follows:[7]

A case of illegal dismissal and underpayment of wages [was] filed by MS. EPIFANIA ANTONIO [private respondent herein] against PULP AND PAPER DISTRIBUTORS INC., [petitioner herein] x x x. In filing the present complaint, complainant in her position paper alleges that she was a regular employee of the x x x corporation having served thereat as Wrapper sometime in September 1975. On November 29, 1991, for unknown reasons, she was advised verbally of her termination and was given a prepared form of Quitclaim and Release which she refused to sign. Instead she brought the present complaint for illegal dismissal. In charging the [herein petitioner] of underpayment of wages, complainant in the same position paper alleges that, rarely during her employment with the respondent she received her salary, a salary which was in accordance with the minimum wage law. She was not paid overtime pay, holiday pay and five-day service incentive leave pay, hence she is claiming for payments thereof by instituting the present case. Respondent on the otherhand [sic] denied having terminated the services of the complainant and alleges inter alia that starting 1989 the orders from customers became fewer and dwindled to the point that it is no longer practical to maintain the present number of packer/wrappers. Maintaining the same number of packers/wrappers would mean less pay because the work allocation is no longer the same as it was. Such being the case, the respondent has to reduce temporarily the number of packers/wrappers. Complainant was among those who were temporarily laid-off from work. Complainant last worked with the company on June 29, 1991. As regards complainants allegation that on November 29, 1991, she was forced to sign a quitclaim and release by the respondent, the latter clarified that considering that five months from the time the complainant last worked with the company, the management decided to release the complainant and give her a chance to look for another job in the meantime that no job is available for her with the company. In other words, complainant was given the option and considering that she did not sign the documents referred to as the Quitclaim and Release, the respondent did not insist, and did not terminate the services of the complainant. It was just surprise [sic] to receive the present complaint. In fact, respondent added that the reason why the complainant was called on November 29, 1991 was not to work but to receive her 13th month pay of P636.70 as shown by the voucher she signed (Annex-A, Respondent). As regards the claim of the complainant for underpayment, respondent did not actually denied (sic) the same but give [sic] the reservation that should the same be

determined by this Office it is willing to settle the same considering the fact that complainant herein being paid by results, it is not in a proper position to determine whether the complainant was underpaid or not.
The Issues Petitioner couched the main issue in this wise:[8]

Did the Public Respondent NLRC act correctly in affirming in toto the decision rendered by the labor arbitration branch a quo in NLRC NCR Case no. 00-01-0049492?
While it expressly admits that private respondent is entitled to separation pay, petitioner raises nonetheless the following queries: (a) Are the factors in determining the amount of separation pay for a piece-rate worker the same as that of a timeworker? (b) Is a worker, who was terminated for lack of work, entitled to separation pay at the rate of one-months pay for every year of service?[9] The petition is based on the following grounds:
I

Public Respondent NLRC committed grave abuse of discretion and serious reversible error when it affirmed in toto the award of separation pay in favor of private respondent, without bases in fact and in law.
II

Public Respondent NLRC committed grave abuse of discretion and serious reversible error when it affirmed in toto the award of underpayment in favor of private respondent, without bases in fact and in law.
The Public Respondents Ruling In dismissing the appeal of petitioner, public respondent reasoned:[10]

It is true that all the above circumstances cited by the [herein petitioner] are not present in the case at bar, hence, separation pay based on those circumstances is not owing to the [herein private respondent]. However, it is quite obvious that [petitioner] missed the legal and factual basis why separation pay was awarded by the Labor Arbiter. In the first place, the [petitioner] admits that the complainant-appellee was temporarily laid off on June 29, 1991. This means that there was a temporary

suspension of employer-employee relationship between the appellant and the appellee. Lay-off is a temporary termination initiated by the employer, but without prejudice to the reinstatement or recall of the workers who have been temporarily separated. The reasons for laying off employees are varied: lack of work, shutdown for repairs, business reverses, and the like. Always, however, there is the expectation that the employees who have been laid off will be recalled or rehired. This situation is governed by Rule I, Section 12, of Book VI of the Implementing Rules and Regulations of the Labor Code, which provides: Sec. 12. Suspension of Relationship. -- The employer-employee relationship shall be deemed suspended in case of suspension of operation of the business or undertaking of the employer for a period not exceeding six (6) months x x x. From June 29, 1991 up to the time the complainant-appellee filed her complaint on January 21, 1992, there was more than six (6) months that already elapse (sic) and yet, the appellant failed to recall the appellee to let her resume working. If the appellant was not yet in a possession to recall or reinstate the appellee after six (6) months, up to when shall appellant let her keep in waiting. Of course, she cannot be allowed to wait interminably. That is the reason why the law imposes a period of six (6) months within which the resumption of employer-employee relationship must be resumed in temporary lay-offs. Otherwise, any employer can, in the guise of a temporary lay-off, close its doors to an employee for more than six months and their claim that the layoff has ripened into termination and try to get away from any liability. The award of separation pay is hereby declared in order. On the second issue raised by the (petitioner) on appeal, We are also for the Labor Arbiters ruling upholding the appellees right to salary differential in the amount computed. The argument interposed by the [petitioner] based on Art. 101 of the Labor Code, in relation to Rule VII, Section (8), Book III of the Omnibus Implementing Rule and Regulations, will not lie in the case at bar. In the first place, pursuant to the provision of law cited by the [petitioner], all time and motion studies, or any other schemes or devices to determine whether the employees paid by results are being compensated in accordance with the minimum wage requirements, shall only be approved on petition of the interested employer. Thus, it is the fault of the [petitioner] on whose initiative, a time and motion study or any other similar scheme is not yet available in its establishment.
The Courts Ruling

The appeal is not meritorious.

First Issue: Computation of Minimum Wage Petitioner argues that private respondent was a piece-rate worker and not a timeworker. Since private respondents employment as (p)acker/(w)rapper in 1975 until her separation on June 29, 1991, (h)er salary depended upon the number of reams of bond paper she packed per day. Petitioner contends that private respondents work depended upon the number and availability of purchase orders from customers. Petitioner adds that, oftentimes, packers/wrappers only work three to four hours a day. Thus, her separation pay must be based on her latest actual compensation per piece or on the minimum wage per piece as determined by Article 101 of the Labor Code, whichever is higher, and not on the daily minimum wage applicable to time-workers.[11]

Compensation of Pieceworkers In the absence of wage rates based on time and motion studies determined by the labor secretary or submitted by the employer to the labor secretary for his approval, wage rates of piece-rate workers must be based on the applicable daily minimum wage determined by the Regional Tripartite Wages and Productivity Commission. To ensure the payment of fair and reasonable wage rates, Article 101[12] of the Labor Code provides that the Secretary of Labor shall regulate the payment of wages by results, including pakyao, piecework and other nontime work. The same statutory provision also states that the wage rates should be based, preferably, on time and motion studies, or those arrived at in consultation with representatives of workers and employers organizations. In the absence of such prescribed wage rates for piece-rate workers, the ordinary minimum wage rates prescribed by the Regional Tripartite Wages and Productivity Boards should apply. This is in compliance with Section 8 of the Rules Implementing Wage Order Nos. NCR-02 and NCR-02-A -- the prevailing wage order at the time of dismissal of private respondent, viz.:[13]

SEC. 8. Workers Paid by Results. -- a) All workers paid by results including those who are paid on piece work, takay, pakyaw, or task basis, shall receive not less than the applicable minimum wage rates prescribed under the Order for the normal working hours which shall not exceed eight (8) hours work a day, or a proportion thereof for work of less than the normal working hours. The adjusted minimum wage rates for workers paid by results shall be computed in accordance with the following steps: 1) Amount of increase in AMW x 100 = % increase

Previous AMW 2) Existing rate/piece x % increase = increase in rate/piece; 3) Existing rate/piece + increase in rate/piece = adjusted rate/piece. b) The wage rates of workers who are paid by results shall continue to be established in accordance with Art. 101 of the Labor Code, as amended and its implementing regulations. (Underscoring supplied.)
On November 29, 1991, private respondent was orally informed of the termination of her employment. Wage Order No. NCR-02, in effect at the time, set the minimum daily wage for non-agricultural workers like private respondent at P118.00.[14] This was the rate used by the labor arbiter in computing the separation pay of private respondent. We cannot find any abuse of discretion, let alone grave abuse, in the order of the labor arbiter which was later affirmed by the NLRC. Moreover, since petitioner employed piece-rate workers, it should have inquired from the secretary of labor about their prescribed specific wage rates. In any event, there being no such prescribed rates, petitioner, after consultation with its workers, should have submitted for the labor secretarys approval time and motion studies as basis for the wage rates of its employees. This responsibility of the employer is clear under Section 8, Rule VII, Book III of the Omnibus Rules Implementing the Labor Code:

Section 8. Payment by result. (a) On petition of any interested party, or upon its initiative, the Department of Labor shall use all available devices, including the use of time and motion studies and consultations with representatives of employers and workers organizations, to determine whether the employees in any industry or enterprise are being compensated in accordance with the minimum wage requirements of this Rule. (b) The basis for the establishment of rates for piece, output or contract work shall be the performance of an ordinary worker of minimum skill or ability. (c) An ordinary worker of minimum skill or ability is the average worker of the lowest producing group representing 50% of the total number of employees engaged in similar employment in a particular establishment, excluding learners, apprentices and handicapped workers employed therein. (d) Where the output rates established by the employer do not conform with the standards prescribed herein, or with the rates prescribed by the Department of Labor in an appropriate order, the employees shall be entitled to the difference between the amount to which they are entitled to receive under such prescribed standards or rates and that actually paid them by employer.

In the present case, petitioner as the employer unquestionably failed to discharge the foregoing responsibility. Petitioner did not submit to the secretary of labor a proposed wage rate -- based on time and motion studies and reached after consultation with the representatives from both workers and employers organization -- which would have applied to its piece-rate workers. Without those submissions, the labor arbiter had the duty to use the daily minimum wage rate for non-agricultural workers prevailing at the time of private respondents dismissal, as prescribed by the Regional Tripartite Wages and Productivity Boards. Put differently, petitioner did not take the initiative of proposing an appropriate wage rate for its piece-rate workers. In the absence of such wage rate, the labor arbiter cannot be faulted for applying the prescribed minimum wage rate in the computation of private respondents separation pay. In fact, it acted and ruled correctly and legally in the premises. It is clear, therefore, that the applicable minimum wage for an eight-hour working day is the basis for the computation of the separation pay of piece-rate workers like private respondent. The computed daily wage should not be reduced on the basis of unsubstantiated claims that her daily working hours were less than eight. Aside from its bare assertion, petitioner presented no clear proof that private respondents regular working day was less than eight hours. Thus, the labor arbiter correctly used the full amount of P118.00 per day in computing private respondents separation pay. We agree with the following computation:[15]

Considering therefore that complainant had been laid-off for more than six (6) months now, we strongly feel that it is already reasonable for the respondent to pay the complainant her separation pay of one month for every year of service, a fraction of six (6) months to be considered as one whole year. Separation pay should be computed based on her minimum salary as will be determined hereunder. Separation pay 1 month = 16 years P118.00 x 26 x 16 years = P49,088.00
The amount P118.00 represents the applicable daily minimum wage per Wage Order Nos. NCR-02 and NCR-02-A; 26, the number of working days in a month after excluding the four Sundays which are deemed rest days; 16, the total number of years spent by private respondent in the employ of petitioner.

Second Issue: Computation of Separation Pay Petitioner questions not only the basis for computing private respondents monthly wage; it also contends that private respondents separation pay should not have been computed at one months pay for every year of service. Because private respondent should be considered retrenched, the separation pay should be one months pay or at least one/half (1/2) month pay for every year of service, whichever is higher, and not one (1) months pay for every year of service as public respondent had ruled. [16]

Petitioner misapprehended the ground relied upon by public respondent for awarding separation pay. In this case, public respondent held that private respondent was constructively dismissed, pursuant to Article 286 of the Labor Code which reads:

ART. 286. When employment not deemed terminated. -- The bonafide suspension of the operation of a business or undertaking for a period not exceeding six (6) months, or the fulfillment by the employee of a military or civic duty shall not terminate employment. In all such cases, the employer shall reinstate the employee to his former position without loss of seniority rights if he indicates his desire to resume his work not later that one (1) month from his resumption of operations of his employer or from his relief from the military or civic duty.
Petitioner failed to discern that public respondent, in finding that the services of private respondent were terminated, merely adopted by analogy the rule on constructive dismissal. Since private respondent was not reemployed within six (6) months from the suspension of her employment, she is deemed to have been constructively dismissed.[17]Otherwise, private respondent will remain in a perpetual floating status. Because petitioner had not shown by competent evidence any just cause for the dismissal of private respondent, she is entitled to reinstatement [18] or, if this is not feasible, to separation pay equivalent to one (1) month salary for every year of service. Private respondent, however, neither asked for reinstatement [19] nor appealed from the labor arbiters finding that she was not illegally dismissed; she merely prayed for the grant of her monetary claims. Thus, we sustain the award of separation pay made by public respondent,[20] for employees constructively dismissed are entitled to separation pay. Because she did not ask for more, we cannot give her more. We repeat: she appealed neither the decision of the labor arbiter nor that of the NLRC. Hence, she is not entitled to any affirmative relief. Furthermore, we cannot sustain petitioners claim that private responden t was retrenched. For retrenchment to be considered a ground for termination, the employer must serve a written notice on the workers and the Department of Labor and Employment at least one month before the intended date thereof. [21] Petitioner did not comply with this requirement.

Third Issue: Determination of Salary Differential In light of the foregoing discussion, we must also dismiss petitioners chall enge to the computation of salary differential. As earlier observed, private respondent is entitled to the minimum wage prevailing at the time of the termination of her employment. The same rate of minimum wage, P118.00, should be used in computing her salary differential resulting from petitioners underpayment of her wages. Thus, the labor arbiter correctly deducted private respondents actually received wage of P60 a day from the prescribed daily minimum wage of P118.00, and multiplied the difference by 26

working days, and subsequently by 16 years, equivalent to her length of service with petitioner. Thus, the amount of P31,149.56 as salary differential.[22] Petitioner argues that the work of the private respondent is seasonal, being dependent upon the availability of job-orders and not twenty-six (26) days a month.[23] Further, petitioner contends that private respondent herself admitted she was a piece worker whose work [was] seasonal.[24] Contrary to the assertion of petitioner, neither the assailed Decision nor the pleadings of private respondent show that private respondents work was seasonal. More important, petitioner utterly failed to substantiate its allegation that private respondents work was seasonal. We observe that the labor arbiter based the computation of the salary differential on a 26-day month on the presumption that private respondents work was continuous. In view of the failure of petitioner to support its claim, we must sustain the correctness of this computation. WHEREFORE, premises considered, the petition is DISMISSED and the assailed Decision is AFFIRMED. Costs against petitioner. SO ORDERED Narvasa, C.J., (Chairman), Romero, Melo, and Francisco, JJ., concur.

[1]

Second Division composed of Commissioner Rogelio I. Rayala, ponente, and Presiding Commissioner Edna Bonto-Perez and Commissioner Domingo H. Zapanta, concurring. Rollo, pp. 40-47. Ibid., pp. 54-55. Formerly NLRC NCR 00-01-00494-92. Rollo, pp. 25-29. Ibid., pp. 28-29. Ibid., pp. 25-27. Ibid., pp. 8-9; some of the words in the text are originally in upper case. Ibid., p. 9. Ibid., pp. 44-46. Ibid., pp. 11-13; underscoring omitted. The provision reads:

[2]

[3]

[4]

[5]

[6]

[7]

[8]

[9]

[10]

[11]

[12]

Art. 101. Payment by results. - (a) The Secretary of Labor shall regulate the payment of wages by results, including pakyao, piecework and other nontime work, in order to ensure the payment of fair and reasonable wage rates, preferably through time and motion studies or in consultation with representatives of workers and employers organizations.
[13]

Issued in pursuance of Section 5, Rule IV of the National Wages and Productivity Commission Rules of Procedure on Minimum Wage Fixing and took effect per Section 16 of the same Rules on January 8, 1991.

[14]

Section 4 of the Rules Implementing Wage Order Nos. NCR-02 and NCR-02-A. Labor arbiters decision, p. 4; rollo, p. 28. Rollo, p. 15. Manipon, Jr. vs. National Labor Relations Commission, 239 SCRA 451, 457, December 27, 1994; Peoples Security, Inc. vs. NLRC, 226 SCRA 146, 152-153, September 8, 1993; International Hardware, Inc. vs. NLRC, 176 SCRA 256, 261, August 10, 1989. Article 279. 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. (As amended by Section 34 of RA 6715). Rollo, pp. 142-145. Toogue vs. National Labor Relations Commission, 238 SCRA 241, 246, November 18, 1994. Article 283, Labor Code. See Catatista vs. NLRC, 247 SCRA 46, August 3, 1995. From the computation of the labor arbiter, the following figures were utilized:

[15]

[16]

[17]

[18]

[19]

[20]

[21]

[22]

Underpayment Average (P60/day) 1/21/89 - 6/30/89 = 5.3 mos. P64.00 (minimum wage [RA 6640] effective December 14, 1987) - P60.00 P4.00 x 26 x 5.3/mos. 7/1/89 - 10/31/90 = 16.0/mos. P89.00 (minimum wage [RA 6727], effective July 1, 1989) - P60.00 = P29.00 x26 x 16.0/mos. 11/1/90 - 1/7/91 = 2.23/mos. P106.00 (minimum wage-Wage Order No. [NCR-01], effective November 1,1990)- P60.00 = P46.00 x 26 x 2.23/mos. 11/23/91 - 11/29/91 = 0.2/mo. P118.00 (minimum wage-Wage Order No. [NCR-02], effective January 8, 1991) P100.00 = P18.00 x 26 x 0.2/mo. =P 93.60 Total P 31,149.56.
[23]

= P 551.20

= P12,064.00

= P15,773.68

Rollo, pp. 16-17. Ibid., p. 155. Republic of the Philippines Congress of the Philippines Metro Manila First Special Session Begun and held in Metro Manila on Friday the seventh day of June nineteen hundred and ninety-six.

[24]

REPUBLIC ACT No. 8188 AN ACT INCREASING THE PENALTY AND IMPOSING DOUBLE INDEMNITY FOR VIOLATION OF THE PRESCRIBED INCREASES OR ADJUSTMENTS IN THE WAGE RATES. AMENDING FOR THE PURPOSE SECTION TWELVE OF REPUBLIC ACT NUMBERED SIXTY-SEVEN HUNDRED TWENTYSEVEN. OTHERWISE KNOWN AS THE WAGE RATIONALIZATION ACT. Be it enacted by the Senate and House of Representatives of the Philippines in the Congress assembled : SECTION 1. Section 12 of Republic Act Numbered Sixty-seven hundred twenty- seven is hereby amended to read to as follows: SEC 12 Any person. corporation. trust. firm. parmersnip. association or entity which refuses or fails to pay any of the prescribed increases or adjustments in the wage rales made in accordance with this Act shall be punished by a fine not less than Twenty-five thousand pesos (P25.000) nor more than One hundred thousand pesos (P100.000) or imprisonment of not less than two (2) years nor more than four (4) years or both such fine and imprisonment at the discretion of the court: Provided. That any person convicted under this Act shall not be entitled to the benefits provided for under the Probation Law. The employer concerned shall be ordered to pay an arnount equivalent to double the unpaid benefits owing to the employees:Provided. That payment of indemnity shall not absolve the employer from the criminal liability imposable under this Act. "If the violation is committed by a corporation. trust or firm. partnership, association or any other entity, the penalty of imprisonment shall be imposed upon the entity's responsible officers including but not limited to the president, vicepresident, chief executive officer, general manager, managing director or partner. SECTION 2. All laws, presidential decrees, executive orders, rules and regulations or parts thereof inconsistent with the provisions of this Act are hereby repealed or modified accordingly. SECTION 3. This Act shall take effect fifteen (15) days after its complete publication in a newspaper of general circulation. Approved. JOSE DE VENENCIA JR. Speaker of the House of Representative NEPTALI GONZALES President of the Senate

This Act, which is a consolidation of Senate Bill No. 407 and House Bill No. 5808 was finally passed by the Senate and the House of Representatives on June 7, 1996. CAMILO L. SABIO Secretary General HEZEL P. GACUTAN Secretary of the Senate

House of Reprentatives

Approved: June 11,1996 FIDEL V RAMOS President of the Philippines Top

Republic of the Philippines DEPARTMENT OF LABOR AND EMPLOYMENT Manila DEPARTMENT ORDER NO. 10 Series of 1998 Guidelines on the imposition of Double Indemnity For Non-Compliance with the Prescribed Increases or Adjustments In Wage Rates Pursuant to the rule-making authority of the Secretary of Labor and Employment under Article 5 of the Labor Code, as amended, and Section 13 of the Republic Act No. 6727, and to ensure uniformity in the implementation of the provisions of Republic Act No. 8188 entitled "An Act Increasing the Penalty and Imposing Double Indemnity for Violation of the Prescribed Increases or Adjustments in the Wage Rates, amending for the Purpose Section Twelve of Republic Act Numbered Sixty-Seven Hundred Twenty Seven. Otherwise known as Wage Rationalization Act". This Guidelines is hereby promulgated for the guidelines of and compliance by all concerned. SECTION 1. Coverage - This Guidelines shall apply to any person, corporation, trust, firm, partnership, association, organization, or entity in the capacity of an employer. SECTION 2. Definition of Terms - As used in this Guidelines, the following terms shall mean:
a. b. c. d. e. f. g.

"Act" refers to Republic Act No. 8188. "Department" refers to the Department of Labor and Employment. "Regional Director" refers to the Director of the Regional Office of the Department. "Board" refers to the Regional Tripartite Wages and Productivity Board. "Employer" refers to any person, corporation, trust, firm, partnership association or entity acting directly or indirectly in the interest of the employer in relation to an employee. "Employee" refers to any individual employed by an employer. "Wage Rates" refers to the lowest basic pay that the employer can pay his workers including cost of living allowances as fixed by the Board, but excludes other wage-related

h. i.

j. k.

l.

m.

n.

benefits such as overtime pay, bonuses, night shift differential pay, holiday pay, premium pay, 13th month pay, premium pay, leave benefits, among others. "Wage Order " refers to the order promulgated by the board pursuant to its wage fixing authority. "Prescribed increases or Adjustments" refer to the amount of increase or adjustment in the wage rate of workers fixed by the Board which the Employer is mandated to pay upon effectivity of a wage order "Violation" refers to the refusal or failure to pay an employee of the prescribed increases or adjustments as may be established by the Regional Director. "Unpaid Benefits" refer to the prescribed wage rates which the employer failed to pay upon the effectivity of a wage order exclusive of other wage-related benefits. "Unpaid benefits" as herein understood shall be the principal basis for computing the double indemnity. "Double Indemnity" refers to the payment to a concerned employee of the prescribed increases or adjustments in the wage rates, which was not paid by an employer in amount equivalent to twice the unpaid benefits owing to such employee. "Notice of Inspection Result" refers to the inspection form duly accomplished and issued by the labor standards enforcement officer to the employer or his representative after the completion of the inspection. The notice shall specify the violations discovered, if any, together with the officers recommendation and computation of the unpaid benefits due each worker with an advice that the employer shall be liable for double indemnity in case of refusal or failure to correct the violation within five (5) calendar days from receipt of notice. "Compliance order" refers to the order issued by the regional director, after due notice and hearing conducted by himself or a duly authorized hearing officer finding that a violation has been committed and directing the employer to pay the amount due each worker within ten (10) calendar days from receipt thereof.

SECTION 3. Issuance of a Compliance Order. In cases where the Secretary of Labor and Employment of the Regional Director has acquired jurisdiction over a violation as defined herein pursuant to the visitorial and enforcement powers vested upon him by Article 128 (b) of the Labor Code as amended, he shall have the power to issue a compliance order to give effect to the provisions of the Act. Such order shall be subject to the following principles.
a.

In case of routine inspection where the violation has been established after due notice and hearing where appropriate the Regional Director shall, after (7) calendar days from the employer's receipt of the notice of inspection result, issue a compliance order. b. Ion case of complaint inspection, the Regional Director shall call for summary investigation and after due notice and hearing shall, where appropriate issue a compliance order. c. The compliance order shall directly the employer to pay the amount due each worker within ten (10) days from receipt thereof and to submit proof of compliance. The order shall specify the amount due each worker and shall include the computation on which the order was based. d. Upon the finality of the compliance order, the Regional Director shall cause the issuance of a writ of execution for its enforcement.

e.

No compliance order shall be issued during the pendency of an application for exemption from a wage order duly filed with the appropriate board.

SECTION 4. Double Indemnity, when to Start Period of Compution.

a.

The computation for double indemnity as herein defined shall start from the effectivity of the prescribed increases or adjustments as indicated in the wage order. b. The basis for the computation of double indemnity shall be limited to the unpaid benefits as defined herein. c. Where there is partial compliance with the prescribed increase or adjustment the basis for computing double indemnity shall be the balance of unpaid benefits reckoned from the effectivity of the wage order. SECTION 5. Supersession Clause - All rules, regulations, issuances, or parts thereof which are consistent with this guidelines are deemed superseded or modified accordingly. SECTION 6. Separability Clause - If any provision or portion of this guidelines is declared void or unconstitutional, the remaining portions or provisions hereof shall continue to be valid and effective. SECTION 7. Effectivity - This Guidelines shall take effect fifteen (15) days after after its complete publication in at least one (1) newspaper of general circulation. 04 May 1998 CRESENCIANO B. TRAJANO Secretary

)_____
Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

G.R. No. 109328 August 16, 1994 ASSOCIATED LABOR UNIONS-TUCP representing its members, DMPIEU-ALU-TUCP, LOCAL 302 and/or GERONIMO DE LOS SANTOS, petitioners, vs. THE HON. NATIONAL LABOR RELATIONS COMMISSION (FIFTH DIVISION), ATTY. NOEL AUGUSTO S. MAGBANUA in his capacity as Labor Arbiter, and DEL MONTE PHILIPPINES, INC., respondents.

Seno, Mendoza & Associates for petitioners. Nuevas & Nuevas Law Offices for private respondent.

MENDOZA, J.: This is a special civil action of certiorari to set aside the decision and resolution dated June 22, 1992 and September 14, 1992 respectively of the National Labor Relations Commission (Fifth Division). 1 The antecedent facts are as follows: On July 1, 1989, Republic Act No. 6727, otherwise known as the Wage Rationalization Act, took effect, granting a P25.00/day increase in the statutory minimum wage of all workers and employees in the private sector, subject to certain conditions. In implementation of the law, private respondent Del Monte Philippines, Inc. gave a P25.00/day increase to the P54.00/day wages of its temporary employees or "broilers." Because the regular employees, members of petitioner union, who were then receiving P100.80 a day were not granted a similar increase, they complained to the management of private respondent. On February 14, 1990, the parties executed a Memorandum Agreement wherein private respondent, "in positive response to the union's representations and notwithstanding that it has no legal or contractual obligation," granted the members of petitioner union a P10.00/day wage increase effective January 1, 1990, subject to the latter's right to claim P15.00/day as balance, through compulsory arbitration. 2 On June 5, 1990, petitioners (Associated Labor Union-TUCP, representing its members, DMPIEUALU-TUCP, Local 302 and Geronimo de los Santos) filed a complaint against private respondent in the National Labor Relations Commission (NLRC) Regional Arbitration Branch X in Cagayan de Oro City. They alleged that a wage distortion 3 had been created by the grant to its temporary employees of
a P25.00/day salary increase under Republic Act No. 6727, thereby reducing to P21.80 from the previous P46.80, the difference in salaries between the regular employees (herein petitioners) and the temporary employees.

On November 27, 1990, the Labor Arbiter, Noel Augusto S. Miranda, dismissed the complaint for lack of merit. He found no wage distortion in view of a series of salary increases which respondent had granted to petitioners vis-a-vis the temporary employees, as shown by the following table: Pay of Union Pay of Temporary Difference Members Employees A. Prior to July 1, 1989 P100.80/day P54.00/day P46.80 B. Effective July 1, 1989 P100.80/day P79.00/day P21.80 (Under R.A. No. 6727 giving P25.00/day increase to the temporary employees)

C. Effective Sept. 1, 1989 P115.80/day P79.00/day P36.80 (Under CBA giving P15.00/day increase to the union members) D. Effective Jan. 1, 1990 P125.80/day P79.00/day P46.80 (Under Agreement on Feb. 14, 1990 giving P10.00/day increase to the union members) E. Effective Sept. 1, 1990 P140.80/day P79.00/day P61.80 (Under CBA giving P15.00/day increase to the union members) On appeal the NLRC affirmed the Labor Arbiter's findings and denied petitioners' motion for reconsideration. Hence this petition. Petitioners contend that the increases mandated by the parties' Collective Bargaining Agreement and the voluntary agreement dated February 14, 1990 should not be considered as having corrected the wage distortion, since employee benefits derived from law are exclusive, distinct, and separate from those obtained through negotiation and agreement. The contention has no merit. Art. 124 of the Labor Code, as amended by Republic Act No. 6727, expressly provides that where the application of any prescribed wage increase by virtue of a law or wage order issued by any Regional Board results in distortions of the wage structure within an establishment, the employer and the union shall negotiate to correct the distortions. The law recognizes, therefore, the validity of negotiated wage increases to correct wage distortions. The legislative intent is to encourage the parties to seek solution to the problem of wage distortions through voluntary negotiation or arbitration, rather than strikes, lockouts, or other concerted activities of the employees or management. 4 Recognition and validation of wage increases given by employers either unilaterally or as
a result of collective bargaining negotiations for the purpose of correcting wage distortions are in keeping with the public policy of encouraging employers to grant wage and allowance increases to their employees which are higher than the minimum rates of increases prescribed by statute or administrative regulation. 5 As this Court stated in Apex Mining, Inc. v. NLRC: 6

To compel employers simply to add on legislated increases in salary or allowances without regard to what is already paid, would be to penalize employers who grant their workers more than the statutorily prescribed minimum rates of increases. Clearly, this would be counterproductive so far as securing the interest of labor is concerned. Thus in Cardona v. NLRC, 7 it was held that there was no wage distortion where the employer made
salary adjustments in terms of restructing of benefits and allowances and there was an increase pursuant to the CBA.

There is thus, to use the language of the law, no "effective obliterat[ion of] the distinction embodied in [private respondent's] wage structure based on skills, length of service, or other logical basis of differentiation" in this case. For it is undisputed that the difference in wages between petitioners and

the temporary employees is now even greater than it used to be prior to the grant of the P25.00/day increase to the latter pay pursuant to Republic Act No. 6727. Finally, whether or not a wage distortion exists by reason of the grant of a wage increase to certain employees is essentially a question of fact. In this case, the findings of the Labor Arbiter, affirmed by the NLRC, that no wage distortion exists being based on substantial evidence, are entitled to respect and finality. 8 WHEREFORE, the petition is DISMISSED. SO ORDERED. Narvasa, C.J., Padilla, Regalado and Puno, JJ., concur.

#Footnotes

1 Per Commissioner Leon G. Gonzaga, Jr., Commissioners Musib M. Buat and Oscar N. Bella, concurring. 2 Exhibit G, Rollo, p. 38. 3 Under Art. 124 of the Labor Code, as amended by Republic Act No. 6727, a "wage distortion" is defined as "a situation where an increase in prescribed wage rates results in the elimination or severe contraction of intentional quantitative differences in wage or salary rates between and among employee groups in an establishment as to effectively obliterate the distinctions embodied in such wage structure based on skills, length of service, or other logical bases of differention." 4 Ilaw at Buklod ng Mangagagawa v. NLRC, G.R. No. 91980, June 27, 1991, 198 SCRA 586, 595. 5 National Federation of Labor v. NLRC and Franklin Baker Company of the Philippines (Davao Plant), G.R. No. 103586, July 21, 1994. 6 G.R. No. 86200, February 25, 1992, 206 SCRA 497, 501. 7 G.R. No. 89007, March 11, 1991, 195 SCRA 92, 97. 8 Cardona v. NLRC, supra; Metropolitan Bank and Trust Company Employees Union-ALU-TUCP v. NLRC and Metropolitan Bank and Trust Company, G.R. No. 102636, September 10, 1993, 226 SCRA 268.

))))_____
Republic of the Philippines SUPREME COURT Manila

THIRD DIVISION G.R. No. 93044 March 26, 1992 RADIO COMMUNICATIONS OF THE PHILIPPINES, INC. (RCPI), petitioner, vs. NATIONAL WAGES COUNCIL and BUKLOD NG MANGGAGAWA SA RCPI-NFL, respondents.

GUTIERREZ, JR., J.: The focal issue for the Court's determination is whether or not petitioner Radio Communications of the Philippines, Inc. (RCPI) was, as of December 31, 1985, a distressed employer entitled to exemption from compliance with Wage Order No. 6 for the year 1985-1986. On October 26, 1984, the President of the Philippines promulgated Wage Order No. 6 which provided for the increase of statutory minimum wage rates and cost of living allowances in the private sector. Distressed enterprises, however, were granted exemption from compliance with said wage order for a period not exceeding two years. On October 30, 1984, respondent National Wages Council (NWC) promulgated NWC Policy Guidelines No. 8 which spelled out the following criteria for exemption: Sec. 5. Criteria for Exemption. A. Actual Losses (1) In the case of stock corporation, partnership, single proprietorship or non-stock/non-profit organization engaged in business activities or charging fees for their services: (a) a full exemption of one (1) year may be granted when the accumulated losses as of the end of the period have impaired by 25% or more the paid up capital as of the end of the last full accounting period in the case of corporation, or losses for the period shall have impaired by 25% or more the total invested capital at the beginning of the last full accounting period in the case of partnership and single proprietorship (Emphasis supplied) (Rollo, p. 7) RCPI filed an application for exemption for the year 1984-1985 which was approved by the NWC. In approving the exemption, NWC stated: After a thorough study of the supporting documents on file and the supplemental pleadings relative to the above subject, the Executive Committee is of the opinion that RCPI'S continued operational losses in 1984 and 1985 and the undertaking under the Compromise Agreement dated October 24, 1985 under PD 1713 and Wage Order No. 1, in addition to the requirements of Wage Order Nos. 2, 3, 5 & 6, would directly contribute to the financial dislocation of the company, unless remedial measures are instituted to avert such situation. (Rollo, p. 24)

RCPI thereafter filed its second application for exemption for the year 1985-1986. This time, the NWC, on December 29, 1986, disapproved the application on the ground that RCPI did not quality as a distressed establishment because it had retained earnings of P10,278,275 in its unaudited balance sheet as of December 31, 1985. RCPI filed four motions for reconsideration which were all denied by respondent NWC. In denying the fourth motion for reconsideration, the NWC justified its action by pointing out that RCPI was not a distressed company since it had retained earnings of P8,327,528 based on its audited balance sheet as of December 31, 1985. Hence, this petition. RCPI alleges that respondent NWC acted with grave abuse of discretion amounting to excess of jurisdiction in disapproving its second application for exemption. To prove that its accumulated losses have impaired its capital by more than 25% thereby entitling it to continued exemption for the second year, petitioner RCPI advances the following computation: Retained earnings as of December 31, 1984 P19,820,785 Deduct: Net loss for 1985 12,067,834 7,752,951 Less: Appraisal Increment transferred to Retained Earnings As of 1984 P27,809,943 For 1985 484,577 28,294,520 Accumulated losses absorbed by Appraisal Increment P20,541,569 Paid up capital 22,589,970 % of Impairment: 20,541,569 22,589,970 90% (Petitioner's Memorandum, Rollo, p. 278. Figures used are based on audited financial statements.) The petitioner proceeds with the assertion that while it had retained earnings of P8,237,528 as of 1985, such figure is in its entirety composed of appraisal increments which are purely theoretical increases resulting from the revaluation of its property equipment and not actual or realized profits arising from business operations. (Rollo, p. 280) Hence, the petitioner contends that, while on paper RCPI may theoretically appear to be reaping revenues because of a positive retained earning balance, in reality it is suffering actual losses. (Rollo, p. 281) And since appraisal increments (not being earnings, profit or income) were erroneously transferred to constitute the entire retained earnings, then the same appraisal increments must be subtracted to get the actual accumulated loss of RCPI. (Rollo, p. 283) This accumulated loss, not the retained earnings figure appearing in the

financial statement, is the basis for the computation of the minimum 25% capital impairment for purposes of exemption (Rollo, p. 280). Based on the foregoing computation, RCPI's accumulated losses had impaired its paid-up capital by 90% and therefore it qualified as a distressed establishment entitled to such exemption. (Rollo, p. 283) This is not the first time this issue has come before us. In our resolution in Buklod ng Manggagawa sa RCPI-NFL v. Hon. Augusto Sanchez, G.R. No. 77503, July 13, 1988, this Court sustained NWC's grant of exemption to RCPI under Wage Order No. 6 inspite of the fact that RCPI's retained earnings balance as of 1984 was also in positive terms. The Court affirmed the questioned NWC order which "found that private respondent(RCPI) was incurring losses in its operations, justifying its aforesaid exemption, a finding that appears to be based on a thorough study of the documents and pleadings on record." Significantly, the Solicitor General after there extensions of time in the present case, from June 21, 1990 to August 24, 1990, stated that, after judicious scrutiny of the record and in consonance with applicable law and jurispredunce, the could not, without violating the law, sustain the findings of public respondent NWC. He asked to be excused from representing the NWC in this case. To be exempt from Wage Order No. 6, the impairment formula applied by NWC is: Sec. 5. Criteria for Exemption: A. Actual losses 1. In the case of stock corporation xxx xxx xxx a) A full exemption of one (1) year may be granted when accumulated losses as of the end of the period have impaired by 25% or more the paid capital as of the end of the last full accounting period in case of corporation, . . . . b) A partial exemption of six (6) months may be granted when accumulated losses as of the end of the period have impaired by 20% or more but less that 25% the paid up capital in the case of corporation . . . . (NWC Policy Guidelines No. 8, emphasis supplied) (Rollo, p. 55) We note from the above that the impairment formula speaks of actual losses in contra-distinction to actual profit or income. The formula requires accumulated losses, not for that year alone but for a period of time backwards until the given cut off date. Since the purpose of the wage exemption is to assist financially beleaguered companies, the distinction between real or actual income and theoretical earnings arising from accounting principles becomes important. To arrive at a distinction, we first adopt certain definitions:

Retained earnings (or income) accumulated net income, less distributions to stockholders and transfers to paid-in capital accounts. . . . Also known by the older title earned surplus (Eric L. Kohler, A Dictionary for Accountants, 5th Ed., p. 409) Earnings A general term embracing revenue profit, or income, (Id., p. 188) Income 1. Money or money equivalent earned or accrued . . . and arising from sales or rentals of any type of goods or services, commissions, interest, gifts recoveries from damages and windfallsfrom any outside source. 2. Sales of goods or services; in this sense, the term is less used than formerly, revenue now being preferred. 3. An addition, a receipt; often in contrast with outgo; as, the income and outgo of stores. 4. . . . (b) the remainder of revenue after deducting costs of sales and operating other expenses (= net income) (Id., pp. 249-250). Profit 1. A general term for the excess of revenue, proceeds, or selling price over related costs;any pecuniary benefit arising from a commercial operation, from the practice of a profession, or from one or more individual transactions of any person. (Id., p. 379). Revenue 1. Sales of products, merchandise and services, and earnings from interest, dividends, rents and wages; transactions resulting in increases in assets. (Id., p. 410). FURTHER: Retained Earnings (or Earned Surplus) is the accumulated amount of profits and earnings of the business which has not been capitalized, offset by losses, or given out to stockholders as property dividends. (D.S. Pasion, Introductory Accounting, p. 195). The retained earnings is credited with the income of the period which may include: a. earnings of the business in its line of endeavor, such as the selling of merchandise or services; b. compensation received for the lending of capital, and c. profits or incomes of any kind resulting from the exchange of assets. It is debited with the loss of the period which may include: a. costs, expenses, and losses connected with its regular line of business: b. expenses and losses suffered in the financing of the business from outside sources, other than from stockholders;

c. expenses and losses of any kind in the exchange of asset; and d. distribution of income earned to stockholders. Profit is the excess of the incoming assets over outgoing capital . . . (Id., p. 291). (Rollo, pp. 58-59) To add to have above, the Statement of Financial Accounting Standards No. 12 issued by the Accounting Standards Council defines certain terms as follows: Appraised or appraisal value, also termed as replacement cost or reproduction cost, is the revalued amount of property, plant and equipment determined by recognized specialists. Accumulated depreciation on appraisal, also, termed as observed depreciation, is the accumulated depreciation based on the appraised or appraisal value per appraiser's report. Sound value, also net appraised value, is the value per appraisal computed by deducting observed depreciation from appraised value. Net book value is computed by deducting accumulated depreciation on costs from historical cost. Appraisal increase is computed by deducting historical cost from appraised values. Revaluation increment is the excess of sound value over net book value. (At p. 4) The transfer from revaluation increment on property to retained earnings representing the accumulated depreciation on appraisal increase already charged to operations was approved by the RCPI Board of Directors on April 12, 1982. The depreciation on appraisal increase previously deducted from actual income was added to retained earnings. This transfer resulted in the P8,237,528.00 retained earnings pinpointed by the respondent NWC., Actually, this covers a six year period as follows: Retained Earning as of 1979 P3,797,215.00 Add: Net Income (Loss) 1980 (P7,434,493) 1981 (3,149,329) 1982 2,630,447 1983 (1,579,372) 1984 (2,559,372) 1985 (12,067,834) (21,000,658.00) T O T A L (17,203,443.00) Dividends Declared 1980 P799,642 1982 2,053,907 (2,853,549.00) Balance of Retained Earnings/Deficit as of 1985 (P20,056,992.00)

Add: Transfer of Portion of revaluation increment in property to retained earnings (depreciation on appraisal increase) 1980 P8,571,430 1981 7,526,837 1982 4,316,459 1983 3,927,412 1984 3,467,805 1985 484,577 28,294,520.00 RETAINED EARNINGS AS OF 1985 P8,237,528.00 (Rollo, pp. 141-142) RCPI argues that the amount of P28,294,520.00 representing the portion of revaluation increment (depreciation on appraisal increase) transferred to retained earnings should be deducted from the balance of retained earnings to arrive at the operational loss of P20,056,992.00. The public respondent states that this is wrong because it would be tantamount to double deduction since said amount has already been yearly deducted from operations through additional depreciation charges starting 1980. As earlier stated, the purpose of wage exemptions is to help financially distressed companies meet their labor costs without endangering the existence or viability of the firm upon which both management and labor depend for a living. Under the spirit of Wage Order No. 6, it is the actual ability of a firm to spend for its current needs and costs and not how the assests and liabilities of a firm may appear in the technical jargon of higher accounting principles which is important. For instance, no matter how solid a firm may be in terms of essential fixed assets, its ability to pay daily payrolls will depend only on actual income unless some of the fixed assets are sold for wages and salaries. True, the retained earnings account constitutes a company's accumulated profits or losses. However, it is not enough to treat said earnings as "earnings" in the real sense of the word for purposes of wage exemptions. We have to inquire into the true nature and composition of the retained earnings account. The figures of the respondent NWC show that if we do not include the transfer of portions of revaluation increment in property to retained earnings, RCPI had an income deficit of P20,056,992 from 1980 to 1985. It is only when we add to the retained earnings account, the portion of the revaluation increment in property for the same period for a total of P28,294,520.00 that we get a positive retained earnings balance of P8,237,528.00. Without the transfer of the revaluation increment in property to the retained earnings account, there would be no positive balance. There would be a deficit. Should we treat revaluation increment in property as income for purposes of determining wage levels? To a company striving to meet daily payrolls, it is not of any comfort to say that the "appraisal increment transferred to retained earnings" represents actual earnings which were previously deducted from the actual net income figure through additional depreciation expense resulting from appraisal. In purely technical accounting terms, they may be considered as merely being returned not to the net income account but to the retained earnings balance to which the net income account is ultimately closed. This is to keep the books straight.

For purposes of compliance with the law on wage exemptions, however, the retained earnings arising from appraisal increment do not represent hard cash but merely theoretical increases resulting from upward valuations of old fixed assets. There is no income or profit from the sale of goods or services. No income is realized from the reappraisal of fixed assets until such a time as the machinery, equipment, and other fixed assets are sold or disposed of in the event of a liquidation of assets. As stated in the preamble clauses of Wage Order No. 6, it is intended to enable workers to cope with price increases through the adjustment of their wages but "with due regard to insure increased productivity and viability of business and industry." The NWC ruling treats the revaluation increment as similar to the sale of fixed assets. In the same way, however, that machinery and equipment should not be sold in order to meet increases in the wages of workers (for this would destroy not only the company but the employment of the workers themselves) so should a similar attitude be adopted when machinery or equipment is not sold but merely revalued. On December 16, 1986, the NWC, through then Secretary Augusto B. Sanchez its chairman, approved the application for exemption of RCPI and stated, among other things, that: The Executive Committee, therefore, recognizes the necessity to set aside technicalities required by existing criteria under NWC Policy Guidelines Nos. 6 and 8 and bestow greater significance to the actual financial condition of RCPI. (Rollo, p. 24; Emphasis supplied) NWC decided to give RCPI a breathing spell because of numerous obligations that the company had to meet. Under a compromise agreement, RCPI bound itself to pay 30% of whatever was due the employees under PD 1713 for the mandatory third year increases and Wage Order No. 1 for the first and second year. The balance of 70% was subject to negotiations. (See G.R. No. 77503, Buklod ng Manggagawa v. Sanchez, supra, Rollo, p. 168). NWC found that RCPI's compliance with the Wage Orders would result in the company's financial dislocation and, accordingly, granted it the prayed for exemption. We see no reason from the records why a different treatment should apply in the following year. Simply because there were changes or transfers of the same items to differently named accounts in the books of the company, it does not follow that it thereby ceased to be entitled to exemptions. WHEREFORE, the petition is hereby GRANTED. The questioned decision and resolutions of the National Wages Council are SET ASIDE and the application for exemption from Wage Order No. 6 is GRANTED. SO ORDERED. Bidin, Davide, Jr. and Romero, JJ., concur. Feliciano, J., is on leave.

Republic of the Philippines Supreme Court

Manila
SECOND DIVISION

C. PLANAS COMMERCIAL and/or MARCIAL COHU, Petitioners,

G.R. No. 144619 Present:

- versus -

NATIONAL LABOR RELATIONS COMMISSION (Second Division), ALFREDO OFIALDA, DIOLETO MORENTE Promulgated: and RUDY ALLAUIGAN, Respondents. November 11, 2005 x------------------------------------------------x

*PUNO, Chairman, AUSTRIA-MARTINEZ, CALLEJO, SR., TINGA, and **CHICO-NAZARIO, JJ.

DECISION

AUSTRIA-MARTINEZ, J.: Before us is a petition for review on certiorari filed by C. Planas Commercial and/or Marcial Cohu, (petitioners) assailing the Decision of the Court of Appeals (CA) dated January 19, 2000[1] which affirmed in toto the decision of the National Labor Relations Commission (NLRC) and the Resolution dated August 15, 2000[2]denying petitioners motion for reconsideration. On September 14, 1993, Dioleto Morente, Rudy Allauigan and Alfredo Ofialda (private respondents) together with 5 others[3] filed a complaint for underpayment of wages, nonpayment of overtime pay, holiday pay, service incentive leave pay and premium pay for holiday and rest day and night shift

differential against petitioners with the Arbitration Branch of the NLRC. The case was docketed as NLRC Case No. 00-09-05804-93.[4] In their position paper, private respondents alleged that petitioner Cohu, owner of C. Planas Commercial, is engaged in wholesale of plastic products and fruits of different kinds with more than 24 employees; that private respondents were hired by petitioners on January 14, 1990, May 14, 1990 and July 1, 1991, respectively, as helpers/laborers; that they were paid below the minimum wage law for the past 3 years; that they were required to work for more than 8 hours a day without overtime pay; that they never enjoyed holiday pay and did not have a rest day as they worked for 7 days a week; and they were not paid service incentive leave pay although they had been working for more than one year. Private respondent Ofialda asked for night shift differential as he had worked from 8 p.m. to 8 a.m. the following day for more than one year. Petitioners filed their comment admitting that private respondents were their helpers who used to accompany the delivery trucks and helped in the loading and unloading of merchandise being distributed to clients; that they usually started their work from 10 a.m. to 6 p.m.; that private respondents stopped working with petitioners sometime in September 1993 as they were already working in other establishments/stalls in Divisoria; that they only worked for 6 days a week; that they were not entitled to holiday and service incentive leave pays for they were employed in a retail and service establishment regularly employing less than ten workers. On December 6, 1994, a decision[5] was rendered by the Labor Arbiter dismissing private respondents money claims for lack of factual and legal basis. He made the following findings:
The basic issue raised before us is whether or not complainants are entitled to the money claims. The rule in this jurisdiction is that employers who are regularly employing not more than ten workers in retail establishments are exempt from the coverage of the minimum wage law. In connection therewith and in consonance with Sec. 1, Rule 131 of the Rules of Court, it is incumbent upon the party to support affirmative allegation that an employer regularly employs more than ten (10) workers.

In the case at bar, complainants failed to substantiate their claim that the respondent establishment regularly employs twenty (sic) (24) workers. Accordingly, we have no factual basis to grant salary differentials to complainants. In the same context, under Sec. 1 (b), Rule IV and Sec. 1(g), Rule V of the Implementing Rules of the Labor Code, complainants are not entitled to legal holiday pay and service incentive leave pay. We also do not have sufficient factual basis to award overtime pay and premium pay for holiday and rest day because complainants failed to substantiate that they rendered overtime and during rest days.[6]

Private respondents filed their appeal with the NLRC which was opposed by petitioners. However, pending the appeal, private respondents Morente[7] and Allauigan[8] filed their respective motions to dismiss with release and quitclaim before the NLRC. On September 30, 1997, the NLRC rendered its decision,[9] the dispostive portion of which reads:
WHEREFORE, in view of all the foregoing considerations, the decision appealed from should be, as it is hereby, MODIFIED by directing the respondent to pay Alfredo Ofialda, Diolito Morente and Rudy Allauigan the total amount of Seventy-Five Thousand One Hundred Twenty Five Pesos (P75,125.00) representing their combined salary differentials, holiday pay, and service incentive leave pay.

The NLRC made the following ratiocinations:

On claims for underpayment/non-payment of legally mandated wages and fringe benefits where exemption from coverage of the minimum wage law is put up as a defense, he who invokes such an exemption (usually the employer) has the burden of showing the basis for the exemption like for instance the fact of employing regularly less than ten workers. In the instant case, complainants alleged that despite employing more than twenty-four (24) workers in his establishment, hence covered by the minimum wage law, nevertheless the individual respondent did not pay his workers the legal rates and benefits due them since their employment. By way of answer, respondents countered that they employ less than ten (10) persons, hence the money claims of complainants lack factual and legal basis.

Stated differently, against complainants charge of underpayment in wages and non-payment of fringe benefits legally granted to them, the respondents raised the defense of exemption from coverage of the minimum wage law and in support thereof alleged that they regularly employed less than ten (10) workers to serve as basis for their exemption under the law, they (respondents) must prove that they employed less than ten workers, instead of more than twenty-four (24) workers as alleged by the complainants. However, apart from their allegation, respondents presented no evidence to show the number of workers they employed regularly. This failure is fatal to respondents defense. This in turn brings us to the question of whether the complainants were underpaid and unpaid of legal holiday pay and service incentive leave pay due them. Stated earlier are the different amounts that each complainant was receiving by way of salary on certain periods of their employment with respondents, which amounts according to complainants are way below the minimum wage then prevailing. Considering that respondents failed to present the payrolls or vouchers which could prove otherwise, the money claims deserve favorable consideration. Taking note of the 3 year prescription, the period covered is from September 14, 1990 to September 14, 1993 when the instant case was filed, and based on a 6-day work per week, the underpayment (salary differential), legal holiday pay, and service incentive leave pay due to complainants, as computed, are as follows:

1. A. OFIALDA 2. D. MORENTE 3. R. ALLAUIGAN

Salary Diff. P14,934.00 23,964.00 22,609.00

Holiday Pay P2,362.00 3,258.00 3,258.00

SILP P1,180.00 1,730.00 1,730.00

With respect to the other claims, i.e., overtime pay and premium pay for holiday and rest day, We find no reason to disturb the Labor Arbiters ruling thereon, that there is no sufficient factual basis to award the claims because complainants failed to substantiate that they rendered overtime and during rest days. These claims, unlike claims for underpayment and non-payment of fringe benefits mandated by law, need to be proven by the claimants.[10]

Petitioners filed a petition for certiorari[11] with prayer for temporary restraining order and preliminary injunction before this Court on November 26, 1997. Respondents were required to file their Comment but only public respondent NLRC, through the Solicitor General, complied therewith. In a Resolution dated June 28, 1999,[12] the petition was referred to the CA pursuant to our ruling in St. Martin Funeral Homes vs. NLRC. On January 19, 2000,[13] the CA denied the petition for lack of merit and affirmed in toto the NLRC decision. It said:
Having claimed exemption from the coverage of the minimum wage laws or order, it was incumbent upon petitioner to prove such claim. Apart from simply denying private respondents allegation that it employs more than 24 workers in its business, petitioner failed to adduce evidence to prove that it is, indeed, a retail establishment which employs less than ten (10) employees. Its failure to present records of its workers and their respective wages gives rise to the presumption that these are adverse to its claims. Indeed, it is hard to believe that petitioner does not keep such records. More so, considering private respondents claim that petitioner employs more than twenty four (24) employees and engaged in both wholesale and retail business of fruits by volume on CONTAINER BASIS, not by price of fruit, but by container size retail, involving millions of pesos capital, fruits coming from China, Australia and the United States (p. 170, Rollo). Needless to say, the inclusion of respondents Morente and Allauigan in the NLRC award is in order. In its decision, public respondent awarded P75,125.00, representing the combined salary differentials, holiday pay and service incentive leave pay of all three (3) private respondents. Of this, P28,952.00 is earmarked for respondent Morente, and P27,597.00 for respondent Allauigan, both of whom executed quitclaims after receiving P3,000.00 and P6,000.00 respectively, from petitioner. On this score, the Court quotes with approval the arguments advanced by the Solicitor General thus: While a compromise agreement or amicable settlement is not against public policy per se it must be shown however that it was voluntarily entered into and represents a reasonable settlement, and the consideration for the quitclaim is credible and reasonable (Santiago v. NLRC, 198 SCRA 111 [1991]). For the law usually looks with disfavor upon quitclaims and releases executed by employees usually resulting from a compromise with their employers. (Velasco v. DOLE, 200 SCRA 201 [1991]). This is so because the employers and the employees obviously do not

stand on equal footing. Driven against the wall by the employer, the employee is in no position to resist the money offered. (Lopez Sugar Corp v. FFW-PLU, 189 SCRA 179 [1990]). Thus, Fuentes v. NLRC, 167 SCRA 767 (1988) enunciates: In the absence of any showing that the compromise settlement and the quitclaims and releases entered into and made by the employees were free, fair and reasonable- especially as to the amount or consideration given by the employer in exchange therefore, the fact that they executed the same and received their monetary benefits thereunder does not militate against them. The Law does not consider as valid any agreement to receive less compensation than what a worker is entitled to receive. In the case at bar, it will be noticed that the vouchers dated September 13, 1995 and September 20, 1996 (pp. 194 and 197, NLRC Record), submitted by petitioners (pp. 191-192, Record), show that private respondent Allauigan was only paid P6,000.00 and Morente, P3,000.00 --- when they are legally entitled to receiveP28,952.00 and P27,597.00, respectively. Under the circumstances, subject compromise settlements cannot be considered valid and binding upon the NLRC as they do not represent fair and reasonable settlements, nor do they demonstrate voluntariness on the part of private respondents Morente and Allauigan. These employees should still be paid the full amounts of their salary differentials, holiday pay and service incentive leave pay less the amounts they had already received under the compromise settlements with petitioners (pp. 174-175, Rollo). Parenthetically, the Court notes that petitioner availed itself of this remedy without first seeking a reconsideration of the assailed decision. As a general rule, certiorari will not lie unless an inferior court, has through a motion for reconsideration, a chance to correct the errors imputed to it. While the rule admits of exceptions, petitioner has not shown any reason for this Court not to apply said rule, which would have justified outright dismissal of the petition were it not for the Courts desire to resolve the case not on a technicality but on the merits.[14]

Petitioners motion for reconsideration was denied in a Resolution dated August 15, 2000.[15] Hence, the instant petition for review on certiorari filed by petitioners.

Petitioners insist that C. Planas Commercial is a retail establishment principally engaged in the sale of plastic products and fruits to the customers for personal use, thus exempted from the application of the minimum wage law; that it merely leases and occupies a stall in the Divisoria Market and the level of its business activity requires and sustains only less than ten employees at a time. Petitioners contend that private respondents were paid over and above the minimum wage required for a retail establishment, thus the Labor Arbiter is correct in ruling that private respondents claim for underpayment has no factual and legal basis. Petitioners claim that since private respondents alleged that petitioners employed 24 workers, it was incumbent upon them to prove such allegation which private respondents failed to do. Petitioners also contend that the CA erred in applying strictly the rules of evidence against them by holding that it was incumbent upon them to prove that their company is exempted from the minimum wage law. They contend that they could not present records of their workers and their respective wages because by the very nature of their business, the system of management is very loose and informal, thus salaries and wages are paid by merely handing the money to the worker without the latter being required to sign anything as proof of receipt. Thus, it would be unreasonable to insist upon petitioner to present documents that they do not possess or keep in the first place. We are not persuaded. R.A. No. 6727 known as the Wage Rationalization Act provides for the statutory minimum wage rate of all workers and employees in the private sector. Section 4 of the Act provides for exemption from the coverage, thus:
Sec. 4. ... (c) Exempted from the provisions of this Act are household or domestic helpers and persons employed in the personal service of another, including family drivers. Retail/service establishments regularly employing not more than ten (10) workers may be exempted from the applicability of this Act upon application with and as determined by the appropriate Regional Board in accordance with the

applicable rules and regulations issued by the Commission. Whenever an application for exemption has been duly filed with the appropriate Regional Board, action on any complaint for alleged non-compliance with this Act shall be deferred pending resolution of the application for exemption by the appropriate Regional Board. In the event that applications for exemptions are not granted, employees shall receive the appropriate compensation due them as provided for by this Act plus interest of one percent (1%) per month retroactive to the effectivity of this Act.

Clearly, for a retail/service establishment to be exempted from the coverage of the minimum wage law, it must be shown that the establishment is regularly employing not more than ten (10) workers and had applied for exemptions with and as determined by the appropriate Regional Board in accordance with the applicable rules and regulations issued by the Commission. Petitioners main defense in controverting private respondents claim for underpayment of wages is that they are exempted from the application of the minimum wage law, thus the burden of proving[16] such exemption rests on petitioners. Petitioners had not shown any evidence to show that they had applied for such exemption and if they had applied, the same was granted. In Murillo vs. Sun Valley Realty, Inc.[17] where the respondents claim that petitioners therein are not entitled to service incentive leave pay inasmuch as establishment employing less than ten (10) employees are exempted by the Labor Code and the Implementing Rules from paying service incentive leave pay, we held:
..the clear policy of the Labor Code is to include all establishments, except a few classes, under the coverage of the provision granting service incentive leave to workers. Private respondents' claim is that they fell within the exception. Hence, it was incumbent upon them to prove that they belonged to a class excepted by law from the general rule. Specifically, it was the duty of respondents, not of petitioners, to prove that there were less than ten (10) employees in the company. Having failed to discharge its task, private respondents must be deemed to be covered by the general rule, notwithstanding the failure of petitioners to allege the exact number of employees of the corporation. In other words, petitioners must be deemed entitled to service incentive leave.[18]

Moreover, in C. Planas Commercial vs. NLRC,[19] where herein petitioners are also involved in a case filed by one of its employees, we ruled:
Petitioners invoke the exemption provided by law for retail establishments which employ not more than ten (10) workers to justify their non-liability for the salary differentials in question. They insist that PLANAS is a retail establishment leasing a very small and cramped stall in the Divisoria market which cannot accommodate more than ten (10) workers in the conduct of its business. We are unconvinced. The records disclose de los Reyes' clear entitlement to salary differentials. Well-settled is the rule that factual findings of labor officials who are deemed to have acquired expertise in matters within their jurisdiction are generally accorded not only respect but even finality and bind this Court when supported by substantial evidence or that amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion. Thus, as long as their decisions are devoid of any unfairness or arbitratriness in the process of their deduction from the evidence proferred by the parties before them, all that is left is our stamp of finality by affirming the factual findings made by them. In this case, the award of salary differentials by the NLRC in favor of de los Reyes was made pursuant to RA 6727 otherwise known as the Wage Rationalization Act, and the Rules Implementing Wage Order Nos. NCR-01 and NCR-01-A and Wage Order Nos. NCR-02 and NCR-02-A. Petitioners claim exemption under the aforestated law. However, the best proof that they could have adduced was their approved application for exemption in accordance with applicable guidelines issued by the Commission. Section 4, subpar. (c) of RA 6727 categorically provides:
Retail/service establishments regularly employing not more than ten (10) workers may be exempted from the applicability of this Act upon application with and as determined by the appropriate Regional Board in accordance with the applicable rules and regulations issued by the Commission. Whenever an application for exemption has been duly filed with the appropriate Regional Board, action on any complaint for alleged non-compliance with this Act shall be deferred pending resolution of the application for exemption by the appropriate Regional Board. In the event that applications for exemptions are not granted, employees shall receive the appropriate compensation due them as provided for by this Act plus interest of one percent (1%) per month retroactive to the effectivity of this Act (emphasis supplied).

Extant in the records is the fact that petitioners had persistently raised the matter of their exemption from any liability for underpayment without substantiating it by showing compliance with the aforecited provision of law. It bears stressing that the NLRC affirmed the Labor Arbiters award of salary differentials due to underpayment on the ground that de los Reyes' claim therefor was not even denied or rebutted by petitioners.

More importantly, NLRC correctly upheld the Labor Arbiter's finding that PLANAS employed around thirty (30) workers. We have every reason to believe that petitioners need at least thirty (30) persons to conduct their business considering that Manager Cohu did not submit any employment record to prove otherwise. As employer, Manager Cohu ought to be the keeper of the employment records of all his workers. Thus, it was well within his means to refute any monetary claim alleged to be unpaid. His inability to produce the payrolls from their files without any satisfactory explanation can be interpreted no less as suppression of vital evidence adverse to PLANAS.

Petitioners aver that the CA erred in ruling that private respondents Morente and Allauigan are still entitled to monetary awards despite the latters execution of release and quitclaims because the settlement was not voluntarily entered into by private respondents. Petitioners insist that both private respondents Morente and Allauigan voluntarily entered into an amicable settlement with them on September 17 and 18, 1995, respectively; that they were the ones who initiated the talks for settlement and who pegged the amount; that they both voluntarily appeared before the Labor Arbiter to move for the dismissal of their case insofar as their claims are concerned as well as submitted to the Labor Arbiter their respective quitclaims and releases which were duly subscribed before the Labor Arbiter and duly notarized. We find merit in petitioners argument. It has been held that not all quitclaims are per se invalid or against public policy, except (1) where there is clear proof that the waiver was wangled from an unsuspecting or gullible person, or (2) where the terms of settlement are unconscionable on their face. In these cases, the law will step in to annul the questionable transactions.[20] Such quitclaim and release agreements are regarded as ineffective to bar the workers from claiming the full measure of their legal rights.[21] We find these two instances not present in private respondents Allauigan and Morentes case. They failed to refute petitioners allegation that the settlement was voluntarily made as they had not filed any pleadings before the CA. Notably, we have required private respondents to file their comment on the instant petition, however, they failed to do so. They were then required to show cause why they should not be disciplinarily dealt with or held in contempt.[22] However, they still failed to file their comment, thus, they were imposed a fine of P1,000.00[23] which was subsequently increased to P2,000.00 as there was still no compliance. In a

Resolution dated July 22, 2002, the Court ordered the National Bureau of Investigation to arrest and detain private respondents and the private respondents to file their comment.[24] As private respondents could not be located at their given address and they are not known in their locality, the order of arrest and commitment was returned unserved,[25] thus the Court required the Office of the Solicitor General to file the comment in behalf of all the respondents.[26] The Court finds such inaction on the part of private respondents Allauigan and Morente an indication that they already relented in their claims and gives credence to petitioners claim that they had voluntarily executed the release and quitclaim and the motion to dismiss. The CA found that the subject compromise agreements are not valid considering that they did not represent the fair and reasonable settlements, i.e., that private respondent Allauigan was only paid P6,000.00 and Morente, P3,000.00 --when they are legally entitled to receive P28,952.00 and P27,597.00, respectively. We do not agree. It bears stressing that at the time of the execution of the release and quitclaim, the case filed by private respondents against petitioners was already dismissed by the Labor Arbiter and it was pending appeal before the NLRC. Private respondents could have executed the release and quitclaim because of a possibility that their appeal with the NLRC may not be successful. Since there was yet no decision rendered by the NLRC when the quitclaims were executed, it could not be said that the amount of the settlement is unconscionable. In any event, no deception has been established that would justify the annulment of private respondents quitclaims.[27] In Mercer vs. NLRC,[28] we held that:
In Samaniego v. NLRC, we ruled that: A quitclaim executed in favor of a company by an employee amounts to a valid and binding compromise agreement between them." Recently, we held that in the absence of any showing that petitioner was "coerced or tricked" into signing the above-quoted Quitclaim and Release or that the consideration thereof was very low, she is bound by the conditions thereof.

As computed by the NLRC, private respondent Alfredo Ofialda is entitled to the payment of P14,934.00 as salary differential, P2,362.00 as legal holiday pay andP1,180.00 as service incentive leave pay, all in the total amount of P18,476.00. WHEREFORE, the petition is PARTLY GRANTED. The Decision of the Court of Appeals dated January 19, 2000 and its Resolution dated August 15, 2000 are AFFIRMED with MODIFICATION that petitioners are ordered to pay private respondent Alfredo Ofialda the total amount of P18,476.00 and the monetary awards in favor of private respondents Rudy Allauigan and Dioleto Morente are hereby DELETED. SO ORDERED.

MA. ALICIA AUSTRIA-MARTINEZ Associate Justice

WE CONCUR:

REYNATO S. PUNO Associate Justice

ROMEO J. CALLEJO, SR. Associate Justice

DANTE O. TINGA Associate Justice

(On leave) MINITA V. CHICO-NAZARIO Associate Justice

CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

REYNATO S. PUNO Acting Chief Justice

* **
[1] [2]

[3]

[4] [5] [6] [7] [8] [9]

[10] [11] [12] [13] [14] [15]

[16]

[17] [18] [19]

Acting Chief Justice. On leave. Penned by Justice Artemio G. Tuquero, concurred in by Justices Ramon U. Mabutas, Jr. and Mercedes Gozo-Dadole, Ninth Division; Rollo, pp. 115-122. Penned by Justice Ramon U. Mabutas, Jr., concurred in by Justices Mercedes Gozo-Dadole and Elvi John S. Asuncion, Special Former Ninth Division; Rollo, p. 131. Jonel Patron, Rogelio Amar, Jaime Vili, Junny Villamor and Roger Ofialda subsequently amicably settled their claims. Rollo, pp. 24-34. Id., at pp. 36-40; penned by Labor Arbiter Geobel A. Bartolabac. Id., at pp. 39-40. Id., at p. 51. Id., at p. 52. Id., at pp. 54-62; penned by Commissioner Victoriano R. Calaycay, concurred in by Commissioners Raul T. Aquino and Rogelio I. Rayala; NLRC Case No. 008537-95 Id., at pp. 58-62. Docketed as G.R. No. 131348. Id., at p. 97. Id., at pp. 115-122. Id., at pp. 119-121. Id., at p. 131. Section 1 of Rule 131 of the Rules on Evidence Burden of proof is the duty of a party to present evidence on the facts in issue necessary to establish his claim or defense by the mount of evidence required by law. No. L-67272, June 30, 1988, 163 SCRA 271. Id., at p. 277. G.R. No. 121696, February 11, 1999, 303 SCRA 49.

[20]

[21]

[22] [23] [24] [25] [26] [27] [28]

Unicane Workers Union-CLUP vs. National Labor Relations Commission, G.R. No. 107545, September 9, 1996, 261 SCRA 573, 585-586. JGB and Associates, Inc. vs. National Labor Relations Commission, G.R. No. 109390, March 7, 1996, 254 SCRA 457, 465. Resolution dated February 5, 2001; Rollo, p. 141. Resolution dated September 12, 2001. Rollo, pp.160-161. Id., at p. 168. Id., at p. 175-176. Veloso vs. Department of Labor and Employment, G.R. No. 87297, August 5, 1991, 200 SCRA 201, 205. G.R. No. 105606, March 16, 1995, 242 SCRA 376.

FIRST DIVISION

[G.R. No. 113097. April 27, 1998]

NASIPIT LUMBER COMPANY, INC., and PHILIPPINE WALLBOARD CORPORATION, petitioners, vs. NATIONAL WAGES AND PRODUCTIVITY COMMISSION, WESTERN AGUSAN WORKERS UNION (WAWU-ULGWP LOCAL 101), TUNGAO LUMBER WORKERS UNION (TULWU-ULGWP LOCAL 102) and UNITED WORKERS UNION (UWU-ULGWP LOCAL 103), respondents. DECISION
PANGANIBAN, J.:

The Labor Code, as amended by RA 6727 (the Wage Rationalization Act), grants the National Wages and Productivity Commission (NWPC) the power to prescribe rules and guidelines for the determination of appropriate wages in the country. Hence, guidelines issued by the Regional Tripartite Wages and Productivity Boards (RTWPB) without the approval of or, worse, contrary to those promulgated by the NWPC are ineffectual, void and cannot be the source of rights and privileges.

The Case This is the principle used by the Court in resolving this petition for certiorari under Rule 65 of the Rules of Court assailing the Decision [1] dated March 8, 1993, promulgated by the NWPC[2] which disposed as follows:

WHEREFORE, premises considered, the Decision appealed from is hereby MODIFIED. The application for exemption of Anakan Lumber Company is hereby GRANTED for a period of one (1) year retroactive to the date subject

Wage Orders took effect until November 21, 1991. The applications for exemption of Nasipit Lumber Company and Philippine Wallboard Corporation are hereby DENIED for lack of merit, and as such, they are hereby ordered to pay their covered workers the wage increases under subject Wage Orders retroactive to the date of effectivity of said Wage Orders plus interest of one percent (1%) per month. SO ORDERED.
Petitioners also challenge the NWPCs Decision[3] dated November 17, 1993 which denied their motion for reconsideration. The RTWPBs August 1, 1991 Decision, which the NWPC modified, disposed as follows:

WHEREFORE, all foregoing premises considered, the instant petition for exemption from compliance with Wage Order Nos. RX-01 and RX-01-A is hereby approved under and by virtue of criteria No. 2, Section 3 of RTWPB Guidelines No. 3 on Exemption, dated November 26, 1990, for a period of only one (1) year, retroactive to the date said Wage Order took effect up to November 21, 1991. SO ORDERED.[4]
The Facts The undisputed facts are narrated by the NWPC as follows:

On October 20, 1990, the Region X [Tripartite Wages and Productivity] Board issued Wage Order No. RX-01 which provides as follows: Section 1. Upon the effectivity of this Wage Order, the increase in minimum wage rates applicable to workers and employees in the private sector in Northern Mindanao (Region X) shall be as follows: a. The provinces of Agusan del Norte, Bukidnon, Misamis Oriental, and the Cities of Butuan, Gingoog, and Cagayan de Oro - - - - -P13.00/day b. The provinces of Agusan del Sur, Surigao del Norte and Misamis Occidental, and the Cities of Surigao Oroquieta, Ozamis and Tangub - - - - P11.00/day

c.

The province of Camiguin P9.00/day

Subsequently, a supplementary Wage Order No. RX-01-A was issued by the Board on November 6, 1990 which provides as follows: Section 1. Upon the effectivity of the original Wage Order RX-01, all workers and employees in the private sector in Region X already receiving wages above the statutory minimum wage rates up to one hundred and twenty pesos (P120.00) per day shall also receive an increase of P13, P11, P9 per day, as provided for under Wage Order No. RX-01; Applicants/appellees Nasipit Lumber Company, Inc. (NALCO), Philippine Wallboard Corporation (PWC), and Anakan Lumber Company (ALCO), claiming to be separate and distinct from each other but for expediency and practical purposes, jointly filed an application for exemption from the abovementioned Wage Orders as distressed establishments under Guidelines No. 3, issued by the herein Board on November 26, 1990, specifically Sec. 3(2) thereof which, among others, provides: A. For purposes of this Guidelines the following criteria to determine whether the applicant-firm is actually distressed shall be used.
xxx xxx xxx

2. Establishment belonging to distressed industry - an establishment that is engaged in an industry that is distressed due to conditions beyond its control as may be determined by the Board in consultation with DTI and NWPC. (Underscoring supplied)
xxx xxx xxx

Applicants/appellees aver that they are engaged in logging and integrated wood processing industry but are distressed due to conditions beyond their control, to wit: 1) Depressed economic conditions due to worldwide recession; 2) Peace and order and other emergency-related problems causing disruption and suspension of normal logging operations; 3) Imposition of environmental fee for timber production in addition to regular forest charges; 4) Logging moratorium in Bukidnon; 5) A reduction in the annual allowable volume of cut logs of NALCO & ALCO by 59%; 6) Highly insufficient raw material supply; 7) Extraordinary increases in the cost of fuel, oil, spare parts, and maintenance; 8) Excessive labor cost/production ratio that is more or less 47%; and 9) Lumber export ban.

On the other hand, oppositor/appellant Unions jointly opposed the application for exemption on the ground that said companies are not distressed establishments since their capitalization has not been impaired by 25%. [5]
Citing liquidity problems and business decline in the wood-processing industry, the RTWPB approved the applicants joint application for exemption in this wise:

1. The Board considered the arguments presented by petitioners and the oppositors. The Board likewise took note of the financial condition of petitioner firms. One of the affiliates, Anakan Lumber Company, is confirmed to be suffering from capital impairment by: 14:80% in 1988, 71.35% in 1989 and 100% in 1990. On the other hand, NALCO had a capital impairment of 6.41%. 13.53% and 17.04% in 1988, 1989 and 1990, respectively, while PWC had no capital impairment from 1988 to 1990. However, the Board also took note of the fact that petitioners are claiming for exemption, not on the strength of capital impairment, but on the basis of belonging to a distressed industry an establishment that is engaged in an industry that is distressed due to conditions beyond its control as may be determined by the Board in consultation with DTI and NWPC. 2. Inquiries made by the Board from the BOI and the DTI confirm that all petitioner-firms are encountering liquidity problems and extreme difficulty servicing their loan obligations. 3. A perusal of the Provincial Trade and Industry Development Plan for Agusan del Norte and Butuan City where petitioners are operating their business, confirms the existence of a slump in the wood-processing industry due to the growing scarcity of [a] large volume of raw materials to feed the various plywood and lumber mills in the area. A lot of firms have closed and shifted to other ventures, the report continued, although the competitive ones are still in operation. 4. The Board took note of the fact that most of the circumstances responsible for the financial straits of petitioners are largely external, over which petitioners have very little control. The Board feels that as an alternative to closing up their business[es] which could bring untold detriment and dislocation to [their] 4,000 workers and their families, petitioners should be extended assistance and encouragement to continue operating - so that jobs could thereby be preserved during these difficult times. One such way is for the Board to grant them a temporary reprieve from compliance with the mandated wage increase specifically W.O. RX-01 and RX-01-A only.[6]

Dissatisfied with the RTWPBs Decision, the private respondents lodged an appeal with the NWPC, which affirmed ALCOs application but reversed the applications of herein petitioners, NALCO and PWC. The NWPC reasoned:

The Guidelines No. 3 dated November 26, 1990, issued by the herein Board cannot be used as valid basis for granting applicants/appellees application for exemption since it did not pass the approval of this Commission. Under the Rules of Procedure on Minimum Wage Fixing dated June 4, 1990, issued by this Commission pursuant to Republic Act 6727, particularly Section 1 of Rule VIII thereof provides that: Section 1. Application For Exemption. Whenever a wage order provides for exemption, applications thereto shall be filed with the appropriate Board which shall process the same,subject to guidelines issued by the Commission. (Underscoring supplied) Clearly, it is the Commission that is empowered to set [the] criteria on exemption from compliance with wage orders. While the Boards may issue supplementary guidelines on exemption, the same should first pass the Commission for the purpose of determining its conformity to the latters general policies and guidelines relative thereto. In fact, under the Guidelines on Exemption from Compliance with the Prescribed Wage/Cost of Living Allowance Increases Granted by the Regional Tripartite Wages and Productivity Boards dated February 25, 1991, issued by the Commission, there is a provision that (T)he Board may issue supplementary guidelines for exemption x x x subject to review/approval by the Commission. (Section 11). In the case at bar, after the Commission Secretariat made some comments on said Guidelines No. 3, the same was never submitted again for [the] Commissions approval either justifying its original provisions or incorporating the comments made thereon. Until and unless said Guidelines No. 3 is approved by the Commission, it has no operative force and effect. The applicable guidelines on exemption therefore is that one issued by the Commission dated February 25, 1991, the pertinent portion of which reads: Section 3. CRITERIA FOR EXEMPTION
xxx xxx xxx

2. Distressed Employers/Establishment:

a. In the case of a stock corporation, partnership, single proprietorship or non-stock, non-profit organization engaged in business activity or charging fees for its services. When accumulated losses at end of the period under review have impaired by at least 25 percent the: - Paid-up-capital at the end of the last full accounting period preceding the application, in the case of corporations; - Total invested capital at the beginning of the last full accounting period preceding the application, in the case of partnership and single proprietorships(Underscoring supplied) A perusal of the financial documents on record shows that for the year 1990, which is the last full accounting period preceding the applications for exemption, appellees NALCO, ALCO, and PWC incurred a capital impairment of 1.89%, 28.72%, and 5.03%, respectively. Accordingly, based on the criteria set forth above in the NWPC Guidelines on Exemption, only the application for exemption of ALCO should be approved in view of its capital impairment of 28.72%. We are not unmindful of the fact that during the Board hearing conducted, both labor and management manifested their desire for a uniform decision to apply to all three (3) firms. However, we cannot grant the same for want of legal basis considering that we are required by the rules to decide on the basis of the merit of application by an establishment having a legal personality of its own.[7]
In denying petitioners motion for reconsideration, public respondent explained:

The fact that applicant companies relied in good faith upon Guidelines No. 3 issued by the Board a quo, the same is not sufficient reason that they should be assessed based on the criteria of said Guidelines considering that it does not conform to the policies and guidelines relative to wage exemption issued by this Commission pursuant to Republic Act 6727. Consequently, it has no force and effect. As such, said Guidelines No. 3 cannot therefore be a source of a right no matter if one has relied on it in good faith. In like manner that the workers, who are similarly affected, cannot be bound thereof. Moreover, even assuming that Guidelines No. 3 conforms to the procedural requirement, still, the same cannot be given effect insofar as it grants

exemption by industry considering that the subject Wage Order mentioned only distressed establishments as one of those to be exempted thereof. It did not mention exemption by industries. Well-settled is the rule that an implementing guidelines [sic] cannot expand nor limit the provision of [the] law it seeks to implement. Otherwise, it shall be considered ultra vires. And, contrary to applicant companies claim, this Commission does not approve rules implementing the Wage Orders issued by the Regional Tripartite Wages and Productivity Boards. Perforce, it cannot be said that this Commission has approved the Rules Implementing Wage Order No[s]. RX-01 and RX-01-A.[8]
Hence, this recourse.[9]

The Issue Petitioners raise this solitary issue:

With all due respect, Public Respondent National Wages and Productivity Commission committed grave abuse of discretion amounting to lack of or in excess of jurisdiction in ruling that RTWPB-X-Guideline No. 3 has no operative force and effect, among others, and consequently, denying for lack of merit the application for exemption of petitioners Nasipit Lumber Company, Inc. and Philippine Wallboard Corporation from the coverage of Wage Orders Nos. RX-01 and RX-01-A.
In the main, the issue boils down to a question of power. Is a guideline issued by an RTWPB without the approval of or, worse, contrary to the guidelines promulgated by the NWPC valid? The Courts Ruling The petition is unmeritorious. The answer to the above question is in the negative.

Sole Issue: Approval of NWPC Required Petitioners contend that the NWPC gravely abused its discretion in overturning the RTWPBs approval of their application for exemption from Wage Orders RX -01 and RX01-A. They argue that under Art. 122 (e) of the Labor Code, the RTWPB has the power [t]o receive, process and act on applications for exemption from prescribed wage rates

as may be provided by law or any wage order.[10] They also maintain that no law expressly requires the approval of the NWPC for the effectivity of the RTWPBs Guideline No. 3. Assumingarguendo that the approval of the NWPC was legally necessary, petitioners should not be prejudiced by their observance of the guideline, pointing out that the NWCPs own guidelines[11] took effect only on March 18, 1991 long after Guideline No. 3 was issued on November 26, 1990.[12] Lastly, they posit that the NWPC guidelines cannot be given retroactive effect as [they] will affect or change the petitioners vested rights.[13] The Court is not persuaded.

Power to Prescribe Guidelines Lodged in the NWPC, Not in the RTWPB The three great branches and the various administrative agencies of the government can exercise only those powers conferred upon them by the Constitution and the law.[14] It is through the application of this basic constitutional principle that the Court resolves the instant case. RA 6727 (the Wage Rationalization Act), amending the Labor Code, created both the NWPC and the RTWPB and defined their respective powers. Article 121 of the Labor Code lists the powers and functions of the NWPC, as follows:

ART. 121. Powers and Functions of the Commission. - The Commission shall have the following powers and functions: (a) To act as the national consultative and advisory body to the President of the Philippine[s] and Congress on matters relating to wages, incomes and productivity; (b) To formulate policies and guidelines on wages, incomes and productivity improvement at the enterprise, industry and national levels; (c) To prescribe rules and guidelines for the determination of appropriate minimum wage and productivity measures at the regional, provincial or industry levels; (d) To review regional wage levels set by the Regional Tripartite Wages and Productivity Boards to determine if these are in accordance with prescribed guidelines and national development plans; (e) To undertake studies, researches and surveys necessary for the attainment of its functions and objectives, and to collect and compile data and periodically disseminate information on wages and productivity and other

related information, including, but not limited to, employment, cost-of-living, labor costs, investments and returns; (f) To review plans and programs of the Regional Tripartite Wages and Productivity Boards to determine whether these are consistent with national development plans; (g) To exercise technical and administrative supervision over the Regional Tripartite Wages and Productivity Boards; (h) To call, from time to time, a national tripartite conference of representatives of government, workers and employers for the consideration of measures to promote wage rationalization and productivity; and (i) To exercise such powers and functions as may be necessary to implement this Act. xxx xxx x x x (Underscoring supplied)

Article 122 of the Labor Code, on the other hand, prescribes the powers of the RTWPB thus:

ART.122. Creation of Regional Tripartite Wages and Productivity Boards. xxx xxx xxx

The Regional Boards shall have the following powers and functions in their respective territorial jurisdiction: (a) To develop plans, programs and projects relative to wages, income and productivity improvement for their respective regions; (b) To determine and fix minimum wage rates applicable in their region, provinces or industries therein and to issue the corresponding wage orders, subject to guidelines issued by the Commission; (c) To undertake studies, researches, and surveys necessary for the attainment of their functions, objectives and programs, and to collect and compile data on wages, incomes, productivity and other related information and periodically disseminate the same; (d) To coordinate with the other Regional Boards as may be necessary to attain the policy and intention of this Code.

(e) To receive, process and act on applications for exemption from prescribed wage rates as may be provided by law or any Wage Order; and (f) To exercise such other powers and functions as may be necessary to carry out their mandate under this Code. (Underscoring supplied)
The foregoing clearly grants the NWPC, not the RTWPB, the power to prescribe the rules and guidelines for the determination of minimum wage and productivity measures. While the RTWPB has the power to issue wage orders under Article 122 (b) of the Labor Code, such orders are subject to the guidelines prescribed by the NWPC. One of these guidelines is the Rules on Minimum Wage Fixing, which was issued on June 4, 1990.[15] Rule IV, Section 2 thereof, allows the RTWPB to issue wage orders exempting enterprises from the coverage of the prescribed minimum wages.[16] However, the NWPC has the power not only to prescribe guidelines to govern wage orders, but also to issue exemptions therefrom, as the said rule provides that [w]henever a wage order provides for exemption, applications thereto shall be filed with the appropriate Board which shall process the same,subject to guidelines issued by the Commission.[17] In short, the NWPC lays down the guidelines which the RTWPB implements. Significantly, the NWPC authorized the RTWPB to issue exemptions from wage orders, but subject to its review and approval.[18] Since the NWPC never assented to Guideline No. 3 of the RTWPB, the said guideline is inoperative and cannot be used by the latter in deciding or acting on petitioners application for exemption. Moreover, Rule VIII, Section 1 of the NWPCs Rules of Procedure on Minimum Wage Fixing issued on June 4, 1990 -- which was prior to the effectivity of RTWPB Guideline No. 3 -- requires that an application for exemption from wage orders should be processed by the RTWPB, subject specifically to the guidelines issued by the NWPC. To allow RTWPB Guideline No. 3 to take effect without the approval of the NWPC is to arrogate unto RTWPB a power vested in the NWPC by Article 121 of the Labor Code, as amended by RA 6727. The Court will not countenance this naked usurpation of authority. It is a hornbook doctrine that the issuance of an administrative rule or regulation must be in harmony with the enabling law. If a discrepancy occurs between the basic law and an implementing rule or regulation, it is the former that prevails.[19] This is so because the law cannot be broadened by a mere administrative issuance. It is axiomatic that [a]n administrative agency cannot amend an act of Congress.[20] Article 122 (e) of the Labor Code cannot be construed to enable the RTWPB to decide applications for exemption on the basis of its own guidelines which were not reviewed and approved by the NWPC, for the simple reason that a statutory grant of powers should not be extended by implication beyond what may be necessary for their just and reasonable execution. Official powers cannot be merely assumed by administrative officers, nor can they be created by the courts in the exercise of their judicial functions.[21] There is no basis for petitioners claim that their vested rights were prejudiced by the NWPCs alleged retroactive application of its own rules [22] which were issued on

February 25, 1991 and took effect on March 18, 1991. [23] Such claim cannot stand because Guideline No. 3, as previously discussed and as correctly concluded by the NWPC,[24] was not valid and, thus, cannot be a source of a right; much less, a vested one. The Insertion in Guideline No. 3 of Distressed Industry as a Criterion for Exemption Void The Court wishes to stress that the law does not automatically grant exemption to all establishments belonging to an industry which is deemed distressed. Hence, RXO1, Section 3 (4), must not be construed to automatically include all establishments belonging to a distressed industry. The fact that the wording of a wage order may contain some ambiguity would not help petitioners. Basic is the rule in statutory construction that all doubts in the implementation and the interpretation of the provisions of the Labor Code, as well as its implementing rules and regulations, must be resolved in favor of labor.[25] By exempting all establishments belonging to a distressed industry, Guideline No. 3 surreptitiously and irregularly takes away the mandated increase in the minimum wage awarded to the affected workers. In so acting, the RTWPB proceeded against the declared policy of the State, enshrined in the enabling act, to rationalize the fixing of minimum wages and to promote productivity-improvement and gain-sharing measures to ensure a decent standard of living for the workers and their families; to guarantee the rights of labor to its just share in the fruits of production; x x x.[26] Thus, Guideline No. 3 is void not only because it lacks NWPC approval and contains an arbitrarily inserted exemption, but also because it is inconsistent with the avowed State policies protective of labor.

NWPC Decision Not Arbitrary To justify the exemption of a distressed establishment from effects of wage orders, the NWPC requires the applicant, if a stock corporation like petitioners, to prove that its accumulated losses impaired its paid-up capital by at least 25 percent in the last full accounting period preceding the application[27] or the effectivity of the order.[28] In the case at bar, it is undisputed that during the relevant accounting period, NALCO, ALCO and PWC sustained capital impairments of 1.89, 28.72, and 5.03 percent, respectively.[29] Clearly, it was only ALCO which met the exemption standard. Hence, the NWPC did not commit grave abuse of discretion in approving the application only of ALCO and in denying those of petitioners. Indeed, the NWPC acted within the ambit of its administrative prerogative when it set guidelines for the exemption of a distressed establishment. Absent any grave abuse of discretion, NWPCs actions will not be subject to judicial review.[30] Accordingly, we deem the appealed Decisions to be consistent with law. WHEREFORE, the petition is hereby DISMISSED. The assailed Decisions are hereby AFFIRMED. Costs against petitioners.

SO ORDERED. Davide, Jr., (Chairman), Bellosillo, Vitug, and Quisumbing, JJ., concur.

[1] [2]

Rollo, pp. 32-38. Signed by then Labor Secretary Ma. Nieves R. Confesor, chairman; Secretary Cielito F. Habito, vice chairman; and Cedric R. Bagtas, (representing labor), Vicente S. Bate (also representing labor), and Carmelita M. Pineda, members. The two other members representing the employer sector, Francisco R. Floro and Eduardo T. Rondain, dissented. [3] Rollo, pp. 39-44. [4] Ibid., p. 44. [5] Ibid., pp. 32-34. [6] RTWPB Decision, pp. 7-8; Rollo, pp.65-66. [7] NWPC Decision dated March 8, 1993, pp. 4-6; Rollo, pp. 35-37. [8] Assailed Decision denying the motion for reconsideration, pp. 4-5; Rollo, pp. 42-43. [9] The case was deemed submitted for resolution on May 9, 1996 upon receipt by this Court of private respondents Memorandum dated April 22, 1996. [10] Petitioners Memorandum, pp. 14-15; Rollo, pp. 234-235. [11] Rollo, pp. 79-80. [12] Petitioners Memorandum, p. 21; Rollo, p. 241. [13] Ibid., p.18; Rollo, p.238. [14] Azarcon vs. Sandiganbayan, 268 SCRA 747, 760-761, February 26, 1997. [15] Rollo, pp. 68-77. [16] Ibid., p. 73. [17] Section 1, Rule VIII, NWPCs Rule on Minimum Wage Fixing. Underscoring supplied. [18] Section 11 of NWPCs original Guidelines on Exemption From Compliance with the Prescribed Wage/Cost of Living Allowance Increase Granted by the RTWPBs dated February 25, 1991; Rollo, p.80. [19] Land Bank of the Philippines vs. Court of Appeals, 249 SCRA 149, 158, October 6, 1995, per Francisco, J.; citing Shell Philippines, Inc. vs. Central Bank of the Philippines, 162 SCRA 628, June 27, 1988. [20] Cebu Oxygen & Acetylene Co., Inc. vs. Drilon, 176 SCRA 24, 29, August 2, 1989, per Gancayco, J.; citing Manuel vs. General Auditing Office, 42 SCRA 660, December 29, 1971. [21] Gonzales, Neptali A., Administrative Law: A Text, p. 46, 1979 ed.; citing 42 Am Jur., 316-318. (Emphasis supplied.) [22] Rollo, pp. 79-80. [23] Petition, p. 22; rollo, p. 23. [24] NWPC Decision dated November 17, 1993, p. 4; rollo, p. 42. [25] Article 4, Labor Code of the Philippines. See Chartered Bank Employees Association vs. Ople, 138 SCRA 273, August 28, 1985 and Insular Bank of Asia and America Employees Union (IBAAEU) vs. Inciong, 132 SCRA 663, October 23, 1984. [26] . 2, RA 6727. [27] 3, par. 2 of Original NWPC Guidelines on Exemption From Compliance with the Prescribed Wage/Cost of Living Allowance Increase Granted by the RTWPBs dated February 25, 1991. See Central Textile Mills, Inc. vs. National Wages and Productivity Commission, 260 SCRA 368, 369, August 7, 1996. See also National Wages Council (now abolished predecessor of the NWPC) Policy Guideline No. 8, Section 5 as cited in Radio Communications of the Phils., Inc. (RCPI) vs. National Wages Council, 207 SCRA 581, 582-583, March 26, 1992. [28] 3, par. 3-a.1, Revised NWPC Guidelines on Exemption From Compliance with the Prescribed Wage/Cost of Living Allowance Increase Granted by the RTWPBs dated September 15, 1992. See Joy Brothers, Inc., vs. National Wages and Productivity Commission, G.R. No. 122932, p. 3, June 17, 1997. [29] NWPC Decision dated March 8, 1993, p. 5; rollo, p. 36. [30] See PNOC-Energy Development Corp. vs. NLRC, 201 SCRA 487, 494, September 11, 1991.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 162994 September 17, 2004

DUNCAN ASSOCIATION OF DETAILMAN-PTGWO and PEDRO A. TECSON, petitioners, vs. GLAXO WELLCOME PHILIPPINES, INC., Respondent. RESOLUTION TINGA, J.: Confronting the Court in this petition is a novel question, with constitutional overtones, involving the validity of the policy of a pharmaceutical company prohibiting its employees from marrying employees of any competitor company. This is a Petition for Review on Certiorari assailing the Decision1 dated May 19, 2003 and the Resolution dated March 26, 2004 of the Court of Appeals in CA-G.R. SP No. 62434.2 Petitioner Pedro A. Tecson (Tecson) was hired by respondent Glaxo Wellcome Philippines, Inc. (Glaxo) as medical representative on October 24, 1995, after Tecson had undergone training and orientation. Thereafter, Tecson signed a contract of employment which stipulates, among others, that he agrees to study and abide by existing company rules; to disclose to management any existing or future relationship by consanguinity or affinity with co-employees or employees of competing drug companies and should management find that such relationship poses a possible conflict of interest, to resign from the company. The Employee Code of Conduct of Glaxo similarly provides that an employee is expected to inform management of any existing or future relationship by consanguinity or affinity with co-employees or employees of competing drug companies. If management perceives a conflict of interest or a potential conflict between such relationship and the employees employment with the company, the management and the employee will explore the possibility of a "transfer to another department in a non-counterchecking position" or preparation for employment outside the company after six months. Tecson was initially assigned to market Glaxos products in the Camarines Sur-Camarines Norte sales area. Subsequently, Tecson entered into a romantic relationship with Bettsy, an employee of Astra Pharmaceuticals3(Astra), a competitor of Glaxo. Bettsy was Astras Branch Coordinator in Albay. She supervised the district managers and medical representatives of her company and prepared marketing strategies for Astra in that area. Even before they got married, Tecson received several reminders from his District Manager regarding the conflict of interest which his relationship with Bettsy might engender. Still, love prevailed, and Tecson married Bettsy in September 1998.

In January 1999, Tecsons superiors informed him that his marriage to Bettsy gave rise to a conflict of interest. Tecsons superiors reminded him that he and Bettsy should decide which one of them would resign from their jobs, although they told him that they wanted to retain him as much as possible because he was performing his job well. Tecson requested for time to comply with the company policy against entering into a relationship with an employee of a competitor company. He explained that Astra, Bettsys employer, was planning to merge with Zeneca, another drug company; and Bettsy was planning to avail of the redundancy package to be offered by Astra. With Bettsys separation from her company, the potential conflict of interest would be eliminated. At the same time, they would be able to avail of the attractive redundancy package from Astra. In August 1999, Tecson again requested for more time resolve the problem. In September 1999, Tecson applied for a transfer in Glaxos milk division, thinking that since Astra did not have a milk division, the potential conflict of interest would be eliminated. His application was denied in view of Glaxos "least-movement-possible" policy. In November 1999, Glaxo transferred Tecson to the Butuan City-Surigao City-Agusan del Sur sales area. Tecson asked Glaxo to reconsider its decision, but his request was denied. Tecson sought Glaxos reconsideration regarding his transfer and brought the matter to Glaxos Grievance Committee. Glaxo, however, remained firm in its decision and gave Tescon until February 7, 2000 to comply with the transfer order. Tecson defied the transfer order and continued acting as medical representative in the Camarines Sur-Camarines Norte sales area. During the pendency of the grievance proceedings, Tecson was paid his salary, but was not issued samples of products which were competing with similar products manufactured by Astra. He was also not included in product conferences regarding such products. Because the parties failed to resolve the issue at the grievance machinery level, they submitted the matter for voluntary arbitration. Glaxo offered Tecson a separation pay of one-half () month pay for every year of service, or a total of P50,000.00 but he declined the offer. On November 15, 2000, the National Conciliation and Mediation Board (NCMB) rendered its Decision declaring as valid Glaxos policy on relationships between its employees and persons employed with competitor companies, and affirming Glaxos right to transfer Tecson to another sales territory. Aggrieved, Tecson filed a Petition for Review with the Court of Appeals assailing the NCMB Decision. On May 19, 2003, the Court of Appeals promulgated its Decision denying the Petition for Review on the ground that the NCMB did not err in rendering its Decision. The appellate court held that Glaxos policy prohibiting its employees from having personal relationships with employees of competitor companies is a valid exercise of its management prerogatives.4 Tecson filed a Motion for Reconsideration of the appellate courts Decision, but the motion was denied by the appellate court in its Resolution dated March 26, 2004.5 Petitioners filed the instant petition, arguing therein that (i) the Court of Appeals erred in affirming the NCMBs finding that the Glaxos policy prohibiting its employees from marrying an employee of a competitor company is valid; and (ii) the Court of Appeals also erred in not finding that Tecson was constructively dismissed when he was transferred to a new sales territory, and deprived of the opportunity to attend products seminars and training sessions.6

Petitioners contend that Glaxos policy against employees marrying employees of competitor companies violates the equal protection clause of the Constitution because it creates invalid distinctions among employees on account only of marriage. They claim that the policy restricts the employees right to marry.7 They also argue that Tecson was constructively dismissed as shown by the following circumstances: (1) he was transferred from the Camarines Sur-Camarines Norte sales area to the Butuan-SurigaoAgusan sales area, (2) he suffered a diminution in pay, (3) he was excluded from attending seminars and training sessions for medical representatives, and (4) he was prohibited from promoting respondents products which were competing with Astras products.8 In its Comment on the petition, Glaxo argues that the company policy prohibiting its employees from having a relationship with and/or marrying an employee of a competitor company is a valid exercise of its management prerogatives and does not violate the equal protection clause; and that Tecsons reassignment from the Camarines Norte-Camarines Sur sales area to the Butuan City-Surigao City and Agusan del Sur sales area does not amount to constructive dismissal.9 Glaxo insists that as a company engaged in the promotion and sale of pharmaceutical products, it has a genuine interest in ensuring that its employees avoid any activity, relationship or interest that may conflict with their responsibilities to the company. Thus, it expects its employees to avoid having personal or family interests in any competitor company which may influence their actions and decisions and consequently deprive Glaxo of legitimate profits. The policy is also aimed at preventing a competitor company from gaining access to its secrets, procedures and policies.10 It likewise asserts that the policy does not prohibit marriage per se but only proscribes existing or future relationships with employees of competitor companies, and is therefore not violative of the equal protection clause. It maintains that considering the nature of its business, the prohibition is based on valid grounds.11 According to Glaxo, Tecsons marriage to Bettsy, an employee of Astra, posed a real and potential conflict of interest. Astras products were in direct competition with 67% of the products sold by Glaxo. Hence, Glaxos enforcement of the foregoing policy in Tecsons case was a valid exercise of its management prerogatives.12 In any case, Tecson was given several months to remedy the situation, and was even encouraged not to resign but to ask his wife to resign form Astra instead.13 Glaxo also points out that Tecson can no longer question the assailed company policy because when he signed his contract of employment, he was aware that such policy was stipulated therein. In said contract, he also agreed to resign from respondent if the management finds that his relationship with an employee of a competitor company would be detrimental to the interests of Glaxo.14 Glaxo likewise insists that Tecsons reassignment to another sales area and his exclusion from seminars regarding respondents new products did not amount to constructive dismissal. It claims that in view of Tecsons refusal to resign, he was relocated from the Camarines SurCamarines Norte sales area to the Butuan City-Surigao City and Agusan del Sur sales area. Glaxo asserts that in effecting the reassignment, it also considered the welfare of Tecsons family. Since Tecsons hometown was in Agusan del Sur and his wife traces her roots to Butuan City, Glaxo assumed that his transfer from the Bicol region to the Butuan City sales area would be favorable to him and his family as he would be relocating to a familiar territory and minimizing his travel expenses.15

In addition, Glaxo avers that Tecsons exclusion from the seminar concerning the new anti-asthma drug was due to the fact that said product was in direct competition with a drug which was soon to be sold by Astra, and hence, would pose a potential conflict of interest for him. Lastly, the delay in Tecsons receipt of his sales paraphernalia was due to the mix-up created by his refusal to transfer to the Butuan City sales area (his paraphernalia was delivered to his new sales area instead of Naga City because the supplier thought he already transferred to Butuan).16 The Court is tasked to resolve the following issues: (1) Whether the Court of Appeals erred in ruling that Glaxos policy against its employees marrying employees from competitor companies is valid, and in not holding that said policy violates the equal protection clause of the Constitution; (2) Whether Tecson was constructively dismissed. The Court finds no merit in the petition. The stipulation in Tecsons contract of employment with Glaxo being questioned by petitioners provides: 10. You agree to disclose to management any existing or future relationship you may have, either by consanguinity or affinity with co-employees or employees of competing drug companies. Should it pose a possible conflict of interest in management discretion, you agree to resign voluntarily from the Company as a matter of Company policy. 17 The same contract also stipulates that Tescon agrees to abide by the existing company rules of Glaxo, and to study and become acquainted with such policies.18 In this regard, the Employee Handbook of Glaxo expressly informs its employees of its rules regarding conflict of interest: 1. Conflict of Interest Employees should avoid any activity, investment relationship, or interest that may run counter to the responsibilities which they owe Glaxo Wellcome. Specifically, this means that employees are expected: a. To avoid having personal or family interest, financial or otherwise, in any competitor supplier or other businesses which may consciously or unconsciously influence their actions or decisions and thus deprive Glaxo Wellcome of legitimate profit. b. To refrain from using their position in Glaxo Wellcome or knowledge of Company plans to advance their outside personal interests, that of their relatives, friends and other businesses. c. To avoid outside employment or other interests for income which would impair their effective job performance. d. To consult with Management on such activities or relationships that may lead to conflict of interest.

1.1. Employee Relationships Employees with existing or future relationships either by consanguinity or affinity with coemployees of competing drug companies are expected to disclose such relationship to the Management. If management perceives a conflict or potential conflict of interest, every effort shall be made, together by management and the employee, to arrive at a solution within six (6) months, either by transfer to another department in a non-counter checking position, or by career preparation toward outside employment after Glaxo Wellcome. Employees must be prepared for possible resignation within six (6) months, if no other solution is feasible.19 No reversible error can be ascribed to the Court of Appeals when it ruled that Glaxos policy prohibiting an employee from having a relationship with an employee of a competitor company is a valid exercise of management prerogative. Glaxo has a right to guard its trade secrets, manufacturing formulas, marketing strategies and other confidential programs and information from competitors, especially so that it and Astra are rival companies in the highly competitive pharmaceutical industry. The prohibition against personal or marital relationships with employees of competitor companies upon Glaxos employees is reasonable under the circumstances because relationships of that nature might compromise the interests of the company. In laying down the assailed company policy, Glaxo only aims to protect its interests against the possibility that a competitor company will gain access to its secrets and procedures. That Glaxo possesses the right to protect its economic interests cannot be denied. No less than the Constitution recognizes the right of enterprises to adopt and enforce such a policy to protect its right to reasonable returns on investments and to expansion and growth.20 Indeed, while our laws endeavor to give life to the constitutional policy on social justice and the protection of labor, it does not mean that every labor dispute will be decided in favor of the workers. The law also recognizes that management has rights which are also entitled to respect and enforcement in the interest of fair play.21 As held in a Georgia, U.S.A case,22 it is a legitimate business practice to guard business confidentiality and protect a competitive position by even-handedly disqualifying from jobs male and female applicants or employees who are married to a competitor. Consequently, the court ruled than an employer that discharged an employee who was married to an employee of an active competitor did not violate Title VII of the Civil Rights Act of 1964.23The Court pointed out that the policy was applied to men and women equally, and noted that the employers business was highly competitive and that gaining inside information would constitute a competitive advantage. The challenged company policy does not violate the equal protection clause of the Constitution as petitioners erroneously suggest. It is a settled principle that the commands of the equal protection clause are addressed only to the state or those acting under color of its authority.24 Corollarily, it has been held in a long array of U.S. Supreme Court decisions that the equal protection clause erects no shield against merely private conduct, however, discriminatory or wrongful.25 The only exception occurs when the state29 in any of its manifestations or actions has been found to have become entwined or involved in the wrongful private conduct.27 Obviously, however, the exception is not present in this case. Significantly, the company actually enforced the policy after repeated requests to the employee to comply with the policy. Indeed, the application of the policy was made in an impartial and even-handed manner, with due regard for the lot of the employee.

In any event, from the wordings of the contractual provision and the policy in its employee handbook, it is clear that Glaxo does not impose an absolute prohibition against relationships between its employees and those of competitor companies. Its employees are free to cultivate relationships with and marry persons of their own choosing. What the company merely seeks to avoid is a conflict of interest between the employee and the company that may arise out of such relationships. As succinctly explained by the appellate court, thus: The policy being questioned is not a policy against marriage. An employee of the company remains free to marry anyone of his or her choosing. The policy is not aimed at restricting a personal prerogative that belongs only to the individual. However, an employees personal decision does not detract the employer from exercising management prerogatives to ensure maximum profit and business success. . .28 The Court of Appeals also correctly noted that the assailed company policy which forms part of respondents Employee Code of Conduct and of its contracts with its employees, such as that signed by Tescon, was made known to him prior to his employment. Tecson, therefore, was aware of that restriction when he signed his employment contract and when he entered into a relationship with Bettsy. Since Tecson knowingly and voluntarily entered into a contract of employment with Glaxo, the stipulations therein have the force of law between them and, thus, should be complied with in good faith."29 He is therefore estopped from questioning said policy. The Court finds no merit in petitioners contention that Tescon was constructively dismissed when he was transferred from the Camarines Norte-Camarines Sur sales area to the Butuan City-Surigao City-Agusan del Sur sales area, and when he was excluded from attending the companys seminar on new products which were directly competing with similar products manufactured by Astra. Constructive dismissal is defined as a quitting, an involuntary resignation resorted to when continued employment becomes impossible, unreasonable, or unlikely; when there is a demotion in rank or diminution in pay; or when a clear discrimination, insensibility or disdain by an employer becomes unbearable to the employee.30 None of these conditions are present in the instant case. The record does not show that Tescon was demoted or unduly discriminated upon by reason of such transfer. As found by the appellate court, Glaxo properly exercised its management prerogative in reassigning Tecson to the Butuan City sales area: . . . In this case, petitioners transfer to another place of assignment was merely in keeping with the policy of the company in avoidance of conflict of interest, and thus validNote that [Tecsons] wife holds a sensitive supervisory position as Branch Coordinator in her employer-company which requires her to work in close coordination with District Managers and Medical Representatives. Her duties include monitoring sales of Astra products, conducting sales drives, establishing and furthering relationship with customers, collection, monitoring and managing Astras inventoryshe therefore takes an active participation in the market war characterized as it is by stiff competition among pharmaceutical companies. Moreover, and this is significant, petitioners sales territory covers Camarines Sur and Camarines Norte while his wife is supervising a branch of her employer in Albay. The proximity of their areas of responsibility, all in the same Bicol Region, renders the conflict of interest not only possible, but actual, as learning by one spouse of the others market strategies in the region would be inevitable. [Managements] appreciation of a conflict of interest is therefore not merely illusory and wanting in factual basis31 In Abbott Laboratories (Phils.), Inc. v. National Labor Relations Commission,32 which involved a complaint filed by a medical representative against his employer drug company for illegal dismissal for allegedly terminating his employment when he refused to accept his reassignment to a new area, the Court upheld the right of the drug company to transfer or reassign its employee in accordance

with its operational demands and requirements. The ruling of the Court therein, quoted hereunder, also finds application in the instant case: By the very nature of his employment, a drug salesman or medical representative is expected to travel. He should anticipate reassignment according to the demands of their business. It would be a poor drug corporation which cannot even assign its representatives or detail men to new markets calling for opening or expansion or to areas where the need for pushing its products is great. More so if such reassignments are part of the employment contract.33 As noted earlier, the challenged policy has been implemented by Glaxo impartially and disinterestedly for a long period of time. In the case at bar, the record shows that Glaxo gave Tecson several chances to eliminate the conflict of interest brought about by his relationship with Bettsy. When their relationship was still in its initial stage, Tecsons supervisors at Glaxo constantly reminded him about its effects on his employment with the company and on the companys interests. After Tecson married Bettsy, Glaxo gave him time to resolve the conflict by either resigning from the company or asking his wife to resign from Astra. Glaxo even expressed its desire to retain Tecson in its employ because of his satisfactory performance and suggested that he ask Bettsy to resign from her company instead. Glaxo likewise acceded to his repeated requests for more time to resolve the conflict of interest. When the problem could not be resolved after several years of waiting, Glaxo was constrained to reassign Tecson to a sales area different from that handled by his wife for Astra. Notably, the Court did not terminate Tecson from employment but only reassigned him to another area where his home province, Agusan del Sur, was included. In effecting Tecsons transfer, Glaxo even considered the welfare of Tecsons family. Clearly, the foregoing dispels any suspicion of unfairness and bad faith on the part of Glaxo.34 WHEREFORE, the Petition is DENIED for lack of merit. Costs against petitioners. SO ORDERED. Puno, Austria-Martinez, Callejo, Sr., and Chico-Nazario*, JJ., concur. Footnotes
1

Penned by Associate Justice Rosmari D. Carandang and concurred in by Justices Conrado M. Vasquez, Jr. and Mercedes Gozo-Dadole. Rollo,pp. 22-32.
2

Duncan Association of Detailman-PTGWO and Pedro A. Tecson, petitioners, v. Glaxo Wellcome Philippines, Inc., respondent.
3

Now Astra Zeneca Pharmaceuticals, Inc. Rollo, pp. 28-32. Id. at 55. Id. at 9. Id. at 9-11. Id. at 14-17.

Id. at 96-112. Id. at 99-100. Id. at 101-102. Id. at 102-103. Id. at 102-104. Id. at 104-105. Id. at 64. Id. at 106-110. See Decision of the Court of Appeals; Rollo, pp. 23-24.

10

11

12

13

14

15

16

17

Item No. 6 of Tecsons employment contract cited by the Court of Appeals in its Decision, Id.
18 19

Excerpt of Glaxos Employee Handbook, Annex "A" of respondents Comment, Id. at 114. Section 3, Article XIII of the Constitution provides: The State shall regulate the relations between workers and employers, recognizing the right of labor to its just share in the fruits of production and the right of enterprises to reasonable returns on investments, and to expansion and growth.

20

21

Sta. Catalina College v. National Labor Relations Commission, G.R. No. 144483, November 19, 2003.
22

Emory v. Georgia Hospital Service Association (1971), DC Ga., 4 CCH EPD 7785, 4 BNA FEP Cas 891, affd (CA5) 446 F2d 897, 4 CCH EPD 7786; Cited 45 Am Jr 2d Sec. 469. 42 USCS 2000e2002e17. Title VII prohibits certain employers, employment agencies, labor organizations, and joint labor-management training committees from discriminating against applicants and employees on the basis of race or color, religion, sex, national origin, or opposition to discriminatory practices.
23

There is no similar legislation in the Philippines.

24

Avery v. Midland County, 390 US 474, 20 L. Ed 2d 45, 88 S Ct 1114, on remand (Tex) 430 SW2d 487; Cooper v. Aaron, 358 US 1, 3 L Ed 2d 5, 78 S Ct 1401.
25

District of Columbia v. Carter, 409 US 418, 34 L.Ed.2d 613, 93 S. Ct. 602, 35 L.Ed.2d 694, 93 S. Ct. 1411; Moose Lodge No. 107 v. Irvis, 407 US 163, 32 L.Ed.2d 627, 92 S. Ct. 1965; United States v. Price, 383 US 787, 16 L.Ed. 2d 267, 86 S. Ct. 1152; Burton v. Wilmington Parking Authority, 365 US 715, 6 L.Ed.2d 45, 81 S. Ct. 856; Shelley v. Kraemer, 334 US 1,

92 L.Ed.1161, 68 S. Ct. 836, 3 ALR2d 441; United States v. Classic, 313 US 299, 85 L.Ed 1368, 61 S. Ct. 1031, 86 L.Ed 565, 62 S. Ct. 51; Nixon v. Condon, 286 US 73, 76 L.Ed. 984, 52 S. Ct. 484, 88 ALR 458; Iowa-Des Moines Nat. Bank v. Bennet, 284 US 239, 76 L.Ed 265, 52 S. Ct. 133; Corrigan v. Buckley, 271 US 323, 70 L.Ed. 969, 46 S. Ct. 521; U.S. Adickes v. S. H. Kress & Co., N.Y., 90 S. Ct. 1598, 398 U.S. 144, 26 L. Ed. 2d 142.
26

The equal protection clause contained in the Fourteenth Amendment of the U.S. Constitution is a restriction on the state governments and operates exclusively upon them. It does not extend to authority exercised by the Government of the United States. 16 A Am Jur 2d 742.
27

Gilmore v. Montgomery, 417 US 556, 41 L Ed 2d 304, 94 S Ct 2416; Evans v. Newton, 382 US 296, 15 L Ed 2d 373, 86 S Ct 486; Anderson v. Martin, 375 US 399, 11 L Ed 2d 430, 84 S Ct 454; Peterson v. Greenville, 373 US 244, 10 L Ed 2d 323, 83 S Ct 1119; Burton v. Wilmington Parking Authority, supra note 25.
28

Decision of the Court of Appeals, Rollo, p. 28.

29

Article 1159, Civil Code. See National Sugar Trading and/or the Sugar Regulatory Administration v. Philippine National Bank, G.R. No. 151218, January 18, 2003, 396 SCRA 528; Pilipinas Hino, Inc. v. Court of Appeals, G.R. No. 126570, August 18, 2000, 338 SCRA 355.
30

Leonardo v. National Labor Relations Commission, et al., G.R. Nos. 125303, and 126937, June 16, 2000, 333 SCRA 589.
31

Rollo, pp. 30-31. G.R. No. L-76959, October 12, 1987, 154 SCRA 713. Id. at 719. Decision of the Court of Appeals, Rollo, pp. 24-27.

32

33

34

SECOND DIVISION

[G.R. No. 118978. May 23, 1997]

PHILIPPINE TELEGRAPH AND TELEPHONE COMPANY, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and GRACE DE GUZMAN, respondents.
*

DECISION
REGALADO, J.:

Seeking relief through the extraordinary writ of certiorari, petitioner Philippine Telegraph and Telephone Company (hereafter, PT&T) invokes the alleged concealment of civil status and defalcation of company funds as grounds to terminate the services of an employee. That employee, herein private respondent Grace de Guzman, contrarily argues that what really motivated PT&T to terminate her services was her having contracted marriage during her employment, which is prohibited by petitioner in its company policies. She thus claims that she was discriminated against in gross violation of law, such a proscription by an employer being outlawed by Article 136 of the Labor Code. Grace de Guzman was initially hired by petitioner as a reliever, specifically as a Supernumerary Project Worker, for a fixed perio d from November 21, 1990 until April 20, 1991 vice one C.F. Tenorio who went on maternity leave. [1] Under the Reliever Agreement which she signed with petitioner company, her employment was to be immediately terminated upon expiration of the agreed period. Thereafter, from June 10, 1991 to July 1, 1991, and from July 19, 1991 to August 8, 1991, private respondents services as reliever were again engaged by petitioner, this time in replacement of one Erlinda F. Dizon who went on leave during both periods.[2] After August 8, 1991, and pursuant to their Reliever Agreement, her services were terminated. On September 2, 1991, private respondent was once more asked to join petitioner company as a probationary employee, the probationary period to cover 150 days. In the job application form that was furnished her to be filled up for the purpose, she indicated in the portion for civil status therein that she was single although she had contracted marriage a few months earlier, that is, on May 26, 1991.[3] It now appears that private respondent had made the same representation in the two successive reliever agreements which she signed on June 10, 1991 and July 8, 1991. When petitioner supposedly learned about the same later, its branch supervisor in Baguio City, Delia M. Oficial, sent to private respondent a memorandum dated January 15, 1992 requiring her to explain the discrepancy. In that memorandum, she was reminded about the companys policy of not accepting married women for employment.[4] In her reply letter dated January 17, 1992, private respondent stated that she was not aware of PT&Ts policy regarding married women at the time, and that all along she had not deliberately hidden her true civil status.[5] Petitioner nonetheless remained unconvinced by her explanations. Private respondent was dismissed from the company effective January 29, 1992,[6] which she readily contested by initiating a complaint for illegal dismissal, coupled with a claim for non-payment of cost of living allowances (COLA), before the Regional Arbitration Branch of the National Labor Relations Commission in Baguio City. At the preliminary conference conducted in connection therewith, private respondent volunteered the information, and this was incorporated in the stipulation of facts between the parties, that she had failed to remit the amount of P2,380.75 of her collections. She then executed a promissory note for that amount in favor of petitioner.[7] All of these took place in a formal proceeding and with the agreement of the parties and/or their counsel.

On November 23, 1993, Labor Arbiter Irenarco R. Rimando handed down a decision declaring that private respondent, who had already gained the status of a regular employee, was illegally dismissed by petitioner. Her reinstatement, plus payment of the corresponding back wages and COLA, was correspondingly ordered, the labor arbiter being of the firmly expressed view that the ground relied upon by petitioner in dismissing private respondent was clearly insufficient, and that it was apparent that she had been discriminated against on account of her having contracted marriage in violation of company rules. On appeal to the National Labor Relations Commission (NLRC), said public respondent upheld the labor arbiter and, in its decision dated April 29, 1994, it ruled that private respondent had indeed been the subject of an unjust and unlawful discrimination by her employer, PT&T. However, the decision of the labor arbiter was modified with the qualification that Grace de Guzman deserved to be suspended for three months in view of the dishonest nature of her acts which should not be condoned. In all other respects, the NLRC affirmed the decision of the labor arbiter, including the order for the reinstatement of private respondent in her employment with PT&T. The subsequent motion for reconsideration filed by petitioner was rebuffed by respondent NLRC in its resolution of November 9, 1994, hence this special civil action assailing the aforestated decisions of the labor arbiter and respondent NLRC, as well as the denial resolution of the latter. 1. Decreed in the Bible itself is the universal norm that women should be regarded with love and respect but, through the ages, men have responded to that injunction with indifference, on the hubristic conceit that women constitute the inferior sex. Nowhere has that prejudice against womankind been so pervasive as in the field of labor, especially on the matter of equal employment opportunities and standards. In the Philippine setting, women have traditionally been considered as falling within the vulnerable groups or types of workers who must be safeguarded with preventive and remedial social legislation against discriminatory and exploitative practices in hiring, training, benefits, promotion and retention. The Constitution, cognizant of the disparity in rights between men and women in almost all phases of social and political life, provides a gamut of protective provisions. To cite a few of the primordial ones, Section 14, Article II[8] on the Declaration of Principles and State Policies, expressly recognizes the role of women in nation-building and commands the State to ensure, at all times, the fundamental equality before the law of women and men. Corollary thereto, Section 3 of Article XIII[9] (the progenitor whereof dates back to both the 1935 and 1973 Constitution) pointedly requires the State to afford full protection to labor and to promote full employment and equality of employment opportunities for all, including an assurance of entitlement to tenurial security of all workers. Similarly, Section 14 of Article XIII[10] mandates that the State shall protect working women through provisions for opportunities that would enable them to reach their full potential. 2. Corrective labor and social laws on gender inequality have emerged with more frequency in the years since the Labor Code was enacted on May 1, 1974 as Presidential Decree No. 442, largely due to our countrys commitment as a signatory to

the United Nations Convention on the Elimination of All Forms of Discrimination Against Women (CEDAW).[11] Principal among these laws are Republic Act No. 6727 [12] which explicitly prohibits discrimination against women with respect to terms and conditions of employment, promotion, and training opportunities; Republic Act No. 6955 [13] which bans the mailorder-bride practice for a fee and the export of female labor to countries that cannot guarantee protection to the rights of women workers; Republic Act No. 7192, [14] also known as the Women in Development and Nation Building Act, which affords women equal opportunities with men to act and to enter into contracts, and for appointment, admission, training, graduation, and commissioning in all military or similar schools of the Armed Forces of the Philippines and the Philippine National Police; Republic Act No. 7322[15] increasing the maternity benefits granted to women in the private sector; Republic Act No. 7877[16] which outlaws and punishes sexual harassment in the workplace and in the education and training environment; and Republic Act No. 8042,[17] or the Migrant Workers and Overseas Filipinos Act of 1995, which prescribes as a matter of policy, inter alia, the deployment of migrant workers, with emphasis on women, only in countries where their rights are secure. Likewise, it would not be amiss to point out that in the Family Code,[18] womens rights in the field of civil law have been greatly enhanced and expanded. In the Labor Code, provisions governing the rights of women workers are found in Articles 130 to 138 thereof. Article 130 involves the right against particular kinds of night work while Article 132 ensures the right of women to be provided with facilities and standards which the Secretary of Labor may establish to ensure their health and safety. For purposes of labor and social legislation, a woman working in a nightclub, cocktail lounge, massage clinic, bar or other similar establishments shall be considered as an employee under Article 138. Article 135, on the other hand, recognizes a womans right against discrimination with respect to terms and conditions of employment on account simply of sex. Finally, and this brings us to the issue at hand, Article 136 explicitly prohibits discrimination merely by reason of the marriage of a female employee. 3. Acknowledged as paramount in the due process scheme is the constitutional guarantee of protection to labor and security of tenure. Thus, an employer is required, as a condition sine qua non prior to severance of the employment ties of an individual under his employ, to convincingly establish, through substantial evidence, the existence of a valid and just cause in dispensing with the services of such employee, ones labor being regarded as constitutionally protected property. On the other hand, it is recognized that regulation of manpower by the company falls within the so-called management prerogatives, which prescriptions encompass the matter of hiring, supervision of workers, work assignments, working methods and assignments, as well as regulations on the transfer of employees, lay-off of workers, and the discipline, dismissal, and recall of employees.[19] As put in a case, an employer is free to regulate, according to his discretion and best business judgment, all aspects of employment, from hiring to firing, except in cases of unlawful discrimination or those which may be provided by law.[20]

In the case at bar, petitioners policy of not accepting or considerin g as disqualified from work any woman worker who contracts marriage runs afoul of the test of, and the right against, discrimination, afforded all women workers by our labor laws and by no less than the Constitution. Contrary to petitioners assertion that it dismissed private respondent from employment on account of her dishonesty, the record discloses clearly that her ties with the company were dissolved principally because of the companys policy that married women are not qualified for employment in PT&T, and not merely because of her supposed acts of dishonesty. That it was so can easily be seen from the memorandum sent to private respondent by Delia M. Oficial, the branch supervisor of the company, with the reminder, in the words of the latter, that youre fully aware that the company is not accepting married women employee (sic), as it was verbally instructed to you. [21] Again, in the termination notice sent to her by the same branch supervisor, private respondent was made to understand that her severance from the service was not only by reason of her concealment of her married status but, over and on top of that, was her violation of the companys policy against marriage (and even told you that married women employees are not applicable [sic] or accepted in our company.)[22] Parenthetically, this seems to be the curious reason why it was made to appear in the initiatory pleadings that petitioner was represented in this case only by its said supervisor and not by its highest ranking officers who would otherwise be solidarily liable with the corporation.[23] Verily, private respondents act of concealing the true nature of her status from PT&T could not be properly characterized as willful or in bad faith as she was moved to act the way she did mainly because she wanted to retain a permanent job in a stable company. In other words, she was practically forced by that very same illegal company policy into misrepresenting her civil status for fear of being disqualified from work. While loss of confidence is a just cause for termination of employment, it should not be simulated.[24] It must rest on an actual breach of duty committed by the employee and not on the employers caprices.[25] Furthermore, it should never be used as a subterfuge for causes which are improper, illegal, or unjustified.[26] In the present controversy, petitioners expostulations that it dismissed private respondent, not because the latter got married but because she concealed that fact, does have a hollow ring. Her concealment, so it is claimed, bespeaks dishonesty hence the consequent loss of confidence in her which justified her dismissal. Petitioner would asseverate, therefore, that while it has nothing against marriage, it nonetheless takes umbrage over the concealment of that fact. This improbable reasoning, with interstitial distinctions, perturbs the Court since private respondent may well be minded to claim that the imputation of dishonesty should be the other way around. Petitioner would have the Court believe that although private respondent defied its policy against its female employees contracting marriage, what could be an act of insubordination was inconsequential. What it submits as unforgivable is her concealment of that marriage yet, at the same time, declaring that marriage as a trivial matter to which it supposedly has no objection. In other words, PT&T says it gives its blessings to its female employees contracting marriage, despite the maternity leaves and other benefits it would consequently respond for and which obviously it would have

wanted to avoid. If that employee confesses such fact of marriage, there will be no sanction; but if such employee conceals the same instead of proceeding to the confessional, she will be dismissed. This line of reasoning does not impress us as reflecting its true management policy or that we are being regaled with responsible advocacy. This Court should be spared the ennui of strained reasoning and the tedium of propositions which confuse through less than candid arguments. Indeed, petitioner glosses over the fact that it was its unlawful policy against married women, both on the aspects of qualification and retention, which compelled private respondent to conceal her supervenient marriage. It was, however, that very policy alone which was the cause of private respondents secretive conduct now complained of. It is then apropos to recall the familiar saying that he who is the cause of the cause is the cause of the evil caused. Finally, petitioners collateral insistence on the admission of private respondent that she supposedly misappropriated company funds, as an additional ground to dismiss her from employment, is somewhat insincere and self-serving. Concededly, private respondent admitted in the course of the proceedings that she failed to remit some of her collections, but that is an altogether different story. The fact is that she was dismissed solely because of her concealment of her marital status, and not on the basis of that supposed defalcation of company funds. That the labor arbiter would thus consider petitioners submissions on this supposed dishonesty as a mere afterthought, just to bolster its case for dismissal, is a perceptive conclusion born of experience in labor cases. For, there was no showing that private respondent deliberately misappropriated the amount or whether her failure to remit the same was through negligence and, if so, whether the negligence was in nature simple or grave. In fact, it was merely agreed that private respondent execute a promissory note to refund the same, which she did, and the matter was deemed settled as a peripheral issue in the labor case. Private respondent, it must be observed, had gained regular status at the time of her dismissal. When she was served her walking papers on January 29, 1992, she was about to complete the probationary period of 150 days as she was contracted as a probationary employee on September 2, 1991. That her dismissal would be effected just when her probationary period was winding down clearly raises the plausible conclusion that it was done in order to prevent her from earning security of tenure. [27] On the other hand, her earlier stints with the company as reliever were undoubtedly those of a regular employee, even if the same were for fixed periods, as she performed activities which were essential or necessary in the usual trade and business of PT&T.[28] The primary standard of determining regular employment is the reasonable connection between the activity performed by the employee in relation to the business or trade of the employer.[29] As an employee who had therefore gained regular status, and as she had been dismissed without just cause, she is entitled to reinstatement without loss of seniority rights and other privileges and to full back wages, inclusive of allowances and other benefits or their monetary equivalent.[30] However, as she had undeniably committed an

act of dishonesty in concealing her status, albeit under the compulsion of an unlawful imposition of petitioner, the three-month suspension imposed by respondent NLRC must be upheld to obviate the impression or inference that such act should be condoned. It would be unfair to the employer if she were to return to its fold without any sanction whatsoever for her act which was not totally justified. Thus, her entitlement to back wages, which shall be computed from the time her compensation was withheld up to the time of her actual reinstatement, shall be reduced by deducting therefrom the amount corresponding to her three months suspension. 4. The government, to repeat, abhors any stipulation or policy in the nature of that adopted by petitioner PT&T. The Labor Code states, in no uncertain terms, as follows:

ART. 136. Stipulation against marriage. - It shall be unlawful for an employer to require as a condition of employment or continuation of employment that a woman shall not get married, or to stipulate expressly or tacitly that upon getting married, a woman employee shall be deemed resigned or separated, or to actually dismiss, discharge, discriminate or otherwise prejudice a woman employee merely by reason of marriage.
This provision had a studied history for its origin can be traced to Section 8 of Presidential Decree No. 148,[31] better known as the Women and Child Labor Law, which amended paragraph (c), Section 12 of Republic Act No. 679,[32] entitled An Act to Regulate the Employment of Women and Children, to Provide Penalties for Violations Thereof, and for Other Purposes. The forerunner to Republic Act No. 679, on the other hand, was Act No. 3071 which became law on March 16, 1923 and which regulated the employment of women and children in shops, factories, industrial, agricultural, and mercantile establishments and other places of labor in the then Philippine Islands. It would be worthwhile to reflect upon and adopt here the rationalization in Zialcita, et al. vs. Philippine Air Lines,[33] a decision that emanated from the Office of the President. There, a policy of Philippine Air Lines requiring that prospective flight attendants must be single and that they will be automatically separated from the service once they marry was declared void, it being violative of the clear mandate in Article 136 of the Labor Code with regard to discrimination against married women. Thus:

Of first impression is the incompatibility of the respondents policy or regulation with the codal provision of law. Respondent is resolute in its contention that Article 136 of the Labor Code applies only to women employed in ordinary occupations and that the prohibition against marriage of women engaged in extraordinary occupations, like flight attendants, is fair and reasonable, considering the pecularities of their chosen profession. We cannot subscribe to the line of reasoning pursued by respondent. All along, it knew that the controverted policy has already met its doom as early as March 13, 1973 when Presidential Decree No. 148, otherwise known as the Women and Child

Labor Law, was promulgated. But for the timidity of those affected or their labor unions in challenging the validity of the policy, the same was able to obtain a momentary reprieve. A close look at Section 8 of said decree, which amended paragraph (c) of Section 12 of Republic Act No. 679, reveals that it is exactly the same provision reproduced verbatim in Article 136 of the Labor Code, which was promulgated on May 1, 1974 to take effect six (6) months later, or on November 1, 1974. It cannot be gainsaid that, with the reiteration of the same provision in the new Labor Code, all policies and acts against it are deemed illegal and therefore abrogated. True, Article 132 enjoins the Secretary of Labor to establish standards that will ensure the safety and health of women employees and in appropriate cases shall by regulation require employers to determine appropriate minimum standards for termination in special occupations, such as those of flight attendants, but that is precisely the factor that militates against the policy of respondent. The standards have not yet been established as set forth in the first paragraph, nor has the Secretary of Labor issued any regulation affecting flight attendants. It is logical to presume that, in the absence of said standards or regulations which are as yet to be established, the policy of respondent against marriage is patently illegal. This finds support in Section 9 of the New Constitution, which provides: Sec. 9. The State shall afford protection to labor, promote full employment and equality in employment, ensure equal work opportunities regardless of sex, race, or creed, and regulate the relations between workers and employees. The State shall assure the rights of workers to self-organization, collective bargaining, security of tenure, and just and humane conditions of work x x x. Moreover, we cannot agree to the respondents proposition that termination from employment of flight attendants on account of marriage is a fair and reasonable standard designed for their own health, safety, protection and welfare, as no basis has been laid therefor. Actually, respondent claims that its concern is not so much against the continued employment of the flight attendant merely by reason of marriage as observed by the Secretary of Labor, but rather on the consequence of marriage-pregnancy. Respondent discussed at length in the instant appeal the supposed ill effects of pregnancy on flight attendants in the course of their employment. We feel that this needs no further discussion as it had been adequately explained by the Secretary of Labor in his decision of May 2, 1976. In a vain attempt to give meaning to its position, respondent went as far as invoking the provisions of Articles 52 and 216 of the New Civil Code on the preservation of marriage as an inviolable social institution and the family as a basic social institution,

respectively, as bases for its policy of non-marriage. In both instances, respondent predicates absence of a flight attendant from her home for long periods of time as contributory to an unhappy married life. This is pure conjecture not based on actual conditions, considering that, in this modern world, sophisticated technology has narrowed the distance from one place to another. Moreover, respondent overlooked the fact that married flight attendants can program their lives to adapt to prevailing circumstances and events. Article 136 is not intended to apply only to women employed in ordinary occupations, or it should have categorically expressed so. The sweeping intendment of the law, be it on special or ordinary occupations, is reflected in the whole text and supported by Article 135 that speaks of non-discrimination on the employment of women.
The judgment of the Court of Appeals in Gualberto, et al. vs. Marinduque Mining & Industrial Corporation[34] considered as void a policy of the same nature. In said case, respondent, in dismissing from the service the complainant, invoked a policy of the firm to consider female employees in the project it was undertaking as separated the moment they get married due to lack of facilities for married women. Respondent further claimed that complainant was employed in the project with an oral understanding that her services would be terminated when she gets married. Branding the policy of the employer as an example of discriminatory chauvinism tantamount to denying equal employment opportunities to women simply on account of their sex, the appellate court struck down said employer policy as unlawful in view of its repugnance to the Civil Code, Presidential Decree No. 148 and the Constitution. Under American jurisprudence, job requirements which establish employer preference or conditions relating to the marital status of an employee are categorized as a sex-plus discrimination where it is imposed on one sex and not on the other. Further, the same should be evenly applied and must not inflict adverse effects on a racial or sexual group which is protected by federal job discrimination laws. Employment rules that forbid or restrict the employment of married women, but do not apply to married men, have been held to violate Title VII of the United States Civil Rights Act of 1964, the main federal statute prohibiting job discrimination against employees and applicants on the basis of, among other things, sex.[35] Further, it is not relevant that the rule is not directed against all women but just against married women. And, where the employer discriminates against married women, but not against married men, the variable is sex and the discrimination is unlawful.[36] Upon the other hand, a requirement that a woman employee must remain unmarried could be justified as a bona fide occupational qualification, or BFOQ, where the particular requirements of the job would justify the same, but not on the ground of a general principle, such as the desirability of spreading work in the workplace. A requirement of that nature would be valid provided it reflects an inherent quality reasonably necessary for satisfactory job performance. Thus, in one case, a nomarriage rule applicable to both male and female flight attendants, was regarded as

unlawful since the restriction was not related to the job performance of the flight attendants.[37] 5. Petitioners policy is not only in derogation of the provisions of Article 136 of the Labor Code on the right of a woman to be free from any kind of stipulation against marriage in connection with her employment, but it likewise assaults good morals and public policy, tending as it does to deprive a woman of the freedom to choose her status, a privilege that by all accounts inheres in the individual as an intangible and inalienable right.[38] Hence, while it is true that the parties to a contract may establish any agreements, terms, and conditions that they may deem convenient, the same should not be contrary to law, morals, good customs, public order, or public policy.[39] Carried to its logical consequences, it may even be said that petitioners policy against legitimate marital bonds would encourage illicit or common-law relations and subvert the sacrament of marriage. Parenthetically, the Civil Code provisions on the contract of labor state that the relations between the parties, that is, of capital and labor, are not merely contractual, impressed as they are with so much public interest that the same should yield to the common good.[40] It goes on to intone that neither capital nor labor should visit acts of oppression against the other, nor impair the interest or convenience of the public. [41] In the final reckoning, the danger of just such a policy against marriage followed by petitioner PT&T is that it strikes at the very essence, ideals and purpose of marriage as an inviolable social institution and, ultimately, of the family as the foundation of the nation.[42] That it must be effectively interdicted here in all its indirect, disguised or dissembled forms as discriminatory conduct derogatory of the laws of the land is not only in order but imperatively required. ON THE FOREGOING PREMISES, the petition of Philippine Telegraph and Telephone Company is hereby DISMISSED for lack of merit, with double costs against petitioner. SO ORDERED. Romero, Puno, Mendoza, and Torres, Jr., JJ., concur.

The phrase herein represented by DELIA M. OFICIAL, added hereto in the title of this case as stated in the petition, has been deleted for being unnecessary and violative of the rules on pleadings, and is commented upon in the text of this opinion.
* [1]

Rollo, 42; Annex D. Ibid., 44-45; Annexes F and G. Ibid., 46-48; Annexes H and I. Ibid., 49; Annex J. Id., 50 Annex K. Id., 51; Annex L.

[2]

[3]

[4]

[5]

[6]

[7]

Id., 53; Annex N. The State recognizes the role of women in nation-building, and shall ensure the fundamental equality before the law of women and men (Sec. 14, Art. II).

[8]

[9]

The State shall afford full protection to labor, local and overseas, organized or unorganized, and promote full employment and equality of employment opportunities for all. It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations, and peaceful concerted activities, including the right to strike in accordance with law. They shall be entitled to security of tenure, humane conditions of work, and a living wage. They shall also participate in policy and decision-making processes affecting their rights and benefits as may be provided by law. The State shall promote the principle of shared responsibility between workers and employers and the preferential use of voluntary modes of settling disputes, including conciliation, and shall enforce their mutual compliance therewith to foster industrial peace. The State shall regulate the relations between workers and employers, recognizing the right of labor to its just share in the fruits of production and the right of enterprises to reasonable returns on investment, and to expansion and growth (Sec. 3, Art. XIII).
[10]

The State shall protect working women by providing safe and healthful working conditions, taking into account their maternal functions, and such facilities and opportunities that will enhance their welfare and enable them to realize their full potential in the service of the nation (Sec. 14, Art. XIII).

[11]

Adopted in 1979 by the UN General Assembly, it is regarded as the most comprehensive international treaty governing the rights of women. The Philippines became a signatory thereto a year after its adoption by the UN and in 1981, the country ratified it. The Philippines had likewise been an active participant in all the four U.N. World Conferences on Women, namely those held in Mexico in 1975, Copenhagen in 1980, Nairobi in 1985, and Beijing in 1995. Other relevant international laws to which the Philippines adheres as a member of the international community include the Universal Declaration of Human Rights, the International Covenant on Civil and Political Rights, and the International Covenant on Economic, Social and Cultural Rights.
[12]

Approved, June 9, 1989. Approved, June 13, 1990. Approved, February 12, 1992. Approved, March 30, 1992. Approved, February 14, 1995. Approved, June 7, 1995. Effective August 3, 1988. Caltex Refinery Employees Association (CREA) vs. National Labor Relations Commission, et al., G.R. No. 102993, July 14, 1995, 246 SCRA 271; Oriental Mindoro Electric Cooperative, Inc. vs. National Labor Relations Commission, et al., G.R. No. 111905, July 31, 1995, 246 SCRA 794; Nuez vs. National Labor Relations Commission, et al., G.R. No. 107574, December 28, 1994, 239 SCRA 518; San Miguel Corporation vs. Ubaldo, et al., G.R. No. 92859, February 1, 1993, 218 SCRA 293. NAFLU vs. National Labor Relations Commission, et al., G.R. No. 90739, October 3, 1991, 202 SCRA 346.

[13]

[14]

[15]

[16]

[17]

[18]

[19]

[20]

[21]

Quoted in the Decision of the Third Division, NLRC, in NLRC Case No. RAB-CAR-02-0042-92, Annex B of petition; Rollo, 35. See also Annex J, supra, Fn. 4. Annex L, id.; Rollo, 51. Art. 289, Labor Code; see AC Ransom Labor Union-CCLU vs. National Labor Relations Commission, et al., G.R. No. 69494, June 10, 1986, 142 SCRA 269; Chua vs. National Labor Relations Commission, et al., G.R. No. 81450, February 15, 1990, 182 SCRA 353. Mapalo vs. National Labor Relations Commission, et al., G.R. No. 107940, June 17, 1994, 233 SCRA 266; PNOC-Energy Development Corporation vs. National Labor Relations Commission, et al., G.R. No. 79182, September 11, 1991, 201 SCRA 487. San Antonio vs. National Labor Relations Commission, et al., G.R. No. 100829, November 21, 1995, 250 SCRA 359; Labor vs. National Labor Relations Commission, G.R. No. 110388, September 14, 1995, 248 SCRA 183. Hospicio de San Jose de Basili vs. National Labor Relations Commission, et al., G.R. No. 75997, August 18, 1988, 164 SCRA 516. Cielo vs. National Labor Relations Commission, et al., G.R. No. 78693, January 28, 1991, 193 SCRA 410; Brent School, Inc. vs. Zamora, et al., G.R. No. 48494, February 5, 1990, 181 SCRA 702. Art. 280, Labor Code; see PLDT vs. Montemayor, et al., G.R. No. 88626, October 12, 1990, 190 SCRA 427. De Leon vs. National Labor Relations Commission, et al., G.R. No. 70705, August 21, 1989, 176 SCRA 615. Molave Tours Corp. vs. National Labor Relations Commission, et al., G.R. No. 112909, November 24, 1995, 250 SCRA 325; see Art. 279, Labor Code, as amended by Republic Act No. 6715. Promulgated on March 13, 1973. Approved on April 15, 1952. It was later amended by Republic Act No. 1131, which in turn was approved on June 16, 1954. Case No. RO4-3-3398-76; February 20, 1977. CA-G.R. No. 52753-R, June 28, 1978. 45A Am. Jur. 2d, Job Discrimination, Sec. 506, p. 486. Ibid., id., id.. Ibid., id., Sec. 507. Tolentino, A., Civil Code of the Philippines, Vol. III, 1979 ed., 235; see Art. 874, Civil Code. Art. 1306, Civil Code. Art. 1700, Civil Code; see Macleod & Co. of the Philippines vs. Progressive Federation of Labor, 97 Phil. 205 (1955). Art. 1701, Civil Code. The 1987 Constitution provides:

[22]

[23]

[24]

[25]

[26]

[27]

[28]

[29]

[30]

[31]

[32]

[33]

[34]

[35]

[36]

[37]

[38]

[39]

[40]

[41]

[42]

The State recognizes the sanctity of family life and shall protect and strengthen the family as a basic autonomous social institution. x x x (Sec. 15, Art. II). The State recognizes the Filipino family as the foundation of the nation. Accordingly, it shall strengthen its solidarity and actively promote its total development (Sec. 1, Art. XV).

Marriage, as an inviolable social institution, is the foundation of the family and shall be protected by the State (Sec. 2, Art. XV).