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

DOLE PHILIPPINES, INC., petitioner, vs.THE HON. VICENTE LEOGARDO, JR. (in his capacity as Deputy Minister of Labor), and ASSOCIATED LABOR UNION (ALU), respondents.

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

DOLE PHILIPPINES, INC., petitioner, vs.THE HON. VICENTE LEOGARDO, JR. (in his capacity as Deputy Minister of Labor), OSCAR RABINO, OSCAR SERENUELA, RAUL MONTEJO, and ALL REGULAR RANK AND FILE WORKERS OF THE STANDARD (PHILIPPINES) FRUIT CORPORATION (now merged with DOLE PHILIPPINES, INC.), respondents.

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

Jose C. Espinas for respondent O. Rabino.

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

ESCOLIN, J.:

Petition for certiorari to annul and set aside the order of respondent Deputy Minister of Labor, dated October 26, 1981, which affirmed the order of the Regional Director of the Ministry of Labor, Davao City, requiring petitioner Dole Philippines, Inc. to pay its employees the year-end productivity bonus agreed upon in their Collective Bargaining Agreement in addition to the 13th month pay prescribed under Presidential Decree No. 851.

The salient facts are as follows:

On June 6, 1975, Standard Philippines Fruit Corporation or STANFILCO, a company merged in 1981 with petitioner Dole Philippines, Inc., entered into a collective bargaining agreement with the Associated Labor Union, ALU for short, effective for a period of three (3) years, beginning June 1, 1975 to May 31, 1978. The Collective Bargaining Agreement provided, among others, the grant of a yearend productivity bonus to all workers within the collective bargaining unit. Section 1, Article XVII thereof reads as follows:

ARTICLE XVII

YEAR-END PRODUCTIVITY BONUS

SECTION 1. The COMPANY agrees to grant each worker within the bargaining unit a year-end productivity bonus equivalent to ten (10) days of his basic daily wage if eighty percent (80%) or more of the average total banana production for the two (2) preceding calendar years together with the current year's estimate is attained. This bonus is exclusive of any bonus which the Company may be presently giving or may give in the future to its workers pursuant to the COMPANY's rights under Section 4, Article I of this Agreement.

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

SECTION 4. All terms and conditions of employment of workers not specifically excluded in Section I of this Article are embodied in this Agreement, and the same shall govern the relationship between the COMPANY and such workers. On the other hand, all such benefits and/or privileges as are not expressly provided for in this Agreement but which are now being accorded, may in the future be accorded, or might have previously been accorded to the workers, no matter how long or how often, shall be deemed purely acts of grace and dependent upon the sole judgment and discretion of the COMPANY to grant, modify or withdraw, and shall not be construed as establishing an obligation on the part of the COMPANY.

The 80% production level stated in Article XVII of said CBA having been attained in 1975, the workers were paid the stipulated year-end productivity bonus on December 11, 1975.

Shortly thereafter, or on December 16, 1975, Presidential Decree 851 took effect. Section 1 thereof required all employers to pay their employees receiving a basic salary of not more than P1,000.00 a month, regardless of the nature of their employment, a 13th month pay not later than December 24 of every year. Section 2 of the law, however, exempted from its coverage those employers already paying their employees a 13th month pay or its equivalent.

On June 22, 1975, Secretary (now Minister) of Labor, Hon. Blas F. Ople, issued the "Rules and Regulations Implementing Presidential Decree 851." Section 3(c) thereof provides that the term "its equivalent" ... shall include Christmas bonus, mid-year bonus, profit-sharing payments and other cash bonuses amounting to not less than 1/12th of the basic salary but shall not include rash and stock dividends, cost of living allowance and other allowances regularly enjoyed by the employee as well as non-monetary benefits ...

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

To comply with the provision of P.D. 851 on the 13th month pay, STANFILCO paid its workers on December 29, 1975 the difference between 1/12th of their yearly basic salary and their year-end productivity bonus. In doing so, STANFILCO relied on Section 2 of the decree, as interpreted by the MOLE's implementing rules. The same method of computation was followed in the payment of the year-end productivity bonus and the 13th month pay for the years 1976, 1977 and 1978.

Questioning this procedure, respondent ALU, joined by STANFILCO technical employees as well as its rank-and-file workers, filed on February 19, 1979 a complaint with the South Cotabato District Labor Office at General Santos City, docketed as LR-003-G.S.-79, ALU charging STANFILCO with unfair labor practice and non-implementation of the CBA provision on the year-end productivity bonus. The following day, February 20, 1979, Oscar Rabino, Oscar Serenuela, Raul Montejo and all the rank-and-file workers of STANFILCO instituted another complaint before the same district labor office, docketed as LR-010-G.S.-79, charging the company with non-payment of the production incentive bonus for the years 1975, 1976, 1977 and 1978.

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

On May 25, 1979, the Regional Director of MOLE, Davao City, issued an order sustaining respondents' position that the year-end productivity bonus, being a contractual commitment, is separate and distinct from the 13th month pay and must, therefore, be paid separately in full. The decretal portion of the order reads:

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

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

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

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

4) GRANTING the complaint of OSCAR RABINO and his group as the complaint of all rank and file workers covered by the CBA, and which will also include all rank and file workers under the complaint filed by ALU;

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

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

In mandating the payment of the 13th month compensation to employees earning less than P1,000.00, PD 851 obviously seeks to remedy the sad plight of labor in a milieu of worldwide inflation vis-a-vis a static wage level. However, cognizant of the fact that the remedy sought to be enforced had long been granted by some employers out of their own volition and magnanimity, the law has expressly exempted from its coverage those employers "who are already paying their employees a 13th month pay or its equivalent." 1

While the intention to exclude those certain employers from the operation of the law is quite clear, the parties advance conflicting views as to the meaning of the phrase "or its equivalent."

Section 3(e) of the Rules and Regulations Implementing PD No. 851, issued by the Minister of Labor on December 22, 1975 explicitly states that the term "or its equivalent ... shall include Christmas bonus, mid-year bonus, profit-sharing payments and other cash bonuses amounting to not less than one-twelfth of the basic salary. Where an employer pays less than 1/12 of the employee's basic salary, the employer shall pay the difference."

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

Having been issued by the agency charged with the implementation of PD No. 851 as its contemporaneous interpretation of the law, the quoted rule shall be accorded great weight.

Furthermore, to resolve the growing number of controversies stemming from the interpretation of Section 2, PD No. 851, this Court in the above-cited case, speaking thru Justice Plana, established definitely the legal equivalent of the 13th month pay in this wise:

The evident intention of the law, as revealed by the law itself, was to grant an additional income in the form of a 13th month pay to employees not already receiving the same. Otherwise put, the intention was to grant some relief — not to all workers — but only to the unfortunate ones not actually paid a 13th month salary or what amounts to it, by whatever name caned; but it was not envisioned that a double burden would be imposed on the employer already paying his employees a 13th month pay or its equivalent — whether out of pure generosity or on the basis of a binding agreement, and, in the latter case, regardless of the conditional character of the grant (such as making the payment dependent on profit), so long as there is actual payment. Otherwise, what was conceived to be

a 13th month salary would in effect become a 14th or possibly 15th month pay. (Emphasis supplied).<äre||anº•1àw>

Continuing, this Court said:

Pragmatic considerations also weigh heavily in favor of crediting both voluntary and contractual bonuses for the purpose of determining liability for the 13th month pay ... (Emphasis supplied).

Tested against this norm, it becomes clear that the year-end productivity bonus granted by petitioner to private respondents pursuant to their CBA is, in legal contemplation, an integral part of their 13th month pay, notwithstanding its conditional nature. When, therefore, petitioner, in order to comply with the mandate of PD No. 851, credited the year-end productivity bonus as part of the 13th month pay and adopted the procedure of paying only the difference between said bonus and 1/12th of the worker's yearly basic salary, it acted well within the letter and spirit of the law and its implementing rules. For in the event that "an employer pays less than one-twelfth of the employees' basic salary, all that said employer is required to do under the law is to pay the difference." 3

To hold otherwise would be to impose an unreasonable and undue burden upon those employers who had demonstrated their sensitivity and concern for the welfare of their employees. A contrary stance would indeed create an absurd situation whereby an employer who started giving his employees the 13th month pay only because of the unmistakable force of the law would be in a far better position than another who, by his own magnanimity or by mutual agreement, had long been extending to his employees the benefits contemplated under PD No. 851, by whatever nomenclature these benefits have come to be known. Indeed, PD No. 851, a legislation benevolent in its purpose, never intended to bring about such oppressive situation.

WHEREFORE, this petition is hereby granted and, accordingly, the order of respondent Deputy Minister of Labor, dated October 26, 1981, is set aside. No costs.

SO ORDERED.

G.R. No. L-69741 August 19, 1986

BROKENSHIRE MEMORIAL HOSPITAL, INC., petitioner, vs.THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION AND THE BROKENSHIRE MEMORIAL HOSPITAL EMPLOYEES AND WORKERS UNION-FFW, respondents.

Maximo Magno-Libre for petitioner.

Ireneo B. Bernardo for private respondent.

NARVASA, J.:

Are employees in a private enterprise entitled to the so called "13th month pay" prescribed by PD 851 "on top of bonuses" already being given by the employer prior to the decree's effectivity on December 16, 1975?

To this question, a negative answer has twice been given by this Court.

In National Federation of Sugar Workers (NFSW) vs. Ovejera, promulgated on May 31, 1982 1-where a collective bargaining agreement required the employer among others "to maintain the present practice on the grant of Christmas bonus, milling bonus and amelioration bonus" ("amounting to more than a month's pay")-this Court made the following pronouncements on the issue: 2

Keenly sensitive to the needs of the workingmen, yet mindful of the mounting production cost that are the woe of capital which provides employment to labor, President Ferdinand E. Marcos issued Presidential Decree No. 851 on 16 December 1975. Thereunder, 'all employers are hereby required to pay all their employees receiving a basic salary of not more than Pl,000 a month, regardless of the nature of their employment, a 13th month pay not later than December 24 of every year.' Exempted from the obligation however are:

Employers already paying their employees a 13th month pay or its equivalent. . . . (Section 2)

The evident intention of the law, as revealed by the law itself, was to grant an additional income in the form of a 13th month pay to employees not already receiving the same. Otherwise put, the intention was to grant some relief-not to all workers-but only to the unfortunate ones not actually paid a 13th month salary or what amounts to it, by whatever

name called; but it was not envisioned that a double burden would be imposed on the employer already paying his employees a 13th month pay or its equivalent-whether out of pure generosity or on the basis of a binding agreement and, in the latter case, regardless of the conditional character of the grant (such as making the payment dependent on profit), so long as there is actual payment. Otherwise, what was conceived to be a 13th month salary would in effect become a 14th or possibly 15th month pay.

This view is justified by the law itself which makes no distinction in the grant of exemption: 'Employers already paying their employees a 13th month pay or its equivalent are not covered by this Decree.' (P.D. 851)

The Rules Implementing P.D. 851 issued by MOLE immediately after the adoption of said law reinforce this stand. Under Section 3(e) thereof-

The term "its equivalent" . . . shall include Christmas bonus, mid-year bonus, profit-sharing payments and other cash bonuses amounting to not less than 1/12th of the basic salary but shall not include cash and stock dividends, cost of living allowances and all other allowances regularly enjoyed by the employee, as well as non-monetary benefits. Where an employer pays less than 1/12th of the employee's basic salary, the employer shall pay the difference.' (Empahsis supplied)

Having been issued by the agency charged with the implementation of PD 851 as its contemporaneous interpretation of the law, the quoted rule should be accorded great weight.

Pragmatic considerations also weigh heavily in favor of crediting both voluntary and contractual bonuses for the purpose of determining liability for the 13th month pay. To require employers (already giving their employees a 13th month salary or its equivalent to give a second 13th month pay would be unfair and productive of undesirable results. To the employer who had acceded and is already bound to give bonuses to his employees, the additional burden of a 13th month pay would amount to a penalty for his munificence or liberality. The probable reaction of one so circumstanced would be to withdraw the bonuses or resist further voluntary grants for fear that if and when a law is passed giving the same benefits, his prior concessions might not be given due credit; and this negative attitude would have an adverse impact on the employees.

In Dole Philippines, Inc. vs. Leogardo, Jr., decided on October 23, 1982 3 -where a collective bargaining agreement imposed on the employer the obligation to pay "a year-end productivity bonus equivalent to ten (10) days of ... (the employee's) basic daily wage" if a stipulated level of production were attained, and the first bonus was in fact given on December 11, 1975-this Court 4 adverted to the NFSW decision as binding norm and went on to say.

Tested against this norm, it becomes clear that the year-end productivity bonus granted by petitioner to private respondents pursuant to their CBA is, in legal contemplation, an integral part of their 13th month pay, notwithstanding its conditional nature. When, therefore, petitioner, in order to comply with the mandate of PD 851, credited the year-end productivity bonus as part of the 13th month pay and adopted the procedure of paying only the difference between said bonus and 1/12 of the worker's yearly basic salary, it acted well within the letter and spirit of the law and its implementing rules. For in the event that "an employer pays less than one twelfth of the employees' basic salary, all that said employer is required to do under the law is to pay the difference.

To hold otherwise would be to impose an unreasonable and undue burden upon those employers who had demonstrated their sensitivity and concern for the welfare of their employees. A contrary stance would indeed create an absurd situation whereby an employer who started giving his employees the 13th month pay only because of the unmistakable force of the law would be in a far better position than another who, by his own magnanimity or by mutual agreement, had long been extending to his employees the benefits contemplated under PD 851, by whatever nomenclature these benefits have come to be known. Indeed, PD No. 851, a legislation benevolent in its purpose, never intended to bring about such oppressive situation.

This Court is now called upon to answer the same question again, this time at the instance of petitioner Brokenshire Memorial Hospital, which initiated the special civil action of certiorari at bar to annul the resolution of the National Labor Relations Commission (Second Division) affirming the decision of a Labor Arbiter of Regional Arbitration Branch XI of the Ministry of Labor and Employment in NLRC Case No. 64-LS-XI-82 entitled "Brokenshire Memorial Hospital Employees and Workers Union FFW v. Brokenshire Memorial Hospital." The affirmed decision required the hospital to pay its employees a yearly Christmas bonus in addition to the 13th month pay under PD 85l. 5 The answer to the question will be the same. The hospital can not be obliged to bear the "double burden" of giving its employees not only the 13th month pay required by PD 851 but also the Christmas bonus it had theretofore been granting. The decisions in question will have to be reversed.

At the time that PD 851 became effective on December 16, 1975, the hospital had for many years been giving its employees an annual Christmas bonus. It continued to do so afterwards. But after 1979 the hospital stopped giving the bonus because avowedly its poor financial condition no longer made this possible.

Protesting the discontinuance, respondent union filed a complaint 6 against the hospital for unlawful diminution of benefits, alleging a violation of Article 100 of the Labor Code and Section 10 of PD 851. 7 In response, 8 the hospital asserted that the giving of the bonus was not an established and continuing obligation on its part but was contingent and entirely dependent on its financial condition in any given year. This is why the matter of the bonus was not dealt with at all in the Collective Bargaining Agreement between it and the union. At any rate, it further claimed, it should not be made to bear the double burden of giving both 13th month pay and bonus, in the light of the decision in National Federation of Sugar Workers (NFSW) vs. Ethelwoldo R. Ovejera, et al., G.R. No. 59743, rendered in the context of Section 2, PD 851, and Section 3(c) of the Rules and Regulations Implementing PD 851, declaring said decree inapplicable to "employers already paying their employees a 13th month pay or its equivalent.

On March 23, 1983, the Labor Arbiter promulgated judgment requiring the hospital "to pay all its employees, as it had done in 1979, an extra Christmas bonus of P100.00 per year, for 1980, 1981, and 1982." 9 The hospital appealed. On December 14, 1984, the National Labor Relations Commission affirmed the labor Arbiter's decision. 10

It is difficult to understand why the Labor Arbiter took no account whatever of this Court's decision in NFSW vs. Ovejera despite its having been explicitly brought to his attention. He never mentioned the case in his decision at all. Instead, he occupied Himself with a discussion of the financial condition of the hospital, declaring that his reading of the hospital's financial statement for 1980 revealed a "surplus available for expenditure" from which the employees' bonuses could be drawn.

Equally difficult to understand is the refusal of the National Labor Relations Commission to apply the NFSW vs. Ovejera ruling. According to the Commission-

Respondent's (the hospital's) reliance on the La Carlota case, GR No. 59743, is unavailing. We are not persuaded to view the matter that way. For in the La Carlota case, the NFSW union is claiming entitlement to a 13th month pay, on top of Christmas bonuses already given, whereas, in the instant case, respondent discontinued and eliminated a favorable practice being enjoyed by the employee at the time of promulgation of the rules implementing PD No. 851 on December 22, 1975 which, as fixed below, amounts to P100 christmas bonus, on top of the 13th month pay.

The distinction sought to be drawn by the Commission between the case at bar and NFSW vs. Ovejera is insubstantial and unjustifiable. The message of NFSW vs. Ovejera is clear and unequivocal: An employer may not be obliged to assume a "double burden" of paying the 13th month pay in addition to bonuses or other pecuniary benefits given by way of fringe benefits aside from the employees' basic salaries or wages; PD 851 accorded to him the option either to exempt himself from the obligation to give 13th month pay or discontinue the payment of the bonuses or fringe benefits deemed to be the equivalent of said 13th month pay. In any event, whatever doubt might have existed regarding this option on the employer's part should have been dispelled by this Court's decision in Dole Phils., Inc. vs. Leogardo, Jr. promulgated on October 23, 1982, 11 more than two (2) years before the rendition of the resolution of the National Labor Relations Commission on December 14, 1984. In Dole, this Court declared that when an employer, in order to comply with the mandate of PD 851, credits the bonus being paid by him as part of his employees' 13th month pay and adopts the procedure of paying only the difference between said bonus and 1/12 of the employees' yearly basic salary, said employer acts well within the letter and spirit of the law and its implementing rules; for in the event that "an employer pays less than one twelfth of the employees' basic salary, all that said employer is required to do under the law is to pay the difference."

Prescinding from these legal considerations, it would appear that the ratiocinations of the Labor Arbiter based on his own interpretation of the financial statements of petitioner hospital for 1980 were quite erroneous. Where those financial statements, to an accountant, or one familiar with accountancy, should have shown a deficit, to the Labor Arbiter they showed a surplus.

Be this as it may, the fact is that as early as November 5, 1984, the hospital sent to the Minister of Labor and Employment a notice of closure 12 because of its "critically grave" financial condition. 13 And on March 2, 1985 the hospital finally ceased to operate for lack of operating capital 14 resulting from the garnishment of its bank deposits amounting to P163,047.50. 15

Whether or not this unhappy eventuality would have come to pass had the decision of the Labor Arbiter or that of the National Labor Relations Commission correctly applied the doctrine enunciated by this Court in NFSW vs. Ovejera and Dole Phils., Inc. vs. Leogardo, Jr., is a question that perhaps is incapable of a fair and realistic answer. But the mere possibility that closure, with the consequent loss of work for so many, was caused or hastened by the questioned decisions should be enough to give pause and provide an object lesson to address such matters more studiously and with greater circumspection in the future.

WHEREFORE, the Decision of the Labor Arbiter dated March 23, 1983 and the Resolution of the National Labor Relation Commission in affirmance thereof, dated December 14, 1984, are

hereby reversed and set aside, and the complaint filed by respondent union is hereby dismissed, with costs against said private respondent.

SO ORDERED.

G.R. No. 70763 April 30, 1987

UNITED CMC TEXTILE WORKERS UNION, petitioner, vs.THE HONORABLE LABOR ARBITER, RAYMUNDO VALENZUELA, ARBITRATION BRANCH, NATIONAL LABOR RELATIONS COMMISSION, respondents.

Isaias O. Cortes for petitioner.

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

PARAS, J.:

Petitioner seeks to compel the public respondent Labor Arbiter to issue the necessary writ of execution in Case No. NCRAB-62563-79 (NCR-LRD-6-740-79) there being a Final Entry of Judgment in G.R. No. 58666.

The antecedent facts of the case read as follows:

Sometime in 1979, petitioner filed a complaint against Central Textile Mills, Inc. (CTMI, for brevity) at the Ministry of Labor and Employment for non-payment of Christmas bonus of the rank and file employees of said company as provided in Art. XI of the then existing collective bargaining agreement between petitioner and CTMI. Among the provisions of the said collective agreement is the payment of Christmas bonus based on the following schedule:

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

7 years and up but less

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

2 years but less than

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

6 months and up but less

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

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

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

Foregoing PREMISES CONSIDERED, we find that Sec. 1, Art XI of the CBA concluded between the parties dealing on the payment of Christmas Bonus is violated by the refusal of respondent Central Textile Mills, Inc. to pay the same despite demand by complainant United CMC Textile Workers Union. Consequently, respondent, Central Textile Mills, Inc. should be as it is hereby ordered to implement the same by paying the workers covered by said CBA the total amount of ONE HUNDRED TWENTY TWO THOUSAND EIGHT HUNDRED FORTY PESOS (P122,840.00) corresponding to the 1978 Christmas Bonus, the break down of which is reflected in the list attached to this decision the accuracy of the termination of which by complainant union is not, in the least, disputed by the respondent company. (p. 106, Rollo)

Respondent CTMI appealed said decision to the National Labor Relations Conunission (NLRC, for brevity) which affirmed the Labor Arbiter's decision with the modification that the complainant (petitioner herein) was ordered to furnish a copy of the computation list in order that respondents may verify the correctness and/or validity of the individual claims and for the latter to present their objection, if any, to the Labor Arbiter of origin, prior to the execution of the decision. CTMI sought the review of said decision by filing with Us a Petition for certiorari docketed as G.R. No. 58666. On January 20, 1982, We dismissed said petition for lack of merit. A motion for reconsideration was likewise denied as per Our resolution dated August 18, 1982. Subsequently, Entry of Judgment 1 dated September 22, 1982, rendered Our dismissal of the petition final and executory.

Petitioner filed with the NLRC a motion for execution of the decision in October, 1984. Pursuant to such motion, conferences were held by the parties before the respondent Labor Arbiter. However, these were stopped when CTMI filed an appeal with the NLRC stating that the decision of this Court in G.R. No. 68666 has become moot and academic by virtue of Our ruling in the case of National Federation of Sugar Workers Page 428 vs. Central Azucarera de la Carlota, et al. 2 to the effect that ,employers already paying the equivalent of the 13th month pay to their employees, such as Christmas bonus, are under no legal obligation to pay an additional 13th month pay prescribed under P.D. No. 851. Due to the appeal of CTMI, respondent Labor Arbiter refused to continue with the execution of the final order or decision in G.R. No. 58666 contending that it has become moot and academic.

Hence this petition by the workers' union praying that a writ of mandamus be issued to compel herein respondent Labor Arbiter Raymundo Valenzuela to issue a writ of execution in G.R. No. 58666 or NCR-AB-62563-79 (NCR-6-740-79). It is the position of petitioner that in

view of the finality of the aforesaid judgment. It is the bounden duty of the public respondent, to issue the proper writ of execution prayed for.

Petitioner argues thus:

... From receipt of the Entry of Judgment, in Case No. NCRAB-6-2563-79 (NCR-6-740-79) G.R. No. 58666, petitioner was vested with a right to satisfaction of the aforecited judgment of -this Honorable Court. A decision, or resolution of the Court which has become final and executory is enforceable for a period of five years. Since the decision rendered by this Honorable Court in Case No. NCR-AB-6- 2563-79, G.,R. No. 58666 has become final and executory, the writ of execution prayed for by petitioner must be accordingly issued to satisfy judgment. Without said writ the right of petitioners as affirmed by this Honorable Tribunal would be rendered nugatory or useless. Justice would be meaningless.

The contention that the final decision of this Honorable Court in Case No. NCR-AB-6-2563-79 (NCR-LRD-6-740-79), G.R. No. 58666 had become moot and academic due to the new ruling enunciated in the La Carlota Case has no basis in law With due respect, although the principle of law adopted by this Honorable in Case No. NCR-AB6-2563-79, G.R. No. 58666 may be different or contrary to that one adopted in the La Carlota Case, since the decision has become final and executory, the La Carlota Case ruling cannot render moot and academic the final decision of this Honorable Court in G.R. No. 58666. After judgment has become final no additions can be made thereto, and nothing can be done therewith except its execution; otherwise there would be no end to litigation, thus setting naught the main rule of Court of Justice, which is to assist in the enforcement of the rule of law and the maintenance of peace and order, by setting justice controversies with finality (Vda. de Emmas vs. Emmas, 95 SCRA 470).

The appeal filed by private respondent, Central Textile Mills, Inc, with the National Labor Relations Commission is already barred by the prior judgment made in G.R. No. 58666 under the doctrine of Res Judicata. A prior judgment to constitute a bar to subsequent case, the following requisites must concur: (1) it must be a final judge judgment; (2) it must have been rendered by a court having jurisdiction over the subject matter and over the parties; (3) it must be a judgment on the merits; (4) there must be between the first and the second actions, Identity of parties, Identity of subject matter and Identity of cause of action (Republic vs. Court of Appeals, 99 SCRA 742). The requisites for a prior judgment are

present in Case No. NCR-AB-62563-79 (NCR-LRD-6-740-79) G.R. No. 58666 thus rendering the case/appeal filed by respondent Central Textile Mills, Inc. at the National Labor Relations Commission, moot and academic. (pp. 107-108, Rollo)

Respondent CTMI in its memorandum invites Our attention to the fact that its Petition for Review in G.R. No. 58666 was denied because of Our ruling in the case of "Marcopper Mining Corporation vs. Honorable Blas Ople, et. al., G.R. No. L-51254, 3 that the 13th month pay was required on top of the other bonuses agreed upon by the employer and employee. However, on May 31, 1982, in the aforementioned case of "NFSW vs. Central Azucarera de la Carlota, et al.," We reversed the Marcopper doctrine and ruled that if an employer is already paying its employees the Christmas bonus under the Collective Bargaining Agreement (CBA) the same is no longer required to pay the 13th month pay provided, however, if the said Christmas bonus is less than one-twelfth (1/12) of the employees basic pay within a calendar year, the employer shall pay the difference. It is this La Carlota doctrine which respondents now invoke in support of their contentions, alleging that this doctrine speaks of no exception in its application, especially considering that it was handed down by this Court Page 430 during the pendency of said G.R. No. 58666 and that petitioner had earlier accepted and recognized the applicability of the La Carlota ruling in Case No. 58666 when the new CBA of 1983 was negotiated and signed, herein petitioner voluntarily and readily agreed to the deletion of the provision on Christmas bonus and tacitly withdrew their claims for Christmas bonus for 1978.

We find the contentions of petitioner more meritorious than the contentions of respondents. When We dismissed the petition for review of private respondents in G.R. No. 58666 on January 20,1982, for lack of merit, We did so upon the doctrine laid down in the Marcopper Case which was promulgated on June 11, 1981. Before the dismissal of said case became final and executory, We decided the La Carlota case on May 31, 1982 wherein We ruled that employees are no longer entitled to an additional Christmas bonus or other Christmas benefits if they are already entitled to a 13th month pay. Meanwhile in Case No. 58666 the company filed their motion for reconsideration of the dismissal of their petition which We denied as per Our resolution on August 18, 1982. Subsequently, said dismissal became final and executory as per Entry of Judgment dated September 22, 1982. Thus, it can be seen that despite the La Carlota ruling We denied the company's Motion for reconsideration and We reiterated Our previous dismissal of the petition for review for lack of merit. This only goes to show that We refused to apply or did not choose to apply the La Carlota doctrine to the case at bar. And We have consistently held in a number of Our decisions that judgments which had long become final and executory can no longer be amended or modified by the courts. Such is the doctrine known as "the law of the case."

Furthermore, the findings of the NLRC as stated in its decision 4 show that the claim is for Christmas bonus for the year 1978 only. It appears from the records that the employees of

the respondent company had been paid their bonuses in accordance with the collective bargaining agreement, in addition to the 13th month pay, for the years 1979 and 1980. The Page 431 collective bargaining agreement in question took effect on November 1, 1978, 3 years after the promulgation of P.D. No. 851. If the Christmas bonus was included in the 13th month pay, then there would be no need for having a specific provision on Christmas bonus in the CBA. But it did provide for a bonus in graduated amounts depending on the length of service of the employee. The intention is clear therefore that the bonus provided in the CBA was meant to be in addition to the legal requirement. Moreover, why exclude the payment of the 1978 Christmas bonus and pay only the 1979-1980 bonus. The classification of the company's workers in the CBA according to their years of service supports the allegation that the reason for the payment of bonus was to give bigger reward to the senior employees — a purpose which is not found in P.D. 851. A bonus under the CBA is an obligation created by the contract between the management and workers while the 13th month pay is mandated by the law (P.D. 851).

Likewise We find no merit in respondent's allegations that the applicability of the said La Carlota ruling to the case at bar is explicitly recognized by herein petitioner. A cursory reading of the CBA signed on November 2, 1983 5 shows that petitioner Union recognizes only the application of the La Carlota doctrine in so far as it had agreed to the deletion of the provision on payment of Christmas bonus in the new CBA of 1983 without necessarily giving up their claim for their 1978 bonus under their former collective bargaining agreement.

WHEREFORE, finding merit in the instant petition the same is hereby GRANTED. Respondent Labor Arbiter Raymundo Valenzuela, Arbitration Branch, NLRC, is hereby ordered to issue the writ of execution in Case No. AB-62563-79 (NCR- LRD-6-740-79), G.R. 58666.

SO ORDERED.

G.R. No. 107994 August 14, 1995

PHILIPPINE AGRICULTURAL COMMERCIAL AND INDUSTRIAL WORKERS UNION (PACIWU)-TUCP, petitioner, vs.NATIONAL LABOR RELATIONS COMMISSION AND VALLACAR TRANSIT, INC., respondents.

KAPUNAN, J.:

This is a petition for certiorari seeking to reverse the decision of the National Labor Relations Commission (NLRC) in NLRC Case No. V-0159-92 which dismissed the appeal of petitioner union and in effect, affirmed the decision of the Labor Arbiter ordering the dismissal of the complaint of petitioner for payment of 13th month pay to the drivers and conductors of respondent company.

Petitioner Philippine Agricultural Commercial and Agricultural Workers Union — TUCP is the exclusive bargaining agent of the rank and file employees of respondent Vallacar Transit, Inc. Petitioner union instituted a complaint with NLRC Regional Arbitration Branch No. VI, Bacolod City, for payment of 13th month pay in behalf of the drivers and conductors of respondent company's Visayan operation on the ground that although said drivers and conductors are compensated on a "purely commission" basis as described in their Collective Bargaining Agreement (CBA), they are automatically entitled to the basic minimum pay mandated by law should said commission be less than their basic minimum for eight (8) hours work. 1

In its position paper, respondent Vallacar Transit, Inc. contended that since said drivers and conductors are compensated on a purely commission basis, they are not entitled to 13th month pay pursuant to the exempting provisions enumerated in paragraph 2 of the Revised Guidelines on the Implementation of the Thirteenth Month Pay Law. 2 It further contended that Section 2 of Article XIV of the Collective Bargaining Agreement (CBA) concluded on October 17, 1988 expressly provided that "drivers and conductors paid on a purely commission are not legally entitled to 13th month pay." Said CBA, being the law between the parties, must be respected, respondent opined.

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

The appeal of the petitioner to the National Labor Relations Commission was likewise dismissed 4 so was the motion for reconsideration of the said decision. 5

Hence, the present petition.

The principal issue posed for consideration is whether or not the bus drivers and conductors of respondent Vallacar Transit, Inc. are entitled to 13th month pay.

We rule in the affirmative.

It may be recalled that on December 16, 1975, P.D. 851, otherwise known as the "13th Month Pay" Law, was promulgated. The same prescribed payment of 13th month pay in the following terms:

Sec. 1. All employers are hereby required to pay all their employees receiving a basic salary of not more than P1,000.00 a month, regardless of the nature of the employment, a 13th month pay not later than December 24 of every year.

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

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

xxx xxx xxx

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

(b) basic salary shall include all remunerations or earnings paid by an employer to an employer for services rendered, but may not include cost of living allowances granted pursuant to Presidential Decree No. 525 or Letter of Instructions No. 174, profitsharing payments, and all allowances and monetary benefits which are not considered or integrated as part of the regular or basic salary of the employee at the time of the promulgation of the Decree on December 16, 1975.

xxx xxx xxx

On August 13, 1986, President Corazon C. Aquino, exercising both executive and legislative authority, issued Memorandum Order No. 28 which provided as follows:

xxx xxx xxx

Sec.1. of Presidential Decree No. 851 is hereby modified to the extent that all employers are hereby required to pay all their rank-and-file employees a 13th month pay not later than December 24 of every year.

xxx xxx xxx

In connection with and in implementation of Memorandum Order No. 28, the then Minister of Labor and Employment issued MOLE Explanatory Bulletin No. 86-12 on November 24, 1986. Item No. 5 (a) of the said issuance read:

xxx xxx xxx

Employees who are paid a fixed or guaranteed wage plus commission are also entitled to the mandated 13th month pay, based on their total earning(s) during the calendar year, i.e., on both their fixed and guaranteed wage and commission.

xxx xxx xxx

(emphasis ours)

From the foregoing legal milieu, it is clear that every employee receiving a commission in addition to a fixed or guaranteed wage or salary, is entitled to a 13th month pay. For purposes of entitling rank and file employees a 13th month pay, it is immaterial whether the employees concerned are paid a guaranteed wage plus commission or a commission with guaranteed wage inasmuch as the botton line is that they receive a guaranteed wage. This is correctly construed in the MOLE Explanatory Bulletin No. 86-12.

In the case at bench, while the bus drivers and conductors of respondent company are considered by the latter as being compensated on a commission basis, they are not paid purely by what they receive as commission. As admitted by respondent company, the said bus drivers and conductors are automatically entitled to the basic minimum pay mandated by law in case the commissions they earned be less than their basic minimum for eight (8) hours work. 6 Evidently therefore, the commissions form part of the wage or salary of the bus drivers and conductors. A contrary interpretation would allow an employer to skirt the law and would result in an absurd situation where an employee who receives a guaranteed minimum basic pay cannot be entitled to a 13th month pay simply because he is technically referred to by his employer per the CBA as an employee compensated on a purely commission basis. Such would be a narrow interpretation of the law, certainly not in accord with the liberal spirit of our labor laws. Moreover, what is controlling is not the label

attached to the remuneration that the employee receives but the nature of the remuneration 7 and the purpose for which the 13th month pay was given to alleviate the plight of the working masses who are receiving low wages. This is extant from the "WHEREASES" of PD 851, to wit:

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

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

WHEREAS, the Christmas season is an opportune time for society to show its concern for the plight of the working masses so they may properly celebrate Christmas and New Year.

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

Commission is the recompense, compensation, reward of an employee, agent, salesman, executor, trustee, receiver, factor, broker or bailee, when the same is calculated as a percentage on the amount of his transactions or on the profit of the principal. 8 While said commissions may be in the form of incentives or encouragement to inspire said bus drivers and conductors to put a little more zeal and industry on their jobs, still, it is safe to say that the same are direct remunerations for services rendered, given the small remuneration they receive for the services they render, 9 which is precisely the reason why private respondent allowed the drivers and conductors a guaranteed minimum wage. The conclusion is ineluctable that said commissions are part of their salary. In Philippine Duplicators, Inc. v. National Labor Relations Commission, 10 we had the occasion to estate that:

. . . Article 97 (f) of the Labor Code defines the term "wage" (which is equivalent to "salary," as used in P.D. No. 851 and Memorandum Order No. 28) in the following terms:

(f) "Wage" paid to any employee shall mean the remuneration or earnings, however designated, capable of being expressed in term of money, money, whether fixed or ascertained on a time, task, piece, or commission basis, or other method of calculating the same, which is payable by an employer to employee under a written or unwritten contract of employment for work done or to be done, or for services rendered or to be rendered, and includes the fair and reasonable value, as determined by the Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer to the employee. "Fair

and reasonable value" shall not include any profit to the employer or to any person affiliated with the employer.

In the instant case, there is no question that the sales commissions earned by salesmen who make or close a sale of duplicating machines distributed by petitioner corporation, constitute part of the compensation or remuneration paid to salesmen for serving as salesmen, and hence as part of the "wage" or "salary" of petitioner's salesmen. Indeed, it appears that petitioner pays its salesmen a small fixed or guaranteed wage; the greater part of the salesmen's wages or salaries being composed of the sales or incentive commissions earned on actual sales closed by them. No doubt this particular salary structure was intended for the benefit of petitioner corporation, on the apparent assumption that thereby its salesmen would be moved to greater enterprise and diligence and close more sales in the expectation of increasing their sales commissions. This, however, does not detract from the character of such commissions as part of the salary or wage paid to each or its salesmen for rendering services to petitioner corporation. 11

In sum, the 13th month pay of the bus drivers and conductors who are paid a fixed or guaranteed minimum wage in case their commissions be less than the statutory minimum, and commissions only in case where the same is over and above the statutory minimum, must be equivalent to one-twelfth (1/12) of their total earnings during the calendar year.

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

SO ORDERED.

G.R. No. 85073 August 24, 1993

DAVAO FRUITS CORPORATION, petitioner, vs.ASSOCIATED LABOR UNIONS (ALU) for in behalf of all the rank-and-file workers/employees of DAVAO FRUITS CORPORATION and NATIONAL LABOR RELATIONS COMMISSION, respondents.

Dominguez & Paderna Law Offices for petitioners.

The Solicitor General for public respondents.

QUIASON, J.:

This is a petition for certiorari to set aside the resolution of the National Labor Relations Commission (NLRC), dismissing for lack of merit petitioner's appeal from the decision of the Labor Arbiter in NLRC Case No. 1791-MC-X1-82.

On December 28, 1982 respondent Associated Labor Unions (ALU), for and in behalf of all the rank-and-file workers and employees of petitioner, filed a complaint (NLRC Case No. 1791-MC-XI-82) before the Ministry of Labor and Employment, Regional Arbitration Branch XI, Davao City, against petitioner, for "Payment of the Thirteenth-Month Pay Differentials." Respondent ALU sought to recover from petitioner the thirteenth month pay differential for 1982 of its rank-and-file employees, equivalent to their sick, vacation and maternity leaves, premium for work done on rest days and special holidays, and pay for regular holidays which petitioner, allegedly in disregard of company practice since 1975, excluded from the computation of the thirteenth month pay for 1982.

In its answer, petitioner claimed that it erroneously included items subject of the complaint in the computation of the thirteenth month pay for the years prior to 1982, upon a doubtful and difficult question of law. According to petitioner, this mistake was discovered only in 1981 after the promulgation of the Supreme Court decision in the case of San Miguel Corporation v. Inciong (103 SCRA 139).

A decision was rendered on March 7, 1984 by Labor Arbiter Pedro C. Ramos, in favor of respondent ALU. The dispositive portion of the decision reads as follows:

WHEREFORE, in view of all the foregoing considerations, judgment is hereby rendered ordering respondent to pay the 1982 — 13th month pay differential to all its rank-and-file workers/employees herein represented by complainant Union (Rollo, p. 32).

Petitioner appealed the decision of the Labor Arbiter to the NLRC, which affirmed the said decision accordingly dismissed the appeal for lack of merit.

Petitioner elevated the matter to this Court in a petition for review under Rule 45 of the Revised Rules of Court. This error notwithstanding and in the interest of justice, this Court resolved to treat the instant petition as a special civil action for certiorari under Rule 65 of the Revised Rules of Court (P.D. No. 1391, Sec. 5; Rules Implementing P.D. No. 1391, Rule II, Sec. 7; Cando v. National Labor Relations Commission, 189 SCRA 666 [1990]: Pearl S. Buck Foundation, Inc. v. National Labor Relations Commission, 182 SCRA 446 [1990]).

The crux of the present controversy is whether in the computation of the thirteenth month pay given by employers to their employees under P.D. No. 851, payments for sick, vacation and maternity leaves, premiums for work done on rest days and special holidays, and pay for regular holidays may be excluded in the computation and payment thereof, regardless of long-standing company practice.

Presidential Decree No. 851, promulgated on December 16, 1975, mandates all employers to pay their employees a thirteenth month pay. How this pay shall be computed is set forth in Section 2 of the "Rules and Regulations Implementing Presidential Decree No. 851," thus:

SECTION 2. . . .

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

(b) "Basic Salary" shall include all renumerations or earnings paid by an employer to an employee for services rendered but may not include cost of living allowances granted pursuant to Presidential Decree No. 525 or Letter of Instructions No. 174, profit-sharing payments, and all allowances and monetary benefits which are not considered or integrated as part of the regular or basic salary of the employee at the time of the promulgation of the Decree on December 16, 1975.

The Department of Labor and Employment issued on January 16, 1976 the "Supplementary Rules and Regulations Implementing P.D. No. 851" which in paragraph 4 thereof further defines the term "basic salary," thus:

4. Overtime pay, earnings and other renumerations which are not part of the basic salary shall not be included in the computation of the 13th month pay.

Clearly, the term "basic salary" includes renumerations or earnings paid by the employer to employee, but excludes cost-of-living allowances, profit-sharing payments, and all allowances and monetary benefits which have not been considered as part of the basic salary of the employee as of December 16, 1975. The exclusion of cost-of-living allowances and profit sharing payments shows the intention to strip "basic salary" of payments which are otherwise considered as "fringe" benefits. This intention is emphasized in the catch all phrase "all allowances and monetary benefits which are not considered or integrated as part of the basic salary." Basic salary, therefore does not merely exclude the benefits expressly mentioned but all payments which may be in the form of "fringe" benefits or allowances (San Miguel Corporation v. Inciong, supra, at 143-144). In fact, the Supplementary Rules and Regulations Implementing P.D. No. 851 are very emphatic in declaring that overtime pay, earnings and other renumerations shall be excluded in computing the thirteenth month pay.

In other words, whatever compensation an employee receives for an eight-hour work daily or the daily wage rate in the basic salary. Any compensation or remuneration other than the daily wage rate is excluded. It follows therefore, that payments for sick, vacation and maternity leaves, premium for work done on rest days special holidays, as well as pay for regular holidays, are likewise excluded in computing the basic salary for the purpose of determining the thirteen month pay.

Petitioner claims that the mistake in the interpretation of "basic salary" was caused by the opinions, orders and rulings rendered by then Acting Labor Secretary Amado C. Inciong, expressly including the subject items in computing the thirteenth month pay. The inclusion of these items is clearly not sanctioned under P.D. No. 851, the governing law and its implementing rules, which speak only of "basis salary" as the basis for determining the thirteenth month pay.

Moreover, whatever doubt arose in the interpretation of P.D. No. 851 was erased by the Supplementary Rules and Regulations which clarified the definition of "basic salary."

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

While doubt may have been created by the prior Rules and Regulations and Implementing Presidential Decree 851 which defines basic salary to

include all remunerations or earnings paid by an employer to an employee, this cloud is dissipated in the later and more controlling Supplementary Rules and Regulations which categorically, exclude from the definition of basic salary earnings and other remunerations paid by employer to an employee. A cursory perusal of the two sets of Rules indicates that what has hitherto been the subject of broad inclusion is now a subject of broad exclusion. The Supplementary Rules and Regulations cure the seeming tendency of the former rules to include all remunerations and earnings within the definition of basic salary.

The all-embracing phrase "earnings and other remunerations which are deemed not part of the basic salary includes within its meaning payments for sick, vacation, or maternity leaves, premium for work performed on rest days and special holidays, pay for regular holidays and night differentials. As such they are deemed not part of the basic salary and shall not be considered in the computation of the 13th-month pay. If they were not so excluded, it is hard to find any "earnings and other remunerations" expressly excluded in computation of the 13th month-pay. Then the exclusionary provision would prove to be idle and with purpose.

The "Supplementary Rules and Regulations Implementing P.D. No. 851," which put to rest all doubts in the computation of the thirteenth month pay, was issued by the Secretary of Labor as early as January 16, 1976, barely one month after the effectivity of P.D. No. 851 and its Implementing Rules. And yet, petitioner computed and paid the thirteenth month pay, without excluding the subject items therein until 1981. Petitioner continued its practice in December 1981, after promulgation of the afore-quoted San Miguel decision on February 24, 1981, when petitioner purportedly "discovered" its mistake.

From 1975 to 1981, petitioner had freely, voluntarily and continuously included in the computation of its employees' thirteenth month pay, the payments for sick, vacation and maternity leaves, premiums for work done on rest days and special holidays, and pay for regular holidays. The considerable length of time the questioned items had been included by petitioner indicates a unilateral and voluntary act on its part, sufficient in itself to negate any claim of mistake.

A company practice favorable to the employees had indeed been established and the payments made pursuant thereto, ripened into benefits enjoyed by them. And any benefit and supplement being enjoyed by the employees cannot be reduced, diminished, discontinued or eliminated by the employer, by virtue of Section 10 of the Rules and Regulations Implementing P.D. No. 851, and Article 100 of the labor of the Philippines, which

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

Petitioner cannot invoke the principle of solutio indebiti which as a civil law concept that is not applicable in Labor Law. Besides, in solutio indebiti, the obligee is required to return to the obligor whatever he received from the latter (Civil Code of the Philippines, Arts. 2154 and 2155). Petitioner in the instant case, does not demand the return of what it paid respondent ALU from 1975 until 1981; it merely wants to "rectify" the error it made over these years by excluding unilaterally from the thirteenth month pay in 1982 the items subject of litigation. Solutio indebiti, therefore, is not applicable to the instant case.

WHEREFORE, finding no grave abuse of discretion on the part of the NLRC, the petition is hereby DISMISSED, and the questioned decision of respondent NLRC is AFFIRMED accordingly.

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

G.R. No. 110068 February 15, 1995

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

R E S O L U T I O N

FELICIANO, J.:

On 11 November 1993, this Court, through its Third Division, rendered a decision dismissing the Petition for Certiorari filed by petitioner Philippine Duplicators, Inc. (Duplicators) in G.R. No. 110068. The Court upheld the decision of public respondent National Labor Relations Commission (NLRC), which affirmed the order of Labor Arbiter Felipe T. Garduque II directing petitioner to pay 13th month pay to private respondent employees computed on the basis of their fixed wages plus sales commissions. The Third Division also denied with finality on 15 December 1993 the Motion for Reconsideration filed (on 12 December 1993) by petitioner.

On 17 January 1994, petitioner Duplicators filed (a) a Motion for Leave to Admit Second Motion for Reconsideration and (b) a Second Motion for Reconsideration. This time, petitioner invoked the decision handed down by this Court, through its Second Division, on 10 December 1993 in the two (2) consolidated cases of Boie-Takeda Chemicals, Inc. vs. Hon. Dionisio de la Serna and Philippine Fuji Xerox Corp. vs. Hon. Cresenciano B. Trajano, in G.R. Nos. 92174 and 102552, respectively. In its decision, the Second Division inter alia declared null and void the second paragraph of Section 5 (a) 1 of the Revised Guidelines issued by then Secretary of Labor Drilon. Petitioner submits that the decision in the Duplicators case should now be considered as having been abandoned or reversed by the Boie-Takeda decision, considering that the latter went "directly opposite and contrary to" the conclusion reached in the former. Petitioner prays that the decision rendered in Duplicators be set aside and another be entered directing the dismissal of the money claims of private respondent Philippine Duplicators' Employees' Union.

In view of the nature of the issues raised, the Third Division of this Court referred the petitioner's Second Motion for Reconsideration, and its Motion for Leave to Admit the Second Motion for Reconsideration, to the Court en banc en consulta. The Court en banc, after preliminary deliberation, and inorder to settle the condition of the relevant case law, accepted G.R. No. 110068 as a banc case.

Deliberating upon the arguments contained in petitioner's Second Motion for Reconsideration, as well as its Motion for Leave to Admit the Second Motion for Reconsideration, and after review of the doctrines embodied, respectively, in Duplicators and Boie-Takeda, we consider that these Motions must fail.

The decision rendered in Boie-Takeda cannot serve as a precedent under the doctrine of stare decisis. The Boie-Takeda decision was promulgated a month after this Court, (through its Third Division), had rendered the decision in the instant case. Also, the petitioner's (first) Motion for Reconsideration of the decision dated 10 November 1993 had already been denied, with finality, on 15 December 1993, i.e.; before the Boie-Takeda decision became final on 5 January 1994.

Preliminarily, we note that petitioner Duplicators did not put in issue the validity of the Revised Guidelines on the Implementary on of the 13th Month Pay Law, issued on November 16, 1987, by then Labor Secretary Franklin M. Drilon, either in its Petition for Certiorari or in its (First) Motion for Reconsideration. In fact, petitioner's counsel relied upon these Guidelines and asserted their validity in opposing the decision rendered by public respondent NLRC. Any attempted change in petitioner's theory, at this late stage of the proceedings, cannot be allowed.

More importantly, we do not agree with petitioner that the decision in Boie-Takeda is "directly opposite or contrary to" the decision in the present (Philippine Duplicators). To the contrary, the doctrines enunciated in these two (2) cases in fact co-exist one with the other. The two (2) cases present quite different factual situations (although the same word "commissions" was used or invoked) the legal characterizations of which must accordingly differ.

The Third Division in Durplicators found that:

In the instant case, there is no question that the sales commission earned by the salesmen who make or close a sale of duplicating machines distributed by petitioner corporation, constitute part of the compensation or remuneration paid to salesmen for serving as salesmen, and hence as part of the "wage" or salary of petitioner's salesmen. Indeed, it appears that petitioner pays its salesmen a small fixed or guaranteed wage; the greater part of the salesmen's wages or salaries

being composed of the sales or incentive commissions earned on actual sales closed by them. No doubt this particular galary structure was intended for the benefit of the petitioner corporation, on the apparent assumption that thereby its salesmen would be moved to greater enterprise and diligence and close more sales in the expectation of increasing their sales commissions. This, however, does not detract from the character of such commissions as part of the salary or wage paid to each of its salesmen for rendering services to petitioner corporation.

In other words, the sales commissions received for every duplicating machine sold constituted part of the basic compensation or remuneration of the salesmen of Philippine Duplicators for doing their job. The portion of the salary structure representing commissions simply comprised an automatic increment to the monetary value initially assigned to each unit of work rendered by a salesman. Especially significant here also is the fact that the fixed or guaranteed portion of the wages paid to the Philippine Duplicators' salesmen represented only 15%-30% of an employee's total earnings in a year. We note the following facts on record:

Salesmen's Total Earnings and 13th Month Pay For the Year 1986 2

Name of Total Amount Paid Montly FixedSalesman Earnings as 13th Month Pay Wages x 12 3

Baylon, P76,610.30 P1,350.00 P16,200.00Benedicto

Bautista 90,780.85 1,182.00 14,184.00Salvador

Brito, 64,382.75 1,238.00 14,856.00Tomas

Bunagan, 89,287.75 1,266.00 15,192.00Jorge

Canilan, 74,678.17 1,350.00 16,200.00Rogelio

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

Centeno, 51,854.15 1,266.04 15,192.00Melecio, Jr.

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

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

Garcia, 93,753.75 1,294.00 15,528.00Delfin

Navarro, 98,618.71 1,266.00 15,192.00Ma. Teresa

Ochosa, 66,275.65 1,406.00 16,872.00Rolano

Quisumbing, 101,065.75 1,406.00 16,872.00Teofilo

Rubina, 42,209.73 1,266.00 15,192.00Emma

Salazar, 64,643.65 1,238.00 14,856.00Celso

Sopelario, 52,622.27 1,350.00 16,200.00Ludivico

Tan, 30,127.50 1,238.00 14,856.00Leynard

Talampas, 146,510.25 1,434.00 17,208.00Pedro

Villarin, 41,888.10 1,434.00 17,208.00Constancio

Carrasco, 50,201.20 403.75*Cicero

Punzalan, 24,351.89 1,266.00 15,192.00Reynaldo

Poblador, 25,516.75 323.00*Alberto

Cruz, 32,950.45 323.00*Danilo

Baltazar, 15,681.35 323.00*Carlito

Considering the above circumstances, the Third Division held, correctly, that the sales commissions were an integral part of the basic salary structure of Philippine Duplicators' employees salesmen. These commissions are not overtime payments, nor profit-sharing payments nor any other fringe benefit. Thus, the salesmen's commissions, comprising a pre-determined percent of the selling price of the goods sold by each salesman, were properly included in the term "basic salary" for purposes of computing their 13th month pay.

In Boie-Takeda the so-called commissions "paid to or received by medical representatives of Boie-Takeda Chemicals or by the rank and file employees of Philippine Fuji Xerox Co.," were excluded from the term "basic salary" because these were paid to the medical representatives and rank-and-file employees as "productivity bonuses." 4 The Second Division characterized these payments as additional monetary benefits not properly included in the term "basic salary" in computing their 13th month pay. We note that productivity bonuses are generally tied to the productivity, or capacity for revenue production, of a corporation; such bonuses closely resemble profit-sharing payments and have no clear director necessary relation to the amount of work actually done by each individual employee. More generally, a bonus is an amount granted and paid ex gratia to the employee; its payment constitutes an act of enlightened generosity and self-interest on the part of the employer, rather than as a demandable or enforceable obligation. In Philippine Education Co. Inc. (PECO) v. Court of Industrial Relations, 5 the Court explained the nature of a bonus in the following general terms:

As a rule a bonus is an amount granted and paid to an employee for his industry loyalty which contributed to the success of the employer's business and made possible the realization of profits. It is an act of generosity of the employer for which the employee ought to be thankful and grateful. It is also granted by an enlightened employer to spur the employee to greater efforts for the success of the business and realization of bigger profits. . . . . From the legal point of view a bonus is not and mandable and enforceable obligation. It is so when It is made part of the

wage or salary or compensation. In such a case the latter would be a fixed amount and the former would be a contingent one dependent upon the realization of profits. . . . 6 (Emphasis supplied)

In Atok-Big Wedge Mining Co., Inc. v. Atok-Big Wedge Mutual Benefit Association, 7 the Court amplified:

. . . . Whether or not [a] bonus forms part of waqes depends upon the circumstances or conditions for its payment. If it is an additional compensation which the employer promised and agreed to give without any conditions imposed for its payment, such as success of business or greater production or output, then it is part of the wage. But if it is paid only if profits are realized or a certain amount of productivity achieved, it cannot be considered part of wages. . . . It is also paid on the basis of actual or actual work accomplished. If the desired goal of production is not obtained, or the amount of actual work accomplished, the bonus does not accrue. . . . 8 (Emphasis supplied)

More recently, the non-demandable character of a bonus was stressed by the Court in Traders Royal Bank v. National Labor Relations Commission: 9

A bonus is a "gratuity or act of liberality of the giver which the recipient has no right to demand as a matter of right." (Aragon v. Cebu Portland Cement Co., 61 O.G. 4567). "It is something given in addition to what is ordinarily received by or strictly due the recipient." The granting of a bonus is basically a management prerogative which cannot be forced upon the employer "who may not be obliged to assume the onerous burden of granting bonuses or other benefits aside from the employee's basic salaries or wages . . ." (Kamaya Point Hotel v. NLRC, 177 SCRA 160 [1989]). 10 (Emphasis supplied)

If an employer cannot be compelled to pay a productivity bonus to his employees, it should follow that such productivity bonus, when given, should not be deemed to fall within the "basic salary" of employees when the time comes to compute their 13th month pay.

It is also important to note that the purported "commissions" paid by the Boie-Takeda Company to its medical representatives could not have been "sales commissions" in the same sense that Philippine Duplicators paid its salesmen Sales commissions. Medical representatives are not salesmen; they do not effect any sale of any article at all. In common commercial practice, in the Philippines and elsewhere, of which we take judicial notice, medical representatives are employees engaged in the promotion of pharmaceutical products or medical devices manufactured by their employer. They promote such products

by visiting identified physicians and inform much physicians, orally and with the aid of printed brochures, of the existence and chemical composition and virtues of particular products of their company. They commonly leave medical samples with each physician visited; but those samples are not "sold" to the physician and the physician is, as a matter of professional ethics, prohibited from selling such samples to their patients. Thus, the additional payments made to Boie-Takeda's medical representatives were not in fact sales commissions but rather partook of the nature of profit-sharing bonuses.

The doctrine set out in the decision of the Second Division is, accordingly, that additional payments made to employees, to the extent they partake of the nature of profit-sharing payments, are properly excluded from the ambit of the term "basic salary" for purposes of computing the 13th month pay due to employees. Such additional payments are not "commissions" within the meaning of the second paragraph of Section 5 (a) of the Revised Guidelines Implementing 13th Month Pay.

The Supplementary Rules and Regulations Implementing P.D. No. 851 subsequently issued by former Labor Minister Ople sought to clarify the scope of items excluded in the computation of the 13th month pay; viz.:

Sec. 4. Overtime pay, earnings and other remunerations which are not part of the basic salary shall not be included in the computation of the 13th month pay.

We observe that the third item excluded from the term "basic salary" is cast in open ended and apparently circular terms: "other remunerations which are not part of the basic salary." However, what particular types of earnings and remuneration are or are not properly included or integrated in the basic salary are questions to be resolved on a case to case basis, in the light of the specific and detailed facts of each case. In principle, where these earnings and remuneration are closely akin to fringe benefits, overtime pay or profit-sharing payments, they are properly excluded in computing the 13th month pay. However, sales commissions which are effectively an integral portion of the basic salary structure of an employee, shall be included in determining his 13th month pay.

We recognize that both productivity bonuses and sales commissions may have an incentive effect. But there is reason to distinguish one from the other here. Productivity bonuses are generally tied to the productivity or profit generation of the employer corporation. Productivity bonuses are not directly dependent on the extent an individual employee exerts himself. A productivity bonus is something extra for which no specific additional services are rendered by any particular employee and hence not legally demandable, absent a contractual undertaking to pay it. Sales commissions, on the other hand, such as those paid in Duplicators, are intimately related to or directly proportional to the extent or energy of an employee's endeavors. Commissions are paid upon the specific results achieved by a

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

Finally, the statement of the Second Division in Boie-Takeda declaring null and void the second paragraph of Section 5(a) of the Revised Guidelines Implementing the 13th Month Pay issued by former Labor Secretary Drilon, is properly understood as holding that that second paragraph provides no legal basis for including within the term "commission" there used additional payments to employees which are, as a matter of fact, in the nature of profit-sharing payments or bonuses. If and to the extent that such second paragraph is so interpreted and applied, it must be regarded as invalid as having been issued in excess of the statutory authority of the Secretary of Labor. That same second paragraph however, correctly recognizes that commissions, like those paid in Duplicators, may constitute part of the basic salary structure of salesmen and hence should be included in determining the 13th month pay; to this extent, the second paragraph is and remains valid.

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

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

[G.R. No. 122827. March 29, 1999]

LIDUVINO M. MILLARES, J. CAPISTRANO CORDITA, SHIRLEY P. UY, DIONISIO J. REQUINA, GABRIEL A. DEJERO, NELSON T. GOMONIT, IMELDA IMPEYNADO SULPICIO B. SUMILE, MA. CONSUELO AVIEL, SILVINO S. GUEVARRA, FIDEL DUMANHOG, NELFA T. POLOTAN, LEMUEL C. RISMA, JUANITO M. GONZALES, ROGELIO B. CABATUAN, EPIFANCIO E. GANANCIAL, DOMINADOR D. ATOK, CONRADO U. SERRANO, ISIDRO J. BARNAJA, ROMEO VIRTUDAZO, AVELINO NABLE, EDGAR TAMPOS, ERNESTO ORIAS, DALMACIO LEGARAY, ROMEO R . BULA, ROBERTO G. GARCIA, RUDOLFO SUZON, JERRY S. DANO, AUGUST G. ESCUDERO, OSCAR B. CATBAGAN, TEOFILO C. SISON, NARCISO BULASA, ALBERTO CORTEZ, LILIA C. CABRERA, NESTOR A. ACASO, BIENVENIDO MOZO, ISIDORO A. ALMENDAREZ, VICENTE M. PILONGO, ROBERTO N. LUMPOT, PATRICIO BANDOLA, MANUEL S. ESPINA, ISIDRO K. BALCITA, JR., EMMANUEL O. ABRAHAM, OLEGARIO A. EPIS, NESTOR D. PEREGRINO, RAMON A. USANAGA, PRESTO BARTOLOME, BRADY EMPEYNADO, PORFERIO N. CONDADO, AQUILLO V. CORDOVA, LEONARDO ESTOSI, PACIFICO B. DACORINA, PABLITO B. LLUBIT, ANTONIO DOZA, LEONITO LABADIA, EDGARDO BELLIZA, FEDENCIO P. GEBERTAS, VIRGILIO D. GULBE, MANUEL A. LERIO, JR., ROGELIO B. OCAMIA, RODOLFO A. CASTILLO, EDMUNDO L PLAZA, ROBERTO D. YAGONIA, JR., PETRONIO ESTELA, JR, CRISOLOGO A. LOGRONIO, ERNESTO T. MORIO, ROGELIO M. DAVID, BENJAMIN U. ARLIGUE, APOLONIO MUNDO, JR., NENE M. E NOSA, NILO B. BALAORO, GERONIMO S. CONVI, VICENTE R. TARAGOZA, YOLANDO A. SALAZAR, MANUEL A. NERI, ROGELIO C. TICAR, ROBERTO A. MACALAM, MIGUEL MACARIOLA, WALTERIO DAPADAP, SILVERIO CUAMAG, EUPARQUIO PLANOS, GILBERTO M. MIRA, REYNALDO BACSARSA, DIOSDADO B. ABING, ARISTARCO V. SALON, TOMAS N. CATACTE, RODOLFO MEMORIA, PAPENIANO CURIAS, JOSE S. CANDIA, DESIDERIO C. NAVARRO, EMMANUEL O. ABRAHAM, JOSELITO D. ARLAN, FRANCISCO S. SANCHEZ, MANSUETO B. LINGGO, ISIDRO BARNAJA, ROMEO S. CABRERA, LEODEGARIO CAINTIC, NESTOR G. BLANDO, FLORENCIO B. DELIZO, MILAN M. ETES, GONZALO C. PADILLO, LEONARDO CAGAKIT, JOSEFINO E. DULGUIME, PEPITO G. ARREZA, AMADOR G. CAGALAWAN, GAUDENCIO C. SARMIENTO, FLORENTINO J. BRACAMONTE, DOMINADOR H. TY, LEOPOLDO T. SUPIL, JOSE A. DOHINOG, ANIANO T. REYES, CARLITO G. UY, PLACIDO D. PADILLO, TERESITA C. ADRIANO, CANDIDO S. ADRIANO, and AVELINO G. VENERACION, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, (FIFTH DIVISION), and PAPER INDUSTRIES CORPORATION OF THE PHILIPPINES (PICOP), respondents.

D E C I S I O N

BELLOSILLO, J.:

Petitioners numbering one hundred sixteen (116)i[1] occupied the positions of Technical Staff, Unit Manager, Section Manager, Department Manager, Division Manager and Vice President in the mill site of respondent Paper Industries Corporation of the Philippines (PICOP) in Bislig, Surigao del Sur. In 1992 PICOP suffered a major financial setback allegedly brought about by the joint impact of restrictive government regulations on logging and the economic crisis. To avert further losses, it undertook a retrenchment program and terminated the services of petitioners. Accordingly, petitioners received separation pay computed at the rate of one (1) month basic pay for every year of service. Believing however that the allowances they allegedly regularly received on a monthly basis during their

employment should have been included in the computation thereof they lodged a complaint for separation pay differentials.

The allowances in question pertained to the following -

1. Staff/Manager's Allowance -

Respondent PICOP provides free housing facilities to supervisory and managerial employees assigned in Bislig. The privilege includes free water and electric consumption. Owing however to shortage of such facilities, it was constrained to grant Staff allowance instead to those who live in rented houses outside but near the vicinity of the mill site. But the allowance ceases whenever a vacancy occurs in the company's housing facilities. The former grantee is then directed to fill the vacancy. For Unit, Section and Department Managers, respondent PICOP gives an additional amount to meet the same kind of expenses called Manager's allowance.

2. Transportation Allowance -

To relieve respondent PICOP's motor pool in Bislig from a barrage of requests for company vehicles and to stabilize company vehicle requirements it grants transportation allowance to key officers and Managers assigned in the mill site who use their own vehicles in the performance of their duties. It is a conditional grant such that when the conditions no longer obtain, the privilege is discontinued. The recipients of this kind of allowance are required to liquidate it by submitting a report with a detailed enumeration of expenses incurred.

3. Bislig Allowance -

The Bislig Allowance is given to Division Managers and corporate officers assigned in Bislig on account of the hostile environment prevailing therein. But once the recipient is transferred elsewhere outside Bislig, the allowance ceases.

Applying Art.,97, par. (f), of the Labor Code which defines if wage," the Executive Labor Arbiter opined that the subject allowances, being customarily furnished by respondent PICOP and regularly received by petitioners, formed part of the latter's wages. Resolving the controversy from another angle, on the strength of the ruling in Santos v. NLRCii[2] and Soriano v. NLRCiii[3] that in the computation of separation pay account should be taken not just of the basic salary but also of the regular allowances that the employee had been receiving, he concluded that the allowances should be included in petitioners' base pay. Thus respondent PICOP was ordered on 28 April 1994 to pay petitioners Four Million Four Hundred Eighty-One Thousand Pesos (P4,481,000.00) representing separation pay differentials plus ten per cent (10%) thereof as attorney's fees.iv[4]

The National Labor Relations Commission (NLRC) did not share the view of the Executive Labor Arbiter. On 7 October 1994 it set aside the assailed decision by decreeing that the allowances did not form part of the salary base used in computing separation pay.v[5]

Its ruling was based on the finding that the cases relied upon by the Executive Labor Arbiter were inapplicable since they involved illegal dismissal where separation pay was granted in lieu of reinstatement which was no longer feasible. Instead, what it considered in point was Estate of the late Eugene J. Kneebone v. NLRCvi[6] where the Court held that representation and transportation allowances were deemed not part of salary and should therefore be excluded in the computation of separation benefits. Relating the present case with Art. 97, par. (f), of the Labor Code, the NLRC likewise found that petitioners' allowances were contingency-based and thus not included in their salaries. On 26 September 1995 reconsideration was denied.vii[7]

In this petition for certiorari, petitioners submit that their allowances are included in the definition of "facilities" in Art. 97, par. (f), of the Labor Code, being necessary and indispensable for their existence and subsistence. Furthermore they claim that their availment of the monetary equivalent of those "facilities" on a monthly basis was characterized by permanency, regularity and customariness. And to fortify their arguments they insist on the applicability of Santos,viii[8] Soriano,ix[9] The Insular Life Assurance Company,x[10] Planters Products, Inc.xi[11] and Songcoxii[12] which are all against the NLRC holding that the salary base in computing separation pay includes not just the basic salary but also the regular allowances.

There is no showing of grave abuse of discretion on the part of the NLRC. In case of retrenchment to prevent losses, Art. 283 of the the Labor Code imposes on the employer an obligation to grant to the affected employees separation pay equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. Since the law speaks of "pay," the question arises, "What exactly does the term connote?" We correlate Art. 283 with Art. 97 of the same Code on definition of terms. "Pay" is not defined therein but "wage." In Songco the Court explained that both words (as well as salary) generally refer to one and the same meaning, i.e., a reward or recompense for services performed. Specifically, "wage" is defined in letter (f) as the remuneration or earnings, however designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis, or other method of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of employment for work done or to be done, or for services rendered or to be rendered and includes the fair and reasonable value, as determined by the Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer to the employee.

We invite attention to the above-underlined clause. Stated differently, when an employer customarily furnishes his employee board, lodging or other facilities, the fair and reasonable value thereof, as determined by the Secretary of Labor and Employment, is included in "wage." In order to ascertain whether the subject allowances form part of petitioner's

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"wages," we divide the discussion on the following - "customarily furnished;" "board, lodging or other facilities;" and, "fair and reasonable value as determined by the Secretary of Labor."

"Customary" is founded on long-established and constant practicexiii[13] connoting regularity.xiv[14] The receipt of an allowance on a monthly basis does not ipso facto characterize it as regular and forming part of salaryxv[15] because the nature of the grant is a factor worth considering. We agree with the observation of the Office of the Solicitor General- that the subject allowances were temporarily, not regularly, received by petitioners because -

In the case of the housing allowance, once a vacancy occurs in the company-provided housing accommodations, the employee concerned transfers to the company premises and his housing allowance is discontinued x x x x

On the other hand, the transportation allowance is in the form of advances for actual transportation expenses subject to liquidation x x x given only to employees who have personal cars.

The Bislig allowance is given to Division Managers and corporate officers assigned in Bislig, Surigao del Norte. Once the officer is transferred outside Bislig, the allowance stops.xvi[16]

We add that in the availment of the transportation allowance, respondent PICOP set another requirement that the personal cars be used by the employees in the performance of their duties. When the conditions for availment ceased to exist, the allowance reached the cutoff point. The finding of the NLRC along the same line likewise merits concurrence, i.e., petitioners' continuous enjoyment of the disputed allowances was based on contingencies the occurrence of which wrote finis to such enjoyment.

Although it is quite easy to comprehend "board" and "lodging," it is not so with "facilities." Thus Sec. 5, Rule VII, Book III, of the Rules Implementing the Labor Code gives meaning to the term as including articles or services for the benefit of the employee or his family but excluding tools of the trade or articles or service primarily for the benefit of the employer or necessary to the conduct of the employer's business. The Staff /Manager's allowance may fall under "lodging" but the transportation and Bislig allowances are not embraced in "facilities"

on the main consideration that they are granted as well as the Staff/Manager's allowance for respondent PICOP's benefit and convenience, i.e., to insure that petitioners render quality performance. In determining whether a privilege is a facility, the criterion is not so much its kind but its purpose.xvii[17] That the assailed allowances were for the benefit and convenience of respondent company was supported by the circumstance that they were not subjected to withholding tax. Revenue Audit Memo Order No. 1-87 pertinently provides -

3.2 x x x x transportation, representation or entertainment expenses shall not constitute taxable compensation if:

(a) It is for necessary travelling and representation or entertainment expenses paid or incurred by the employee in the pursuit of the trade or business of the employer, and

(b) The employee is required to, and does, make an accounting/liquidation for such expense in accordance with the specific requirements of substantiation for such category or expense.

Board and lodging allowances furnished to an employee not in excess of the latter's needs and given free of charge, constitute income to the latter except if such allowances or benefits are furnished to the employee for the convenience of the employer and as necessary incident to proper performance of his duties in which case such benefits or allowances do not constitute taxable income.xviii[18]

The Secretary of Labor and Employment under Sec. 6, Rule VII, Book III, of the Rules Implementing the Labor Code may from time to time fix in appropriate issuances the "fair and reasonable value of board, lodging and other facilities customarily furnished by an employer to his employees." Petitioners' allowances do not represent such fair and reasonable value as determined by the proper authority simply because the Staff/Manager's allowance and transportation allowance were amounts given by respondent company in lieu of actual provisions for housing and transportation needs whereas the Bislig allowance was given in consideration of being assigned to the hostile environment then prevailing in Bislig.

The inevitable conclusion is that, as reached by the NLRC, subject allowances did not form part of petitioners' wages.

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In Santosxix[19] the Court decreed that in the computation of separation pay awarded in lieu of reinstatement, account must be taken not only of the basic salary but also of transportation and emergency living allowances. Later, the Court in Soriano, citing Santos, was general in its holding that the salary base properly used in computing separation pay where reinstatement was no longer feasible should include not just the basic salary but also the regular allowances that the employee had been receiving. Insular merely reiterated the aforementioned rulings. The rationale is not difficult to discern. It is the obligation of the employer to pay an illegally dismissed employee the whole amount of his salaries plus all other benefits, bonuses and general increases to which he would have been normally entitled had he not been dismissed and had not stopped working.xx[20] The same holds true in case of retrenched employees. And thus we applied Insular and Soriano in Planters in the computation of separation pay of retrenched employees. Songco likewise involved retrenchment and was relied upon in Planters, Soriano and Santos in determining the proper amount of separation pay. As culled from the foregoing jurisprudence, separation pay when awarded to an illegally dismissed employee in lieu of reinstatement or to a retrenched employee should be computed based not only on the basic salary but also on the regular allowances that the employee had been receiving. But in view of the previous discussion that the disputed allowances were not regularly received by petitioners herein, there was no reason at all for petitioners to resort to the above cases.

Neither is Kneebone applicable, contrary to the finding of the NLRC, because of the difference in factual circumstances. In Kneebone, the Court was tasked to resolve the issue whether the representation and transportation allowances formed part of salary as to be considered in the computation of retirement benefits. The ruling was in the negative on the main ground that the retirement plan of the company expressly excluded such allowances from salary.

WHEREFORE, the petition is DISMISSED. The resolution of public respondent National Labor Relations Commission dated 7 October 1994 holding that the Staff /Manager's, transportation and Bislig allowances did not form part of the salary base used in computing the separation pay of petitioners, as well as its resolution dated 26 September 1995 denying reconsideration, is AFFIRMED. No costs.

SO ORDERED.

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