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Saturday, December 19, 2009

Who are covered the employees’ right to self-organization?

The Labor Code of the Philippines, Article 243, provides thus:
ART. 243.  Coverage and Employees’ Right to Self-Organization.  – All persons employed in commercial, industrial and agricultural enterprises and in religious, charitable, medical or educational institutions whether operating for profit or not, shall have the right to self-organization and to form, join, or assist labor organizations of their own choosing for purposes of collective bargaining.  Ambulant, intermittent and itinerant workers, self-employed people, rural workers and those without any definite employers may form labor organizations for their mutual aid and protection.
Consistent with the Constitutional mandate, Article 243 of the Code allows “all persons employed in commercial, industrial and agricultural enterprises” to form, join or assist labor organizations of their own choosing for purposes of collective bargaining.

The right is extended even to those employed in traditionally non-profit organizations like religious, charitable, medical or educational institutions.  This extension of the right departs from the policy under the old Industrial Peace Act (R.A. No. 875) which withheld the right to organize from employees of non-profit firms.

But the seemingly all-inclusive coverage of “all persons” in Article 243 actually admits of exceptions. 

Under Art. 244, for instance, all employees in the civil service, that is, those not employed in government corporations established under the Corporation Code, may only form associations but may not collectively bargain on employment terms and conditions fixed by law.

Similarly, under Art. 245, managerial employees, regardless of the kind of organization where they are employed, may not join, assist or form any labor organization.

Accordingly, managerial employees cannot, in the absence of an agreement to the contrary, be allowed to share in the concessions obtained by the labor union through collective negotiation.  Otherwise, they would be exposed to the temptation of colluding with the union during the negotiations to the detriment of the employer. (Martinez vs. NLRC, GMCR Inc. and M.A. Javier, G.R. No. 118743, October 12, 1998)

However, there is nothing to prevent the employer from granting benefits to managerial employees equal to or higher than those afforded to union members.

Supervisors are allowed to organize, but they cannot form, join or assist a rank-and-file union.

More exceptions to the right to organize can be found in court decisions, however.

Thursday, November 12, 2009

"Wage" and "Salary" Defined

The term "wages," as distinguished from "salary," applies to the compensation for manual labor, skilled or unskilled, paid at stated times, and measured by the day, week, month, or season, while "salary" denotes a higher degree of employment, or a superior grade of services, and implies a position or office; by contrast, the term "wages" indicates inconsiderable pay for a lower and less responsible character of employment, while "salary" is suggestive of a larger and more permanent or fixed compensation for more important service. 

By some of the authorities, it has been noted that the word "wages" in its ordinary acceptance, has a less extensive meaning than the word "salary," "wages" being ordinarily restricted to sums paid as hire or reward to domestic or menial servants and to sums paid to artisans, mechanics, laborers, and other employees of like class, as distinguished from the compensation of clerks, officers of public corporations, and public offices.  

In many situations, however, the words "wages" and "salary" are synonymous. (35 Am. Jur., Sec. 63, pp. 496-497)

Our Supreme Court reached the same conclusion, i.e., the words "wages" and "salary" are in essence synonymous.

Wednesday, November 11, 2009

Wage Includes Sales Commissions

"Salary," the etymology of which is the Latin word "salarium," is often used interchangeably with "wage," the etymology of which is the Middle English word "wagen."   

Both words generally refer to one and the same meaning, that is, a reward or recompense for services performed.  Likewise, "pay" is the synonym of "wages" and "salary."  

Inasmuch as the words "wage," "pay" and "salary" have the same meaning, and commission is included in the definition of "wage," the logical conclusion is, in the computation of the separation pay, the salary base should include also the earned sales commissions.  (Songco, et al. vs. National Labor Relations Commission, G.R. Nos. 50999-51000, March 23, 1990)

In another case, certain workers received compensation on a percentage commission based on the gross sale of the fish-catch, i.e., 13% of the proceeds of the sale if the total proceeds exceed the cost of the crude oil consumed during the fishing trip, otherwise, only 10% of the proceeds of the sale.  Such compensation falls within the scope and meaning of the term "wage" as defined under Article 97(f) of the Labor Code.  (Ruga, et al. vs. National Labor Relations Commission, G.R. Nos. 72654-61, Jan. 22, 1990)

Sunday, November 8, 2009

Can Bonus Be Withdrawn by the Employer?

Even if a bonus is not demandable for not forming part of the wage, salary or compensation of the employee, the same may nevertheless be granted on equitable consideration.

In Philippine Education Co., Inc. vs. Court of Industrial Relations, et al. (92 SCRA 381), the Court ruled: 
Taking into consideration the facts and circumstances of the case -- that bonuses had been given to the employees at least in three previous years; that the amount of P90,706.36 has been set aside for payment as bonus to its employees and laborers and the reason for withholding the payment thereof was the strike staged by the employees and laborers for more favorable working conditions which was declared legal by the respondent court -- justice and equity demand that bonus already set aside for its employees and laborers be paid to them.  

The award would still be within the ambit of the respondent court's power and function which is mainly to prevent further disputes and perhaps strikes which are so detrimental to both labor and management and to the public weal.
Furthermore, while normally discretionary, the grant of a gratuity or bonus by reason of its long and regular concession, may be regarded as part of regular compensation.  (Liberation Steamship Co., Inc. vs. Court of Industrial Relations, et al., G.R. No. L-25389, June 27, 1968, 23 SCRA 1105; National Development Co. vs. Court of Industrial Relations, et al., G.R. No. L-25390, June 27, 1958, 23 SCRA 1106)

In Heacock Co. vs. NLU, et al. (95 Phil. 553), the Court ruled:
"It appears herein that for the year 1947 the Company paid a bonus of one month salary to all its employees, and for the years 1948 and 1949, realizing necessary profits, it also paid a bonus to its executives and heads of departments, omitting only the low-salaried employees.  The payment of the bonus in 1947 already generated in the minds of all the employees the fixed hope of receiving the same concession in subsequent years, and on the ground of equity they deserved to be paid the bonus for the years 1948 and 1949, when the Company admittedly realized enough profits.

"The Company insists that its high officials were given bonus for 1948 and 1949 because they had never been granted any salary raise or paid for any overtime work.  This is, however, answered by the Union which alleges that no salary increase or overtime pay was necessary for the high officials of the Company, since they have already been receiving adequate compensation.

"The Company also maintains that no valid obligation to pay the bonus in question could arise, because there was no consideration therefor.  It is sufficient to state that any extra concession granted by the employer to his employee or laborer is necessarily premised on the need of improving the latter's working conditions to the highest possible level, in return only for the efficient service and loyalty expected from the employee or laborer.

"The decision favorable to the Union may further be predicated upon the case of Philippine Education Company, Inc. vs. Court of Industrial Relations, et al. (48 Off. Gaz. (13) 5278; 92 Phil. 381), in which we held that, even if a bonus is not demandable for not forming part of the wage, salary or compensation of the employee, the same may nevertheless be granted on equitable considerations."
The Heacock ruling, rendered in 1954, reverberated in NWSA vs NWSA Consolidated Labor Union (21 SCRA 203) rendered in 1967.  In that case the employer granted Christmas bonus under a collective bargaining agreement up to its expiry in 1959.  In 1960, while a labor dispute was pending, the employer again paid the bonus.  For 1961, the union pressed again for continuance of the bonus.  The employer strongly refused.  The Supreme Court held:
"Petitioner disputes the grant of Christmas bonus for the year 1961 and points out that it is purely an act of liberality which may be withheld, considering that the collective bargaining agreement of 1956 under which the employees enjoyed such benefits had already expired.  This is true enough, as a matter of law.  But this Court has held that "even if a bonus is not demandable for not forming part of the wage, salary or compensation of the employee, the same may nevertheless be granted on equitable considerations" (Heacock Co. vs. National Labor Union, et al., 95 Phil. 553, 559), and the Court of Industrial Relations, "according to the law of its creation, may make an award for the purpose of settling and preventing further disputes." 
Respondent Court stated the following considerations, which we believe justify the award:
"There is no question that the respondent's employees and laborers have been enjoying the benefit of Christmas bonus.  It is not denied that even during the operation of the corporation under the defunct Metropolitan Water District and since its administration and operation by the respondent Authority, the employees and laborers have been continuously given such benefit.  And even while this case was pending, the NWSA granted Christmas bonus in December 1960."
In the 1995 case of Marcos et al. vs. NLRC and Insular Life Assurance Co. (G.R. No. 111744, September 8, 1995), the Court quoted authorities holding that if one enters into a contract of employment under an agreement that he shall be paid a certain salary by the week or some other stated period and, in addition, a bonus, in case he serves for a specified length of time, there is no reason for refusing to enforce the promise to pay the bonus, if the employee has served during the stipulated time, on the ground that it was a promise of mere gratuity.  

The Court further said:
This is true if the contract contemplates a continuance of the employment for a definite term, and the promise of the bonus is made at the time the contract is entered into.  If no time is fixed for the duration of the contract of employment, but the employee enters upon or continues in service under an offer of a bonus if he remains therein for a certain time, his service, in case he remains for the required time, constitutes an acceptance of the offer of the employer to pay the bonus and, after that acceptance, the offer cannot be withdrawn, but can be enforced by the employee.

The weight of authority in American jurisprudence, with which we are persuaded to agree, is that after the acceptance of a promise by an employer to pay the bonus, the same cannot be withdrawn, but may be enforced by the employee."

Wednesday, September 9, 2009

Prohibitions Regarding Wages: Wage Deductions

The Labor Code of the Philippines, in requiring written authorization as a pre-requisite to wage deductions, seeks to protect the employee against unwarranted practices that would diminish his compensation without his knowledge and consent.

Nonetheless, service fee collected by the Union does not run counter to the express mandate of the law since the same are not unwarranted.  Also, the deductions for the union service fee are authorized by law and do not require individual check-off authorizations.  [Radio Communications of the Philippines, Inc. vs. Secretary of Labor, G.R. No. 77950, Jan. 9, 1989]

In one case, the question is whether the non-payment of stock subscriptions can be offset against a money claim of an employee against the employer.

The corporation admitted that there was due to the employee the amount of P17,060,07, but this was applied to the unpaid balance of his subscription in the amount of P95,439.93.  The employee questioned the set-off alleging that there was no call or notice for the payment of the unpaid subscription and that, accordingly, the alleged obligation was not enforceable.

The Court ruled that the set-off was without lawful basis, if not premature.  As there was no notice or call for the payment of unpaid subscriptions, the same is not yet due and payable.  Assuming that there was a call for payment of the unpaid subscription, the NLRC cannot validly set it off against the wages and other benefits due the petitioner.

Article 113 of the Labor Code allows such a deduction from the wages of the employees by the employer, only in three instances, to wit:  

(a)  in cases where the worker is insured with his consent by the employer, and the deduction is to recompense the employer for the amount paid by him as premium on the insurance;

(b)  for union dues, in cases where the right of the workers or his union to check-off has been recognized by the employer or authorized in writing by the individual worker concerned; and

(c)  in cases where the employer is authorized by law or regulations issued by the Secretary of Labor.  [Apodaca vs. National Labor Relations Commission, et al., G.R. No. 80039, April 18, 1989]

Sunday, September 6, 2009

Overseas Employment Policy of the Philippines

The export of Filipino labor is an offspring of national poverty. The export of people, instead of products, has come about largely because of the high rate of unemployment and under-employment.

Particularly during the dark, debauched, and deplorable years of the Martial Law presidency, manpower export had to happen to alleviate the twin problems of unemployment and the deficit in the balance of trade.

But the dictatorial government did not even bother to formulate the courses of action that it would take if misfortune should befall its working citizens abroad. And yet, it did not forget to require homeward remittance of their earnings.

Because of the remittances, the so-called stop-gap measure fast evolved to become the country's top dollar-earning industry. Indeed, good sums of money flowed in.

But it was blood money. The remittances were accompanied by accounts of horrendous abuses suffered by Filipino workers in the hands of some foreign employers. The fate of the Contemplacions, the Magas, and the Balabagans woke the government up. Out of these tales of woe, condemned in widespread street demonstrations, the "Migrant Workers and Overseas Filipinos Act of 1995" (R.A. No. 8042) was passed during the Ramos Administration.

R.A. No. 8042

R.A. No. 8042, which was signed on June 7, 1995 and took effect on July 16, 1995, redefines the policy on overseas employment. It states in part: 
"While recognizing the significant contribution of Filipino migrant workers to the national economy through their foreign exchange remittances, the State does not promote overseas employment as a means to sustain economic growth and achieve national development. The existence of the overseas employment program rests solely on the assurance that the dignity and fundamental human rights and freedoms of the Filipino citizen shall not, at any time, be compromised or violated. The State, therefore, shall continuously create local employment opportunities and promote the equitable distribution of wealth and the benefits of development." (Sec. 2[c], R.A. No. 8042)


Republic Act No. 8042, furthermore, requires certain guarantee of protection for the overseas workers before they are deployed. It states: 
SEC. 4. Deployment of Migrant Workers -- The State shall deploy overseas Filipino workers only in countries where the rights of Filipino migrant workers are protected. The government recognizes any of the following as a guarantee for the protection of the receiving country for the protection of the rights of overseas Filipino workers:

(a) It has existing labor and social laws protecting the rights of migrant workers;  
(b) It is a signatory to multilateral conventions, declarations or resolutions relating to the protection of migrant workers;  
(c) It has concluded a bilateral agreement or arrangement with the government protecting the rights of overseas Filipino workers; and  
(d) It is taking positive, concrete measures to protect the rights of migrant workers.

SEC. 5. Termination or Ban on Deployment -- Notwithstanding the provisions of Section 4 hereof, the government, in pursuit of the national interest or when public welfare so requires, may, at any time, terminate or impose a ban on the deployment of migrant workers.

Cesario Alvero Azucena, Jr., The Labor Code With Comments and Cases, 1999, p. 44.

Wednesday, August 12, 2009

Article 97

ART. 97.  Definition.

As used in this Title:  (a)  "Person" means an individual, partnership, association, corporation, business trust, legal representative, or any organized group of persons.

(b)  "Employer" includes any person acting directly or indirectly in the interest of an employer in relation to an employee and shall include the Government and all its branches, subdivision and instrumentalities, all government-owned or -controlled corporations and institutions, as well as non-profit private institutions, or organizations.

(c)  "Employee" includes any individual employed by an employer.

(d)  "Agriculture" includes farming in all its branches and, among other things, includes the cultivation and tillage of soil, dairying, the production, cultivation, growing and harvesting of any agricultural and horticultural commodities, the raising of livestock or poultry, and any practices performed by a farmer on a farm as an incident to or in conjunction with such farming operations, but does not include the manufacturing or processing of sugar, coconuts, abaca, tobacco, pineapples or other farm products.

(e)  "Employ" includes to suffer or permit to work.

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

Sunday, August 9, 2009

Marcos et al vs. NLRC et al

Republic of the Philippines


G.R. No. 111744
September 8, 1995

- versus -



This petition for certiorari seeks the nullification of the decision1 of the National Labor Relations Commission (NLRC) promulgated on May 31, 1992 in NLRC NCR CA No. 004120-92, and its resolution dated August 27, 1993 denying petitioner's motion for reconsideration thereof. The said decision set aside on appeal, the decision of Labor Arbiter Alex Arcadio Lopez ordering private respondent to pay petitioners their service awards, anniversary bonus and prorated performance bonus in the amount of P144,579.00 and 10% attorney's fees in the amount of P14,457.90.2

First, the undisputed facts.

Petitioners were regular employees of private respondent Insular Life Assurance Co:, Ltd., but they were dismissed on November 1, 1990 when their positions were declared redundant. A special redundancy benefit was paid to them, which included payment of accrued vacation leave and fifty percent (50%) of unused current sick leave, special redundancy benefit, equivalent to three (3) months salary for every year of service; and additional cash benefits, in lieu of other benefits provided by the company or required by law.3

Before the termination of their services, petitioner Marcos had been in the employ of private respondent for more than twenty (20) years, from August 26, ]970; petitioner Andrada, more than twenty-five (25) years, from July 26, 1965; petitioner Lopez, exactly thirty (30) years, from October 31, 1960; and petitioner Cruz, more than twenty (20) years, from March 1, 1970.4

Petitioners, particularly Baltazara J. Lopez, sent a letter dated October 23, 1990 to respondent company questioning the redundancy package, She claimed that they should receive their respective service awards and other prorated bonuses which they had earned at the time they were dismissed. In addition, Lopez argued that "the cash service awards have already been budgeted in a fund distinct and apart from redundancy fund.5

Thereafter, private respondent required petitioners to execute a "Release and Quitclaim," 6 and petitioners complied but with a written protest reiterating their previous demand that they were nonetheless entitled to receive their service awards.

On March 21, 1991, petitioners inquired from the Legal Service of the Department of Labor and Employment whether respondent corporation could legally refuse the payment of their service awards as mandated in their Employee's Manual.

About three months later the labor department issued its opinion, with pertinent authorities, responding to petitioners' query as follows:

xxx xxx xxx

This Department believes that your query presents several issues. These shall be addressed point by point, thus:

First, the Department deems the service award to be part of the benefits of the employees of Insular Life. Company policies and practices are fertile sources of employee's rights. These must be applied uniformly as interpretation cannot vary from one employee to another. . . .

xxx xxx xxx

While it may be argued that the above-cited case applies only to retirement benefits, we find solace in the cases of Liberation Steamship Co., Inc. vs. CIR and National Development Company vs. Unlicensed Crew members of Three Dons vessels (23 SCRA 1105) where the Supreme Court held that a gratuity or bonus, by reason of its long and regular concession indicating company practice, may become regarded as part of regular compensation and thus demandable.
xxx xxx xxx

Second, the award is earned at the pertinent anniversary date. At this time, entitlement to the award becomes vested. The anniversary date is the only crucial determining factor. Since the award accrues on that date, it is of no moment that the entitled employee is separated from service (for whatever cause) before the awards are physically handed out.
xxx xxx xxx
Third, even if the award has not accrued — as when an employee is separated from service because of redundancy before the applicable 5th year anniversary, the material benefits of the award must be given, prorated, by Insular Life. This is especially true (in) redundancy, wherein he/she had no control.
xxx xxx xxx
Fourth, the fact that you were required to sign "Release and Quitclaim" does not affect your right to the material benefits of the service award. . . . 8

Meanwhile, in the same year, private respondent celebrated its 80th anniversary wherein the management approved the grant of an anniversary bonus equivalent to one (1) month salary only to permanent and probationary employees as of November 15, 1990.9

On March 26, 1991, respondent company announced the grant of performance bonus to both rank and file employees and supervisory specialist grade and managerial staff equivalent to two (2) months salary and 2.75 basic salary, respectively, as of December 30, 1990. The performance bonus, however, would be given only to permanent employees as of March 30, 1991.10

Despite the aforequoted opinion of the Department of Labor and Employment, private respondent refused to pay petitioners service awards. This prompted the latter to file a consolidated complaint, which was assigned to NLRC Labor Arbiter Lopez, for payment of their service awards, including performance and anniversary bonuses.
In their complaint, petitioners contended that they are likewise entitled to the performance and anniversary bonuses because, at the time the performance bonus was announced to be given, they were only short of two (2) months service to be entitled to the full amount thereof as they had already served the company for ten (10) months prior to the declaration of the grant of said benefit. Also, they lacked only fifteen (15) days to be entitled to the full amount of the anniversary bonus when it was announced to be given to employees as of November 15, 1990.
In a decision dated October 8, 1992, the labor arbiter ordered respondent company to pay petitioners their service awards, anniversary bonuses and prorated performance bonuses, including ten percent (10%) thereof as attorney's fees.
Respondent company appealed to public respondent NLRC claiming grave abuse of discretion committed by the labor arbiter in holding it liable to pay said service award, performance and anniversary bonuses, and in not finding that petitioners were estopped from claiming the same as said benefits had already been given to them.
In setting aside the decision of the labor arbiter, respondent NLRC upheld the validity of the quitclaim document executed by petitioners. For this conclusion, it rationalized that "(c)ertainly, before complainants signed the quitclaim and release, they are aware of the nature of such document. In fact, they never assailed the genuineness and due execution of the same. Hence, we can safely say that they were not placed under duress or were compelled by means of force to sign the document."11

Furthermore, the NLRC held that "(n)either was there any unwritten agreement between complainants and respondent upon separation, which entitled the former to other renumerations or benefits. On the contrary, they voluntarily accepted the redundancy benefit package, otherwise, they would not have been separated from employment."12

Hence, this petition wherein it is postulated that the basic issue is whether or not respondent NLRC committed reversible error or grave abuse of discretion in affirming the validity of the "Release and Quitclaim" and, consequently, that petitioners are not entitled to payment of service awards and other bonuses.13
The Solicitor General public respondent NLRC and private respondent company duly filed their respective comments.14

In their petition, petitioners stress that they have actually devoted much, if not all, of their employable life with private respondent; that given their length of service, their loyalty to the latter is easily demonstrable; and that the same length of service had rendered slim, if not eliminated, their chances of getting employed somewhere else."15

On the other hand, respondent company reiterates its basic contention that the consideration for the settlement of petitioners' claim is credible and reasonable, more than satisfies the legal requirement therefor, and that petitioners, in executing the release and quitclaim, did so voluntarily and with full knowledge of the consequences thereof.16

The petition being meritorious, we find for petitioners.
Under prevailing jurisprudence, the fact that an employee has signed a satisfaction receipt for his claims does not necessarily result in the waiver thereof. The law does not consider as valid any agreement whereby a worker agrees to receive less compensation than what he is entitled to recover. A deed of release or quitclaim cannot bar an employee from demanding benefits to which he is legally entitled.17

We have heretofore explained that the reason why quitclaims commonly frowned upon as contrary to public policy, and why they are held to be ineffective to bar claims for the full measure of the workers' legal rights, is the fact that the employer and the employee obviously do not stand on the same footing. The employer drove the employee to the wall.  The latter must have harsh necessities of life. He thus found himself in no position to resist money proffered. His, then, is a case of adherence, not of choice. One thing sure, however, is that petitioners did not relent on their claim.  They pressed it.  They are deemed not have waived any of their rights. Renuntiatio non praesumitur.18

Along this line, we have more trenchantly declared that quitclaims and/or complete releases executed by the employees do not estop them from pursuing their claims arising from unfair labor practices of the employer. The basic reason for this is that such quitclaims and/or complete releases are against public policy and, therefore, null and void. The acceptance of termination does not divest a laborer of the right to prosecute his employer for unfair labor practice acts.19  While there maybe possible exceptions to this holding, we do not perceive any in the case at bar.

Furthermore, in the instant case, it is an undisputed fact that when petitioners signed the instrument of release and quitclaim, they made a written manifestation reserving their right to demand the payment of their service awards.20 The element of total voluntariness in executing that instrument is negated by the fact that they expressly stated therein their claim for the service awards, a manifestation equivalent to a protest and a disavowal of any waiver thereof.

As earlier stated, petitioners even sought the opinion of the Department of Labor and Employment to determine where and how they stood in the controversy. This act only shows their adamant desire to obtain their service awards and to underscore their disagreement with the "Release and Quitclaim" they were virtually forced to sign in order to receive their separation pay.

We have pointed out in Veloso, et al., vs. Department of Labor and Employment, et al.,21 that:

While rights may be waived, the same must not be contrary to law, public order, public policy, morals or good customs or prejudicial to a third person with a right recognized by law.

Article 6 of the Civil Code renders a quitclaim agreement void ab initio where the quitclaim obligates the workers concerned to forego their benefits while at the same time exempting the employer from any liability that it may choose to reject. This runs counter to Art. 22 of the Civil Code which provides that no one shall be unjustly enriched at the expense of another.

We agree with the further observations of the Solicitor General who, in recommending the setting aside of the decision of respondent NLRC, called attention to the fact that "contrary to private respondent's contention, the "additional" redundancy package does not and could not have covered the payment of the service awards, performance and anniversary bonuses since the private respondent company has initially maintained the position that petitioners are not legally entitled to the same. . . . Surprisingly, in a sudden turnabout, private respondent now claims . . . that the subject awards and bonuses are integrated in the redundancy package. It is evident, therefore, that private respondent has not truly consolidated the payment of the subject awards and bonuses in the redundancy package paid to the petitioners.22

We are likewise in accord with the findings of the labor arbiter that petitioners are indeed entitled to receive service awards and other benefits, thus:
Since each of the complainants have rendered services to respondent in multiple(s) of five years prior to their separation from employment, respondent should be paid their service awards for 1990.

We are not impressed with the contention of the respondent that service award is a bonus and therefore is an act of gratuity which the complainants have no right to demand. Service awards are governed by respondent's employee's manual and (are) therefore contractual in nature.
On the matter of anniversary and performance bonuses, it is not disputed that it is respondent's practice to give an anniversary bonus every five years from its incorporation; that pursuant to this practice, respondent declared an anniversary bonus for its 80th Anniversary in 1990; that per terms of this declaration, only the employees of respondent as of 15 November 1990 will be given the bonus; and that complainants were separated from respondent only 25 days before :the respondent's anniversary. On the other hand, it is also (not) disputed that respondent regularly gives performance bonuses; that for its commendable performance in 1990, respondent declared a performance bonus; that per terms of this declaration, only permanent employees of respondent as of March 30, 1991 will be given this bonus; and that complainants were employees of respondents for the first 10 months of 1990.

We cannot see any cogent reason why an anniversary bonus which respondent gives only once in every five years were given to all employees of respondent as of 15 November 1990 (pro rata even to probationary employees; Annex 9) and not to complainants who have rendered service to respondent for most of the five year cycle. This is also true in the case of performance bonus which were given to permanent employees of respondent as of 30 March 1991 and not to employees who have been connected with respondent for most of 1990 but were separated prior to 30 March 1991.

We believe that the prerogative of the employer to determine who among its employee shall be entitled to receive bonuses which are, as a matter of practice, given periodically cannot be exercised arbitrarily.23  (Emphasis and corrections in parentheses supplied.)

The grant of service awards in favor of petitioners is more importantly underscored in the precedent case of Insular Life Assurance Co., Ltd., et al. vs. NLRC, et al.,24 where this Court ruled that "as to the service award differentials claimed by some respondent union members, the company policy shall likewise prevail, the same being based on the employment contracts or collective bargaining agreements between the parties. As the petitioners had explained, pursuant to their policies on the matter, the service award differential is given at the end of the year to an employee who has completed years of service divisible by 5.

A bonus is not a gift or gratuity, but is paid for some services or consideration and is in addition to what would ordinarily be given.25  The term "bonus" as used in employment contracts, also conveys an idea of something which is gratuitous, or which may be claimed to be gratuitous, over and above the prescribed wage which the employer agrees to pay.

While there is a conflict of opinion as to the validity of an agreement to pay additional sums for the performance of that which the promisee is already under obligation to perform, so as to give the latter the right to enforce such promise after performance, the authorities hold that if one enters into a contract of employment under an agreement that he shall be paid a certain salary by the week or some other stated period and, in addition, a bonus, in case he serves for a specified length of time, there is no reason for refusing to enforce the promise to pay the bonus, if the employee has served during the stipulated time, on the ground that it was a promise of a mere gratuity.

This is true if the contract contemplates a continuance of the employment for a definite term, and the promise of the bonus is made at the time the contract is entered into. If no time is fixed for the duration of the contract of employment, but the employee enters upon or continues in service under an offer of a bonus if he remains therein for a certain time, his service, in case he remains for the required time, constitutes an acceptance of the offer of the employer to pay the bonus and, after that acceptance, the offer cannot be withdrawn, but can be enforced by the employee.26

The weight of authority in American jurisprudence, with which we are persuaded to agree, is that after the acceptance of a promise by an employer to pay the bonus, the same cannot be withdrawn, but may be enforced by the employee.27 However, in the case at bar, equity demands that the performance and anniversary bonuses should be prorated to the number of months that petitioners actually served respondent company in the year 1990. This observation should be taken into account in the computation of the amounts to be awarded to petitioners.

WHEREFORE, the assailed decision and resolution of respondent National Labor Relations Commission are hereby SET ASIDE and the decision of Labor Arbiter Alex Arcadio Lopez is REINSTATED.


Narvasa, C.J., Puno, Mendoza and Francisco, JJ., concur.


1 Rollo, 42; per Commissioner Rogelio I. Rayala, with Commissioners Edna Bonto-Perez and Domingo H. Zapanta, concurring.
2 Ibid., 53; id.
3 Ibid., 43, 237-239.
4 Petition, 3; Rollo, 4.
5 Ibid., 4; id., 5.
6 Rollo, 5.
7 Ibid., 6.
8 Ibid., 7-8.
9 Ibid., 93.
10 Ibid., 43-44
11 Ibid., 50-51.
12 Ibid., 51.
13 Ibid., 18.
14 Ibid., 88, 145, and 65.
15 Ibid., 32.
16 Memorandum of Private Respondent, 13-14; Rollo, 226-227.
17 Fuentes vs. NLRC, et al., G.R. No. 76835, November 24, 1988, 167 SCRA 767; see alsoGarcia vs. NLRC, et al., G.R. No. 67825, September 4, 1987, 153 SCRA 639.
18 Lopez Sugar Corporation vs. Federation of Free Workers, Philippine Labor Union Association (PLUA-NACUSIP), et al, G.R. Nos. 75700-01, August 30, 1990, 189 SCRA 179, quoting from CariƱo, et al., vs. Agricultural Credit and Cooperative Financing Administration, et al., L-19808, September 29, 1966, 18 SCRA 183.
19 Armed Forces of the Philippine Mutual Benefit Association, Inc. vs. Armed Forces of the Philippine Mutual Benefit Association, Inc. Employees' Union (AFP-MBAI-EU), et al., L-39145, May 17, 1980, 97 SCRA 715.
20 Rollo, 5.
21 G.R. No. 87297, August 5, 1991, 200 SCRA 201.
22 Rollo, 123.
23 Ibid., 46-48.
24 G.R. No. 74191, December 21, 1987, 156 SCRA 740.
25 Kenicott vs. Wayne County, 16 Wall. (U.S.) 452, 21 L. Ed. 319.
26 35 Am. Jur. Master and Servant, Section 71, 501-502.
27 Roberts vs. Mays Mills, 184 NC 406, 114 SE 530, 28 ALR 338; Scott vs. J. F. Duthie & Co, 125 Wash 470, 216 P 853, 28 ALR 328; Zwolanek vs. Baker Mfg. Co. 150 Wis 517, 137 NW 769, 44 LRA (NS) 1214, Ann Cas 1914A, 793.

Saturday, August 8, 2009

Rights of Legitimate Labor Organizations

The rights of legitimate labor organizations are enumerated in Article 242 of the Labor Code of the Philippines, as amended by Sec. 17, R.A. 6715.

The code provides thus:

A legitimate labor organization shall have the right:

(a) To act as the representative of its members for the purpose of collective bargaining;

(b) To be certified as the exclusive representative of all the employees in an appropriate collective bargaining unit for purposes of collective bargaining;

(c) To be furnished by the employer, upon written request, with the annual audited financial statements, including the balance sheet and the profit and loss statement, within thirty (30) calendar days from the date of receipt of the request, after the union has been duly recognized by the employer or certified as the sole and exclusive barganing representatives of the employees in the bargaining unit, or within sixty (60) calendar days before the expiration of the existing collective bargaining agreement, or during the collective bargaining negotiation;

(d) To own property, real or personal, for the use and benefit of the labor organization and its members;

(c) To sue and be sued in its registered name; and

(d) To undertake all other activities designed to benefit the organization and its members, including cooperative, housing welfare and other projects not contrary to law.

Notwithstanding any provision of a general or special law to the contrary, the income and the properties of legitimate labor organizations, including grants, endowments, gifts, donations and contributions they may receive from fraternal and similar organizations, local or foreign, which are actually, directly and exclusively used for their lawful purposes, shall be free from taxes, duties and other assessments. The exemptions provided herein may be withdrawn only by a special law expressly repealing this provision.

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